UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2000
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
No. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
----------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
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 and 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 x No.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 31,076,499 Shares of Common
Stock of the registrant were outstanding at October 20, 2000.
<PAGE>
Item 1 - Financial Statements (unaudited)
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, June 30,
ASSETS 2000 2000
(Unaudited) (Audited)
--------------- ---------------
Current assets:
Cash and cash equivalents $ 935 $ 935
Accounts receivable, net of allowance
for doubtful accounts of $1,706 at
September 30, 2000 and
$1,614 at June 30, 2000 98,410 93,652
Inventories 163,486 177,835
Other current assets 7,590 5,950
--------------- ---------------
Total current assets 270,421 278,372
Property, plant and equipment:
Land and buildings 299,717 299,572
Machinery and equipment 643,066 639,674
Construction in progress 15,563 15,841
--------------- ---------------
958,346 955,087
Less accumulated depreciation (329,510) (316,790)
--------------- ---------------
Net property, plant and equipment 628,836 638,297
Excess of cost over net assets acquired 15,110 15,642
Other 26,578 27,546
--------------- ---------------
Total assets $ 940,945 $ 959,857
=============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,791 $ 79,535
Accrued interest payable 849 2,186
Accrued payroll expenses 7,457 10,095
Accrued operating expenses 10,620 11,485
Reserve for potential loss on purchase commitment 7,110 8,899
Other current liabilities 22,946 23,381
Current portion of long-term debt 134 131
--------------- ---------------
Total current liabilities 119,907 135,712
Deferred liabilities 11,768 12,040
Reserve for potential loss on purchase commitment 30,000 30,000
Long-term debt, less current portion 605,907 594,090
Stockholders' equity:
Preferred stock, par value $.01; authorized:
5,000 shares - -
Common stock, par value $.01; authorized:
75,000 shares; issued: 31,110 at
September 30, 2000 and 31,058 at June 30, 2000 311 310
Additional paid-in capital 342,344 342,257
Treasury stock, 50 and 81 shares at
September 20, 2000
and June 30, 2000, respectively, at cost (321) (465)
Unearned compensation (522) (667)
Retained deficiency (168,449) (153,420)
--------------- ---------------
Total stockholders' equity 173,363 188,015
--------------- ---------------
Total liabilities and stockholders'
equity $ 940,945 $ 959,857
=============== ===============
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended September 30,
---------------------------------
2000 1999
(Unaudited) (Unaudited)
--------------- ---------------
Net sales $ 206,337 $ 234,763
Cost of sales:
Other than depreciation and amortization 182,023 195,239
Depreciation and amortization 13,425 15,791
--------------- ---------------
Gross profit 10,889 23,733
Start-up and restructuring costs and other
unusual items 400 13,205
Selling, general and administrative expense 10,304 14,490
Interest expense, including
amortization of debt issue costs 15,540 10,429
--------------- ---------------
(15,355) (14,391)
Other income, net 412 977
(Loss) income from equity investments (21) 8
Minority interest in loss of subsidiary - 1,758
--------------- ---------------
Loss from continuing operations
before income taxes (14,964) (11,648)
Provision for income taxes 65 4,006
--------------- ---------------
Loss from continuing operations (15,029) (15,654)
Discontinued operations:
Reversal of loss on disposition of
discontinued operations - 21,420
--------------- ---------------
Net (loss) income $ (15,029) $ 5,766
=============== ===============
Weighted average shares outstanding 30,892 29,705
=============== ===============
Basic and diluted per share amounts:
Loss from continuing operations $ (0.49) $ (0.53)
Reversal of loss on disposition of
discontinued operations - 0.72
--------------- --------------
Net (loss) income per share $ (0.49) $ 0.19
=============== ==============
Cash dividends declared per share $ 0.00 $ 0.025
=============== ===============
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
September 30,
---------------------------------
2000 1999
(Unaudited) (Unaudited)
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (15,029) $ 5,766
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 13,425 15,791
Provision for doubtful accounts receivable 92 40
Minority interest in loss of subsidiary - (1,758)
Gain on sale of assets - (11)
Loss (income) from equity investments 21 (8)
Reversal of loss on discontinued operations - (21,420)
Other 1,889 361
Changes in operating assets and liabilities:
Accounts receivable (4,850) (5,478)
Inventories 14,349 (27,265)
Other current assets (1,640) 5,129
Accounts payable (8,744) (2,896)
Accrued liabilities (7,405) 8,458
Deferred liabilities (272) 401
--------------- ---------------
Net cash used in operating activities (8,164) (22,890)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,926) (6,341)
Proceeds from disposal of property, plant
and equipment - 11
(Additions to) reductions in other
non-current assets (394) 47
--------------- ---------------
Net cash used in investing activities (3,320) (6,283)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term repayments and borrowings (34) 31
Borrowings under revolving credit facility 457,663 372,269
Payments on revolving credit facility (445,812) (342,342)
Payment of debt issue costs (333) -
Cash dividends paid - (742)
--------------- ---------------
Net cash provided by financing activities 11,484 29,216
--------------- ---------------
Net increase in cash and cash equivalents - 43
Cash and cash equivalents at:
Beginning of period 935 935
--------------- ---------------
End of period $ 935 $ 978
=============== ===============
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Birmingham Steel Corporation (the Company) owns and operates facilities in the
mini-mill sector of the steel industry. The Company also owns an equity interest
in a scrap collection and processing operation. The Company's Rebar/Merchant
segment produces a variety of steel products including semi-finished steel
billets, reinforcing bars and merchant products, such as rounds, flats, squares,
strips, angles and channels. These products are sold primarily to customers in
the steel fabrication, manufacturing and construction industries. The Company
has regional warehouses and distribution facilities, which are used to
distribute its rebar and merchant products.
In addition, the Company's Special Bar Quality (SBQ) segment, which was reported
in discontinued operations prior to the second quarter of fiscal 2000 and
subsequently retained in continuing operations (see Note 2), produces high
quality rod, bar and wire that is sold primarily to customers in the automotive,
agricultural, industrial fastener, welding, appliance and aerospace industries
in the Unites States and Canada.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements are prepared in
accordance with accounting principals generally accepted in the United States
(GAAP) for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
In the opinion of management, all material adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the accompanying unaudited financial statements. Operating results
for the interim periods reflected herein are not necessarily indicative of the
results that may be expected for full fiscal year periods. Therefore, it is
suggested these Consolidated Financial Statements and footnotes thereto should
be read in conjunction with the Company's Annual Report on Form 10-K for the
year ended June 30, 2000.
Accounting Pronouncements
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
(as amended by Statements No. 137 and 138) was adopted by the Company effective
July 1, 2000. This statement requires the Company to recognize all derivatives
on the balance sheet at fair value. The adoption by the Company of Statement No.
133, as amended, did not have an impact on the Company's financial position or
results of operations because the Company does not presently use derivatives or
engage in hedging activities.
FASB Interpretation 44, Accounting for Certain Transactions Involving Stock
Compensation (FIN 44), was adopted by the Company effective July 1, 2000. FIN 44
provides an interpretation of APB Opinion 25 on accounting for employee stock
compensation and describes its application to certain transactions. It applies
on a prospective basis to events occurring after July 1, 2000, except for
certain transactions involving options granted to non-employees, repriced fixed
options, and modifications to add reload option features, which apply to awards
granted after December 31, 1998. The provisions of FIN 44 have not impacted
transactions entered into through the first quarter ended September 30, 2000.
<PAGE>
2. DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED
Fiscal 1999
In fiscal 1999, prior management announced plans to sell the Company's SBQ
segment, which includes rod, bar and wire facilities in Cleveland, Ohio; a high
quality melt shop in Memphis, Tennessee; and the Company's 50% interest in
American Iron Reduction, L.L.C. (AIR). Accordingly, as required by APB Opinion
30 (as interpreted by EITF 95-18), the operating results of the SBQ segment were
reflected as discontinued operations in the Company's annual financial
statements for fiscal 1999 and in the first quarter of fiscal 2000.
Fiscal 2000
On January 31, 2000, subsequent to a change in management which occurred after a
proxy contest, new management announced the Company would no longer reflect its
SBQ segment as discontinued operations. The change was required as a result of
new management's decision to re-establish its Cleveland-based American Steel &
Wire (AS&W) in the SBQ markets. Management's decision to continue operating the
AS&W facilities was based on the following considerations:
o The Company's attempts to sell the facility had not been successful and, at
that time, management believed that a sale in the near term would not
generate sufficient proceeds to pay down a meaningful amount of the
Company's long-term debt.
o New management believes there is a viable long-term market for AS&W's
high-quality rod, bar and wire products.
o The Company had identified several potential sources of high-quality
billets for the AS&W operations to replace the Memphis melt shop (which was
shut down in early January 2000) as the primary supply source.
Management also concluded, at that time, that a sale of the entire SBQ segment
by the end of fiscal 2000, as had been previously anticipated by former
management, was no longer likely based upon the results of selling efforts to
date and then prevalent market conditions. In accordance with EITF 90-16,
Accounting for Discontinued Operations Subsequently Retained, the results of
operations of the SBQ segment have been reported within continuing operations
since the beginning of the second quarter of fiscal 2000. In addition, operating
results of the SBQ segment for all periods prior to October 1, 1999 have been
reclassified from discontinued operations to continuing operations.
As a result of unwinding the discontinued operations accounting treatment of the
SBQ segment, the Company reversed the remaining balance of the reserves for loss
on disposal and operating losses, and their related income tax effects, in the
second quarter of fiscal 2000. The utilization of the reserve (established as of
June 30, 1999) during the first quarter of fiscal 2000 is reflected in the
financial statements herein as a reversal of the reserve as of September 30,
1999. The reclass of SBQ's operating results within continuing operations
decreased net income from continuing operations by $21 million ($0.72 per share)
for the three months ended September 30, 1999 versus the amount previously
reported in the Company's form 10-Q for the prior year quarter. (See Note 7 for
segment information).
Fiscal 2001
In a press release dated September 28, 2000, the Company reported it had signed
a definitive agreement with North American Metals, Ltd. (NAM) to sell the
Cleveland and Memphis facilities of the SBQ segment. The selling price, per
terms of the agreement, is $267 million plus working capital. (See the Sale and
Purchase Agreement as filed in Item 6 to this report). The transaction is
pending completion of financing agreements with the lenders of NAM, negotiations
of terms of the sale of working capital, and approval of the Company's Board of
Directors and lenders. Because of the significance of the remaining conditions
precedent to closing the pending sale, the Company did not meet the criteria for
applying discontinued operations accounting treatment during the first quarter.
The Company expects this transaction to be finalized in December 2000; however,
there can be no assurance that the transaction will be closed at such time. Upon
sale of the SBQ segment, the Company expects to reduce debt and interest expense
by approximately 30%. In addition, the transaction will relieve the Company of
an off-balance sheet leveraged lease obligation associated with the Memphis
facility and will position the Company for future growth and/or consolidation
opportunities.
Management is unable to estimate a range of loss which will be realized upon
consummation of the transaction at this time because of uncertainties related to
negotiations for the sale of working capital and other financing aspects of the
transaction. However, the Company expects to record a minimum charge of $40
million upon closing of the transaction to reflect the difference between the
book value of the Cleveland assets and the expected sales proceeds.
When the transaction is closed, or final terms are negotiated and approval from
the lenders is received, the Company will report the SBQ segment's operating
results, and the related loss on disposal, as discontinued operations and will
restate its financial statements for all prior periods to reflect such treatment
in accordance with APB Opinion 30 (as interpreted by EITF 95-18).
3. START-UP AND RESTRUCTURING COSTS AND OTHER UNUSUAL ITEMS
Start-up and restructuring costs and other unusual items consist of the
following (in thousands):
Three Months Ended
September 30,
--------------------------------
2000 1999
-------------- -------------
Start-up expenses:
Memphis $ - $ 8,146
Cartersville 400 4,497
Other unusual items:
Proxy solicitation - 562
-------------- -------------
$ 400 $ 13,205
============== =============
The above charges are reflected in the Company's reportable segments as follows
(in thousands):
Three Months Ended
September 30,
--------------------------------
2000 1999
-------------- -------------
Rebar/Merchant $ 400 $ 4,497
SBQ - 8,146
Corporate unallocated - 562
-------------- -------------
$ 400 $ 13,205
============== =============
A narrative description of the significant items summarized in the preceding
tables follows:
Memphis Start-up: During the first quarter of fiscal 2000, the Memphis,
Tennessee melt shop facility was in start-up phase. In the second quarter of
fiscal 2000, the Company announced suspension of operations at this facility and
management has been actively pursuing a sale or other disposition since that
time (see Note 2 to these Consolidated Financial Statements). Accordingly, the
Memphis melt-shop is being treated as an asset held for disposition and
depreciation expense is no longer being recognized. The Company completed the
shut down at Memphis during fiscal 2000 and expects to incur costs of
approximately $1 million per month to maintain the facility until it is sold or
disposed of otherwise.
Cartersville Start-up: In the third quarter of fiscal 1999, the Cartersville,
Georgia mid-section mill began operations and was considered to be in start-up
phase through July 2000. Start-up was determined to be complete as of August
2000 when Cartersville achieved consistent, commercially viable production
levels.
Proxy Solicitation: These costs, principally consisting of legal, public
relations and other consulting fees, were incurred during fiscal 2000 in the
Company's defense of a proxy contest led by The United Company Shareholder Group
(the United Group). On December 2, 1999, the Company and the United Group
reached a settlement appointing John D. Correnti as Chairman and Chief Executive
Officer and appointing nine new board members approved by the United Group. All
of the expenses for the aforementioned proxy contest were recorded during fiscal
2000.
4. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market, as
summarized in the following table (in thousands):
September 30, 2000 June 30, 2000
Raw Materials and Mill Supplies $ 43,894 $ 45,328
Work-in-Process 32,663 42,168
Finished Goods 86,929 90,339
--------------- ---------------
$ 163,486 $ 177,835
=============== ===============
5. LONG-TERM DEBT
Fiscal 2000
On May 15, 2000, the Company and its lenders executed new amendments to its
principal debt and letter of credit agreements to provide for the continuation
of the Company's borrowing arrangements on a long-term basis. These amendments
replaced previous amendments which were negotiated by the Company's prior
management in October 1999. Among other things, the May 2000 amendments
generally provided more operating flexibility, less restrictive financial
covenants and $25 million in additional funding commitments from the lenders.
The May 2000 amendments require the Company to maintain a minimum EBITDA
(earnings before interest, taxes, depreciation and amortization) and a minimum
fixed charge coverage amount on a quarterly basis as well as a positive
quarterly EBITDA at the Cleveland SBQ facility. The lenders agreed that a change
in control did not occur as a result of the proxy contest and resulting change
in management in December 1999. In addition, the new agreement allows the
Company to retain $100 million of proceeds from issuance of new equity.
In exchange for the financing agreement modifications and the new $25 million in
funding commitment, the lenders received warrants to purchase 3 million shares
of the Company's common stock, which may be exercised anytime during the 10-year
term of the warrants. The warrants are exercisable at a price of $3 per share.
The Company recorded the fair value of the warrants as an equity transaction in
May 2000. A portion of the warrant value was recognized as debt amendment costs
and the remainder was capitalized and is being amortized over the remaining
terms of the related debt as a component of interest expense.
A summary of significant provisions of the Company's principal debt and letter
of credit agreements, as amended in May 2000, is further explained in the
Company's 2000 Annual Report on Form 10-K.
Fiscal 2001
As of September 30, 2000, the Company was in compliance with all of its debt
covenants. However, should factors described under "Risk Factors" in the
Company's Form 10-K for fiscal 2000 adversely affect future operating results,
the Company could violate one or more of its restrictive covenants within the
next twelve months. Based upon the current level of the Company's operations and
current industry conditions, the Company anticipates that it will have
sufficient resources to make all required interest and principal payments under
its principal debt agreements through December 15, 2001. However, the Company is
required to make significant principal repayments on December 15, 2001 and,
accordingly, may be required to refinance substantially all of its long-term
debt obligations on or prior to such date. There can be no assurance that any
such refinancing would be possible at such time, or, if possible, that
acceptable terms could be obtained, particularly in view of the Company's high
level of debt. If principal debt agreements were refinanced, the Company would
likely incur a material debt extinguishment loss.
6. CONTINGENCIES
Environmental
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, waste water effluents, air
emissions and furnace dust management and disposal. The Company believes that it
is currently in compliance with all known material and applicable environmental
regulations.
Legal Proceedings
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. Such claims are generally covered
by various forms of insurance. In the opinion of management, any uninsured or
unindemnified liability resulting from existing litigation would not have a
material effect on the Company's business, its financial position, liquidity or
results of operations.
7. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company has two reportable segments -- Rebar/Merchant and SBQ. Summarized
financial information concerning the Company's reportable segments is shown in
the following tables (in thousands):
Three months ended September 30, 2000: Rebar/
Merchant SBQ Total
----------- ----------- ----------
Net sales $ 178,662 $ 27,675 $ 206,337
Intersegment revenue 5,085 191 5,276
Start-up costs and unusual items reflected
in segment profit(loss) 400 - 400
Segment profit (loss) (3,530) (9,732) (13,262)
Segment assets 1,165,496 284,969 1,450,465
Three months ended September 30, 1999: Rebar/
Merchant SBQ Total
----------- ----------- ----------
Net sales $ 176,802 $ 57,961 $ 234,763
Intersegment revenue 9,593 139 9,732
Start-up costs and unusual items reflected
in segment profit (loss) 4,497 8,146 13,205
Segment profit (loss) 8,833 (21,420) (12,587)
Segment assets 1,151,697 274,196 1,425,893
<PAGE>
Reconciliations: Three months ended
September 30,
2000 1999
------------- ------------
Revenue
Total external revenue for reportable segments $ 206,337 $ 234,793
Intersegment revenue for reportable segments 5,276 9,732
Elimination of intersegment revenue (5,276) (9,732)
------------- ------------
Total consolidated revenue $ 206,337 $ 234,763
============= ============
Segment Loss
Total loss for reportable segments $ (13,262) $ (12,587)
Unallocated unusual items - (562)
Other unallocated costs (1,702) 1,501
------------- ------------
Loss from continuing operations
before income taxes $ (14,964) $ (11,648)
============= ============
Assets
Total assets for reportable segments $ 1,450,465 $ 1,425,893
Elimination of intercompany balances (492,123) (413,278)
Other eliminations (17,397) (23,765)
------------- ------------
Total assets $ 940,945 $ 988,850
============= ============
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intersegment sales are recorded at
cost plus $25 per unit; however, the intercompany profit is eliminated for
consolidated reporting. The Company evaluates performance based on operating
earnings of the respective facilities.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
In December 1999, following a proxy contest, the Company's shareholders elected
new management and reconstituted the Board of Directors.
Despite increasingly difficult industry conditions and the loss reported in the
first quarter of fiscal 2001, the Company has continued to make progress in
turnaround efforts begun last December. A number of significant developments
occurred during the first quarter of fiscal 2001 including:
o Signed definitive agreement to sell Cleveland and Memphis facilities
o Completed start-up phase and increased production and sales at the
Cartersville division
o Achieved breakeven quarterly EBITDA (earnings before interest, taxes,
depreciation and amortization) at the Cleveland operation
o Reduced inventories by $14 million since June 30, 2000
o Settled all severance obligations with prior management
o Reduced SG&A expenses by 29% compared to the first quarter of the prior fiscal
year
o Received favorable ruling on rebar trade case which could result in higher
duties on imported rebar products and could reduce the level of rebar imports
During the first quarter of fiscal 2001, industry conditions became increasingly
difficult as a result of pricing pressures and excess inventories throughout the
steel industry. The following external and internal factors had a significant
impact on profitability in the quarter:
o Market conditions created a $26 decrease in merchant products selling price
compared to the immediately preceding quarter.
o The Company incurred higher production costs as a result of production
curtailments implemented to control inventory levels and increased energy
costs.
o The Company realized a 9% reduction in shipments compared to the same period
in the prior fiscal year as a result of continued pressures from steel
imports and excess steel service center inventories.
In a press release dated September 28, 2000, the Company reported it had signed
a definitive agreement with North American Metals, Ltd. (NAM) to sell the
Cleveland and Memphis facilities of the Special Bar Quality (SBQ) segment. The
selling price, per terms of the agreement, is $267 million plus working capital.
(See the Sale and Purchase Agreement as filed in Item 6 to this report). The
transaction is pending completion of financing agreements with the lenders of
NAM, negotiations of terms of the sale of working capital, and approval of the
Company's Board of Directors and lenders. Because of the significance of the
remaining conditions precedent to closing the pending sale, the Company did not
meet the criteria for applying discontinued operations accounting treatment
during the first quarter. The Company expects the transaction to be finalized in
December 2000; however, there can be no assurance that the transaction will be
closed at such time. Upon sale of the SBQ segment, the Company expects to reduce
debt and interest expense by approximately 30%. In addition, the transaction
will relieve the Company of an off-balance sheet leveraged lease obligation
associated with the Memphis facility and will position the Company for future
growth and/or consolidation opportunities.
Management is unable to estimate a range of loss which will be realized upon
consummation of the transaction at this time because of uncertainties related to
negotiations for the sale of working capital and other financing aspects of the
transaction. However, the Company expects to record a minimum charge of $40
million upon closing of the transaction to reflect the difference between the
book value of the Cleveland assets and the expected sales proceeds.
When the transaction is closed, or final terms are negotiated and approval from
the lenders is received, the Company will report the SBQ segment's operating
results, and the related loss on disposal, as discontinued operations and will
restate its financial statements for all prior periods to reflect such treatment
in accordance with APB Opinion 30 (as interpreted by EITF 95-18).
Results from Operations
The Company reported a net loss from continuing operations of $15.0 million or
$0.49 per share, basic and diluted, for the first quarter of fiscal 2001
compared with a net loss from continuing operations of $15.7 million or $0.53
per share in the first quarter of fiscal 2000. The loss for the current period
reflects lower shipments and average selling prices as described more fully in
the "Sales" section below.
<PAGE>
Sales
The following table compares shipments and average selling prices per ton for
the first quarters of fiscal 2001 and 2000:
Three months ended September 30,
--------------------------------------------------
2000 1999
--------------------------------------------------
Average Average
Product Tons Shipped Sales Price Tons Shipped Sales Price
---------------------------------------------------
Rebar Products 368,283 $262 405,251 $264
Merchant Products 241,239 300 223,243 304
SBQ Products 66,218 422 144,812 404
Billets/Other 43,156 230 13,515 333
---------------------------------------------------
Totals 718,896 $287 786,821 $303
---------------------------------------------------
Sales for the first quarter of fiscal 2001 were $206.3 million, down 12%
compared to fiscal 2000 first quarter sales of $234.8 million. The decrease in
sales was due to a $16 average price per ton decrease in average selling prices
and a 9% decrease in total tons shipped. Average selling prices for steel
products have generally declined throughout the 2000 calendar year, primarily
because of continuing pressure of steel imports and higher overall inventories
of steel service center customers and other steel producers which created
unfavorable trends in product mix.
Cost of Sales
As a percentage of net sales, cost of sales (other than depreciation and
amortization) increased to 88% in the current quarter compared to 83% in the
first quarter of fiscal 2000. The percentage increase in cost of sales for the
current quarter resulted primarily because of lower average sales prices, higher
energy costs and higher production costs due to production curtailments
implemented to control inventories.
Depreciation and amortization expense for the first quarter of fiscal 2001
declined approximately $2 million compared to the first quarter of fiscal 2000
primarily as a result of the cessation of depreciation associated with the
Memphis facility, which suspended operations during the third quarter of fiscal
2000.
Selling, General and Administrative (SG&A)
SG&A expenses decreased from $14.5 million in the first quarter of fiscal 2000
to $10.3 million in the first quarter of fiscal 2001, down 29% from the same
period last year. As a percentage of net sales, SG&A expenses decreased to 5% in
the current fiscal quarter from 6% in the first quarter last year. The decrease
in current year SG&A expenses is the result of a reduction in personnel and
overall spending levels in accordance with the Company's turnaround efforts.
Expenses have also declined as a result of the shutdown of the Memphis facility
and reductions at Cleveland and corporate headquarters which began in the second
quarter of fiscal 2000.
Start-Up and Restructuring Costs and Other Unusual Items
Start-up expense, restructuring cost and other unusual items were $400,000 in
the first quarter of fiscal 2001, compared to $13.2 million in the same period
last year. In the first quarter of fiscal 2001, the Cartersville mid-section
rolling mill achieved commercially viable production levels and essentially
completed the start-up phase of operations. Also, second quarter results for
fiscal 2000 reflect start-up expenses related to the now-idled Memphis
operation. For additional discussion of these items, refer to Note 3 of these
Consolidated Financial Statements.
Interest Expense
Interest expense increased to $15.5 million in the first quarter of fiscal 2001
from $10.4 million in the same period last year. Higher interest charges are the
result of higher debt balances in the curent year and a series of modifications
to the Company's long-term debt agreements, which increased the Company's
average borrowing rate to 8.93% in the first quarter of fiscal 2001 from 7.18%
in the same period last year. Recurring amortization of debt issue costs is also
higher in 2001, reflecting the impact of amendment fees and other issuance costs
incurred in connection with the May 2000 amendments.
Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $8.2 million for the quarter ended
September 30, 2000, compared to $22.9 million in the same period last year. Cash
required for operating activities decreased primarily due to a reduction in
inventory as a result of production curtailments put into place in response to
current industry conditions and lower start-up costs.
The carrying cost of the Memphis facility, which is currently idle and held for
disposition, is approximately $1 million per month, which represents a $2.5
million improvement over the $3.5 million monthly operating losses that were
being incurred prior to the shutdown.
Because of the recent rise in natural gas prices, the American Iron Reduction
(AIR) Direct Reduced Iron (DRI) plant is unable to economically produce DRI. In
October 2000, the AIR facility suspended operations. The co-sponsors of the AIR
venture (the Company and GS Industries) are currently in discussions with AIR's
lenders regarding the future operations and funding requirements for AIR. The
Company previously established a reserve of $40.2 million for potential
liabilities associated with the AIR venture and, as of September 30, 2000, the
balance of this reserve is $37.1 million. Although management believes this
reserve will be sufficient to satisfy future obligations related to AIR, the
ultimate loss on settlement of the AIR purchase commitment will depend upon a
number of factors. These factors include the length of time the Company remains
obligated under the purchase commitment until an acceptable sale of the AIR
facility can be completed, the proceeds from the sale (which directly impact the
amount of the termination payment), the fluctuations in the market price of DRI
and changes in AIR's production costs. As is the case with all estimates that
involve predictions of future outcomes, management's estimate of the loss on the
DRI purchase commitment is subject to change.
Investing Activities
Net cash used in investing activities was $3.3 million for the quarter ended
September 30, 2000, as compared to $6.3 million in the same period last year.
The change was attributable to reduced capital spending for major projects. The
debt covenants in the Company's new amended financing agreements restrict
capital expenditures to $40 million in fiscal 2001 and to $25 million in fiscal
2002. However, the new financing agreements allow the Company to carryover
unused capital expenditures to succeeding fiscal years. Capital expenditures
were $2.9 million in the first quarter of fiscal 2001. The Company believes the
level of capital expenditures allowed in the new financing agreements is
adequate to support management's plans for the ongoing operations.
Financing Activities
Net cash provided by financing activities was $11.5 million for the first
quarter of fiscal 2001, compared to $29.2 million in the same period last year.
Net outstanding borrowings on the Company's revolving credit facility increased
$1.8 million during the first quarter of fiscal 2001. The Company also paid
$300,000 in additional debt issuance costs in the first quarter of fiscal 2001
related to the fiscal 2000 debt amendments.
The Company is currently in compliance with the restrictive debt covenants
governing its loan agreements. However, should factors described under "Risk
Factors" in the Company's Form 10-K for fiscal 2000 adversely affect future
operating results, the Company could violate one or more of its restrictive
covenants within the next twelve months. For additional discussion of long-term
debt refer to Note 5 of the Consolidated Financial Statements.
Working Capital
Working capital at the end of the first quarter of fiscal 2001 was $150.5
million, compared to $142.7 million at June 30, 2000. The increase in working
capital was primarily attributable to increased accounts receivable and a
reduction in accounts payable. Accounts payable declined primarily because of a
decrease in inventory offset by the acceleration of payments to vendors, a
substantial portion of which was funded by the Company's revolving credit
facility.
<PAGE>
Market Risk Sensitive Instruments
There have been no material changes in the Company's inherent market risks since
the disclosures made as of June 30, 2000, in the Company's Annual Report on Form
10-K.
Risk Factors That May Affect Future Results; Forward Looking Statements
This quarterly report includes forward-looking statements based on our current
expectations and projections about future events, including: market conditions;
future financial performance and potential growth; effect of indebtedness;
future cash sources and requirements, expected capital expenditures; competition
and production costs; strategic plans, estimated proceeds from and the timing of
asset sales including the sale of the SBQ segment; the Company's interest in
AIR; environmental matters and liabilities; possible equipment losses; labor
relations; and other matters. These forward-looking statements are subject to a
number of risks and uncertainties, including those identified in the Annual
Report on Form 10-K for fiscal year 2000, which could cause our actual results
to differ materially from historical results or those anticipated and certain of
which are beyond our control. The words "believe", "expect", "anticipate" and
similar expressions identify forward-looking statements. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. It is important to note that the
Company's actual results could differ materially from those described or implied
in such forward-looking statements. Moreover, new risk factors emerge from time
to time and it is not possible for the Company to predict all such risk factors,
nor can the Company assess the impact of all such risk factors on its business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those described or implied in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of
actual results.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Refer to the information in MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS under the caption MARKET RISK SENSITIVE
INSTRUMENTS
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report:
(1) Settlement Agreement dated September 19, 2000 between Birmingham
Steel Corporation and Robert A. Garvey.
(2) Sale and Purchase Agreement between Birmingham Steel Corporation
and North American Metals, Ltd., dated September 28, 2000
(b) Reports on Form 8-K
None
Pursuant to the requirements 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.
Birmingham Steel Corporation
November 1, 2000
/s/ J. Daniel Garrett
-----------------------
J. Daniel Garrett
Chief Financial Officer and
Vice President Finance
Exhibit 6.1
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made and entered into this 19th day of
September, 2000, between Birmingham Steel Corporation, a Delaware corporation
(the "Company"), and Robert A. Garvey ("Garvey").
RECITALS:
--------
Garvey and the Company are parties to that certain Employment Agreement
dated January 5, 1996 as amended pursuant to an Amendment to Employment
Agreement dated August 10, 1998, and Amendment to Employment Agreement dated
September 20, 1999 (as so amended, the "Employment Agreement"). Garvey has made
certain claims against the Company under the Employment Agreement and under the
Executive Severance Plan adopted by the Company's Board of Directors on August
29, 1997 and amended and restated as of September 2, 1999 (the "Plan") and under
various other retirement and benefit plans of the Company. Garvey's employment
by the Company terminated on December 2, 1999. The Company and Mr. Garvey are
also parties to the following litigation and arbitration proceedings
(collectively, the "Litigation"):
(i) Robert A. Garvey, et al. v. Birmingham Steel Corporation, CV-00-417,
pending in the Circuit Court of Jefferson County, Alabama.
(ii) Robert A. Garvey, et al. v. Birmingham Steel Corporation, CV-17754,
pending in the Delaware Court of Chancery (New Castle County).
(iii) Robert A. Garvey, et al. v. Birmingham Steel Corporation, et al.,
CV-00-L-0493-S, previously pending in the United States District Court for the
Northern District of Alabama.
(iv) Arbitration of Robert A. Garvey & Birmingham Steel Corporation, #30
620 00020 00, pending with the American Arbitration Association.
(v) Arbitration of Harold Olden & Birmingham Steel Corporation, #39 620
00016 00, pending with the American Arbitration Association (filed under a joint
demand, but Garvey is not a named party in this docket number).
(vi) Birmingham Steel Corporation v. Shapiro, Forman & Allen, LLP. et al.,
CV-00-433, pending in the Circuit Court of Jefferson County, Alabama.
The Company and Garvey are willing to compromise and settle Garvey's claims for
benefits under the Employment Agreement, the Plan and under all other retirement
and benefit plans of the Company and to compromise and settle all claims under
the Litigation according to the following terms and conditions:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Garvey hereby agree as
follows:
1. Settlement Payments.
(a) The Company shall pay on or before September 19, 2000 in settlement of
all Garvey's claims under the Plan a lump sum cash payment to Garvey of Nine
Hundred Thousand and 00/100 Dollars ($900,000.00), subject to such withholding
as is otherwise applicable under Section 7(e) hereof.
(b) The Company shall pay on or before September 19, 2000 in settlement of
all of Garvey's claims under the Employment Agreement, the Litigation, and all
other retirement and benefit plans or policies of the Company (collectively, the
"Claims") the following:
(i) a lump sum cash payment to Garvey of Two Million Two Hundred
Thousand and 00/100 Dollars ($2,200,000.00), which amount includes all
vacation pay (if any) owed to Garvey; and
(ii) a lump sum cash payment of Three Hundred Thousand and 00/100
Dollars ($300,000.00) payable into an interest bearing escrow account with
an escrow agent agreeable to the parties that will be released to Garvey
within forty-eight (48) hours after repayment to the Company of all
remaining amounts that are held by four law firms from the original
$450,000 deposited by the Company with such law firms on December 1, 1999
for the purpose of paying legal fees of beneficiaries of the Plan incurred
in connection with disputes with the Company relating to the Plan and to
certain employment agreements (the "Legal Fee Funds"), along with a
certification from each such law firm of the amounts expended by such firms
as more particularly provided in Section 3 below.
(c) In further settlement of the Claims, the Company shall immediately
transfer or shall cause the trustee of the Company's Rabbi Trust to transfer to
Garvey ownership of, and all rights, title and interest in, the following two
life insurance policies insuring the life of Garvey; provided, however, that if
for any reason such policies cannot be transferred, the Company will pay to
Garvey a cash payment of $725,000 in lieu of such transfer:
(i) Policy No. 9 667 556 dated May 10, 1996, issued by Massachusetts
Mutual Life Insurance Company naming the Company as the owner and
beneficiary.
(ii) Policy No. 9 666 110 dated May 10, 1996, issued by Massachusetts
Mutual Life Insurance Company naming the Company's Rabbi Trust as the owner
and beneficiary.
(d) On or before September 19, 2000, the Company shall distribute to Garvey
in cash all vested amounts currently in Garvey's compensation deferral plan
account under the Company's Executive Retirement Plan ($237,324.36 as of August
31, 2000, together with any additional earnings or losses thereon since that
date), subject to such withholding as is otherwise applicable under Section
7(e).
(e) On or before September 19, 2000, the Company will release to Garvey
16,000 shares of the Company's Common Stock currently held by the Company
pursuant to the Employment Agreement and all restrictions on resale of such
shares will terminate, subject only to any restrictions under the Securities Act
of 1933, as amended or applicable state laws regulating the sale of securities.
On or before September 18, 2000, the Company will release to Garvey 47,105
shares of the Company's Common Stock currently held by the Company in the
Company's Stock Accumulation Plan, subject to such withholding as is otherwise
applicable under Section 7(e), and all restrictions on resale of such shares
will terminate, subject only to any restrictions under the Securities Act of
1933, as amended, or applicable state laws regulating the sale of securities.
Within 5 business days of the date hereof, the Company shall tender to Garvey a
stock certificate evidencing all of such shares.
(f) All options granted pursuant to the Incentive Stock Option Agreement
dated January 5, 1996, the Non-Qualified Stock Option Agreement dated January 5,
1996, the Non-Qualified Stock Option Agreement dated September 2, 1997, the
Incentive Stock Option Agreement dated September 2, 1997, the Non-Qualified
Stock Option Agreement dated August 10, 1998, the Incentive Stock Option
Agreement dated August 10, 1998, the Non-Qualified Stock Option Agreement dated
January 18, 1999, and the Incentive Stock Option Agreement dated January 18,
1999, all between the Company and Garvey shall vest in full as of the date
hereof and such options shall be and remain exercisable until and expire on
December 2, 2000, in accordance with the amended Option Agreements attached
hereto as Exhibits A, B, C, D, E, F, G and H. The parties acknowledge that all
such options that were originally incentive stock options have been converted to
non-qualified stock options.
(g) The Company shall provide for the continued benefit of Garvey for the
remainder of Garvey's life all benefits equivalent to the benefits provided
under the Company's medical, dental and prescription drug plans, programs or
arrangements whether group or individual and whether written or unwritten, in
which Garvey was entitled to participate or did participate at any time during
the 6-month period prior to the termination of his employment, such benefits to
be continued at the same level and at no greater cost to Garvey than were in
effect during such 6-month period; provided, however, that such coverage shall
be secondary to any coverage provided to Garvey from any other employer of
Garvey, and following attainment by Garvey of the age of sixty-five, the
coverage provided hereunder shall be secondary to coverage provided to Garvey by
Medicare or other public insurance.
2. No Mitigation Required. Garvey shall not be required to mitigate the amount
of any payment or benefit provided for in Section 1 above by seeking other
employment or otherwise, and the amount of any payment or benefit provided for
in Section 1 shall not be reduced by any compensation, benefits or other amounts
paid to or earned by Garvey as the result of employment with another employer or
otherwise, except as otherwise provided in Section 1(g).
3. Legal Fee Funds. The Company has been furnished with a current estimate by
Garvey's counsel showing that aggregate fees, costs and expenses of the
Litigation, as well as other services (including negotiations on this Settlement
Agreement and settlement with Harold Olden) approximate a total of $413,000.
Thus, the parties contemplate that, absent unforeseen material additional
expenditure of time or money, approximately $37,000 of the Legal Fee Funds would
remain to be returned to the Company. Garvey shall use his best efforts to, and
the Company shall cooperate with Garvey (including the Company's best efforts to
obtain the consent of any of the remaining participants in the Executive
Severance Plan to a waiver of claims against, and a return of the funds
remaining in the Legal Fee Funds) in an effort to seek the return of the Legal
Fee Funds to the Company. The Company agrees that, based upon the certification
by the law firms described above, all costs and expenses, including reasonable
attorneys fees, incurred by Garvey and Harold Olden in connection with their
claims against the Company and the Litigation, and the costs and expenses of the
law firms involved in the Litigation through and including the negotiation and
execution of this Agreement, the settlement of claims between the Company and
Harold Olden, and the releases and dismissal of the Litigation contemplated in
this Agreement are properly assessable against the Legal Fee Fund in the
aggregate, without regard to the source of such funds. Upon the return of the
remainder of the Legal Fee Funds, the Company shall indemnify and hold Garvey
harmless from any claims by a participant in the Plan arising out of the return
of such funds.
4. Payment Obligations Absolute; Default Rate. The Company's obligation to pay
Garvey the amounts provided for herein and to provide the benefits provided for
herein shall be absolute and unconditional. In the event of the Company's
failure to pay any amounts provided for hereunder on a timely basis, all amounts
due hereunder shall immediately become due and payable, and interest shall
accrue on such unpaid amount at an annual rate equal to twenty percent (20%).
5. Release and Waiver.
(a) For and in consideration of the payments and benefits to be made and
provided hereunder by the Company, Garvey, on behalf of himself and his
representatives, heirs, successors and assigns, hereby waives and releases the
Company, its subsidiaries, affiliated companies, successors and assigns, and
their respective officers, directors, employees, agents representatives,
attorneys, heirs and assigns (hereinafter "the Released Parties"), from any and
all liability, claims, demands, causes of action, and suits of every kind and
nature which Garvey may now have, or may have had at any time heretofore, or may
have at any time hereafter arising from or resulting from or in any manner
incidental to any and every matter, thing or event, occurring or failing to
occur, at any time in the past, up to and including the date hereof, including,
but without in anyway limiting the generality of the foregoing, any and all
liability, claims, demands, causes of action, and suits of every kind and nature
which Garvey may have, or may have had at any time heretofore, or may have at
any time hereafter pertaining to, relating to or arising out of any and all
claims asserted by Garvey, and any and all claims related to any claims asserted
by Garvey, or any claims which could have been asserted by Garvey in the
following proceedings (collectively hereinafter "the Lawsuits"):
(i) Robert A. Garvey, et al. v. Birmingham Steel Corporation,
CV-00-417, pending in the Circuit Court of Jefferson County, Alabama.
(ii) Robert A. Garvey, et al. v. Birmingham Steel Corporation,
CV-17754, pending in the Delaware Court of Chancery (New Castle County).
(iii) Robert A. Garvey, et al. v. Birmingham Steel Corporation, et
al., CV-00-L-0493-S, previously pending in the United States District Court
for the Northern District of Alabama.
(iv) Arbitration of Robert A. Garvey & Birmingham Steel Corporation,
#30 620 00020 00, pending with the American Arbitration Association.
(v) Arbitration of Harold Olden & Birmingham Steel Corporation, #39
620 00016 00, pending with the American Arbitration Association (filed
under a joint demand, but Garvey is not a named party in this docket
number).
(vi) Birmingham Steel Corporation v. Shapiro, Forman & Allen, LLP. et
al., CV-00-433, pending in the Circuit Court of Jefferson County, Alabama.
The payments and benefits to be made and provided hereunder by the
Company are in lieu of any payment or benefit to which Garvey would
otherwise be entitled under the Executive Severance Plan, Garvey's
Employment Agreement, the Executive Retirement Plan, and any other employee
benefit or welfare benefit plan to which Garvey would otherwise be
entitled. Garvey hereby acknowledges that upon receipt of the payments
required hereunder, he has received payment of all amounts owed to him
under all contracts, pension and benefit plans of the Company, except as
otherwise required under Section 1(g) above. However nothing in this
paragraph shall constitute a waiver of any rights Garvey may have to the
benefits to be provided pursuant to Section 1(g) above, the Company's
qualified pension plan or to indemnification from the Company in accordance
with the laws of the state of Delaware, the bylaws of the Company, and any
policy of insurance obtained in connection therewith, or any rights Garvey
may have for specific performance for enforcement of this Agreement.
In further consideration, based on the independent judgment of Garvey,
and with the advice of legal counsel chosen by Garvey, Garvey expressly
agrees to dismiss with prejudice, by any means necessary, the Lawsuits and
any and all claims asserted therein, and to direct all of his lawyers, the
lawfirm of Ritchie & Rediker, LLC, the lawfirm of Shapiro, Forman & Allen,
LLP, and the lawfirm of Bouchard, Margules & Friedlander, P.A. to dismiss
all claims brought against the Company with prejudice. Furthermore, Garvey
agrees to withdraw his demand for arbitration and to dismiss all claims
pending with the American Arbitration Association against the Company, and
to have a consent order thereafter entered by the Circuit Court of
Jefferson County, Alabama, the Honorable Jack D. Carl presiding, taking
jurisdiction of and dismissing all such claims with prejudice. Garvey
agrees that, except as provided in Section 3, each party to the Lawsuits
shall bear their own costs of the Lawsuits, including court costs.
Garvey declares, represents, and warrants to Released Parties that he
has the authority and capacity to file the complaints in the Lawsuits, and
that he has the authority to consent to the dismissal with prejudice of all
claims asserted in the Lawsuits. Garvey further declares, represents, and
warrants that he has never assigned to any other person or party any
portion or all of any claim whatsoever that he may have, have had, or may
have in the future against any of the Released Parties.
(b) In consideration of this mutual release, the Company hereby waives and
releases Garvey, and his representatives, attorneys, heirs, successors and
assigns, from any claim, cause of action, expense or liability, and suits of
every kind and nature which the Company may now have, or may have had at any
time heretofore, or may have at any time hereafter arising from or resulting
from or in any manner incidental to any and every matter, thing or event,
occurring or failing to occur, at any time in the past, up to and including the
date hereof, including, but without in anyway limiting the generality of the
foregoing, any and all liability, claims, demands, causes of action, and suits
of every kind and nature which the Company may have, or may have had at any time
heretofore, or may have at any time hereafter pertaining to, relating to or
arising out of any and all claims asserted by the Company, and any and all
claims related to any claims asserted by the Company, or any claims which could
have been asserted by the Company in the Lawsuits. However, nothing in this
paragraph shall constitute a waiver of any rights the Company may have for
specific performance for enforcement of this Agreement.
In further consideration, based on the independent judgment of the Company and
with the advice of legal counsel, the Company expressly agrees to dismiss with
prejudice, by any means necessary, the Lawsuits and any and all claims asserted
therein against Garvey. The Company agrees that, except as provided in Section
3, each party to the Lawsuits shall bear their own costs of the Lawsuits,
including court costs.
6. Waiver of Non-Compete and Non-Solicitation. The Company hereby waives its
right to enforce and Garvey is hereby released unconditionally from any further
obligations under the provisions of Sections 5(a) and 5(c) of the Employment
Agreement relating to the non-solicitation of employees and customers and
Garvey's covenant not to compete.
7. General Provisions.
(a) This Agreement shall be binding upon any successor (whether direct or
indirect) by purchase, merger, consolidation, liquidation or otherwise, to all
or substantially all of the business and/or assets of the Company. Additionally,
the Company shall require any such successor expressly to agree to assume all of
the obligations of the Company under this Agreement upon or prior to such
succession taking place. Failure of the Company to obtain such agreement upon or
prior to any such succession shall be a breach of this Agreement.
(b) Garvey's rights hereunder are personal, and Garvey may not assign or
transfer any part of his rights or duties hereunder, or any payment or benefit
due Garvey hereunder, to any other person, except that this Agreement, including
without limitation the payments under Section 1, shall inure to the benefit of
and be enforceable by Garvey's personal legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, or beneficiaries.
<PAGE>
(c) If any term or provision of this Agreement or the application thereof
to Garvey shall to any extent be invalid or unenforceable, the remainder of the
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
(d) The statutes and common law of the State of Delaware (excluding its
choice of law statues and common law) shall apply to the interpretation,
administration and enforcement of this Agreement. Any disputes arising under
this Agreement shall be resolved in the Circuit Court of Alabama in Jefferson
County, Alabama or in Federal District Court in Jefferson County, Alabama, and
the parties hereto hereby submit to the jurisdiction of such courts.
(e) The Company may withhold from any amounts payable to Garvey hereunder
all federal, state or other taxes that the Company shall reasonably determine or
require to be withheld pursuant to any applicable law or regulation.
(f) Benefits hereunder shall be paid from the general assets of the
Company.
(g) Neither Garvey nor the Company shall issue any press release or
announcement regarding the termination of Garvey's employment with the Company
or the contents or provisions of this Agreement without the prior written
consent of the other, which consent shall not be unreasonably withheld;
provided, however, that the Company shall not be prohibited from making such
disclosures as it reasonably determines are required by federal and state
securities laws. Neither party hereto shall make disparaging remarks about the
other or otherwise seek to damage the reputation or standing of the other in the
business community.
(h) It is understood and agreed by Garvey and the Company that this
Agreement constitutes a settlement of all disputed claims between the parties
and that the parties deny any and all wrongdoing, liability or responsibility to
each other in connection with or on account of same. The parties have entered
into this Agreement solely in order to avoid the cost of continuing to arbitrate
or litigate these matters.
(i) The Agreement may be executed in counterparts, and the parties will
accept faxed signatures in anticipation of originals to follow.
(j) This Agreement is part of a global settlement of all claims, lawsuits,
and arbitration proceedings between Garvey and the Company and is expressly
contingent on the dismissal with prejudice of the Litigation and on the
execution of additional full and complete mutual releases between the Company
and (1) Harold Olden, (2) the firm of Ritchie & Rediker, L.L.C., (3) the law
firm of Shapiro, Forman & Allen LLP, (4) the law firm of Bouchard, Margules &
Friedlander, P.A., and (5) the law firm of Lindquist & Vennum, P.L.L.P., it
being understood that such dismissal may occur after the execution of such
mutual releases.
IN WITNESS WHEREOF, the Company and Garvey have caused this Agreement
to be executed as of the date first above written.
BIRMINGHAM STEEL CORPORATION
By /s/ John D. Correnti
-----------------------
John D. Correnti
Its Chairman and CEO
/s/ Robert A. Garvey
-----------------------
Robert A. Garvey
<PAGE>
Exhibit 6.2
SALE AND PURCHASE AGREEMENT
BETWEEN
BIRMINGHAM STEEL CORPORATION,
and
NORTH AMERICAN METALS, LTD.
September 28, 2000
<PAGE>
TABLE OF CONTENTS
1. PURCHASE AND SALE OF THE BUSINESS.......................................1
1.1 Purchase and Sale of Memphis Assets...... ..................1
1.2 Excluded Assets.............................................3
1.3 Assumption of Liabilities...................................4
1.4 Purchase and Sale of Capital Stock of AS&W..................5
2. PURCHASE PRICE, CLOSING, AND RELATED MATTERS............................6
2.1 Purchase Price..............................................6
2.2 Allocation..................................................7
2.3 Closing.....................................................7
2.4 Purchase Price Adjustment...................................8
3. REPRESENTATIONS AND WARRANTIES OF BIRMINGHAM STEEL......................8
3.1 Organization and Good Standing..............................8
3.2 Authority; Validity; No Breach..............................8
3.3 Extent of Transferred Assets and Stock......................9
3.4 Consents and Approvals......................................9
3.5 Financial Statements.......................................10
3.6 Absence of Adverse Changes.................................10
3.7 Licenses and Permits.......................................10
3.8 Commitments................................................11
3.9 Brokers and Finders........................................12
3.10 Real Property..............................................12
3.11 Personal Property..........................................14
3.12 Litigation and Orders......................................15
3.13 Intellectual Property......................................16
3.14 Taxes......................................................16
3.15 Insurance..................................................18
3.16 Employees; Employee Benefit Plans; Labor Matters...........19
3.17 Environmental..............................................21
3.18 Accuracy of Information; Full Disclosure...................23
3.19 Valid Title to Shares; No Options..........................23
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................24
4.1 Organization...............................................24
4.2 Authority; Validity; No Breach.............................24
4.3 Consents and Approvals; No Violations......................24
4.4 Litigation.................................................25
4.5 Access.....................................................25
4.6 Financial Ability..........................................25
4.7 Brokers and Finders........................................25
4.8 Accuracy of Information; Full Disclosure...................25
5. COVENANTS OF BIRMINGHAM STEEL..........................................26
5.1 Access and Information; Inspections........................26
5.2 Preserve Accuracy of Representations and Warranties........26
5.3 Conduct of Business........................................26
5.4 HSR........................................................28
5.5 Non-Compete Agreements.....................................28
5.6. Monthly Financial Statements...............................28
5.7. Taxes......................................................29
6. COVENANTS OF BUYER....................................................29
6.1 HSR........................................................29
6.2 Preserve Accuracy of Representations and Warranties........30
6.3 Continuation of Employment.................................30
6.4 Taxes......................................................30
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIRMINGHAM STEEL................31
7.1 Warranties True and Correct................................31
7.2 Execution and Delivery of Instruments......................31
7.3 Unfavorable Action or Proceeding...........................31
7.4 Performance of Covenants...................................31
7.5 Consents, Approvals and Authorizations.....................31
7.6 Exhibits and Schedules.....................................32
7.7 Opinion of Counsel.........................................32
7.8 Material Adverse Change....................................32
7.9 Releases...................................................32
7.10 Governmental Concurrences..................................32
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER...........................32
8.1 Warranties True and Correct................................32
8.2 Consents, Approvals and Authorizations.....................32
8.3 Execution and Delivery of Instruments......................32
8.4 Performance of Covenants...................................33
8.5 Unfavorable Action or Proceeding...........................33
8.6 Governmental Concurrences..................................33
8.7 Opinion of Counsel.........................................33
8.8 Exhibits and Schedules.....................................33
8.9 Material Adverse Change....................................33
9. CLOSING................................................................34
9.1 Items to be Delivered at the Closing.......................34
10. TRANSITIONS FOLLOWING CLOSING..........................................36
10.1 Books and Records..........................................36
10.2 Confidentiality............................................37
10.3 Sale of DRI................................................37
10.4 Accounts Receivable........................................37
10.5 Transition.................................................37
11. INDEMNIFICATION........................................................38
11.1 Survival...................................................38
11.2 Indemnification by Birmingham Steel........................38
11.3 Indemnification by the Buyer...............................39
11.4 Claims.....................................................40
11.5 Limitation.................................................41
11.6 Basket.....................................................41
12. TERMINATION AND ABANDONMENT............................................41
12.1 Methods of Termination.....................................41
12.2 Termination Due to Default.................................42
12.3 Procedure Upon Termination.................................42
13. ARBITRATION............................................................42
14. BENEFIT AND BINDING EFFECT; NO ASSIGNMENT..............................43
15. EXPENSES...............................................................43
16. NOTICES................................................................43
17. SEVERABILITY...........................................................44
18. AMENDMENTS.............................................................45
19. COUNTERPARTS...........................................................45
20. HEADINGS...............................................................45
21. GOVERNING LAW..........................................................45
22. PUBLIC ANNOUNCEMENTS...................................................45
23. ENTIRE AGREEMENT.......................................................45
24. DEFINITIONS............................................................46
<PAGE>
SALE AND PURCHASE AGREEMENT
THIS SALE AND PURCHASE AGREEMENT (the "Agreement") is entered into as
of the 28th day of September, 2000, by and between Birmingham Steel
Corporation, a Delaware corporation ("Birmingham Steel"), and North American
Metals, Ltd., a Michigan corporation ("Buyer").
Recitals
A........Birmingham Steel owns and operates various steel mill
facilities throughout the United States. Birmingham Steel owns all rights,
titles and interests to all of the issued and outstanding capital stock of
American Steel & Wire corporation, a Delaware corporation ("AS&W").
B........AS&W owns all rights, titles and interests in all of the
assets and business currently conducted at and operates the Cuyahoga Works
facility located in Cuyahoga Heights, Ohio and the Missile Wire Facility (also
known as the T.O.W. facility) located in Cleveland, Ohio (collectively, the
"Cleveland Facilities"), and Birmingham Steel owns and operates a steel plant in
Memphis, Tennessee (the "Memphis Facility"). The ownership and operation of the
Cleveland Facilities and the Memphis Facility is referred to herein as the
"Business".
C........The Cleveland Facilities and the Memphis Facility, together
with the American Iron Reduction, LLC facility located in Louisiana (the "AIR
Facility"), generally comprise the Special Bar Quality Division of Birmingham
Steel (the "SBQ Division"). The Memphis Facility and the Cleveland Facilities
are collectively referred to herein as the "Facilities".
D........Buyer desires to purchase, and Birmingham Steel desires to
sell, all right, title and interest in the Business, which transaction will be
consummated by the purchase and sale of all the assets of any kind of Birmingham
Steel which are used or held for use in the operation of the Memphis Facility,
except as specifically excluded herein, and all of the capital stock of AS&W
(and thereby all the assets owned by AS&W and currently used at the Cleveland
Facilities), subject to the terms and conditions of this Agreement.
Agreements
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
adequacy of which are hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF THE BUSINESS.
1.1 Purchase and Sale of Memphis Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
2.3 below), Birmingham Steel shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase and acquire from Birmingham Steel, on the
Closing Date (as defined in Section 2.3 below), all of the business, assets,
properties, goodwill and rights of Birmingham Steel of any kind which are used
or necessary for the operation of the Memphis Facility (whether owned, leased or
otherwise controlled, directly or indirectly, and regardless of location) other
than the Excluded Assets (as defined in Section 1.2) (all of the transferred
assets being referred to collectively as the "Transferred Assets"), free and
clear all of all liens, encumbrances, mortgages and/or claims and third party
rights of any kind (other than the Permitted Exceptions, as defined in Section
3.10(a) below and the Assumed Liabilities, as defined in Section 1.3 below),
including, without limitation, all of Birmingham Steel's right, title and
interest in and to the following:
(a) all real property owned by Birmingham Steel upon which the
Memphis Facility is located and more particularly described on Schedule
3.10(a)(1) attached hereto, together with all buildings, structures,
improvements, appurtenances and fixtures located thereon, together with all of
Birmingham Steel's right, title and interest in and to all easements, rights of
way, licenses and other interests therein;
(b) Birmingham Steel's leasehold interest in and to all
parcels of real property used in the Memphis Facility that are leased by
Birmingham Steel from third parties pursuant to the Real Property Leases set
forth on Schedule 3.10(b)(1) attached hereto, together with Birmingham Steel's
right, title and interest in and to all structures, improvements, buildings,
leasehold improvements, appurtenances and fixtures located thereon, together
with all of Birmingham Steel's right, title and interest in and to all
easements, rights of way, licenses and other interests therein;
(c) All tangible personal property used in connection with the
operation of the Memphis Facility of every kind and nature, including, without
limitation, all furniture, fixtures, equipment and machinery and spare parts and
consumables for same, including raw materials, billets, work in process, and
finished goods inventory with respect to the Memphis Facility, vehicles, and
owned or licensed computer systems, including without limitation, the personal
property for the Memphis Facility on Schedule 1.1(c);.
(d) All intangible property of every kind and nature which
exists as of the Closing Date and which is necessary or useful in Birmingham
Steel's operation of the Memphis Facility, including, without limitation, the
following:
(i) all patents, trademarks, trade names, service marks,
logos, trade secrets, copyrights, and all applications and
registrations therefor that are owned, licensed or otherwise
controlled by Birmingham Steel and used or required in connection
with the operation of the Memphis Facility, and licenses thereof
pursuant to which Birmingham Steel have any right to the use or
benefit of, or other rights (with respect to the Memphis
Facility), with respect to any of the foregoing, including
without limitation, the items identified on Schedule 1.1(d)(i)
(the "Intellectual Property");
(ii) Except as provided on Schedule 3.4 hereto, all
licenses, permits, certificates, franchises, registrations, other
indicia of authority relating to the operation of the Memphis
Facility as presently conducted by Birmingham Steel and relating
to any renovation or construction on the Real Property, which
Permits are listed on Schedule 3.7(1); and
(iii) the goodwill of the Memphis Facility.
(e) Birmingham Steel's respective rights pursuant to all
leases of personal property to which Birmingham Steel is a party relating to the
Memphis Facility accruing on or after the Closing, including without limitation,
the Personal Property Leases listed on Schedule 3.11(b)(1), and all of the oral
and written contracts, obligations, purchase and sales orders or other
commitment which are currently in effect with respect to the construction,
renovation, ownership, servicing, maintenance, occupancy and/or operation of the
Memphis Facility (the "Contracts") accruing on or after the Closing, including,
without limitation, the Contracts listed on Schedule 3.8(1) hereof; (f) all
files, contracts, documents, records, customer lists, research and development
reports and records, production reports and records, service and warranty
records, equipment logs, operating guides and manuals, creative materials,
advertising materials, promotional materials, studies, reports, correspondence
and other similar documents and records and copies of all personnel records of
Employees (as defined in Section 3.16(a)) retained by Buyer, as all such books
and records relate to the operations of the Facilities (regardless of the form
of storage or retrieval); and (g) all accounts receivable of Birmingham Steel
relating to the Memphis Facility carried on the books of Birmingham Steel as of
the Closing Date.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 1.1 or elsewhere in this Agreement, the following items (collectively,
the "Excluded Assets) are not part of the sale and purchase contemplated
hereunder, are excluded from the Transferred Assets, and shall remain the
property of Birmingham Steel after the Closing:
(a) all cash and cash equivalents and all securities and
short term investments (other than outstanding accounts
receivable);
(b) the minute books, stock records and corporate seal of
Birmingham Steel;
(c) U.S. Trademark Registration Number: 797.516; serial
number 74/310482; applicant: Birmingham Steel Corporation, mark B
design.
(d) the rights of Birmingham Steel under this Agreement;
(e) all contracts of insurance of Birmingham Steel and any
claim or right of Birmingham Steel thereunder, except as may be
provided by this Agreement;
(f) rights and claims of Birmingham Steel that may be
asserted as a defense, cross claim or counterclaim in any action,
suit, proceeding that may be brought against Birmingham Steel and
that relate to any liability or obligation of Birmingham Steel
retained by Birmingham Steel pursuant to this Agreement;
(g) Birmingham Steel's tangible assets located at Birmingham
Steel's home office in Birmingham, Alabama; and
(h) the original tax returns, financial records, and other
books, records and correspondence of Birmingham Steel relating to
the Memphis Facility pre-Closing, other than those files and
records specifically included by Section 1.1(f) and copies of any
of the foregoing or other files required by Buyer in the
operation of the Memphis Facility; and
(i) any assets relating to or used exclusively in the
operation of the AIR Facility and not located at the Facilities.
1.3 Assumption of Liabilities. On the Closing Date, Buyer shall
assume and agree to discharge only the following specifically
enumerated obligations and liabilities of Birmingham Steel and
AS&W, (the "Assumed Liabilities"):
(a) Unless discharged by the Buyer in accordance with Section 2.1(d)
below, the following indebtedness of Birmingham Steel or AS&W:
(i) The Industrial Development Board of the City of Memphis and
County of Shelby, Tennessee Pollution Control Revenue Bonds
(Birmingham Steel Corporation) Series 1996, dated October 1, 1996, in
the original amount of Twenty Six Million and No/100 Dollars
($26,000,000.00), and the related promissory note, loan agreement, and
ancillary agreements thereto, along with the Reimbursement Agreement,
dated October 1, 1996, and amendments thereto, by and between
Birmingham Steel and PNC Bank (the "Memphis Loan");
(ii) The Promissory Note between Birmingham Steel Corporation and
the Tennessee Valley Authority, dated February 13, 1998, in the
original amount of One Million Five Hundred Thousand and No/100
Dollars ($1,500,000.00) (the "Memphis TVA Note");
(iii) The State of Ohio Solid Waste Disposal Revenue Bonds Series
1995 (AS&W Corporation Project), dated September 1, 1995, in the
original amount of Fifteen Million Five Hundred Thousand and No/100
Dollars ($15,000,000.00), and the related promissory note, loan
agreement, and ancillary agreements thereto, along with the Amended
and Restated Reimbursement Agreement, dated October 12, 1999, and
amendments thereto, by and among Birmingham Steel, AS&W and Bank of
America, N.A. (the "Cleveland Loan").
The Memphis Loan, the Memphis TVA Note, and the Cleveland Loan shall be
collectively referred to herein as the "Assumed Indebtedness."
(b) All obligations under the Contracts, Real Property Leases
and Personal Property Leases relating to the Business, that become due after
Closing, but specifically excluding any obligation or liability arising from any
default or non performance by Birmingham Steel or AS&W prior to the Closing Date
and any liability for payment of any retention compensation to any Employees,
which liabilities shall be the sole responsibility of Birmingham Steel;
(c) Subject to the provisions of Section 2.4, all accounts
payable of Birmingham Steel and AS&W relating to the operation of the Business
existing as of the Closing Date incurred in the ordinary course of business
prior to the Closing Date, but in no event more than the value of the inventory
of AS&W and of the Memphis Facility acquired under this Agreement.
Notwithstanding the foregoing provisions, Birmingham Steel
shall retain and the Buyer shall not assume and shall not be liable in any way
for any costs, claims, liabilities or obligations of any kind of Birmingham
Steel or AS&W whether from the Transferred Assets or the Business and/or
Birmingham Steel's or AS&W's other assets and businesses (regardless of when
asserted) other than the Assumed Liabilities, including without limitation,
taxes, government assessments or fees, employee severance payments, benefit
claims, or staywell bonuses, product liability, workers' compensation, third
party claims, government investigations and/or litigation (actual or threatened)
("Retained Liabilities"). In addition, subject to the limitations of Section 11,
Birmingham Steel shall retain and indemnify Buyer from and against, and Buyer
shall not assume and shall not be liable in any way for any Environmental Costs
or Environmental Matters arising out of or in any way related to Birmingham
Steel's or AS&W's operation of the Transferred Assets or the Business between
June 30, 1986, and the Closing Date ("Retained Environmental Liabilities").
1.4 Purchase and Sale of Capital Stock of AS&W. Subject to the terms and
conditions of this Agreement, at the Closing and on the Closing Date (as defined
below), Birmingham Steel will sell, assign, transfer and deliver to Buyer, and
Buyer will purchase, all of the issued and outstanding shares of common stock,
par value $0.01 per share, of AS&W (the "Shares"). At the Closing, Birmingham
Steel shall deliver, or cause to be delivered, to Buyer, free and clear of all
pledges, liens or encumbrances of any kind, the certificates representing all of
the Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank. As a consequence of the sale and transfer of the Shares, the Buyer
will acquire indirectly, through ownership of the Shares, all of the assets of
AS&W currently used in the operation of the Cleveland Facilities (whether owned,
leased or otherwise controlled, directly or indirectly, and regardless of
location, other than the Excluded Assets set forth in 1.2) (the "AS&W Assets"),
including, but not limited to (i) the assets of AS&W referred to in Section
3.3,(ii) the owned real property of AS&W and all buildings, structures,
improvements, appurtenances and fixtures located thereon and related easements,
rights-of-way and other interests referred to in Section 3.10 and described on
Schedule 3.10(a)(2), and the leased real property leases described on Schedule
3.10(b)(2), (iii) the owned personal property of AS&W referred to in Section
3.11 and listed on Schedule 3.11(a)(1), and the leased personal property listed
on Schedule 3.11(b)(2), and all furniture, fixtures, equipment and machines and
spare parts and consumables, vehicles and computer systems, (iv) all
intellectual property and intangible personal property of AS&W including that
referred to in Section 3.13 and listed on Schedule 3.13, (v) all licenses,
permits, certificates, franchises, registrations and other indicia of authority
listed in Schedule 3.7(2), (vii) the goodwill of AS&W, (viii) all files,
contracts, corporate records and documents, customer lists, research and
development reports and records, production reports and records, service and
warranty records, equipment logs, operating guides and manuals, creative
materials, advertising materials, promotional materials, studies, reports and
other documents and records and personnel records of Employees of AS&W, (ix) all
raw materials, billetts, work in process and finished goods inventory of AS&W,
and (x) all accounts receivable of AS&W.
2. PURCHASE PRICE, CLOSING, AND RELATED MATTERS
2.1 Purchase Price. The purchase price for the Transferred Assets (the
"Purchase Price") shall be payable by Buyer to Birmingham Steel at Closing as
follows:
(a) Buyer shall deposit with a financial institution
acceptable to both parties (the "Escrow Agent"), in an interest bearing account,
the amount of Ten Million United States Dollars ($10,000,000.00) (together with
any interest accrued thereon from time to time (the "Escrow Deposit"). The
Escrow Deposit shall be disbursed eighteen (18) months from the date of Closing
in accordance with the terms of an Escrow Agreement, in form agreed to by the
parties, among Birmingham Steel, Buyer, and the Escrow Agent (the "Escrow
Agreement");
(b) Buyer shall deliver to Birmingham Steel a promissory note
(the "Promissory Note") in the amount of Forty Million United States Dollars
($40,000,000.00) payable to Birmingham Steel in equal semi-annual installments
of principal and interest based upon a ten (10) year amortization schedule with
the remaining balance paid in a lump sum payment at the end of the fifth (5th)
year. Interest shall be payable at an annualized rate of seven percent (7%) per
year on the outstanding principal balance. The Promissory Note shall be fully
negotiable, allowing Birmingham Steel the right to sell or transfer the
Promissory Note to any third party who is not a competitor of Buyer. The
Promissory Note shall be in form acceptable to the parties and will be secured
by a second security interest in the Transferred Assets and the Shares. The
Promissory Note shall be subordinate to the Buyer's primary financing. Buyer
shall have the right at any time to prepay the Promissory Note without penalty.
(c) Buyer shall pay to the "Owner Participants" and the
"Lenders" an amount equal to the "Stipulated Loss Value" (as such terms are
defined in the Memphis Equipment Lease (defined below)) as of the Closing Date,
to discharge all obligations of Birmingham Steel under the Equipment Lease
Agreement, dated September 30, 1997, and the Lease Supplement, dated November
10, 1997, and all amendments and ancillary agreements thereto (the "Memphis
Equipment Lease"). Attached hereto as Schedule 2.1(c) is a schedule which
indicates the "Stipulated Loss Value Percentage" (as defined in the Equipment
Lease), which is used to calculate the Stipulated Loss Value pursuant to the
Equipment Lease, which payment amount as of the date hereof shall not exceed
$73,000,000. Birmingham Steel shall receive at Closing a release from the Owner
Participants and the Lenders stating that its obligations under the Equipment
Lease have been fully and completely discharged.
(d) Buyer shall deliver to Birmingham Steel either (i) a
mutually acceptable assignment and assumption agreement whereby the Buyer agrees
to assume all obligations of Birmingham Steel under the Assumed Indebtedness,
including, any documents or instruments which Buyer is required to execute in
order to replace or renegotiate all or any portion of the Assumed Indebtedness
and release Birmingham Steel of its obligations thereunder, or (ii) a mutually
acceptable written confirmation that Buyer has directly discharged all of the
Assumed Indebtedness not assumed by Buyer in (i) above; provided, Buyer shall
only be obligated to assume or discharge under (i) or (ii) above an aggregate
amount of principal payments equal to Forty Two Million and No/100 Dollars
($42,000,000.00); provided, further, that under either (i) or (ii), Buyer shall
obtain for Birmingham Steel a release of Birmingham Steel's obligations under
the Assumed Indebtedness from the appropriate third parties thereunder, up to
the maximum amount of Buyer's liability stated in this paragraph.
(e) Buyer shall deliver to Birmingham Steel by wire transfer
cash in an amount equal to the sum of the following (the "Cash Purchase Price"):
(i) the net purchase price adjustment in accordance with
Section 2.4 below; plus
(ii) an amount equal to Two Hundred Seventeen Million and
No/100 Dollars ($217,000,000.00), less (A) the Stipulated Loss
Value paid by the Buyer pursuant to Section 2.1(c) above, and (B)
the principal portion of the obligations assumed or paid by Buyer
and any interest paid by Buyer pursuant to Section 2.1(d) above.
2.2 Allocation. The Purchase Price shall be allocated between the Transferred
Assets and the Shares, and among the Various Transferred Assets as shall be
mutually agreed by the parties prior to the Closing. After the Closing, the
parties shall make consistent use of the allocation, fair market value and
useful lives of the Transferred Assets for all tax purposes and in any and all
filings, declarations and reports with the Internal Revenue Service ("IRS") in
respect thereof, including the reports required to be filed under Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), if applicable, it
being understood that Buyer shall prepare and delivery IRS Form 8594 to
Birmingham Steel within forty-five (45) days after the Closing Date if such form
is required to be filed with the IRS. In any Proceeding related to the
determination of any tax, neither Buyer nor Birmingham Steel shall contend or
represent that such allocation is not a correct allocation. 2.3 Closing. The
consummation of the transactions contemplated by this Agreement (the "Closing")
shall take place at a mutually agreeable time and place in Birmingham, Alabama
at 9:00 a.m. (local time), no later than November 1, 2000, subject to the
applicable waiting period under the Hart-Scott-Rodino Act, unless the parties
agree otherwise (the date of Closing shall be referred to as the "Closing
Date"). Should the transactions contemplated by this Agreement not close on or
before such date, the parties' rights, duties and obligations under and pursuant
to this Agreement shall be governed by Section 12 of this Agreement.
Consummation of the transactions provided for in this Agreement shall be
effective as of the closing of business on the Closing Date.
2.4 Purchase Price Adjustment.
(a) Prior to the Closing Date, the parties will each provide
appropriate representatives who will conduct a physical count and quality of the
Inventory at the Facilities, and the parties will review the accounts receivable
of AS&W and the Memphis Facility (the "Accounts Receivable") and will agree on a
value of the inventory being acquired. The value of the inventory purchased
shall take into account obsolescence and merchantable condition. The purchase
price payable at Closing will then be adjusted by adding to the purchase price
the agreed value of such inventory and Accounts Receivable and by subtracting
the agreed amount of accounts payable of AS&W and the accounts payable of the
Memphis Facility as of the Closing Date. For purposes of determining the amount
of accounts receivable to be added to the purchase price, the total accounts
receivable of AS&W and the Memphis Facility will be discounted by five percent
(5%).
(b) If the parties cannot agree on the value of the inventory,
such value shall be determined by an independent appraisal by a qualified
appraiser agreed to by both parties, and if the parties cannot agree on an
appraiser, each of the Buyer and Birmingham Steel shall select an appraiser and
the two so selected shall select a third. The value shall be the average of the
two appraisals closest in amount. The parties each shall bear the cost of their
respective appraiser and shall split the cost of the third. If only one
appraiser is required, the parties shall split the cost.
3. REPRESENTATIONS AND WARRANTIES OF BIRMINGHAM STEEL.
Birmingham Steel, on its own behalf and on behalf of AS&W, represents
and warrants to Buyer, which representations and warranties shall be true and
correct on the date hereof and through and including the Closing Date, as
follows:
3.1 Organization and Good Standing. Both Birmingham Steel and AS&W are each a
corporation duly organized, validly existing and in good standing under the laws
of their respective states of incorporation. Birmingham Steel has all requisite
corporate power and authority and is entitled to own or lease the Transferred
Assets, and insofar as it relates to the business of the Memphis Facility, to
carry on such business in all places where such business is now conducted and
such properties are owned or leased. AS&W has all requisite corporate power and
authority to and is entitled to own or lease all of its assets and to carry on
such business in all places where such business is now conducted and such
properties are owned or leased.
3.2 Authority; Validity; No Breach.
(a) Birmingham Steel has the full corporate or other right,
power, legal capacity and authority, without the consent of any other person, to
execute, deliver and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated hereby. All corporate and other actions
required to be taken by Birmingham Steel to authorize the execution, delivery
and performance of this Agreement, all documents executed by Birmingham Steel
which are necessary to give effect to this Agreement, and all transactions
contemplated hereby have been duly and properly taken or obtained or will be
duly and properly taken or obtained by Birmingham Steel prior to the Closing
Date. No other corporate or other action on the part of Birmingham Steel is
necessary to authorize the execution, delivery and performance of this
Agreement, all documents necessary to give effect to this Agreement, and all
transactions contemplated hereby.
(b) This Agreement is, and the documents to be delivered at
the Closing will be, the lawful, valid and legally binding obligation of
Birmingham Steel, each enforceable in accordance with its terms, except to the
extent enforceability is limited by equitable remedies and laws affecting
creditors' rights generally. Except for the consents set forth on Schedule 3.4
(which Birmingham Steel believes can be obtained), the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not, with or without the giving of notice and/or the passage of time:
(i) violate or conflict with the Certificate of
Incorporation, Bylaws, or other internal governance documents
of Birmingham Steel or AS&W or any provision of law, statute,
rule, regulation, agreement or other obligation to which
Birmingham Steel or AS&W is subject;
(ii) violate or conflict with any judgment, order, writ
or decree of any court applicable to Birmingham Steel or
AS&W;
(iii) result in the breach or termination of any
provision of, or create rights of acceleration or constitute
a default under, the terms of any material indenture,
mortgage, deed of trust, contract, agreement or other
instrument to which Birmingham Steel or AS&W is a party or
by which Birmingham Steel or AS&W is bound or result in the
creation or imposition of any lien, charge or encumbrance
upon any of the Transferred Assets; and
(iv) not provoke or exacerbate any third party or
governmental litigation, claim, investigation and/or
proceeding that would have a Material Adverse Effect (as
defined in Section 3.4 herein) on the Business or would
require Buyer's material involvement in an ongoing
litigation or proceeding.
3.3 Extent of Transferred Assets and Stock. The Transferred Assets include all
of the real and personal property, intangible property, rights and other assets
owned, leased or used by Birmingham Steel directly in connection with the
operation of the Memphis Facility on and immediately prior to the date hereof,
excluding the Excluded Assets. AS&W owns or leases all of the AS&W Assets used
in connection with the operation of the Cleveland Facilities on and immediately
prior to the date hereof.
3.4 Consents and Approvals. Except as set forth in Schedule 3.4, or Schedule
3.11(a), 3.11(b)(1), or 311(b)(2), no consent, approval, permit, waiver,
authorization or other action of or by any nongovernmental person or entity, and
no consent, approval, permit, waiver, authorization or other action of or by any
court or governmental person or entity, is required in connection with the
transfer of the Transferred Assets and the Shares to Buyer and the execution,
delivery or performance of this Agreement by Birmingham Steel, except those
which, individually or in the aggregate, would not have a material adverse
effect on the Business taken as a whole (a "Material Adverse Effect").
3.5 Financial Statements. Prior to the date hereof, Birmingham Steel has
delivered to Buyer copies of the unaudited balance sheets with respect to the
Business as of June 30, 2000, 1999, 1998 1997, 1996, 1995 and 1994, as well as
unaudited statements of operations and line of business equity (deficiency) and
cash flows for the seven months ended June 30, 1994, and for each of the next
six years in the period ended June 30, 2000, copies of which are attached as
Schedule 3.5 (the "Financial Statements"). Within ten (10) days prior to
Closing, Birmingham Steel will deliver to Buyer audited Financial Statements as
of and for the periods referenced above. Birmingham Steel has delivered to Buyer
copies of monthly financial statements certified by the Chairman and Chief
Financial Officer of Birmingham Steel covering the monthly periods from June 30,
2000, to the date of this Agreement, to the extent such statements have been
prepared by Birmingham Steel as of the date hereof. The monthly unaudited
financial statements are true, complete and correct in all material respects and
present fairly and accurately the financial condition of the Business and the
results of operations thereof at the dates and for the periods indicated and
have been prepared in conformity with generally accepted accounting principles,
applied consistently for the periods specified (the unaudited financial
statements do not include a statement of cash flows or footnotes nor have they
been audited or reviewed by independent auditors). From and after June 30, 2000,
Birmingham Steel has not (and at Closing shall not have) made any changes in
their accounting methods or practices with respect to the Business.
3.6 Absence of Adverse Changes. Since June 30, 2000, there has not been any
material adverse change in the assets, liabilities, business, or operations of
the Facilities or the Transferred Assets. 3.7 Licenses and Permits. Except for
the pending permits set forth on Schedule 3.7(1) and Schedule 3.7(2), Birmingham
Steel and AS&W have all governmental permits, licenses, orders and
authorizations, and has made all required filings and registrations with,
governmental entities, required for the conduct of its business as presently
conducted at the Facilities and the ownership, lease or operation of the
Facilities, except where the failure to have obtained any such permit would not,
individually or in the aggregate, have a Material Adverse Effect. A complete and
correct list of the permits is set forth on Schedule 3.7(1) and Schedule 3.7(2)
(collectively, the "Permits"), and a true and complete copy of each such Permit
has been previously delivered to the Buyer. All the Permits are valid and in
full force and effect, and Birmingham Steel or AS&W have duly performed and are
in compliance with all its obligations under the Permits, except where any
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect. To the Best Knowledge of Birmingham Steel and AS&W, no event has
occurred with respect to the Permits which allows, or after notice or lapse of
time or both would allow, the suspension, limitation, revocation or termination
thereof or would result in any other material impairment of the rights of
Birmingham Steel or AS&W in and under any of the Permits, and no terminations
thereof or proceedings to suspend, limit, revoke or terminate any Permit have
been threatened. As used throughout this Agreement, the phrase "to the Best
Knowledge of Birmingham Steel and AS&W" shall refer to matters actually known by
the President, Chief Executive Officer, Chief Administrative Officer, Chief
Financial Officer, any Vice President, the Secretary, the Comptroller of
Birmingham Steel, the Plant Manager at the Facilities, and the Environmental
Manager of Birmingham Steel, after reasonable inquiry but without any imputed or
constructive knowledge.
3.8 Commitments.
(a) Schedule 3.8(1) sets forth a list of the contracts,
obligations or commitments (whether written or oral) of Birmingham Steel which
directly relate to the Memphis Facility and Schedule 3.8(2) sets forth a list of
the contracts, obligations or commitments (whether written or oral) of AS&W
(each a "Commitment"): (i) any contract for the lease of property from or to
third parties requiring aggregate lease or rental payments in excess of $50,000
over the term of the lease; (ii) any contract in effect on the date hereof which
involves more than $50,000 for the purchase of materials, commodities, supplies
or other property or for the receipt of services or for the sale of property in
the ordinary course of business; (iii) any partnership, joint venture,
shareholder or similar agreement; (iv) any mortgage, pledge, deed of trust, loan
or credit agreement, contract for borrowed money, guaranty, letter of credit,
currency or interest rate exchange agreement or similar instrument or agreement
related to the Assumed Liabilities; (v) any manufacturer's representative
agreement, brokers agreement, distributorship or dealer agreement or other
agreement relating to the sale or distribution of products to or by persons or
other retailers; (vi) any agreement involving in excess of $50,000 in any year
and not made in the ordinary course of business; (vii) any agreement with any
manufacturer, supplier or customer with respect to discounts or allowances other
than agreements for the purchase and sale of goods and services of Birmingham
Steel (with respect to the Memphis Facility) or AS&W reflecting normal and
customary discounts and allowances given and received by Birmingham Steel (with
respect to the Memphis Facility) or AS&W; (viii) any agreement relating to the
acquisition or disposition of businesses, product lines or a material amount of
assets other than in the ordinary course of business; (ix) any indemnification
agreement with an Employee of the Business (as defined in Section 3.18(a)); (x)
any other agreement not of the type referred to in clauses (i) through (ix) to
which either Birmingham Steel or AS&W is a party or by which any of the their
assets may be bound or affected that was not entered into in the ordinary course
of business, and (1) which involves more than $50,000, (2) has an unexpired term
longer than one year which cannot be canceled within thirty (30) days without
penalty, or (3) is otherwise material to the Facilities. Birmingham Steel has
delivered to the Buyer true and complete copies of all Commitments, which are
required to be disclosed pursuant to this Agreement.
(b) All purchase orders and commitments and all sales orders
and commitments of Birmingham Steel with respect to the Memphis Facility and
AS&W have been entered into in the ordinary course of business.
(c) No default or any event, which, with the lapse of time or
the election of any person other than Birmingham Steel or AS&W, will become a
default exists under any of the Commitments listed in Schedule 3.8(1) and
Schedule 3.8(2). Each of the Commitments is now valid, in full force and effect
and enforceable in accordance with its terms, and Birmingham Steel or AS&W, as
the case may be, has fulfilled in all material respects, or taken all action
reasonably necessary to enable it to fulfill when due, all its obligations under
the Commitments.
3.9 Brokers and Finders. Neither Birmingham Steel or AS&W has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement for which either Birmingham Steel or AS&W shall be responsible. 3.10
Real Property.
(a) Schedule 3.10(a)(1) attached hereto sets forth a
description of the real property owned by Birmingham Steel relating specifically
to the Memphis Facility and Schedule 3.10(a)(2) sets forth a description of the
real property owned by AS&W (collectively, the "Owned Real Property"). Either
Birmingham Steel or AS&W has, except as set forth on Schedules 3.10(a)(1) and
3.10(a)(2), good, clear, indefeasible, insurable and marketable title in fee
simple to the Owned Real Property free and clear of any and all mortgages, deeds
of trust, security interests, mechanics or other liens, easements, pledges,
rights of way or encumbrances of any kind subject only to the Permitted
Exceptions (as defined below). There are no purchase contracts, options or other
agreements of any kind whereby any person or entity will have acquired or will
have any basis to assert any right, title or interest in, or right to the
possession, use, enjoyment or proceeds of, any part or all of the Owned Real
Property.
"Permitted Exceptions" shall mean with respect to any of the
Real Property: (i) liens for taxes and assessments assessed by state or local
jurisdictions not yet due and payable, to the extent such taxes are, or will be,
prorated among the parties; (ii) Real Property Leases (as defined in Section
3.10(b)); (iii) imperfections of title, easements and encumbrances, if any,
which do not materially adversely affect the present use of the Real Property or
otherwise materially interfere with the business being conducted at such Real
Property; (iv) any statutory lien arising in the ordinary course of business by
operation of law with respect to a liability that is not yet due or delinquent;
(v) liens for taxes, assessments and charges and other claims which the either
Birmingham Steel or AS&W are contesting in good faith and for which either
Birmingham Steel or AS&W shall have provided adequate security for the payment
thereof; (vi) all matters specifically waived by Buyer, as set forth on Schedule
3.10(a)(1) and 3.10(a)(2); and (vii) liens, financing statements and security
interests relating to any of the Assumed Liabilities; provided, however, that
Permitted Exceptions shall not include any of Birmingham Steel's or AS&W's
mortgages, deeds of trusts, deeds to secure debt, debts, liens or other monetary
encumbrances of any nature whatsoever if not related to the Assumed Liabilities.
(b) Schedule 3.10(b)(1) attached hereto sets forth an accurate
and complete list of all real property leases, subleases, options and
commitments, oral or written, pursuant to which Birmingham Steel is, and will be
as of the Closing Date, a lessor, lessee or sublessee, and Schedule 3.10(b)(2)
attached hereto sets forth an accurate and complete list of all real property
leases, subleases, options and commitments, oral or written, pursuant to which
AS&W is, and will be as of the Closing Date, a lessor, lessee or sublessee
(collectively referred to as the "Real Property Leases"), including without
limitation, the street address and a legal description of the real property
subject to each Real Property Lease and the name and address of the lessor of
each such Real Property Lease. Birmingham Steel has provided Buyer with complete
and correct copies of all Real Property Leases. Except for the disputed default
notice from the Port Authority of Memphis, and except for the various amendments
and restatements to the Real Property Leases, as such items are set forth in
Schedule 3.10(b)(1) or 3.10(b)(2):
(i) the Real Property Leases have not been modified,
amended or assigned, are legally valid, binding and
enforceable in accordance with their respective terms, and are
in full force and effect, except to the extent enforceability
is limited by equitable remedies and laws affecting creditors'
rights generally;
(ii) there are no monetary defaults and no material
nonmonetary defaults by Birmingham Steel or AS&W or, to the
Best Knowledge of Birmingham Steel and AS&W, any other party
to the Real Property Leases;
(iii) neither Birmingham Steel nor AS&W has received
notice of any default, offset, counterclaim or defense under
any of the Real Property Leases;
(iv) to the Best Knowledge of Birmingham Steel and
AS&W, no condition or event has occurred which with the
passage of time or the giving of notice or both would
constitute a default or breach by Birmingham Steel or AS&W of
the terms of any of the Real Property Leases. All of the rent,
security deposits, and other sums and charges due and payable
under the Real Property Leases have been paid in full through
the date hereof except as set forth on Schedule 3.10(b)(1) and
Schedule 3.10(b)(2); and
(v) to the Best Knowledge of Birmingham Steel and
AS&W, there are no purchase contracts, options or other
agreements of any kind whereby any person or entity as of the
Closing Date, will have acquired or will have any basis to
assert any right, title or interest in, or right to the
possession, use, enjoyment or proceeds of, any part or all of
Birmingham Steel's or AS&W's, as applicable, leasehold
interests in the Real Property (as defined in Section
3.10(d)).
(c) Schedule 3.10(c) sets forth, to the Best Knowledge of
Birmingham Steel and AS&W, a list of the name and address of each person whose
consent is required to effect the transfer and assignment of the Real Property
Leases as herein contemplated and to the Best Knowledge of Birmingham Steel and
AS&W, there is no basis or unreasonable demands which would impede a timely
securing of such consents.
(d) To the Best Knowledge of Birmingham Steel and AS&W, the
Owned Real Property and Leased Real Property (collectively referred to herein as
the "Real Property") is zoned to permit the uses for which each parcel of Real
Property is presently used. To the Best Knowledge of Birmingham Steel and AS&W,
neither Birmingham Steel nor AS&W has received any notice that the Real Property
is not in compliance with all applicable building, zoning, and other land use
and similar laws, codes, ordinances, rules, regulations and orders, including,
without limitation, the Americans With Disabilities Act (other than
environmental laws, which are more particularly described below) (collectively,
"Real Property Laws"), except for any noncompliance that would not have a
Material Adverse Effect. Neither Birmingham Steel nor AS&W has received any
written notice of violation or claimed violation of any Real Property Law that
would materially affect the use, occupancy, operation or marketability of the
Real Property. To the Best Knowledge of Birmingham Steel and AS&W, the continued
use, occupancy and operation of the Real Property, as currently used, occupied
and operated does not constitute a nonconforming use under any Real Property
Law, and the continued existence, use, occupancy and operation of the Real
Property, and the right and ability to repair and/or rebuild any unit of the
Real Property in the event of casualty, is not dependent on any special permit,
exception, approval or variance other than as required by the laws, rules and
regulations generally applicable to the operation of the Facilities.
(e) To the Best Knowledge of Birmingham Steel and AS&W,
neither the whole nor any portion of the Real Property owned, leased, occupied
or used by either Birmingham Steel or AS&W has been condemned, requisitioned or
otherwise taken by any public authority (a "Public Taking"), and no notice of
any Public Taking has been received by either Birmingham Steel or AS&W with
regard to the Real Property. To the Best Knowledge of Birmingham Steel and AS&W,
no such Public Taking is threatened or contemplated. To the Best Knowledge of
Birmingham Steel and AS&W, no public improvements have been ordered to be made
or which have heretofore been assessed, and to the Best Knowledge of Birmingham
Steel and AS&W, there are no special, general or other assessments pending,
threatened against or affecting the Real Property.
(f) To the Best Knowledge of Birmingham Steel and AS&W, there
are no conditions that would have a Material Adverse Effect on the ownership,
possession, use or occupancy of the Real Property ("Adverse Conditions")
relating directly to the physical condition of the Real Property or any portion
thereof, including, without limitation, Adverse Conditions relating to soil
conditions, sinkholes or geologic faults
(g) The Real Property owned or leased by AS&W constitutes all of
the Real Property used in connection with the operation of the
Cleveland Facilities.
3.11 Personal Property.
(a) Set forth on Schedule 3.11(a)(1) is a description of all
tangible personal property owned by AS&W of every kind and nature, including,
without limitation, all furniture, fixtures, equipment and machinery and spare
parts and consumables for same, vehicles, owned or licensed computer systems,
and equipment, along with all raw materials, billetts, work in process and
finished goods inventory with respect to the Facilities (the "Inventory"). The
personal property described on Schedule 1.1(c) with respect to the Memphis
Facility and Schedule 3.11(a)(1) is herein referred to collectively as the
"Personal Property." Either Birmingham Steel or AS&W has sole title and
ownership of all the Personal Property. Except as set forth in such schedules,
none of the Personal Property is subject to, or will be subject to as of the
Closing Date, any security interest, mortgage, pledge, lien, right of first
refusal, option, restriction, liability, covenant, charge or encumbrance of any
kind or character whatsoever, other than the Permitted Exceptions. Birmingham
Steel represents and warrants that the Cleveland Facilities, and the assets
located at the Cleveland Facilities, including the Personal Property located at
the Cleveland Facilities, are in operating condition in good working order and
repair, ordinary wear and tear excepted, and there are no material defects or
capital expenditures required. Buyer acknowledges that the Memphis Facility has
never been fully operational and has been shut down since January of 2000.
Birmingham Steel makes no representation or warranty of any kind or character as
to the physical condition of the Memphis Facility, the real properties and
improvements comprising the Memphis Facility, and any tangible Transferred Asset
relating to the Memphis Facility; such Transferred Assets relating to the
Memphis Facility are conveyed to the Buyer as of the date hereof and as of the
Closing Date "AS IS, WHERE IS, AND WITH ALL FAULTS."
(b) Schedule 3.11(b)(1) sets forth an accurate and complete
list of all leases of personal property to which Birmingham Steel is a party and
which relate to the Memphis Facility and Schedule 3.11(b)(2) sets forth an
accurate and complete list of all leases of personal property to which AS&W is a
party, and with respect to both Schedules 3.10(b)(1) and 3.10(b)(2), which are
not cancelable upon thirty (30) days notice or pursuant to which there is an
outstanding obligation in excess of $50,000 (the "Personal Property Leases").
Birmingham Steel will provide Buyer with complete and correct copies of all such
Personal Property Leases before Closing. Except as set forth in Schedule
3.11(b):
(i) the Personal Property Leases listed therein have
not been modified, amended or assigned, are legally valid,
binding and enforceable in accordance with their respective
terms and are in full force and effect, except to the extent
enforceability is limited by equitable remedies or laws
affecting creditors' rights generally;
(ii) there are no monetary defaults and no material nonmonetary
defaults by Birmingham Steel or AS&W, or, to the Best
Knowledge of Birmingham Steel and AS&W, any other party to the
Personal Property Leases listed therein;
(iii) Neither Birmingham Steel nor AS&W has received notice of any
default, offset, counterclaim or defense under any Personal
Property Lease listed therein; and
(iv) to the Best Knowledge of Birmingham Steel and AS&W, no
condition or event has occurred which with the passage of time
or the giving of notice or both would constitute a default or
breach by Birmingham Steel or AS&W of the terms of any
Personal Property Leases listed therein.
(c) The Personal Property owned or leased by AS&W constitutes
all of the Personal Property used in connection with the operation of the
Cleveland Facilities. 3.12 Litigation and Orders. Except as set forth in
Schedule 3.12 attached hereto (said matters set forth in Schedule 3.12 being
collectively referred to herein as "Pending Litigation"), neither Birmingham
Steel nor AS&W is engaged in or a party to or, to the Best Knowledge of
Birmingham Steel and AS&W, threatened with any suit, action, proceeding,
inquiry, enforcement action, investigation, claim or demand or legal,
administrative, arbitration or other method of settling disputes or
disagreements which are reasonably likely to have a Material Adverse Effect on
the Facilities, and to the Best Knowledge of Birmingham Steel and AS&W, there is
no basis for any such action. Neither Birmingham Steel nor AS&W has received
notice of any investigation, claim threatened or contemplated, by any federal or
state governmental authority or agency, that remains unresolved, involving the
Transferred Assets or the AS&W Assets. Set forth in Schedule 3.12 is a complete
and accurate description of each outstanding order, writ, injunction or decree
of any court, arbitrator, government or governmental agency against or affecting
the Transferred Assets or the AS&W Assets.
3.13 Intellectual Property. All patents, trademarks, trade names, service marks,
logos, trade secrets, copyrights, and all applications and registrations
therefor that are owned, licensed or otherwise controlled by Birmingham Steel
and used or required in connection with the operation of the Memphis Facility is
set forth in Section 1.1(d)(i), and all patents, trademarks, trade names,
service marks, logos, trade secrets, copyrights, and all applications and
registrations therefor that are owned, licensed or otherwise controlled by AS&W
is set forth on Schedule 3.13 (collectively the "Intellectual Property"); either
Birmingham Steel or AS&W own or possess adequate licenses or other rights to use
all such Intellectual Property, and no rights thereto have been granted to
others by Birmingham Steel or AS&W (as applicable). Except as set forth in
Section 1.1(d)(i) or Schedule 3.13 attached hereto, no other patents,
trademarks, service marks, trade names or copyrights are necessary to conduct or
to continue the operation of the Facilities as heretofore conducted.
3.14 Taxes.
(a) Definitions. For purposes of this Agreement,
(i) The term "Taxes" shall mean all federal, state,
local, foreign, alternative or add-on minimum tax, and other
net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees,
assessments, or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax, or
additional amounts with respect thereto, and the term "Tax"
means any one of the foregoing Taxes;
(ii) The term "Returns" means all returns,
declarations, reports, statements, and other documents
required to be filed in respect of Taxes, and the term
"Return" means any one of the foregoing Returns.
(b) Birmingham Steel hereby represents and warrants the
following with respect to AS&W and the Memphis Facility:
(i) Filing of Returns. There have been properly
completed and filed on a timely basis and in correct form all
Returns required to be filed on or prior to the date hereof.
As of the time of filing, the foregoing Returns correctly
reflected the facts regarding the income, business, assets,
operations, activities, status, or other matters of Birmingham
Steel, the Memphis Facility and AS&W or any other information
required to be shown thereon. In particular, the foregoing
returns are not subject to penalties under Section 6662 of the
Code, relating to accuracy-related penalties (or any
corresponding provision of the state, local or foreign Tax
law) or any predecessor provision of law. An extension of time
has been requested for all income tax returns for the tax year
ending June 30, 2000.
(ii) Payment of Taxes. With respect to all amounts in
respect of Taxes imposed on Birmingham Steel, the Memphis
Facility and AS&W or for which Birmingham Steel, the Memphis
Facility and AS&W is or could be liable, whether to taxing
authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation
agreements), with respect to all taxable periods or portions
of periods ending on or before the Closing Date, all
applicable tax laws and agreements have been fully complied
with, and all such amounts required to be paid by Birmingham
Steel, the Memphis Facility and AS&W to taxing authorities or
have been paid or have been properly accrued in the financial
statements, or will be paid in the future by Birmingham Steel.
(iii) Audit History. As of the Closing Date, no
issues have been raised (and are currently pending) by any
taxing authority in connection with any of the Returns that
have been filed. No waivers of statutes of limitation with
respect to the Returns have been given by or requested from
AS&W.
(iv) Liens. There are no liens for Taxes (other than
for current Taxes not yet due and payable) on either the
assets of Birmingham Steel or AS&W.
(v) Prior Affiliated Groups. Except for the group of
which AS&W is presently a member, AS&W has never been a
member of an affiliated group of corporations, within the
meaning of Section 1504 of the Code.
(vi) Section 341(f) Consent. AS&W has not filed a
consent pursuant to the collapsible corporation provisions of
Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of any asset owned by it.
(vii) Safe Harbor Lease Property. None of the assets
of AS&W is property that it is required to treat as being
owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code.
(viii) Adjustments Under Section 481. AS&W has not
agreed to make nor is it required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(ix) Parachute Payment. AS&W is not a party to any
agreement, contract, arrangement, or plan that has resulted or
would result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(x) International Boycott. AS&W has not participated in
and will not participate in an international boycott within
the meaning of Section 999 of the Code.
(xi) Foreign Person. Birmingham Steel is not a person
other than a United States person within the meaning of the
Code.
(xii) Permanent Establishment. AS&W does not have and
has not had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or
convention.
(xiii) Existing Partnerships. AS&W is not a party to
any joint venture, partnership, limited liability company or
other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
(xiv) Excess Loss Account. No excess loss account,
within the meaning of Treasury Regulation Section 1.1502-19,
exists with respect to AS&W at the Closing Date.
(xv) Deferred Intercompany Transactions. AS&W will not
have, as of the Closing Date, any deferred gain or loss
arising from deferred intercompany transactions, within the
meaning of Treasury Regulation Section 1.1502-13.
(xvi) Net Operating Loss and Other Carryovers. The
net operating loss and other carryovers available to AS&W, to
the Best Knowledge of Birmingham Steel and AS&W, as of June
30, 2000, are set forth on Schedule 3.14(b)(xvi). These
amounts are subject to change, pending the completion of
Birmingham Steel's income tax returns for the tax years ending
June 30, 2000 and 2001, for any allocations or adjustments
required pursuant to Treasury Regulation Sections 1.1502-21,
1.1502-76, and 1.1502-79 and Proposed Treasury Regulation
Section 1.1502-55 and for any changes made by any tax
authority after the Closing Date that affect such amounts.
(xvii) Overall Foreign Losses. As of the Closing Date,
AS&W has not sustained an "overall foreign loss," within the
meaning of Section 904(f) of the Code.
(xviii) Overall Foreign Losses. As of the Closing Date,
AS&W has not sustained an "overall foreign loss," within the
meaning of Section 904(f) of the Code. 3.15 Insurance.
Schedule 3.15 attached hereto sets forth a complete and
accurate list and brief description of all insurance
policies currently held by Birmingham Steel and AS&W with
respect to the Facilities, including an indication of
whether such policies are "claims made" or "occurrence"
policies. Except as set forth on Schedule 3.15, such
insurance policies are in full force and effect. Birmingham
Steel is not delinquent with respect to any premium payments
thereon nor are Birmingham Steel and AS&W in default or
breach with respect to any provision contained in any such
insurance policies.
3.16 Employees; Employee Benefit Plans; Labor Matters.
(a) Schedule 3.16(a) contains a current, correct and complete
list by Facility of the names and current hourly wage, monthly salary and other
compensation of all employees of Birmingham Steel who perform services for
Birmingham Steel at the Memphis Facility, and all employees of AS&W who perform
services for AS&W at the Cleveland Facilities (collectively, the "Employees");
provided, however, that the Employees shall not include any employees employed
by Birmingham Steel at the Birmingham Steel home office in Birmingham, Alabama.
Except as set forth in Schedule 3.16(c), neither Birmingham Steel nor AS&W is a
party to any oral (express or implied) or written employment agreement, employee
benefit plan, consulting agreement or independent contractor agreement with any
individual or entity, or any other agreements that contain any severance or
termination pay obligations with regard to the Employees (other than funded
obligations to pay liabilities to Employees under Birmingham Steel's qualified
retirement plans).
(b) As of the Closing Date, all retention payments, vacation
pay, holiday pay, short or long-term disability, reimbursement of expenses,
severance payments, staywell bonuses, tuition reimbursement, commissions,
compensation for absences due to jury duty and funeral leave, paid time off,
wages, salaries, bonuses, sick pay, extended sick leave, insurance benefits, or
other employee benefits or reimbursements of any kind (collectively, "Paid Time
Off") with regard to any Employee, to the extent same is owed and with the
exception of any amounts disputed in good faith by either Birmingham Steel or
AS&W (which shall be the responsibility of Birmingham Steel), will have been
paid by either Birmingham Steel or AS&W, prior to or at Closing in accordance
with their practices and procedures.
(c) Except as set forth in Schedule 3.16(c) attached hereto,
neither Birmingham Steel nor AS&W is a party to, bound by or obligated to
contribute to or under, any: pension or retirement plan (except for Social
Security), medical, hospitalization, vision, dental, life, disability or other
similar benefit plan, deferred compensation plan, or other similar plan,
severance plan or policy, or any other similar performance, bonus, incentive or
benefit plans, trusts, funds, arrangements, policies, agreements or
understanding, and are not a party to or bound by any collective bargaining
agreement, policy manual or employment handbook (all of the foregoing are
collectively referred to as the "Benefit Plans") with respect to any Employees.
To the Best Knowledge of Birmingham Steel and AS&W, no Employee is represented
by any labor union or organization. Birmingham Steel is not in material default
under any Benefit Plan, and each has been administered substantially in
accordance with its terms.
(d) Except with respect to Workers' Compensation claims or
matters set forth on Schedule 3.12, there is no labor dispute, collective
bargaining or other union agreements, work stoppage, strike, investigation,
controversy, grievance, arbitration, complaint, claim or other labor relations
problem (collectively, "Labor Proceeding") pending or, to the Best Knowledge of
Birmingham Steel and AS&W, threatened, between Birmingham Steel or AS&W and any
present or former Employee, nor have any discharges or terminations occurred
which, to the Best Knowledge of Birmingham Steel and AS&W, would form the basis
for any valid claim of discrimination against Birmingham Steel or AS&W which
could have a Material Adverse Effect upon the Facilities.
(e) With regard to the Employees, Birmingham Steel and AS&W
have materially complied with and are currently materially complying with, and
neither Birmingham Steel nor AS&W has received any notice of noncompliance with,
any and all applicable laws relating to the employment of labor including,
without limitation, those laws relating to wages, hours, equal employment,
occupational safety and health, workers' compensation, unemployment insurance,
collective bargaining, affirmative action and the payment and withholding of
social security and other taxes. Birmingham Steel and AS&W have withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of the Employees, and are not liable for any material arrearages of any tax or
penalties for failure to comply with the foregoing.
(f) Schedule 3.16(f) sets forth all Employee Pension Benefit
Plans (as defined in Section 3(2) of ERISA) ("Plan" or "Plans") applicable to
the Employees. With respect to each Plan, no litigation or administrative or
other proceeding is pending or, to the Best Knowledge of Birmingham Steel and
AS&W, threatened involving such Plan; such Plan has been administered and
operated in substantial compliance with, and has been amended to substantially
comply with all applicable laws, including, without limitation, ERISA, the Code
and the regulations issued under ERISA and the Code; provided, however, that the
Plan has not been amended to the extent that it is within a remedial amendment
period under Code Section 401(b); Birmingham Steel has made and as of the
Closing Date will have made or accrued, all payments and contributions required,
or reasonably expected to be required, to be made under the provisions of such
Plan or required to be made under applicable laws, with respect to any period
prior to the Closing Date, such amounts to be determined using the ongoing
actuarial and funding assumptions of the Plan; such Plan is fully funded in an
amount sufficient to pay all liabilities accrued (including, if applicable,
liabilities and obligations for health care, life insurance and other benefits
after termination of employment) and claims incurred to the Closing Date, or the
Financial Statements contain adequate reserves or paid-up insurance has been
provided, therefor; on the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the Closing Date; and such Plan has been
administered and operated only in the ordinary and usual course and
substantially in accordance with its terms. With respect to each Plan, to the
Best Knowledge of Birmingham Steel and AS&W, neither such Plan, nor any trustee,
administrator, fiduciary, agent or employee thereof, has at any time been
involved in a transaction which would constitute a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, unless
such transaction is specifically permitted under Section 407 or 408 of ERISA,
Section 4975 of the Code, or a class or administrative exception issued by the
U.S. Department of Labor, nor has any such person been involved in or caused
such Plan to be involved in a breach of fiduciary duty under Section 404 of
ERISA. Neither Birmingham Steel, AS&W, nor any Plan has any obligation to
provide, or liability for, health care, life insurance or other benefits after
termination of employment, except as required by Section 601 of ERISA and
Section 4980B of the Code.
(g) Neither Birmingham Steel nor AS&W have now and have not in
the past maintained a Plan which is a "defined benefit plan" (as defined in
Section 3(35) of ERISA or 414(j) of the Code) or any other Plan which is subject
to the minimum funding requirements of Section 302 of ERISA or Section 412 of
the Code applicable to the Employees. With respect to the Employees, neither
Birmingham Steel nor AS&W now and have not in the past participated in or had
any obligation to contribute to a "multiemployer plan" (as defined in Section
3(37) of ERISA) or any plan which is subject to the laws of any country other
than the United States. 3.17 Environmental. Except as identified in Schedule
3.17, with respect to the Cleveland Facilities after June 30, 1986, and the
Memphis Facility:
(a) Birmingham Steel or AS&W has obtained and is in compliance
with all material permits, licenses, approvals and other authorizations required
under Environmental Laws for the operation of the Facilities as they are being
operated on the Closing Date (the "Environmental Permits"). To the extent
required by applicable Environmental Laws, Birmingham Steel or AS&W have made or
will make prior to the Closing Date, timely and, to the Best Knowledge of
Birmingham Steel and AS&W, complete applications for the extension, reissuance,
renewal, or transfer of the Environmental Permits.
(b) To the Best Knowledge of Birmingham Steel and AS&W,
Birmingham Steel and AS&W since June 30, 1986 have fully complied, and are
currently in material compliance with all federal, state and local environmental
statutes, laws, ordinances, orders, rules, regulations and moratoria, including,
without limitation, the Clean Air Act, as amended ("CAA"); the Federal Water
Pollution Control Act, as amended ("CWA"); the Safe Drinking Water Act, as
amended ("SDWA"); the Resource Conservation and Recovery Act, as amended
("RCRA"); the Hazardous Material Transportation Act, as amended ("HMTA"); the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act of 1986, as amended
("CERCLA"); and all other similar federal, state or local laws, ordinances,
orders, rules, regulations or moratoria relating to the protection of the
environment, including the Common Law (collectively "Environmental Laws"). Since
June 30, 1986, neither Birmingham Steel nor AS&W has received any written notice
alleging any noncompliance with or potential liability pursuant to any of such
Environmental Laws except, to the Best Knowledge of Birmingham Steel and AS&W,
for such notices that have been fully satisfied, resolved, or complied with and
are no longer pending.
(c) With the exception of such substances transported,
generated, treated, used, stored or disposed of in the ordinary course of
Birmingham Steel's and AS&W's business, no medical wastes or hazardous wastes,
as defined in Subtitle C of RCRA or under applicable state law, and no hazardous
substances, as defined in CERCLA or under applicable state law, and no hazardous
materials, as defined by HMTA or under applicable state law, and no toxic
pollutants, as defined in CAA, CWA or SDWA, and no petroleum, including crude
oil or any fraction thereof, or any other toxic, infectious or noxious
substances and/or any waste or recycled products thereof (as such substances are
defined by Environmental Laws (collectively "Hazardous Substances")) have been
spilled, leaked, released, discharged or disposed of (collectively "Releases")
by Birmingham Steel or AS&W since June 30, 1986, on, into, under or from, the
Real Property (which for purposes of this Section 3.17 shall include, without
limitation, the air above and all surface and subsurface soil and water), or at
any location except in compliance with applicable Environmental Laws and except
to the extent to which such Releases will not cause a Material Adverse Effect
(as defined in Section 3.4 of this Agreement).
(d) There is not now occurring on the Real Property and to the
Best Knowledge of Birmingham Steel and AS&W, there has not been in the past
since June 30, 1986, any Release or threatened Release of any Hazardous
Substances from any source except to the extent to which such Releases will not
cause a Material Adverse Effect (as defined in Section 3.4 of this Agreement).
Further, to the Best Knowledge of Birmingham Steel, and AS&W there are no
Hazardous Substances including polychlorinated biphenyls ("PCBs"), asbestos,
radon, chemicals, or other conditions or uses of the Real Property or property
in its vicinity, whether natural or man-made, which pose a present or potential
threat of damage to the health of persons, to property, to natural resources or
to the environment. To the Best Knowledge of Birmingham Steel and AS&W, no
underground storage tanks, as defined under Environmental Laws, are present on
or under the Real Property, and to the Best Knowledge of Birmingham Steel and
AS&W, no such tanks were previously situated on or under, or abandoned or
removed on or from, the Real Property.
(e) To the Best Knowledge of Birmingham Steel and AS&W,
neither Birmingham Steel nor AS&W have any liability, responsibility or
obligation, whether fixed, unliquidated or absolute under or pursuant to any
Environmental Laws relating to Hazardous Substances, including, without
limitation, any liability, responsibility or obligation to any person, entity or
governmental authority for fines, violations, penalties, personal injury,
damages or awards, or for investigation, expense, removal, or remedial action to
effect compliance with or discharge any duty, obligation or claim under any such
laws or regulations ("Environmental Claims"), and no such Environmental Claims
are pending or threatened.
(f) Neither Birmingham Steel nor AS&W since June 30, 1986, nor
to the Best Knowledge of Birmingham Steel and AS&W, have any prior owners or
operators or lessees of the Real Property, ever sent, arranged for disposal or
treatment, arranged with a transporter for transport for disposal or treatment,
transported, or accepted for transport any Hazardous Substances from the Real
Property to a facility, site or location (collectively, "Arrangement for
Disposal"), which, pursuant to CERCLA or any Environmental Law, (a) has been
placed or is proposed to be placed, on the National Priorities List (as such
term is defined in CERCLA), or any state cleanup list, or (b) which is subject
to a pending or threatened claim, administrative order or other demand or
request to take removal or remedial action by any person, entity or governmental
authority except to the extent to which such Arrangements for Disposal will not
cause a Material Adverse Effect (as defined in Section 3.4 of this Agreement).
(g) To the Best Knowledge of Birmingham Steel and AS&W, they
have provided Purchaser with true, complete and accurate copies of (and Schedule
3.17(g) identifies) all material audits, investigations or assessments with
respect to Environmental Laws or environmental conditions of the Facilities in
the possession, custody or control of Birmingham Steel or AS&W with respect to
the Facilities, or, the Transferred Assets and identifies the results of
groundwater, surface water, air and soil testing, underground storage tank
tests, building material or paint testing, and written communications with
federal, state or local governments regarding Environmental Laws in connection
with the Facilities or their operations.
(h) For purposes of this Agreement, the following terms shall
have the following meanings:
"Environmental Costs" means, without limitation actual or
potential cleanup costs, remediation, removal, or other response costs required
to cause the Facilities or the Transferred Assets to come into compliance in all
material respects with Environmental Laws, investigation costs (including,
without limitation, reasonable fees of consultants, counsel, and other experts
in connection with any environmental investigation, testing, audits or studies)
required by any governmental agency or authority, losses, liabilities or
obligations (including, without limitation, liabilities or obligations under any
lease or other contract), payments, damages (including, without limitation, any
actual, punitive or consequential damages under any statutory laws, common law
cause of action or contractual obligations or otherwise, including, without
limitation, damages (i) of third parties for personal injury or property damage,
or (ii) to natural resources), civil or criminal fines or penalties, judgments,
and amounts paid in settlement, arising out of or relating to or resulting from
any Environmental Matter.
"Environmental Matter" means any matter relating to, the
Facilities or the Transferred Assets arising out of, relating to, or resulting
from the violation of or liability under any Environmental Law, and any such
matters relating to emissions, discharges, disseminations, releases or
threatened releases, of Hazardous Materials into the air (indoor and outdoor),
surface water, groundwater, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures in violation of or resulting
in liability under any Environmental Law or otherwise arising out of, relating
to, or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, arranging for transport or disposal, or handling
of Hazardous Materials by the Facilities or the Transferred Assets in violation
of or resulting in liability under any Environmental Law.
3.18 Accuracy of Information; Full Disclosure. All documents delivered by or on
behalf of Birmingham Steel and AS&W in connection with this Agreement are
complete and accurate in all material respects; provided, however, Birmingham
Steel makes no warranty as to the accuracy of third party material. No
representation or warranty by Birmingham Steel or on behalf of AS&W contained in
this Agreement or in any Exhibit or Schedule or document referenced therein,
hereto delivered to the Buyer pursuant hereto or in connection herewith contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements made, in the
context in which made, not materially false or misleading. 3.19 Valid Title to
Shares; No Options. The authorized capital stock of AS&W consists of one
thousand (1,000) shares of common stock, par value $0.01 per share. As of the
date hereof, one thousand (1,000) Shares are issued and outstanding and
Birmingham Steel is the sole, true, lawful record and beneficial owner of all of
such Shares. AS&W has issued no options to purchase or rights to subscribe for
or otherwise acquire any securities and/or any rights or interests therein of
the AS&W and none of the Shares are subject to any voting trust or other
agreement or arrangement with respect to the voting of such Shares or any lien,
pledge or encumbrance of any kind.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Birmingham Steel, which
representations and warranties shall be true and correct on the date hereof and
through and including the Closing Date, as follows: 4.1 Organization. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of its incorporation with full corporate power and authority to carry on its
businesses as it is now being conducted. Buyer is or prior to closing will be
duly qualified as a foreign business in the State of Tennessee and the State of
Ohio. The Buyer is a newly organized entity and is currently not engaged in any
operating business whatsoever.
4.2 Authority; Validity; No Breach.
(a) Buyer has the full right, power, legal capacity and
authority, without the consent of any other person, to execute, deliver and
carry out the terms of this Agreement and all documents and agreements necessary
to give effect to the provisions of this Agreement and to consummate the
transactions contemplated hereby. All internal governance and other actions
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement, all documents executed by them necessary to give
effect to this Agreement, and all transactions contemplated hereby have been
duly and properly taken or obtained or will be duly and properly taken or
obtained by Buyer prior to the Closing. No other internal governance or other
action on the part of Buyer is necessary to authorize the execution, delivery
and performance of this Agreement, all documents necessary to give effect to
this Agreement and all transactions contemplated hereby.
(b) This Agreement is, and the documents to be delivered at
the Closing will be, the lawful, valid and legally binding obligations of Buyer
enforceable in accordance with their respective terms, except as enforceability
may be limited by equitable remedies or laws affecting creditors' rights
generally. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not, with or without the giving of
notice and/or the passage of time: (i) violate or conflict with the Articles of
Incorporation, by-laws or other internal governance documents of Buyer, or any
provision of law, statute, rule or regulation to which Buyer is subject; or (ii)
violate or conflict with any judgment, order, writ or decree of any court
applicable to Buyer; or (iii) violate or conflict with any law or regulation
applicable to Buyer; or (iii) result in the breach or termination of any
provision of, or create rights of acceleration or constitute a default under,
the terms of any material indenture, mortgage, deed of trust, contract,
agreement or other instrument to which Buyer is a party or by which it is bound.
4.3 Consents and Approvals; No Violations. Except for applicable requirements of
the Hart-Scott-Rodino Act, no filing or registration with, and no permit,
authorization, consent or approval of any domestic or foreign government or
public body, agency or authority is necessary for the consummation by the Buyer
of the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by the Buyer nor the consummation by the Buyer of the
transactions contemplated hereby nor compliance by the Buyer with any of the
provisions hereof will (a) conflict with or result in violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which the
Buyer is a party or by which the Buyer or any of its properties or assets may be
bound, or (b) violate any order, writ, injunction, decree, statute, treaty, rule
or regulation applicable to the Buyer or any of its properties or assets.
4.4 Litigation. There is no legal action or governmental proceeding or
investigation pending or, to the Knowledge of Buyer, threatened against or
relating to Buyer, its properties or business, nor does Buyer know or have
reason to know of any basis for any such action, that would in any way adversely
affect or prevent the consummation of the transactions contemplated by this
Agreement. As used throughout this Agreement, the phrase "to the Knowledge of
Buyer" shall refer to matters actually known by William L. Powers and Howard B.
Hill after reasonable inquiry but without any imputed or constructive knowledge.
4.5 Access. Birmingham Steel has provided and will provide the Buyer with such
access to and copies of the books, records, facilities and personnel of
Birmingham Steel and AS&W with respect to the Facilities as the Buyer has
requested in connection with its investigation of the business, affairs and
properties of Birmingham Steel and AS&W relating to the Facilities prior to the
Closing.
4.6 Financial Ability. On the Closing Date, the Buyer will have available
sufficient cash, lines or credit or other sources of immediately available funds
to enable it to pay the Purchase Price at the Closing. 4.7 Brokers and Finders.
Buyer has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby. 4.8 Accuracy of Information; Full Disclosure. All documents
delivered by or on behalf of the Buyer in connection with this Agreement are
complete and accurate in all material respects; provided, however, Buyer makes
no warranty as to the accuracy of third party material. No representation or
warranty by the Buyer contained in this Agreement or in any Exhibit or Schedule
hereto delivered to Birmingham Steel pursuant hereto or in connection herewith
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements made, in
the context in which made, not materially false or misleading.
5. COVENANTS OF BIRMINGHAM STEEL.
5.1 Access and Information; Inspections. From the date hereof until the Closing,
Birmingham Steel shall give to Buyer and its representatives complete and
unconditional access at the offices of Birmingham Steel in Birmingham, Alabama
and the Facilities, as may be required, during normal business hours, upon
reasonable notice from Buyer make and timely deliver such copies as Buyer may
require to all of Birmingham Steel's or AS&W's personnel, books, accounts and
records and all other relevant documents and information with respect to the
Facilities as representatives of Buyer may from time to time request, all in
such manner as to not unduly disrupt Birmingham Steel's or AS&W's normal
business activities. From the date hereof until the Closing, Birmingham Steel
shall make the Facilities and their respective assets available for inspection
by Buyer and its representatives during normal business hours and upon at least
twenty-four (24) hours notice. Further, Buyer may, at its sole cost and expense,
undertake environmental, mechanical and structural surveys of the Real Property
and may examine all documents related to Environmental Laws or related to any
private or governmental agency which licenses or certifies any operations or
procedures at the Real Property.
5.2 Preserve Accuracy of Representations and Warranties. Birmingham Steel shall
correct any inaccuracy or change in information contained in the Schedules to
this Agreement as promptly as reasonably practicable, provided that all such
changes shall be delivered to Buyer and its legal counsel at least three (3)
business days before Closing and Buyer shall have the right to terminate this
Agreement without liability if materially adverse information has been presented
that is unacceptable to Buyer or its lenders prior to Closing. Prior to Closing,
Birmingham Steel covenants and agrees to amend the schedules with respect to any
item or event within ten (10) business days of Birmingham Steel's or AS&W's
discovery of such item or event, other than those items or events which are
within the ordinary course of business of Birmingham Steel or AS&W, which would
render any representation or warranty contained in Section 3 of this Agreement,
or would otherwise make the information contained in such schedules, inaccurate
in any material respect.
5.3 Conduct of Business. Prior to the Closing, except as otherwise approved by
Buyer in writing which approval will not be unreasonably withheld, and except
for the transactions herein contemplated, Birmingham Steel and AS&W shall:
(a) operate the Facilities and the Business as presently
operated and only in the ordinary course, and comply in all material respects
with all applicable legal and contractual obligations of and Commitments of
Birmingham Steel and AS&W;
(b) preserve the Facilities and the Business intact and
preserve the goodwill of Birmingham Steel's and AS&W's suppliers, customers,
employees and others relating to the Facilities and the Business and with whom
they have business relationships;
(c) make and continue to make or cause to be made all repairs,
restoration, replacements and maintenance that may be necessary to maintain the
assets used in the Facilities in as good a condition as they exist as of the
date hereof except that Birmingham Steel and AS&W shall not be required to make
any repairs or replacements in the nature of capital expenditures other than
capital expenditures that are reasonably necessary to the continued use of the
assets used in the Facilities and/or continued operation of the Facilities;
(d) not sell, lease or otherwise dispose of any of the assets
used in the Facilities with a value in excess of Fifty Thousand Dollars
($50,000) for any one sale, lease or other disposal or transfer, or Fifty
Thousand Dollars ($50,000) in the aggregate for all such sales, leases or other
disposals or transfers, or sell, lease or otherwise dispose of or transfer any
assets, properties, rights or claims not in the ordinary course of business.
Notwithstanding anything to the contrary contained in this Section 5.4(d):
(i) Birmingham Steel or AS&W shall be entitled to (A)
sell or consume inventory in the ordinary course of business
and (B) trade-in assets used in the Facilities on the purchase
of new assets (which assets would be among the Transferred
Assets or the assets owned by AS&W),
(ii) Other than in the ordinary course of business,
neither Birmingham Steel nor AS&W shall sell, lease or
otherwise dispose of or transfer any assets or properties, or
any assets used in the Facilities, which have been retired or
the use of which has been discontinued, and
(iii) Birmingham Steel shall be entitled to sell,
lease or otherwise dispose of or transfer any assets or
properties listed in Section 1.2 as Excluded Assets.
(e) not incur any indebtedness (i) which would have a Material
Adverse Effect on Birmingham Steel's ability to close the transactions
contemplated by this Agreement, (ii) which would cause any of the assets used in
the Facilities to be subject to any lien, security interest, restriction,
encumbrance or liability, or (iii) which would cause Birmingham Steel to breach
any of the representations and warranties contained in Section 3 of this
Agreement;
(f) not amend AS&W's Certificate of Incorporation or Bylaws,
and not materially amend Birmingham Steel's Certificates of Incorporation or
Bylaws which amendment would (i) have a Material Adverse Effect on Birmingham
Steel's ability to close the transactions contemplated by this Agreement, or
(ii) cause Birmingham Steel to breach any of the representations and warranties
contained in Section 3 hereof;
(g) not renew, extend or amend the Real Property or Personal
Property Leases or Contracts, which will be assigned to Buyer, without prior
written consent of Buyer, which shall not be unreasonably withheld;
(h) not enter into or extend any employment agreement with any
Employee who will be retained by Buyer or increase the compensation of any
Employee retained by Buyer, other than increases in accordance with Birmingham
Steel's or the prevailing plans procedures that do not cause compensation
payable to such Employee to exceed market rates;
(i) deal exclusively with Buyer for the Transferred Assets and
the Business and not (directly or indirectly) solicit, show, negotiate and/or
consummate in any way the sale, lease, transfer, encumbrance or conveyance in
any way the Transferred Assets or the Business or any rights, interests,
obligations and/or liabilities therein to any other party, except in the
ordinary course of business; and
(j) not agree, whether in writing or otherwise, to do any of the
foregoing actions specified in items (d) through (i) above.
Birmingham Steel will promptly notify Buyer of the occurrence
of any events which, individually or in the aggregate, may result in a material
adverse change in the assets used in the Facilities, their financial value or
condition, or the operations or information supplied by Birmingham Steel to
Buyer.
5.4 HSR. Within ten (10) business days of the date hereof, Birmingham
Steel shall cause to be filed any notification and report forms and related
material that it may be required to file with the Federal Trade Commission and
the Anti-Trust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act (the "HSR Act"), will use their commercially reasonable
efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be necessary. Any and
all filing fees associated therewith shall be borne equally by Buyer and
Birmingham Steel.
5.5 Non-Compete Agreements. On or before the Closing, Birmingham Steel shall
enter into a Confidentiality Agreement and Covenant not to Compete in form
mutually acceptable, whereby Birmingham Steel shall agree, among other things,
(i) not to disclose proprietary information transferred to Birmingham Steel by
Buyer; and (ii) not to compete directly or indirectly, with Buyer for a period
of three (3) years from the date of Closing.
5.6. Monthly Financial Statements.
From the date hereof, until the Closing Date, Birmingham Steel shall deliver to
Buyer monthly financial statements of the Business, certified by the Chairman
and Chief Executive Officer of Birmingham Steel, within twenty (20) days after
each month-end beginning with the month-end immediately after the date of this
Agreement.
5.7. Taxes.
(a) Termination of Existing Tax-Sharing Agreements. All
tax-sharing agreements or similar agreements with respect to or involving AS&W
shall be terminated prior to the Closing Date, and after the Closing Date, AS&W
shall not be bound thereby or have any liability thereunder for amounts due in
respect of periods prior to the Closing Date.
(b) Tax Elections. No new elections with respect to Taxes or
any changes in current elections with respect to Taxes affecting AS&W shall be
made after the date of this Agreement without prior written consent of Buyer.
(c) Cooperation and Records Retention. On a timely basis,
Birmingham Steel shall (i) provide Buyer with such assistance as may reasonably
be requested by Buyer in connection with the preparation of any Return, audit or
other examination by any taxing authority or judicial or administrative
proceedings relating to liability for Taxes, (ii) retain and provide Buyer with
any records or other information that may be relevant to such Return, audit or
examination, proceeding or determination, and (iii) provide Buyer with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Return of the other for any
period. Without limiting the generality of the foregoing, Birmingham Steel shall
retain, until the applicable statutes of limitations (including any extensions)
have expired, copies of all Returns, supporting work schedules, and other
records or information that may be relevant to such returns for all tax periods
or portions thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing Buyer
with a reasonable opportunity to review and copy the same.
(d) Tax Proceedings. Birmingham Steel shall exercise, at its
expense, complete control over the handling, disposition, and settlement of any
governmental inquiry, examination or proceeding that could result in a
determination with respect to Taxes due or payable by AS&W for which Birmingham
Steel may be liable or against AS&W which Birmingham Steel may be required to
indemnify Buyer pursuant hereto. Birmingham Steel shall, however, promptly
notify the Buyer if, in connection with any such inquiry, examination or
proceeding, any government authority proposes in writing to make any assessment
or adjustment with respect to Tax items of AS&W, which assessments or
adjustments could effect AS&W following the Closing Date, and shall consult with
the Buyer with respect to any such proposed assessment or adjustment.
(e) Election Under Section 338(h)(10). Birmingham Steel will not
consent to an election under Sections 338(g) and 338(h)(10) of the Code
with respect to the sale of AS&W.
6. COVENANTS OF BUYER.
6.1 HSR. Within ten (10) business days of the date hereof, Buyer shall cause to
be filed any notification and report forms and related material that it may be
required to file with the Federal Trade Commission and the Anti-Trust Division
of the United States Department of Justice under the HSR Act, will use their
commercially reasonable efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary. Any and all filing fees associated therewith shall be borne equally
by Buyer and Birmingham Steel.
6.2 Preserve Accuracy of Representations and Warranties. Buyer shall correct any
inaccuracy or change any information contained in Section 4 at least three (3)
days prior to the Closing.
6.3 Continuation of Employment. Buyer agrees that
pursuant to the Worker Adjustment and Retraining Notification Act ("WARN Act"),
29 U.S.C. ss.ss. 2101-2109, at the time of sale, Birmingham Steel's (with
respect to the Memphis Facility) or AS&W's Employees will immediately become the
Buyer's Employees for purposes of the WARN Act and, after such time, Buyer will
have the sole power and discretion to order a "plant closing" or "mass layoff,"
as those terms are defined in 29 U.S.C. ss. 2101(a)(2) and (3), respectively, or
to otherwise trigger the obligation to provide the notices required by the WARN
Act. If the obligation to provide WARN Act notices arises as a result of this
sale or thereafter, Buyer agrees to provide the notices required by the WARN
Act. Buyer further agrees to provide any and all notices required under any
state or local law relating to plant closings, mass layoffs, or reduction in
operations, including, but not limited to Tenn. Code ss. 50-1-104 and ss.
50-1-601 through 604.
6.4 Taxes.
(a) Cooperation and Records Retention. On a timely basis,
Buyer shall (i) provide Birmingham Steel with such assistance as may reasonably
be requested by Birmingham Steel in connection with the preparation of any
Return, audit or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) retain and
provide Birmingham Steel with, any records or other information that may be
relevant to such Return, audit or examination, proceeding or determination, and
(iii) provide Birmingham Steel with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Return of the other for any period. Without limiting the generality
of the foregoing, Buyer shall retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all Returns,
supporting work schedules, and other records or information that may be relevant
to such returns for all tax periods or portions thereof ending before or
including the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing Birmingham Steel with a reasonable
opportunity to review and copy the same.
(b) Tax Proceedings. Buyer shall notify Birmingham Steel
promptly, in writing, upon learning of any governmental inquiry, examination or
proceeding that could result in a determination with respect to Taxes due or
payable by AS&W for which Birmingham Steel may be liable or required to
indemnify Buyer. Buyer shall cooperate with Birmingham Steel, as it may
reasonably request, in any such inquiry, examination or proceeding. Buyer
acknowledges that Birmingham Steel will have complete control over any Tax
Proceedings where Birmingham Steel has any financial obligation for such tax.
(c) Election Under Section 338(h)(10). Buyer shall not make an
election under Sections 338(g) and 338(h)(10) of the Code with respect
to the acquisition of AS&W. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF
BIRMINGHAM STEEL.
Birmingham Steel's obligation to close the transactions contemplated by
this Agreement shall be, at the option of Birmingham Steel, subject to the
satisfaction of each of the following conditions (which may be waived
specifically in writing by Birmingham Steel in whole or in part) at or prior to
the Closing:
7.1 Warranties True and Correct. Each of the representations and
warranties made by Buyer set forth in this Agreement and in the Exhibits and
Schedules attached hereto shall be true and correct in all material respects at
and as of the Closing Date.
7.2 Execution and Delivery of Instruments. Buyer shall have executed and
delivered all documents and instruments required to be executed and delivered by
Buyer pursuant to the provisions of this Agreement.
7.3 Unfavorable Action or Proceeding. On the Closing Date, no action or
proceeding shall be pending or threatened wherein an unfavorable judgment,
decree or order would, in Birmingham Steel's reasonable opinion, prevent or make
unfavorable the carrying out of this Agreement, or would cause the transactions
contemplated by this Agreement to be rescinded. In the event of the receipt of
any communication from any department or agency of government or any other
notice (a copy of which communication or notice shall be promptly delivered to
the other parties hereto) prior to the Closing with regard to the transactions
contemplated by this Agreement, which communication or notice shall in the
reasonable opinion of Birmingham Steel threaten such an action or proceeding,
Birmingham Steel may cancel this Agreement by giving written notice to Buyer and
all parties shall thereupon be released from any and all liability related to
this Agreement, except for the obligations with respect to Sections 11.2 and
12.2 below.
7.4 Performance of Covenants. Buyer shall have materially performed all of the
obligations and materially complied with all of the covenants, agreements and
conditions required to be performed or complied with by them on or prior to the
Closing.
7.5 Consents, Approvals and Authorizations. The parties shall have obtained all
material consents, licenses, approvals, permits, waivers and authorizations of
third parties necessary or required for completion of the transactions
contemplated by this Agreement, including the expiration of the waiting period
under the HSR Act.
7.6 Exhibits and Schedules. The provisions of all Schedules that are to be
provided by Buyer shall be acceptable to Birmingham Steel in their reasonable
discretion.
7.7 Opinion of Counsel. Birmingham Steel shall have received the opinion of
Buyer's counsel dated the Closing Date in the form which is mutually acceptable.
7.8 Material Adverse Change. There shall not have been any material adverse
change in the financial position, earnings or prospects of Buyer.
7.9 Releases. Birmingham Steel shall have received a release from all applicable
parties with respect to the Assumed Indebtedness and the Equipment Lease.
7.10 Governmental Concurrences. Birmingham Steel shall be satisfied in the
exercise of Birmingham Steel's reasonable judgment that Buyer has obtained
assurances from all of the necessary governmental authorities that Buyer will be
granted all governmental approvals, licenses, certificates of need, clearances,
provider numbers and/or contracts necessary or appropriate for the operation of
the Transferred Assets as previously operated on and after the Closing including
the expiration of the waiting period under the HSR Act.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
Buyer's obligation to close the transactions contemplated by this
Agreement shall be, at the option of Buyer, subject to the satisfaction of each
of the following conditions (which may be waived specifically in writing by
Buyer in whole or in part) at or prior to the Closing:
8.1 Warranties True and Correct. Each of the representations and warranties made
by Birmingham Steel and on behalf of AS&W and set forth in this Agreement and in
the Exhibits and Schedules attached hereto shall be true and correct in all
material respects at and as of the Closing Date.
8.2 Consents, Approvals and Authorizations. The parties shall have obtained all
material consents, licenses, approvals, permits, waivers and authorizations of
third parties necessary or required for completion of the transactions
contemplated by this Agreement.
8.3 Execution and Delivery of Instruments. Birmingham Steel shall have executed
and delivered all documents and instruments required to be executed by
Birmingham Steel pursuant to all of the provisions of this Agreement, or as
reasonably required by Buyer to effect the transactions contemplated by this
Agreement.
8.4 Performance of Covenants. Birmingham Steel shall have materially
performed all of the obligations and materially complied with all of the
covenants, agreements and conditions required to be performed or complied with
by Birmingham Steel on or prior to the Closing.
8.5 Unfavorable Action or Proceeding. On the Closing Date, no action or
proceeding shall be pending or threatened wherein an unfavorable judgment,
decree or order would, in the reasonable opinion of Buyer, prevent or make
unfavorable the carrying out of this Agreement, or would cause the transactions
contemplated by this Agreement to be rescinded, or would require Birmingham
Steel to divest itself of any portion of the Transferred Assets, or would
materially and adversely affect the operation of the Facilities by Buyer
following the Closing Date. In the event of the receipt of any communication
from any department or agency of government or any other notice (a copy of which
communication or notice shall be promptly delivered to the other parties hereto)
prior to the Closing with regard to the transactions contemplated by this
Agreement, which communication or notice shall in the reasonable opinion of
Buyer threaten such an action or proceeding, Buyer may cancel this Agreement by
giving written notice to Birmingham Steel, and all parties shall thereupon be
released from any and all liability related to this Agreement except for the
obligations with respect to Sections 11.2 and 12.2 below.
8.6 Governmental Concurrences. Buyer shall have obtained assurances from all of
the necessary governmental authorities, in form and substance reasonably
satisfactory to Buyer, that Buyer will be granted all governmental approvals,
licenses, certificates of need, clearances, provider numbers and/or contracts
necessary or appropriate for the operation of the Transferred Assets as
previously operated on and after the Closing including the expiration of the
waiting period under the HSR Act.
8.7 Opinion of Counsel. Buyer shall have received the opinion of Birmingham
Steel's counsel dated the Closing Date, in the form mutually acceptable.
8.8 Exhibits and Schedules. The provisions of all Schedules shall be acceptable
to Buyer in its reasonable discretion.
8.9 Material Adverse Change. There shall not have been any material adverse
change in the financial position, earnings or prospects of Birmingham Steel, the
Business, AS&W, or any of the Facilities or assets used in the operation of
same.
9. CLOSING.
At the Closing, the following shall be done:
9.1 Items to be Delivered at the Closing.
(a) Birmingham Steel. At or before the Closing, Birmingham Steel
shall execute and/or deliver or cause to be delivered to Buyer the
following:
(i) General warranty deeds conveying to Buyer fee simple
marketable title, under the laws governing the situs of the Real
Property to the Owned Real Property relating to the Memphis
Facility (described on Schedule 3.10(a)(1), free and clear of all
liens, encumbrances, recorded or unrecorded leases and
restrictions of any kind, other than the Permitted Encumbrances;
(ii) A mutually acceptable Assignment and Assumption
Agreement in substantially the form attached hereto as Exhibit
9.1(a)(ii) with respect to the Assumed Liabilities, and such
other assumption documents and instruments as may be necessary or
required pursuant to Section 2.1(d) hereof;
(iii) A mutually acceptable Assignment and Bill of Sale with
respect to the remainder of the Transferred Assets;
(iv) Favorable original certificates of good standing of
Birmingham Steel and AS&W issued by the Secretary of State of
Delaware, Alabama, Tennessee and Ohio.
(v) A mutually acceptable opinion of Birmingham Steel's
counsel.
(vi) A mutually acceptable certificate of a duly authorized
officer of Birmingham Steel certifying to Buyer in all material
respects the accuracy of the representations and warranties set
forth in Section 3 hereof; a certificate of a duly authorized
officer of Birmingham Steel certifying (A) compliance in all
material respects with Birmingham Steel's covenants set forth in
this Agreement and (B) that all material consents and approvals
that are required in connection with the consummation of the
transaction contemplated by this Agreement by Birmingham Steel
have been obtained;
(vii) A mutually acceptable certificate of the corporate
secretary of Birmingham Steel certifying to Buyer: (A) the
incumbency of the officers of Birmingham Steel from the date of
this Agreement to the Closing Date and bearing the authentic
signatures of all such officers who shall execute this Agreement
and any additional documents contemplated by this Agreement; (B)
as to the resolutions of the Board of Directors of Birmingham
Steel authorizing the transfer of the Transferred Assets, and the
Shares to Buyer and the execution, delivery and performance of
this Agreement by Birmingham Steel; and (C) that such resolutions
have not been amended or rescinded and remain in full force and
effect; and (D) as to the current certificates of incorporation
and bylaws of such Birmingham Steel;
(viii) Mutually acceptable copies of all third-party
consents required in connection with the transfer of the
Transferred Assets and Shares to Buyer, including consents to
assignment of all Real Property Leases (to the extent required),
the consents and other documents contained in the schedules;
(ix) the Escrow Agreement executed by Birmingham Steel;
(x) such other bills of sales, instruments of title,
certificates, consents, endorsements, assignments, assumptions
and other documents or instruments in a form reasonably
satisfactory to Buyer and its counsel, as may be reasonably
requested by Buyer in order to transfer the Transferred Assets
and Shares of Birmingham Steel to Buyer, and to carry out the
transactions contemplated by this Agreement and to comply with
the terms hereof; provided such additional documents will not
cause unreasonable efforts or expense to Birmingham Steel;
(xi) the certificate or certificates representing all of the
Shares owned, of record or beneficially, or both, by Birmingham
Steel, duly endorsed in blank or accompanied by stock powers
endorsed in blank.
(b) Buyer. At or before the Closing, Buyer shall execute and/or
deliver or cause to be delivered to Birmingham Steel the following:
(i) The mutually acceptable Assignment and Assumption Agreements
with respect to the Real Property Leases, Personal Property Leases,
the Contracts and the Assumed Indebtedness;
(ii) Payment of the Cash Purchase Price as herein provided;
(iii) Delivery of the Promissory Note;
(iv) Deposit of the Escrow Amount with the Escrow Agent;
(v) A mutually acceptable certificate of an officer of Buyer
certifying to Birmingham Steel in all material respects (a) the
accuracy of the representations and warranties set forth in Section 4
hereof and compliance in all material respects with Buyer's covenants
set forth in this Agreement and (b) that all material consents and
approvals that are required in connection with the consummation of the
transaction contemplated by this Agreement by Buyer have been
obtained;
(vi) A mutually acceptable certificate of an officer of Buyer
certifying to Birmingham Steel: (a) the incumbency of the officers of
Buyer from the date of this Agreement to the Closing Date and bearing
the authentic signatures of all such officers who shall execute this
Agreement and any additional documents contemplated by this Agreement;
(b) as to the resolutions of the partners of Buyer authorizing the
execution, delivery and performance of this Agreement; (c) that such
resolutions have not been amended or rescinded and remain in full
force and effect; and (d) as to the current charter and partnership
agreement of Buyer;
(vii) A mutually acceptable opinion of Buyer's counsel;
(viii) Such mutually acceptable other instruments, certificates,
consents or other documents as may be reasonably necessary to carry
out the transactions contemplated by this Agreement and to comply with
the terms hereof; provided such additional documents will not cause
unreasonable efforts or expense to Buyer.
10. TRANSITIONS FOLLOWING CLOSING.
In order to ensure reasonable continuity in connection with the
transactions contemplated by this Agreement, Birmingham Steel and Buyer further
covenant and agree as follows: 10.1 Books and Records. Buyer shall maintain and
retain for a period of seven (7) years after the Closing Date, all books and
records in its possession after the Closing Date concerning or relating to the
Facilities prior to the Closing Date, wherever located. Such books and records
shall be made available to Birmingham Steel upon reasonable notice; and Buyer
shall not destroy any such books and records during such seven year period
without first specifying to Birmingham Steel the nature and coverage of the
records proposed to be destroyed and offering to turn them over to Birmingham
Steel. If, at the end of such seven year period, Buyer shall have been notified
in writing by Birmingham Steel that any of such records are material to any
litigation or dispute relating to or involving Birmingham Steel or AS&W that is
pending at the end of such period, Buyer shall continue to maintain such records
until Buyer has been notified by Birmingham Steel that such litigation or
dispute has been resolved, or, Buyer may, in such case, turn such books and
records over to Birmingham Steel. 10.2 Confidentiality.
(a) Birmingham Steel acknowledges that Buyer would be
irreparably damaged if confidential and proprietary information and trade
secrets concerning the Transferred Assets, Business, Facilities and/or Buyer's
other operations and businesses were disclosed to or utilized by any person
(which is not an Affiliate of Birmingham Steel) to the detriment of Buyer. A
person or entity is an "Affiliate" of Birmingham Steel if it owns or controls,
directly or indirectly, at least 50% of the voting control or 50% of the voting
control through other contractual relationships. Therefore, Birmingham Steel
shall not at any time, directly or indirectly, without the prior written consent
of Buyer divulge, or permit any of its affiliates, directors, officers,
employees or agents to divulge, to any person (which is not an Affiliate of
Birmingham Steel), any nonpublic or proprietary information and trade secrets
concerning the Transferred Assets, the Business, commercial or financial or
other affairs of the Facilities, or any of the methods of doing business used by
Birmingham Steel or Buyer in the operation of the Facilities that could be used
to the detriment of Buyers, except to the extent required by law, including but
not limited to the security laws, rules, regulations and orders) or in order to
preserve or enforce their respective rights under this Agreement.
(b) Buyer acknowledges that Birmingham Steel would be
irreparably damaged if confidential and proprietary and trade secret information
concerning the Excluded Assets and/or Birmingham Steel's other operations and
businesses, were disclosed to or utilized by any person other than Buyer to the
detriment of Birmingham Steel. Therefore, Buyer shall not, at any time, directly
or indirectly, without the prior written consent of Birmingham Steel, divulge,
or permit any of its affiliates, directors, officers, employees or agents to
divulge, to any person (which is not an Affiliate of Buyer) any nonpublic or
proprietary information and trade secrets concerning the Excluded Assets, and/or
Birmingham Steel's other operations and businesses that could be used to the
detriment of Birmingham Steel, except to the extent required by law (including
any securities law, rules, regulations or orders) or in order to preserve or
enforce their respective rights under this Agreement. 10.3 Sale of DRI. For so
long as Birmingham Steel continues to own a direct or indirect interest in the
AIR Facility and the AIR Facility continues to manufacture direct reduced iron
("DRI"), Birmingham Steel agrees to make available to Buyer, from time to time
upon Buyer's request, DRI fully complying with and having the quality and
specifications required by Buyer. The price, terms of sale and quantity
purchased, if any, for such DRI shall be subject to prior mutual agreement of
the parties.
10.4 Accounts Receivable. Birmingham Steel shall permit Buyer reasonable access
to its books and records relating to the Accounts Receivable upon reasonable
notice at any time during normal business hours and shall make its staff
available during normal business hours to assist Buyer as may be reasonably
required in connection with the Accounts Receivable.
10.5 Transition. Birmingham Steel shall cooperate with and provide reasonable
assistance to Buyer after Closing to assist in transitioning the Business from a
subsidiary and division to a stand-alone entity, including assistance in setting
up appropriate systems and software needed to operate the Business.
11. INDEMNIFICATION.
11.1 Survival. The representations and warranties set forth in Section 3.17 of
this Agreement and Birmingham Steel's retention of Retained Environmental
Liabilities in Section 1.3 and Birmingham Steel's indemnification obligation
under Section 11.2(a)(iii) below shall survive the Closing and remain in full
force and effect for ten (10) years following the Closing Date. Except as
otherwise set forth in this Section 11.1 and Section 11.3(c) of this Agreement,
all other representations and warranties made in this Agreement and Birmingham
Steel's indemnity obligation under Section 11.2(a)(iv) shall survive the Closing
and remain in full force and effect for a period of eighteen (18) months after
the Closing Date. If notice of any claim for indemnification under this Section
11 shall have been given within the applicable survival period, the
representations and warranties that are the subject of such indemnification
claim shall survive, but only with respect to such claim, until such time as
such claim is finally resolved.
11.2 Indemnification by Birmingham Steel.
(a) From and after the Closing Date, Birmingham Steel shall
indemnify and hold harmless the Buyer, its Affiliates, their respective
officers, directors, employees and agents from and against any and all claims,
losses, liabilities, actions or causes of action, assessments, damages, fines,
penalties, costs and expenses of any kind (including, without limitation,
reasonable fees and out-of-pocket disbursements of counsel) (collectively,
"Losses"), and all Environmental Costs, based upon, arising out of, or resulting
from, any of the following:
(i) any breach by Birmingham Steel of any of the representations
or warranties contained in Section 3 in this Agreement and/or any
Schedules referenced therein;
(ii) any failure by Birmingham Steel to perform any of its
covenants or agreements contained in this Agreement;
(iii) the Retained Environmental Liabilities; and
(iv) the Retained Liabilities.
(b) Notwithstanding Section 11.2(a), the Buyer's rights to
indemnification under this Section 12 shall be limited as follows:
(i) the amount of any Losses incurred by the Buyer
shall be reduced by the net amount the Buyer or its Affiliates
recovers (after deducting all attorneys' fees, expenses and
other costs of recovery) under any third-party warranties with
respect to the Transferred Assets, or any assets owned by AS&W
and the Buyer shall use reasonable best efforts to effect any
such recovery; provided, however, the Buyer shall have no
obligation to pursue any insurer, other than under product
warranties as provided above, to effect such recovery. There
shall be no duplicative payments or indemnities;
(ii) if the amount of any limitation pursuant to this
Section 11.2(b) is determined after payment by Birmingham
Steel to the Buyer of any amount otherwise required to be paid
pursuant to this Section 11, the Buyer shall repay to
Birmingham Steel, promptly after such determination, any
amount that Birmingham Steel would not have had to pay
pursuant to this Section 11 had such determination been made
at the time of such payment;
(iii) in no event shall Birmingham Steel be liable
for consequential or punitive damages (for purposes of this
Section 11.2(b)(iii), any punitive damages paid by the Buyer
to a third party which results in a Loss that is otherwise
indemnifiable under this Section 11 shall be considered actual
damages of Buyer and recoverable from Birmingham Steel). After
the Closing, the Buyer shall take all reasonable steps to
mitigate any Losses, upon becoming aware of any event which
could reasonably be expected to give rise thereto.
11.3 Indemnification by the Buyer.
(a) From and after the Closing Date the Buyer shall indemnify
and hold harmless Birmingham Steel, from and against any and all Losses based
upon or resulting from any of the following:
(i) any breach by the Buyer of any of the representations or
warranties made by the Buyer in Section 4 of this Agreement; or
(ii) any failure by the Buyer to perform any of its
covenants or agreements contained in this Agreement; or
(iii) any Losses suffered or incurred by Birmingham Steel as
a result of Buyer's post-closing operation of the Facilities and
the Business except for Losses (i) that are attributable to the
operations of the Facilities by Birmingham Steel prior to the
Closing, or (ii) that result from or are caused by, any breach of
any covenant or agreement, or any misrepresentation made herein,
by Birmingham Steel.
(b) Notwithstanding Section 11.4(a), Birmingham Steel's rights to
indemnification under this Section 11 shall be limited as follows:
(i) the amount of any Losses incurred by Birmingham Steel
shall be reduced by the net amount Birmingham Steel recovers
(after deducting all attorneys' fees, expenses and other costs of
recovery) from any insurer or other third party liable for such
Losses, provided that Birmingham Steel shall have no obligation
to pursue such insurer to affect such recovery. There shall be no
duplicative payments or indemnities;
(ii) if the amount of any limitation pursuant to this
Section 11.3(b) is determined after payment by the Buyer to
Birmingham Steel of any amount otherwise required to be paid
pursuant to this Section 11, Birmingham Steel shall repay to the
Buyer, promptly after such determination, any amount that the
Buyer would not have had to pay pursuant to this Section 11 had
such determination been made at the time of such payment;
(iii) in no event shall Birmingham Steel be liable for
consequential or punitive damages (for purposes of this Section
11.3(b)(iii), any punitive damages paid by Birmingham Steel to a
third party resulting in a Loss which is otherwise indemnifiable
under this Section 11.3 shall be considered the actual damages of
Birmingham Steel and recoverable from Buyer). After the Closing,
Birmingham Steel shall take all reasonable steps to mitigate any
Losses, upon becoming aware of any event which could reasonably
be expected to give rise thereto.
(c) The parties acknowledge and agree that AS&W is a party to
that certain Asset Purchase Agreement between AS&W and United States
Steel Corporation ("US Steel"), dated May 19, 1986, relating to the
purchase of certain steel manufacturing facilities and other assets
(the "US Steel Agreement"). In the event Birmingham Steel incurs any
Losses after the Closing Date in connection with the Joliet Works
operation (which was formally owned by AS&W), and Birmingham Steel
reasonably believes that AS&W would have been entitled to
indemnification from US Steel under the US Steel Agreement had AS&W
incurred the Losses, AS&W, at Birmingham Steel's request, shall pursue
indemnification of such Losses directly from US Steel and AS&W shall
forward any monies received from US Steel to Birmingham Steel for such
Losses to the extent AS&W is able to obtain indemnification from US
Steel. Birmingham Steel shall reimburse AS&W for all reasonable costs
and expenses AS&W incurs in seeking indemnification from US Steel
pursuant to this section. In the event that AS&W is required to
commence litigation, Birmingham Steel shall advance all reasonable
costs required, including without limitation, legal expenses and court
costs. This indemnification obligation shall survive the Closing and
remain in full force and effect after the Closing Date.
11.4 Claims. When a party seeking indemnification under Section 11.2, 11.3 or
11.4 (the "Indemnified Party") receives notice of any claims made by third
parties (individually, a "Third Party Claim" and collectively, "Third Party
Claims") or has any other claim for indemnification other than a Third Party
Claim, which is to be the basis for a claim for indemnification hereunder, the
Indemnified Party shall give prompt written notice thereof to the other party
(the "Indemnifying Party") reasonably indicating (to the extent known) the
nature of such claims and the basis thereof; provided, however, that failure of
the Indemnified Party to give the Indemnifying Party prompt notice as provided
herein shall not relieve the Indemnifying Party of any of its obligations
hereunder. Upon notice from the Indemnified Party, the Indemnifying Party may,
but shall not be required to, assume the defense of any such Third Party Claim,
including its compromise or settlement, and the Indemnifying Party shall pay all
reasonable costs and expenses thereof and shall be fully responsible for the
outcome thereof; provided, however, that in such case, the Indemnifying Party
shall have no obligation to pay any further costs or expenses of legal counsel
of the Indemnified Party thereafter incurred in connection with such defense
other than reasonable costs of investigation. No compromise or settlement in
respect of any Third Party Claims may be effected by the Indemnifying Party
without the Indemnified Party's prior written consent (which consent shall not
be unreasonably withheld), unless the sole relief is monetary damages that are
paid in full by the Indemnifying Party. The Indemnifying Party shall give notice
to the Indemnified Party as to its intention to assume the defense of any such
Third Party Claim within 30 days after the date of receipt of the Indemnified
Party's notice in respect of such Third Party Claim. If the Indemnifying Party
does not, within 30 days after the Indemnified Party's notice is given, give
notice to the Indemnified Party of its assumption of the defense of the Third
Party Claim, the Indemnifying Party shall be deemed to have waived its rights to
control the defense thereof. If the Indemnified Party assumes the defense of any
Third Party Claim because of the failure of the Indemnifying Party to do so in
accordance with this Section 11.4, it may do so in such reasonable manner as it
may deem appropriate, and the Indemnifying Party shall pay all reasonable costs
and expenses of such defense. The Indemnifying Party shall have no liability
with respect to any compromise or settlement thereof effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed),
unless the sole relief granted was equitable relief for which it would have no
liability or to which it would not be subject. 11.5 Limitation. No Indemnifying
Party shall indemnify any Indemnitee for any Losses under any indemnity claim or
any other contract claim to the extent indemnification would exceed in the
aggregate ten million and no/100 dollars ($10,000,000.00) (the "Limitation
Amount"), which amount includes any off-set against the Escrow Deposit. 11.6
Basket. No party shall have any obligation to indemnify any other party for
Losses under any indemnity claim until such time, if ever, as the aggregate
amount of all such Losses incurred by the Buyer in the case of indemnification
under Section 11.2 or by Birmingham Steel in the case of indemnification under
Section 11.3 shall exceed One Million Dollars ($1,000,000) if the
indemnification is for a breach of the warranty contained in Section 3.17 or Two
Hundred Fifty Thousand Dollars ($250,000) if such indemnification is based on
any other claim (the "Basket Amount"); provided, however, that this limitation
shall not apply to Buyer's obligation to pay the Purchase Price. Once
indemnifiable losses exceed the relevant Basket Amount, all such indemnifiable
losses shall be indemnifiable by the appropriate party on a dollar for dollar
basis.
12. TERMINATION AND ABANDONMENT. 12.1 Methods of Termination. The
transactions contemplated herein may be terminated and abandoned at any
time prior to Closing:
(a) By mutual consent of Buyer and Birmingham Steel;
(b) By written notice from Buyer to Birmingham Steel, or from
Birmingham Steel to Buyer, if it becomes certain that any of the conditions to
the closing obligations of the party giving such notice cannot be satisfied for
a reason other than such party's default on or before December 1, 2000, and such
party is not willing to waive the satisfaction of such conditions;
(c) By written notice from Buyer to Birmingham Steel, or from
Birmingham Steel to Buyer, if the Closing does not occur on or before December
1, 2000, and the party giving such notice is not in breach of this Agreement.
12.2 Termination Due to Default.
(a) If Birmingham Steel terminates this Agreement pursuant to Section 12.1(b) or
(c) and the reason for failure to complete the transactions contemplated hereby
on or before the termination date is the intentional or willful material breach
by Buyer of any material covenant in this Agreement to be performed or observed
by Buyer, then Birmingham Steel shall be and Birmingham Steel shall have the
right to seek all remedies available at law or in equity against the breaching
party. Otherwise, Seller's sole right shall be to terminate the Agreement. (b)
If Buyer terminates this Agreement pursuant to Section 13.1(b) or (c) and the
reason for failure to complete the transactions contemplated hereby on or before
the termination date is the intentional or willful material breach by Birmingham
Steel of any material covenant in this Agreement to be performed or observed by
Birmingham Steel, then Buyer shall have the right to seek all remedies available
at law or in equity against the breaching party. Otherwise, Buyer's sole right
shall be to terminate the Agreement. 12.3 Procedure Upon Termination. In the
event of termination and/or abandonment by any party, pursuant to Section 12.1
hereof, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated and/or
abandoned, without further action by Buyer or Birmingham Steel. If the
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein, each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby
which contains confidential information, whether so obtained before or after the
execution of this Agreement, to the party furnishing the same and be responsible
for its own expenses incurred in this transaction.
13. ARBITRATION.
The parties hereto agree to submit to binding arbitration any and all
matters in dispute or in controversy among or between them concerning the terms
and provisions of this Agreement and the other agreements contemplated hereby
(the "Agreements"). All such disputes and controversies shall be determined and
adjudged by the arbitrators, and the hearing shall be held at the offices of the
American Arbitration Association, in either Cleveland, Ohio or Memphis,
Tennessee, depending on the location where the primary events took place which
gave rise to the dispute or disputes. If the non-submitting party does not agree
with the location for arbitration selected by the submitting party based upon
the foregoing sentence, the place of location shall be determined by the
American Arbitration Association in accordance with its rules and procedures. If
the matter in controversy is in excess of Two Hundred Fifty Thousand Dollars
($250,000), the panel of arbitrators shall consist of three (3) persons. If the
amount in controversy shall be Two Hundred Fifty Thousand Dollars ($250,000) or
less, or if no amount is specified, the dispute shall be submitted to one (1)
arbitrator. The selection of arbitrators and the procedure shall be in
accordance with the commercial arbitration rules (the "Rules") then in effect of
the American Arbitration Association, except that the Federal Rules of Civil
Procedure as then in effect shall apply and take precedence over the Rules with
respect to pre-hearing discovery and deposition of witnesses and potential
witnesses, interrogatories, and the like. Any awards rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in the highest
court of Ohio, Tennessee, or any court having jurisdiction, which is hereby
selected by the parties as the or an appropriate forum with respect to any
matter in controversy or dispute arising under or pursuant to the terms of any
of the Agreements. The expenses of the arbitration shall be borne equally by the
parties to the arbitration, provided that each party shall pay for and bear the
costs of such party's own experts, evidence and counsel's fees, except that in
the discretion of the arbitrator(s), any award may include the costs of a
party's counsel if the arbitrator(s) expressly determine(s) that the party
against whom such award is entered has caused the dispute, controversy, or claim
to be submitted to arbitration as a dilatory tactic. The obligations herein to
arbitrate shall not prevent any party from seeking temporary restraining orders,
preliminary injunctions or other procedures in a court of competent jurisdiction
to obtain interim relief when deemed necessary by such party and court to
preserve the status quo or prevent irreparable injury pending resolution by
arbitration of the actual dispute or to seek a remedy specifically provided for
in any of the Agreements. All parties hereto acknowledge and agree that the
state and federal courts of the State of Ohio and State of Tennessee are courts
of competent jurisdiction for purposes of this section and do hereby submit to
the jurisdiction of the appropriate court in either such state to which the
matter is first submitted by a party for enforcement of any arbitration award or
to obtain any such interim relief as herein above provided.
14. BENEFIT AND BINDING EFFECT; NO ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
respective successors, assigns or legal representatives of the parties hereto,
but shall not otherwise inure to the benefit of any third parties.
Notwithstanding the foregoing sentence, this Agreement shall not be assigned by
Birmingham Steel without the prior written consent of Buyer, or by Buyer without
the prior written consent of Birmingham Steel. 15. EXPENSES.
Birmingham Steel and the Buyer will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby and thereby. 16. NOTICES.
Any notice or other communication provided for herein or given hereunder to
a party hereto shall be in writing and shall be delivered in person to such
party or mailed by first class registered or certified mail, postage prepaid, or
given by facsimile transmission (which is confirmed) addressed as follows (or at
such other address for a party as shall be specified in a like notice):
If to Buyer: ......... North American Metals, Ltd.
1800 West Maple Road
......... Troy, Michigan 48084
......... Fax: (248) 614-3898
......... Confirmation: (248) 614-3877
......... Attn: William L. Powers
with a copy to:
Howard B. Hill, Esq.
......... 600 North Old Woodward
......... Suite 302
......... Birmingham, Michigan 48009
......... Fax: (248) 540-2250
......... Confirmation: (248) 258-8844
If to Birmingham Steel:....Birmingham Steel Corporation
......... 1000 Urban Center Drive
......... Birmingham, Alabama 35242
......... Fax: (205) 970-1353
......... Confirmation: (205) 970-1219
......... Attn: John D. Correnti
with a copy to:
Burr & Forman LLP
......... 3100 SouthTrust Tower
......... 420 N. 20th Street
......... Birmingham, Alabama 35203
Facsimile: (205) 458-5100
......... Confirmation: (205) 458-5240
......... Attn: Gene T. Price, Esq.
Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party, except that any notice delivered by facsimile
transmission shall be deemed to have been given upon confirmation of
transmission; provided that notice so delivered is promptly followed by
duplicate notice to the same party sent by first class registered or certified
mail, postage prepaid.
17. SEVERABILITY.
If any provision, or application thereof, of this Agreement is held
unlawful or unenforceable in any respect, the parties hereto agree that such
illegality or enforceability shall not affect other provisions or applications
that can be given effect, and this Agreement shall be construed as if the
unlawful or unenforceable provision or application had not been contained
herein. The parties hereto agree that any court may modify the objectionable
provision so as to make it valid, reasonable and enforceable and agree to be
bound by the terms of such provision, as modified by the court.
18. AMENDMENTS.
This Agreement may be amended or modified only by a written instrument
executed by all parties hereto.
19. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which shall constitute but one instrument. 20.
HEADINGS.
The headings contained in this Agreement are for convenience only and
shall not be deemed to affect the interpretation of the provisions of this
Agreement.
21. GOVERNING LAW.
This Agreement is made pursuant to, and shall be construed under, the
substantive laws of the State of Ohio without regard to principles governing
conflicts of law.
22. PUBLIC ANNOUNCEMENTS.
Except as otherwise required by applicable law or the rules of the New
York Stock Exchange or NASD and the Nasdaq National Market, neither Birmingham
Steel nor Buyer shall, or shall permit any of its affiliates or subsidiaries to,
issue or cause the publication of any press release or other public announcement
with respect to, or otherwise make any public statement concerning, the
transactions contemplated by this Agreement without the prior consent of the
other party, which consent shall not be unreasonably withheld. The parties agree
that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by
them.
23. ENTIRE AGREEMENT.
Before signing this Agreement the parties had numerous conversations,
including preliminary discussions, formal negotiations and informal
conversations, and generated correspondence and other writings, in which the
parties discussed the transaction which is the subject of this Agreement and
their aspirations for its success. In such conversations and writings,
individuals representing the parties may have expressed their judgments and
beliefs concerning the intentions, capabilities, and practices of the parties,
and may have forecasted future events. The parties recognize that such
conversations and writings often involve an effort by both sides to be positive
and optimistic about the prospects for the transaction. It is also recognized,
however, that all business transactions contain an element of risk, and that it
is normal business practice to limit the legal obligations of contracting
parties to only those promises and representations which are essential to their
transaction so as to provide certainty as to their respective future rights and
remedies. Accordingly, this Agreement and all ancillary agreements are intended
to define the full extent of the legally enforceable undertakings of the parties
hereto, and no related promise or representation, written or oral, which is not
set forth explicitly in this Agreement and all ancillary agreements is intended
by either party to be legally binding. The parties hereto acknowledge that in
deciding to enter into this transaction they have relied on no representations,
written or oral, other than those explicitly set forth in this Agreement or any
ancillary agreements. The parties hereto have relied entirely on their own
judgment in entering into this Agreement.
24. DEFINITIONS.
Each of the following terms is defined in the article, section,
paragraph, or provision of this Agreement set forth opposite such term.
Defined Terms Section
------------- -------
Accounts Receivable 2.4(a)
Adverse Conditions 3.10(f)
Affiliate 11.2
Agreement Preamble
Agreements 13
AIR Facility Recital B
Arrangement for Disposal 3.17(f)
AS&W Preamble
AS&W Assets 1.4
Assignment and Assumption Agreement 2.1(d)
Assumed Indebtedness 1.3(a)
Assumed Liabilities 1.3
Benefit Plans 3.16(c)
Best Knowledge of Birmingham Steel and AS&W 3.7
Birmingham Steel Preamble
Business Recital B
Buyer Preamble
Buyer Plan 6.3
CAA 3.17(a)
Cash Purchase Price 2.1(a)
CERCLA 3.17(a)
Clean Air Act 3.17(a)
Cleveland Facilities Recital B
Cleveland SW Note 1.3(a)(iv)
Closing ......... 2.3
Closing Date ......... 2.3
Code ......... 2.2
Commitment ......... 3.8
Contracts ......... 1.1(e)
CWA ......... 3.17(a)
Deposit Escrow Agreement... 2.6
DRI ......... 10.3
Employees ......... 3.16(a)
Environmental Claims....... 3.17(d)
Environmental Costs........ 3.17(g)
Environmental Laws......... 3.17(a)
Environmental Matters...... 3.17(g)
Environmental Permits...... 3.17(a)
Excluded Assets ......... 1.2
Facilities ......... Recital C
Financial Statements....... 3.5
Hazardous Substances....... 3.17(b)
HMTA ......... 3.17(a)
HSR Act ......... 5.6
Indemnified Party ......... 11.5
Indemnifying Party......... 11.5
Intellectual Property...... 3.13
Inventory ......... 3.11(a)
IRS ......... 2.2
Knowledge of Buyer......... 5.4
Labor Proceeding ......... 3.16(d)
Losses ......... 11.2
Material Adverse Effect.... 3.4
Memphis Equipment Lease.... 1.3(a)(i)
Memphis Facility ......... Recital B
Memphis SW Note ......... 1.3(a)(ii)
Memphis TVA Note ......... 1.3(a)(iii)
OSHA ......... 3.17(a)
Owned Real Property........ 3.10(a)
Paid Time Off ......... 3.16(b)
PCBs ......... 3.17(c)
Pending Litigation......... 3.12
Permits ......... 3.7
Permitted Exceptions....... 3.10(a)
Personal Property ......... 3.11(a)
Personal Property Leases... 3.11(b)
Plan or Plans ......... 3.16(f)
Promissory Note ......... 2.1(c)
Public Taking ......... 3.10(e)
Purchase Price ......... 2.1
RCRA ......... 3.17(a)
Real Property ......... 3.10(d)
Real Property Laws......... 3.10(d)
Real Property Leases....... 3.10(b)
Releases ......... 3.17(c)
Retained Environmental Liabilities 1.4
Retained Liabilities....... 1.4
Return ......... 3.14(a)(ii)
Returns ......... 3.14(a)(ii)
Rules ......... 13
SBQ Division ......... Recital C
SDWA ......... 3.17(a)
Shares ......... 1.4
Tax ......... 3.14(a)(i)
Taxes ......... 3.14(a)(i)
Third Party Claim ......... 11.5
Transferred Assets......... 1.1
US Steel ......... 11.3(c)
US Steel Agreement......... 11.3(c)
WARN Act ......... 6.3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
NORTH AMERICAN METALS, LTD. BIRMINGHAM STEEL CORPORATION
By: /s/ William L. Powers By: /s/ James A. Todd, Jr.
------------------------- ------------------------
William L. Powers James A. Todd, Jr.
Its: Its: Vice Chairman
<PAGE>
SCHEDULES
Schedule 1.1(c) Personal Property Disclosures
Schedule 2.1(c)... Stipulated Loss amount
Schedule 3.4...... Consents and Approvals
Schedule 3.5...... Financial Statements
Schedule 3.7(1)... Permits-Memphis Facility
Schedule 3.7(2)... Permits-AS&W
Schedule 3.8(1)... Commitments-Memphis Facility
Schedule 3.8(2)... Commitments-AS&W
Schedule 3.10(a)(1) Owned Real Property-Memphis Facility
Schedule 3.10(a)(2) Owned Real Property-AS&W
Schedule 3.10(b)(1) Leased Real Property-Memphis Facility
Schedule 3.10(b)(2) Leased Real Property-AS&W
Schedule 3.10(c).. Consents for Real Property Leases
Schedule 3.11(a).. Encumbered Personal Property
Schedule 3.11(b)(1) Personal Property Leases-Memphis Facility
Schedule 3.11(b)(2) Personal Property Leases-AS&W
Schedule 3.12..... Litigation and Orders
Schedule 3.13..... Other Patents, Trademarks, Etc.
Schedule 3.14(b)(xvi) Net Operating Loss and Other Carryovers
Schedule 3.15..... Insurance
Schedule 3.16(a).. Employees
Schedule 3.16(c).. Benefit Plans
Schedule 3.16(f).. Pension Benefit Plans
Schedule 3.16(g).. Defined Benefit Plans
Schedule 3.17..... Environmental Disclosures
Schedule 3.17(g).. Environmental Audits
