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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16254
Steel of West Virginia, Inc.
(Exact name of registrant as specified in its charter)
Delaware 55-0684304
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
17th Street and 2nd Avenue, Huntington, West Virginia 25703
(Address of principal executive offices, Zip Code)
(304) 696-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
The number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 1997, is as follows:
5,991,276 shares of common stock, par value $.01 per share.
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STEEL OF WEST VIRGINIA, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of 3
September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Income for 4
the Three-Month and Nine-Month Periods Ended
September 30, 1997 and September 30, 1996
Condensed Consolidated Statements of Cash Flows 5
for the Three-Month and Nine-Month Periods Ended
September 30, 1997 and September 30, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
2
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PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED BALANCE SHEETS
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
September 30 December 31
1997 1996
------------ -----------
ASSETS
CURRENT ASSETS
Cash....................................... $ 42 $ 0
Receivables, net of allowances of $594
and $599................................... 11,955 6,579
Inventories................................ 21,822 17,307
Deferred income taxes...................... 3,121 3,121
Other current assets....................... 662 220
------ ------
TOTAL CURRENT ASSETS............................ 37,602 27,227
Property, plant, and equipment.................. 51,226 33,298
Goodwill........................................ 17,940 18,452
Other assets.................................... 664 322
------ ------
TOTAL ASSETS.................................... $107,432 $79,299
------ ------
------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Overdraft.................................. $ 0 $ 1,097
Accounts payable........................... 12,323 4,161
Accrued payroll and benefits payable....... 4,687 3,599
Income taxes payable (refundable).......... 1,072 (1,146)
Other current liabilities.................. 1,874 2,021
Current maturities of long-term debt....... 1,941 2,434
------ ------
TOTAL CURRENT LIABILITIES....................... 21,897 12,166
Long-term debt.................................. 25,521 10,975
Deferred income taxes........................... 6,332 6,332
Other long-term liabilities..................... 176 819
------ ------
TOTAL LIABILITIES............................... 53,926 30,292
STOCKHOLDERS' EQUITY
Common stock, $.01 par value: 12,000,000
voting shares authorized, 7,096,576 and
7,091,360 issued, including treasury
stock.................................... 71 71
Paid-in capital........................... 26,627 26,627
Treasury stock - 1,105,300 shares at cost. (11,483) (11,483)
3
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Retained earnings........................... 38,291 33,792
------ ------
TOTAL STOCKHOLDERS' EQUITY..................... 53,506 49,007
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $107,432 $79,299
------ ------
------ ------
NOTE: The balance sheet at December 31, 1996, has been derived from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
-------------------- -----------------------
<S> <C> <C> <C> <C>
Net sales............................. $29,550 $22,229 $81,900 $72,673
Cost of sales......................... 26,191 20,225 70,233 64,894
------ ------ ------ ------
GROSS PROFIT...................... 3,359 2,004 11,667 7,779
Selling and administrative expenses... 1,337 973 4,391 3,128
Interest Expense...................... 187 294 682 1,002
(Gain)/Loss on disposal of assets..... (288) 464 (741) 2,467
Other (income) expense................ (98) (54) (441) (309)
------ ------ ------ ------
INCOME BEFORE INCOME TAXES..... 2,221 327 7,776 1,491
Income Taxes (924) (318) (3,277) (851)
------ ------ ------ ------
NET INCOME $ 1,297 $ 9 $ 4,499 $ 640
------ ------ ------ ------
------ ------ ------ ------
NET INCOME PER COMMON SHARE,
based on 5,994,705 and
5,993,560 weighted average
shares of common stock
outstanding during the three
months and nine months ended
September 30, 1997 and 5,988,025
and 6,036,503 weighted average
shares of common stock
outstanding during the three
months and nine months ended
September 30, 1996................ $.22 $.00 $.75 $.11
</TABLE>
See notes to condensed consolidated financial statements.
5
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
-------------------- -----------------------
<S> <C> <C> <C> <C>
CASH FROM OPERATIONS............ $ 2,910 $ 5,522 $ 4,009 $ 11,970
INVESTMENT ACTIVITIES
Additions to property, plant,
and equipment.............. (7,934) (3,490) (16,923) (4,934)
FINANCING ACTIVITIES
Revolving credit loan........ 2,520 (222) 5,746 1,006
Proceeds from debt issue..... 4,500 0 10,500 0
Long-term debt repayments.... (223) (1,472) (2,193) (4,414)
Purchase of treasury stock 0 0 0 (3,500)
------ ------ ------ ------
6,797 (1,694) 14,053 (6,908)
------ ------ ------ ------
INCREASE (DECREASE) IN CASH $ 1,773 $ 338 $ 1,139 $ 128
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See notes to condensed consolidated financial statements.
6
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
September 30, 1997
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Steel of West Virginia, Inc. (the Company) and
its wholly-owned subsidiaries SWVA, Inc. and Marshall Steel, Inc. Such
condensed financial statements have been prepared in accordance with
generally accepted accounting principles 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 generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the three-month and nine-month periods ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
The preparation of the condensed consolidated financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Net income per common share is calculated based on 5,994,705 and
5,993,560 weighted average shares of common stock outstanding during the
three-month and nine-month periods ended September 30, 1997 and
5,988,025 and 6,036,503 weighted average shares of common stock
outstanding during the three-month and nine-month periods ended
September 30, 1996. The effect of the Company's stock option plans was
anti-dilutive for all periods presented.
NOTE B--INVENTORIES
Inventories consist of the following (in thousands):
September 30 December 31
1997 1996
------------- ------------
Raw materials $ 2,486 $ 1,638
Work-in-process 7,242 6,624
Finished goods 12,523 9,103
Manufacturing supplies 3,596 3,967
------------- ------------
25,847 21,332
Less LIFO reserve 4,025 4,025
------------- ------------
$21,822 $17,307
------------- ------------
------------- ------------
Annually, at the end of each year, management determines inventory
levels based on the taking of a physical inventory. The amount of
inventories at September 30, 1997, has been determined based upon
inventory
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levels indicated by perpetual inventory accounting records. In addition, an
actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Since these are subject to many forces beyond management's control, interim
results are subject to the final year-end LIFO inventory valuation.
NOTE C--CREDIT ARRANGEMENTS
A summary of indebtedness under the Company's credit arrangements
consists of the following (in thousands):
September 30 December 31
1997 1996
------------- ------------
Term loan I $ 0 $ 1,120
Term loan II 0 427
1994 Capital expenditure line 3,635 4,280
1997 Capital expenditure line 10,500 0
Revolver 13,051 7,305
Other notes payable 276 277
------------- ------------
27,462 13,409
Less current maturities (1,941) (2,434)
------------- ------------
$25,521 $10,975
------------- ------------
------------- ------------
The Company maintains a senior financing agreement that, as last amended
April 1997, provides for up to $15,000,000 of revolving credit
borrowings, capital expenditure line term loans, and other term loans.
The interest rates on its existing credit lines and term loans vary
based on the Chemical Bank prime rate or LIBOR plus 1-3/4%; and the
annual revolving credit line commitment fee is 1/8% of the unused
balance. Under the terms of its senior financing agreement, the Company
is permitted to convert its Capital Expenditure Line indebtedness to a
fixed interest rate. The senior credit agreement may be terminated by
the Company or, on or after January 1, 2001 and upon 90 days written
notice, by the lender.
Effective April 1997, the Company's senior lending agreement was amended
to provide, under the terms of an "Additional Capital Expenditure Line,"
up to $23,000,000 additional borrowing availability to finance current
machinery and equipment expenditures, governed by a percentage of such
expenditures. Under the terms of the amendment the total borrowings
under this new borrowing line may, at the Company's election, through
January 1, 1999, bear a fixed interest rate, and certain prepayments of
the credit through January 1, 1999, could result in prepayment fees of
1.5% of the amounts prepaid. As of September 30, 1997, the Company has
borrowed $10,500,000 under this "Additional Capital Expenditure Line."
The final principal installments totaling $1,547,050 under the Term Loan
I and II portions of the senior financing agreement were repaid in full
during the quarter ended March 31, 1997. As of September 30, 1997, the
revolving credit line loan balance, due January 1, 2001, was
$13,051,000, and the unused borrowing availability approximated
$1,949,000. The 1994 Capital Expenditure Line portion of the loan
agreement is required to be repaid in quarterly principal installments
of $215,000, with a final principal payment of $195,000 on October 1,
2001. The 1997 Capital Expenditure Line will be repaid in equal
quarterly installments of principal computed on a ten year amortization
schedule, which installments shall commence on July 1, 1998 and
quarterly thereafter until paid in full.
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The Company's senior lending agreement contains various restrictive
covenants, including that the Company must maintain specified levels of
working capital and net worth (as defined in the agreement). In
addition, capital expenditures and dividends are limited to the annual
amounts set forth in the agreement. At September 30, 1997, the
Company's retained earnings available for dividends is $-0-. As a
result of the lending agreement, substantially all of the Company's
property, plant, and equipment, inventory and accounts receivable are
subject to a third party's security interests.
NOTE D--COMMITMENTS AND CONTINGENCIES
The Company is principally self-insured for employees' medical care
costs and workers' compensation claims up to certain specified dollar
limits. Under the medical care program, the Company is insured by a
private carrier for individual claims in excess of specified dollar
limits. The Company also has excess coverage provided by the West
Virginia Workers' Compensation Fund (a state agency) for certain work
related injuries. In connection with the self-insured workers'
compensation program, the Company has obtained an irrevocable standby
letter of credit in the amount of $1,000,000 (through July 1998). A
liability has been established for those illnesses and injuries
occurring on or before September 30, 1997, for which an amount of
expected loss could be reasonably estimated.
NOTE E--STOCKHOLDERS' EQUITY
Commencing in April 1995 through the quarter ended March 31, 1996, the
Company repurchased 1,105,000 shares at a total cost of $11,483,000,
including 350,000 shares purchased at a cost of $3,500,000 during the
quarter ended March 31, 1996.
NOTE F--FIXED ASSET IMPAIRMENT
During the first quarter of 1996, the Company determined that certain
cut-to-length equipment utilized in one of the Company's production
lines was not performing up to expectations and the decision to replace
the equipment was made. Based upon this indication of impairment, the
Company recorded a $1,862,000 charge against operations that has been
included in the gain/loss on disposal of assets.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales
Net sales increased 32.9% in the third quarter of 1997 to $29,550,000 up
$7,321,000 from the third quarter of 1996, primarily due to an increase
in tonnage of products shipped. Finished tonnage sales increased to
48,950 tons in the third quarter of 1997 from 35,501 tons for the third
quarter of 1996. Billet sales decreased to 1,447 tons for the third
quarter of 1997 from 1,728 tons in the third quarter of 1996.
Net sales for the nine months ended September 30, 1997 increased 12.7%
to $81,900,000 from $72,673,000 for the comparable period in 1996,
primarily due to an increase in tonnage of products shipped. Finished
tonnage sales increased to 131,478 tons for the nine months ended
September 30, 1997 from 111,308 tons for the comparable period in 1996.
Billet sales increased to 4,827 tons for the same period in 1997 from
4,063 tons for the comparable period in 1996.
Cost of Sales
Cost of sales decreased to 88.6% of net sales or $26,191,000 for the
third quarter of 1997 from 91.0% of net sales or $20,225,000 for the
third quarter of 1996. The percent decrease in cost of goods sold is
principally due to a decrease in workers compensation and disability
expense coupled with fixed costs being a smaller component of cost of
goods sold due to higher sales and production levels. These decreases
were partially offset by the effect of a five day shutdown of the #2
Mill for the switch-over to a new reheat furnace as well as the effect
of a short break-in period.
Cost of sales for the nine months ended September 30, 1997 decreased to
85.8% of net sales or $70,233,000 from 89.3% of net sales or $64,894,000
for the comparable period in 1996. This decrease in cost of goods sold
was principally due to a decrease in workers compensation and disability
expense coupled with fixed costs being a smaller component of cost of
goods sold due to higher sales and production levels.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the third quarter of 1997
were $1,337,000 as compared to $973,000 for the third quarter of 1996. This
increase was due primarily to higher professional and consulting fees, travel
expenses, and compensation payments made under the Company's Non-Competition
Agreement with its former Chairman. As a percentage of net sales, selling
and administrative expense was 4.5% in the third quarter of 1997 and 4.4% for
the comparable period in 1996.
Selling, general, and administrative expenses for the nine month period
ended September 30, 1997 were $4,391,000, compared to $3,128,000 for the
comparable period in 1996. This increase was due primarily to higher
professional and consulting fees, including the higher fees resulting
from the unsolicited proposal from CPT Holdings, Inc. to enter into
discussions regarding the possible sale of the Company; the proxy
contest relating to certain of the matters that were voted on by the
stockholders at the Annual Meeting of the Stockholders; and higher
travel expenses. As a percentage of net sales, selling and
administrative expense was 5.4% in the nine month period ended September
30, 1997, compared to 4.3% for the comparable period in 1996.
10
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Interest Expense, Gain/Loss on Disposal of Assets and Other Operating
Expense/Income
Interest expense for the third quarter of 1997 was $187,000, compared to
$294,000 for the third quarter of 1996. Interest expense decreased
primarily due to $291,000 of interest costs being capitalized in
connection with Phase II of the Company's expansion and modernization
program. As a percentage of net sales, interest expense was .6% in the
third quarter of 1997, compared to 1.3% for the third quarter of 1996.
The Company recognized a gain on the sale of certain equipment during
the third quarter of 1997 in the amount of $288,000 as compared to a
$464,000 loss in the third quarter of 1996. Other operating
expense/income for the third quarter of 1997 was $98,000 of income
compared to $54,000 of income for the third quarter of 1996.
Interest expense for the nine months ended September 30, 1997 was
$682,000, compared to $1,002,000 for the comparable period in 1996.
Interest expense decreased primarily due to $470,000 of interest costs
being capitalized in connection with Phase II of the Company's expansion
and modernization program. As a percentage of net sales, interest
expense was .8% in the nine month period ended September 30, 1997,
compared to 1.4% for the comparable period in 1996. The Company
recognized a gain on the sale of certain equipment of $741,000 for the
nine months ended September 30, 1997 compared to a loss on the disposal
of equipment of $2,467,000 for the nine months ended September 30, 1996.
Other operating expense/income for the nine months ended September 30,
1997 was $441,000 of income compared to $309,000 of income for the
comparable period in 1996.
Net Income
Net income for the third quarter of 1997 increased by $1,288,000 to
$1,297,000 from $9,000 for the third quarter of 1996. This increase in
net income is due primarily to higher sales and operating income, and an
absence, in this year's results, of a loss on disposal of assets. As a
percentage of net sales, net income was 4.4% for the third quarter of
1997, compared to 0.0% for the third quarter of 1996.
Net income for the nine months ended September 30, 1997 was $4,499,000,
compared to $640,000 for the comparable period in 1996. This increase
in net income is due primarily to higher sales and operating income, and
an absence, in this year's results, of a loss on disposal of assets. As
a percentage of net sales, net income was 5.5% in the nine month period
ended September 30, 1997, compared to 0.9% for the comparable period in
1996.
Liquidity and Sources of Capital
The Company's primary ongoing cash needs are for working capital
requirements, debt service and capital expenditures. The three present
sources for the Company's liquidity needs are internally generated
funds, a capital expenditure term loan line, and the Company's revolving
credit facility, which the Company anticipates will be sufficient for
its ongoing cash needs. Working capital at the end of the third quarter
of 1997 was $15,705,000, compared to $15,061,000 at the end of the prior
fiscal year. This increase in working capital was funded primarily by
the proceeds from the Company's credit arrangements with its senior
lender. The Company's expenditures for required capital replacements
are currently anticipated to average approximately $1,000,000 annually
over the next several years.
In December 1996, the Company's Board of Directors approved Phase II of
the Company's expansion and modernization program to the Huntington,
West Virginia
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plant. The program includes a new high speed reheat
furnace, quick-change mill roll stands, new warehouse space, and other
miscellaneous equipment enhancements. The project is expected to cost
approximately $31.5 million (not including capitalized interest) and is
scheduled to be completed by early 1998 without material disruptions to
existing operations. The Company has funded, and will continue to fund,
the project from a combination of internally generated cash flow and
bank debt. In addition, from time to time, the Company evaluates
discretionary capital expenditures and acquisition opportunities. Any
such expenditure would be subject to availability of funds and approval
by the Company's Board of Directors.
Forward Looking Statements
Any Forward Looking Statements contained herein are subject to the
section on Forward Looking Statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, including the
following risk factors set forth therein: the cyclical and capital
intensive nature of the industry; pressure resulting from foreign and
domestic competition; reduction in demand for the Company's products and
industry pricing; volatility of raw material costs, especially steel
scrap, resulting in reduced profit margins; excess industry capacity
resulting in reduced profit margins; and the cost of compliance with
environmental regulations. In addition, the Forward Looking Statements
contained herein are also subject to the timely completion of the
modernization and expansion program and the Company's ability to
effectively integrate new equipment.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
10.1 Non-Competition Agreement, effective as of July 11, 1997,
between Steel of West Virginia, Inc. (the "Company") and
Robert L. Bunting, Jr.
10.2 Change in Control Severance Agreement, dated as of July 9,
1997, between the Company and Timothy R. Duke
10.3 Change in Control Severance Agreement, dated as of July 7,
1997, between the Company and Mark Meikle
11.1 Computation of Earnings Per Share Data
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
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.
DATED: November 14, 1997 STEEL OF WEST VIRGINIA, INC.
----------------------------------
(Registrant)
/s/ Timothy R. Duke
----------------------------------
Timothy R. Duke, President and
Chief Executive Officer
/s/ Mark G. Meikle
----------------------------------
Mark G. Meikle, Vice President,
Treasurer and Chief Financial
Officer
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Exhibit 10.1
NON-COMPETITION AGREEMENT
Non-Competition Agreement, effective as of July 11, 1997, between
Steel Of West Virginia, Inc. (the "Company") and Mr. Robert L. Bunting, Jr.
("Mr. Bunting"). In return and in consideration of Mr. Bunting's waiver of
claims, and his covenants against competition, solicitation, disclosure and
disparagement contained herein, and in return and in consideration of the
Company's promises herein, the Company and Mr. Bunting hereby agree as follows:
1. Termination. Mr. Bunting's resignation from all positions as an
officer and as a director with the Company and it subsidiaries shall be
effective on July 11, 1997.
2. Lump Sum Payment. On the eighth day after Mr. Bunting's
execution of this Agreement, the Company will make a lump sum payment to Mr.
Bunting in the amount of $368,808 (being comprised of (i) 150% of Mr. Bunting's
prior base salary, plus (ii) 5% of such amount, "grossed up" for tax purposes),
without tax withholdings, payroll or other deductions or offsets of any kind.
Mr. Bunting will be responsible for any and all taxes payable with regard to
such lump sum payment.
3. Bonus. Promptly after the Compensation and Benefits Committee of
the Company determines executive bonuses for 1997, the Company will pay to Mr.
Bunting a pro rata portion of the bonus awarded to him for 1997, calculated by
multiplying the bonus awarded
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to him by a fraction, the numerator of which will be 192, and the denominator
of which will be 365. Such bonus payment shall be subject to tax withholdings
and other customary payroll deductions, but to no other deductions or offsets
of any kind.
4. Health Insurance. Mr. Bunting is hereby electing to take COBRA
healthcare coverage. On the eighth day after Mr. Bunting's execution of this
Agreement, the Company will pay to Mr. Bunting $7,702, without any deductions or
offsets of any kind, such $7,702 being the amount of the premium for such
coverage ("grossed up" for tax purposes) from July 12, 1997 through January 31,
1998. Further, no later than ten days before the due date for the premium for
such coverage for the period from February 1, 1998 through the date of Mr.
Bunting's 65th birthday, the Company will pay to Mr. Bunting an amount equal to
the premium for such coverage ("grossed up" for tax purposes) for such period,
without any deductions or offsets of any kind. Mr. Bunting will pay the
appropriate premium for his COBRA coverage to the Company's third party COBRA
administrator in accordance with the requirements of such third party
administrator. The Company's obligation to make such payments to Mr. Bunting
will terminate before said date at such time, if any, as substantially
comparable healthcare coverage is provided to Mr. Bunting from another source at
no cost to Mr. Bunting.
5. No Other Company Obligations. The Company will have no
obligations to Mr. Bunting whatsoever other than as specifically set forth in
this Agreement, and no promises have been made to Mr. Bunting other than as set
forth in this Agreement.
6. Release by Mr. Bunting. Mr. Bunting, for himself, his heirs,
executors, administrators and assigns, hereby freely relinquishes and waives any
claims and all possible claims of any kind whatsoever that Mr. Bunting ever had,
now has or may have hereafter against
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the Company, its subsidiaries and affiliates, and its and their successors,
assigns, employees, agents, officers, directors and stockholders (the
"Releasees") which may have arisen or relate to any actual or alleged act,
omission, transaction, practice, conduct, occurrence or other matter
whatsoever, through the date of his signing of this Agreement, provided that
Mr. Bunting does not waive any claims created by the Company's breach of this
Agreement. The terms "claims and all possible claims" includes, but is not
limited to, any claims under the Age Discrimination in Employment Act, Title
VII of the Civil Rights Act of 1964, the Equal Pay Act, the Americans with
Disabilities Act, the Civil Rights Act of 1991, or any or all other laws with
the same or similar intent or scope as those acts and laws set forth above,
applicable in any jurisdiction to which the Releasees or Mr. Bunting are or
become subject, including, but not limited to, the State of West Virginia.
These laws prohibit, among other things, discrimination in employment on the
basis of sex, race, color, religion, national origin, age, marital status or
disability. This relinquishment and waiver also includes any claims for
wrongful discharge, breach of contract, infliction of emotional distress, and
all other claims arising from statute, local law, administrative regulation
or common law. This relinquishment and waiver includes claims now known to
Mr. Bunting, as well as any and all possible claims that are not now known to
him.
7. Release by the Company. The Company, for itself and its
successors and assigns, hereby freely relinquishes and waives any claims and all
possible claims of any kind whatsoever that the Company ever had, now has or may
have hereafter against Mr. Bunting which may have arisen or relate to any actual
or alleged act, omission, transaction, practice, conduct, occurrence or other
matter whatsoever, through the date of its signing of this
3
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Agreement, provided that the Company does waive (a) any claim created by Mr.
Bunting's breach of this Agreement, or (b) any claim brought by any third
party in the name or on behalf of the Company. This relinquishment and waiver
includes all claims arising from statute, local law, administrative
regulation or common law. This relinquishment and waiver includes claims now
known to the Company, as well as any and all claims that are not now known to
the Company.
8. Secrecy and Non-disclosure.
(a) Mr. Bunting agrees to treat as secret and confidential all of the
Trade Secrets (as hereinafter defined) of the Company, and Mr. Bunting agrees
further not to disclose, use, publish or in any other manner reveal, directly or
indirectly, at any time or after the term of this Agreement, any Trade Secret,
except as required by law, in which case Mr. Bunting shall provide the Company
with written notice of such requirement by law no less than five (5) days prior
to any such disclosure, or, if Mr. Bunting is required to make such disclosure
in a lesser period of time, Mr. Bunting shall provide the Company with as much
advance notice as may then be practicable.
(b) "Trade Secrets", as used in this Agreement, shall mean any and
all information regarding the business of the Company and any subsidiary (as
hereinafter defined) or affiliates (as hereinafter defined) of the Company,
including, but not limited to, information regarding operations, systems,
services, know-how, supplier lists, customer lists, customer accounts, financial
information, gross margin analysis, costing data and marketing plans to the
extent not generally available to the public.
4
<PAGE>
(c) "Affiliates", as used in this Section 8, shall mean any person,
firm or entity that, directly or indirectly, controls, is controlled by, or is
under common control with, the Company. "Subsidiary" shall mean wholly as well
as partly-owned subsidiaries.
9. Proprietary Information and Disclosure to the Company. Mr.
Bunting will deliver to the Company all the Company property in his possession
or under his control, including, but not limited to, financial statements, mill
and production data, marketing and sales data, copies of designs, patent
applications, drawings and other documents.
10. Non-Competition.
(a) Mr. Bunting agrees that during the period commencing with the
date hereof and ending on the 18-month anniversary of the date hereof, Mr.
Bunting shall not, directly or indirectly
(i) become associated with, render services to, invest in,
represent, advise or otherwise participate as an employee, officer, director,
partner, joint venturer, shareholder, agent of or consultant for any business or
enterprise which is directly or indirectly competitive with the business engaged
in by the Company either during Mr. Bunting's employment with the Company or at
the Termination Date, provided, however, that nothing herein shall prevent Mr.
Bunting from investing in the securities of any company listed on a national
securities exchange or quoted on the NASDAQ quotation system, provided his
involvement with any such company is solely that of a stockholder owning less
than five percent (5%) of such company;
(ii) employ or solicit the employment or engagement by himself or
others of any employees of the Company; provided, however, that this Section
10(a)(ii) shall apply only with respect to such employment or solicitation of
employment in a business or
5
<PAGE>
venture which is directly or indirectly competitive with the business engaged
in by the Company at the Termination Date;
(iv) for himself, or as agent, employee or consultant of any
person, firm or corporation, knowingly canvass or solicit business from any of
the Company's customers; provided, however, that this Section shall apply only
with respect to such canvassing or solicitation of business which business is
directly or indirectly competitive with the business engaged in by the Company
at the Termination Date.
(b) Definitions.
(i) For purposes of this Section 10, businesses or enterprises
"similar to" or "competitive with" the Company shall mean those engaged, in
whole or substantially in part, in (A) the business of manufacturing and
distributing special steel sections, and/or (B) any new business engaged in by
the Company during the period beginning on the date hereof and ending on the
18-month anniversary of the date hereof, of which Mr. Bunting receives written
notice (which may be given prior to the Company's engaging in such business)
prior to Mr. Bunting's engaging in such business.
(ii) For purposes of this Section 10, "the Company" shall mean
the Company and any subsidiaries and affiliates thereof.
(c) Reasonableness of Restrictions. Mr. Bunting acknowledges that
the restrictions specified under this Section 10 are reasonable, in view of the
nature of the business in which the Company is engaged and Mr. Bunting's special
and unique skills, reputation and knowledge of the the Company's operations.
Mr. Bunting further acknowledges that his services, if used by a competitor,
could cause significant harm to the Company.
6
<PAGE>
(d) Modification of Restrictions. Notwithstanding anything contained
in this Section 10 to the contrary, the parties hereto intend that the covenant
contained in this Section 10 hereof shall be deemed a series of separate
covenants for each state, county and city. If, in any judicial proceeding, a
court shall refuse to enforce all the separate covenants deemed included in this
Section 10, because, taken together, they cover too extensive a geographic area,
the parties hereto intend that those of such covenants (taken in order of the
cities, counties and states therein which are least populous), which, if
eliminated, would permit the remaining separate covenants to be enforced in such
proceeding, shall for the purposes of such proceedings, be deemed eliminated
from the provisions of this Section 10.
11. Consent to Equitable Relief and other Remedies. Mr. Bunting
consents and agrees that if Mr. Bunting violates or threatens to violate any of
the provisions contained in Section 8, 9, or 10 of this Agreement, the Company
shall, in addition to such other remedies as it may have at law or in equity, be
entitled to (a) an injunction to be issued by a court of competent jurisdiction
restraining and prohibiting Mr. Bunting from committing or continuing any
violation of such provision, and (b) offset any amounts payable to Mr. Bunting
under the terms of this Agreement. If the scope of any restriction contained in
this Agreement is too broad to permit enforcement to its fullest extent, then
such restriction shall be enforced to the maximum extent permitted by law.
12. Non-Disparagement.
(a) The Company will not in any way or in any forum disparage, demean
or impugn the good name or reputation of Mr. Bunting.
7
<PAGE>
(b) Mr. Bunting will not in any way or in any forum disparage, demean
or impugn the good name or reputation or business or trade name or reputation of
the Company or any officer, director, stockholder, employee or agent of the
Company.
13. Opportunity to Review. Mr. Bunting acknowledges that his
decision to enter into this Agreement, including his relinquishment and waiver
of claims and all possible claims and his making the covenants contained herein,
in return for the benefits set forth above, were made after careful thought, and
after an opportunity to consult with an attorney of his choice, which the
Company has advised him to do. Mr. Bunting acknowledges that he has been
granted at least 21 days, which he agrees is adequate time, to thoroughly and
carefully review and consider this Agreement, and that he fully understands and
agrees to all of its terms.
14. Revocation. Mr. Bunting may revoke this Agreement within seven
days of his signing it. Revocation can be made by delivering written notice of
revocation to Stephen A. Albert, Sierchio & Albert, P.C., 41 East 57th Street,
New York, New York 10022. For this revocation to be effective, the written
notice must be received by Mr. Albert's office no later than the close of
business on the seventh day after Mr. Bunting signs this Agreement, or else Mr.
Albert's office must be notified by telephone on that day that the written
notice has been mailed on that day. If Mr. Bunting revokes this Agreement, this
Agreement will be rescinded in its entirety, and Mr. Bunting will not receive
any of the benefits set forth herein.
15. Amendments. This Agreement may not be altered or terminated
except by a writing signed by both Mr. Bunting and a duly authorized
representative of the Company.
16. Notices. All notices, claims, requests, demands and other
communications hereunder must be in writing and will be deemed to have been duly
given on
8
<PAGE>
the day of delivery if personally delivered or delivered by facsimile
transmission (during normal business hours, and if not delivered during normal
business hours such notice shall be deemed to have been given on the next
succeeding business day) and on the business day immediately following the
deposit thereof with a nationally recognized overnight courier for delivery to
the other party, addressed:
(a) If to the Company:
(i) Steel of West Virginia, Inc.
17th Street and 2nd Avenue
Huntington, West Virginia 25726
Att: Timothy R. Duke
President
Fax: (304) 529-1479
(b) If to Mr. Bunting:
Robert L. Bunting
62 North Calibogue Cay
Hilton Head, SC 29928
Fax: (803) 363-6325
or to such other address as either party may designate to the other by notice
given in accordance with this Section 16.
17. Construction of Agreement. All parts of this Agreement shall be
consulted in the context of the whole, according to their fair meaning, and
shall not be construed strictly for or against either party.
9
<PAGE>
NOTICE
THIS AGREEMENT CONTAINS A WAIVER OF ALL KNOWN OR UNKNOWN LEGAL CLAIMS, AND
COVENANTS BY YOU AGAINST COMPETITION, SOLICITATION, DISCLOSURE AND
DISPARAGEMENT. READ THIS ENTIRE AGREEMENT CAREFULLY BEFORE SIGNING. DO NOT
SIGN THIS AGREEMENT UNLESS YOU AGREE WITH ALL OF ITS TERMS.
Steel of West Virginia, Inc.
______________________ By: _____________________
Robert L. Bunting, Jr.
Date:_________________ Date: ___________________
10
<PAGE>
Exhibit 10.2
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") is made and
entered into as of this 9th day of July, 1997, by and between Steel of West
Virginia, Inc. ("Steel") and SWVA, Inc. ("SWVA"), both Delaware corporations
with offices at 17th Street and 2nd Avenue, Huntington, West Virginia 25703
(together, the "Company"), and Timothy R. Duke (the "Executive"), whose
residence address is 24 Marne Drive, Huntington, West Virginia, 25705.
WHEREAS, Executive is currently serving as the Chief Executive Officer and
President of the Company; and
WHEREAS, the Board of Directors of the Company recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of the Company may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of key management personnel to the detriment of the Company and
its stockholders; and
WHEREAS, the Board of Directors of the Company believes it is in the best
interest of the Company to enter into this Agreement with Executive in order to
assure continuity of management of the Company and to reinforce and encourage
the continued attention and dedication of Executive to his assigned duties
without distraction in the face of potentially
1
<PAGE>
disruptive circumstances arising from the possibility of a change in control
of the Company, although no such change is now contemplated; and
WHEREAS, the Board of Directors of the Company has approved and authorized
the execution of this Agreement with Executive;
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements herein contained, and intending to be legally bound, the parties
hereby agree as follows:
1. DEFINITION OF CHANGE OF CONTROL.
As used herein, "Change of Control" means any of the following events:
(a) Steel or SWVA is a party to a merger or combination under the
terms of which any person or group as that term is used in Rule 13d-5
under the Securities Exchange Act of 1934 own 20% or more of the
shares in the resulting company, or
(b) at least 50% in fair market value of Steel or SWVA's assets are
sold; or
(c) at least 20% in voting power in election of directors of Steel's
or SWVA's capital stock is acquired by any one person or group as
that term is used in Rule 13d-5 under the Securities Exchange Act
of 1934; or
(d) the individuals comprising the Board of Directors of the
Company on the date hereof cease to comprise a majority of the Board
of Directors of Steel or SWVA.
2
<PAGE>
As used herein, "Cause" means any act of fraud against the Company, or
conviction of a felony, or Executive's knowingly engaging in acts materially
detrimental to Steel or SWVA; provided that Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of Steel
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with his counsel,
to be heard before the Board), stating that in the good faith opinion of the
Board, Executive was guilty of conduct constituting "Cause" as set forth above
and specifying the particulars thereof in detail.
2. SEVERANCE BENEFITS.
(a) Upon the date of the occurrence of a Change of Control, the
Company shall pay to Executive in a lump sum in cash an amount equal to the
greater of (i) 125% of Executive's annual base salary for the year in which such
Change of Control occurs, and (ii) 125% of Executive's annual base salary for
the year preceding the year in which such Change of Control occurs. At the
discretion of Executive, such payment shall be made, on a pro rata basis,
bi-monthly during the 12 months following Executive's termination.
(b) Following the occurrence of a Change of Control, the Company
shall cause health insurance coverage (substantially similar to the coverage
maintained by the Company for the Employee prior to the Change of Control) to be
maintained for Executive at the Company's expense for a period of 12 months.
3. EFFECT ON EXISTING BENEFIT PLANS.
3
<PAGE>
This Agreement contains the entire understanding between the parties
hereto, and supersedes any prior agreement between the Company and Executive,
with regard to severance payments resulting from a Change of Control, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of any kind elsewhere provided. No provision
of this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits that those available to him without reference to this
Agreement.
4. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit
of, Executive, Steel and SWVA, and their respective successors and assigns.
5. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there by an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
4
<PAGE>
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
5
<PAGE>
6. NO MITIGATION.
The amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by Executive as the result of
employment by another employer, by retirement benefits after the date of
termination or otherwise.
7. NO ASSIGNMENTS.
(a) This Agreement is personal to each of the parties hereto, and
except as provided in Section 7(b) neither party may assign or delegate any of
its rights or obligations hereunder without first obtaining the written consent
of the other party.
(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by his personal and legal
representatives, executors, administrators, successors, heirs, distributee,
devisee and legatees. If Executive should die while any amounts would still
be payable to Executive hereunder if the Executive had continued to live, all
such amounts, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or if there is no such
designee, to Executive's estate.
8. NOTICES.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing in
accordance herewith.
6
<PAGE>
9. AMENDMENTS.
No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties.
10. SECTION HEADINGS.
The section headings used in this Agreement are included solely for
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
12. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
without regard to the choice of laws principles thereof.
13. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitration award in any court having jurisdiction.
14. REIMBURSEMENT.
In the event the Company purports to terminate Executive for Cause,
but it is determined pursuant to Section 13 that Cause did not exist for such
termination, or if in any event it is determined pursuant to Section 13 that the
Company has failed to make timely
7
<PAGE>
payment of any amounts owed to Executive under this Agreement, Executive
shall be entitled to reimbursement for all reasonable costs, including
attorneys' fees, and expenses, incurred in challenging such termination or
collecting such amounts. Such reimbursement shall be in addition to all
rights to which Executive is otherwise entitled under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Executive Steel of West Virginia, Inc.
By:
- ---------------------------- ---------------------------------------
Timothy R. Duke
SWVA, Inc.
By:
---------------------------------------
8
<PAGE>
Exhibit 10.3
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT ("Agreement") is made and
entered into as of this 7th day of July, 1997, by and between Steel of West
Virginia, Inc. ("Steel") and SWVA, Inc. ("SWVA"), both Delaware corporations
with offices at 17th Street and 2nd Avenue, Huntington, West Virginia 25703
(together, the "Company"), and Mark Meikle G. Meikle (the "Executive"), whose
residence address is 62 Mockingbird Lane, Ona, West Virginia, 25545.
WHEREAS, Executive is currently serving as the Chief Financial Officer of
the Company; and
WHEREAS, the Board of Directors of the Company recognizes that, as is the
case with publicly held corporations generally, the possibility of a change in
control of the Company may exist and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure
or distraction of key management personnel to the detriment of the Company and
its stockholders; and
WHEREAS, the Board of Directors of the Company believes it is in the best
interest of the Company to enter into this Agreement with Executive in order to
assure continuity of management of the Company and to reinforce and encourage
the continued attention and dedication of Executive to his assigned duties
without distraction in the face of potentially
1
<PAGE>
disruptive circumstances arising from the possibility of a change in control
of the Company, although no such change is now contemplated; and
WHEREAS, the Board of Directors of the Company has approved and authorized
the execution of this Agreement with Executive;
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements herein contained, and intending to be legally bound, the parties
hereby agree as follows:
1. DEFINITION OF CHANGE OF CONTROL.
As used herein, "Change of Control" means any of the following events:
(a) Steel or SWVA is a party to a merger or combination under the
terms of which any person or group as that term is used in Rule 13d-5
under the Securities Exchange Act of 1934 own 20% or more of the
shares in the resulting company, or
(b) at least 50% in fair market value of Steel or SWVA's assets are
sold; or
(c) at least 20% in voting power in election of directors of Steel's
or SWVA's capital stock is acquired by any one person or group as
that term is used in Rule 13d-5 under the Securities Exchange Act
of 1934; or
(d) the individuals comprising the Board of Directors of the
Company on the date hereof cease to comprise a majority of the Board
of Directors of Steel or SWVA.
2
<PAGE>
As used herein, "Cause" means any act of fraud against the Company, or
conviction of a felony, or Executive's knowingly engaging in acts materially
detrimental to Steel or SWVA; provided that Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors of Steel
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with his counsel,
to be heard before the Board), stating that in the good faith opinion of the
Board, Executive was guilty of conduct constituting "Cause" as set forth above
and specifying the particulars thereof in detail.
2. SEVERANCE BENEFITS.
(a) Upon the date of the occurrence of a Change of Control, the
Company shall pay to Executive in a lump sum in cash an amount equal to the
greater of (i) 125% of Executive's annual base salary for the year in which such
Change of Control occurs, and (ii) 125% of Executive's annual base salary for
the year preceding the year in which such Change of Control occurs. At the
discretion of Executive, such payment shall be made, on a pro rata basis,
bi-monthly during the 12 months following Executive's termination.
(b) Following the occurrence of a Change of Control, the Company
shall cause health insurance coverage (substantially similar to the coverage
maintained by the Company for the Employee prior to the Change of Control) to be
maintained for Executive at the Company's expense for a period of 12 months.
3. EFFECT ON EXISTING BENEFIT PLANS.
3
<PAGE>
This Agreement contains the entire understanding between the parties
hereto, and supersedes any prior agreement between the Company and Executive,
with regard to severance payments resulting from a Change of Control, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of any kind elsewhere provided. No provision
of this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits that those available to him without reference to this
Agreement.
4. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit
of, Executive, Steel and SWVA, and their respective successors and assigns.
5. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there by an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
4
<PAGE>
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
5
<PAGE>
6. NO MITIGATION.
The amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by Executive as the result of
employment by another employer, by retirement benefits after the date of
termination or otherwise.
7. NO ASSIGNMENTS.
(a) This Agreement is personal to each of the parties hereto, and
except as provided in Section 7(b) neither party may assign or delegate any of
its rights or obligations hereunder without first obtaining the written consent
of the other party.
(b) This Agreement and all rights of Executive hereunder shall inure
to the benefit of and be enforceable by his personal and legal representatives,
executors, administrators, successors, heirs, distributee, devisee and legatees.
If Executive should die while any amounts would still be payable to Executive
hereunder if the Executive had continued to live, all such amounts, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or if there is no such designee, to Executive's
estate.
8. NOTICES.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing in
accordance herewith.
6
<PAGE>
9. AMENDMENTS.
No amendments or additions to this Agreement shall be binding unless
in writing and signed by both parties.
10. SECTION HEADINGS.
The section headings used in this Agreement are included solely for
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
12. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
without regard to the choice of laws principles thereof.
13. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitration award in any court having jurisdiction.
14. REIMBURSEMENT.
In the event the Company purports to terminate Executive for Cause,
but it is determined pursuant to Section 13 that Cause did not exist for such
termination, or if in any event it is determined pursuant to Section 13 that the
Company has failed to make timely
7
<PAGE>payment of any amounts owed to Executive under this Agreement,
Executive shall be entitled to reimbursement for all reasonable costs,
including attorneys' fees, and expenses, incurred in challenging such
termination or collecting such amounts. Such reimbursement shall be in
addition to all rights to which Executive is otherwise entitled under this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Executive Steel of West Virginia, Inc.
- -------------------------- By:
Mark G. Meikle -----------------------------
SWVA, Inc.
By: -----------------------------
8
<PAGE>
Exhibit - 11.1
Computation of Earnings Per Share Data
The following formulas were used to calculate the earnings per
share data shown in the Consolidated Statements of Income and Retained
Earnings for the three months and nine months ended September 30, 1997
and September 30, 1996 included in this Report.
Calculation
-----------
Three Months Ended
- ------------------
September 30, 1997 Net Income Net Income = $1,297,000 = $ .22
----------------------- ----------
per common Weighted average shares 5,994,705
share of Common Stock for the
period
September 30, 1996 Net Income Net Income = $ 9,000 = $ .00
----------------------- ----------
per common Weighted average shares 5,988,025
share of Common Stock for the
period
Nine Months Ended
- -----------------
September 30, 1997 Net Income Net Income = $4,499,000 = $ .75
----------------------- ----------
per common Weighted average shares 5,993,560
share of Common Stock for the
period
September 30, 1996 Net Income Net Income = $ 640,000 = $ .11
----------------------- ----------
per common Weighted average shares 6,036,503
share of Common Stock for the
period
For purposes of calculating earnings per share, there were 5,994,705 and
5,993,560 weighted average shares of common stock outstanding during the
three months and nine months ended September 30, 1997 and 5,988,025 and
6,036,503 weighted average shares of common stock outstanding during the
three months and nine months ended September 30, 1996. The effect of
the Company's stock option plans was anti-dilutive for all periods
presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 11,955
<ALLOWANCES> 594
<INVENTORY> 21,822
<CURRENT-ASSETS> 37,602
<PP&E> 81,670
<DEPRECIATION> (30,444)
<TOTAL-ASSETS> 107,432
<CURRENT-LIABILITIES> 21,897
<BONDS> 27,462
0
0
<COMMON> 71
<OTHER-SE> 53,435
<TOTAL-LIABILITY-AND-EQUITY> 107,432
<SALES> 81,900
<TOTAL-REVENUES> 81,900
<CGS> 70,233
<TOTAL-COSTS> 70,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 682
<INCOME-PRETAX> 7,776
<INCOME-TAX> 3,277
<INCOME-CONTINUING> 4,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,499
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
</TABLE>
