<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
REGISTRATION NO. 333-4254
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BAR TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3312 13-3753384
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
</TABLE>
------------------------
227 FRANKLIN STREET, SUITE 300
JOHNSTOWN, PENNSYLVANIA 15901
(814) 533-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
JAMES R. POWERS
CHIEF EXECUTIVE OFFICER
BAR TECHNOLOGIES INC.
227 FRANKLIN STREET, SUITE 300
JOHNSTOWN, PENNSYLVANIA 15901
(814) 533-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
WILSON S. NEELY, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
The address of the principal executive offices of each of the additional
registrants listed below, and the name and address of the agent for service
therefor, is the same as is set forth for Bar Technologies Inc. on the facing
page of this Registration Statement.
<TABLE>
<CAPTION>
PRIMARY STANDARD
INDUSTRIAL I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION NUMBER NUMBER
- ------------------------------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
Bliss & Laughlin Industries Inc...... Delaware 3316 36-2607304
Bliss & Laughlin Steel Company....... Illinois 3316 36-3183728
Canadian Drawn Steel Company Inc..... Canada 3316 Not Applicable
</TABLE>
i
<PAGE>
BAR TECHNOLOGIES INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER LOCATION IN PROSPECTUS
-------------------------------------- -------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.......................... Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information......................... Summary; Pro Forma Financial
Information; Selected Financial
Information; Risk Factors
4. Terms of the Transactions............. Summary; Use of Proceeds; The
Exchange Offer; Certain Federal
Income Tax Considerations;
Description of the Exchange Notes;
Notes Registration Rights
5. Pro Forma Financial Information....... Pro Forma Financial Information
6. Material Contracts with the Company
Being Acquired...................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........... Not Applicable
8. Interests of Named Experts and
Counsel............................. Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... Not Applicable
10. Information with Respect to S-3
Registrants......................... Not Applicable
11. Incorporation of Certain Information
by Reference........................ Not Applicable
12. Information with Respect to S-2 or S-3
Registrants......................... Not Applicable
13. Incorporation of Certain Information
by Reference........................ Not Applicable
14. Information with Respect to
Registrants Other than S-3 or S-2
Registrants......................... Summary; The Company; Capitalization;
Pro Forma Financial Information;
Selected Financial Information;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Financial Statements
15. Information with Respect to S-3
Companies........................... Not Applicable
16. Information with Respect to S-2 or S-3
Companies........................... Not Applicable
17. Information with Respect to Companies
Other than S-3 or S-2 Companies..... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be
Solicited........................... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer... Management; Certain Transactions;
Principal Stockholders
</TABLE>
ii
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 29, 1996
PROSPECTUS
BAR TECHNOLOGIES INC.
AND BLISS & LAUGHLIN STEEL INDUSTRIES INC., BLISS & LAUGHLIN
STEEL COMPANY AND CANADIAN DRAWN STEEL COMPANY
OFFER TO EXCHANGE $91,609,000 OF ITS 13 1/2% SENIOR SECURED
NOTES DUE 2001 WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT FOR $91,609,000 OF ITS OUTSTANDING 13 1/2%
SENIOR SECURED NOTES DUE 2001
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1996, UNLESS EXTENDED (THE 'EXPIRATION DATE').
Bar Technologies Inc., a Delaware corporation ('BarTech'), and each of its
existing wholly owned subsidiaries, Bliss & Laughlin Industries Inc., Bliss &
Laughlin Steel Company and Canadian Drawn Steel Company Inc. (collectively, the
'Guarantors'), hereby offer to exchange (the 'Exchange Offer') up to $91,609,000
in aggregate principal amount of BarTech's new 13 1/2% Senior Secured Notes due
2001 (the 'Exchange Notes') for $91,609,000 in aggregate principal amount of
BarTech's outstanding 13 1/2% Senior Secured Notes due 2001 (the 'Notes'). The
terms of the Exchange Notes are identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Notes for
which they may be exchanged pursuant to this offer, except that the Exchange
Notes will be freely transferable by holders thereof (other than as provided
below) and are issued free from any covenant regarding registration. The
Exchange Notes will evidence the same indebtedness as the Notes and contain
terms which are identical in all material respects to the terms of the Notes
that are to be exchanged therefor.
The Notes were sold by BarTech in connection with (i) the merger of a wholly
owned subsidiary of BarTech with and into Bliss & Laughlin Industries Inc. (the
'B&L Acquisition'), (ii) the entering into by BarTech and certain of its
subsidiaries of the New Credit Agreement (as defined) and (iii) the issuance of
shares of Special Class B Common Stock of BarTech (the 'Class B Common Stock'
and, together with the Class A Common Stock of BarTech (the 'Class A Common
Stock'), the 'Common Stock'), representing a majority of the outstanding Common
Stock on a fully diluted basis for gross proceeds of $30.0 million in cash (the
'Blackstone Investment') provided by Blackstone Capital Partners II Merchant
Banking Fund L.P. and its affiliates (collectively, 'Blackstone'). The issuance
of the Notes, the B&L Acquisition, the effectiveness of the New Credit Agreement
and the Blackstone Investment, together with the repayment of certain
outstanding indebtedness, are referred to herein as the 'Recapitalization.'
The Exchange Notes will bear interest at a rate of 13 1/2% per annum payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1996.
BarTech has placed into an escrow account (the 'Interest Escrow Account') for
the benefit of the holders of the Notes and the Exchange Notes (collectively,
the 'Noteholders') approximately $18.5 million of the net proceeds from the sale
of the 91,609 units (collectively, the 'Units'), each consisting of $1,000
principal amount of Notes and one warrant (a 'Warrant'), each Warrant initially
entitling the holder thereof to purchase one share of Class A Common Stock,
representing funds that will be sufficient to pay interest on the Notes and the
Exchange Notes due on the first three interest payment dates.
The Exchange Notes will be redeemable, in whole or in part, at the option of
BarTech, at any time on or after April 1, 1999, at the redemption prices set
forth herein. In addition, at any time prior to April 1, 1999, BarTech may
redeem up to 35% of the aggregate principal amount of the Exchange Notes
originally issued in the event of one or more Public Equity Offerings (as
defined) for aggregate gross proceeds of $35.0 million or more at 113 1/2% of
the principal amount thereof, together with accrued interest thereon; provided
that not less than $55.0 million aggregate principal amount of Exchange Notes
would remain outstanding immediately after giving effect to any such redemption.
The Exchange Notes will be senior obligations of BarTech ranking pari passu
in right of payment with all existing and future senior indebtedness of BarTech.
The Exchange Notes will be guaranteed (the 'Guarantees') on a senior basis,
jointly and severally, by the Guarantors. The Exchange Notes and the Guarantees
will initially be secured by first or second priority liens on certain assets of
BarTech and the Guarantors and certain other assets as described under 'Summary
of Collateral and Intercreditor Agreements.' As of March 31, 1996, after giving
effect on a pro forma basis to the Recapitalization and including $4.3 million
of Caster financing incurred after March 31, 1996, BarTech and its subsidiaries
would have had $50.5 million of other indebtedness which was pari passu with the
Exchange Notes and the Guarantees, of which approximately $17.7 million was
secured by liens on certain assets that were prior to the liens securing the
Exchange Notes and the Guarantees.
If BarTech has Excess Cash Flow (as defined) for any fiscal year, BarTech
will under certain circumstances be obligated to make an offer to purchase
Exchange Notes in an aggregate principal amount equal to the Noteholders' Pro
Rata Share (as defined) of 75% of such Excess Cash Flow at a price of 100% of
the principal amount thereof. Upon the occurrence of a Change of Control (as
defined), BarTech will be obligated to make an offer to purchase all of the
outstanding Exchange Notes at a purchase price equal to 101% of the principal
amount thereof. If such an offer is made, there can be no assurance that BarTech
or the Guarantors will have available funds sufficient to pay for all of the
Exchange Notes that might be delivered by holders of Exchange Notes seeking to
accept such offer. In addition, BarTech may be obligated to make an offer to
purchase Exchange Notes at a price equal to 100% of the aggregate principal
amount thereof in the event of certain asset sales. See 'Description of the
Exchange Notes.'
The Notes were issued on April 2, 1996 in transactions not registered under
the Securities Act of 1933, as amended (the 'Securities Act'), in reliance upon
the exemption provided by Section 4(2) of the Securities Act. Accordingly, the
Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy certain of
the obligations of BarTech and the Guarantors under the registration rights
agreement relating to the Notes. See 'The Exchange Offer--Purpose of the
Exchange Offer.' BarTech and the Guarantors are making the Exchange Offer in
reliance upon an interpretation by the staff of the Securities and Exchange
Commission set forth in a series of no-action letters issued to third parties.
Based on such interpretation, BarTech and the Guarantors believe that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by holders thereof (other than any
holder which is an 'affiliate' of BarTech and the Guarantors within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holder's business,
such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such Exchange
Notes. However, BarTech and the Guarantors have not sought, and do not intend to
seek, their own no-action letter, and there can be no assurance that the staff
of the Securities and Exchange Commission would make a similar determination
with respect to the Exchange Offer. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal relating to the Exchange Offer states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Each broker-dealer that received the Notes from BarTech in the
Offering (as defined) and not as a result of market-making or other trading
activities, in the absence of an exemption, must comply with the registration
requirements of the Securities Act. BarTech and the Guarantors will, for a
period of 180 days after consummation of the Exchange Offer, make copies of this
Prospectus available to any broker-dealer for use in connection with any such
resale. See 'Plan of Distribution.'
The Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ('PORTAL') market. The Exchange Notes
constitute securities for which there is no established trading market. Any
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
BarTech and the Guarantors do not currently intend to list the Exchange Notes on
any securities exchange. To the extent that any Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Notes could be
adversely affected. No assurance can be given as to the liquidity of the trading
market for either the Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange. The date of acceptance and exchange
of the Notes (the 'Exchange Date') will be the first business day following the
Expiration Date. Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. BarTech and the Guarantors will pay
all expenses incident to the Exchange Offer. BarTech and the Guarantors will not
receive any proceeds from the Exchange Offer.
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
, 1996
<PAGE>
ADDITIONAL INFORMATION
BarTech and the Guarantors (collectively, the 'Issuers') have filed with
the Securities and Exchange Commission (the 'Commission') a Registration
Statement on Form S-4 (together with all amendments, exhibits, schedules and
supplements thereto, the 'Registration Statement') under the Securities Act with
respect to the Exchange Notes being offered hereby. This Prospectus, which forms
a part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Issuers and the Exchange Notes, reference is made to the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions in such exhibit,
to which reference is hereby made. Copies of the Registration Statement may be
examined without charge at the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the Registration Statement can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by
the Commission.
The Issuers are not currently subject to the informational requirements of
Securities Exchange Act of 1934, as amended (the 'Exchange Act'). Upon
completion of the Exchange Offer, BarTech will be subject to the informational
requirements of the Exchange Act, and, in accordance therewith, will file
periodic reports and other information with the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of any material so filed can be obtained
from the Public Reference Section of the Commission, upon payment of certain
fees prescribed by the Commission. In addition, pursuant to the Indenture
covering the Notes and the Exchange Notes, BarTech has agreed to file with the
Commission and provide to the Noteholders the annual reports and the
information, documents and other reports otherwise required pursuant to Section
13 of the Exchange Act.
------------------------------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements (and
notes thereto) included elsewhere in this Prospectus. References to 'BarTech'
shall mean Bar Technologies Inc. and references to the 'Company' shall, unless
the context otherwise requires, include BarTech and its direct and indirect
subsidiaries. Unless the context otherwise requires, references to 'B&L' shall
mean Bliss & Laughlin Industries Inc. and its subsidiaries Bliss & Laughlin
Steel Company ('BLSC') and Canadian Drawn Steel Company Inc. ('CDSC'). All
references to a fiscal year of the Company, BarTech or B&L refer to the 12-month
period ended on September 30 of such year. Holders of Notes considering
tendering their Notes in the Exchange Offer should read this Prospectus in its
entirety. This Prospectus contains forward-looking statements which involve
certain risks and uncertainties. Actual results and events may differ
significantly from those discussed in the forward-looking statements. Factors
that might cause a difference include, but are not limited to, those discussed
in 'Risk Factors.'
THE COMPANY
The Company believes that, upon the completion of the two phases of its
strategic modernization and expansion plan which is expected to be completed by
the end of 1997, it will be positioned to be one of the lowest cost vertically
integrated producers of high quality hot rolled engineered and cold finished
steel bar products in North America due to its collective bargaining agreement,
attractive support arrangements and the B&L Acquisition. In September 1994, the
Company acquired certain steelmaking and bar rolling assets (the 'BRW Assets')
of the former Bar, Rod and Wire Division (the 'Bethlehem BRW Division') of
Bethlehem Steel Corporation ('Bethlehem'). Until it shut down its manufacturing
operations in December 1992, the Bethlehem BRW Division was a leading
manufacturer of high quality engineered bar, rod and wire products. In
conjunction with the acquisition of the BRW Assets, the Company (i) negotiated a
new five-year labor agreement which it believes provides significant cost
advantages over its competitors and the historical labor costs of the Bethlehem
BRW Division, (ii) secured long-term, low interest economic development funding
from Federal and State and local agencies and attractive economic development
rates and other support arrangements from utilities and other suppliers, and
(iii) developed and is implementing a major modernization and expansion plan
that it expects will reduce its per ton operating costs significantly below
Bethlehem's costs of operating the BRW Assets. On February 9, 1996, BarTech
restarted its Lackawanna, New York 13" bar mill (the 'Lackawanna Facility') on a
limited basis and began producing for commercial sale hot rolled engineered bar
products. BarTech expects to commence commercial steelmaking operations at its
Johnstown, Pennsylvania facility (the 'Johnstown Facility') in the summer of
1996. In addition, BarTech on April 2, 1996 acquired B&L, the second largest
processor of cold finished steel bar products in North America. The Company
expects to realize a number of strategic benefits from the B&L Acquisition,
including (i) providing BarTech with a wholly owned consumer of hot rolled
engineered bar products, (ii) providing BarTech and B&L with an expanded breadth
and scope of product offerings and opportunities for enhanced distribution of
their products, and (iii) providing B&L with a more reliable, long-term source
of supply of higher quality and larger sized hot rolled engineered bar products
that it expects will enable it to bid effectively for more new business. In
fiscal 1995, B&L purchased 246,000 tons of hot rolled engineered bar products.
Hot rolled engineered bar products are high quality carbon and alloy steel
bars that are manufactured to meet rigorous end user requirements for surface
quality, strength, hardenability, machinability, toughness and other engineering
objectives. In order to meet these quality specifications, detailed and specific
practices must be followed in the engineered bar production process. The
principal markets for engineered bar products are, among others, the automotive,
industrial machinery, heavy equipment and independent forging industries, which
use engineered bar products in a wide variety of applications where product
quality and strength are critical, such as cam shafts, axles, roller bearings,
hydraulic fittings, ordnance, valves and fittings, and wheel hubs and spindles.
The Company believes that the engineered bar market is generally less volatile
than the overall steel market, and hot rolled engineered bar products generally
sell for higher prices and yield higher margins than lower grades of bar
products such as merchant quality and reinforcing bar products. The Company
estimates that the total North American market during calendar 1994 for hot
rolled engineered bar products was approximately 8.7 million tons.
3
<PAGE>
The Company plans to target the higher quality, higher margin segment of
the hot rolled engineered bar market. Customers in this market segment require
specialized products with stringent quality specifications for applications such
as the 'near net shape' manufacturing process, which is designed to produce
parts as similar as possible in size and shape to the final part and, by
minimizing costly machining and scrap, results in lower costs to the end user.
These stringent product requirements limit the number of steelmakers that can
produce higher quality hot rolled engineered bar products. The Company believes
it will have a lower cost structure than most large producers of higher quality
hot rolled engineered bar products and that other steelmakers that may operate
with lower cost structures, such as certain mini-mills, generally lack the
facilities or production processes to manufacture such high quality products.
Pursuant to the B&L Acquisition, the Company has become a major processor
of cold finished bar products. Cold finished bars are processed from hot rolled
bars through value-adding processes that improve the physical properties of hot
rolled bars, such as cold drawing, turning, grinding, polishing and thermal
treating or combinations of such processes. Cold finishing allows for the
manufacture of products with more precise size and straightness tolerances as
well as surface finishes that allow customers to more efficiently produce a
number of end products. Cold finished bar products include rounds, squares,
hexagons and flats, all of which can be further processed by cold finished bar
customers. The Company estimates that the total North American market during
fiscal 1995 for cold finished bar products was approximately 2.4 million tons
per year.
ACQUISITION OF BRW ASSETS, IMPROVED COST STRUCTURE AND STRATEGIC MODERNIZATION
AND EXPANSION PLAN
In September 1994, the Company acquired the BRW Assets from Bethlehem for
an aggregate price of $26.5 million (consisting of $15.5 million in cash, the
$5.5 million Bethlehem Subordinated Note and $5.5 million of Bethlehem Preferred
Stock) without assuming any liability for past service costs for pension and
retiree medical benefits and with an indemnification to limit BarTech's
liability for material costs arising from certain pre-acquisition environmental
conditions (i) through December 31, 1996, to 50% of the first $2.0 million in
damages, or $1.0 million, and (ii) thereafter, to 50% of the first $10.0 million
of damages, or $5.0 million in the aggregate. The BRW Assets had a net book
value on Bethlehem's balance sheet at the time of acquisition in excess of
$140.0 million. Through a new labor agreement and the procurement of attractive
support arrangements and upon the completion of its strategic modernization and
expansion plan, the Company believes it will be positioned to establish itself
as one of the lowest cost producers of high quality hot rolled engineered bar
products in North America.
New Labor Agreement and Employee Partnership. BarTech's new five-year
collective bargaining agreement with the United Steelworkers of America (the
'USWA') for the Johnstown Facility and the Lackawanna Facility (together, the
'BarTech Facilities') represents the start of a new partnership between BarTech
and its employees. The new collective bargaining agreement provides for
all-inclusive wage and benefits costs of approximately $16 per hour per employee
for the first year of the agreement, which commenced with the restart of
commercial operations at the Lackawanna Facility on February 9, 1996, and
provides for increases in each year thereafter, culminating with all-inclusive
wage and benefit costs of approximately $23 per hour per employee in the last
year of the agreement. See 'Business--Employees.' BarTech's first year wage and
benefits costs per employee under the agreement will be approximately half of
that experienced under the USWA labor agreement applicable to the BarTech
Facilities when operated by the Bethlehem BRW Division in 1992 (the 'Bethlehem
Labor Agreement') and will be even more advantageous when compared with average
steel industry all-inclusive wage and benefits costs, which were approximately
$33 per hour per employee for calendar 1994 according to the American Iron and
Steel Institute ('AISI'). BarTech also expects to realize reduced staffing
levels and substantial operating flexibility resulting from a reduction in job
classifications to five in the new agreement compared with 34 in the Bethlehem
Labor Agreement. The new agreement also provides for a defined contribution plan
for retirement benefits whereas retirement benefits under the Bethlehem Labor
Agreement were on a defined benefit basis. Under a defined benefit plan the
employer guarantees the participant a certain level of retirement income. Under
a defined contribution plan the participant's retirement benefit is not
guaranteed by the employer, but rather is based solely on (1) the amount
contributed to the participant's account and (2) any income, expenses, gains and
losses of such account. Unlike the defined benefit plan provided for by the
Bethlehem Labor Agreement, the Company
4
<PAGE>
will not have an obligation to ensure that the defined contribution plan has
adequate assets to fund any specified benefit level.
The Company believes that its new partnership with its BarTech employees
through the new collective bargaining agreement with the USWA provides a
foundation for favorable labor relations with its BarTech employees. In exchange
for the USWA entering into the new agreement, the Company agreed to establish an
employee stock ownership plan (the 'ESOP'). The Company also agreed that BarTech
would contribute a minimum of 20% of the then outstanding Common Stock of
BarTech to the ESOP (subject to dilution for events occurring subsequent to
February 1994) and granted the USWA the power to appoint, and the USWA has
appointed, two of the eleven existing directors of BarTech. The Company intends
to continue to work closely with the USWA to improve productivity and maintain
low overall labor costs while providing a stable and safe work environment at
competitive wage rates.
The Company believes that it is unlikely that a competitor will be able to
negotiate a similar contract with the USWA in the foreseeable future, although
no assurance can be given to such effect. When the Company's labor contract was
negotiated, the Company believes that the USWA was under considerable pressure
to be conciliatory due to the shutdown of the Bethlehem BRW Division
specifically and the generally poor performance of the steel industry. In
contrast, the steel industry has since then experienced a turn-around in
performance, and the Company believes that the USWA will request wage increases
as contract discussions are reopened with other steel companies.
Attractive Support Arrangements. The Company has secured favorable
economic development funding commitments for the BarTech Facilities totaling
$43.5 million, after giving effect to the Recapitalization on a pro forma basis,
from several Federal and State and local governmental entities in the
Commonwealth of Pennsylvania and the State of New York. The majority of these
funding arrangements carry annual interest rates of 3% or below with final
maturities of up to 15 years.
For the Johnstown Facility, the Company has a non-binding memorandum of
understanding with its electric supplier which it believes will provide it with
favorable electric rates. For example, in its first year of operations, the
Company expects its rates to be as low as 3.2cents per kilowatt hour ('KWH'). A
definitive agreement with Johnstown's electric supplier is expected to be signed
in August 1996 and will become effective upon approval by the Pennsylvania
Utility Commission. The Company also has entered into a letter of intent to
purchase a local natural gas transmission line that will assure the Company's
continued access to gas service at a cost below local utility rates. The
Lackawanna Facility is expected to benefit from low electric rates of
approximately 2.0cents per KWH (based on current rates) and favorable natural
gas transmission rates. Utilities represent approximately 11% of the cost of
production of hot rolled bars.
Bethlehem also agreed to indemnify the Company for material costs arising
from certain pre-acquisition environmental conditions relating to the BRW
Assets. See 'Risk Factor--Environmental Considerations.' In addition, the
Company expects that most of BarTech's employees will be former Bethlehem BRW
Division employees who have qualified for Bethlehem pension benefits. Pursuant
to an agreement with Bethlehem, such employees will continue to receive their
medical benefits pursuant to Bethlehem's pension plan and the obligation of
BarTech relating to these medical benefits will be limited to an annual fixed
payment per employee by BarTech to Bethlehem that will be less than one-half of
the factual cost for each employee for such benefits and will not vary over time
or based on actual claims experience.
Strategic Modernization and Expansion Plan. The Company developed and is
implementing a plan to modernize and expand the Johnstown Facility to take
advantage of proven technological advances in hot rolled engineered bar
production. Phase One of the two phase plan involves replacing the former ingot
based steel production process at the Johnstown Facility with a flexible
combination bloom/billet continuous casting process, together with the
installation of a new computerized management information system. The completion
of Phase One is expected to lead to many cost savings and quality improvements
for the Company as compared with the operations of the Bethlehem BRW Division.
Phase One is scheduled to be completed and steelmaking operations are expected
to commence at the Johnstown Facility in the summer of 1996. As of July 8, 1996,
the Company estimates that an additional $6.3 million of capital expenditures
(net of an approximate $2 million prepayment discount, as discussed in
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources') will be required to complete Phase
One. See 'Business--BarTech Modernization and Expansion Plan.'
5
<PAGE>
The Company plans to further modify the Johnstown Facility in Phase Two of
its modernization and expansion plan, which will provide bloom processing and
direct charged large sized bar finishing capabilities. Direct charging
facilities will allow the Company to roll semi-finished billet and finished bar
products directly as the blooms are produced from the continuous caster, thereby
further reducing manufacturing costs, increasing productivity and improving
product quality. Phase Two is intended to allow the Company to expand and
diversify its product offerings and market share and penetrate additional higher
quality and larger size segments of the engineered bar market, which segments
the Company believes have fewer competitors than the engineered bar market
generally. Commercial steelmaking operations of the Company will begin after the
completion of Phase One and are not conditioned or dependent on the completion
or progress of Phase Two. It is expected that the Company's commercial
steelmaking operations at the Johnstown Facility will continue with minimal
disruption during the construction and implementation of Phase Two, which is
currently scheduled to be completed by the end of 1997. By the end of the summer
of 1997, the Company expects to have the capability to cast larger blooms of up
to 10" by 14" and to direct charge blooms and equalize their temperature in the
new bloom reheat furnace immediately after casting and before further rolling on
the existing 30"-21" mill and discharge to the new turnover cooling bed. By the
end of 1997, with the addition of mill stands and other equipment to the
existing 30"-21" mill, the Company expects to have the capability to produce
large round and round-cornered square bars in sizes up to 6". See 'Risk
Factors--Risks of Implementation of Modernization and Expansion Plan and
Start-Up of Idle Manufacturing Facilities' and 'Business--BarTech Modernization
and Expansion Plan--Phase Two.'
The cost of Phase Two was estimated in March 1996 to be approximately $25
million. However, it is now expected that the total cost may ultimately be $10
million to $15 million higher than the original estimate primarily due to (i)
the Company's contemplated purchase of new, more efficient mill stands rather
than the previously intended utilization of currently owned redundant mill
stands, (ii) the receipt of higher price quotations than earlier anticipated,
(iii) the incorporation of certain equipment modifications in order to allow
casting of additional bloom sizes to optimize efficiency at the Company's
rolling mill operations and (iv) the addition of equipment to further improve
the internal quality of the as-cast bloom product to enhance product
marketability. The Company is continuing to analyze all aspects of Phase Two and
negotiate with vendors and contractors in order to complete Phase Two at the
lowest possible cost. See 'Business--BarTech Modernization and Expansion
Plan--Phase Two.'
Projects designed to take advantage of additional growth opportunities
currently are being planned and analyzed by the Company. These projects include
the modification of the Company's existing 11" bar mill in Johnstown,
Pennsylvania with the installation of a rod block that would allow the Company
to compete in the high quality, high margin segment of the steel rod market. The
Company believes that the high quality segment of the rod market is served by
few low cost domestic competitors and the Company's proximity to a major local
customer of rod products should enable it to compete successfully in this
market. This and other additional projects will be pursued only after the
completion of the Company's two phase modernization and expansion plan and upon
the Company's final determination that its entry into any new market would be a
sustainable long-term enhancement to the Company's future profitability.
THE B&L ACQUISITION
On October 4, 1995, BarTech entered into an amended merger agreement (the
'Merger Agreement') with B&L, and on April 2, 1996, BarTech acquired B&L for
$9.50 per share of common stock in cash for an aggregate purchase price of
approximately $38.0 million. The Company believes that B&L currently is the
second largest processor of cold finished steel bar products in North America
and offers the widest range of grades, shapes and sizes of cold finished bar
products in North America. B&L has received quality awards from a number of its
customers, including Ford Motor Company's 'Q1 Preferred Quality Award' for B&L's
Harvey, Illinois and Cartersville, Georgia facilities and Case Corporation's
'Supplier Quality Assurance Recognition Award' for the Harvey, Illinois
facility. B&L was one of the largest purchasers of hot rolled engineered bar
products from the Bethlehem BRW Division before Bethlehem shut down the
operations of the Bethlehem BRW Division in 1992.
Through the B&L Acquisition and with the commencement of steelmaking
production at the BarTech Facilities, the Company will be a vertically
integrated producer of high quality hot rolled and cold finished steel bar
products. The Company believes it will realize significant benefits from the B&L
Acquisition, including: (i) a preferred supplier relationship with B&L as a
wholly owned consumer of
6
<PAGE>
many of BarTech's engineered bar products, which will provide the Company with
additional stability during its initial market re-entry and during any
subsequent market downturns, (ii) cost savings through the consolidation of
select corporate functions and the synergy of certain sales and marketing
efforts and other activities, (iii) an expanded breadth and scope of product
offerings and opportunities for enhanced distribution of the Company's products,
(iv) improved inventory management due to dependable raw material sourcing for
B&L, and (v) the opportunity for B&L to pursue more aggressively longer term
marketing opportunities not previously pursued due to a lack of a reliable,
long-term source of supply of higher quality and larger sized hot rolled
engineered bar products.
MARKET RE-ENTRY STRATEGY
The Company has begun the implementation of its marketing plan for its hot
rolled engineered bar products, including contacting potential customers, many
of whom are former customers of the Bethlehem BRW Division, and determining and
identifying potential customer product and volume requirements.
During its first year of commercial operations, BarTech's market re-entry
strategy is to focus on shipping its hot rolled engineered bar products to the
lower end segments of the engineered bar market where it believes fewer
pre-qualification requirements exist and where its low cost operating structure
will provide a competitive advantage over its primary competitors. The Company
expects that, in addition to its lower end market shipments, BarTech will also
produce trial heats of higher quality hot rolled engineered bar products for
testing and analysis by customers requiring pre-qualification of products. As
market penetration is gained in the lower end segment of the engineered bar
market and pre-qualification of its higher quality products is achieved, BarTech
will then selectively pursue higher quality engineered bar market segments that
offer potentially higher profit margins than other engineered bar market
segments.
As part of its initial hot rolled engineered bar product strategy, the
Company restarted operations at the Lackawanna Facility's 13" bar mill on
February 9, 1996, utilizing semi-finished billets purchased from other
steelmakers to produce hot rolled engineered bar products for the lower end
segment of the engineered bar market. These initial operations at the Lackawanna
Facility are intended to re-establish the Company as a supplier in the hot
rolled engineered bar market while facilitating its transition into full
steelmaking and bar rolling operations by avoiding simultaneous start-ups of its
steelmaking and bar rolling facilities.
In addition to these marketing strategies, the Company intends to
capitalize on its new affiliation with B&L by supplying B&L, a large consumer of
hot rolled engineered bar products, with a portion of BarTech's initial
production of hot rolled engineered bar products. The Company believes that
BarTech will have the capability to supply B&L with up to approximately 115,000
tons of product annually after the completion of Phase One, based on B&L's
current projections for its hot rolled engineered bar requirements. Following
the completion of Phase Two and BarTech's entry into the higher end segments of
the engineered bar market, BarTech will have the capability to supply B&L with
up to approximately 180,000 tons of product per year and therefore may be able
to further expand its shipments to B&L. The Company believes that sales to B&L
will (i) enhance BarTech's near term entry into the engineered bar market, (ii)
provide an immediate initial market for BarTech's engineered bar products to
permit more efficient production, and (iii) potentially offset any effects of
any softening in the market for hot rolled engineered bar products.
MANAGEMENT
Both BarTech's and B&L's management teams have extensive experience in the
steel industry. BarTech's management team consists of executives that have had
experience at many of the Company's principal competitors and at mini-mills, and
also includes key personnel from the Bethlehem BRW Division. In connection with
the integration of the operations of B&L and the implementation of the strategic
modernization and expansion plan, the Company has been in discussions with
several individuals who may fill one or more senior management positions of the
Company. Collectively, the top four senior executives of the Company have 125
years of experience in the steel industry. In addition, it is intended that,
subject to certain vesting provisions, senior management of the Company will
have an ownership interest in BarTech equal to approximately 2.1% of the Common
Stock (after giving effect to all the issuances agreed to as of the time of the
Recapitalization, but subject to further dilution for subsequent events). See
'Management--Executive Compensation.'
7
<PAGE>
THE RECAPITALIZATION
The Units were offered as part of a recapitalization (the
'Recapitalization') of BarTech. The other principal components of the
Recapitalization, which were consummated concurrently with the offering of the
Units (the 'Offering'), include the following:
o The issuance of 536,829 shares of Class B Common Stock of BarTech in
consideration of the $30.0 million Blackstone Investment, representing a
58.6% equity interest in BarTech on a fully diluted basis. See 'Principal
Stockholders.' Blackstone, as the beneficial owner of the Class B Common
Stock, is entitled to designate the Class B Directors, who hold 50% of
the voting power of the Board of Directors, such 50% voting power to
continue regardless of the percentage of BarTech's equity represented by
the Class B Common Stock. In addition, pursuant to the terms of the
Stockholders' Agreement, Blackstone has the right to cause one additional
director to be replaced by a person designated by Blackstone.
Accordingly, Blackstone has the ability to control the affairs of BarTech
and its subsidiaries.
o The establishment of a new senior revolving credit agreement (the 'New
Credit Agreement') among BarTech, B&L and a syndicate of banks led by
Chemical Bank, as agent, which provides BarTech and B&L with a revolving
credit facility in an aggregate principal amount of up to $90.0 million,
of which a portion will be available in the form of letters of credit.
The New Credit Agreement is initially secured by (i) all of the
inventory, accounts receivable, related intangibles and documents and the
proceeds of the foregoing, (ii) all of the Common Stock of BarTech
outstanding on the Issue Date, subject to dilution and release under
certain circumstances, and (iii) all the capital stock of each direct or
indirect subsidiary of BarTech. The pledges of capital stock referred to
in (ii) and (iii) will be made on a first priority basis and will be
equal and ratable with the liens on such capital stock in favor of
Noteholders. Borrowings under the New Credit Agreement will bear interest
at a rate per annum equal to, at BarTech's option, either a prime rate
plus 2.00% or an adjusted Libor rate plus 3.00%, subject to upward
adjustment in certain circumstances. See 'Description of Other
Indebtedness--The New Credit Agreement.'
o The consummation of the B&L Acquisition and the payment of the aggregate
purchase price of approximately $38.0 million. See 'The
Company--Acquisition of B&L by BarTech.'
o The repayment of the following indebtedness: (i) approximately $16.8
million aggregate principal amount of outstanding loans under the B&L
Revolving Credit Facilities (as defined); (ii) approximately $5.8 million
aggregate principal amount of outstanding loans under the Existing
BarTech Credit Facilities (as defined); and (iii) approximately $6.1
million aggregate principal amount of outstanding loans under the Master
Agreement (as defined).
The following table sets forth a summary of the sources and uses of funds
associated with the Recapitalization:
<TABLE>
<CAPTION>
SOURCES
- -------------------------------------------------- AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Issuance of the Units............................. $ 90.0
Blackstone Investment............................. 30.0
--------
Total........................................... $ 120.0
--------
--------
<CAPTION>
USES
- --------------------------------------------------
<S> <C>
Purchase Price for the B&L Acquisition............ $ 38.0
Repayment of Indebtedness(a)...................... 27.4
Pre-funding of Phase Two of the Modernization and
Expansion Plan.................................. 20.0
Funding of the Interest Escrow Account............ 18.5
Expenses of the Recapitalization other than for
the Offering.................................... 8.8
Fees and expenses related to the Offering......... 7.3
--------
Total........................................... $ 120.0
--------
--------
</TABLE>
- ------------------
(a) In addition, approximately $1.3 million of Indebtedness was repaid utilizing
the Company's available sources of liquidity.
8
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer............ BarTech and the Guarantors are offering to
exchange pursuant to the Exchange Offer up to
$91,609,000 aggregate principal amount of
BarTech's new 13 1/2% Senior Secured Notes due
2001 (the 'Exchange Notes') for $91,609,000
aggregate principal amount of BarTech's
outstanding 13 1/2% Senior Secured Notes due 2001
(the 'Notes'). The terms of the Exchange Notes
are identical in all material respects (including
principal amount, interest rate and maturity) to
the terms of the Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable
by holders thereof (other than as provided
herein), and are not subject to any covenant
regarding registration under the Securities Act.
See 'The Exchange Offer--Terms of the Exchange'
and '--Terms and Conditions of the Letter of
Transmittal' and 'Description of Exchange Notes.'
Interest Payments............. Interest on the Exchange Notes shall accrue from
the last Interest Payment Date (April 1 or
October 1) on which interest was paid on the
Notes so surrendered or, if no interest has been
paid on such Notes, from April 2, 1996 (the
'Issue Date').
Minimum Condition............. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Notes being
tendered for exchange.
Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless
extended (the 'Expiration Date'). Any Note not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Exchange Date................. The date of acceptance for exchange of the Notes
will be the first business day following the
Expiration Date.
Conditions of the Exchange
Offer....................... BarTech and the Guarantors' obligation to
consummate the Exchange Offer will be subject to
certain conditions. See 'The Exchange
Offer--Conditions to the Exchange Offer.' BarTech
and the Guarantors reserve the right to terminate
or amend the Exchange Offer at any time prior to
the Expiration Date upon the occurrence of any
such condition.
Withdrawal Rights............. The tender of Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date.
Procedures for Tendering
Notes....................... See 'The Exchange Offer--Tender Procedure.'
Federal Income Tax
Consequences................ The exchange of Notes for Exchange Notes will not
be a taxable exchange for federal income tax
purposes. See 'Certain Federal Income Tax
Considerations.'
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Effect on Holders of Notes.... As a result of the making of, and upon acceptance
for exchange of all validly tendered Notes
pursuant to the terms of, this Exchange Offer,
BarTech and the Guarantors will have fulfilled a
covenant contained in the Registration Rights
Agreement (the 'Notes Registration Rights
Agreement') dated April 1, 1996 by and among
BarTech, the Guarantors and Chase Securities
Inc., as Initial Purchaser (the 'Initial
Purchaser'), and, accordingly, there will be no
increase in the interest rate on the Notes
pursuant to the terms of the Notes Registration
Rights Agreement, and the holders of the Notes
will have no further registration or other rights
under the Notes Registration Rights Agreement.
Holders of the Notes who do not tender their
Notes in the Exchange Offer will continue to hold
such Notes and will be entitled to all the rights
and limitations applicable thereto under the
Indenture dated as of April 1, 1996, among
BarTech, the Guarantors and United States Trust
Company of New York, as trustee, relating to the
Notes and the Exchange Notes (the 'Indenture'),
except for any such rights under the Notes
Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness
as a result of the making of, and the acceptance
for exchange of all validly tendered Notes
pursuant to, the Exchange Offer. All untendered
Notes will continue to be subject to the
restrictions on transfer provided for in the
Notes and in the Indenture. To the extent that
Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered Notes
could be adversely affected.
Use of Proceeds............... There will be no cash proceeds to BarTech and the
Guarantors from the exchange pursuant to the
Exchange Offer.
Exchange Agent................ United States Trust Company of New York is
serving as Exchange Agent in connection with the
Exchange Offer.
Consequence of Failure to
Exchange.................... Holders of Notes who do not exchange their Notes
for Exchange Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions
on transfer of such Notes as set forth in the
legend thereon as a consequence of the offer or
sale of the Notes pursuant to an exemption from,
or in a transaction not subject to, the
registration requirements of the Securities Act
and applicable state securities laws. In general,
the Notes may not be offered or sold, unless
registered under the Securities Act, except
pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. BarTech and
the Guarantors do not currently anticipate that
they will register the Notes under the Securities
Act.
TERMS OF THE EXCHANGE NOTES:
Maturity Date................. April 1, 2001.
Interest Payment Dates;
Interest Escrow Account..... Interest will accrue on the Exchange Notes at a
rate of 13 1/2% per annum from the Issue Date and
will be payable
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
semiannually on each April 1 and October 1,
commencing October 1, 1996. On the Issue Date,
the Company placed approximately $18.5 million of
the net proceeds from the sale of the Units into
the Interest Escrow Account.
Optional Redemption........... The Exchange Notes will be redeemable, in whole
or in part, at the option of BarTech, at any time
on or after April 1, 1999 at the redemption
prices set forth in 'Description of the Exchange
Notes--Redemption,' together with accrued and
unpaid interest, if any, to the date of
redemption. In addition, at any time prior to
April 1, 1999, BarTech may redeem up to 35% of
the aggregate principal amount of the Exchange
Notes originally issued in the event of one or
more Public Equity Offerings (as defined in
'Description of the Exchange Notes--Redemption')
for aggregate gross proceeds of $35.0 million or
more at a redemption price of 113 1/2% of
principal amount, together with accrued and
unpaid interest, if any, thereon; provided that
not less than $55.0 million aggregate principal
amount of Notes and Exchange Notes would remain
outstanding immediately after giving effect to
any such redemption.
Guarantees.................... The Exchange Notes will be guaranteed (the
'Guarantees') on a senior basis, jointly and
severally, by all of BarTech's existing
subsidiaries, Bliss & Laughlin Industries Inc.,
Bliss & Laughlin Steel Company and Canadian Drawn
Steel Company ('CDSC'), and any future subsidiary
of BarTech that owns or holds any Collateral (as
defined below).
Security...................... The Exchange Notes and the Guarantees will
initially be secured by liens on (i) interests in
certain real properties owned or leased by
BarTech and the Guarantors on the Issue Date,
(ii) interests in machinery and equipment owned
on, or acquired after, the Issue Date by BarTech
and the Guarantors located at such real
properties, (iii) all of the Common Stock of
BarTech outstanding on the Issue Date (which was
pledged by all of the shareholders of BarTech as
of the Issue Date on a non-recourse basis and
will be subject to dilution for issuances of
Common Stock subsequent to the Offering and
release upon the occurrence of certain events),
(iv) all of the outstanding capital stock of
BarTech's existing subsidiaries, (v) certain
contract and intellectual property rights of
BarTech and the Guarantors, (vi) the Interest
Escrow Account, and (vii) proceeds of the
foregoing. The assets and property described in
clauses (i)-(vii) above are collectively referred
to herein as the 'Collateral.' The claims of
Noteholders to proceeds of the Collateral will be
entitled to a first or second priority pursuant
to the terms of two intercreditor agreements
which define the relative rights and remedies of
various creditors having claims on the
Collateral. As of March 31, 1996, on a pro forma
basis after giving effect to the
Recapitalization, BarTech and the Guarantors
would have had an aggregate amount of
approximately $17.7 million of indebtedness
outstanding secured by liens on certain of those
assets which are senior to the liens securing the
Exchange
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Notes and the Guarantees (which includes the
caster financing described under 'Description of
Other Indebtedness' that is not reflected on the
March 31, 1996 balance sheet of BarTech). In
addition, the first priority lien of Noteholders
in the capital stock of BarTech and its
subsidiaries is shared on a pro rata basis (based
upon relative outstanding principal amounts,
including the face amount of outstanding letters
of credit) with the lenders under the New Credit
Agreement. The Exchange Notes and the Guarantees
generally will not be secured by separable and
identifiable plants or facilities (including
machinery and equipment located thereat) acquired
or constructed by the Company after the Issue
Date. The indenture under which the Exchange
Notes will be issued (the 'Indenture') also
permits substitution of Collateral under certain
circumstances and releases of Collateral without
substitution of property of equal value under
certain circumstances. See 'Description of the
Exchange Notes--Possession, Use and Release of
Collateral' and 'Summary of Collateral and
Intercreditor Agreements.'
Ranking of the Exchange Notes
and Guarantees.............. The Exchange Notes will be senior obligations of
BarTech ranking pari passu in right of payment
with all existing and future senior indebtedness
of the Company. Each Guarantee is a senior
obligation of the applicable Guarantor ranking
pari passu in right of payment with all existing
and future senior indebtedness of such Guarantor.
As of March 31, 1996, after giving effect on a
pro forma basis to the Recapitalization and
including $4.3 million of Caster financing
incurred after March 31, 1996, BarTech and the
Guarantors would have had $50.5 million of other
indebtedness (not including $4.6 million of
undrawn letters of credit under the New Credit
Agreement) which was pari passu with the Exchange
Notes and the Guarantees, of which an aggregate
of $17.7 million was secured by liens on certain
assets that were prior to the liens on the
Exchange Notes and the Guarantees.
Change of Control Offer....... In the event of a Change of Control, BarTech will
be obligated to make an offer to purchase all of
the then outstanding Exchange Notes at a purchase
price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any,
to the date of purchase. In the event of certain
other changes of ownership, substantially all of
BarTech's other indebtedness would become capable
of being accelerated. Accordingly, no assurance
can be given that BarTech or the Guarantors will
be able to purchase all of the Exchange Notes
with respect to which such offer is accepted. See
'Description of the Exchange Notes--Change of
Control Offer.'
Excess Cash Flow Offer........ If the Company has Excess Cash Flow for any
fiscal year, BarTech will be required, subject to
certain exceptions and limitations (including its
ability to retain the first $10.0 million of
Excess Cash Flow), to use the Noteholders' Pro
Rata Share (defined based on relative outstanding
principal amounts of indebtedness in respect of
the Notes and Exchange Notes as
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
compared with the New Credit Agreement) of 75% of
such Excess Cash Flow to make an offer to
purchase Notes and Exchange Notes at a price
equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the
date of purchase. See 'Description of the
Exchange Notes--Excess Cash Flow Offer.'
Asset Sale Offer.............. BarTech will be required in certain circumstances
to make an offer to purchase Exchange Notes with
the proceeds of certain asset sales at a purchase
price equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any,
to the date of purchase. See 'Description of the
Exchange Notes--Certain Covenants--Disposition
of Proceeds of Asset Sales.'
Certain Covenants............. The Indenture contains certain restrictive
covenants including (i) limitations on additional
indebtedness, (ii) limitations on issuances and
sales of preferred stock of certain subsidiaries,
(iii) limitations on restricted payments, (iv)
limitations on liens, (v) limitations on
sale-leaseback transactions, (vi) limitations on
payment restrictions affecting subsidiaries,
(vii) limitations on the disposition of proceeds
from asset sales, (viii) limitations on
transactions with interested persons and (ix)
limitations on designations of Unrestricted
Subsidiaries (as defined). In addition, the
Indenture limits the ability of BarTech and the
Guarantors to consolidate, merge or sell all or
substantially all of their assets. These
covenants are subject to important exceptions and
qualifications. See 'Description of the Exchange
Notes--Certain Covenants.'
</TABLE>
PROJECTIONS
THE INFORMATION INCLUDED IN THE 'PROJECTIONS' SECTION NECESSARILY ARE BASED
UPON NUMEROUS ESTIMATES AND ASSUMPTIONS, INCLUDING THAT THE COMPANY WILL RESTART
ITS IDLE JOHNSTOWN FACILITY AND COMPLETE ITS MODERNIZATION AND EXPANSION PLAN ON
A TIMELY BASIS AND ON THE COST BASIS FORECASTED BY THE COMPANY AND, AS A NEW
MARKET ENTRANT, SUCCESSFULLY RE-ENTER THE HOT ROLLED ENGINEERED BAR MARKET AND
OBTAIN CUSTOMERS ON A TIMELY BASIS. THESE ESTIMATES AND ASSUMPTIONS ARE
INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES, CONTINGENCIES AND RISKS, MANY OF WHICH ARE BEYOND THE CONTROL OF
THE COMPANY, AND UPON ASSUMPTIONS WITH RESPECT TO FUTURE BUSINESS DECISIONS AND
CONDITIONS THAT ARE LIKELY TO CHANGE. SEE 'RISK FACTORS.' THE PROJECTIONS AND
ACTUAL RESULTS WILL VARY AND THOSE VARIATIONS MAY BE MATERIAL. FINANCIAL
PROJECTIONS NECESSARILY ARE SPECULATIVE IN NATURE AND ONE OR MORE OF THE
ASSUMPTIONS UNDERLYING SUCH PROJECTIONS MAY PROVE NOT TO BE VALID. THIS SECTION
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON
THAT THE PROJECTIONS WILL BE ACHIEVED. NOTEHOLDERS CONSIDERING TENDERING THEIR
NOTES IN EXCHANGE FOR EXCHANGE NOTES ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THE PROJECTIONS.
RISK FACTORS
NOTEHOLDERS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS, THE FACTORS DESCRIBED IN 'RISK FACTORS' BEFORE TENDERING
THEIR NOTES IN EXCHANGE FOR THE EXCHANGE NOTES OFFERED HEREBY.
13
<PAGE>
RISK FACTORS
Noteholders should consider carefully, in addition to the other information
in this Prospectus, the following factors before tendering their Notes in
exchange for the Exchange Notes offered hereby. The risk factors set forth below
are generally applicable to the Notes as well as the Exchange Notes.
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the offer or sale of the Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers do not currently anticipate that
they will register the Notes under the Securities Act. Based on interpretations
by the staff of the Commission, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an 'affiliate' of the Issuers within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
Each broker-dealer that received the Notes from the Company in the Offering and
not as a result of market-making or other trading activities, in the absence of
an exemption, must comply with the registration requirements of the Securities
Act. See 'Plan of Distribution.'
LIMITED OPERATING HISTORY
Noteholders have limited historical operating information about BarTech
upon which to base an evaluation of its prospects and future operating
performance. BarTech is a recently organized company that has had a limited
operating history, has commenced limited hot rolled engineered bar manufacturing
operations at its Lackawanna Facility on February 9, 1996 and has not previously
owned a cold finished bar operation. In addition, the operating results
available for the Bethlehem BRW Division for periods prior to its shut-down in
December 1992 are not presented in this Prospectus because, among other things,
they would not present comparable information for prospective investors in the
Company. Among other things, the Bethlehem BRW Division had an operating cost
structure that was materially different than that which the Company expects for
BarTech, and BarTech's operations will consist of hot rolled and cold finished
engineered bar manufacturing operations while the Bethlehem BRW Division
conducted hot rolled bar, rod and wire manufacturing operations.
LIMITED FINANCIAL HISTORY
Noteholders have limited historical financial information about BarTech
upon which to base an evaluation of its prospects and future financial
performance. BarTech is a recently organized company that has had a limited
financial history. In addition, the financial results available for the
Bethlehem BRW Division for periods prior to its shut-down in December 1992 are
not presented in this Prospectus because, among other things, they would not
present comparable information for prospective investors in the Company.
14
<PAGE>
LOSSES OF BETHLEHEM BRW DIVISION AND OF BARTECH
Bethlehem BRW Division incurred operating losses from the late 1980s until
it halted steelmaking operations in December 1992. And since its formation in
September 1994, BarTech has incurred losses as a result of the ongoing
maintenance of its facilities and its general administrative expenses. After
giving effect to the Recapitalization on a pro forma basis, the Company would
have had a net loss of approximately $18.1 million for fiscal 1995 and $18.0
million for the six-month period ended March 31, 1996. The ability of the
Company to achieve profitable operations will be dependent upon its ability to
successfully complete Phase One of its modernization and expansion plan and
restart the BarTech Facilities, profitably re-enter the hot rolled engineered
bar market, obtain customers and successfully manage B&L following the B&L
Acquisition, in addition to many other factors, many of which will be beyond its
control. The Company does not expect to be profitable prior to the commencement
of commercial steelmaking operations at the Johnstown Facility. There can be no
assurance that the Company will be able to operate profitably.
DEFICIENCY OF EARNINGS TO FIXED CHARGES
After giving effect to the Recapitalization on a pro forma basis, the
Company's earnings would have been insufficient to cover fixed charges by $18.1
million for fiscal 1995 and $17.6 million for the six-month period ended March
31, 1996. As discussed above, the ability of the Company to achieve profitable
operations will be dependent upon its ability to successfully complete Phase One
of its modernization and expansion plan and restart the BarTech Facilities,
profitably re-enter the hot rolled engineered bar market, obtain customers and
successfully manage B&L following the B&L Acquisition, in addition to many other
factors, many of which will be beyond its control. The Company does not expect
to be profitable prior to the commencement of commercial steelmaking operations
at the Johnstown Facility and does not expect that its earnings will be
sufficient to cover fixed charges in the first few years of its operations.
Although the Company expects to have adequate cash flow to cover interest
expense (see 'Projections--Projected Financial Information'), there can be no
assurance that the Company will be able to generate sufficient cash flow to
service its indebtedness or make other necessary expenditures.
RISKS OF IMPLEMENTATION OF MODERNIZATION AND EXPANSION PLAN AND START-UP OF IDLE
MANUFACTURING FACILITIES
The Company has not commenced steelmaking operations at the Johnstown
Facility and the Company's ability to do so depends upon the successful
completion of Phase One of the Company's two phase modernization and expansion
plan. The plan, which includes, among other things, the installation of a
six-strand combination bloom/billet continuous caster and related equipment, the
installation of a new walking beam bloom reheat furnace and other steelmaking
equipment and the reactivation and upgrade of the Company's existing 30"-21"
billet/bar mill, involves significant risks. These risks include, among other
things, the potential unavailability of components, unforeseen engineering
problems, work stoppages, untimely performance by its turnkey contractors,
weather interference, unanticipated cost increases and the inability to obtain
requisite licenses, permits and authorizations. No assurance can be given that
the Company will be able to complete all or any portion of its modernization and
expansion plan on a timely basis, if at all, or on the cost basis projected by
the Company or achieve the product quality to compete and prequalify its
products in the higher quality segment of the engineered bar market that it has
targeted. Given the Company's strategy of initially targeting at below market
prices customers of engineered bar products used in less stringent applications
and with little or no pre-qualification requirements and of potentially
re-entering the market at below market prices, the Company may initially be
expected to realize lower margins which could have an adverse effect on
short-term profitability. If the Company fails in its attempts to achieve
pre-qualification of its products in the engineered bar market, the Company will
have to pursue opportunities within the carbon and alloy
15
<PAGE>
bar products market at lower margins in order to allow its hot rolled facilities
to operate at efficient levels, which may be expected to have a similar adverse
effect on margins and profitability. Any substantial delay or significant
unanticipated costs in completing the Company's modernization and expansion plan
or failure to achieve targeted quality or efficiency levels could have a
material adverse effect on the Company's financial condition and results of
operations. In addition, no assurance can be given that the anticipated benefits
from the Company's modernization and expansion plan will be realized or that
competitive pressures or deteriorating market conditions will not require a
delay in the implementation of Phase Two, which delay could have a material
adverse effect on the Company's financial condition and results of operations.
See '--Cyclicality of Steel Industry; Dependence on Certain Industries' and
'--Competition.'
The Johnstown Facility has not been commercially operated since December
1992. The start-up of a manufacturing facility that has been idle for a
significant period of time involves certain risks, some of which are
unforeseeable. These risks, which include machinery and equipment malfunction,
the inability of personnel and information and control systems to coordinate the
manufacturing process on a timely or effective basis, substantial delays in
obtaining all permits necessary to operate the Johnstown Facility, the inability
to establish a customer base and the inability to secure raw materials on
competitive terms, among others, may result in delays in restarting the
operations at the Johnstown Facility and may increase the cost of the Company's
operations. No assurance can be given that the Company will be able to restart
operations at this facility on a timely basis or on the cost basis projected by
the Company. Any substantial delay or significant unanticipated costs in
restarting the Johnstown Facility could have a material adverse effect on the
Company's financial condition and results of operations.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO REFINANCE EXCHANGE NOTES
As of March 31, 1996, and after giving pro forma effect to the
Recapitalization, the Company would have had indebtedness of approximately
$143.3 million, which would have been substantial relative to its total
capitalization. As of March 31, 1996, and after giving pro forma effect to the
Recapitalization, the Company would have had the ability to borrow an additional
approximate $35.7 million (based upon the Company's accounts receivable and
inventory as of such date) under the New Credit Agreement (which includes $4.627
million of reimbursement obligations under letters of credit issued as of March
31, 1996).
The ability of the Company to meet its debt service and other obligations
or to refinance its indebtedness, including the Exchange Notes, will depend upon
the future performance of the Company which, in turn, is subject to the success
of the Company's business plan (including its ability to successfully commence
steel production at the Johnstown Facility and the success of its modernization
and expansion plan), general economic conditions and financial, competitive,
regulatory, labor and other factors, many of which may be unforeseen or beyond
the Company's control. The Company's ability to meet its debt service and other
obligations also may be affected by changes in prevailing interest rates since
borrowings under the New Credit Agreement will bear interest at floating rates.
There can be no assurance that the Company will be able to meet its debt service
and other obligations or be able to refinance the Exchange Notes or other
indebtedness prior to maturity. In addition, the Company's highly leveraged
capital structure could significantly limit, among other things, the Company's
ability to finance future required expenditures, expand its business or operate
successfully under adverse economic conditions. Although the Company believes
that it will have adequate excess cash balances and available liquidity under
the New Credit Agreement and other credit arrangements, there can be no
assurance that the New Credit Agreement or any other source of funds would be
available in amounts sufficient for the Company to meet its obligations under
the Exchange Notes and other indebtedness and provide for its capital
expenditures and other operating requirements when
16
<PAGE>
required. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources.'
The Indenture, the New Credit Agreement and certain other agreements
governing indebtedness of the Company impose covenants and restrictions that,
among other things, limit the type and amount of additional indebtedness that
may be incurred by the Company and impose limitations on investments, loans and
other payments, certain transactions with affiliates, and certain mergers and
related transactions. The New Credit Agreement also will require the Company to
maintain certain levels of cash flow to cash interest expense and not to incur
capital expenditures in excess of certain levels. The ability of the Company to
comply with these covenants and restrictions can be affected by events beyond
its control and there can be no assurance that the Company will achieve
operating results that would permit the Company to remain in compliance with
such provisions. Maintaining compliance with the capital expenditure covenants
could cause the Company to limit or defer capital expenditures that were
otherwise warranted. To borrow funds, the Company may need to satisfy the
conditions to borrowing under the New Credit Agreement, which require compliance
with financial covenants and representations and warranties, among other things.
The breach of any of the foregoing covenants would result in a default under the
New Credit Agreement and certain other agreements governing indebtedness of the
Company, permitting the lenders thereunder to accelerate such indebtedness and
foreclose upon and sell any assets securing such indebtedness. In addition, a
Change of Control would constitute a default under the New Credit Agreement. If
a Change of Control were to occur, the Company might be prohibited from making
the Change of Control Offer and/or unable to purchase all of the Exchange Notes
tendered in response to a Change of Control Offer. See 'Description of Other
Indebtedness.'
AVAILABILITY OF PROJECTIONS; UNCERTAINTY OF PROJECTIONS
This Prospectus includes financial projections (the 'Projections')
concerning the Company. See 'Projections'. The Company was the sole preparer of
the Projections, which are based on management's estimated results of operations
for the Company under the hypothetical assumptions described in
'Projections--Assumptions.' Neither Arthur Andersen LLP, independent public
accountants for the Company, nor any other firm has examined or provided any
other form of assurance on the Projections and, consequently, neither Arthur
Andersen LLP nor any other firm has reviewed or assumes any responsibility for
the Projections. The Projections necessarily are based upon numerous estimates
and assumptions, including that the Company will successfully restart its idle
Johnstown Facility and complete its modernization and expansion plan on a timely
basis and on the cost basis forecasted by the Company and, as a new market
entrant, successfully re-enter the engineered bar market and obtain customers on
a timely basis. The Projections have not taken into account the potential impact
on market conditions if existing competitors expand their production capacity or
if new competitors enter the Company's targeted markets. The estimates and
assumptions used in the projections are inherently subject to significant
business, economic and competitive uncertainties, contingencies and risks, many
of which are beyond the control of the Company, and upon assumptions with
respect to future business decisions and conditions that are likely to change.
The projections and actual results will vary and those variations may be
material. Financial Projections necessarily are speculative in nature and one or
more of the assumptions underlying such projections may prove not to be valid.
The Projections should not be regarded as a representation by the Company or any
other person that the Projections will be achieved. Noteholders considering
tendering Notes in exchange for Exchange Notes are cautioned not to place undue
reliance on the Projections.
17
<PAGE>
LIMITATION ON UTILIZATION OF NET OPERATING LOSS CARRYFORWARDS
Section 382 of the Internal Revenue Code of 1986, as amended (the 'Code'),
as well as Treasury Regulations implementing parts of Section 382, contain rules
that limit the ability of a loss corporation to offset taxable income against
its net operating loss carryforwards in the event of a change in ownership. As
of September 30, 1995, the Company had approximately $19.8 million in regular
net operating loss carryforwards for federal income tax purposes. As a result of
the Recapitalization, a change in ownership of the Company has occured, and the
Company's ability to use its loss carryforwards for federal income tax purposes
will be limited to an amount estimated at approximately $1.1 million per year
(based on certain assumptions). The net operating loss carryforwards expire in
2010. The Company's ability to use its net operating loss carryforwards is
contingent upon offsetting taxable income.
CYCLICALITY OF STEEL INDUSTRY; DEPENDENCE ON CERTAIN INDUSTRIES
The domestic steel industry is highly cyclical. Certain domestic steel
producers suffered substantial losses in the late 1980s as a result of a number
of factors, including recessionary conditions in the U.S. economy, a high level
of steel imports, the strength of the U.S. dollar against other currencies,
worldwide production overcapacity, increased domestic and international
competition, high labor costs and inefficient physical plants. Similar economic
conditions could have a material adverse effect on the Company's financial
condition and results of operations. Certain domestic hot rolled engineered bar
and cold finished bar producers, including B&L, also suffered losses during the
early 1990s as a result of a downturn in industries upon which the steel
industry is highly dependent, such as the automotive and machinery industries,
which also are highly cyclical and directly affected by, among other things, the
level of consumer confidence and general economic conditions. Downturns in
industries comprising the end user markets for the Company's products could have
a material adverse effect on the Company's financial condition and results of
operations. The Company believes that the dollar volume of shipments of hot
rolled engineered and cold finished bar products for calendar 1994 and fiscal
1995 were among the highest for the past five years and may be at or near the
peak of the current business cycle. B&L's first quarter results for fiscal 1996
reflect a decline in sales and gross margins as compared with the comparable
period of the prior fiscal year. These trends may continue, and there can be no
assurance as to when they will reverse. For further discussion of B&L's views of
its business cycles, see 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations--B&L.'
PRICE SENSITIVITY OF RAW MATERIALS
The Company's principal raw material for its hot rolled engineered bar
production will be ferrous scrap metal, which is generated principally from
industrial, automotive, demolition and railroad sources and is expected to be
purchased by the Company in the open market through a number of scrap brokers
and dealers in Midwest and East Coast markets, or by direct purchase. Although
the Company intends to seek to reduce scrap costs by, among other things, taking
advantage of its proximity to the East Coast scrap markets in which prices
historically have been lower than in the Midwest markets, the market for scrap
metal is highly competitive and its price volatility is influenced by periodic
shortages, freight costs, speculation by scrap brokers, export markets and other
conditions largely beyond the control of the Company. The East Coast scrap
markets are centered in Philadelphia, Pennsylvania and draw on sources from the
New England and Mid-Atlantic states. During periods of scrap price escalation,
the industry historically has sought to maintain profit margins and pass along
increased raw material costs to customers by means of scrap surcharges. However,
when scrap surcharges can be successfully applied, interim reductions in profit
margin spreads frequently occur due to a timing lag between the escalation of
scrap prices and the effective market acceptance of higher selling prices for
finished steel products. There can be no assurance that competitive conditions
will permit the Company
18
<PAGE>
to pass on scrap cost increases in the future. In addition, two of the Company's
primary competitors utilize iron ore in their manufacturing process and,
accordingly, utilize significantly lower amounts of scrap metal than the Company
and may be less affected by fluctuations in the scrap metal market, which may
have an adverse effect on the Company's operations.
Steel manufacturing is also an energy intensive industry. BarTech has
economic development and other support arrangements with many of its utility and
other service suppliers for its hot rolled engineered bar operations which it
believes to be favorable, but certain of these arrangements are non-binding and
there can be no assurance that the Company will continue to be successful in
obtaining similar arrangements from such suppliers or other suppliers in the
future. A substantial increase in certain specific utility or service costs
could have a material adverse effect on the Company's financial condition and
results of operations. See 'Business--Raw Materials.'
COMPETITION
The Company's primary hot rolled engineered bar competitors are certain
large producers of engineered bar products, in addition to select mini-mills
producing limited types of engineered bar products. The Company's primary cold
finished products competitors are other cold finished bar processors, including
certain diversified and vertically integrated domestic steel producers. Many of
these competitors have financial and other resources greater than those of the
Company. Competitive factors include product quality, price, customer service,
breadth of product offerings and delivery capability. The Company faces
competitive pressures from domestic steel producers trying to expand their
product lines and from potential entrants in its product markets. New
participants in, or producers expanding into, the Company's product markets
could materially adversely affect the prices and sales volumes of the Company's
products, including those assumed by it in formulating the Projections. For
example, the Company believes Qualitech Steel Corporation has developed
preliminary plans to build a new engineered bar manufacturing facility with a
potential capacity of 500,000 tons. Foreign competition is a significant factor
in the steel industry and has materially adversely affected product prices in
the past. Imports are substantially affected by fluctuations in the value of the
U.S. dollar versus certain foreign currencies. If the U.S. dollar were to
strengthen significantly against foreign currencies, the prices and sales volume
of the Company's products could be materially adversely affected. See
'Business--Competition.'
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of Federal bankruptcy law and comparable
provisions of State fraudulent transfer laws, if it were found that any
Guarantor (i) had incurred indebtedness represented by its Guarantee or granted
liens on its assets with an intent to hinder, delay or defraud creditors or had
received less than a reasonably equivalent value or fair consideration for such
indebtedness or pledges and (ii) (A) was insolvent, (B) was rendered insolvent
by reason of such incurrence, (C) was engaged or about to engage in a business
or transaction for which its remaining assets constituted unreasonably small
capital to carry on its business, or (D) intended to incur or believed that it
would incur debts beyond its ability to pay as such debts matured, the
obligations of such Guarantor under its Guarantee and liens on Collateral
granted by such Guarantee could be avoided or claims in respect of such
Guarantee and Collateral could be subordinated to all other debts of such
Guarantor. A legal challenge of a Guarantee or a lien on fraudulent conveyance
grounds could, among other things, focus on the benefits, if any, realized by a
Guarantor as a result of the issuance by BarTech of the Notes or the exchange by
BarTech of the Exchange Notes. To the extent that a Guarantee or a lien were
held to be unenforceable as a fraudulent conveyance for any other reason, the
holders of the Exchange Notes would cease to have any direct claim in respect of
a Guarantor and would be solely creditors of BarTech, and would lose the
benefits of the Collateral pledged by such Guarantor. In the event a Guarantee
and related liens were held to be subordinated, the claims of the holders of the
Exchange
19
<PAGE>
Notes would be subordinated to claims of other creditors of such Guarantor and
other creditors secured by the applicable Collateral with respect thereto.
The measures of insolvency for purposes of the foregoing considerations
will vary depending on the law applied in any proceeding with respect to the
foregoing. Generally, however, an issuer would be considered insolvent if the
sum of its debts, including contingent liabilities, were greater than the fair
saleable value of its assets at a fair valuation or if the present fair saleable
value of its assets were less than the amount that would be required to pay its
probable liabilities on its existing debts, including contingent liabilities, as
they become absolute and mature. There can be no assurance, however, as to what
standard a court would apply in making such determination.
The Company believes that the Guarantors received equivalent value at the
time the indebtedness was incurred under the Guarantees and they pledged their
assets. In addition, the Company believes that none of the Guarantors (i) is or
will be insolvent, (ii) is or will be engaged in a business or transaction for
which its remaining assets constitute unreasonably small capital, or (iii)
intends or will intend to incur debt beyond its ability to repay such debts as
they mature. Since each of the components of the question of whether a Guarantee
is a fraudulent conveyance is inherently fact based and fact specific, there can
be no assurance that a court passing on such questions would agree with the
Company. Counsel for the Company will not express any opinion as to Federal or
State laws relating to fraudulent transfers.
SECURITY FOR THE EXCHANGE NOTES
General; Absence of Appraisal of Collateral. As more fully described under
'Summary of Collateral and Intercreditor Agreements,' the Exchange Notes and the
Guarantees will be secured by substantially all of the owned or leased real
property and related assets of BarTech and the Guarantors located at the
existing facilities of BarTech and the Guarantors (other than B&L's
Cartersville, Georgia facility and accounts receivable and inventory and related
intangibles). Separable and identifiable facilities constructed or acquired by
the Company after the Offering (and machinery and equipment located thereat) do
not constitute Collateral. In addition, the Exchange Notes and the Guarantees
will also be secured by a pledge of all of the Common Stock of BarTech
outstanding as of the Issue Date, but the Indenture (i) permits future issuances
of capital stock of BarTech without a pledge of such shares and (ii) allows for
the release of the pledged shares of BarTech in the event of one or more
issuances of certain capital stock of BarTech for aggregate gross proceeds
(before discounts, commissions and expenses) of $40.0 million or more or in the
event of a Change of Control if a Change of Control Offer for the Notes and
Exchange Notes has been made and BarTech purchases all Notes and Exchange Notes
validly tendered pursuant thereto. The provisions of the Indenture also permits
the release of Collateral without substitution under certain other
circumstances. No appraisal or valuation of any of the Collateral has been
obtained by the Company. The aggregate net book value of the Collateral as of
September 30, 1995 was approximately $62.9 million. There can be no assurance
that, in the event of a sale of all or any part of the Collateral and after
payment of all prior claims on such Collateral, that there will be sufficient
proceeds to repay Noteholders in full all amounts owing to them under the
Indenture and the Exchange Notes.
Priority of Noteholders' Claims. In general, under applicable law, the
priority of the liens on a particular item of Collateral securing the claims of
Noteholders is determined by, among other things, the time of perfection of a
security interest in such item of Collateral. In addition, under various laws,
certain creditors, such as purchase money lenders, may be entitled to a prior
claim to that of one who has previously perfected a security interest in an item
of collateral. Furthermore, landlords', warehousemens' and materialmens' liens
and certain tax liens may, as a matter of law, have priority over the liens
granted to the Collateral Agent (as defined) or the Trustee (as defined) in the
Collateral. The Trustee, for the benefit of itself and the Noteholders, has
entered into two intercreditor agreements (together, the 'Intercreditor
Agreements') with various existing secured creditors of BarTech and the
20
<PAGE>
Guarantors and Chemical Bank, as Administrative Agent under the New Credit
Agreement, for the purpose of establishing the relative priorities of their
claims in various items of the Collateral and establishing their relative rights
and remedies in respect of the Collateral, among other things.
Pursuant to the Intercreditor Agreements, the claims of the Noteholders on
the Collateral will generally be first priority claims (after the payment of
certain expenses relating to, among other things, collection and foreclosure) as
compared with the other creditors party to the Intercreditor Agreements, except
(A) interests in capital stock of BarTech and its subsidiaries will be pledged
to secure the claims of Noteholders and the lenders under the New Credit
Agreement on a pro rata basis (based upon relative outstanding principal amounts
of indebtedness and the face amount of outstanding letters of credit in respect
of the Indenture and the New Credit Agreement, as applicable) and (B) in the
following cases in which the claims of Noteholders will rank as a second
priority claim: (i) interests in certain real properties owned or leased by
BarTech and the Guarantors on the Issue Date, (ii) the continuous caster located
at the Johnstown Facility being installed as part of the Company's modernization
and expansion plan and financed by the firm installing such caster until such
time, if any, as such firm's lien on such caster is released and (iii) certain
miscellaneous items of Collateral related to the Lackawanna Facility, which
secure financing available from an agency of the State of New York on a first
priority basis. After giving effect to the Recapitalization on a pro forma
basis, holders of indebtedness of approximately $17.7 million as of March 31,
1996 would have had claims on certain items of Collateral ranking prior to the
claims of Noteholders. Such amount includes $4.3 million of the Company's
obligations to the firm installing the Company's continuous caster represented
by two notes in favor of such firm secured by liens on such caster. A third note
in the amount of $2.9 million in favor of such firm is secured by a letter of
credit under the New Credit Agreement. An additional $3.8 million of funds were
available from sources which would have liens prior to that of the Noteholders
on such Collateral as of such date. The Indenture also permits an additional
$10.0 million of indebtedness in aggregate to be secured by liens on the
Collateral (other than the capital stock of BarTech and its subsidiaries) and
excludes from the Collateral certain property acquired after the Issue Date to
be used at the facilities included in the Collateral. The Company does not
believe there are any material existing prior liens on the Collateral securing
claims of persons not party to the Intercreditor Agreements; however, there can
be no assurance that future additional prior claims will not arise by reason of
applicable law or that a bankruptcy or other court would not refuse, on
equitable or other grounds, to enforce the terms of the Intercreditor Agreements
against the other creditors party thereto, in which case the claims of the other
creditors against the Collateral may be prior to that of the Noteholders.
Ability to Realize upon Collateral. In the event of any foreclosure by
secured creditors which results in the sale of the Johnstown Facility or the
Lackawanna Facility as a whole, it may be impractical to determine the portion
of the proceeds of any such sale allocable to individual categories of
Collateral and no assurance can be given that any such allocation will reflect
the fair market value of any particular category of Collateral. In general,
pursuant to the Principal Intercreditor Agreement (as defined), a secured
creditor of the Company not entitled to a first priority claim on an item of
Collateral will not be able to foreclose upon such item of Collateral without
the consent of the secured creditor(s) holding the first priority claim(s).
Therefore, for example, without the consent of secured creditors entitled to a
prior claim on particular Collateral, the Collateral Agent would not be able to
foreclose upon or sell the Lackawanna Facility as a whole at the direction of
the Noteholders. The value of the items of Collateral located at the Lackawanna
Facility, it foreclosed upon and sold separately, may be substantially less than
the value of the Collateral if the Facility were sold as a whole, and no
assurance can be given that the items of Collateral at the Lackawanna Facility
could be sold on a separate basis. Moreover, pursuant to the Intercreditor
Agreements, decisions regarding Collateral after foreclosure will, subject to
applicable law, be determined by the secured creditor or creditors entitled to
the first priority claim(s) on such item of Collateral, except that, in the case
of decisions relating to pledged capital stock of BarTech and its subsidiaries,
decisions will be made by two-thirds of the class of creditors holding the
largest aggregate principal amount of indebtedness and available commitments, as
more fully described under
21
<PAGE>
'Summary of Collateral and Intercreditor Agreements.' Interests of holders
entitled to first priority claims may diverge from those of holders entitled to
junior priority claims. For example, it may be in the best interest of a
lienholder entitled to a first priority claim to seek an expeditious sale of
Collateral while it may be in the best interest of a lienholder entitled to a
junior claim to delay the sale. The foregoing and other complexities of the
Intercreditor Agreements are such that the only practical means of realizing
upon the Collateral may be on a consensual basis with the other secured
creditors under circumstances in which it may be impractical to determine the
value of that portion of the Collateral on which Noteholders have a first
priority claim. Furthermore, certain future issuances of equity securities by
BarTech may dilute the interests in BarTech pledged by shareholders of BarTech
to secure Noteholders and the lenders under the New Credit Agreement and may
adversely affect the ability of holders to realize the value of the shares
pledged to them since, in a foreclosure, a buyer may require effective means of
obtaining all of the equity interests in BarTech. No assurance can be given that
Noteholders will be able to realize the fair market value of their interest in
the Collateral. See 'Summary of Collateral and Intercreditor Agreements.'
Bankruptcy Risks. The right of the Collateral Agent or the Trustee, as the
case may be, on behalf of or for the benefit of the Noteholders, to repossess
and dispose of any of the Collateral upon the occurrence of an event of default
under the Indenture or under other applicable debt instruments is likely to be
significantly impaired by applicable bankruptcy laws if a bankruptcy proceeding
were to be commenced by or against BarTech or a Guarantor or a pledger of shares
of Common Stock of BarTech (a 'Shareholder Pledgor'), whether instituted by a
Noteholder or another creditor (including a creditor of a Shareholder Pledgor),
prior to such repossession and disposition. Under Federal bankruptcy laws,
secured creditors, such as the Collateral Agent, the Trustee and the
Noteholders, are prohibited from foreclosing upon collateral held by a debtor in
a bankruptcy case, or from disposing of collateral repossessed from such a
debtor, without bankruptcy court approval. Moreover, applicable Federal
bankruptcy laws generally permit a debtor to continue to retain and to use
collateral, including cash collateral, even if the debtor is in default under
the applicable debt instruments, provided that the secured creditor is given
'adequate protection.' The interpretation of the term 'adequate protection' may
vary according to circumstances, but it is intended in general to protect the
value of the secured creditor's interest in collateral. Because the term
'adequate protection' is subject to varying interpretation, because of the broad
discretionary powers of a bankruptcy court and issues related to a Shareholder
Pledgor's bankruptcy proceeding, it is impossible to predict (i) if payments
under the Exchange Notes or the Guarantees would be made following commencement
of and during a bankruptcy case, (ii) whether or when the Collateral Agent or
the Trustee, as the case may be, could foreclose upon or sell any of the
Collateral, or (iii) whether or to what extent Noteholders would be compensated
for any delay in payment or loss of value of Collateral securing the Exchange
Notes and the Guarantees under the doctrine of 'adequate protection.'
Furthermore, in the event a bankruptcy court were to determine that the value of
the Collateral securing the Notes and the Guarantees was not sufficient to repay
all amounts due on the Exchange Notes, the Noteholders would become holders of
'undersecured claims.' Applicable Federal bankruptcy laws do not permit the
payment and/or accrual of interest, costs and attorneys' fees for 'undersecured
claims' during a debtor's bankruptcy case. See 'Summary of Collateral and
Intercreditor Agreements--Certain Bankruptcy Limitations.'
Lender Environmental Liability Risks. A portion of the Collateral securing
the Exchange Notes and the Guarantees is comprised of real property. Real
property pledged as security to a lender may be subject to known and unforeseen
environmental risks. Under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ('CERCLA'), even a lender who
does not foreclose on property may be held liable, in certain limited
circumstances, for the costs of remediating or preventing releases, or
threatened releases, of hazardous substances at mortgaged property. There may be
similar risks under various state laws and common law theories. Finding a lender
liable generally has been based on the lender's having become sufficiently
involved in the operations of the borrower so that its activities are deemed to
constitute 'participation in the
22
<PAGE>
management.' A lender also may be considered to be a current owner of a property
who can be held liable under CERCLA if the lender takes title to the property by
foreclosure. See 'Business--Environmental Compliance' and 'Summary of
Collateral and Intercreditor Agreement--Certain Environmental Law
Considerations.'
ENVIRONMENTAL CONSIDERATIONS
BarTech and BLSC, as domestic steel producers and processors, are subject
to a broad range of United States Federal and State and local environmental laws
and regulations, and CDSC, the Canadian subsidiary of B&L, is also subject to
Canadian Federal and provincial, regional and municipal environmental laws and
regulations, including those governing discharges into the air and water, the
handling and disposal of solid and hazardous wastes, the remediation of soil and
groundwater contaminated by petroleum products or hazardous substances or
wastes, and the health and safety of employees. The BarTech Facilities for many
years were operated by Bethlehem. The Company has sought to reduce the impact of
costs arising from or related to actual or potential environmental conditions at
the BarTech Facilities caused or created by Bethlehem or its predecessors in
title and attributable to the period in which the Bethlehem BRW Division or its
predecessors operated such facilities through the Company's contractual
arrangements with Bethlehem. Pursuant to such arrangements, Bethlehem has agreed
to indemnify the Company for such costs by limiting the Company's potential
exposure to any such damages incurred by the Company (i) through December 1996,
to 50% of the first $2.0 million of damages, or $1.0 million, and (ii)
thereafter, to 50% of the first $10.0 million of damages, or $5.0 million in the
aggregate. There can be no assurance that Bethlehem will meet its obligations
under the indemnification arrangements or that there will not be future
contamination for which the Company might be fully liable and that may require
the Company to incur significant costs that could have a material adverse effect
on the Company's financial condition and results of operations.
Bethlehem is conducting remedial activities on a portion of the Lackawanna
Facility, which was identified by the U.S. Environmental Protection Agency
('EPA') pursuant to an Administrative Order on Consent as requiring certain
corrective action. Bethlehem is ultimately liable for compliance with the
Administrative Order on Consent and the Company believes that Bethlehem is
likely to fulfill these obligations, although there can be no assurance such
will occur. The Company has also received a request for information from the EPA
with respect to a federal investigation and potential remediation of certain
hazardous waste treatment sites at which the Company disposed of waste. The
Company does not believe that such investigation and potential remediation will
have a material adverse effect on the Company's financial condition and results
of operations, although no assurance can be given to this effect.
The Company has taken, and continues to take, into account the requirements
of environmental laws and regulations in the improvement, modernization,
expansion and start-up of its facilities and believes that it is in substantial
compliance with the various material environmental laws and regulations
applicable to its operations. However, the Company has not yet commenced steel
production at the Johnstown Facility, and no assurance can be given that future
regulatory action regarding soil or groundwater at the Company's facilities, as
well as continued compliance with material environmental requirements, will not
require the Company to incur significant costs that could have a material
adverse effect on the Company's financial condition and results of operations.
In addition, the Company has filed for, or is in the process of filing for, and
expects to receive all necessary environmental permits to, construct and operate
the capital improvements that are part of Phase One of the Company's
modernization and expansion plan and any other permits necessary to operate the
Johnstown Facility. No action has been taken to date with respect to Phase Two
of the plan. There can be no assurance that any such permits will be issued on a
timely basis or at all or will not require the Company to incur significant
costs that could have a material adverse effect on the Company's financial
condition and results of operations. See 'Business--Environmental Compliance.'
23
<PAGE>
OWNERSHIP OF THE COMPANY
As a result of the Recapitalization, the Partnerships (as defined) hold all
of the outstanding Common Stock, and Blackstone beneficially owns all of the
shares of Class B Common Stock held by the Partnerships and has the
corresponding right to designate the Class B Directors, who hold 50% of the
voting power of the board of directors of BarTech. The balance of the board of
directors will be designated by certain persons associated with Veritas and the
USWA. Pursuant to the Stockholders' Agreement (as defined), Blackstone has the
right to cause one of the directors designated by Veritas to be replaced by a
person designated by Blackstone. Accordingly, Blackstone has the ability to
control the affairs of BarTech and its subsidiaries. There are likely to be
circumstances in which the interests of Blackstone or affiliates of Veritas, as
equity holders of BarTech, will differ from those of the Noteholders. See
'Principal Stockholders' for a description of the Partnerships and the
Stockholders' Agreement.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Exchange Notes will be deemed to be issued at a discount from their
principal amount for federal income tax purposes. Consequently, holders of the
Exchange Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of the receipt of cash payments to which
the income is attributable.
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code (the 'Bankruptcy Code') after the issuance of the
Exchange Notes, the claim of any holder of Exchange Notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (i) the
initial offering price allocable to that holder's Exchange Notes and (ii) that
portion of the original issue discount attributable to such Exchange Notes that
is not deemed to constitute 'unmatured interest' for purposes of the Bankruptcy
Code. Any original issue discount that was not amortized as of any such
bankruptcy filing would constitute 'unmatured interest.'
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Notes are designated for trading in the PORTAL market. Prior to the
Exchange Offer, there has been no market for the Exchange Notes, and there can
be no assurance as to (i) the liquidity of any such market that may develop,
(ii) the ability of the holders of Exchange Notes to sell their Exchange Notes
or (iii) the price at which the holders of Exchange Notes would be able to sell
their Exchange Notes. If such a market were to exist, the Exchange Notes could
trade at prices that may be higher or lower than their principal amount or
purchase price, depending on many factors, including prevailing interest rates,
the market for similar securities and the financial performance of the Company.
The Company does not presently intend to apply for the listing of any of the
Exchange Notes on any national securities exchange or on the Nasdaq National
Market System. The initial purchaser of the Notes (the 'Initial Purchaser'), a
broker-dealer, has advised the Company that it presently intends to make a
market in the Exchange Notes. The Initial Purchaser is not obligated, however,
to make a market in the Exchange Notes, and any such market-making may be
discontinued at any time at the sole discretion of the Initial Purchaser. In
addition, such market-making activity will be subject to limitations imposed by
the Securities Act and the Exchange Act. Accordingly, no assurance can be given
as to the development or liquidity of any market for the Exchange Notes.
24
<PAGE>
THE COMPANY
The Company believes that, upon the completion of the two phases of its
strategic modernization and expansion plan which is expected to be completed by
the end of 1997, it will be positioned to be one of the lowest cost vertically
integrated producers of high quality hot rolled engineered and cold finished
steel bar products in North America due to its collective bargaining agreement,
attractive support arrangements and the B&L Acquisition. In September 1994, the
Company acquired the BRW Assets from Bethlehem. Until it shut down its
manufacturing operations in December 1992, the Bethlehem BRW Division was a
leading manufacturer of high quality engineered bar, rod and wire products. In
conjunction with the acquisition of the BRW Assets, the Company (i) negotiated a
new five-year labor agreement which it believes provides significant cost
advantages over its competitors and the historical labor costs of the Bethlehem
BRW Division, (ii) secured long-term, low interest economic development funding
from Federal and State and local agencies and attractive economic development
rates and other support arrangements for utilities and other suppliers, and
(iii) developed and is implementing a major modernization and expansion plan
that it expects will reduce its per ton operating costs significantly below
Bethlehem's costs of operating the BRW Assets. BarTech restarted the Lackawanna
Facility in February 1996 on a limited basis and began producing and shipping
hot rolled engineered bar products. BarTech expects to commence commercial
steelmaking operations at the Johnstown Facility in the summer of 1996. In
addition, on April 2, 1996 the Company acquired B&L, the second largest
processor of cold finished steel bar products in North America. The Company
expects to realize a number of strategic benefits from the B&L Acquisition,
including (i) providing BarTech with a wholly owned consumer of hot rolled
engineered bar products, (ii) providing BarTech and B&L with an expanded breadth
and scope of product offerings and opportunities for enhanced distribution of
their products, and (iii) providing B&L with a more reliable, long-term source
of supply of higher quality and larger sized hot rolled engineered bar products
that it expects will enable it to bid effectively for more new business.
Bethlehem BRW Division Background. In the late 1980s and early 1990s, the
Bethlehem BRW Division suffered operating losses which the Company believes were
primarily due to (i) high manufacturing costs as a result of producing steel
using a low efficiency ingot based steel production process, (ii) high overhead
as a result of numerous layers of management and allocated corporate costs, and
(iii) high labor costs under the Bethlehem Labor Agreement (between $28.50 and
$30.00 per hour per employee) and inefficient use of labor (due primarily to the
use of the ingot based process and excessive job classifications). The Company
understands that in response to such losses Bethlehem reviewed a restructuring
and modernization program to replace its ingot based process with a continuous
casting process, but the Company believes that Bethlehem concluded that such an
expenditure was imprudent without revising the Bethlehem Labor Agreement.
In 1992, Bethlehem announced that it would close and/or divest the
Bethlehem BRW Division. Bethlehem began a systematic wind-down and divestment of
the Bethlehem BRW Division operations by selling, among other assets, the
Bethlehem BRW Division wire business (renamed Johnstown Wire Technologies) and
Gautier Mills (renamed J-Pitt Steel) and eventually shutting down the remaining
Bethlehem BRW Division steelmaking businesses in December 1992. Bethlehem
continued to keep the BRW Assets well maintained in order to enable a timely
restart of these operations.
Acquisition of the BRW Assets by the Company. BarTech acquired the BRW
Assets from Bethlehem on September 26, 1994. The total consideration paid by
BarTech for the BRW Assets, which had a net book value on Bethlehem's balance
sheet at the time of acquisition in excess of $140.0 million, was $26.5 million,
comprised of cash of $15.5 million and obligations of BarTech, including a $5.5
million 7% subordinated note maturing in 2002 (the 'Bethlehem Subordinated
Note') and $5.5 million of Series A redeemable preferred stock due 2000. BarTech
did not assume the substantial past service costs for pension and retiree
medical benefits arising out of the Bethlehem BRW Division's operations and
received an indemnity from Bethlehem to limit BarTech's liability for material
costs arising from pre-acquisition environmental conditions relating to the BRW
Assets.
Acquisition of B&L by BarTech. On October 4, 1995, the Company entered
into the Merger Agreement, whereby it agreed to acquire B&L. The B&L Acquisition
was effected by a merger of a newly
25
<PAGE>
organized, wholly owned subsidiary of BarTech with and into B&L, with B&L
surviving the merger and becoming a wholly owned subsidiary of BarTech. Upon
consummation of the merger, each outstanding share of B&L common stock was
converted into the right to receive $9.50 in cash, and outstanding B&L stock
options and stock equivalents were settled in cash based on the $9.50 per share
price. The aggregate consideration for the B&L Acquisition was approximately
$38.0 million. The terms of the Merger Agreement also provide that, under
certain circumstances, holders of B&L common stock will receive additional
consideration if the Company sells all or substantially all of the stock or
assets of B&L or merges B&L into an unaffiliated third party within one year of
the date of the Merger Agreement.
The Company's principal executive offices are located at 227 Franklin
Street, Suite 300, Johnstown, Pennsylvania 15901, and its telephone number is
(814) 533-7200.
USE OF PROCEEDS
There will be no cash proceeds to the Issuers resulting from the Exchange
Offer.
The net proceeds from the sale of the Units, after deducting expenses of
the Offering, were approximately $82.7 million. The Company used the net
proceeds from the sale of the Units, together with the proceeds of the
Blackstone Investment and available sources of liquidity, as follows: (i)
approximately $38.0 million was used to fund the B&L Acquisition (excluding
related fees and expenses), (ii) approximately $28.7 million was used to repay
certain outstanding indebtedness and other obligations of BarTech and B&L, (iii)
approximately $20.0 million was used to pre-fund Phase Two of the Company's
modernization and expansion plan, (iv) approximately $18.5 million was used to
fund the Interest Escrow Account, and (v) approximately $8.8 million was used to
pay other fees and expenses related to the Recapitalization. The fees and
expenses of the Recapitalization include $2.0 million and $2.0 million of fees
paid to an affiliate of Blackstone and an affiliate of Veritas, respectively.
The outstanding indebtedness repaid consisted of (i) approximately $16.8
million principal amount of revolving credit loans outstanding on the Issue Date
under existing revolving credit facilities for B&L (the 'B&L Revolving Credit
Facilities'), of which $12.9 million was payable by BLSC and $3.9 million was
payable by CDSC, (ii) approximately $5.8 million principal amount of loans
outstanding on the Issue Date under BarTech's existing term loans and revolving
credit facilities (the 'Existing BarTech Credit Facilities' and, together with
the B&L Revolving Credit Facilities, the 'Existing Credit Facilities') with
Congress Financial Corporation ('Congress') that were incurred to finance a
portion of the acquisition of the BRW Assets and for working capital and general
corporate purposes, and (iii) as required by the Master Agreement (as defined),
approximately $6.1 million principal amount of certain of the term loans
provided by the Commonwealth of Pennsylvania pursuant to the Master Agreement.
The term loans under the Existing BarTech Credit Facilities bore interest at the
prime rate plus 1.75% and would have matured on September 21, 1999. BLSC's
revolving loans and CDSC's revolving loan bore interest at prime rate. At March
31, 1996, the prime rate was 8.25%. The CDSC revolving loan facility would have
matured on April 30, 1996.
Pursuant to the Recapitalization, the Company replaced the Existing Credit
Facilities with the New Credit Agreement providing for a $90.0 million revolving
credit loan commitment. The Company repaid all outstanding indebtedness under
the Existing Credit Facilities simultaneously with the Recapitalization. BarTech
repaid approximately $6.1 million principal amount of the indebtedness required
to be repaid pursuant to the Master Agreement, representing an amount equal to
the $7.1 million aggregate amount required to be repaid under the Master
Agreement less the amount of unfunded commitments from the Commonwealth of
Pennsylvania (estimated to be approximately $1.0 million as of the Issue Date)
immediately subsequent to the Offering. The balance of such $7.1 million will be
repaid upon the funding of the approximate $1.0 million of unfunded commitments
from the Commonwealth of Pennsylvania, which is expected to occur during
calendar 1996.
For certain additional information concerning fees and expenses related to
the Recapitalization, see 'Pro Forma Financial Information' and 'Certain
Transactions.'
26
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Notes were originally issued and sold on the Issue Date. The offer and
sale of the Notes was not required to be registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act. In
connection with the sale of the Notes, BarTech and the Guarantors agreed to file
with the Commission a registration statement relating to an exchange offer
pursuant to which new senior secured notes of BarTech covered by such
registration statement and containing terms identical in all material respects
to the terms of the Notes would be offered in exchange for Notes tendered at the
option of the holders thereof or, if applicable interpretations of the staff of
the Commission did not permit BarTech and the Guarantors to effect such an
exchange offer, or, among other things, if the Exchange Offer is not consummated
within 150 days of the Issue Date, BarTech and the Guarantors agreed, at their
cost, to file a registration statement (the 'Shelf Registration Statement')
covering resales of the Notes and use all reasonable efforts to have such Shelf
Registration Statement declared effective and kept effective until the third
anniversary of the Issue Date or such shorter period that will terminate when
all the Transfer Restricted Notes covered by the Shelf Registration Statement
have been sold pursuant thereto.
The purpose of the Exchange Offer is to fulfill certain of BarTech's and
the Guarantors' obligations under the Notes Registration Rights Agreement. This
Prospectus may not be used by any holder of the Notes or any holder of the
Exchange Notes to satisfy the registration and prospectus delivery requirements
under the Securities Act that may apply in connection with any resale of such
Notes or Exchange Notes. See 'Terms of the Exchange' below.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See 'Plan of Distribution.'
TERMS OF THE EXCHANGE
BarTech and the Guarantors hereby offer to exchange, subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of the Notes. The terms of the Exchange Notes are identical in
all material respects to the terms of the Notes for which they may be exchanged
pursuant to this Exchange Offer, except that the Exchange Notes will generally
be freely transferable by holders thereof and will not be subject to any
covenant regarding registration. The Exchange Notes will evidence the same
indebtedness as the Notes and will be entitled to the benefits of the Indenture.
See 'Description of the Exchange Notes.'
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange.
BarTech and the Guarantors have not requested, and do not intend to
request, an interpretation by the staff of the Commission with respect to
whether the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
BarTech and the Guarantors believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Notes may be offered for sale, resold and
otherwise transferred by any holder of such Exchange Notes (other than any such
holder that is an 'affiliate' of BarTech and the Guarantors within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage
27
<PAGE>
in a distribution of such Exchange Notes. Since the Commission has not
considered the Exchange Offer in the context of a no-action letter, there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Any holder who is an affiliate of BarTech
and the Guarantors or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Notes, where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. Each broker-dealer that received the
Notes from the Company in the Offering and not as a result of market-making or
other trading activities, in the absence of an exemption, must comply with the
registration requirements of the Securities Act. See 'Plan of Distribution.'
Interest on the Exchange Notes shall accrue from the last Interest Payment
Date on which interest was paid on the Notes so surrendered or, if no interest
has been paid on such Notes, from the Issue Date.
Tendering holders of the Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Notes pursuant
to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
'Expiration Date' means 5:00 p.m., New York City time, on , 1996,
unless BarTech and the Guarantors in their sole discretion extend the period
during which the Exchange Offer is open, in which event the term 'Expiration
Date' shall mean the latest time and date on which the Exchange Offer, as so
extended by BarTech and the Guarantors, shall expire. BarTech and the Guarantors
reserve the right to extend the Exchange Offer at any time and from time to time
by giving oral or written notice to the Exchange Agent and by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Notes previously tendered and not withdrawn
pursuant to the Exchange Offer will remain subject to the Exchange Offer.
The term 'Exchange Date' means the first business day following the
Expiration Date. BarTech and the Guarantors expressly reserve the right to (i)
terminate the Exchange Offer and not accept for exchange any Notes if any of the
events set forth below under 'Conditions to the Exchange Offer' shall have
occurred and shall not have been waived by BarTech and the Guarantors and (ii)
amend the terms of the Exchange Offer in any manner which, in their good faith
judgment, is advantageous to the holders of the Notes, whether before or after
any tender of the Notes. Unless BarTech and the Guarantors terminate the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
BarTech and the Guarantors will exchange the Exchange Notes for the Notes on the
Exchange Date.
TENDER PROCEDURE
The tender to BarTech and the Guarantors of Notes by a holder thereof
pursuant to one of the procedures set forth below and the acceptance thereof by
BarTech and the Guarantors will constitute a binding agreement between such
holder and BarTech and the Guarantors in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal. This
Prospectus, together with the Letter of Transmittal, will first be sent out on
or about , 1996, to all holders of Notes known to BarTech and the
Guarantors and the Exchange Agent.
A holder of Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or
28
<PAGE>
certificates representing the Notes being tendered and any required signature
guarantees and any other documents required by the Letter of Transmittal, to the
Exchange Agent at its address set forth on the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Notes are registered in the name of the signer of the Letter of
Transmittal and the Exchange Notes to be issued in exchange therefor are to be
issued (and any untendered Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
'book-entry transfer facility') whose name appears on a security listing as the
owner of Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to BarTech and the Guarantors and
duly executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a commercial bank or trust company
located or having an office, branch, agency or correspondent in the United
States, or by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. (any of the foregoing
hereinafter referred to as an 'Eligible Institution'). If the Exchange Notes
and/or Notes not exchanged are to be delivered to an address other than that of
the registered holder appearing on the note register for the Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
THE METHOD OF DELIVERY OF NOTES AND ALL OTHER DOCUMENTS IS AT THE ELECTION
AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE OBTAINED, AND THE MAILING BE
MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR
NOTES SHOULD BE SENT TO BARTECH AND THE GUARANTORS.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Notes at the book-entry
transfer facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Notes by causing such book-entry transfer facility to transfer such
Notes into the Exchange Agent's account with respect to the Notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of Notes may be effected through book-entry transfer into the Exchange
Agent's accounts at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth on the Letter of Transmittal on or prior
to the Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Notes to reach the Exchange Agent before the Expiration
Date or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if the Exchange Agent has received at its office
listed on the Letter of Transmittal on or prior to the Expiration Date a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Notes are registered and, if possible, the certificate numbers of the Notes
to be tendered, and stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Notes, in proper form for transfer (or a confirmation
of book-entry transfer of such Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), BarTech and the Guarantors
may, at their option, reject the tender. Copies of a Notice of Guaranteed
Delivery
29
<PAGE>
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Notes (or a confirmation of book-entry transfer of such Notes
into the Exchange Agent's account at the book-entry transfer facility) is
received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Notes tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Notes will be determined
by BarTech and the Guarantors, whose determination will be final and binding.
BarTech and the Guarantors reserve the absolute right to reject any Notes not
properly tendered or the acceptance for exchange of which may, in the opinion of
BarTech and the Guarantors' counsel, be unlawful. BarTech and the Guarantors
also reserve the absolute right to waive any of the conditions of the Exchange
Offer or any defect or irregularity in the tender of any Notes. Unless waived,
any defects or irregularities in connection with tenders of Notes for exchange
must be cured within such reasonable period of time as BarTech and the
Guarantors shall determine. None of BarTech, the Guarantors, the Exchange Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See 'Plan of Distribution.'
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the 'Transferor') exchanges,
assigns and transfers the Notes to BarTech and the Guarantors and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Notes to be assigned, transferred and exchanged.
The Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, BarTech and the Guarantors will acquire good and
unencumbered title to the tendered Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or BarTech and the Guarantors
to be necessary or desirable to complete the exchange, assignment and transfer
of tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The Transferor agrees that
acceptance of any tendered Notes by BarTech and the Guarantors and the issuance
of Exchange Notes in exchange therefor shall constitute performance in full by
BarTech and the Guarantors of certain of their obligations under the Notes
Registration Rights Agreement. All authority conferred by the Transferor will
survive the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
The Transferor certifies that it is not an 'affiliate' of BarTech and the
Guarantors within the meaning of Rule 405 under the Securities Act and that it
is acquiring the Exchange Notes offered hereby in the ordinary course of such
Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such Exchange Notes. Each holder,
30
<PAGE>
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes. Each Transferor which
is a broker-dealer receiving Exchange Notes for its own account must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an 'underwriter' within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. BarTech and the Guarantors will, for a period of 180 days after
consummation of the Exchange Offer, make copies of this Prospectus available to
any broker-dealer for use in connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the Letter of Transmittal, and with respect to a facsimile
transmission, must be confirmed by telephone and an original delivered by
guaranteed overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Notes to be
withdrawn, the certificate numbers of Notes to be withdrawn, the principal
amount of Notes to be withdrawn, a statement that such holder is withdrawing his
election to have such Notes exchanged, and the name of the registered holder of
such Notes, and must be signed by the holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
guarantees) or be accompanied by evidence satisfactory to BarTech and the
Guarantors that the person withdrawing the tender has succeeded to the
beneficial ownership of the Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Notes promptly following receipt of notice of
withdrawal. If Notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the book-entry transfer facility to be credited with the withdrawn
Notes or otherwise comply with the book-entry transfer facility procedure. All
questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by BarTech and the Guarantors, and such
determination will be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Notes tendered by
book-entry transfer into the Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
Notes will be credited to an account with such book-entry transfer facility
specified by the holder) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Notes may be
retendered by following one of the procedures described under '--Tender
Procedure' above at any time on or prior to the Expiration Date.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the satisfaction or waiver of all the terms and conditions of the
Exchange Offer, the acceptance for exchange of Notes validly tendered and not
withdrawn and issuance of the Exchange Notes will be made on the Exchange Date.
For the purposes of the Exchange Offer, BarTech and the Guarantors shall be
deemed to have accepted for exchange validly tendered Notes when, as and if
BarTech and the Guarantors have given oral or written notice thereof to the
Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Notes for
the purposes of receiving Exchange Notes from BarTech and causing the Notes to
be assigned, transferred and exchanged. Upon the terms and subject to the
conditions of the Exchange Offer, delivery of Exchange
31
<PAGE>
Notes to be issued in exchange for accepted Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Notes. Tendered Notes not
accepted for exchange by BarTech and the Guarantors will be returned without
expense to the tendering holders promptly following the Expiration Date or, if
BarTech and the Guarantors terminate the Exchange Offer prior to the Expiration
Date, promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, BarTech and the Guarantors will not be required to issue
Exchange Notes in respect of any properly tendered Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service), or, at their option, modify or otherwise amend the Exchange Offer, if
any of the following events occur:
(a) any law, rule or regulation or applicable interpretations of the
staff of the Commission which, in the good faith determination of
BarTech and the Guarantors, do not permit BarTech and the
Guarantors to effect the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes to be offered
for resale, resold and otherwise transferred by holders thereof
(other than any such holder that is an 'affiliate' of BarTech and
the Guarantors within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes;
or
(c) There shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any
national securities exchange or in the over-the-counter market,
(ii) any limitation by any governmental agency or authority which
may adversely affect the ability of BarTech and the Guarantors to
complete the transactions contemplated by the Exchange Offer,
(iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely
affects the extension of credit or (iv) a commencement of a war,
armed hostilities or other similar international calamity directly
or indirectly involving the United States, or, in the case of any
of the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening thereof; or
(d) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties,
assets, liabilities, financial condition, operations, results of
operations or prospects of the Company that is or may be adverse
to the Company, or the Company shall have become aware of facts
that have or may have adverse significance with respect to the
value of the Notes or the Exchange Notes;
which, in the reasonable judgment of BarTech and the Guarantors in any case, and
regardless of the circumstances (including any action by BarTech and the
Guarantors) giving rise to any such condition, makes it inadvisable to proceed
with the Exchange Offer and/or with such acceptance for exchange or with such
exchange.
BarTech and the Guarantors expressly reserve the right to terminate the
Exchange Offer and not accept for exchange any Notes upon the occurrence of any
of the foregoing conditions (which represent all of the material conditions to
the acceptance by BarTech and the Guarantors of properly tendered Notes). In
addition, BarTech and the Guarantors may amend the Exchange Offer at any time
prior to the Expiration Date if any of the conditions set forth above occur.
Moreover, regardless of whether any of
32
<PAGE>
such conditions has occurred, BarTech and the Guarantors may amend the Exchange
Offer in any manner which, in its good faith judgment, is advantageous to
holders of the Notes.
The foregoing conditions are for the sole benefit of BarTech and the
Guarantors and may be waived by BarTech and the Guarantors, in whole or in part,
in the reasonable judgment of BarTech and the Guarantors. Any determination made
by BarTech and the Guarantors concerning an event, development or circumstance
described or referred to above will be final and binding on all parties.
BarTech and the Guarantors are not aware of the existence of any of the
foregoing events.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the Letter of Transmittal. United
States Trust Company of New York also acts as Trustee and Registrar (the
'Registrar') under the Indenture.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
SOLICITATION OF TENDERS; EXPENSES
BarTech and the Guarantors have not retained any dealer-manager or similar
agent in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others for soliciting acceptances of the Exchange Offer.
BarTech and the Guarantors will, however, pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for reasonable
out-of-pocket expenses in connection therewith. BarTech and the Guarantors will
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
and related documents to the beneficial owners of the Notes and in handling or
forwarding tenders for their customers.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by BarTech and the Guarantors.
Neither the delivery of this Prospectus nor any exchange made hereunder shall,
under any circumstances, creates any implication that there has been no change
in the affairs of the Company since the respective dates as of which information
is given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Notes in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, BarTech and the
Guarantors may, at their discretion, take such action as they may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to holders of Notes in such jurisdiction. In any jurisdiction in which the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
BarTech and the Guarantors by one or more registered brokers or dealers which
are licensed under the laws of such jurisdiction.
TRANSFER TAXES
Holders who tender their Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
BarTech and the Guarantors to register Exchange Notes in the name of, or request
that Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
33
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the offer or sale of the Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. BarTech and the Guarantors do not currently
anticipate that they will register the Notes under the Securities Act. Based on
interpretations by the staff of the Commission, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Notes may
be offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is an 'affiliate' of BarTech and the Guarantors
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See 'Plan of Distribution.'
OTHER
Participation in the Exchange Offer is voluntary, and holders of Notes
should carefully consider whether to participate. Holders of the Notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Notes pursuant to the terms of, this Exchange Offer, BarTech
and the Guarantors will have fulfilled a covenant contained in the Notes
Registration Rights Agreement. Holders of Notes who do not tender their Notes in
the Exchange Offer will continue to hold such Notes and will be entitled to all
the rights, and limitations applicable thereto, under the Indenture, except for
any such rights under the Notes Registration Rights Agreement that by their
terms terminate or cease to have further effectiveness as a result of the making
of this Exchange Offer. See 'Description of Exchange Notes.' All untendered
Notes will continue to be subject to the restrictions on transfer set forth in
the Indenture. To the extent that Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Notes could be adversely
affected.
BarTech and the Guarantors may in the future seek to acquire untendered
Notes in open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. BarTech and the Guarantors have no present plan to
acquire any Notes which are not tendered in the Exchange Offer.
34
<PAGE>
CAPITALIZATION
Set forth below is the unaudited consolidated cash and cash equivalents and
capitalization of each of BarTech and B&L as of March 31, 1996 and of the
Company as adjusted to give effect to the Recapitalization (including the
Blackstone Investment). The unaudited information set forth below should be read
in conjunction with the consolidated financial statements of BarTech and B&L and
the related notes and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------------------
BARTECH B&L AS ADJUSTED
-------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............... $ 3,415 $ 912 $ 41,575(a)
-------- -------- -----------
-------- -------- -----------
Short-term debt:
Current maturities of long-term
debt............................. $ 2,532 $ -- $ 1,607
Existing revolving credit
facilities(b).................... -- 16,700 --
-------- -------- -----------
Total short-term debt............ 2,532 16,700 1,607
-------- -------- -----------
Long-term debt:
New Credit Agreement(b)............ -- -- 0
Notes.............................. -- -- 91,609
Existing BarTech Credit Facilities
(term loans)(b).................. 3,913 -- --
Various economic development
loans(c)......................... 48,076 3,600 44,564
Bethlehem Subordinated Note........ 5,500 -- 5,500
Original issue discount(d)......... (908) -- (7,636)
-------- -------- -----------
Total long-term debt(e).......... 56,581 3,600 134,037
-------- -------- -----------
Redeemable preferred stock(f)........... 5,500 -- 5,500
Stockholders' equity (deficit).......... (21,304) 25,804 10,390
-------- -------- -----------
Total capitalization............. $ 43,309 $ 46,104 $ 151,534
-------- -------- -----------
-------- -------- -----------
</TABLE>
- ------------------
(a) Includes approximately $18.5 million placed into the Interest Escrow
Account for the benefit of Noteholders sufficient to pay interest on the
Notes and Exchange Notes due on the first three interest payment dates and
approximately $20.0 million expected to be used to pre-fund part of Phase
Two of the Company's modernization and expansion plan. See 'Description of
the Exchange Notes--Interest Escrow Account.' Since the Issue Date, such
pre-funding moneys have been utilized to pay operational and capital
expenses rather than drawing on the Company's revolving credit facility.
(b) In connection with the Recapitalization, the Company replaced the Existing
Credit Facilities with the New Credit Agreement, which provides the Company
with a maximum of $90.0 million of revolving credit loan availability.
Borrowings under the New Credit Agreement will be available based upon a
borrowing base initially equal to 73% of the aggregate net book value of
accounts receivable and inventory, subject to certain limitations. See
'Description of Other Indebtedness--The New Credit Agreement.' As of March
31, 1996, after giving effect to the Recapitalization, the Company would
have been able to borrow (or issue letters of credit with respect to)
approximately $35.7 million under the New Credit Agreement based upon the
borrowing base in effect on the Issue Date (at which date $4.6 million face
amount of letters of credit was issued).
(c) BarTech entered into economic development loan agreements, the proceeds
from which were made, or will be made, available to acquire the BRW Assets,
fund Phase One and provide working capital and general corporate
requirements during the commencement of steelmaking operations at the
BarTech Facilities. See 'Use of Proceeds.'
(Footnotes continued on next page)
35
<PAGE>
(Footnotes continued from previous page)
(d) The original issue discount represents (i) the $5.1 million in value
ascribed to the Warrants for accounting purposes, (ii) the 1.6 million
difference between the aggregate principal amount of the Notes and the
price to investors for (iii) $908,000 representing the unamortized amount
of the reduction of the Bethlehem Subordinated Note to its estimated fair
value on the Issue Date.
(e) Does not include $7.2 million of the Caster Financing which will be
outstanding as described under 'Description of Other Indebtedness--Caster
Financing.'
(f) BarTech issued 1,100 shares of Series A redeemable preferred stock to
Bethlehem (the 'Bethlehem Preferred Stock') in connection with the
acquisition of the BRW Assets. Holders of Bethlehem Preferred Stock will be
entitled to receive annual cash dividends equal to $350 per share. BarTech
will be required to redeem all shares of Bethlehem Preferred Stock on
September 26, 2000 at a redemption price of $5,000 per share in aggregate
plus any accrued and unpaid dividends.
(g) Stockholders' equity, as adjusted, includes (i) shares of Class A Common
Stock and Class B Common Stock, which are identical in all respects, other
than that holders of Class B Common Stock are entitled to elect the Class B
Directors, who hold 50% of the voting power of the board of directors of
BarTech, and to a preference prior to any payments to holders of Class A
Common Stock of up to $30.0 million to the extent the proceeds from any
liquidation, dissolution or winding-up or merger or consolidation involving
BarTech allocated pro rata among all the Common Stock would otherwise
result in payment to holders of Class B Common Stock of less than $30.0
million; (ii) one share of Series B preferred stock of BarTech, par value
$0.001 per share held by the USWA giving it the right to appoint two
directors of BarTech, but which is not entitled to receive dividends and is
nonredeemable, and (iii) $5.1 million in value ascribed to the Warrants for
accounting purposes, which will entitle the holders thereof to acquire an
aggregate of 91,609 shares of Class A Common Stock, representing 10% of
BarTech's outstanding Common Stock on a fully diluted basis immediately
after giving effect to the consummation of the Recapitalization and certain
other agreed to issuances of Common Stock and rights therefor. The
following table sets forth the reconciliation of pro forma stockholders'
equity, as adjusted:
<TABLE>
<S> <C>
BarTech stockholders' equity (deficit)...................... $ (21,304)
B&L stockholders' equity.................................... 25,804
Blackstone Investment....................................... 30,000
Warrants outstanding........................................ 5,119
Extraordinary charge for write-off of debt financing costs
and payment of termination fees........................... (2,214)
Elimination of B&L stockholders' equity..................... (25,804)
Non-recurring charges for severence and other costs, net of
tax....................................................... (1,211)
----------
Total.................................................. $ 10,390
----------
----------
</TABLE>
36
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following sets forth the unaudited Pro Forma Condensed Consolidated
Statement of Income of BarTech and B&L for their fiscal years ended September
30, 1995 and the six months ended March 31, 1996 after giving effect to the
Recapitalization. The pro forma condensed consolidated statement of income and
other data gives effect to the Recapitalization as if it had occurred on October
1, 1994. The pro forma condensed consolidated balance sheet information gives
effect to the Recapitalization as if it had occurred on March 31, 1996.
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the results
that actually would have occurred had the Recapitalization been consummated on
the dates indicated or the results that may occur or be obtained in the future.
The following information is qualified in its entirety by reference to and
should be read in conjunction with 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and the consolidated financial
statements of BarTech and B&L, respectively, and related notes thereto and other
historical financial information included elsewhere in this Prospectus.
The pro forma financial information reflects the purchase method of
accounting for the B&L Acquisition and, accordingly, is based on estimated
purchase accounting adjustments that are subject to further revision depending
upon the results of any appraisals or other studies of the fair value of B&L's
assets and liabilities to be undertaken following the B&L Acquisition.
37
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1995
----------------------------------------------------------------------
B&L
ACQUISITION OTHER PRO FORMA
BARTECH B&L ADJUSTMENTS ADJUSTMENTS(A) COMBINED
-------- -------- ----------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................ $ -- $169,372 $ -- $ -- $ 169,372
Cost of goods sold............... -- 148,093 332(b) -- 148,425
Operating Expenses............... 10,658 11,687 -- -- 22,345
-------- -------- ----------- -------------- ---------
Operating income (loss).......... (10,658) 9,592 (332) -- (1,398)
Interest expense, net............ 3,151 1,508 -- 12,733(c) 17,392
Other expense (income), net...... (977) 264 -- -- (713)
-------- -------- ----------- -------------- ---------
Income (loss) before income
taxes.......................... (12,832) 7,820 (332) (12,733) (18,077)
Provisions (benefit) for income
taxes.......................... -- 2,608 (2,608)(d) -- --
-------- -------- ----------- -------------- ---------
Net income (loss)................ $(12,832) $ 5,212 $ 2,276(e) $(12,733) $ (18,077)
-------- -------- ----------- -------------- ---------
-------- -------- ----------- -------------- ---------
Ratio of earnings to fixed
charges(f)..................... -- 5.90x --
OTHER DATA:
EBITDA(g)........................ $ (9,826)(h) $ 11,092 $ 1,266
Depreciation and amortization.... 362 1,764 2,458
Capital expenditures............. 9,210 2,144 11,354
</TABLE>
- ------------------
(a) Other Adjustments reflects adjustments for the Offering and the Blackstone
Investment and the intended application of the proceeds therefrom.
(b) Represents amortization of excess purchase price allocated to goodwill over
40 years.
(c) Reflects (i) an increase in interest expense of approximately $12.4 million
associated with the Notes, (ii) the elimination of historical interest
expense of approximately $1.9 million as a result of repayment of
outstanding indebtedness of BarTech and B&L, (iii) amortization of deferred
financing costs of approximately $2.2 million, (iv) amortization of the
original issue discount on the Notes related to the value ascribed to the
Warrants and the difference between the aggregate principal amount of the
Notes and the price to investors for the Units of $973,000 and (v) a
reduction for interest income estimated on the Interest Escrow Account of
approximately $928,000.
(d) Represents the elimination of the historical income tax provision as a
result of pro forma losses incurred by the Company.
(e) Excludes non-recurring charges for severance and other costs of
approximately $2.0 million. These charges have not been included in the Pro
Forma Condensed Consolidated Statement of Income, but will be reflected in
future financial statements of the Company. The non-recurring charges, net
of the tax benefit, have been reflected as a charge to pro forma
stockholders' equity in the Pro Forma Condensed Consolidated Balance Sheet.
(f) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before taxes plus fixed charges and (ii) fixed
charges consist of interest expense incurred, amortization of debt expense
and one-third of rental payments under operating leases (an amount estimated
by the Company to be the interest portion of such rentals). Earnings did not
cover fixed charges of BarTech by $12.8 million. On a pro forma combined
basis, the Company's earnings would not have covered fixed charges by
approximately $18.1 million.
(g) EBITDA represents the earnings of the Company before income taxes, net
interest expense, depreciation and amortization and other noncash items
reducing net income. EBITDA is not a measure of financial performance under
generally accepted accounting principles ('GAAP). Accordingly, it does not
represent net income or cash flows from operations as defined by GAAP and
does not necessarily indicate that cash flows will be sufficient to fund
cash needs. As a result, EBITDA should not be considered as an alternative
to net income as an indicator of operating performance or to cash flows as a
measure of liquidity. The Company has included information concerning EBITDA
as it understands that it is used by certain investors as one measure of an
issuer's historical ability to service its debt.
(h) EBITDA for BarTech includes $470,000 of lease rental and other income.
38
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31, 1996
-----------------------------------------------------------------------
B&L ACQUISITION OTHER PRO FORMA
BARTECH B&L ADJUSTMENTS ADJUSTMENTS(A) COMBINED
-------- ------- --------------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................ $ 588 $77,102 $ -- $ -- $ 77,690
Cost of goods sold............... 8,111 70,578 166(b) -- 78,855
Operating Expenses............... 2,131 5,337 -- -- 7,468
-------- ------- --------------- -------------- ---------
Operating income (loss).......... (9,654) 1,187 (166) -- (8,633)
Interest expense, net............ 1,850 715 -- 6,382(c) 8,947
Other expense (income), net...... 11 1,897 (1,897)(d) -- 11
-------- ------- --------------- -------------- ---------
Income (loss) before income
taxes.......................... (11,515) (1,425) 1,731 (6,382) (17,591)
Provisions (benefit) for income
taxes.......................... -- 243 (243)(e) -- --
-------- ------- --------------- -------------- ---------
Net income (loss) before
cumulative effect of change in
accounting principle........... $(11,515) $(1,668) $ 1,974(f) $ (6,382) $(17,591)
-------- ------- --------------- -------------- ---------
-------- ------- --------------- -------------- ---------
Ratio of earnings to fixed
charges(g)..................... -- -- --
OTHER DATA:
EBITDA(h)........................ $ (9,554)(i) $ 2,240 $ (7,314)
Depreciation and amortization.... 279 1,053 1,498
Capital expenditures............. 7,941 585 8,526
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) Other Adjustments reflects adjustments for the Offering and the Blackstone
Investment and the intended application of the proceeds therefrom.
(b) Represents amortization of excess purchase price allocated to goodwill over
40 years.
(c) Reflects (i) an increase in interest expense of approximately $6.2 million
associated with the Notes, (ii) the elimination of historical interest
expense of approximately $912,000 as a result of repayment of outstanding
indebtedness of BarTech and B&L, (iii) amortization of deferred financing
costs of approximately $1.1 million, (iv) amortization of the original issue
discount on the Notes related to the value ascribed to the Warrants and the
difference between the aggregate principal amount of the Notes and the price
to investors for the Units of $468,000 and (v) a reduction for interest
income estimated on the Interest Escrow Account of approximately $464,000.
(d) Represents the elimination of a $1.0 million payment made by B&L to BarTech
in connection with entering into the Merger Agreement on October 4, 1995 and
$897,000 of expenses related to the B&L Acquisition incurred by B&L for,
among other things, legal expenses and professional fees.
(e) Represents the elimination of the historical income tax provision as a
result of pro forma losses incurred by the Company.
(f) Excludes non-recurring charges for severance and other costs of
approximately $2.0 million. These charges have not been included in the Pro
Forma Condensed Consolidated Statement of Income, but will be reflected in
future financial statements of the Company. The non-recurring charges, net
of the tax benefit, have been reflected as a charge to pro forma
stockholders' equity in the Pro Forma Condensed Consolidated Balance Sheet.
(g) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before taxes plus fixed charges and (ii) fixed
charges consist of interest expense incurred, amortization of debt expense
and one-third of rental payments under operating leases (an amount estimated
by the Company to be the interest portion of such rentals). Earnings did not
cover fixed charges of BarTech and B&L by $11.5 million and $1.4 million,
respectively. On a pro forma combined basis, the Company's earnings would
not have covered fixed charges by approximately $18.0 million.
(h) EBITDA represents the earnings of the Company before income taxes, net
interest expense, depreciation and amortization and other noncash items
reducing net income. EBITDA is not a measure of financial performance under
GAAP. Accordingly, it does not represent net income or cash flows from
operations as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. As a result, EBITDA should not
be considered as an alternative to net income as an indicator of operating
performance or to cash flows as a measure of liquidity. The Company has
included information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
(i) EBITDA for BarTech includes $158,000 of lease rental and other income.
</TABLE>
39
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------------------------------------------------
B&L ACQUISITION OTHER PRO FORMA
BARTECH B&L ADJUSTMENTS ADJUSTMENTS(A) COMBINED
------- ------- --------------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents........ $ 3,415 $ 912 $ (41,934)(b) $ 79,182(c) $ 41,575
Accounts receivable, net......... 1,803 18,219 -- -- 20,022
Inventories...................... 5,296 30,385 3,048(b) -- 38,729
Other current assets............. 536 1,603 -- -- 2,139
------- ------- --------------- -------------- ---------
Total current assets........ 11,050 51,119 (38,886) 79,182 102,465
Property, plant and equipment,
net............................ 43,690 16,709 -- -- 60,399
Intangible assets................ -- -- 13,301(b) -- 13,301
Other assets..................... 4,090 3,774 -- 9,954(d) 17,818
------- ------- --------------- -------------- ---------
Total assets................ $58,830 $71,602 $ (25,585) $ 89,136 $ 193,983
------- ------- --------------- -------------- ---------
------- ------- --------------- -------------- ---------
Short-term debt.................. $ 2,532 $16,700 $ -- $(17,625)(e) $ 1,607
Accounts payable................. 11,892 15,590 -- -- 27,482
Deferred merger consideration.... 1,000 -- (1,000)(f) -- --
Accrued liabilities.............. 2,629 4,150 2,019(g) -- 8,798
------- ------- --------------- -------------- ---------
Total current liabilities... 18,053 36,440 1,019 (17,625) 37,887
Long-term debt................... 56,581 3,600 -- 73,856(e) 134,037
Other long-term liabilities...... -- 5,758 411(h) -- 6,169
------- ------- --------------- -------------- ---------
Total liabilities(i)........ 74,634 45,798 1,430 56,231 178,093
------- ------- --------------- -------------- ---------
Redeemable preferred stock....... 5,500 -- -- -- 5,500
Stockholders' equity (deficit)... (21,304) 25,804 (27,015)(j) 32,905(k) 10,390
------- ------- --------------- -------------- ---------
Total liabilities and
stockholders' equity...... $58,830 $71,602 $ (25,585) $ 89,136 $ 193,983
------- ------- --------------- -------------- ---------
------- ------- --------------- -------------- ---------
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) Other Adjustments reflects adjustments for the Offering and the Blackstone
Investment and the intended application of the proceeds therefrom.
(b) The preliminary allocation of the estimated purchase price to assets
acquired and liabilities assumed as of March 31, 1996 are as follows:
</TABLE>
<TABLE>
<S> <C>
Purchase price......................................... $37,980
Estimated acquisition costs............................ 3,954
-------
Total purchase price............................ $41,934
-------
-------
Net book value of assets acquired...................... $25,804
Adjustments to fair value:
Inventory......................................... 3,048
Establishment of net deferred tax liabilities..... (1,219)
Deferred merger consideration..................... 1,000
Goodwill............................................... 13,301
-------
Total........................................... $41,934
-------
-------
</TABLE>
(Footnotes continued on next page)
40
<PAGE>
(Footnotes continued from previous page)
<TABLE>
<S> <C>
(c) Represents the gross proceeds of the Blackstone Investment of $30.0 million
and the Offering of $90.0 million, less reductions for (i) repayment of
certain outstanding indebtedness of BarTech and B&L of approximately $28.7
million and (ii) payment of estimated financing costs of approximately $12.2
million.
(d) Represents payment of estimated deferred financing costs of approximately
$12.2 million related to the Offering, reduced by the write-off of
previously deferred financing costs as a result of the repayment of certain
outstanding indebtedness of BarTech and B&L with the proceeds of the
Offering and the Blackstone Investment.
(e) Represents the principal amount of $91.6 million, less the $5.1 million in
value ascribed to the Warrants and the $1.6 million difference between the
aggregate principal amount of the Notes and the price to investors for the
Units, and less repayment of (i) approximately $5.8 million principal amount
of term loans outstanding as of March 31, 1996, (ii) approximately $6.1
million principal amount of Commonwealth of Pennsylvania economic
development loans outstanding as of March 31, 1996 required to be repaid
under the Master Agreement, and (iii) approximately $16.8 million principal
amount of revolving credit loans outstanding as of March 31, 1996 under the
B&L Revolving Credit Facilities.
(f) Represents the elimination of a $1.0 million payment made by B&L to BarTech
in connection with entering into the Merger Agreement on October 4, 1995.
(g) Represents non-recurring charges for severance and other costs of
approximately $2.0 million, but does not give effect to any offsetting
impact of cash surrender value of certain insurance policies for the benefit
of B&L.
(h) Reflects net deferred tax liabilities established as a result of the B&L
Acquisition.
(i) Does not include the $7.2 million of Caster Financing to be outstanding as
described under 'Description of Other Indebtedness--Caster Financing.'
(j) Reflects (i) the elimination of B&L stockholders' equity of approximately
$25.8 million and (ii) the non-recurring charges for severance and other
costs, net of tax, of approximately $1.2 million.
(k) Represents the Blackstone Investment of $30.0 million and the $5.1 million
in value ascribed to the Warrants, less an extraordinary charge of $2.2
million for the write-off of previously deferred financing costs and payment
of termination fees as a result of the repayment of certain outstanding
indebtedness of BarTech and B&L with the proceeds of the Offering and the
Blackstone Investment.
</TABLE>
41
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information of BarTech and B&L has been
derived from the consolidated financial statements of BarTech and B&L and
related notes thereto included elsewhere in this Prospectus. The information is
qualified in its entirety by reference to and should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the consolidated financial statements of BarTech and B&L and
related notes thereto and other historical financial information included
elsewhere in this Prospectus.
BAR TECHNOLOGIES INC.(A)
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
--------------------- ---------------------
1994 1995 1995 1996
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................... $ -- $ -- $ -- $ 588
Cost of sales................................ -- -- -- 8,111
Depreciation and Amortization................ -- 362 181 279
Selling, General and Administrative
Expense.................................... -- 10,296 5,360 1,852
------- -------- ------- --------
Operating loss............................... -- (10,658) (5,541) (9,654)
Interest expense............................. -- 3,151 1,458 1,850
Other expense (income), net.................. -- (977) (348) 11
------- -------- ------- --------
Income (loss) before income taxes............ -- (12,832) (6,651) (11,515)
------- -------- ------- --------
Income tax provision......................... -- -- -- --
------- -------- ------- --------
Net income (loss)............................ $ -- $(12,832) $(6,651) $(11,515)
------- -------- ------- --------
------- -------- ------- --------
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 9,178 $ 1,650 $ 1,996 $ 3,415
Working capital.............................. 7,662 (1,108) 290 (7,003)
Total assets................................. 46,849 46,001 40,388 58,830
Long-term debt (including current portion)... 34,845 46,665 34,870 59,113
Redeemable preferred stock................... 5,500 5,500 5,550 5,500
Stockholders' equity (deficit)............... 3,536 (9,625) (3,280) (21,304)
</TABLE>
- ------------------
(a) The acquisition of the BRW Assets from Bethlehem was consummated on
September 26, 1994. BarTech had no income statement activity prior to the
acquisition of the BRW Assets, and such activity was insignificant for the
period from September 26, 1994 through September 30, 1994. Accordingly, no
fiscal 1994 activity is disclosed in the table above. The acquisition of the
BRW Assets does not represent a business that would require presentation of
the financial statements of the Bethlehem BRW Division as a predecessor to
BarTech pursuant to Regulation S-X of the Securities and Exchange
Commission.
42
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT MATERIAL COST PER TON)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $114,528 $121,677 $136,923 $152,435 $169,372 $88,041 $77,102
Cost of sales......................... 107,545 111,507 127,923 136,173 148,093 76,779 70,578
-------- -------- -------- -------- -------- ------- -------
Gross profit.......................... 6,983 10,170 9,000 16,262 21,279 11,262 6,524
Selling and administrative
expenses............................ 9,223 8,918 9,807 11,367 11,687 6,722 5,337
-------- -------- -------- -------- -------- ------- -------
Operating income (loss)............... (2,240) 1,252 (807) 4,895 9,592 4,540 1,187
Interest expense, net................. 1,422 814 1,035 1,266 1,508 791 715
Other expense (income), net........... -- (216) (6) (2) 264 (1) 1,897
-------- -------- -------- -------- -------- ------- -------
Income (loss) before provision for
income taxes and cumulative effect
of change in accounting principle... (3,662) 654 (1,836) 3,631 7,820 3,750 (1,425)
Income tax provision (benefit)........ (1,265) 357 594 866 2,608 770 243
-------- -------- -------- -------- -------- ------- -------
Net income (loss) before cumulative
effect of change in accounting
principle........................... (2,397) 297 (2,430) 2,765 5,212 2,980 (1,668)
Cumulative effect of change in
accounting principle(a)............. -- -- (1,789) 813 -- -- (2,368)
-------- -------- -------- -------- -------- ------- -------
Net income (loss)................... $ (2,397) $ 297 $ (4,219) $ 3,578 $ 5,212 $ 2,980 $(4,036)
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 502 $ 719 $ 827 $ 926 $ 918 $ 1,082 $ 912
Working capital....................... 11,486 11,040 8,158 10,437 15,972 13,257 14,679
Total assets.......................... 57,645 57,963 68,995 67,739 71,870 78,981 71,602
Long-term debt (including current
portion)............................ 13,600 13,600 22,600 20,150 17,500 23,500 20,300
Stockholders' equity.................. 27,003 26,115 21,219 24,722 29,968 27,510 25,804
OTHER DATA:
Tons.................................. 164,856 185,336 200,810 220,120 243,105 127,329 108,761
Average material cost per ton......... $ 517 $ 502 $ 510 $ 509 $ 528 517 544
EBITDA(b)............................. $ (118) $ 2,976 $ 705 $ 6,513 $ 11,092 $ 5,453 $ 2,240
Capital expenditures.................. 1,215 1,238 1,612 1,949 2,144 951 585
Depreciation and amortization......... 2,122 1,508 1,506 1,616 1,764 912 1,053
Ratio of earnings to fixed
charges(c).......................... -- 1.70x -- 3.67x 5.90x 5.49x --
</TABLE>
- ------------------
(a) Consists of a cumulative effect of change in accounting principle related to
the adoption of SFAS No. 109: Accounting for Income Taxes in fiscal 1994 and
a cumulative effect of change in accounting principle related to the
adoption of SFAS No. 106: Employers' Accounting for Post-Retirement Benefits
Other than Pensions for domestic operations in fiscal 1993 and foreign
operations in the six month period ended March 31, 1996.
(b) EBITDA represents the earnings of the Company before income taxes, net
interest expense, depreciation and amortization and other noncash items
reducing net income. EBITDA is not a measure of financial performance under
GAAP. Accordingly, it does not represent net income or cash flows from
operations as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. As a result, EBITDA should not
be considered as an alternative to net income, as an indicator of operating
performance or to cash
(Footnotes continued on next page)
43
<PAGE>
(Footnotes continued from previous page)
flows as a measure of liquidity. The Company has included information
concerning EBITDA as it understands that it is used by certain investors as
one measure of an issuer's historical ability to service its debt. For
fiscal years 1991 and 1993, and the first two quarters of fiscal 1996,
earnings did not cover fixed charges by approximately $3.7 million, $1.8
million and $1.4 million, respectively.
(c) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes plus fixed charges and (ii)
fixed charges consist of interest expense incurred, amortization of debt
expense and one-third of rental payments under operating leases (an amount
estimated by the Company to be the interest portion of such rentals). For
fiscal years 1991 and 1993, and the first quarter of fiscal 1996, earnings
did not cover fixed charges by approximately $3.7 million, $1.8 million and
$1.1 million, respectively.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BarTech acquired the BRW Assets from Bethlehem in September 1994. The
Bethlehem BRW Division ceased manufacturing operations in December 1992 and no
historical results are presented for the Bethlehem BRW Division due to the
noncomparability of the Company's operations, management and cost structure.
Since the date of such acquisition, BarTech has been preparing for the start-up
of commercial steel production at the Johnstown Facility, which the Company
expects to commence in early summer 1996, and the rolling of semi-finished steel
billets at the Lackawanna Facility, which the Company restarted in February
1996. A portion of the net proceeds from the sale of the Units was used to
acquire B&L, a processor of cold finished steel bars. The following discussion
of results of operations for BarTech since the date of its inception and for B&L
for the three fiscal years ended September 30, 1995 and the six month periods
ended March 31, 1996 are based on, and qualified by reference to, the financial
statements of BarTech and the consolidated financial statements of B&L and the
respective notes thereto, and the pro forma results of operations of the
Company, included elsewhere in this Prospectus. However, the Company does not
believe that such results, or the pro forma results of operations of the
Company, contained elsewhere in this Prospectus are indicative of its future
results of operations due to the absence of a BarTech operating history, the
absence of an operating history of B&L under the Company's management and the
consequences of operating BarTech and B&L on a vertically integrated basis.
RESULTS OF OPERATIONS
BarTech
BarTech acquired the BRW Assets on September 26, 1994. BarTech had no
income statement activity prior to the acquisition and such activity was
insignificant for the period from September 26, 1994 through September 30, 1994.
During fiscal 1995 and the six month period ended March 31, 1996, the
Company assembled its management team and undertook preparation for the start-up
of commercial steel production at the Johnstown Facility, which the Company
expects to commence in early summer 1996. This included, among other things, the
purchasing, engineering and commencement of the installation of a combination
bloom/billet continuous caster, the development and installation of a management
information system, negotiations with vendors, discussions and meetings with
potential customers and the separation of utilities from Bethlehem.
Costs for the portion of these activities that are not directly associated
with capital projects have been charged to operating expenses in the Statement
of Income. Such costs primarily relate to salaries, utilities, insurance, real
estate taxes and other administrative expenses.
During the three months ended March 31, 1996, BarTech recorded sales as a
result of the rolling of semi-finished steel billets at the Lackawanna Facility.
During fiscal 1995 and the six months ended March 31, 1996, other income
primarily reflects revenues generated from leasing of facilities not currently
used in operations.
No income tax benefit was provided for losses incurred, as such losses did
not satisfy the applicable criteria of Statement of Financial Accounting
Standards ('SFAS') No. 109: 'Accounting for Income Taxes.'
As discussed elsewhere, the Company began producing and shipping hot rolled
engineered bar products on a limited basis from the Lackawanna Facility in
February 1996. The Company expects to commence commercial steelmaking operations
at the Johnstown Facility in the summer of 1996 and achieve a manufacturing and
financial operating run rate prior to September 30, 1996 consistent with that
which it expects for fiscal 1997. In fiscal 1996, the Company will devote
substantial efforts to re-enter the hot rolled engineered bar market and expects
that its initial prices will be below those for the market generally, that its
overall average product margins will initially reflect the Company's re-entry
into
45
<PAGE>
the lower quality segment of the market as the Company seeks to pre-qualify its
products and that it will experience initial inefficiencies resulting from low
volume production levels. As described under 'Risk Factors--Cyclicality of Steel
Industry; Dependence on Certain Industries,' the Company believes that the
dollar volume of its shipments may be at or near the peak of the current
business cycle and the Company anticipates a softening in its markets in fiscal
1997. The Company believes its liquidity position will be sufficient to execute
and complete its modernization and expansion plan, restart the Johnstown
Facility, integrate the operations of BarTech and B&L, effect its hot rolled
engineered bar market re-entry strategy and meet its other capital requirements,
although there can be no assurance that the Company will be able to do so. See
'--Liquidity and Capital Resources.'
B&L
The cold finished steel bar market, like the rest of the steel industry as
a whole, is highly cyclical and is affected by production over capacity and
intense competition, as well as general economic conditions. The cold finished
steel bar industry historically has been characterized by over capacity which
has created pricing pressure on producers. This pricing pressure has been
exacerbated by the fact that cold finished bar is a commodity product with
little opportunity for differentiation. From a competitive standpoint, these
market dynamics place a premium on a competitor's ability to manufacture
products at a low cost. Many domestic steel producers and processors, including
B&L, suffered losses during the recession that began in 1990 as a result of a
downturn in industries upon which the steel industry is very dependent, such as
the automotive and machinery industries, which also are highly cyclical and
directly affected by, among other things, the level of consumer confidence and
general economic conditions. As the U.S. economy emerged from this recession,
the U.S. steel industry, including the cold finished bar market, experienced a
significant resurgence in demand. During fiscal 1995, B&L was able to obtain
several price increases for its products without experiencing a commensurate
increase in its cost of raw materials. As a result, B&L's gross margins improved
throughout the fiscal year. This trend toward higher gross margins has not
continued during fiscal 1996 and B&L's management's view is that B&L's strong
operating performance in fiscal 1995 may be reflective of the industry having
been at or near the peak in the current business cycle. See 'Risk
Factors--Cyclicality of Steel Industry; Dependence on Certain Industries.'
However, the Company believes that B&L's prospective stand-alone performance is
not necessarily indicative of the contribution that B&L will make to the Company
as a whole operating on an integrated basis. The Company expects B&L to benefit
from many operating synergies due to its vertical integration with BarTech,
including B&L's ability to penetrate higher quality, higher margin market
segments utilizing higher quality hot rolled engineered bar products from
BarTech.
SIX MONTHS ENDED MARCH 31, 1996 COMPARED WITH
SIX MONTHS ENDED MARCH 31, 1995
Net sales for the fiscal 1996 first six months were $77,102,000, a decrease
of $10,939,000 or 12.4% from the fiscal 1995 first six months. The decrease in
net sales is primarily attributable to lower tonnage volume amounting to
$12,110,000 offset in part by higher selling prices of $1,171,000.
Cost of sales for the fiscal 1996 first six months was $70,578,000, a
decrease of $6,201,000 or 8.1% from the fiscal 1995 first six months. The
decrease is primarily attributable to the decrease in volume. As a percentage of
net sales, cost of sales increased by 4.3%. Gross margin decreased in the fiscal
1996 first six months primarily due to lower volume of $1,877,000, higher
material costs of $2,924,000 and higher manufacturing costs of $1,098,000.
Selling and administrative expenses for the fiscal year 1996 first six
months amounted to $5,337,000, a decrease of $1,385,000 or 20.6% from the fiscal
year 1995 first six months. The decrease is primarily due to wages and benefits.
As a percentage of net sales, selling and administrative expenses decreased in
the fiscal year 1996 first six months to 6.9% from 7.6% in the fiscal 1995 first
six months.
46
<PAGE>
Interest expense, net, decreased in the fiscal 1996 first six months by
$76,000 or 9.6% from the fiscal 1995 first six months. The decrease is primarily
attributable to lower borrowings against the lines of credit. Interest expense,
net, as a percentage of net sales was .9% in the fiscal 1996 first six months,
the same as in the fiscal 1995 first six months.
Other income (expense) amounted to $1,897,000 of expense in the fiscal 1996
first six months compared with $1,000 income in the fiscal 1995 first six
months. The expense is primarily for, among other things, legal expenses and
professional fees, related to the merger of B&L with a subsidiary of BarTech.
The tax provision in the fiscal 1996 first six months amounted to $243,000
compared with $770,000 in the fiscal 1995 first six months. The provision in
both years consists primarily of a provision for foreign taxes.
The net loss of $4,036,000 in the fiscal 1996 first six months compares
with a net income of $2,980,000 in the fiscal 1995 first six months. Included in
the loss for the fiscal 1996 first six months is a one-time charge resulting
from adoption of SFAS No. 106 by CDSC, B&L's wholly owned foreign subsidiary.
Also contributing to the loss were merger-related expenses of $1,897,000 and
lower gross profit due to lower volume.
FISCAL 1995 COMPARED WITH FISCAL 1994
Net sales for fiscal 1995 were $169,372,000, an increase of $16,937,000, or
11.1%, from fiscal 1994. The increase in net sales is attributable to increased
tonnage volume amounting to $10,562,000 ($3,878,000 attributable to CDSC) and
increased selling prices generating an additional $6,375,000 ($2,269,000
attributable to CDSC).
Cost of sales for fiscal 1995 was $148,093,000, an increase of $11,920,000,
or 8.8%, over fiscal 1994. The increase is primarily attributable to increased
volume. As a percentage of net sales, cost of sales decreased by 1.9%. Gross
margin increased in fiscal 1995 primarily due to higher selling prices as
discussed above, and increased volume of $1,634,000 ($565,000 attributable to
CDSC) offset in part by higher raw material costs of $3,969,000 ($1,527,000
attributable to CDSC).
Selling and administrative expenses for fiscal 1995 amounted to
$11,687,000, an increase of $320,000, or 2.8%, from fiscal 1994. The increase is
primarily due to wages and benefits of $238,000. As a percentage of net sales,
selling and administrative expenses decreased to 6.9% in fiscal 1995 from 7.5%
in fiscal 1994.
Interest expense, net, increased in fiscal 1995 by $242,000, or 19.1%, from
fiscal 1994. The increase was primarily attributable to increased interest
rates. Interest expense, net, as a percentage of net sales, was 0.9% in fiscal
1995 compared with 0.8% in fiscal 1994.
Other expense (income) amounted to $264,000 of expense in fiscal 1995
compared with $2,000 of income in fiscal 1994. Included in fiscal 1995 is
$265,000 of expenses, for among other things, legal expenses and professional
fees, related to the B&L Acquisition.
The tax provision in fiscal 1995 amounted to $2,608,000 compared with
$866,000 in fiscal 1994. The fiscal 1995 provision includes a partial offset to
the domestic tax provision due to the expected utilization of the remaining net
operating loss carryforward. The fiscal 1994 tax provision consisted primarily
of a provision for foreign taxes, while the domestic income tax provision was
offset by the expected utilization of a net operating loss carryforward.
Gross profit as a percentage of revenues increased to 12.6% in fiscal 1995
from 10.7% in fiscal 1994. The increase was primarily attributable to improved
pricing versus material costs, increased volume and operating efficiencies.
B&L was profitable in all four quarters of fiscal 1995, and net income of
$5,212,000 in fiscal 1995 compared with net income of $3,578,000 in fiscal 1994.
Included in fiscal 1994 net income is a one-time credit of $813,000 for adoption
of SFAS No. 109: 'Accounting for Income Taxes.' The increase in net
47
<PAGE>
income is primarily attributable to a higher gross margin of $5,017,000 offset
in part by an increase in the tax provision of $1,742,000, increased selling and
administrative expenses of $320,000, increased interest expense of $242,000 and
other expenses of $265,000 related to the B&L Acquisition.
FISCAL 1994 COMPARED WITH FISCAL 1993
Net sales for fiscal 1994 were $152,435,000, an increase of $15,512,000, or
11.3%, from fiscal 1993. The increase in net sales was attributable to increased
tonnage volume amounting to $8,831,000 ($3,040,000 attributable to CDSC) and
increased prices generating an additional $6,681,000 ($858,000 attributable to
CDSC).
Cost of sales for fiscal 1994 was $136,173,000, an increase of $8,250,000,
or 6.4%, over fiscal 1993. The increase was primarily attributable to the
increased sales volume. As a percentage of net sales, cost of sales decreased by
4.1%. Gross margin increased in fiscal 1994 primarily due to the higher prices
B&L charged for its products, increased volume efficiencies contributing
$984,000 ($481,000 attributable to CDSC), and lower labor and overhead costs of
$534,000 ($442,000 attributable to CDSC), offset by higher raw material costs of
$794,000 ($947,000 attributable to CDSC).
Selling and administrative expenses for fiscal 1994 amounted to
$11,367,000, an increase of $1,560,000, or 15.9%, from fiscal 1993. The increase
is primarily due to wages and benefits of $1,631,000, of which $1,030,000 was
for profit sharing and management supplemental incentive compensation, higher
depreciation and amortization of $123,000 due to the purchase of software and
hardware for a new information system and $101,000 of higher agents' commissions
due to increased sales; these increases were offset in part by lower
professional fees of $286,000.
Interest expense, net, increased in fiscal 1994 by $231,000, or 22.3%, from
fiscal 1993. The increase was primarily attributable to increased average
borrowings and higher interest rates. Interest expense, net, as a percentage of
net sales, was 0.8% in fiscal 1994, unchanged from fiscal 1993.
The tax provision in fiscal 1994 was $866,000 compared with $594,000 in
fiscal 1993. The fiscal 1994 amount consists primarily of a provision for
foreign taxes while the domestic income tax provision was offset by the expected
utilization of a net operating loss carryforward.
The net income of $3,578,000 in fiscal 1994 compared with a net loss of
$4,219,000 in fiscal 1993. Included in fiscal 1994 net income is a one-time
credit of $813,000 for adoption of SFAS No. 109: 'Accounting for Income Taxes;'
included in fiscal 1993 net loss is a one-time charge of $1,789,000 for adoption
of SFAS No. 106: 'Employers' Accounting for Post-Retirement Benefits Other than
Pensions.' The increase in income is primarily attributable to accounting
changes totalling $2,602,000, a higher gross margin of $7,262,000, offset in
part by higher selling and administrative costs of $1,560,000 and higher
interest expense of $231,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity consist of available excess cash
and cash equivalents, availability under the New Credit Agreement and cash flow
from operations. As of March 31, 1996, on a pro forma basis after giving effect
to the Recapitalization, the Company would have had approximately $41.6 million
in available cash and cash equivalents, including in the Interest Escrow
Account, and approximately $35.7 million available (based on the applicable
borrowing base described below) under the New Credit Agreement.
In connection with the Recapitalization, the Company replaced the Existing
Credit Facilities with the New Credit Agreement, which provides the Company with
a maximum of $90.0 million of revolving credit loan availability. Borrowings
under the New Credit Agreement will be available based upon a borrowing base not
to exceed a specified percentage of the aggregate net book value of accounts
receivable and inventory, which percentage shall be, subject to certain
exceptions, 73.0% for the first 18-month period after the Issue Date, 71.4% and
69.0% for the two successive 12-month periods thereafter and 66.7% for the
remainder of the term of the New Credit Agreement. Borrowings under the New
Credit Agreement will bear interest based upon, at the Company's option, a prime
rate plus 2.00%
48
<PAGE>
or an adjusted LIBOR rate plus 3.00%, subject to increase under certain
circumstances. The New Credit Agreement matures four years from the closing of
the Offering. See 'Description of Other Indebtedness.'
BarTech has various financing agreements in place in addition to the New
Credit Agreement that are committed to funding (i) its working capital and
general corporate requirements during the commencement of operations at the
Lackawanna Facility, which commenced in February 1996, and at the Johnstown
Facility, which is expected in the summer of 1996, and (ii) Phase One of the
Company's modernization and expansion plan at the Johnstown Facility. As of
March 31, 1996, the Company had an aggregate amount of approximately $43.5
million of outstanding indebtedness under these committed agreements after the
repayment of approximately $6.1 million of indebtedness (representing an amount
equal to the $7.1 million of indebtedness required to be repaid under the Master
Agreement in connection with the Recapitalization less the amount of unfunded
commitments under the Master Agreement, estimated to be approximately $1.0
million), the repayment of the balance of such $7.1 million of indebtedness upon
the funding of such unfunded commitments, which is expected to occur in calendar
1996, and the termination of a total of approximately $1.5 million of unfunded
commitments under the Master Agreement in connection with the Recapitalization.
Principal and interest installments required under the long-term debt
obligations would have been as follows for the six months ending September 30,
1996 and for the years ending September 30, 1997 and thereafter (dollars in
thousands):
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
--------- --------
<S> <C> <C>
1996......... $ 1,607 $ 1,215
1997......... 2,449 15,173
1998......... 3,883 14,967
1999......... 4,273 14,727
2000......... 4,385 13,866
Thereafter... 119,047 16,626
--------- --------
$ 135,644 $ 76,574
--------- --------
--------- --------
</TABLE>
BarTech's contract with Rokop to modify, install and start-up the
combination bloom/billet caster to be installed at the Johnstown Facility as
part of Phase One of the Company's modernization and expansion plan requires
Rokop to provide $7.2 million to finance a portion of the combination
bloom/billet caster project (the 'Caster Financing'), of which $4.3 million is
secured by liens on the Caster and $2.9 million is secured by a letter of credit
under the New Credit Agreement. The contract with Rokop provides that certain
payments due to Rokop will be evidenced by three notes of BarTech in the
aggregate amount of $7.2 million which become effective and will begin to accrue
interest after the start-up of continuous casting operations. Such notes will be
in principal amounts of $2.9 million, $1.0 million and $3.3 million,
respectively, and the $1.0 million note and $300,000 of the $3.3 million note
will mature upon the successful testing and start-up of the combination
bloom/billet caster. These notes may be prepaid at an approximate $2.0 million
discount prior to December 31, 1996. The Company intends to prepay the notes at
such discount but not prior to the successful testing of the combination
bloom/billet caster.
See 'Description of Other Indebtedness' for a description of the terms of
the Company's indebtedness, including the interest rates due thereunder.
BarTech has commenced and is in the process of implementing Phase One of
its modernization and expansion plan, which includes the acquisition,
installation and implementation of the combination bloom/billet caster and the
installation of a new management information system. The total cost of the
combination bloom/billet caster installation during Phase One is anticipated to
be approximately $31.0 million.
Phase Two of the Company's modernization and expansion plan includes the
installation of equipment to enable the Company to have bloom processing and
direct charged large sized bar
49
<PAGE>
finishing capability, including a new walking beam bloom reheat furnace, a new
turnover cooling bed and a modification of the combination bloom/billet caster
equipment. The cost of Phase Two was estimated in March 1996 to be approximately
$25 million. However, it is now expected that the total cost may ultimately be
$10 million to $15 million higher than the original estimate. Regardless of the
ultimate total cost of Phase Two, $4 million is expected to be incurred during
fiscal 1996. The Company is continuing to analyze all aspects of Phase Two and
negotiate with vendors and contractors in order to complete Phase Two at the
lowest possible cost. The Company believes it has sufficient liquidity from all
sources, including the Offering, to complete the Company's modernization and
expansion plan. See 'Business--BarTech Modernization and Expansion Plan.'
Any substantial delay in completing or a failure to complete Phase One of
the Company's modernization and expansion plan or, to a lesser extent, Phase Two
of the plan, or the inability of the Company to realize the anticipated benefits
from the plan or to sell its products in its target markets could have a
material adverse effect on the Company's financial condition and results of
operations. In the event of a substantial delay in implementation of the plan or
substantial unanticipated costs associated with the implementation of the plan,
the Company may need to borrow funds under the New Credit Agreement or, to the
extent funds are not available thereunder, to obtain additional financing to
meet its cash flow requirements during the Company's start-up period. Given the
Recapitalization, the Company is highly leveraged. Restrictive covenants
included in the Indenture and other debt obligations may have the effect of
limiting the Company's ability to incur additional indebtedness, sell assets, or
acquire other entities and may otherwise limit the operational and financial
flexibility of the Company. The Company believes that its cash flow from
operations, combined with the available funds under the New Credit Agreement and
financing commitments to fund Phase One of its modernization and expansion plan,
will be sufficient to enable the Company to meet its debt service requirements
when due and to fund its capital expenditure and working capital and general
corporate requirements, although there can be no assurance with respect thereto.
See 'Risk Factors--Substantial Indebtedness; Ability to Refinance Exchange
Notes.'
As a result of a change of ownership resulting from the Blackstone
Investment, the Company's ability to use its $19.8 million regular net operating
loss carryforwards (as of September 30, 1995) for federal income tax purposes
will be limited to an amount estimated at approximately $1.1 million per year.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board issued SFAS No. 121:
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of.' The statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The statement is effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company does not believe that adoption of such statement will have a material
effect on its financial statements.
50
<PAGE>
BUSINESS
GENERAL
The Company believes that, upon the completion of its strategic
modernization and expansion plan, it will be positioned to be one of the lowest
cost vertically integrated producers of high quality hot rolled engineered and
cold finished steel bar products in North America due to its collective
bargaining agreement, attractive support arrangements and the B&L Acquisition.
In September 1994, the Company acquired the BRW Assets from Bethlehem. Until it
shut down its manufacturing operations in December 1992, the Bethlehem BRW
Division was a leading manufacturer of high quality engineered bar, rod and wire
products with a total steelmaking capacity of 1.5 million tons per year and
finished bar rolling capacity of 900,000 tons per year. In conjunction with the
acquisition of the BRW Assets, the Company (i) negotiated a new five-year labor
agreement which it believes provides significant cost advantages over its
competitors and the historical labor costs of the Bethlehem BRW Division, (ii)
secured long-term, low interest economic development funding from Federal and
State and local agencies and attractive economic development rates and other
support arrangements from utilities and other suppliers, and (iii) developed and
is implementing a major modernization and expansion plan that it expects will
reduce its per ton operating costs significantly below Bethlehem's costs of
operating the BRW Assets. BarTech restarted the Lackawanna Facility in February
1996 on a limited basis and began producing and shipping hot rolled engineered
bar products. BarTech expects to commence commercial steelmaking operations at
the Johnstown Facility in the summer of 1996. In addition, on April 2, 1996, the
Company acquired B&L, the second largest processor of cold finished steel bar
products in North America. The Company expects to realize a number of strategic
benefits from the B&L acquisition, including (i) providing BarTech with a wholly
owned consumer of hot rolled engineered bar products, (ii) providing BarTech and
B&L with an expanded breadth and scope of product offerings and opportunities
for enhanced distribution of their products, and (iii) providing B&L with a more
reliable, long-term source of supply of higher quality and larger sized hot
rolled engineered bar products that it expects will enable it to bid effectively
for more new business.
INDUSTRY OVERVIEW
Hot Rolled Engineered Bar Market. The production of steel bar products is
a segment of the overall steel market, of which the production of flat rolled
steel products is the largest segment. The bar products segment of the steel
market is further divided into three main categories which are delineated by the
quality and the end use of the bar products: (i) reinforcing bar, which products
have the least restrictive applications of all bar products and are used mostly
as reinforcement for concrete in building foundations, road beds and other
construction applications, (ii) merchant quality bar, which products generally
are used for small structural shapes, such as channels and angles, that are used
mostly in light construction and steel fabrication applications, and (iii) hot
rolled engineered bar, which is the highest quality segment of the bar products
market. The Company estimates that the total market for consumption of bar
products in the United States during calendar 1994 was approximately 16.9
million tons, and the Company estimates that the total North American market
during calendar 1994 for hot rolled engineered bar products was approximately
8.7 million tons, based on information from DRI/McGraw Hill on the total United
States steel bar market.
Hot rolled engineered bar products are the highest quality and most
demanding product category in the bar products market. Hot rolled engineered bar
products are high quality carbon and alloy steel bars that are manufactured to
meet rigorous end user requirements for surface quality, strength,
hardenability, machinability, toughness and other engineering objectives, and
detailed and specific practices must be followed in their production in order to
meet these rigorous end user quality specifications. The production of hot
rolled engineered bar products requires special manufacturing techniques and
equipment, including processes such as ladle refining and vacuum degassing to
eliminate internal impurities and surface defects, as well as specialized
metallurgical knowledge and experience of processing personnel.
51
<PAGE>
The engineered bar products market is characterized by customers that
further process bars into specific shapes utilizing two major types of
processes: (i) 'machining' the bar by removing metal from the bar to manufacture
the end product and (ii) 'forming' the bar through various hot and cold
processes that often require only minimal additional machining to achieve final
part dimensions. Manufacturers using forming techniques usually require very
high quality engineered bar products for their manufacturing processes, such as
the 'near net shape' manufacturing process, which is designed to produce parts
as similar as possible in size and shape to final part dimensions so that less
metal removal through machining by the end user is needed to meet finished part
dimensions. Machining costs usually are the highest cost factor in the
manufacture of finished parts, and the use of 'near net shape' and similar
processes reduces this cost factor for end users. Hot rolled engineered bar
products generally are used in businesses such as the automotive, heavy
equipment and industrial machinery industries for critical applications where
product strength, integrity and durability are imperative considerations, such
as cam shafts, axles, roller bearings, hydraulic fittings, ordnance, valves and
fittings, and wheel hubs and spindles.
Producers of hot rolled engineered carbon and alloy bar products are
distinct from major integrated steel producers that produce flat rolled steel
products and mini-mills that generally produce lower quality bar products, as
hot rolled engineered bar producers compete in a specialized segment of the
overall bar product market in which there are fewer competitors and more
stringent product specifications requiring specialized production equipment and
processes. The Company believes the market for hot rolled engineered bar
products has experienced growth in recent years due to several favorable trends,
including (i) the increased use of engineered bars in forming processes for
parts that had been previously produced by other types of metal processing, such
as casting, (ii) increased domestic sourcing of previously imported parts, (iii)
increased construction of manufacturing operations and facilities in North
America, as a number of component manufacturing operations have been built or
are being built in North America by both domestic and foreign-based
manufacturers, and (iv) an improvement in exchange rates.
Cold Finished Bar Market. Cold finished bars are high quality processed
steel bars used in machined and shafting products that require superior
straightness, tolerance, finish and mechanical properties. Cold finished bars
are processed from hot rolled bars, primarily engineered bars, by a process that
cleans (descales), draws and straightens the raw material and cuts it to
specific lengths. There are four characteristics of cold finished bars that
distinguish the product from other bar products: (i) a smooth and shiny surface
or finish, (ii) uniform shape, with close size tolerance, (iii) superior
strength, and (iv) machinability.
The Company estimates that the total North American market for cold
finished bar products was approximately 2.4 million tons during fiscal 1995,
based on information provided by AISI, Statistics Canada and the Cold Finished
Steel Bar Institute. There are several major cold finished bar processors and
many other smaller processors that produce a limited range of cold finished bar
products, both in North America and abroad. The Company believes that its
facilities, operations and wide range of products will continue to position it
as a leading North American processor of cold finished bar products.
The end users of cold finished bars incorporate the bars in a wide range of
products used in a broad spectrum of the economy. These products are found in
electrical and non-electrical machinery of all types and are used in the
manufacture of automobiles, trucks, tractors, off-road vehicles and agricultural
equipment. In the machinery industry, the Company's cold finished bar products
are used in the manufacture of gears, power shafts, base plates, guides, jigs,
fixtures and hydraulic cylinders. In the automobile, truck, tractor and off-road
vehicle industries, the Company's cold finished bar products are used in spark
plugs, steering gears, shock absorbers, starter motors and alternators, and a
variety of other parts. In the agricultural market, products manufactured from
cold finished bars are used in power transmission shafts and fluid power
mechanisms that control and drive equipment.
52
<PAGE>
PRODUCTS
Hot Rolled Products. The Company will produce various grades and sizes of
semi-finished billets and finished hot rolled engineered bar products. Except
for certain semi-finished products, all of the products to be manufactured by
the Company will be to order and based on customer specifications. The Company
plans to specialize in the higher quality product end of the hot rolled
engineered bar market. These products require special engineering and processing
to meet complex and demanding customer specifications. The semi-finished billets
produced by the Johnstown Facility will be produced to specified chemical
composition, size and quality. The billets will be sold to semi-finished buyers
or will be sent to the Lackawanna Facility or, when reactivated, the Company's
existing 11" bar mill in Johnstown, Pennsylvania for further processing into hot
rolled engineered bar products.
The Company's hot rolled engineered bar products are expected to include
rounds, squares and hexagons in both cut lengths and coils. Upon the successful
completion of Phase One of the Company's modernization and expansion plan for
the Johnstown Facility, the Company will have the capability of producing hot
rolled engineered bar products up to 3 1/4" in diameter, which products are used
in applications such as automotive suspension parts, large fasteners, hydraulic
hose fittings, military ordnance such as projectiles, transmission gears, and
forged hand tools.
Phase Two of the Company's modernization and expansion plan is intended to
give the Company the capability to produce higher quality, higher margin hot
rolled engineered bar products of the same size and additional direct charged
larger sized hot rolled engineered bar products up to 6" in diameter, which
products are used in more critical applications such as oil well drilling
components, gear blanks, hydraulic and pneumatic cylinders, heavy machinery
components, automotive and truck differential gears, crankshafts, rack steering
pistons, tank track components and transmission gears. The Company believes that
few of its competitors currently have the capability to produce these higher
quality and larger sized products.
Cold Finished Products. Cold finished bar products generally are
classified by finish, with subclassifications based on shape and size. The
Company believes that it offers the widest range of sizes and shapes in the cold
finished bar industry. Its products include round bars from 3/16" to 9 1/4" in
diameter, square bars from 1/4" to 6" square, flat bars from 3/8" to 4" thick
and from 1" to 14 5/8" wide, and hexagonal bars from 1/4" to 4" thick. The four
basic cold finishing processes are (i) cold drawn, (ii) turned and polished,
(iii) turned, ground and polished, and (iv) drawn, turned, ground and polished.
Set forth below is a description of the cold finished bar processes utilized by
the Company, along with the typical uses of cold finished bars produced in such
processes:
SELECT COLD FINISHED BAR PROCESSES
<TABLE>
<CAPTION>
PROCESS DESCRIPTION
- ------------------------------- ------------------------------------------------
<S> <C>
Cold Drawn..................... Hot rolled bars that have been descaled by
bombarding the surface with hardened steel shot
('shot blasting') are drawn (pulled) through a
tungsten carbide die (which compresses the
surface, elongates the bar and renders it smooth
and shiny), straightened and cut to length.
Typical uses of these bars include machining
applications, automotive and appliance shafts,
screw machine parts and machinery guides.
Turned and Polished............ Produced by removing the surface of hot rolled
bars with a revolving cutting tool (the turning
process), then rotating the turned bar through
rollers that polish the surface and straighten
the bar. These bars typically are used in
induction hardened parts and spline shafts.
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
Turned, Ground and Polished.... Produced in the same manner as turned and
polished bars, with the addition of a grinding
process that yields very close tolerances. These
bars principally are used in precision shafting.
Drawn, Turned, Ground and
Polished....................... Produced in the same manner as turned, ground
and polished bars, with the addition of a
drawing process to add physical strength and
machinability. These bars typically are used in
chrome-plated hydraulic cylinder shafts.
</TABLE>
The Company also thermally treats both hot rolled and cold finished bars.
The Company's thermally treated steel products include stress relieved, carbon
restored, normalized or annealed (lamellar-pearlitic or spheroidized) products,
all of which offer high strength combined with machinability.
BARTECH MODERNIZATION AND EXPANSION PLAN
Overview. Historically, the Bethlehem BRW Division's Johnstown,
Pennsylvania facilities were capable of producing high quality steel products,
but used a low efficiency ingot based steelmaking process. The ingot process had
many costly and labor intensive intermediate processing steps between the
melting of scrap into liquid steel in the electric arc furnaces and the shipment
of conditioned semi-finished billet products, including pouring of individual
ingots, reheating and rolling of ingots into blooms, cropping and scarfing of
blooms, rolling of blooms into billets, and inspection and conditioning of the
majority of the semi-finished billets due to the inherent quality
inconsistencies associated with the ingot process. The loss of material in these
processing steps resulted in a historical yield of approximately 65%
(approximately 65% of the scrap melted in the furnace became saleable finished
bar steels and the remaining 35% was wasted in processing). In addition, the
average time of the process from the melting of scrap to conditioned
semi-finished billets took approximately seven days.
The Company has developed and is implementing a two phase plan to modernize
and expand its processes and equipment at the Johnstown Facility to take
advantage of proven steelmaking technologies. Phase One of the Company's
modernization and expansion plan involves replacing the existing ingot based
process at the Johnstown Facility with a continuous casting steelmaking process.
The installation of a combination bloom/billet caster and related equipment is
underway and is scheduled to be completed and commercial steelmaking at the
Johnstown Facility is scheduled to commence in the summer of 1996.
The Company expects that the installation of the caster and related
equipment will provide the Company with several advantages over the ingot based
process, such as (i) improved product quality and consistency, (ii) higher
overall process yields with less scrap generated in the manufacturing process,
(iii) improved labor productivity through a significant reduction in crew sizes
with the elimination of intermediate processes, (iv) lower energy costs with the
elimination of equipment such as soaking pits and primary mills, (v) lower
inventory levels due to a shorter time between receipt of purchase orders and
shipments because of the faster, more efficient continuous casting process, and
(vi) expected increased market penetration due to customer preferences for
continuous cast steel, which generally is a more consistent, uniform product in
terms of its surface and internal properties. The continuous casting process
consists of far fewer intermediate process steps than the ingot based process,
as liquid steel is introduced directly into the caster molds and, after
solidifying, the cast steel is automatically cut, with minimal waste, into
individual lengths as required for further processing. The Company expects that
the average time of the continuous casting process, from the melting of scrap
metal to conditioned semi-finished billet products, will be approximately two
days as compared with approximately seven days in the ingot based process.
54
<PAGE>
The diagram below illustrates in summary form the process steps that will
be eliminated as a result of the replacement of the ingot based process used by
the Bethlehem BRW Division with the continuous casting process:
[ARTWORK]
The Company plans to further broaden the production capability of the
Johnstown Facility in Phase Two of its modernization and expansion plan. The
completion of Phase Two is expected to give the Company expanded bloom
processing capability and increased hot rolled engineered bar product
diversification and quality, in addition to providing additional production and
transportation cost savings pursuant to process improvements.
Phase Two is designed to enable the Company to produce products for the
higher quality and larger size hot rolled engineered bar and semi-finished
billet market segments. These market segments include larger size engineered bar
products and smaller but higher quality engineered bars designed for use in more
critical applications. This market segment also has fewer competitors than the
overall hot rolled engineered bar products market due to few producers having
the specialized facilities required to produce higher quality hot rolled
engineered bar products. The Company believes that its presence in the higher
quality segment of the hot rolled engineered bar market will further diversify
its product offerings and provide the Company entry into a higher margin market
segment with fewer competitors, which is intended to enhance the Company's
overall profitability.
The combination bloom/billet caster and related equipment to be installed
in Phase One of the Company's modernization and expansion plan has been designed
so that the equipment modifications required to complete Phase Two of the plan
would be limited and could be accomplished at low cost and with limited
disruption to on-going operations of the Company. Phase Two is scheduled to be
completed by the end of 1997. By the end of the summer of 1997, the Company
expects to have the capability to cast larger blooms of up to 10" by 14" and to
direct charge blooms and equalize their temperature in the new bloom reheat
furnace immediately after casting and before further rolling on the existing
30"-21" mill and discharge to the new turnover cooling bed. By the end of 1997,
with the addition of mill stands and other equipment to the existing 30"-21"
mill, the Company expects to have the capability to produce large round and
round-cornered square bars in sizes up to 6". The Company
55
<PAGE>
believes that after completion of Phase Two, the Johnstown Facility will be one
of the few direct charged bar finishing mills of its kind in North America.
Projects designed to take advantage of additional growth opportunities
currently are being developed and analyzed by the Company. These projects
include the modification of the Company's existing 11" bar mill in Johnstown,
Pennsylvania with the installation of a rod block that would allow the Company
to compete in the high quality, higher margin segment of the rod market. The
Company believes that this segment of the rod market is served by few low cost
domestic competitors and the Company's proximity to a major local customer of
rod products, Johnstown Wire Technologies of Johnstown, Pennsylvania, should
enable the Company to compete successfully in this market, which would be a
natural extension of its engineered bar business. These opportunities will be
pursued only after the completion of the Company's modernization and expansion
plan and upon the Company's final determination that such a project would be a
sustainable enhancement to the Company's future profitability.
Phase One. Phase One of the Company's modernization and expansion plan at
the Johnstown Facility will result in the replacement of the existing ingot
based steelmaking process utilized by the Bethlehem BRW Division with a
six-strand combination bloom/billet continuous caster (the 'Caster'). In
addition, the Company is adding electromagnetic stirring equipment to the Caster
molds to provide additional internal and surface quality benefits and product
consistency. All components of the Caster have been designed to support
'continuous-continuous casting,' which is the ability to cast multiple furnace
'heats' in sequence without interrupting the casting process, and which will
allow the Caster to have an annual capacity of approximately 900,000 tons of
semi-finished bloom and billet product. The Caster was designed to be
convertible to bloom processing capability and with equipment features to insure
compliance with the quality standards of the engineered bar market. These
features include a technically advanced 'tundish' (the liquid steel reservoir
above the molds) with flow control devices to maximize internal cleanliness,
electromagnetic stirring coils in the caster molds, and a specialized water
spray cooling system designed to optimize internal quality of the cast steel.
The Company considered numerous continuous caster designs, taking into
account, among other things, overall cost, the time required for installation,
engineered bar market requirements, the Company's overall business strategy and
the integration of a caster with the Company's existing facilities. After
considering original equipment casters, which ranged in installed cost from
$35.0 million to $40.0 million and did not include the ability to modify the
caster to enable bloom processing as required by Phase Two, the Company located
and acquired an existing caster from Sidecar SAIC, a recently privatized
Argentinean steelmaker. The Caster was built by Concast/Schloemann and was
upgraded by Sidecar SAIC in 1992. The total cost of the Caster installation
project is estimated to be approximately $31.0 million, which includes a
contract with Rokop, a leading caster engineering company, for approximately
$19.9 million, under which Rokop has agreed to upgrade, reassemble, install and
start up the Caster on a 'turnkey' basis, in addition to approximately $9.0
million of other costs to be incurred directly by the Company, including the
purchase and dismantling of the Caster, shipment of the Caster to Johnstown,
Pennsylvania and other ancillary projects in connection with the Caster
installation. The upgrading, reassembly, installation and start-up of the Caster
is expected to take substantially less time than would have been required for
the installation and start-up of a new caster. The Caster has been dismantled,
match-marked and shipped to Johnstown, is currently being upgraded, reassembled
and installed by Rokop and is scheduled to be operational in the summer of 1996.
Maintenance and operating personnel have been receiving and will continue
to receive intensive training from equipment suppliers to provide specific
training on individual equipment and mechanical and electrical systems, in
addition to 'hands on' operational training on similar combination bloom/billet
casters. The costs of this training have been included in the estimated
aggregate Phase One project cost.
56
<PAGE>
Phase One of the Company's modernization and expansion plan also involves
the acquisition, installation and implementation of new management information
system technology. The new information system is a personal computer-based
system designed to support a broad range of business needs from a commercial,
manufacturing and financial standpoint and integrate the Company's different
functions such as customer order processing, manufacturing, distribution and
financial management. The system is designed to allow the Company to identify
cost items and other financial information in detail in order to track costs and
operate more efficiently. See '--Information Systems--BarTech Management
Information System.'
Upon completion of Phase One, the Company believes that it will be
positioned as a low cost producer of high quality semi-finished billets in sizes
from 5 1/8" by 5 1/8" to 7 1/2" by 7 1/2" and hot rolled engineered bar products
in sizes ranging from 1/2" to 3 1/4". Upon the start-up of commercial steel
production at the Johnstown Facility after completion of Phase One, the Company
will be operating numerous modern steelmaking equipment, including the Caster,
two computer-controlled 180-ton electric arc furnaces, a vacuum degasser and
ladle metallurgy facilities, which the Company believes will give it numerous
equipment, production cost, efficiency and product quality advantages over its
primary competitors.
Phase Two. Phase Two of the Company's modernization and expansion plan at
the Johnstown Facility will entail (i) installing a new walking beam bloom
reheat furnace designed to equalize surface and internal temperatures of blooms
immediately after casting and deliver blooms directly to the Company's existing
30"-21" billet/bar mill for processing, (ii) installing a new turnover cooling
bed designed to cool product after rolling and maintain commercially straight
billets and bars, (iii) enhancing its computer system for improved process
control and quality tracking in the casting process, (iv) reactivating and
upgrading the existing 30"-21" billet/bar mill, including reactivating the
existing automated billet inspection and defect marking equipment, and (v)
modifying the Caster by installing a minimal amount of new equipment such as
larger molds and housings, containment rolls and guide sections to enable larger
bloom size processing capability. The Caster, with proper molds installed, has
the versatility to cast semi-finished billets in sizes from 5 1/8" by 5 1/8" to
blooms of up to 10" by 14". The completion of Phase Two is expected to provide
the Company with the capability to cast and roll larger blooms of up to 10" by
14" and to direct charge blooms and equalize their temperature in the new bloom
reheat furnace immediately after casting and before further processing in the
existing 30"-21" mill and discharge to the new turnover cooling bed, thereby
saving energy and processing time by utilizing the existing heat of blooms from
the casting process. With the addition of mill stands and other equipment to the
existing 30"-21" mill the Company will have the capability to produce large
round and round-cornered square bars in sizes up to 6".
57
<PAGE>
The Company believes that after completion of Phase Two of its
modernization and expansion plan, the Johnstown Facility will be one of the few
direct charged bar finishing mills of its kind in North America. The diagram
below illustrates the layout of the Johnstown Facility after Phase One has been
completed and shows in summary form the installation of new equipment and
reactivation of existing facilities proposed in Phase Two:
[Artwork]
The functional specifications for Phase Two have been substantially
developed by the Company and are expected to be finalized by the end of fiscal
1996. The Company has begun implementation of Phase Two with the commencement of
engineering and site preparation and the placement of initial purchase orders.
Phase Two currently is scheduled to be completed by the end of 1997. By the end
of the summer of 1997, the Company expects to have the capability to cast larger
blooms of up to 10" by 14" and to direct charge blooms and equalize their
temperature in the new bloom reheat furnace immediately after casting and before
further rolling on the existing 30"-21" mill and discharge to the new turnover
cooling bed. By the end of 1997, with the addition of mill stands and other
equipment to the existing 30"-21" mill, the Company expects to have the
capability to produce large round and round-cornered square bars in sizes up to
6". The installation of additional equipment in Phase Two will not require a
shut-down of operations at the Johnstown Facility. Both Phase One and Phase Two
were designed and engineered to be independent projects and to minimize, to the
greatest extent practicable, any impact of Phase Two construction and
implementation on on-going operations.
The cost of Phase Two was estimated in March 1996 to be approximately $25
million. However, it is now expected that the total cost may ultimately be $10
million to $15 million higher than the original estimate primarily due to (i)
the Company's contemplated purchase of new, more efficient mill stands rather
than the previously intended utilization of currently owned redundant mill
stands, (ii) the receipt of higher price quotations than earlier anticipated,
(iii) the incorporation of certain equipment modifications in order to allow
casting of additional bloom sizes to optimize efficiency at the Company's
rolling mill operations and (iv) the addition of equipment to further improve
the internal quality of the as-cast bloom product to enhance product
marketability. The Company is continuing to analyze all aspects of Phase Two and
negotiate with vendors and contractors in order to complete Phase Two at the
lowest possible cost.
58
<PAGE>
SALES AND MARKETING
The Company's strategy is to produce hot rolled and cold finished bar
products for select high quality engineered bar market segments in which the
Company believes it can compete effectively as a low cost producer. The Company
plans to emphasize product quality, price, customer service, breadth of product
offerings and delivery capability in its sales and marketing strategy, and
expects to maintain high standards of product quality while keeping production
costs competitive.
The Company's marketing strategy for its hot rolled products is to
initially target customers of engineered bar products used in less stringent
applications and with little or no pre-qualification requirements in order to
enable the BarTech Facilities to operate efficiently with significant volumes as
soon as possible after the Company's start-up of operations. Such strategy is
expected to initially result in lower margins and have a negative effect on
short-term profitability. The Company then plans to selectively market higher
quality, critical application hot rolled engineered bar products, including,
after the completion of Phase Two of its modernization and expansion plan,
larger sized hot rolled engineered bar products. Many customers in these
additional market segments require higher quality hot rolled engineered bar
products for use in hot and cold metal forming operations, such as cold
forge/extrusion, warm forge, hot forge and hot/cold coiling processes, rather
than traditional machining processes.
As part of its initial hot rolled product strategy, the Company restarted
operations on a limited basis at the Lackawanna Facility on February 9, 1996,
utilizing semi-finished billets from other steelmakers to produce and ship hot
rolled engineered bar products for the lower end of the engineered bar market.
The Company intends this operation to re-establish the Company as a supplier in
the hot rolled engineered bar market and, more importantly, to facilitate its
transition into full steelmaking and bar rolling operations by not having
simultaneous start-ups of its steelmaking and bar rolling facilities.
In addition to its commercial production, the Company will produce trial
heats of engineered bar products to be shipped to customers for testing and
analysis in connection with pre-qualification of products in order to become an
approved supplier for certain potential customers. The Company believes that the
pre-qualification of hot rolled engineered bar products will generally take from
three to 12 months depending on the products and customers the Company intends
to pursue. The Company is also targeting accounts with longer pre-qualification
requirements, such as many North American-based Japanese and European automotive
original equipment manufacturers and their parts suppliers. The Company expects
that its volume of shipments will gradually increase as the Company satisfies
product pre-qualification requirements.
The Company's cold finished bar products marketing efforts will continue to
target the steel service center market segment, original equipment manufacturers
and other selected regional market segments based on the strategic location of
its facilities. The Company estimates that over 40% of the annual United States
market for cold finished bar products, based on information provided by AISI and
the Cold Finished Steel Bar Institute, is for products purchased by steel
service centers. Over 45% of B&L's net sales in fiscal 1995 were to steel
service centers. The Company believes that its ability to produce a wide range
of shapes, grades and sizes of cold finished bar products and the proximity of
its Harvey and Batavia, Illinois, Cartersville, Georgia and Hamilton, Ontario,
Canada facilities to major steel service center markets will allow the Company
to continue to effectively serve this market segment. In particular, the
Company's marketing of large round and flat cold finished bar products has
allowed it to provide 'one stop shopping' to many of its steel service center
customers to complement its wide variety of smaller cold finished bar products.
The Company also plans to continue to target large end user markets in selected
regions, such as the machining and automotive original equipment manufacturers
located in the area served by its Medina, Ohio facility, in order to further
diversify its customer base and increase its share of the overall cold finished
bar market.
The Company's Harvey, Illinois cold finishing facility is completing the
implementation of an activity-based costing system that is enabling B&L to work
with many of its customers to identify B&L and
59
<PAGE>
customer costs and activities that can be reduced in order to increase profit
margins without reducing product prices. The Company intends to use this system
to improve its existing relationships and establish new long-term working
relationships with customers. See 'Information Systems--B&L Management
Information Systems.'
The Company believes that the B&L Acquisition will provide it with
increased product diversification and an established distribution network, which
will provide both BarTech and B&L with cross-selling and expanded marketing
opportunities. In addition, the Company believes that its ability to market a
variety of both hot rolled and cold finished bar products will enable it to
service additional customers that it would be difficult for BarTech and B&L to
target individually. The Company has already begun to implement its marketing
plan for its hot rolled engineered bar products, including targeting and
contacting potential hot rolled engineered bar product customers, including many
former customers of the Bethlehem BRW Division. As of March 31, 1996, BarTech
had replied to requests for bids on over 600,000 tons of hot rolled engineered
bar products.
The Company expects that its principal customers for hot rolled engineered
bar products will be manufacturers in the machinery industry, the automotive
industry, the industrial equipment and tools industry, and independent forgers
and steel service centers. B&L is expected to be a significant customer of
BarTech for hot rolled engineered bar products. Customers of BarTech that
further process engineered bar products, such as B&L, employ value-adding
processes that include cold drawing, cold heading, cold forging, hot forging and
machining.
The Company expects to have direct sales representation in the major
manufacturing centers in the Midwest and Great Lakes regions of the United
States, including the Chicago, Detroit and Cleveland markets, and Canada. The
Company believes that the majority of hot rolled and cold finished bar product
consumption in North America is in these markets. The Company has and expects to
utilize additional independent sales agents to cover the remaining areas of the
United States and Canada in which it plans to market its hot rolled and cold
finished bar products. The Company also will have customer service and sales
personnel to staff the Company's in-house sales and service departments.
DISTRIBUTION
The Company's facilities are strategically located to serve the majority of
consumers of hot rolled and cold finished bar products in the United States and
Canada. The Lackawanna Facility and the Company's cold finishing facilities are
located in or near major hot rolled and cold finished bar market areas in Ohio,
Michigan, Illinois and Canada, and the Company has additional cold finished
facilities located near the growing southeastern United States service center
and original equipment automotive parts market areas. The proximity to these hot
rolled and cold finished bar product consumers is expected to allow the Company
to provide competitive rail and truck freight rates and flexible deliveries in
order to satisfy just-in-time and other customer manufacturing requirements.
Customer needs will dictate the type of transportation utilized by the
Company for deliveries. The Company expects to optimize transportation costs
within these constraints, including combining orders in shipments whenever
possible and backhauling scrap and other materials and consumable supplies for
use at the Company's facilities. The Company is negotiating freight rates with
Conrail and currently expects that its cost to ship semi-finished billets from
the Johnstown Facility to the Lackawanna Facility will be $13 or less per ton
for at least the first two years of the Company's operations.
INFORMATION SYSTEMS
BarTech Management Information System. The Company is implementing a new
information technology system for BarTech that is designed to support critical
business functions and that offers increased access to cost and other financial
information to allow BarTech to enhance its cost controls
60
<PAGE>
by tracking costs in minute detail, providing management with considerable data
on cost performance, variances and key cost drivers. The system is expected to
integrate BarTech's cost, financial and other systems with its existing
computer-based manufacturing process control systems. The manufacturing
management system is designed to organize BarTech's steelmaking and rolling
facilities by using advanced planning techniques and control systems to increase
efficiencies and decrease costs. The order management system is designed to
control the customer order process from the receipt of a quote through the
generation of an invoice and is expected to eliminate many manual functions. The
cost and financial management system will track product and job costs, manage
accounts receivable and payable, and maintain and report BarTech's financial
information in its general ledger. The installation of the system hardware and
software is expected to be completed prior to the commencement of BarTech's
commercial steelmaking operations.
B&L Management Information Systems. B&L developed and is implementing two
major projects to upgrade its information processing and cost tracking
capabilities. The first project, scheduled for completion in fiscal 1996, is the
implementation of a new management information system designed to integrate most
elements of B&L's business and provide access to financial, production and other
information to facilitate faster decision making, improved production control
and efficiency, better inventory coverage and utilization and a substantial
improvement in responses to customer service needs.
The second project is the implementation of an activity-based costing
('ABC') system designed to provide more highly refined and pinpointed cost data
and to enable the Company to apply such cost data to the design, manufacture and
delivery of products, in addition to measuring resource consumption by tracking
costs to products and customers. The ABC system allows the Company to reduce
costs and increase profit margins in its cold finished bar product business
while sustaining price levels by detailing costs by activity compared with
market price and expected returns data and pinpointing areas where improvements
can be made. The system is designed to enable the Company to work together with
customers by creating models to increase the efficiency of the order, inventory,
production and delivery processes in order to decrease costs, both for the
Company and its customers. The initial phase of the ABC system modeling has been
implemented at B&L's Harvey, Illinois facility and, to date, the ABC system has
helped B&L and many of its customers achieve manufacturing and other cost
reductions as well as increased profit margins from operations. The model
analysis resulted in the development of a comprehensive cost reduction program
at the Harvey facility, including modifications to the inventory control system
that resulted in a reduction of inventory levels. The Company plans to utilize
the ABC system at its other cold finishing facilities, with the expectation of
increased cost savings and better long-term relationships with a greater number
of its customers.
RAW MATERIALS
Scrap Metal. The Company's major raw material for the manufacture of hot
rolled products will be ferrous scrap metal, which is generated principally from
industrial, automotive, demolition and railroad sources and will be purchased by
the Company in the open market through a number of scrap brokers and dealers,
some of whom have already been contacted by the Company, or by direct purchase.
The long term demand for scrap metal and its importance to the domestic steel
industry is expected to increase as steelmakers continue to expand scrap
metal-based electric furnace capacity, with additions to or replacements of
existing integrated steel manufacturing facilities that use iron ore, coke and
limestone as their raw materials. The market for scrap metal is highly
competitive and its price volatility is influenced by periodic shortages,
freight costs, speculation by scrap brokers and other conditions largely beyond
the control of the Company.
The Company believes that adequate supplies of scrap metal from numerous
suppliers will continue to be available for the foreseeable future. The majority
of the Company's competitors also utilize scrap as their primary raw material,
and increases in scrap market conditions will have an
61
<PAGE>
industry-wide impact on manufacturing costs and selling prices of finished
goods. The Company's location in Johnstown, Pennsylvania gives it access to
United States East Coast scrap markets. The East Coast scrap markets are
centered in Philadelphia, Pennsylvania and draw on sources from the New England
and Mid-Atlantic states. These markets historically have sold scrap at lower
costs than the Chicago, Pittsburgh and other Midwest scrap markets, which are
subject to high demand from other steelmakers located in the Midwest and Great
Lakes regions of the United States and Canada. During periods of scrap price
escalation, the industry historically has sought to maintain profit margins and
pass along increased raw material costs to customers by means of scrap
surcharges. The Company will attempt to limit the impact of fluctuations in the
price of scrap metal by charging certain of its customers a scrap metal
surcharge based on the increase in the price of scrap metal above certain
levels. See 'Risk Factors--Price Sensitivity of Raw Materials.'
The Company restarted the production and shipment of hot rolled engineered
bar products from the Lackawanna Facility in February 1996, utilizing
semi-finished billets from other steelmakers until the commencement of
steelmaking operations at the Johnstown Facility. The Company is in discussions
with several potential suppliers and expects that semi-finished billets will
continue to be readily available.
Energy. Steelmaking and hot rolled steel manufacturing are energy
intensive processes. The Company does not expect to experience difficulty in
obtaining adequate sources of electricity and natural gas, which it uses as its
primary sources of energy at the BarTech Facilities. The Company has negotiated
a non-binding memorandum of understanding with the major utility that will
provide electricity to the Johnstown Facility, which it expects will provide for
favorable economic development rates as low as 3.2cents per KWH for its first
year of operations. A definitive agreement with Johnstown's electric supplier is
expected to be signed in August 1996 and will become effective upon approval by
the Pennsylvania Utility Commission. Utilities represent approximately 11% of
the cost of production of hot rolled bars. As electricity is a major cost in the
operation of the Johnstown Facility, which utilizes electric arc furnaces in its
steelmaking processes, these attractive rates are expected to generate
substantial cost savings as compared with other steelmakers operating without
the benefit of such economic development rates, including the former operations
of the Bethlehem BRW Division. In addition, the Company has entered into a
letter of intent to purchase a natural gas transmission line used by the
Johnstown Facility, which will provide the Company with assured access to
natural gas transmission services at below-market costs. The Lackawanna Facility
also is expected to benefit from low electricity rates, as it has received an
allocation of hydropower-generated electricity that is expected to meet its
entire demand at a current rate of approximately 2.0cents per KWH. The Company
has negotiated attractive transmission rates for its projected usage levels with
the utility that provides natural gas to the Lackawanna Facility, which uses gas
fired furnaces to reheat billets for further processing.
Cold finished manufacturing processes are not energy intensive. Total
energy costs for B&L historically have been less than 2% of its cost of sales.
COMPETITION
The Company will compete mainly on the basis of product quality, price,
customer service, breadth of product offerings and delivery capability. Hot
rolled engineered bar products are characterized by special chemistry and
product quality requirements and cold finished bar products require precise
processing. The Company expects that its low cost operating structure and
distinct operating cost advantages over its primary competitors will allow it to
compete effectively on pricing, and it plans to institute strict customer
service guidelines to re-establish a reputation for quality service to
complement its technological and high quality product capabilities. The Company
believes that it has the widest selection of cold finished bar product grades
and sizes in the industry, and the successful completion of its modernization
and expansion plan will allow the Company to offer a wide selection of high
quality hot rolled engineered bar products. The ability of the Company to
respond quickly to customer orders
62
<PAGE>
currently is, and is expected to remain, important as customers continue to
reduce their in-plant inventories due to increased use of just-in-time and
similar manufacturing strategies.
The Company's primary hot rolled engineered bar products competitors can be
divided into two general categories: primary competitors, which are large
steelmakers such as Republic Engineered Steels, Inc. ('Republic'), USS/Kobe
Steel Company, Inland Steel Industries, Inc., and Stelco Inc., and, to a lesser
extent, specialized mini-mills such as North Star Steel Company and Quanex
Corporation (Mac Steel). Many of the large steelmakers have greater financial
resources than the Company and utilize modern technologies similar to some of
the equipment and processes currently in place or being implemented by the
Company in its modernization and expansion plan, but the Company believes it
will operate with a lower cost structure than these other producers of higher
quality engineered bar products. Specialized mini-mills, which may operate with
lower cost structures, generally lack the facilities or production processes to
manufacture higher quality engineered bar products. The Company believes that,
upon completion of Phase Two of its modernization and expansion plan, it will be
the only hot rolled engineered bar producer among its primary existing
competitors that will have a combination of facilities and equipment
capabilities which include (i) a six-strand combination bloom/billet continuous
caster, (ii) an R-H vacuum degasser, (iii) ladle furnace metallurgy facilities,
(iv) a combination billet/bar mill, (v) an automatic billet inspection system,
(vi) walking beam bloom and billet reheat furnaces, (vii) a closed loop bar
gauge, and (viii) interstand cooling, which will enable the Company to produce a
wide variety of grades and sizes of high quality hot rolled engineered bars in
cut lengths and heavyweight coils. However, there can be no assurance that, upon
the completion of Phase Two, an existing competitor of the Company will not have
or will not be in the process of acquiring such equipment. In addition, the
Company believes that other steelmakers or new entrants may seek to expand their
product lines to compete with the Company and may also utilize such equipment.
The North American market for cold finished bar products is very
competitive and highly fragmented. The Company's primary United States
competitors are large steel producers such as Republic and other diversified
domestic corporations, many having substantially greater financial resources
than the Company and some of which are a division or subsidiary of steel
companies that also produce hot rolled products, including Nucor Corporation and
Quanex Corporation. The Company's primary Canadian competitors are Union Drawn
Steel Company and Laurel Steel Inc.
Foreign competition is a significant factor in the North American
engineered bar industry. Imports are substantially affected by fluctuations in
the value of the U.S. dollar versus certain foreign currencies. If the U.S.
dollar were to strengthen significantly against foreign currencies, the price
and sales volume of the Company's products could be adversely affected. Based on
information compiled from AISI, Statistics Canada and the Cold Finished Steel
Bar Institute, the Company estimates that imports will comprise approximately
6.1% of cold finished bar consumption in North America in calendar 1995. There
can be no assurance, however, that economic changes will not result in increased
foreign competition in the Company's North American markets.
PATENTS, TRADEMARKS AND TRADE NAMES
The Company has the patents, trademarks and trade names necessary for the
operation of its business as now conducted. The loss of any or all of these
patents, trademarks and trade names would not have a material adverse effect on
the Company's business.
BACKLOG
The Company restarted and commenced operations on a limited basis at the
Lackawanna Facility in February 1996; therefore, the Company's backlog of orders
is not meaningful. B&L's backlog of orders scheduled for future delivery within
six months was approximately $32.7 million as of March 31, 1996. B&L estimates
that substantially all of the March 31, 1996 backlog will be shipped before
63
<PAGE>
September 30, 1996. The Company does not believe that the amount of backlog
orders will be a reliable indication of future sales. Orders of engineered bar
products generally are filled within five to 12 weeks of the order depending on
the product, customer needs and other production requirements. Customer orders
generally are subject to cancellation without penalty prior to finish size
rolling and depend on the changing production schedules of customers.
EMPLOYEES
BarTech and the USWA have entered into a collective bargaining agreement
relating to certain of BarTech's employees at the BarTech Facilities. The
agreement provides for a five-year term expiring in February 2001. The new
collective bargaining agreement provides for initial total wage and benefits
costs of approximately $16 per hour per employee for its first year of
operations, which commenced on February 9, 1996 with the restart of its
Lackawanna Facility. Years two, three, four and five of the collective
bargaining agreement provide for total wage and benefit costs of approximately
$16.25, $16.50, $21.00 and $23.00 per hour per employee, respectively. The
Company believes, based on information provided to it, that at the time the
Bethlehem BRW Division shut down its steelmaking operations in 1992, its total
wage and benefits costs were between $28.50 and $30.00 per hour for hourly
employees that were covered by the Bethlehem Labor Agreement. Work
classifications also have been reduced from 34 in the Bethlehem Labor Agreement
to five in the new agreement, which is designed to allow BarTech to implement
reduced manning levels due to much greater flexibility and efficiency in
staffing its shop floor operations. In addition, while the Bethlehem Labor
Agreement limited Bethlehem's ability to contract out work, the new agreement
allows BarTech to contract out many tasks, such as the re-start and
modernization of the Johnstown Facility prior to the commencement of commercial
steelmaking operations. The new agreement institutes a defined contribution
basis for retirement benefits whereas the Bethlehem Labor Agreement was
structured on a defined benefit basis, and the new agreement allows the Company
to fund the BarTech 401(k) plan with eligible securities rather than cash for
the first three years of the plan. The Company expects that most of BarTech's
employees will be former Bethlehem BRW Division employees who have qualified for
Bethlehem pension benefits. Pursuant to an agreement with Bethlehem, such
employees will continue to receive their medical benefits pursuant to
Bethlehem's pension plan, and the obligation of BarTech relating to these
medical benefits will be limited to an annual fixed payment per employee by
BarTech to Bethlehem that will be less than one-half of the expected cost for
each covered employee for such benefits and will not vary over time or based on
actual claims experience. Wage and benefits provisions under the new collective
bargaining agreement are fixed until expiration of the five-year term of the
agreement and will be subject to further negotiations at that time.
The Company believes that BarTech's new collective bargaining agreement
with the USWA is beneficial to the Company. In exchange for the USWA entering
into the agreement, the Company agreed to establish the ESOP. The Company also
agreed that BarTech would contribute a minimum of 20% of the then outstanding
Common Stock of BarTech to the ESOP (subject to dilution for events occurring
subsequent to February 1994) and granted to the USWA the power to appoint, and
the USWA has appointed, two of the eleven existing directors of BarTech.
All production employees at B&L's Medina, Ohio facility are covered by a
collective bargaining agreement with the International Association of Machinists
and Aerospace Workers (the 'IAM') that expires in October 1997. The Medina
agreement provides for a total wage and benefits package of approximately $19
per hour, has flexible work rules and provides for a defined benefit pension
plan. The production employees at B&L's Harvey, Illinois and Hamilton, Ontario,
Canada plants are covered by separate collective bargaining agreements with the
USWA that expire on November 30, 1998 and July 31, 1996, respectively. The
agreements have similar provisions, calling for total wage and benefits costs of
approximately $21 per hour (both in U.S. dollars), and including non-restrictive
work rules and a defined benefit pension plan. The production employees at B&L's
Batavia, Illinois and Cartersville, Georgia facilities are not represented by a
union. The Batavia employees receive a total wage and
64
<PAGE>
benefits package of approximately $21 per hour while the Cartersville employees
receive a package of approximately $17 per hour.
As of March 31, 1996, BarTech had 170 employees and B&L had 451 employees.
The Company believes that it has good relations with its employees.
PROPERTIES
The Company owns all of the facilities listed below except the BarTech
executive offices, which are leased:
BarTech Executive Offices. BarTech's executive offices are in Johnstown,
Pennsylvania. The aggregate floor area of these facilities is approximately
7,550 square feet. The lease on these offices expires in December 1996, by which
time the Company expects to have relocated its executive offices to a location
within the Johnstown Facility.
Johnstown Facility. The Johnstown Facility, located at Johnstown,
Pennsylvania and having an aggregate floor area of approximately 1,916,500
square feet (including the Caster complex), will consist principally of the
following facilities after the completion of Phase One of the Company's
modernization and expansion plan: (i) a steelmaking complex consisting of two
180-ton ultra high powered electric arc melting furnaces, complete ladle
metallurgy facilities, an R-H vacuum degasser and a process control computer,
(ii) a six-strand combination bloom/billet continuous caster, (iii) a 30"-21"
billet/bar mill with six stands and the capacity to roll billets and upgradeable
to produce large diameter bars, (iv) an automated billet inspection and
conditioning facility, (v) an 11" bar mill with 18 vertical/horizontal stands,
bar dimension control and interstand cooling, (vi) a roll shop with computer and
manually controlled lathes, and (vii) complete chemical and environmental labs.
Lackawanna Facility. The Lackawanna Facility, located at Lackawanna, New
York and having an aggregate floor area of approximately 1,099,000 square feet,
is a 13" bar mill with the following features: (i) 22 vertical/horizontal
stands, (ii) closed loop bar dimensional control providing the ability to roll
to 1/4 standard size tolerance, (iii) interstand cooling, (iv) internal roll
shop, (v) ten process control computers, and (vi) mill and material handling
equipment designed to produce coils up to 5,400 pounds, one of the heaviest coil
weights in the industry.
Harvey Facility. The Company's cold finished processing plant at Harvey,
Illinois has approximately 331,000 square feet of manufacturing, office and
storage space and consists principally of the following facilities: (i) two
roller hearth furnaces for thermal-treating bars, (ii) shotblasting equipment
for descaling hot rolled bar surfaces, (iii) four drawbenches for cold drawing
hot rolled bars (including a 650,000 pound drawbench, believed to be the largest
in the industry) into numerous shapes and up to 6" in size, (iv) two mills for
turn-finishing bar surfaces, and (v) 13 cold finished bar
straightener/polishers. B&L's executive offices are also located at the Harvey
Facility. The Harvey facility has an annual capacity of approximately 120,000
tons, based on the Company's current product mix, and in fiscal 1995 produced
approximately 71,733 tons of cold finished bar products.
Batavia Facility. The Company's cold finished processing plant at Batavia,
Illinois has approximately 61,000 square feet of manufacturing, office and
storage space and consists principally of the following facilities: (i)
shotblasting equipment for descaling hot rolled bar surfaces, (ii) four
automatic coil-to-bar machines, which produce bars from hot rolled coil products
including rounds from 1/4" to 1 5/8" in diameter and hexagons and squares from
1/4" to 1" thick, and (iii) one cold finished bar straightener/polisher. The
Batavia facility has an annual capacity of approximately 65,000 tons, based on
the Company's current product mix, and in fiscal 1995 produced approximately
40,142 tons of cold finished bar products.
65
<PAGE>
Cartersville Facility. The Company's cold finished processing plant at
Cartersville, Georgia has approximately 92,000 square feet of manufacturing,
office and storage space and consists principally of the following facilities:
(i) shotblasting equipment for descaling hot rolled bar surfaces, (ii) two
drawbenches for cold drawing hot rolled bars into rounds up to 4" in diameter,
flats up to 6" in width and hexagons and squares up to 2 1/2" thick, (iii) one
automatic coil-to-bar machine, which produces rounds up to 1 1/16" in diameter,
and (iv) four cold finished bar straightener/polishers. The Cartersville
facility has an annual capacity of approximately 60,000 tons, based on the
Company's current product mix, and in fiscal 1995 produced approximately 31,534
tons of cold finished bar products.
Hamilton Facility. The Company's cold finished processing plant at
Hamilton, Ontario, Canada has approximately 135,000 square feet of
manufacturing, office and storage space and consists principally of the
following facilities: (i) two batch furnaces for thermal treating bars, (ii)
shotblasting equipment for descaling hot rolled bar surfaces, (iii) two
drawbenches for cold drawing hot rolled bars into rounds up to 4" in diameter,
flats up to 6" in width and hexagons and squares up to 2 1/2" thick, (iv) two
automatic coil-to-bar machines which produce rounds up to 1 1/16" in diameter,
(v) two mills for turnfinishing bar surfaces, and (vi) five cold finished bar
straightener/polishers. The Hamilton facility has an annual capacity of
approximately 55,000 tons, based on the Company's current product mix, and in
fiscal 1995 produced approximately 53,217 tons of cold finished bar products.
Medina Facility. The Company's cold finished processing plant at Medina,
Ohio has approximately 126,000 square feet of manufacturing, office and storage
space and consists principally of the following facilities: (i) shotblasting
equipment for descaling hot rolled bar surfaces, (ii) two drawbenches for cold
drawing hot rolled bars into rounds up to 4" in diameter, flats up to 4" in
width and hexagons and squares up to 2 1/2" thick, (iii) three automatic
coil-to-bar machines which produce rounds up to 3/4" in diameter, and (iv) four
cold finished bar straightener/polishers. The Medina facility has an annual
capacity of approximately 60,000 tons, based on the Company's current product
mix, and in fiscal 1995 produced approximately 46,479 tons of cold finished bar
products.
ENVIRONMENTAL COMPLIANCE
The domestic steel industry is subject to a broad range of Federal and
State and local environmental laws and regulations, including those governing
discharges into the air and water, the handling and disposal of solid and
hazardous wastes, the remediation of soil and ground water contaminated by
petroleum products or hazardous substances or wastes, and the health and safety
of employees. The Company has taken, and continues to take, into account the
requirements of such environmental laws and regulations in the improvement,
modernization, expansion and start-up of its facilities and believes that it is
currently in substantial compliance with such material laws and regulations. As
is the case with most steel producers, the Company could incur significant costs
related to environmental compliance. To the extent the Company might incur any
such compliance costs, these costs most likely would be incurred over a number
of years; however, no assurance can be given that future regulatory action
regarding soil or ground water at the Company's facilities, as well as continued
compliance with environmental requirements, will not require the Company to
incur significant costs that may have a material adverse effect on the Company's
financial condition and results of operations.
The Company has sought to reduce the impact of costs arising from or
related to actual or potential environmental conditions at the BarTech
Facilities caused or created by Bethlehem or its predecessors in title and
attributable to the period in which the Bethlehem BRW Division or its
predecessors operated such facilities through the Company's contractual
arrangements with Bethlehem. Pursuant to such arrangements, Bethlehem has agreed
to indemnify the Company for such costs by limiting the Company's potential
exposure to any such damages incurred (i) through December 1996, to 50% of the
first $2.0 million in damages, or $1.0 million, and (ii) thereafter, to 50% of
the first $10.0 million of damages, or $5.0 million in the aggregate. Although
several investigations of certain past or present environmental conditions at
the BarTech Facilities have been conducted by or on behalf of Bethlehem
66
<PAGE>
and certain regulatory agencies, the reports and results of which have been made
available to the Company, an in-depth, environmental review of the BarTech
Facilities to determine the potential scope, if any, of required remediation at
such facilities has not been conducted by or on behalf of the Company. There can
be no assurance that Bethlehem will meet its obligations under the
indemnification arrangements or that there will not be future contamination for
which the Company might be fully liable and that may require the Company to
incur significant costs that could have a material adverse effect on the
Company's financial condition and results of operations.
Bethlehem is conducting remedial activities on a small portion of the
Lackawanna Facility historically used for mill scale storage, which was
identified by the U.S. Environmental Protection Agency (the 'EPA') pursuant to
an Administrative Order on Consent issued in August 1990 as requiring certain
corrective action. Bethlehem currently awaits approval of the Remedial Work Plan
for the former mill scale storage area it submitted to the EPA in September
1994. Bethlehem is ultimately liable for compliance with the Administrative
Order on Consent and the Company believes that Bethlehem is likely to fulfill
these obligations, although there can be no assurance such will occur.
In August 1995, B&L received a request for information from the EPA
pursuant to section 104(e) of CERCLA with respect to a federal investigation and
potential remediation of two hazardous waste treatment sites in Kansas City,
Kansas and Kansas City, Missouri. In 1985, B&L shipped ten capacitors from its
Harvey, Illinois facility to these sites for disposal. These capacitors held
approximately 88 gallons of oil that may have contained polychlorinated
biphenyls. At this time, B&L has not received any further correspondence from
the EPA and has not been named as a potentially responsible party under CERCLA
at either of these sites; however, there can be no assurance at this time that
further action by the EPA will not occur. The Company has not estimated the
amount of liability it may incur in connection with this disposal. The Company
understands that the EPA has identified approximately 1,300 customers of these
treatment sites, which operated for several years. While no assurances can be
given, the Company does not believe that B&L's liability relating to these sites
will have a material adverse effect on the Company's financial condition and
results of operations.
Various Federal and State and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos containing materials
('ACMs'). Such laws and regulations may impose liability for the release of ACMs
and may provide for third parties to seek recovery from owners or operators of
facilities at which ACMs were or are located for personal injury associated with
exposure to ACMs. The Company is aware of the presence of ACMs at its
facilities, but it believes that such materials are in acceptable condition at
this time. The Company believes that any future costs related to remediation of
ACMs at these sites will not be material, either on an annual basis or in the
aggregate, although there can be no assurance with respect thereto.
The Company has filed for, or is in the process of filing for, and expects
to receive, all necessary environmental permits to construct and operate the
improvements that are a part of Phase One of its modernization and expansion
plan. No action has been taken to date with respect to Phase Two of the plan.
Environmental operating permits for the BarTech Facilities are currently in
place or are expected to be issued in due course in connection with start-up in
accordance with applicable regulatory procedures. Based on discussions held with
appropriate government agencies, the Company foresees no material issues or
problems in connection with the issuance of such permits, although there can be
no assurance that such permits will be issued on a timely basis or at all or
will not require the Company to incur significant costs that could have a
material adverse effect on its financial condition and results of operations.
CDSC, B&L's Canadian subsidiary, is also subject to Canadian federal,
provincial, regional and municipal environmental laws and regulations B&L
believes it is currently in substantial compliance with all applicable material
environmental laws and regulations and does not anticipate any substantial
additional capital expenditures for environmental control facilities in the near
future. However, there can be no assurance that the Company will not be required
to incur significant costs related to
67
<PAGE>
environmental compliance that could have a material adverse effect on the
Company's financial condition and results of operations.
Some of the steel processing operations presently conducted by BLSC
commenced over 100 years ago by the predecessors of BLSC and included properties
which over the years were sold by BLSC's predecessors. Given the nature and
geographic diversity of its current and its predecessors' former operations, it
is possible that claims could be asserted against B&L in the future based upon
current property ownership of B&L and by historical operations by its
predecessors. However, B&L has received an indemnification from the former owner
and operator of such properties for certain environmental claims or liabilities
relating to activities at B&L's Harvey and Batavia, Illinois and Medina, Ohio
properties prior to October 23, 1984, when BLSC succeeded to ownership of such
properties, and for certain environmental claims or liabilities relating to
properties that were sold by BLSC's predecessors. There can be no assurance that
such former owner and operator will meet its obligations under the
indemnification arrangements or that there will not be future contamination for
which the Company might be fully liable and that may require the Company to
incur significant costs that could have a material adverse effect on the
Company's financial condition and results of operations.
While the Company believes that the foregoing environmental matters will
not, individually or in the aggregate, have a material adverse impact on the
Company's financial condition or results of operations, there can be no
assurance to that effect.
LEGAL PROCEEDINGS
B&L is a party to an action by certain of its former stockholders, filed in
September 29, 1995 in connection with the merger agreement between BarTech and
B&L, which claimed, among other things, that the consideration to be paid
pursuant to the merger was unfair to B&L's stockholders. To the extent such
action continues to be pending, the Company intends to defend the lawsuit
vigorously.
Except as described under '--Environmental Compliance,' the Company is not
involved in any other proceedings which, either individually or in the
aggregate, may have a material adverse effect on the financial condition or
results of operations of the Company.
68
<PAGE>
PROJECTIONS
UNCERTAINTY OF PROJECTIONS
The Company was the sole preparer of the projected financial information
(the 'Projections') set forth herein, which are based on the Company's estimated
results of operations for the Company under the hypothetical assumptions
described in '--Assumptions.' These Projections are qualified in their entirety
by and should be read in conjunction with the information and financial
statements (and notes thereto) included in this Prospectus. Neither Arthur
Andersen LLP, independent public accountants for the Company, nor any other firm
has examined or provided any other form of assurance on the Projections and,
consequently, neither Arthur Andersen LLP nor any other firm has reviewed or
assumes any responsibility for the Projections. The Projections necessarily are
based upon numerous estimates and assumptions, including that the Company will
restart its idle Johnstown Facility and complete its modernization and expansion
plan on a timely basis and on the cost basis forecasted by the Company and, as a
new market entrant, successfully re-enter the hot rolled engineered bar market
and obtain customers on a timely basis. These estimates and assumptions are
inherently subject to significant business, economic and competitive
uncertainties, contingencies and risks, many of which are beyond the control of
the Company, and upon assumptions with respect to future business decisions and
conditions that are likely to change. See 'Risk Factors.' The Projections and
actual results will vary and those variations may be material. Financial
projections necessarily are speculative in nature and one or more of the
assumptions underlying such projections may prove not to be valid. This
Prospectus should not be regarded as a representation by the Company or any
other person that the Projections will be achieved. Noteholders considering
tendering their Notes in exchange for Exchange Notes are cautioned not to place
undue reliance on the Projections.
GENERAL
The Company does not as a matter of course publicly disclose projected
financial information but is providing the projected financial information
included in this Prospectus in connection with the Exchange Offer. The
Projections were prepared by the Company and are qualified by and subject to the
assumptions set forth below and the other information contained herein. In
addition, Arthur Andersen LLP, the independent certified public accountants for
the Company, has neither compiled nor examined the Projections and, accordingly,
does not express any opinion or any other form of assurance with respect to,
assumes no responsibility for, and disclaims any association with, the
Projections. No independent expert has reviewed the Projections and no firm
other than the Company assumes any responsibility for the Projections. The
Projections should be read together with the information contained under the
headings 'Risk Factors,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and 'Business' and the financial statements
and related notes thereto of BarTech and B&L included in this Prospectus.
Upon consummation of the Exchange Offer, the Company will become subject to
the informational requirements of the Exchange Act and, in accordance therewith,
will file periodic reports and other information with the Commission relating to
the Company's business, financial statements and other matters. Such filings
will not include projected financial information. The assumptions described
herein constitute all the assumptions that the Company believes are significant
to the Projections. If the Company is substantially delayed or is unsuccessful
in completing the Company's modernization and expansion plan or selling and
shipping the amount of product assumed in the Projections, the projected
financial information will be adversely affected.
THE PROJECTIONS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT,
WHILE PRESENTED WITH NUMERICAL SPECIFICITY AND CONSIDERED REASONABLE BY THE
COMPANY WHEN TAKEN AS A WHOLE, INHERENTLY ARE SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY, AND ARE BASED UPON SPECIFIC ASSUMPTIONS WITH
RESPECT TO FUTURE BUSINESS DECISIONS, SOME OR ALL OF WHICH WILL CHANGE.
PROJECTIONS ARE NECESSARILY SPECULATIVE IN NATURE AND IT CAN BE
69
<PAGE>
EXPECTED THAT THE ASSUMPTIONS OF THE PROJECTIONS WILL NOT PROVE TO BE VALID OR
WILL VARY FROM ACTUAL RESULTS. ACCORDINGLY, THE PROJECTIONS ARE ONLY AN
ESTIMATE. ACTUAL RESULTS WILL VARY FROM THE PROJECTIONS AND THE VARIATIONS MAY
BE MATERIAL. CONSEQUENTLY, THIS PROSPECTUS SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON OF RESULTS THAT WILL ACTUALLY
BE ACHIEVED. NOTEHOLDERS CONSIDERING TENDERING THEIR NOTES IN EXCHANGE FOR
EXCHANGE NOTES ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE PROJECTIONS.
METHODOLOGY
Revenues were projected based on the Company's estimates of volumes of
shipments of the Company's products, changes in the Company's product mix and
pricing assumptions for the projection period. Projected costs were developed by
the Company after reviewing each process component of the Company's operations
such as scrap and other raw material purchasing, steelmaking, casting, billet
conditioning and product finishing, as well as its corporate functions such as
sales and marketing, human resources, and accounting and finance, among others.
The financial projections pertaining to B&L were prepared by management of
B&L without regard to the integration of BarTech and B&L and do not take into
account, for example, any adjustments in volumes and prices of B&L's raw
materials, any changes in product mix (and related margin impact) and any cold
finished bar product marketing and sales opportunities (including new accounts)
not currently available to B&L on a stand-alone basis but which could be
available to a vertically integrated producer. There can be no assurance that
any of these benefits or other benefits referred to herein will be realized or,
if realized, that such benefits will not be offset by other changes in actual
results from projected results. It should be noted that the Projections for
BarTech and B&L may, therefore, contain different assumptions, such as B&L's
projected purchase prices of certain hot rolled engineered bar products
exceeding BarTech's projected selling prices for such products.
PROJECTION PERIODS PRESENTED AND FISCAL 1996 PLAN
The Company's Projections include periods commencing with fiscal 1997 and
ending with fiscal 2000. The Company restarted the Lackawanna Facility in
February 1996 and began producing and shipping hot rolled engineered bar
products on a limited basis. BarTech currently expects to commence commercial
steelmaking operations at the Johnstown Facility in the summer of 1996. It is
assumed that the Company will achieve a manufacturing and financial operating
run rate prior to September 30, 1996 consistent with that projected for fiscal
1997. The Company believes that, if the planned restart of the Johnstown
Facility is delayed or the Company realizes other problems or delays during the
commencement or ramp-up of its manufacturing operations beyond those already
included in its fiscal 1996 plan, it will have sufficient flexibility to reach
its targeted run rate for fiscal 1997. However, the Company's actual production
schedule and operating results in fiscal 1996 and fiscal 1997 will depend upon a
variety of factors, many of which may be unforeseen or beyond the control of the
Company. See '--Assumptions.'
As of December 31, 1995, after giving effect to the Recapitalization, the
Company would have had significant available liquidity to proceed with its
fiscal 1996 plan including (i) $20.0 million from the proceeds of the
Recapitalization to pre-fund Phase Two of the Company's modernization and
expansion plan, (ii) $18.5 million from the proceeds of the Recapitalization in
the Interest Escrow Account to pre-fund the first three interest payments on the
Notes and the Exchange Notes and (iii) approximately $30.5 million of unused and
available borrowings under the New Credit Agreement (approximately $4.4 million
in face amount of letters of credit was issued and outstanding on the Issue
Date). Furthermore, the Company projects the borrowing base for available
borrowings will grow throughout the projection period. The Company believes its
liquidity position will be sufficient to execute and complete its modernization
and expansion plan, restart its operations at the Johnstown Facility, integrate
the operations of BarTech and B&L, effect its market re-entry strategy and meet
its other capital requirements, although there can be no assurance that the
Company will be able to do so.
70
<PAGE>
ASSUMPTIONS
The Projections assume that the Company achieves its business objective of
operating as a low cost producer as a result of the modernization and expansion
of certain of its facilities and the attractive support arrangements related to
the operations thereof it has been able to secure, including its collective
bargaining agreement and energy and financing cost arrangements. The Projections
are based on certain general assumptions regarding the business of the Company,
including the following: (i) the combination bloom/billet caster currently being
installed by the Company will become operational in the summer of 1996; (ii) the
Company will be successful in developing steelmaking and casting practices to
produce semi-finished billets and hot rolled engineered bar products that meet
customer product specifications; and (iii) the Company will be successful in
penetrating its target markets to achieve its projected market shares over the
projection period.
When formulating the Projections, the Company assumed the compounded effect
of both an overall economic recession and a resulting downturn in the market
beginning in fiscal 1997 for both the hot rolled and the cold finished
engineered bar product market segments. The Company has also assumed that its
market re-entry strategy will require substantial pricing discounts to current
market price levels in order to ensure that it achieves its anticipated market
share. See '--Prices.' The Company believes that the impact on the Company's
business of any market downturn during the projection period will be less than
that of past economic downturns on producers of engineered bar products due to
macroeconomic changes that have positively affected the engineered bar market
segment, including a shifting of foreign manufacturers and their parts suppliers
to North American-based manufacturing facilities and more favorable currency
exchange rates.
B&L was one of the largest purchasers of hot rolled engineered bar products
from the Bethlehem BRW Division prior to its shut-down in 1992. B&L purchased
195,000 tons and 225,000 tons of hot rolled bars in fiscal 1994 and fiscal 1993,
respectively. In fiscal 1995, B&L purchased 246,000 tons of hot rolled bar
products and B&L is assumed to purchase approximately 245,000 tons of hot rolled
bar products per year throughout the projection period. The Company estimates
that BarTech will have the production capability to sell to B&L up to
approximately 115,000 tons of hot rolled engineered bar products annually upon
the successful completion of Phase One, which involves replacing the former
ingot based steel production process at the Johnstown Facility with a flexible
combination bloom/billet continuous casting process. The Company also estimates
that BarTech will have the production capability to sell to B&L up to
approximately 180,000 tons of such products annually upon the completion of
Phase Two, which will provide bloom processing and direct charged large sized
bar finishing capabilities. However, the Projections assume sales of 90,000 tons
of hot rolled engineered bar products annually by BarTech to B&L from fiscal
years 1997 through 2000.
The B&L Acquisition provides the opportunity to, and the Company expects
to, realize cost savings related to the planned consolidation of certain
corporate functions, which savings are projected to be approximately $3.0
million annually. Such cost savings are expected to result from the
consolidation of administrative and financial, sales, transportation, insurance
and pension expenses of BarTech and B&L and are expected to be realized by April
1997.
Prior to the Bethlehem BRW Division's shut-down in 1992, Bethlehem operated
the BarTech Facilities on a substantially different basis than the Company
expects to operate these facilities. For example, Bethlehem used an ingot based
rather than a continuous casting steelmaking process, did not have cold
finishing capabilities, and had a higher overall cost structure. Based on
financial information provided by Bethlehem to the Company in connection with
the Company's acquisition of the BRW Assets, the Company believes that the
Bethlehem BRW Division had a significant operating loss in calendar 1991 but
would have had an operating profit had Bethlehem replaced the Bethlehem Labor
Agreement with the first year terms of BarTech's new collective bargaining
agreement with the USWA (including a significant reduction in the size of its
labor force as a result of reduced job classifications) and been able to
eliminate its past pension and retiree medical costs and corporate overhead for
the entire year on the terms of Bethlehem's agreement with the Company. The new
collective bargaining agreement does not assure that the Company will achieve
operating profitability at the BarTech
71
<PAGE>
Facilities, but it was an important element of the Company's decision to acquire
the BRW Assets and its strategy to enhance profitability through its
modernization and expansion plan and other support arrangements.
In developing the Projections, the Company has made certain assumptions
relating to its business. The major assumptions pertaining to hot rolled and
cold finished bar markets, shipments, prices, operating strategy and costs,
selling, general and administrative expenses, cost savings, interest expense,
taxes, capital expenditures and liquidity are outlined below. The Projections
include a non-cash contribution expense in the Company's operating income
relating to the operation of its ESOP. This expense, which is projected to
remain constant throughout the projection period, has been assumed to equal the
estimated value of the shares on the Issue Date to be contributed to the ESOP.
The actual charge for the ESOP contributions will be equal to the estimated fair
market value of the shares anticipated to be released to participant accounts in
each fiscal year, subject to certain ERISA limitations. See 'Principal
Stockholders.' In addition, the Company did not take into account when
formulating the Projections the effect of unforeseeable events such as labor
disputes, new technologies or competitors, material changes in political or
economic conditions, changes in legislation or regulations, or any changes in
generally accepted accounting principles, the result of any of which alone or in
the aggregate may have a material effect on the Company's business, financial
condition, results of operations or prospects.
MARKETS
Hot Rolled Products. For calendar 1994, the Company estimates that the
total market for consumption of bar products in the United States was
approximately 16.9 million tons and that within the total bar market the
consumption of hot rolled engineered bar products in North America was
approximately 8.7 million tons. The Company believes that the engineered bar
market is a specialized niche segment of the overall steel market, which has
benefitted from, among other factors, (i) the increased use of engineered bars
in forming processes for parts that had been previously produced by other types
of metal processing, such as casting, (ii) increased domestic sourcing of
previously imported parts, and (iii) increased construction of manufacturing
operations and facilities in North America, as a number of component
manufacturing operations have been built or are being built in North America by
both domestic and foreign-based manufacturers. These new production facilities
include various auto parts manufacturing operations, for applications such as
crankshafts, coil springs, cam shafts, universal spiders, transmission parts,
axles and four wheel drive components, and other manufacturing operations in the
heavy industry and machining sectors, including many new hot and cold forging
facilities. Although the Company does not necessarily believe that an economic
recession will occur during the projection period, the Projections assume for
conservative purposes an overall economic recession in the hot rolled engineered
bar market starting in fiscal 1997 and ending in fiscal 1999. However, the
Projections assume that the outlook for the hot rolled engineered bar market for
the one to two year balance of the projection period will be favorable since the
Company believes that demand will continue to rise while the operating capacity
at existing facilities, which are currently operating at historical highs, will
continue to be limited relative to demand.
Cold Finished Products. For fiscal 1995, the Company estimates that
consumption of cold finished bar products in North America was approximately 2.4
million tons. Total consumption of cold finished bar products is, like the
overall steel market, expected to be closely tied to overall capital goods
spending levels and subsequent demand for cold finished bar products by
machinery and equipment manufacturers. The Projections assume an overall
economic recession in the cold finished bar market starting in fiscal 1997;
however, the Company believes that there will be a relatively steady demand for
cold finished bar products for the balance of the projection period.
Engineered Bars from Cast Billets (Phase One). The Company projects that
its shipments of hot rolled engineered bar products that are produced from
direct cast billets, the primary product of BarTech upon completion of Phase
One, will increase steadily over the projection period as the Company
re-establishes its hot rolled engineered bar market position. The Company's
market re-entry strategy is to establish market share by initially focusing on
lower quality hot rolled engineered bar market segments
72
<PAGE>
in which it believes it will have a cost advantage over its principal
competitors and in which initial penetration will be quicker due to fewer
pre-qualification requirements. As market penetration is gained, the Company
plans to selectively pursue higher quality hot rolled engineered bar market
segments that have potentially higher profit margins. The Company has contacted,
and has been contacted by, many potential customers of hot rolled engineered bar
products. In order to help establish its presence in the hot rolled engineered
bar market and to avoid simultaneous start-ups of its steelmaking and bar
rolling facilities, the Company restarted the Lackawanna Facility in February
1996, producing lower quality engineered bar products utilizing semi-finished
billets produced by other steelmakers.
In addition to its commercial production, in fiscal 1996 the Company will
produce trial heats of hot rolled engineered bar products to be shipped to
customers for testing and analysis in connection with pre-qualification of
products targeted for sale in fiscal 1997 and fiscal 1998, which is required for
the Company to become an approved supplier for such customers. The Company has
projected that pre-qualification of its engineered bar products rolled from cast
billets will generally take from three to 12 months depending on the products
and customers the Company intends to pursue. The Projections assume that the
Company has completed most pre-qualification of its billet cast engineered bar
products by the end of fiscal 1997 and has included such products in its
projected sales for the remainder of the projection period.
Engineered Bars from Cast Blooms (Phase Two). Additional incremental
growth in the Company's overall shipments is expected after commencement of
production of hot rolled engineered bar products rolled from cast blooms upon
completion of Phase Two by the end of 1997. Initial shipments of the Company's
higher quality hot rolled engineered bar products are expected to be shipped and
pre-qualification trial heats of such products rolled from cast blooms are
expected to begin during fiscal 1997. The Company expects that its volume of
shipments will gradually increase through fiscal 1997 as the Company satisfies
product pre-qualification requirements. The first full year of shipments of
bloom cast engineered bar products will be in fiscal 1998, by which time the
Company expects to have qualified many such products with most of its customers
that require pre-qualification, including its targeted domestic automotive
accounts. However, the Company is also targeting accounts with longer
pre-qualification requirements, such as many North American-based Japanese and
European automotive original equipment manufacturers and their parts suppliers.
Additional shipments to accounts requiring longer pre-qualification periods are
projected to increase gradually, with the majority of such shipments projected
to occur toward the end of the projection period.
Semi-finished Billet Products. The Company projects that its shipments of
hot rolled semi-finished billet products to other engineered bar and high
quality rod producers will remain fairly constant over the projection period.
The Company has projected that shipments of its higher quality semi-finished
products rolled from cast blooms will increase at modest levels after its first
full year of shipments of such products in fiscal 1998, due to a projected
increase in demand for such products used in the production of higher quality
engineered bar and rod products and the presence of few competitors that are
expected to possess such production capabilities.
Cold Finished Products. The following table represents the Company's
shipment projections for its cold finished bar products:
PROJECTED COLD FINISHED BAR SHIPMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1998 1999 2000
---- ---- ---- ----
(IN THOUSANDS OF TONS)
<S> <C> <C> <C> <C>
Cold Finished Bar Shipments.... 227 227 229 232
</TABLE>
The Company projects that its shipments of cold finished bar products in
fiscal 1996 will be approximately 230,000 tons, assuming maintenance of B&L's
current estimated North American market share and a steady overall demand for
cold finished bar products. The Company expects that cold finished bar product
shipments will remain fairly constant over the projection period.
73
<PAGE>
PRICES
The following table represents the Company's pricing projections for its
hot rolled engineered and cold finished bar products:
PROJECTED HOT ROLLED AND COLD FINISHED BAR PRICES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
1997 1998 1999 2000
---- ---- ---- ----
(AVERAGE SELLING PRICE PER TON)
<S> <C> <C> <C> <C>
Hot Rolled Engineered Bars..... $451 $468 $495 $518
Cold Finished Bars............. 712 705 722 740
</TABLE>
Hot Rolled Engineered Bars. The Company intends to price its hot rolled
engineered bar products at market prices. However, for purposes of the
Projections, the Company has assumed that its initial prices will be below those
it expects for the hot rolled engineered bar market in order to achieve re-entry
into the market. Specifically, the Company has assumed discounts per product
averaging 3% to 5% of current market prices throughout the projection period. In
addition, the Company further reduced its assumed selling prices to reflect the
additional potential effects of an overall economic recession beginning in
fiscal 1997 and to reflect its market re-entry strategy. These additional
discounts amount to an approximate 10% discount to market prices in fiscal 1997
and fiscal 1998 and are over and above the 3% to 5% pricing discounts already
assumed in the Projections. The Company believes that the cumulative effects of
these discounts to current pricing levels, which in some cases amount to over
$75 per ton, is adequate to effectively re-enter the market. The Company expects
that in some instances it may be able to sell many of its products at prevailing
market prices because of, among other things, the Company's expected product
quality as a result of its technological capabilities, including vacuum
degassing, a ladle metallurgy station, a walking beam reheat furnace, automatic
billet inspection and conditioning, bar section control, heavy weight coil
capability, and its ability to roll a wide variety of bar shapes and sizes,
including many products that command higher prices in the market.
The Company believes that the average selling price per ton for its hot
rolled engineered bar products will increase over the projection period mainly
due to improvement in its product mix, taking into effect an overall economic
recession in the market starting in fiscal 1997. The improvement of the
Company's product mix is primarily attributable to increased sales of higher
quality hot rolled engineered bar products with higher selling prices after
completion of Phase Two of the Company's modernization and expansion plan.
Higher average pricing for its products in fiscal 1999 and fiscal 2000 also
reflects the Company's expected completion of pre-qualification of products with
customers requiring product and process qualification and a shift to shipping
more higher quality engineered bar products over the projection period.
Cold Finished Bars. The North American cold finished bar market is highly
fragmented and is characterized by competitive pricing. Hot rolled bars, which
are B&L's primary raw material, historically have constituted approximately 80%
of the cost of goods sold of B&L's cold finished bar products. Cold finished bar
producers attempt to maintain a consistent spread between raw material costs and
cold finished bar selling prices, and therefore prices of cold finished bar
products tend to move in tandem with hot rolled bar prices. The Company will
attempt to maintain a consistent spread between its cost of raw materials and
its cold finished bar product selling prices. However, the Company has assumed
pricing discounts of 3% to 5% to current market price levels.
The average selling prices for the Company's cold finished bar products
reflect the Company's expectation that the cold finished bar market will
experience an overall economic recession starting in fiscal 1997 and will not
fully recover until fiscal 2000. Specifically, the recession results in margin
reduction, as compared with current market prices, of approximately $20 per ton
for the first two years of the projection period, $10 per ton in fiscal 1999 and
a return to current market levels in fiscal 2000. Prices in the cold finished
bar market generally follow trends in the overall steel market and are subject
74
<PAGE>
to changes in overall capital goods spending levels and subsequent demand for
cold finished bar products by machinery and equipment manufacturers.
OPERATING STRATEGY AND COSTS
Hot Rolled Operations. The following table highlights select significant
cost assumptions for scrap, yield, electricity, labor and electrodes, which
collectively represent approximately 65% of the average cost per finished ton of
the Company's hot rolled engineered bar products, and further information is
provided for each assumption as appropriate:
PROJECTED ENGINEERED BAR AND
SEMI-FINISHED PRODUCT KEY PERFORMANCE ASSUMPTIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------
1997 1998 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
PERFORMANCE ASSUMPTIONS
Tons produced (in thousands)(a)......... 375 575 660 705
Tons shipped (in thousands)............. 365 550 650 700
Scrap (average cost per gross ton)...... $ 148 $ 152 $ 157 $ 162
Net average finished bar yield (cast
billet)............................... 83.3% 84.0% 84.2% 84.3%
Melting electricity cost (per charged
ton).................................. $15.36 $15.27 $15.18 $14.96
Head count (at end of period)........... 397 561 631 639
Man-hours per ton (shipped)............. 2.26 2.12 2.02 1.90
Total employment cost (per hour)........ $16.25 $16.50 $21.00 $23.00
Electrode cost (per charged ton)........ $ 9.09 $ 8.90 $ 8.53 $ 8.45
Average cost per finished ton........... $ 387 $ 388 $ 390 $ 395
</TABLE>
- ------------------
(a) Includes amounts to be added to inventory.
Scrap. The Company projects that its cost of ferrous scrap metal will
reflect general market conditions for this commodity as well as unit consumption
levels required by the Company's projected hot rolled product mix. The Company
has assumed an average scrap cost of $140 per gross ton in fiscal 1996 given its
projected product mix. The Company believes that average scrap costs for an
equivalent product mix over the past five years have ranged from approximately
$98 per gross ton to as high as approximately $158 per gross ton, and as of
March 22, 1996, would have been approximately $139 per gross ton. The Company
projects its average price of scrap in fiscal 1997 to increase approximately
5.7%, with 2.7% of the increase due to the shift of the Company's hot rolled
product mix to higher quality bloom cast product and the remaining 3.0%
attributable to inflation. During the balance of the projection period, the
Company has assumed a 3.0% per year average scrap price increase due mainly to
inflation.
During periods of scrap price escalations, the steel industry historically
has sought to maintain profit margins and pass along increased raw material
costs to customers by means of scrap metal surcharges based on increases in the
price of scrap metal above certain levels. The Company plans to limit the impact
of increases in its scrap metal costs by charging certain of its customers a
scrap metal surcharge, although there can be no assurance that this will be the
case. The Company will attempt to take advantage of its access to East Coast
scrap markets, which historically have sold scrap at lower prices than the
Chicago, Pittsburgh and other Midwest scrap markets, which are subject to higher
demand from steelmakers located in the Midwest and the South. The Company has
not included in the Projections any scrap cost savings that might result from
utilizing East Coast scrap markets, nor are savings that might result from
improved furnace, caster and bar mill practices that would allow the use of less
expensive grades of scrap.
Net Average Finished Bar Yield. The Company's projected net average
finished bar yield for its hot rolled engineered bar products represents a
composite of several individual process yield
75
<PAGE>
assumptions including: (i) scrap to liquid steel, (ii) liquid steel to cast
bloom or billet, and (iii) cast bloom or billet to finished bar. The Company
believes that it can achieve a net average finished bar yield greater than 85.0%
based on a variety of factors, including its projected product mix, volume and
industry averages for similar operating scenarios and equipment. The Company has
initially assumed net average finished bar yield of 83.1% in fiscal 1996 and
83.3% in fiscal 1997, its first full year of operations, which incorporates the
Company's initial low volume production levels and the potential time required
to realize the expected efficiencies of the Company's projected casting
practices. Improvements in net average finished bar yield over the projection
period reflect expected improvements in caster operating practices and related
production efficiencies as the Company produces higher volumes of product. The
Company will pursue additional opportunities for improved yields, including the
Company's intention to utilize continuous-continuous casting practices.
Melting Electricity Cost. The Company has projected its melting operations
electric costs measured as dollars per charged ton, based on the rates it
expects to be charged by its Johnstown, Pennsylvania and Lackawanna, New York
electric suppliers. The Company expects that its average costs per charged ton
will be reduced over the projection period mainly due to improving efficiency of
its melting furnace operation as a result of increased operating shifts, which
are directly related to expected higher volume levels over such period. In
fiscal 1996, the Company has assumed certain inefficiencies relating to the
restart of the Johnstown Facility steelmaking operations and the intermittent
operations resulting from its initial low volume steel production levels. This
is projected to result in a power consumption of approximately 496 KWH per
charged ton. As increased volumes are produced, the Company expects to improve
power consumption efficiency. Based on published information from the American
Institute of Mining, Metallurgical and Petroleum Engineers ('AIME'), the Company
has estimated that the average power consumption rates for electric
furnace-based engineered bar producers Republic Engineered Steels, Inc., North
Star Steel Company (Monroe, Michigan), Quanex Corporation (Mac Steel), The
Timken Company, Copperweld Steel Co. and Inland Steel Industries Inc. was 461
KWH per charged ton in calendar 1994.
Labor. The Company has projected its hot rolled operations staffing levels
and total employment cost per hour based on the terms of BarTech's new
collective bargaining agreement with the USWA. The Company has assumed that it
will incur additional labor costs resulting from the initial operations of the
BarTech Facilities and the gradual process to fully implement the Company's
projected steelmaking practices in its caster operations in fiscal 1996. The
Company's expected improvement in man-hours per ton of product shipped over the
projection period results from expected efficiencies in the Company's operations
as labor productivity improves and volumes increase. In the period fiscal 1998
through fiscal 2000, the Company believes that improvements in labor
productivity will be achieved as larger sized and higher quality engineered bar
products are rolled from direct charged blooms, which are expected to require
significantly fewer man-hours per ton to produce as compared with the Company's
other hot rolled engineered bar products.
Electrode Cost. The Company has projected that the cost of the 28"
diameter electrodes utilized on its melting furnaces at the Johnstown Facility
will increase by $0.10 per pound in each of fiscal 1997 and fiscal 1998 and by
$0.05 per pound in each of fiscal 1999 and fiscal 2000 from estimated fiscal
1996 levels. The Company has estimated higher than average electrode consumption
in fiscal 1996 due to the intermittent nature of operations resulting from low
volume steel production levels. As volume increases and melting operations
become more efficient, consumption of furnace electrodes is assumed to improve
to 6.1 pounds per charged ton in fiscal 1997, 5.6 pounds per charged ton in
fiscal 1998, 5.2 pounds per charged ton in fiscal 1999 and 5.0 pounds per
charged ton by fiscal 2000. AIME's study of international industry-wide electric
furnace operations for calendar 1993, the most recent year for which such
information is available to the Company, estimated that industry consumptions
generally ranged from 3.6 to 7.1 pounds per charged ton.
Cold Finished Operations. The costs of hot rolled bar products, the raw
material for processing cold finished bar products, historically has represented
approximately 80% of the average cost of goods sold of B&L's cold finished bar
products. Labor and other operating costs have been assumed for the Projections
to remain relatively constant over the projection period. The Company expects
that its cost
76
<PAGE>
of hot rolled bar products, which will reflect general hot rolled bar market
conditions as well as unit consumption levels as required by the Company's
projected cold finished bar product mix, will not vary significantly and will
remain fairly constant over the projection period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company plans to decentralize decision making and create accountability
for the Company's results to employees at all levels of the organization. For
purposes of the Projections, the Company has allocated many overhead costs,
including quality assurance, production planning, human resources, purchasing,
plant services, management information systems, real estate taxes and insurance
costs, in the Company's cost of goods sold. The Company believes that many large
steelmakers, including many of its competitors, allocate such costs in their
selling, general and administrative ('SG&A') expenses and not in their costs of
goods sold. In any case, the Company intends to operate with a lean corporate
staff and low SG&A expenses and, as a result, the Company's SG&A expenses as a
percentage of net sales is projected to be low as compared with that of many of
its competitors.
SG&A expenses for the Company's hot rolled engineered bar and semi-finished
products is projected to increase by approximately $300,000 from fiscal 1996 to
fiscal 1997 in order to support additional sales and operating requirements as
the Company enters the higher quality segment of the engineered bar product
market. The Company expects that fiscal 1998 SG&A expenses will continue to
increase by an additional $300,000 to a level of 1.7% of net sales. After the
Company completes its market reentry in 1998, SG&A expenses are expected to
remain level at $5.0 million in both fiscal 1999 and fiscal 2000.
The Company's cold finished operations have assumed SG&A expenses to remain
level throughout the projection period. The Company does not expect shipments
from cold finished operations to grow during this period and, therefore,
believes that related SG&A expenses can be controlled for the foreseeable
future. By fiscal 2000, the SG&A expenses of the cold finished operations as a
percent of net sales are expected to be 6.7%.
COST SAVINGS
The B&L Acquisition provides the opportunity to, and, while no assurances
can be given, the Company expects to, realize certain cost savings and operating
synergies, of which $3.0 million annually are reflected in the Projections,
which include certain immediate cost savings related to the planned
consolidation of certain corporate functions. Such cost savings are expected to
be realized from the consolidation of administrative and financial, sales,
transportation, insurance and pension expenses of BarTech and B&L and are
expected to be realized by April 1997. The Company intends to seek other
cost-saving opportunities not reflected in the Projections.
INTEREST EXPENSE
The Company has projected its interest expense net of interest income.
Interest income has been assumed to be earned at a rate equal to 4.5% per annum
on average available balances. The Projections use excess cash flow to build
cash balances and assume no unscheduled prepayments of principal on
indebtedness. Interest expense is projected at the applicable current interest
rates pursuant to the Company's credit facilities that are in place following
the Recapitalization. See 'Description of Other Indebtedness.'
FEDERAL AND STATE TAXES
The Projections assume that the Company will incur losses for tax purposes
in fiscal 1996 and fiscal 1997 primarily as a result of the recognition of tax
attributes that it received with the contribution of the BRW Assets from
Bethlehem, in addition to accelerated depreciation deductions. For tax purposes,
these net operating losses are assumed to be utilized to offset taxable income
in fiscal 1998.
77
<PAGE>
In addition to the losses discussed above, the Company had regular net
operating loss carryforwards for federal income tax purposes which were
generated before the Recapitalization. The Projections assume that these tax
attributes will be limited under Section 382 of the Internal Revenue Code of
1986 to an amount estimated by the Company to be $1.1 million.
As a result of the above, the Projections assume no cash payments for
income taxes for fiscal 1997 and cash payments of $2.0 million, $14.0 million
and $26.0 million in fiscal years 1998, 1999 and 2000, respectively.
CAPITAL EXPENDITURES
The Company's capital expenditure projections for its hot rolled operations
are based on the high end of the Company's spending assumptions for its
modernization and expansion plan as well as anticipated expenditures for
facility maintenance and other expenditures designed to enhance profitability.
See 'Business--BarTech Modernization and Expansion Plan.' The fiscal 1997
projection of $30.0 million in capital expenditures includes approximately $28.0
million for Phase Two and approximately $1.0 million for other expenditures for
its hot rolled operations. The Company projects $5.0 million for capital
expenditures for its hot rolled operations in each of fiscal years 1998 through
2000. The Company has a significant amount of spare parts, including caster
equipment, rolls, motors, transformers and other equipment on hand, which the
Company can utilize for future repairs and maintenance on its steelmaking,
combination bloom/billet continuous caster and rolling mill equipment. However,
the Company assigned no value to such spare parts in the Projections.
Furthermore, because BarTech is a start-up company without records of historical
usage of spare parts, the Company cannot give a reliable estimate of how long
such spare parts can be utilized.
The Company's cold finished operations require minimal levels of capital
expenditures. The Company has projected cold finished operations capital
expenditures to be $1.0 million per fiscal year. The Company's cold finished
operations required capital expenditures of $2.1 million, $1.9 million and $1.6
million for 1995, 1994 and 1993, respectively. These expenditures reflect
increased outlays relating to the one-time project costs for the installation of
computer systems.
78
<PAGE>
PROJECTED FINANCIAL INFORMATION(a)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------
1997 1998 1999 2000
------ ------ ------ ------
(DOLLARS IN MILLIONS AND TONS IN
THOUSANDS)
<S> <C> <C> <C> <C>
Net tons shipped--BarTech............... 365 550 650 700
Net tons shipped--B&L................... 227 227 229 232
INCOME STATEMENT DATA:
Net sales--BarTech...................... $164.6 $257.6 $322.1 $362.9
Net sales--B&L.......................... 164.0 162.4 167.9 173.7
------ ------ ------ ------
Total................................. 328.6 420.0 489.9 536.6
Gross profit--BarTech................... 23.5 44.0 68.6 86.8
Gross profit--B&L....................... 17.2 16.3 18.7 21.8
------ ------ ------ ------
Total................................. 40.6 60.2 87.2 108.6
SG&A expenses--BarTech.................. 4.2 4.5 5.0 5.0
SG&A expenses--B&L...................... 11.7 11.7 11.7 11.7
------ ------ ------ ------
Total................................. 15.9 16.2 16.7 16.7
Cost savings............................ (3.0) (3.0) (3.0) (3.0)
ESOP contributions(b)................... 0.6 0.6 0.6 0.6
Depreciation and amortization........... 7.1 7.4 6.6 6.9
------ ------ ------ ------
Operating income........................ 5.4 20.1 39.0 66.4
Interest expense, net................... 18.4 19.7 19.1 17.2
Taxes................................... 0.3 7.6 19.1 28.5
------ ------ ------ ------
Net income applicable to Common
Stock(c).............................. $ 0.1 $ 10.5 $ 27.0 $ 40.6
------ ------ ------ ------
------ ------ ------ ------
BALANCE SHEET DATA:
Cash & cash equivalents................. $ 1.0 $ 1.0 $ 1.0 $ 11.4
Property, plant & equipment, net........ 107.2 114.0 113.6 112.9
Senior Secured Notes(d)................. 86.4 87.6 89.0 82.2
Total debt (less economic development
loans)(e)............................. 127.5 134.9 115.3 91.3
Total debt, net of cash & cash
equivalents........................... 166.4 170.2 146.8 108.6
Stockholders' equity (deficit).......... 22.1 32.6 59.6 100.2
OTHER DATA:
EBITDA(f)............................... $ 27.7 $ 47.0 $ 73.5 $ 94.9
Capital expenditures.................... 30.0 14.0 6.0 6.0
EBITDA to interest expense, net(g)...... 1.51x 2.39x 3.86x 5.52x
</TABLE>
- ------------------
(a) Numbers may not add due to rounding.
(b) The ESOP contributions, which are projected to remain constant throughout
the projection period, have been assumed to equal the estimated value of the
shares at closing to be contributed to the ESOP. The actual charge for the
ESOP contributions will be equal to the estimated fair market value of the
shares anticipated to be released to participant accounts in each fiscal
year, subject to certain ERISA limitations.
(c) Represents net income applicable to Common Stock after deductions for
management and financial monitoring services and preferred stock dividends.
(d) Given the projection that in fiscal 1999 the Company would have $8.5 million
of Excess Cash Flow (as defined under 'Description of Notes--Certain
Definitions'), it is assumed that $8.5 million principal amount of Exchange
Notes are tendered for repurchase in fiscal 2000 pursuant to the
(Footnotes continued on next page)
79
<PAGE>
(Footnotes continued from previous page)
Excess Cash Flow Offer (as defined under 'Description of Notes--Certain
Definitions') in the same amount.
(e) The economic development loans have been excluded from the amount of total
debt due to the unique nature of the financing. The Company believes that
this is a more useful amount to an investor for understanding the cost of
capital and future capital requirements of the Company.
(f) EBITDA represents the earnings of the Company before income taxes, net
interest expense, depreciation and amortization and other noncash items
reducing net income. EBITDA is not a measure of financial performance under
GAAP. Accordingly, it does not represent net income or cash flows from
operations as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. As a result, EBITDA should not
be considered as an alternative to net income as an indicator of operating
performance or to cash flows as a measure of liquidity. The Company has
included information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
(g) EBITDA to interest expense, net, excluding all non-cash interest associated
with any original issue discount, is projected to be 1.60x, 2.55x, 4.17x and
6.11x for the projected fiscal years 1997, 1998, 1999 and 2000,
respectively.
PROJECTED LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995 after giving effect to the Recapitalization on a
pro forma basis, the Company estimates it would have had approximately $70.1
million of liquidity, including approximately $39.6 million in cash and
approximately $30.5 million of net undrawn available funds under the New Credit
Agreement (approximately $4.4 million in face amount of letters of credit was
issued and outstanding on the Issue Date). The Company's liquidity primarily
will be from its $90.0 million New Credit Agreement, the availability of which
is based on an advance rate on accounts receivable and inventory. Because the
existing B&L Revolving Credit Facilities will be repaid at closing, the Company
initially will have availability based on B&L's existing accounts receivable and
inventory levels. As the Company's product shipments increase, its balance of
accounts receivable and inventory will increase its overall credit availability.
The following assumes prepayments of outstanding indebtedness pursuant to any
excess cash flow offer for the Exchange Notes. In addition, the Projections
assume that the New Credit Agreement, which matures four years after the Issue
Date, will be available to the Company under its current terms and conditions
throughout the projection period.
PROJECTED LIQUIDITY(a)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1998 1999 2000
------ ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Beginning cash balance..................... $ 27.4 $ 1.0 $ 1.0 $ 1.0
Net cash flow(b)........................... (26.4) 0.0 0.0 10.4
------ ----- ----- ------
Ending cash balance...................... 1.0 1.0 1.0 11.4
Borrowing base(c).......................... 66.7 79.8 84.9 87.1
Drawn New Credit Agreement(d).............. 32.6 38.6 17.4 0.0
------ ----- ----- ------
New Credit Agreement availability(c)..... 34.1 41.2 67.6 87.1
------ ----- ----- ------
Total cash & New Credit Agreement
availability(c)....................... $ 35.1 $42.2 $68.6 $ 98.5
------ ----- ----- ------
------ ----- ----- ------
</TABLE>
(Footnotes on next page)
80
<PAGE>
(Footnotes from previous page)
- ------------------
(a) Numbers may not add due to rounding. See also note (d) 'Projected Financial
Information' on the prior page.
(b) Net cash flow equals net income plus depreciation, amortization, deferred
taxes and ESOP contributions plus or minus changes in working capital minus
capital expenditures and changes in other liabilities including financing
proceeds and amortizations. The assumptions for the changes in working
capital are as follows:
<TABLE>
<CAPTION>
BarTech: Days Receivables Outstanding 40
<S> <C> <C>
Inventory Turns 4.7 (fiscal 1997)--5.5 (fiscal
2000)
Days Payable 44.1 (fiscal 1997)--34.0 (fiscal
2000)
B&L Days Receivables Outstanding 46.5
Inventory Turns 5.5-hot rolled bar
9.5-10.0 cold finished bar
Days Payable 40
Drawn Revolver: $32.6 million (fiscal 1997), $38.6 million (fiscal
1998), $17.4 million (fiscal 1999), $0.0 (fiscal 2000))
</TABLE>
(c) Reflects a borrowing base equal to accounts receivable and inventory at
advance rates of 73.0%, 71.4%, 69.0% and 66.7% for the fiscal years 1997,
1998, 1999 and 2000, respectively, subject to certain limitations. See
'Description of Other Indebtedness--The New Credit Agreement.'
(d) Excludes projected outstanding letters of credit of approximately $4.6
million throughout the projection period.
81
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORY
The current executive officers and directors of BarTech are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(a)
- ---------------------------- --- -----------------------------------------------
<S> <C> <C>
James R. Powers............. 60 President, Chief Executive Officer and Director
of BarTech
Denny Bozic................. 59 Executive Vice President and Chief Operating
Officer of BarTech
Birchel S. Brown............ 55 Senior Vice President--Operations/Quality of
BarTech
David L. Cunningham......... 61 Former Chief Commercial Officer of BarTech
Gregory H. Parker........... 62 Former President and Chief Executive Officer of
B&L
Anthony J. Romanovich....... 56 Senior Vice President of B&L
Paul J. Austgen............. 45 Vice President, Finance, Secretary and
Treasurer of B&L
Kenneth R. Brotman(b)(c).... 30 Secretary and Director of BarTech
David A. Stockman........... 48 Class B Director of BarTech
Mikael Salovaara............ 42 Class B Director of BarTech
Robert B. McKeon(b)(c)...... 41 Chairman and Director of BarTech
Thomas J. Campbell(b)(c).... 37 Director of BarTech
Edward N. Ney(b)............ 70 Director of BarTech
Harold A. Poling............ 70 Director of BarTech
Daniel R. DeVos(c).......... 53 Director of BarTech
Anthony Rainaldi............ 71 Director of BarTech
Buddy W. Davis(c)........... 65 Director of BarTech
</TABLE>
- ------------------
(a) BarTech is currently in the process of an executive search for a Chief
Financial Officer.
(b) Member of Compensation Committee.
(c) Member of Audit, Budget, and Finance Committees.
James R. Powers has served as President and Chief Executive Officer of
BarTech since October 1994 and has over 35 years experience in the steel
industry. Prior to joining the Company, from August 1991 until January 1994 he
served as the President and Chief Executive Officer of Sydney Steel Corporation,
and from August 1986 until May 1991, he served as President and Chief Operating
Officer of Seattle Steel Company. He served as President of the Hamilton
Specialty Bar Division of Slater Steel Inc. from July 1980 until July 1986. Mr.
Powers is also a director of American Metals Recovery.
Denny Bozic has served as Executive Vice President and Chief Operating
Officer of BarTech since November, 1994 and has over 30 years experience in
management, operations and engineering in metals and heavy manufacturing
industries. Prior to joining the Company, from June 1994 until October 1994 he
was engaged by Osnos & Company, a New York based crisis management consulting
firm, and from July 1992 until May 1994 he served as an independent consultant
to various steel companies. He served as President and Chief Operating Officer
of Tamper Corp., a heavy equipment manufacturer of railroad equipment, from
September 1988 until June 1992 and served as President and Chief Operating
Officer of the Freight Car Division of Bethlehem Steel Corporation from February
1986 until July 1988.
Birchel S. Brown has served as Senior Vice President, Operations/Quality of
BarTech since November 1994 and has over 30 years of experience in the bar steel
industry. Prior to joining the Company, from 1993 until 1994 he served as Vice
President/Division Manager for Florida Steel Corporation and from 1992 until
1993 he served as Manager for Westinghouse Corporation. He served in various
capacities with Inland Steel Corporation from 1966 until 1992, most recently as
Sales Manager.
David L. Cunningham served as Chief Commercial Officer of BarTech since
July 1995 and had over 35 years of sales and marketing experience in the steel
industry. Prior to joining the Company, from 1989 until 1995 he served as
Product and Market Manager of Inland Steel Bar Company, from
82
<PAGE>
1985 to 1988 he served as General Manager, Hot Rolled Bar Sales for LTV Steel,
and from 1960 until 1984 he served in various capacities with Republic Steel,
most recently as Manager of Bar Sales. He served on the Executive Committee of
the Cold Finished Steel Bar Institute from 1977 until 1979 and has served on
several committees of AISI and the Forging Industry Association. Mr. Cunningham
retired from the Company in June 1996 and was retained as BarTech's consultant.
Gregory H. Parker served as Chairman, President and Chief Executive Officer
of BLSC since October 1984 and held the same positions with B&L since its
formation in November 1988. Mr. Parker was also the Chief Executive Officer of
CDSC since May 1990 and was a director of CDSC from May 1990 until July 24,
1995. Mr. Parker resigned from the Company in June 1996.
Anthony J. Romanovich became Senior Vice President of B&L and BLSC in
October 1989. Mr. Romanovich served as Vice President, Commercial of B&L from
November 1988 to October 1989. From October 1984 through September 1989, Mr.
Romanovich served as Vice President, Commercial, of BLSC. Since October 1984,
Mr. Romanovich has served as a director of BLSC, and he has been a director of
B&L since November 1988.
Paul J. Austgen has served as Vice President, Finance, Secretary and
Treasurer of B&L and BLSC since October 1, 1995. From August 1995 through
September 1995, Mr. Austgen served as controller of B&L. Mr. Austgen served in
various capacities for Inland Steel Corporation from 1972 to 1994, most recently
as Treasurer and Chief Operating Officer of Inland Steel Administrative Service
Company from January 1992 to January 1994 and Director--Internal Audit from
January 1990 through December 1991.
Kenneth R. Brotman has served as Secretary and a director of BarTech since
September 1993. He has served as a partner of Veritas Capital Inc., a New
York-based merchant banking and private equity investment firm, since its
formation in 1992. Prior to that time, he was an associate at Bain Capital, a
Boston-based leveraged buy-out firm and was a principal member of Wasserstein
Perella Management Partners, Inc. a New York-based merchant banking fund, from
1988 to 1992. Mr. Brotman is also a director of HITCO Technologies Inc. and
Colorado West Transportation Co.
David A. Stockman was elected as a Class B Director of BarTech upon the
consummation of the Recapitalization. He is a Senior Managing Director of The
Blackstone Group L.P., with which he has been associated since 1988. Mr.
Stockman is also director of UCAR International Inc. and Co-Chairman of the
board of directors of Collins & Aikman Corporation.
Mikael Salovaara was elected as a Class B Director of BarTech upon the
consummation of the Recapitalization. He has been a Senior Managing Director of
The Blackstone Group L.P. since 1994. He was a general partner of Goldman, Sachs
& Co. from 1988 to 1991, has been a general partner of Greycliff Partners since
1991 and is also a director of Granite Broadcasting Corporation, Hadco
Corporation and Circuit City Stores, Inc.
Robert B. McKeon has served as Chairman and director of BarTech since
September 1993. He has served as President of Veritas Capital Inc., a New
York-based merchant banking and private equity investment firm, since its
formation in 1992. From 1990 to 1992, Mr. McKeon was Chairman and from 1988 to
1990 was President of Wasserstein Perella Management Partners, Inc., a New
York-based merchant banking fund. Mr. McKeon was formerly Chairman of Maybelline
Inc. from 1990 to 1992 and Co-Chairman and Co-Chief Executive Officer of Collins
and Aikman Inc. from 1989 to 1992. Mr. McKeon also serves as Chairman of the
Connecticut Health and Educational Facilities Authority, Chairman of HITCO
Technologies Inc., and Chairman of H. Koch & Sons Inc.
Thomas J. Campbell has served as a director of BarTech since September
1993. He has served as a partner and is a director of Veritas Capital Inc., a
New York-based merchant banking and private equity investment firm, since its
formation in 1992. From 1988 to 1992, Mr. Campbell was Vice President of
Wasserstein Perella Management Partners, Inc., a New York-based merchant banking
fund. He also served as a director of Collins & Aikman Inc. from 1988 to 1992
and as a director of Maybelline Inc. from 1990 to 1992. Mr. Campbell is also a
director of HITCO Technologies Inc.
Edward N. Ney has served as a director of BarTech since December 1994. He
has served as the Chairman of the Board of Advisors of Burson-Marsteller since
September 1, 1992 and on August 1, 1995 became the chairman of Marsteller
Advertising. Prior to that time, Mr. Ney was U.S. ambassador
83
<PAGE>
to Canada from 1989 to 1992. Mr. Ney is also director of Mattel Inc., Barrack
Gold and Power Financial Corporation.
Harold A. Poling has served as a director of BarTech since December 1994.
He served as Chairman and Chief Executive Officer of Ford Motor Company from
March 1990 until October 1993, when he retired. Mr. Poling is also a director of
Chicago and North Western Transportation Co., Flint Ink Corp., Kellogg Company,
LTV Steel Company, Inc. and Shell Oil Company.
Daniel R. DeVos has served as a director of BarTech since December 1994. He
has served as the President and Chief Executive Officer of Concurrent
Technologies Corporation since 1992. Mr. DeVos was President and Chief Executive
Officer of Metalworking Technology, Inc. and National Defense Environmental
Corporation from 1990 until such corporations were merged into Concurrent
Technologies Corporation in 1992. He serves as the director representative of
the Commonwealth of Pennsylvania. Mr. DeVos is also a director of United States
National Bank, Johnstown, Pennsylvania.
Anthony Rainaldi has served as a director of BarTech since April 1995. From
1983 to 1994, Mr. Rainaldi was a District Director and Member of the
International Executive Board of the USWA. He serves as a director
representative of the USWA. Mr. Rainaldi is also a director of Sharpsville
Quality Products.
Buddy W. Davis has served as a director of BarTech since December 1994. Mr.
Davis was a District Director of the USWA from 1974 to April 1993, when he
retired. He serves as a director representative of the USWA.
SPECIAL ADVISOR TO THE BOARD OF DIRECTORS OF BARTECH
William T. Hogan, S.J. is a special advisor to the board of directors of
BarTech. Father Hogan is the director of the Industrial Economics Research
Institute, Fordham University, and has been engaged in economic studies of the
steel industry and other basic, heavy industries for over 35 years. He is the
author of several books on the steel industry, including Productivity in the
Blast Furnace and Open-Hearth Segments of the Steel Industry, the first detailed
study on the subject of steel productivity, and his five-volume work, Economic
History of the Iron and Steel Industry in the United States. Father Hogan has
received numerous awards from steel-producing countries and national and
international steel associations.
OTHER SIGNIFICANT EMPLOYEES OF THE COMPANY
George W. Boyer has served as Manager, Primary Operations of BarTech since
October 1995. Prior to joining the Company, from May 1995 to October 1995 he
served as General Melting and Pouring Supervisor for First Miss Steel, and from
1988 until 1995 he served as Melt Shop Superintendent at Tennessee Valley Steel
Corporation. Prior to 1988 he served in various positions at the Iron and Steel
Company of Trinidad and Tobago, Tennessee Forging Steel Corporation, Connors
Steel Corporation and North Star Steel.
Holton Easter has served as Manager, 13" Bar Mill of BarTech, since
November 1995. Mr. Easter has over 37 years in the steel industry. Prior to
joining the Company, from 1987 to October 1995, he served as owner of a
consulting firm specializing in rolling mill equipment design, including roll
shop and roll pass engineering. Prior to that time, he worked for Inland Steel
Corporation as Manager of the Roll Department, Superintendent of the 10"-14"
mill and 12" mill.
William C. Sawarynski has served as Manager, Quality Assurance and
Technical Services of BarTech since October 1995. He had served as BarTech's
Manager, Primary Operations, from November 1994 to October 1995. Prior to
joining the Company, from 1967 until 1994 he served in various supervisory
capacities for Bethlehem Steel Corporation, most recently as Superintendent,
Steelmaking.
Richard B. Webb has served as Vice President, Sales of BarTech since July
1995 and has over 25 years experience in the steel industry. Prior to joining
the Company, from 1993 until 1995 he served as Vice President of Sales and
Marketing for Tennessee Valley Steel and from 1987 until 1993 he served as Vice
President of Sales and Marketing for Atlantic Steel Industries.
Mary Ann Link has served as Controller of BarTech since November, 1994.
Prior to joining the Company, from 1992 until 1994 she served in various
capacities for Johnstown Corporation, most
84
<PAGE>
recently as Manager of Production Cost Accounting and from 1988 until 1992 she
served as a Cost Analyst for Bethlehem Steel Corporation.
John P. Gundermann has served as Manager, Plant Services of BarTech since
November, 1994. Prior to joining the Company, from 1960 until 1994 he served in
various supervisory capacities for Bethlehem Steel Corporation, most recently as
Superintendent, Maintenance Utilities & Services.
Gerald E. Brady has served as Vice President of BLSC since October 1984.
Prior to that time, from 1976 to October 1984, Mr. Brady held various positions
with the Bliss & Laughlin Steel division of AXIA Incorporated, including Manager
of Batavia Operations from 1983 to 1984 and Manager of Engineering from 1976 to
1984.
Michael A. DeBias has served as Vice President of Purchasing of BLSC since
December 1984. Prior to joining BLSC, Mr. DeBias was Merchandise Manager of A.M.
Castle & Co. from November 1979 to December 1984.
Kenneth B. Morris has served as Vice President, Cartersville Operations of
BLSC since November 1992 and was previously general manager of BLSC's
Cartersville Operations from January 1988 to November 1992. Prior to joining
BLSC, from May 1987 until January 1989, Mr. Morris was General Manager of the
Plymouth, Michigan plant of Wyckoff Steel, Inc.
Chester J. Pucilowski has served as Vice President, Medina Operations of
BLSC since October 1984. Prior to that time, from October 1977 to October 1984,
Mr. Pucilowski was Medina Plant Manager of the Bliss & Laughlin Steel division
of AXIA Incorporated.
R. James Barnett has served as President of CDSC since May 1990, when CDSC
commenced operations as a wholly owned subsidiary of B&L. Prior to that time,
Mr. Barnett had been employed by Stelco Inc. for 26 years, most recently as
General Manager of its Canadian Drawn Steel Company business unit from October
1988 to May 1990. Mr. Barnett became the sole director of CDSC in July 1995.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for the fiscal years ended September 30,
1995, 1994 and 1993 the compensation paid by the Company to its Chief Executive
Officer and each of the four most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------------------- ----- -------- -------- ------------
<S> <C> <C> <C> <C>
James R. Powers, President and Chief
Executive Officer of BarTech.......... 1995 $300,000 $150,000 $303,051(a)
Denny Bozic, Executive Vice President
and Chief Operating Officer of
BarTech............................... 1995 225,000 112,500 228,051(a)
Birchel S. Brown, Senior Vice President
of Operations & Quality of BarTech.... 1995 180,000 75,000 58,051(a)
Gregory H. Parker, former President and
Chief Executive Officer of B&L........ 1995 235,000 143,350 22,935(b)
Anthony J. Romanovich, Senior Vice
President of B&L...................... 1995 145,000 80,113 14,257(b)
</TABLE>
- ------------------
(a) The amounts set forth in this column for Messrs. Powers, Bozic and Brown
reflect amounts of annual premiums paid by BarTech under group term life
insurance for such officers and one-time signing bonuses paid to such
officers. The life insurance carries a maximum value of $300,000 for each
officer and has no cash surrender value. Premiums paid by BarTech in fiscal
1995 for each of Messrs. Powers, Bozic and Brown were $3,051.00. Mr. Powers
received a signing bonus of $300,000 which was paid in October 1994, Mr.
Bozic's signing bonus of $225,000 was paid in
(Footnotes continued on next page)
85
<PAGE>
(Footnotes continued from previous page)
November 1994, and Mr. Brown's signing bonus of $55,000 was paid in two
installments in November 1994 and April 1995.
(b) The amounts set forth in this column for Messrs. Parker and Romanovich
pertain to the following:
Split Dollar Life Insurance Program. In 1988, BLSC entered into a Split
Dollar Life Insurance Agreement with Messrs. Parker and Romanovich and
certain other executive officers and key employees of BLSC whereby the
premiums on the corresponding insurance policies are paid by BLSC. The
amounts set forth under this column for fiscal years 1995, 1994 and 1993,
respectively, are as follows: Mr. Parker, $21,735, $31,365 and $31,946; and
Mr. Romanovich, $13,057, $14,939 and $14,058. See '--Other Employee Benefit
Programs--Split Dollar Life Insurance Program.'
Salary Savings Plan. B&L maintains a salary savings (401(k)) plan for all
BLSC employees who are not covered by a collective bargaining agreement that
serves as the pension plan for such employees. In fiscal years 1995 and
1994, B&L contributed $200 per participant plus 60% of the first $1,000 of a
participant's contribution and 40% of the second $1,000 of the participant's
contribution. For fiscal 1993, B&L contributed $100 per participant plus 50%
of the first $1,000 of a participant's contribution and 25% of the second
$1,000 of the participant's contribution. During fiscal years 1995, 1994 and
1993, the Company contributed an aggregate of $1,200, $1,200 and $850,
respectively, to the accounts of each of Messrs. Parker and Romanovich
pursuant to this plan. Those amounts are included under this column.
BarTech Employment Agreements
Messrs. Powers and Bozic have entered into employment agreements with
BarTech, each of which contains substantially similar terms and conditions
except with respect to salary provisions. Mr. Powers's and Mr. Bozic's
agreements will continue until October 1, 1996 and November 1, 1996,
respectively, and will be renewed for successive one year periods thereafter
unless sooner terminated by Mr. Powers or Mr. Bozic, as applicable, or BarTech.
The base salaries of Messrs. Powers and Bozic currently in effect under these
agreements are $300,000 and $225,000, respectively, and each agreement provides
for an annual increase based upon performance. Mr. Powers and Mr. Bozic also are
entitled to receive equity interests in BarTech which will equal approximately
0.9% and 0.8%, respectively, of the Common Stock (after giving effect to all the
issuances agreed to as of the time of the Recapitalization, but subject to
further dilution for subsequent events), which equity awards were granted upon
execution of their respective contracts and will vest pro rata over three years.
Each of Messrs. Powers and Bozic also will receive an annual bonus of up to 100%
of his base salary, with a minimum guaranteed bonus of 50% of the same during
the first year of employment and 35% over the second year, as well as certain
other benefits as provided in their respective employment agreements.
Each of Messrs. Brown, Cunningham and Webb has executed a memorandum of
understanding with BarTech with respect to the terms of his employment. Mr.
Brown receives an annual base salary of $180,000 and is eligible to receive an
annual bonus of up to $75,000, with a guaranteed minimum bonus of $25,000 in the
first year of his employment. Mr. Brown also is entitled to receive common stock
of BarTech representing approximately 0.4% of the Common Stock (after giving
effect to all the issuances agreed to as of the time of the Recapitalization,
but subject to further dilution for subsequent events), which equity award will
vest pro rata over three years. If Mr. Brown is terminated without cause
('cause' is defined as any act or acts constituting fraud, gross incompetence,
personal dishonesty involving the Company's or a customer's assets, willful
misconduct or gross negligence in the performance of duties), he will be
entitled to receive his regular salary for a period of 24 months from the date
of termination. Mr. Cunningham receives an annual base salary of $125,000 and is
eligible to receive an annual bonus of up to $50,000 with a guaranteed minimum
bonus of $25,000 in the first year. Mr. Cunningham's contract will continue
until July 1, 1996, at which time it can be extended by the mutual agreement of
BarTech and Mr. Cunningham. Mr. Webb receives an annual base salary of $115,000
and is eligible to receive an annual bonus of up to $45,000 with a guaranteed
minimum bonus
86
<PAGE>
of $20,000. Mr. Webb's contract will continue for a minimum of two years and
will continue thereafter until terminated. Each of Messrs. Brown, Cunningham and
Webb is entitled to receive certain other benefits set forth in their respective
employment arrangements or as BarTech may determine.
B&L Employment Agreements
Messrs. Parker and Romanovich, in addition to Messrs. Brady, DeBias and
Pucilowski, officers of BLSC, and Mr. Barnett, the President of CDSC
(collectively, the 'B&L Executives'), are each a party to an employment
agreement with B&L (collectively, the 'B&L Employment Agreements') on
substantially similar terms. The initial term of each B&L Executive's employment
under his B&L Employment Agreement continued until December 31, 1994, at which
time each B&L Executive's employment was automatically continued until such time
as it may be terminated in accordance with the terms of his B&L Employment
Agreement. The B&L Employment Agreements include, among other things, customary
confidentiality and non-compete provisions and certain severance payment
provisions which become applicable upon a 'Change in Control,' as defined in the
B&L Employment Agreements.
A 'Change in Control' under the B&L Employment Agreements will be deemed to
occur if, among other things, (i) any stockholder or group of stockholders of
B&L, or any of their respective affiliates and associates, elects or are elected
a majority of the Board of Directors of B&L, (ii) any third party or third
parties, or any of their respective affiliates or associates, become the owner
of a majority of any outstanding class of securities of B&L entitled to vote for
the election of B&L directors, or (iii) any merger in which B&L is not the
survivor or any consolidation or share exchange or similar transaction occurs.
The consummation of the B&L Acquisition constitutes a Change in Control under
the B&L Employment Agreements.
Upon a Change in Control, each B&L Executive may terminate his employment
within 180 days following such Change in Control and will, upon such
termination, be entitled to receive severance payments in an amount equal to
three times (one time in the case of R. James Barnett) his then annual
compensation in one lump sum. Based on the current annual base salaries of such
B&L Executives, the aggregate amount of such payments is currently estimated
(without giving effect to any reduction pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended (the 'Code')) to be approximately $2,019,000
(U.S.) plus $125,000 (Canadian), of which the estimated amounts payable to
Messrs. Parker, Romanovich, Brady, DeBias, Pucilowski and Barnett upon such
termination are $705,000, $435,000, $330,000, $300,000, $249,000 (all U.S.) and
$125,000 (Canadian), respectively, plus, in each case, the highest amount that
such executive would be entitled to receive as an annual bonus payment under
B&L's Supplemental Incentive Compensation Plan. Notwithstanding such provisions,
the employment agreements provide that in no event shall an executive, as a
consequence of a termination upon a change in control, be entitled to receive
amounts of compensation in excess of certain limits relating to Section 280G. No
member of the board of directors of B&L will receive any severance compensation
as a result of the merger, except for the severance, if any, payable to Messrs.
Parker and Romanovich pursuant to their B&L Employment Agreements.
Mr. Parker resigned from the Company in June 1996 and, as a result, is
entitled to a payment of approximately $705,000 from the Company.
No arrangement has been made between the Company and B&L's officers with
respect to continued employment as officers or employees of the Company
following consummation of the B&L Acquisition.
Directors' Compensation and Consulting Arrangements
For fiscal 1996, each non-employee director of BarTech will receive, as
compensation for serving on the board of directors of BarTech, $25,000, plus
reimbursement of reasonable out-of-pocket expenses.
87
<PAGE>
Other Employee Benefit Programs
Profit Sharing Program. In 1987, B&L established a Profit Sharing Program
(the 'B&L Profit Sharing Program') for all non-bargaining unit employees. The
terms of the B&L Profit Sharing Program are determined on an annual basis by the
board of directors of B&L, which administers the B&L Profit Sharing Program.
Provisions under this program in fiscal years 1995, 1994 and 1993, respectively,
for Mr. Parker were $27,025, $24,323 and $0 and for Mr. Romanovich were $16,675,
$15,008 and $0.
Salary Savings Plan. B&L maintains a salary savings plan for all BLSC
employees who are not covered by a collective bargaining agreement. The salary
savings plan is a 401(k) plan that serves as the pension plan for such B&L
employees. During fiscal 1995 and fiscal 1994, B&L contributed $200 per
participant plus 60% of the first $1,000 of a participant's contribution and 40%
of the second $1,000 of the participant's contribution. During fiscal 1993, B&L
contributed $100 per participant plus 50% of the first $1,000 of a participant's
contribution and 25% of the second $1,000 of a participant's contribution.
During fiscal years 1995, 1994 and 1993, respectively, B&L contributed an
aggregate of $1,200, $1,200 and $850, respectively, to the accounts of each of
Messrs. Parker and Romanovich.
Split-Dollar Life Insurance Program. In 1988, BLSC entered into a Split
Dollar Life Insurance Agreement with Messrs. Parker and Romanovich and certain
other officers and key employees of BLSC whereby the premiums on the
corresponding insurance policies are paid by BLSC. Under the agreement, such
persons have each executed a collateral assignment of their policies. BLSC, as
assignee, is entitled to recover the aggregate premium payments it made through
any combination of (i) borrowing against the policies, (ii) the cash surrender
value of the policies if the policies should be surrendered, and (iii) payment
in the event of the insured's death. In the summary compensation table set forth
above, amounts in the 'All Other Compensation' column include totals of (i) the
amount of the total annual premium paid by B&L for such policies representing
the economic benefit to the officer for term insurance death benefit coverage
(reportable as taxable income) and (ii) the projected actuarial value of the
benefit provided by the remainder of the premium paid by B&L using an
interest-free term loan approach to measure the benefit received annually by the
officer for the use of the money B&L provides in paying the premium. The amounts
included in fiscal years 1995, 1994 and 1993, respectively, for Mr. Parker were
$21,735, $31,365 and $31,946, and for Mr. Romanovich were $13,057, $14,939 and
$14,058.
Supplemental Incentive Compensation Plan. Approximately 28 key management
employees of B&L, including all executive officers of B&L, participate in B&L's
Supplemental Incentive Compensation Plan (the 'Incentive Plan'). The Incentive
Plan provides for payment of cash awards depending upon, among other factors,
the degree to which certain specified income levels have been attained during
B&L's fiscal year. Payments made pursuant to the Incentive Plan in fiscal years
1995, 1994 and 1993, respectively, for the benefit of Mr. Parker were $81,075,
$72,967 and $0, and for Mr. Romanovich were $41,688, $37,519 and $0.
88
<PAGE>
CERTAIN TRANSACTIONS
In connection with the acquisition of the BRW Assets, BarTech has an
agreement with Keilin & Bloom, a financial advisory firm ('K&B') that
represented the USWA during such acquisition, pursuant to which BarTech agreed
to pay to K&B, on behalf of the USWA, certain fees due for services provided by
K&B to the USWA in connection with the negotiation of the collective bargaining
agreement between BarTech and the USWA. These fees totalled $1.5 million, plus
reimbursement of reasonable out-of-pocket expenses not to exceed $25,000.
BarTech paid $1.0 million of these fees in fiscal 1995, and the remaining
$500,000 of fees were paid in December 1995. Messrs. Davis and Rainaldi are
members of the board of directors of BarTech pursuant to the BarTech collective
bargaining agreement and serve as representatives of the USWA and the BarTech
employees covered by the collective bargaining agreement.
The Company has entered into agreements dated as of September 22, 1994 with
two affiliated entities, Johnstown Advisors Corp. ('Advisors') and Johnstown
Acquisition Corp. ('Acquisition' and, together with Advisors, 'JAC'). In
connection with the Recapitalization, BarTech also expects to enter into an
agreement with Blackstone (the 'Blackstone Advisory Agreement') and has amended
the agreement with Advisors, whereby Blackstone and Advisors will provide
certain services to the Company. Pursuant to the agreement with Advisors, as so
amended (the 'Johnstown Advisory Agreement'; together with the Blackstone
Advisory Agreement, the 'Advisory Agreements'), and the Blackstone Advisory
Agreement, Blackstone and Advisors will provide certain management and financial
monitoring services to the Company for which Blackstone and Advisors will share
equally an annual advisory fee of $875,000, plus reimbursement of certain
out-of-pocket expenses. Blackstone and Advisors have agreed to subordinate their
right to certain such fees in the event of a continuing default in respect of
the Exchange Notes or a bankruptcy, liquidation or insolvency proceeding
involving the Company. The agreement with Acquisition (the 'Transaction Advisory
Agreement') was terminated upon payment of the $2.0 million fee referred to
below.
Pursuant to the Blackstone Advisory Agreement, Blackstone received an
origination fee and expense reimbursement totalling $2.0 million upon the
consummation of the Recapitalization. Pursuant to the Transaction Advisory
Agreement, Acquisition received (i) a financial advisory fee in connection with
the consummation of the B&L Acquisition, plus reimbursement of certain
out-of-pocket expenses, (ii) a financing fee upon the sale of the Units and
(iii) fees for past services rendered by Acquisition in connection with the
acquisition of the BRW Assets, which fees and expense reimbursement in the
aggregate totalled $2.0 million and was paid upon the consummation of the
Recapitalization. Blackstone and Acquisition have agreed to subordinate their
right to receive such fees and expense reimbursement in the event of a
continuing default in respect of the Exchange Notes or a bankruptcy, liquidation
or insolvency proceeding involving the Company. Either or both of Blackstone
and/or Acquisition may in the future perform financial advisory and investment
banking services required by the Company for which Blackstone and/or Acquisition
would receive fees to be determined at the time such services are provided,
which fees would not exceed the normal and customary rate for such services. The
Advisory Agreement provides that to the extent such financial advisory and
investment banking services are provided by any affiliate of JAC, Acquisition
shall be the exclusive JAC-affiliated entity through which such services are
provided.
The Advisory Agreements provide for indemnification of Advisors and
Blackstone by the Company for certain losses, claims, damages, liabilities and
expenses incurred by Advisors and Blackstone and their respective directors,
officers, agents, employees and controlling persons in connection with Advisors'
and Blackstone's activities on and after the Issue Date under such agreements.
Messrs. McKeon, Campbell and Brotman, each of whom is a director of the Company,
are the stockholders of Advisors and Acquisition. Messrs. Stockman and
Salovaara, each of whom is a Class B Director of BarTech are associated with
Blackstone.
The Advisory Agreements allow the Company to utilize the resources of
Advisors and Blackstone in connection with a variety of management, financial
and investment matters. The services that have been and will continue to be
provided by Advisors and Blackstone pursuant to these agreements could not
otherwise be obtained by the Company without engaging professional advisors or
adding personnel.
89
<PAGE>
The Company believes that the fees provided under these agreements reasonably
reflect the benefits received and to be received by the Company under the
agreements and were no less favorable to the Company than those which it could
have received from unaffiliated third parties.
Pursuant to the New Credit Agreement and the Stockholders Agreement, the
Company is prohibited from entering into certain transactions with its officers,
directors and other affiliates which are not on an arm's-length basis. Although
the Company has no policy with respect to such transactions, it is expected that
any such transactions will receive an appropriate level of scrutiny from the
Board of Directors.
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information concerning the beneficial
ownership of BarTech Common Stock by (i) all persons known by BarTech to own
beneficially more than 5% of BarTech Common Stock, (ii) each director, (iii)
each of the named executive officers and (iv) all directors and named executive
officers as a group, giving effect to the Recapitalization and giving further
effect on a fully diluted basis to all agreed to issuances of Common Stock and
rights therefor. The shares beneficially owned by the Partnerships include all
the shares beneficially owned by the Blackstone entities and BRW Partners Inc.,
of which the shares beneficially owned by the Blackstone entities consist
entirely of Class B Common Stock. All other shares of Common Stock consist of
shares of Class A Common Stock.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE
- ------------------------------------- -------------------- ----------
<S> <C> <C>
Blackstone Management Associates II
L.L.C.(a)(b)(c).................... 536,829 58.6%
BRW Partners lnc.(a)(d)(e)........... 196,410 21.4
ESOP(f).............................. 49,102 5.4
James R. Powers(g)................... 8,245 0.9
Denny Bozic(g)....................... 7,329 0.8
Birchel S. Brown(g).................. 3,664 0.4
Gregory H. Parker.................... 0 0
Anthony J. Romanovich................ 0 0
David A. Stockman(c)................. 0 0
Mikael Salovaara(c).................. 0 0
Kenneth R. Brotman(e)................ 196,410 21.4
Robert B. McKeon(e).................. 196,410 21.4
Thomas J. Campbell(e)................ 196,410 21.4
Edward N. Ney........................ 0 0
Harold A. Poling..................... 0 0
Daniel R. DeVos...................... 0 0
Anthony Rainaldi..................... 0 0
Buddy W. Davis....................... 0 0
All directors and named executive
officers as a group(h)............. 215,378 23.5
</TABLE>
- ------------------
(a) The Blackstone Investment was made indirectly through BRW Steel Holdings
L.P., a Delaware limited partnership initially organized by persons
associated with Veritas in connection with the acquisition of the BRW Assets
from Bethlehem ('BRWSH'), and BRW Steel Offshore Holdings L.P., a Delaware
limited partnership newly organized by Blackstone and persons associated
with Veritas in connection with the Recapitalization ('Offshore BRWSH';
together with BRWSH, the 'Partnerships'), whereby the Partnerships became
the direct holders of all newly issued shares of Class B Common Stock and
all shares of Class A Common Stock previously held solely by BRWSH. After
the Blackstone Investment, both Blackstone and BRW Partners, Inc. ('BRWPI'),
a corporation controlled by principals of Veritas, hold partnership
interests in each Partnership. The limited partnership agreement of BRWSH
was amended to provide, and the limited partnership agreement of Offshore
BRWSH provides, for certain sharing arrangements between Blackstone, on the
one hand, and BRWPI and the current limited partners of BRWSH, on the other
hand, with respect to proceeds from the sale of the Common Stock held by
such Partnerships. Such limited partnership agreements also provide that,
subject to the Stockholders' Agreement, Blackstone will exercise all voting
and dispositive power with respect to the
(Footnotes continued on next page)
90
<PAGE>
(Footnotes continued from previous page)
Class B Common Stock held by the Partnerships and BRWPI will exercise all
voting and dispositive power with respect to the Class A Common Stock held
by the Partnerships.
(b) Blackstone Management Associates II L.L.C., as the general partner of each
of Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P., exercises voting and dispositive power with respect to
such 536,829 shares. Of such shares, approximately 385,177 shares, 113,697
shares and 37,955 shares, respectively, are held by Blackstone Capital
Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners
II L.P. and Blackstone Family Investment Partnership II L.P.
(c) Messrs. Stockman and Salovaara are affiliated with Blackstone in the
capacities described under 'Management.' Each such person's address is c/o
The Blackstone Group L.P., 345 Park Avenue, New York, New York 10154. Each
of such individuals disclaims beneficial ownership of any shares of Common
Stock beneficially owned by Blackstone.
(d) BRWPI is one of the two general partners of the Partnerships and exercises
voting and dispositive power with respect to the 196,410 shares of Class A
Common Stock.
(e) BRWPI is owned by Robert B. McKeon, Thomas J. Campbell and Kenneth R.
Brotman, all of whom are principals of Veritas and are directors of BarTech.
Pursuant to the organizational documents of BRWPI, all material actions to
be taken by BRWPI as a general partner of BRWSH require the approval of Mr.
McKeon and either of Mr. Campbell or Mr. Brotman. BRWPI's address is c/o
Veritas Capital Inc., 10 East 50th Street, New York, New York 10022. Messrs.
McKeon, Campbell and Brotman each are considered to have beneficial
ownership of all of the shares included in the table above beneficially
owned by BRWPI due to their control of BRWPI.
(f) Pursuant to the collective bargaining agreement with the USWA, the ESOP is
entitled to receive 49,102 shares of Class A Common Stock (which represented
20% of the outstanding Common Stock if issued on the date of such collective
bargaining agreement).
(g) Pursuant to agreements anticipated to be signed with Messrs. Powers, Bozic
and Brown, the Company intends to issue, subject to certain vesting
provisions, shares of Class A Common Stock representing 0.9%, 0.8% and 0.4%,
respectively, of the outstanding Common Stock giving effect to all
issuances, including the Warrants.
(h) Excluding the 196,410 shares of Class A Common Stock beneficially owned by
BRWPI and Messrs. McKeon, Campbell and Brotman, the only shares beneficially
owned by this group are the 19,238 shares of Class A Common Stock (or 2.1%)
potentially issuable to Messrs. Powers, Bozic and Brown.
STOCKHOLDERS' AGREEMENT
Prior to the Recapitalization, BRWSH owned 100% of the outstanding shares
of Common Stock of BarTech, which enabled it to elect all of the directors of
BarTech (other than the two directors elected by the holder of the Series B
Preferred Stock) and determine the outcome of all matters requiring stockholder
approval. As a result of the Recapitalization, Blackstone and BRWPI and certain
persons currently affiliated with BRWPI (BRWPI, together with its affiliates,
the 'BRWPI Affiliates') (indirectly through the Partnerships) collectively own
100% of the outstanding shares of, and will elect all of the directors (other
than the two directors elected by the holder of the Series B Preferred Stock)
of, BarTech and determine the outcome of all matters requiring stockholder
approval, including mergers, consolidations and the sale of all or substantially
all of the assets of BarTech, and prevent or cause a change in control of
BarTech, in each case subject to such restrictions, limitations and conditions
as may be imposed under the Stockholders' Agreement. There can be no assurance
as to how long any of Blackstone or the BRWPI Affiliates will hold, directly or
indirectly, their shares of Common Stock.
In connection with the Recapitalization, BarTech, Blackstone and the BRWPI
Affiliates have entered into the Stockholders' Agreement which provides for,
among other things, the matters described below. It is expected that Messrs.
Powers, Bozic and Brown (collectively, the 'Management Stockholders') will also
become parties to the Stockholders' Agreement.
91
<PAGE>
Election of Directors. The Stockholders' Agreement provides that each of
Blackstone, the BRWPI Affiliates and the Management Stockholders will vote all
of the Common Stock owned or controlled by them so as to elect to the board of
directors all directors designated by the BRWPI Affiliates other than the two
directors designated by the holder of the Series B Preferred Stock and the Class
B Directors. Pursuant to the Restated Certificate of Incorporation of BarTech,
the Class B Directors, on the one hand, and the directors other than the Class B
Directors, on the other hand, each collectively exercise 50% of the voting power
of the board of directors. At any time upon the request of Blackstone, the
Stockholders' Agreement provides that Blackstone shall be entitled to cause one
director designated by the BRWPI Affiliates to be replaced by a person
designated by Blackstone.
Transfers of Common Stock. Subject to certain limitations, the
Stockholders' Agreement restricts transfers of Common Stock unless the
transferee agrees to become a party to, and be bound by, the Stockholders'
Agreement. In addition, the Stockholders' Agreement provides that, except for
transfers to affiliates and transfers pursuant to tag-along, drag-along and
registration rights described below, the BRWPI Affiliates and the Management
Stockholders may transfer shares of Common Stock only (i) after Blackstone has
realized a specified amount of cash proceeds from sales of shares of Common
Stock and (ii) in compliance with Rule 144 under the Securities Act. The
Stockholders' Agreement also contains provisions permitting transfer of Common
Stock to affiliates.
Tag-Along Rights. So long as Blackstone and the BRWPI Affiliates
(indirectly through the Partnerships or otherwise) own not less than one-fourth
of the outstanding Common Stock on a fully diluted basis, the Stockholders'
Agreement grants the BRWPI Affiliates, the ESOP and the Management Stockholders
the right, subject to certain exceptions, in connection with a proposed transfer
of Common Stock by Blackstone, to require the proposed transferee to purchase a
certain percentage of the shares owned by such parties at the same price and
upon the same terms and conditions.
Drag-Along Rights. So long as Blackstone (indirectly through the
Partnerships or otherwise) owns not less than 20% of the outstanding Common
Stock on a fully diluted basis, the Stockholders' Agreement grants to Blackstone
the right, in connection with an offer by a third party to purchase all of the
outstanding shares of Common Stock, to require the BRWPI Affiliates and the
Management Stockholders to transfer all shares of Common Stock owned by them to
such third party on the terms of the offer so accepted by Blackstone, subject to
certain restrictions.
Registration Rights. The Stockholders' Agreement grants 'piggy-back'
registration rights to the BRWPI Affiliates, the ESOP and the Management
Stockholders, subject to certain limitations, each time BarTech files a
registration statement in connection with the sale of Common Stock by Blackstone
if Blackstone has realized a specified amount of cash proceeds from sales of its
Common Stock. The Stockholders' Agreement also grants the stockholders parties
thereto certain 'piggy-back' registration rights with respect to demand
registrations by the holders of the Warrants, subject to customary cutback
provisions. The Stockholders' Agreement grants up to three 'demand'
registrations to Blackstone. The Stockholders' Agreement also grants one
'demand' registration to the BRWPI Affiliates, if Blackstone has realized a
specified amount of cash proceeds from sales of its Common Stock and has not
sold any shares of its Common Stock in the preceding nine month period, and an
additional 'demand' registration to the BRWPI Affiliates, if Blackstone no
longer has any 'demand' registrations.
Affiliate Transactions. The Stockholders' Agreement provides that BarTech
shall not enter into certain affiliate transactions unless the board of
directors of BarTech determines in advance that the terms of such transaction
are no less favorable to BarTech than those obtainable from a third party on an
arms-length basis. Notwithstanding such provision, BarTech may pay an annual
advisory of $875,000 to be shared equally by Blackstone and the Advisors.
Termination. The Stockholders' Agreement will terminate on the earliest
date on which Blackstone (indirectly through the Partnerships or otherwise) does
not own in the aggregate at least 15% of the outstanding Common Stock on a fully
diluted basis.
92
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
The following summary of certain provisions of the instruments governing
certain indebtedness and other obligations of BarTech and B&L does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the provisions of the instruments governing such indebtedness and other
obligations, copies of which are available upon request from the Company.
THE NEW CREDIT AGREEMENT
General. As part of the Recapitalization, BarTech and B&L entered into the
New Credit Agreement.
Borrowers. BarTech and B&L are borrowers under the New Credit Agreement.
Commitment. The New Credit Agreement provides BarTech and B&L with a
revolving credit facility in an aggregate principal amount of up to $90.0
million, a portion of which may be extended in the form of letters of credit for
the account of BarTech and B&L. Borrowings under the New Credit Agreement will
be available based upon a borrowing base not to exceed a specified percentage of
the aggregate net book value of accounts receivable and inventory which
percentage shall be, subject to certain exceptions, 73.0% for the first 18-month
period after the Issue Date, 71.4% and 69.0% for the two successive 12-month
periods thereafter and 66.7% for the remainder of the term of the New Credit
Agreement.
Maturity. The New Credit Agreement matures four years after the Issue
Date. Loans made under the New Credit Agreement may be borrowed, repaid and
reborrowed from time to time, subject to satisfaction of certain conditions on
the date of any such borrowing.
Fees. The Lenders under the New Credit Agreement will be paid commitment
fees at a rate of 0.50% per annum on unused commitments and letter of credit
fees, at a rate per annum equal to the applicable margin for adjusted LIBOR
loans from time to time in effect on the aggregate face amount of outstanding
letters of credit. In addition, Chemical, as agent, and the Lenders will receive
such other fees as have been separately agreed upon.
Interest. Borrowings under the New Credit Agreement will bear interest at
a rate per annum equal to, at the option of the applicable borrower, either (i)
the Alternate Base Rate (which is defined as the higher of Chemical's prime rate
and the Federal Funds Effective Rate plus 0.50%) plus 2.00% or (ii) Adjusted
LIBOR (as defined in the New Credit Agreement) plus 3.00%; provided, however,
that the applicable margin over the Alternate Base Rate and Adjusted LIBOR will
increase to 2.50% and 3.50%, respectively, at any time that the sum of the
aggregate principal amount of all loans and letters of credit outstanding under
the New Credit Agreement exceeds 62.5% of the sum of inventory and accounts
receivable of BarTech, B&L and certain of their subsidiaries (determined in
accordance with GAAP), with certain exceptions.
Guarantees. The obligations of BarTech and B&L under the New Credit
Agreement are unconditionally guaranteed jointly and severally by BarTech, B&L
and each existing subsidiary and each subsequently acquired domestic subsidiary
of BarTech.
Security. The obligations of the borrowers and guarantors under the New
Credit Agreement are secured by (a) all of the inventory, accounts receivables,
intangibles and documents (in each case to the extent necessary to realize on
such inventory and accounts receivable), and the proceeds thereof of such
borrowers and guarantors and (b) all the Common Stock of BarTech outstanding on
the Issue Date and all the capital stock of each direct or indirect subsidiary
of BarTech.
Covenants. The New Credit Agreement contains a number of covenants that,
among other things, will restrict the ability of BarTech and its subsidiaries to
dispose of assets, incur additional indebtedness, prepay other indebtedness or
amend other debt instruments, pay dividends, create liens on assets, enter into
sale and leaseback transactions, make investments, loans or advances, make
acquisitions, engage in mergers or consolidations, change the business conducted
by BarTech and its subsidiaries, make capital expenditures or engage in certain
transactions with affiliates and otherwise
93
<PAGE>
restrict corporate activities. In addition, under the New Credit Agreement,
BarTech will be required to maintain a minimum Consolidated Interest Coverage
Ratio (calculated net of withdrawals from the Interest Escrow Account and fees).
The New Credit Agreement also contains provisions that will prohibit any
modification of the Indenture in any manner adverse to the Lenders and that will
limit BarTech's ability to refinance the Exchange Notes without the consent of
such Lenders.
The New Credit Agreement also contains additional covenants which will
require BarTech to maintain its properties and those of its subsidiaries,
together with insurance thereon, to provide certain information to the Agent,
including financial statements, notices and reports and permit inspections of
the books and records of BarTech and its subsidiaries, to comply with applicable
laws, including environmental laws and ERISA, to pay taxes and contractual
obligations and to use the proceeds of the loans for general corporate purposes.
Events of Default. The New Credit Agreement contains customary events of
default, including payment defaults, breaches of representations and warranties,
covenant defaults, cross-defaults (including to the Exchange Notes), bankruptcy,
ERISA, actual or asserted invalidity of any loan documents and change of control
of BarTech.
ECONOMIC DEVELOPMENT FINANCING
In connection with the acquisition of the BRW Assets and implementation of
Phase One of the modernization and expansion plan, BarTech entered into loan
agreements with lenders in the Commonwealth of Pennsylvania and the State of New
York.
Pennsylvania
General. BarTech entered into a Master Agreement with the Commonwealth of
Pennsylvania on July 18, 1994 which provided BarTech with a commitment for
financing to consummate the acquisition of the BRW Assets from Bethlehem (the
'Bethlehem Acquisition') and to modernize the BarTech Facilities (the
'Modernization'). Pursuant to the Master Agreement, BarTech has entered and will
continue to enter into loan agreements with the Commonwealth, through its
Department of Commerce ('Commerce') or Department of Community Affairs. The
total amount committed to BarTech by the Commonwealth pursuant to the Master
Agreement is approximately $33.0 million, of which an amount equal to $7.1
million, less such amount of the $1.0 million of remaining Commonwealth loan
commitments not disbursed to BarTech, was repaid in connection with the
Recapitalization. The balance of such $7.1 million will be repaid as
disbursements of the remaining $1.0 million Commonwealth loan are completed
which is expected to occur in calendar 1996. A total of $1.45 million of
Commonwealth loan commitments was terminated in connection with the
Recapitalization. The loans have been or will be made through the Sunny Day Fund
('SDF'), the Johnstown Industrial Development Corporation (the 'JIDC'), the
Pennsylvania Industrial Development Authority ('PIDA'), the Business
Infrastructure Development Program ('BID'), the Economic Development Partnership
('EDP'), the Community Development Block Grant Program ('CDBG') and the
Enterprise Zone Competitive Program ('ECP'). (The loans governed by the Master
Agreement are collectively referred to herein as the 'Commonwealth Loans'). As
of March 31, 1996, approximately $30.8 million in aggregate principal amount of
Commonwealth Loans were outstanding.
Covenants. The Master Agreement contains certain affirmative and negative
covenants, including, without limitation, covenants requiring BarTech, subject
to certain exceptions, to: (i) use loan proceeds in a specified manner; (ii)
comply with laws, pay taxes, maintain insurance, preserve its corporate
existence, provide financial statements and other material operational
information and maintain its operations, facility and equipment; (iii) proceed
diligently to complete the modernization and expansion plan; (iv) commence
operations by a certain date and establish various employee benefit programs;
(v) comply with environmental and other laws; (vi) not merge, consolidate with
any other person or sell, assign, lease, abandon or otherwise dispose of certain
property; (vii) not create or incur additional liens, encumbrances or
indebtedness, other than as permitted by the Master Agreement, as
94
<PAGE>
modified by the Intercreditor Agreement; and (viii) pay no dividends or other
distributions to the holders of BarTech's equity or subordinated debt.
PIDA Loan. PIDA has loaned $2.0 million to BarTech (the 'PIDA Loan') to
acquire certain tracts of land in Cambria County, Pennsylvania together with the
buildings thereon (the 'Premises'). The PIDA Loan bears interest at a rate per
annum of 2.00% with quarterly principal and interest payments of approximately
$38,665 that began on January 1, 1995 and matures on October 1, 2009. Pursuant
to the Master Agreement, PIDA made an additional loan to BarTech in the
principal amount of $2.0 million in March 1996 at an interest rate of 3.00% per
annum. As of March 31, 1996, $3.8 million in aggregate principal amount of
indebtedness was outstanding under the PIDA Loans.
SDF Loans. Commerce has made two loans to BarTech in an aggregate
principal amount of $13.0 million (the 'SDF Loans') under the SDF program, both
of which bear interest at a rate of 3.00% per annum. One of the SDF Loans, with
a principal amount of $7.0 million and quarterly principal and interest payments
of approximately $137,255 scheduled to begin on April 1, 1997, matures on
October 1, 2009 and the other, with a principal amount of $6.0 million and
quarterly principal and interest payments of approximately $428,570 scheduled to
begin on July 1, 1998, matures on October 1, 2001. As of March 31, 1996, $13.0
million in aggregate principal amount of indebtedness was outstanding under the
SDF Loans. The Master Agreement requires $7,050,000 in aggregate principal
amount of the SDF Loans, consisting of $6.0 million in principal amount of the
SDF loan maturing in 2001, the total principal amount thereof, and $1,050,000 in
principal amount of the SDF Loan maturing in 2009, to be repaid with the
proceeds of the Offering. The majority of such amount was repaid immediately
subsequent to the Offering and the balance, which will be equal to all unfunded
commitments and escrowed funds under the Master Agreement, will be repaid when
all such commitments and funds have been released to BarTech, which is expected
to occur in calendar 1996. It is anticipated that, in connection with the
Offering, the amortization payments of SDF Loans that remain outstanding after
the Offering will begin in July 1996. This prepayment and earlier principal
amortization will result in a new schedule of principal and interest payments
reduced from those set forth above.
EDP Loans. The City of Johnstown (the 'City') has loaned an aggregate of
$10.3 million (out of a commitment of $11.6 million) to BarTech (the 'EDP
Loans') pursuant to the EDP program. The EDP Loans are in amounts of $6.0
million, with quarterly principal and interest payments of approximately
$117,645 scheduled to begin on April 1, 1997, $1.3 million, with quarterly
principal and interest payments of approximately $34,145 scheduled to begin on
July 1, 1998 and $3.0 million, with quarterly principal and interest payments
scheduled to begin on July 1, 1998. The EDP Loans bear interest at a rate of
3.00% per annum and mature, respectively, on October 1, 2009, October 1, 2010
and October 1, 2010. As of March 31, 1996, $10.3 million in aggregate principal
amount of indebtedness was outstanding under the EDP Loans. The city's total
commitment under the EDP program was reduced by $1.3 million in connection with
the Offering.
CDBG Loans. The County of Cambria, Pennsylvania (the 'County') has loaned
certain funds to BarTech (the 'CDBG Loans') under the CDBG program. As of March
31, 1996, $690,000 in aggregate principal amount of indebtedness was outstanding
under the CDBG Loans. The outstanding CDBG Loans bear interest at a rate of
3.00% per annum, require quarterly principal and interest payments that begin on
October 1, 1999 and July 1, 1998, respectively, and mature on August 17, 2010.
ECP Loans. The City has agreed to loan to BarTech an aggregate of $1.0
million under the ECP program, of which none has been borrowed by BarTech.
BarTech expects to borrow such amount during calendar 1996.
BID Loans. The JIDC has agreed to loan BarTech an aggregate of $2.65
million (the 'BID Loans') under the BID program, of which none has been borrowed
by BarTech. BarTech borrowed $2.5 million of the BID Loans in the first quarter
of calendar 1996, which bear interest at a rate of 3.00% per annum. In
connection with the Offering, JlDC's commitment was reduced by $150,000 and the
amortization payments of BID Loans outstanding after the Offering will begin in
July 1996.
95
<PAGE>
New York
JDA Guaranteed Marine Midland Term Loan. BarTech is party to a Loan and
Use Agreement, dated September 21, 1994 (the 'Marine Midland Loan Agreement'),
with Marine Midland Bank ('Marine Midland'), whereby Marine Midland loaned $10.0
million to BarTech (the 'Marine Midland Loan') for use in connection with the
acquisition of Lackawanna real estate from Bethlehem. BarTech's obligations
under the Marine Midland Loan are guaranteed by the New York Job Development
Authority ('JDA'). The principal of the Marine Midland Loan is payable in equal
monthly installments of approximately $92,600 commencing on November 1, 1995,
together with interest thereon, and matures on October 1, 2004. Interest on the
Marine Midland Loan accrues at a rate based on a prime rate, or a LIBOR based
rate, as selected by BarTech, which rate was 8.25% at March 31, 1996. In
connection with the Offering, the term and amortization of the Marine Midland
Loan was amended such that the new maturity date will be February 1, 2003 and
monthly principal repayments will remain at approximately $92,600 until November
1, 2000, and thereafter they will increase to approximately $153,250 until the
maturity date.
The Marine Midland Loan Agreement contains certain covenants, including,
among other things, covenants requiring BarTech not to (i) permit the transfer
of any of its shares of stock, (ii) issue any additional shares of stock or
create any other class of security except as provided in the Marine Midland Loan
Agreement, or (iii) permit any change in ownership or control of BarTech. As of
March 31, 1996, $9.5 million principal amount of indebtedness was outstanding
under the Marine Midland Loan.
RDC Loan. BarTech is party to a Loan Agreement with the Buffalo and Erie
County Regional Development Corporation ('RDC') providing for a loan in the
amount of $500,000 to be used for working capital needs (the 'RDC Loan'). The
RDC Loan bears interest at a rate of 7.75% per annum. The principal of the RDC
Loan is payable in two equal installments of approximately $250,000 on each of
October 1, 1997 and October 1, 1998, together with interest thereon.
The RDC Loan incorporates all negative covenants set forth in any agreement
evidencing indebtedness, whenever created, of BarTech. The RDC Loan contains
certain events of default, including, among other things, the transfer of any
property of BarTech other than in the ordinary course of business and the
nonpayment of any indebtedness of BarTech in excess of $500,000 under any
agreement or instrument securing indebtedness of BarTech. As of March 31, 1996,
$500,000 principal amount of indebtedness was outstanding under the RDC Loan.
Section 108 Loans
The City and the County have committed to loan to BarTech $5.5 million and
$3.0 million, respectively, from funds received from the U.S. Secretary of
Housing and Urban Development under the Section 108 program (the 'Section 108
Loans'). The Section 108 Loans bear interest at 8.12% per annum, will be
amortized according to a schedule of payments of various amounts included in the
Section 108 Loan agreement, with a payment of principal and interest of $400,000
on October 1, 1996 and quarterly installments beginning (i) for the City loan,
on July 15, 1999, and (ii) for the County loan, on July 15, 1997, and mature on
September 26, 2003. As of March 31, 1996, $8.5 million in aggregate principal
amount was outstanding under the Section 108 Loans. The Company incurred the
balance of the Section 108 Loans in the first quarter of calendar 1996. In
connection with the Offering, $500,000 of the City loan was repaid.
BETHLEHEM SUBORDINATED LOAN AGREEMENT
Pursuant to the terms of a Subordinated Loan Agreement, dated September 21,
1994 (the 'Bethlehem Subordinated Loan Agreement'), Bethlehem loaned to BarTech
$5.5 million. The outstanding principal balance under the Bethlehem Subordinated
Note is payable in three equal installments due on October 1, 2000, October 1,
2001 and September 26, 2002. The Bethlehem Subordinated Note bears interest at a
rate of 7.00% per annum.
The Bethlehem Subordinated Loan Agreement contains certain affirmative and
negative covenants, including, without limitation, covenants limiting (i) the
incurrence by BarTech of additional
96
<PAGE>
indebtedness, liens and encumbrances, (ii) the sale, transfer or disposal of all
material assets of BarTech, (iii) the declaration of dividends other than with
respect to the Bethlehem Preferred Stock, and (iv) the sale of stock of BarTech
or its subsidiaries. As of March 31, 1996, $5.5 million of indebtedness was
outstanding under the Bethlehem Subordinated Note.
CARTERSVILLE IRBS
In December 1988, the Development Authority of Cartersville, Georgia issued
$3.6 million in aggregate principal amount of its tax exempt industrial revenue
bonds (the 'Cartersville IRBs'), the proceeds of which were loaned to BLSC and
used to partially fund the construction and equipping of BLSC's Cartersville,
Georgia facility. The Cartersville IRBs bear interest at a rate equal to the
minimum rate of interest which, in the opinion of the remarketing agent for the
Cartersville IRBs, would be necessary to sell Cartersville IRBs in the secondary
market. The interest rates paid on the Cartersville IRBs varied from 3.75% to
5.5% during fiscal 1995 and was 3.75% at March 31, 1996. Principal payments of
$300,000 are due on the Cartersville IRBs on each December 1 beginning in 2009
and continuing through 2012. Thereafter, payments of $400,000 are due on each
December 1 until the final payment on December 1, 2018. The Cartersville IRBs
are secured by B&L's Cartersville, Georgia facility and the equipment located
thereat. As of March 31, 1996, $3.6 million of indebtedness was outstanding
under the Cartersville IRBs.
CASTER FINANCING
BarTech's contract with Rokop to modify, install and start-up the
combination bloom/billet caster to be installed at the Johnstown Facility as
part of Phase One of the Company's modernization and expansion plan requires
Rokop to provide $7.2 million to finance a portion of the combination
bloom/billet caster project. Approximately $4.3 million of this Caster Financing
is secured by a lien on the Caster that is prior to that of Noteholders and $2.9
million is secured by a letter of credit. The contract with Rokop provides that
certain payments due to Rokop will be evidenced by three notes of BarTech in the
aggregate amount of $7.2 million which become effective and will begin to accrue
interest after the start-up of continuous casting operations. Such notes will be
in principal amounts of $2.9 million, $1.0 million and $3.3 million,
respectively, and the $1.0 million note and $300,000 of the $3.3 million note
will mature upon the successful testing and start-up of the combination
bloom/billet caster. The Caster Financing bears interest at 6.50% commencing on
the date of start-up of the caster. These notes may be prepaid at an
approximately $2.0 million discount prior to December 31, 1996.
97
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an indenture dated as of April 1,
1996 (the 'Indenture') among BarTech, the Guarantors and United States Trust
Company of New York, as trustee (the 'Trustee'). References to the Exchange
Notes include the Notes which are not exchanged pursuant to the Exchange Offer
unless the context otherwise requires. Upon the issuance of the Exchange Notes,
the Indenture will be subject to the Trust Indenture Act of 1939, as amended
(the 'Trust Indenture Act'). The following summary of the material provisions of
the Indenture (a copy of the form of which may be obtained upon request to
BarTech does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Indenture Act, and to all of the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part of the Indenture by reference to the Trust Indenture
Act, as in effect on the date of the Indenture. The definition of certain
capitalized terms used in the following summary are set forth below under
'--Certain Definitions.'
GENERAL
The Exchange Notes will be issued only in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Exchange Notes will be payable, and the
Exchange Notes will be transferable, at the corporate trust office or agency of
the Trustee in the City of New York maintained for such purposes at 147 West
47th Street, New York, New York. In addition, interest may be paid by wire
transfer or check mailer to the person entitled thereto as shown on the register
for the Exchange Notes. No service charge will be made for any registration of
transfer or exchange of the Exchange Notes, except for any tax or other
governmental charge that may be imposed in connection therewith.
Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
MATURITY, INTEREST AND PRINCIPAL
The Exchange Notes will be senior secured obligations of BarTech, limited
to $91,609,000 aggregate principal amount, and will mature on April 1, 2001.
Interest on the Exchange Notes will accrue at the rate of 13 1/2% per annum and
will be payable semi-annually on each April 1 and October 1, commencing October
1, 1996, to the holders of record of Exchange Notes at the close of business on
the March 15 and September 15 immediately preceding such interest payment date.
Interest on the Exchange Notes will accrue from the most recent date which
interest has been paid or, if no interest has been paid, from April 2, 1996 (the
'Issue Date'). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months and the actual number of days elapsed.
Interest on overdue principal and (to the extent permitted by law) on overdue
installments of interest will accrue at a rate equal to 15 1/2% per annum.
As discussed under 'Notes Registration Rights,' pursuant to the Notes
Registration Rights Agreement, BarTech has agreed, at its expense, for the
benefit of the holders of the Notes, to effect the registered Exchange Offer
under the Securities Act to exchange the Notes for Exchange Notes. If (a)
BarTech is not permitted to file the Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (b) any holder of Notes notifies BarTech
within the specified time period that (i) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (ii) due to a change in law
or policy it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales by such holder or (iii) it is a broker-dealer and owns Notes
acquired directly from BarTech or any affiliate of BarTech, BarTech will file
with the Commission the Shelf Registration Statement to cover resales of the
Transfer Restricted Notes (as defined in 'Notes Registration Rights') by the
holders thereof.
98
<PAGE>
The Notes Registration Rights Agreement provides that: (a) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
BarTech will file an Exchange Offer Registration Statement with the Commission
on or prior to 30 days after the Issue Date, (b) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, BarTech will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Issue Date, (c)
unless the Exchange Offer would not be permitted by applicable law or Commission
policy, BarTech will commence the Exchange Offer and use its best efforts to
issue, on or prior to 30 days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, Exchange Notes
in exchange for all Notes tendered prior thereto in the Exchange Offer and (d)
if obligated to file the Shelf Registration Statement, BarTech will file prior
to the later of (i) 75 days after the Issue Date or (ii) 30 days after such
filing obligation arises and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
90 days after such obligation arises; provided that if BarTech has not
consummated the Exchange Offer within 150 days of the Issue Date, then BarTech
will file the Shelf Registration Statement with the Commission on or prior to
the 151st day after the Issue Date. BarTech shall use its best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended until the third anniversary of the Issue Date or such shorter period
that will terminate when all the Transfer Restricted Notes covered by the Shelf
Registration Statement have been sold pursuant thereto; provided that BarTech
may suspend the effectiveness of the Shelf Registration Statement for a period
not to exceed 45 days in any calendar year under certain circumstances. See
'Notes Registration Rights.' If (a) BarTech fails to file any of the
registration statements required by the Notes Registration Rights Agreement on
or before the date specified for such filing, (b) any of such registration
statements are not declared effective by the Commission on or prior to the date
specified for such effectiveness (the 'Effectiveness Target Date'), (c) BarTech
fails to consummate the Exchange Offer within 30 days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter, subject to certain exceptions, ceases to be
effective or usable in connection with the Exchange Offer or resales of Transfer
Restricted Notes, as the case may be, during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above, a 'Registration Default'), then the interest rate on Transfer
Restricted Notes will increase ('Additional Interest'), with respect to the
first 90-day period immediately following the occurrence of such Registration
Default by 0.50% per annum and will increase by an additional 0.50% per annum
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of 1.50% per annum. Following the cure
of all Registration Defaults, the accrual of Additional Interest will cease and
the interest rate will revert to the original rate.
REDEMPTION
Optional Redemption. The Exchange Notes will be redeemable, in whole or in
part, at the option of BarTech, at any time on or after April 1, 1999, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest, if any, to the redemption date, if
redeemed during the 12-month period beginning on April 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------- ----------
<S> <C>
1999.... 106.750%
2000.... 103.375%
</TABLE>
Optional Redemption upon Public Equity Offerings. On or prior to April 1,
1999, BarTech may, at its option, following one or more Public Equity Offerings
(as defined below) which yield gross proceeds (before discounts, commissions and
expenses) of $35.0 million or more in aggregate, redeem up to an aggregate of
35% of the principal amount of Notes and Exchange Notes originally issued from
the holders of Notes and Exchange Notes, on a pro rata basis (or as nearly pro
rata as practicable), at a redemption price equal to 113 1/2% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption; provided that not less than $55.0 million aggregate principal amount
of
99
<PAGE>
Notes and Exchange Notes would remain outstanding immediately after giving
effect to any such redemption. In order to effect the foregoing redemption with
the net proceeds of a Public Equity Offering, BarTech shall send the redemption
notice not later than 60 days after the consummation of the Public Equity
Offering which resulted in aggregate gross proceeds (before discounts,
commissions and expenses) of $35.0 million or more to BarTech.
As used in the preceding paragraph, a 'Public Equity Offering' means an
underwritten public offering of Capital Stock (other than Disqualified Capital
Stock) of BarTech made on a primary basis by BarTech pursuant to a registration
statement filed with and declared effective by the Commission in accordance with
the Securities Act or an underwritten offering of Capital Stock (other than
Disqualified Capital Stock) of BarTech made on a primary basis by BarTech
pursuant to Rule 144A under the Securities Act.
Selection and Notice. In the event that less than all of the Notes and
Exchange Notes outstanding are to be redeemed at any time, selection of Notes
and Exchange Notes for redemption will be made by the Trustee in compliance with
the requirements of the principal national securities exchange, if any, on which
the Notes and Exchange Notes are listed or, if the Notes and Exchange Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that no
Notes or Exchange Notes of $1,000 or less shall be redeemed in part; provided,
further, that any such redemption pursuant to the provisions relating to a
Public Equity Offering shall be made on a pro rata basis or on as nearly a pro
rata basis as practicable (subject to the procedures of The Depository Trust
Company). Notice of redemption shall be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each holder of Exchange
Notes to be redeemed at its registered address. If any Exchange Note is to be
redeemed in part only, the notice of redemption that relates to such Exchange
Note shall state the portion of the principal amount thereof to be redeemed. A
new Exchange Note in a principal amount equal to the unredeemed portion thereof
will be issued in the name of the holder thereof upon cancellation of the
original Exchange Note. On and after the redemption date, interest will cease to
accrue on Exchange Notes or portions thereof called for redemption.
EXCESS CASH FLOW OFFER
If BarTech has Excess Cash Flow for any fiscal year (commencing with fiscal
1996), BarTech shall notify the holders of the Notes and Exchange Notes, in the
manner prescribed by the Indenture, and shall make an offer to purchase (the
'Excess Cash Flow Offer'), on a business day (the 'Excess Cash Flow Payment
Date') not later than 150 days following the end of such fiscal year, from all
holders of Notes or Exchange Notes, up to a maximum principal amount (expressed
as a multiple of $1,000) of Notes and Exchange Notes plus accrued and unpaid
interest thereon, if any, equal to the Noteholders' Pro Rata Share of 75% of
such Excess Cash Flow at a purchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Excess Cash
Flow Payment Date. Notice of an Excess Cash Flow Offer shall be given to holders
of Notes or Exchange Notes not less than 30 days nor more than 45 days before
the Excess Cash Flow Payment Date. The Excess Cash Flow Offer is required to
remain open for at least 20 business days and until the close of business on the
Excess Cash Flow Payment Date.
Notwithstanding the foregoing, BarTech will not be required to make an
Excess Cash Flow Offer with respect to the first $10.0 million of Excess Cash
Flow, which may be retained by BarTech, and may defer making any Excess Cash
Flow Offer until such time as it is required to utilize $10.0 million or more
(taking account of previously unutilized amounts required to be applied to an
Excess Cash Flow Offer) to make an Excess Cash Flow Offer. In addition, if and
to the extent that the sum of the aggregate principal amount of all loans and
letters of credit outstanding under the New Credit Agreement on the date of any
Excess Cash Flow Offer (or the daily average of such amount during the 30-day
period prior to any Excess Cash Flow Offer) exceeds 62.5% of the sum of
inventory and accounts receivable of BarTech, B&L and certain of their
Subsidiaries, BarTech will be required to prepay outstanding loans and letters
of credit under the New Credit Agreement in an amount sufficient to eliminate
such excess prior to making such Excess Cash Flow Offer. To the extent an Excess
Cash Flow Offer is not accepted
100
<PAGE>
by holders of Notes or Exchange Notes, the related Excess Cash Flow need not be
part of any subsequent Excess Cash Flow Offer and may be retained by BarTech or
used to repay other Indebtedness or for any other purpose, subject to any other
covenant in the Indenture.
If BarTech is required to make an Excess Cash Flow Offer, BarTech will
comply with all applicable tender offer laws and regulations, including, to the
extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any
other applicable securities laws and regulations and any applicable requirements
of any securities exchange on which the Exchange Notes are listed.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control (the date of such occurrence
being the 'Change of Control Date'), BarTech shall notify the holders of the
Exchange Notes, in the manner prescribed by the Indenture, of such occurrence
and shall make an offer to purchase (the 'Change of Control Offer'), on a
business day (the 'Change of Control Payment Date') not later than 60 days
following the Change of Control Date, all Exchange Notes then outstanding at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to any Change of Control Payment Date. Notice of a
Change of Control Offer shall be given to holders of Exchange Notes not less
than 30 days nor more than 45 days before the Change of Control Payment Date.
The Change of Control Offer is required to remain open for at least 20 business
days and until the close of business on the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
BarTech or the Guarantors will have available funds sufficient to pay for all of
the Exchange Notes that might be delivered by holders of Exchange Notes seeking
to accept the Change of Control Offer. BarTech shall not be required to make a
Change of Control Offer following a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements applicable to a Change of Control Offer made by BarTech
and purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer. A Change of Control Offer may be made in advance of a
Change of Control, and conditioned upon such Change of Control to the extent a
definitive agreement is in place for the Change of Control at the time of making
of the Change of Control Offer. Except as provided under '--Defeasance or
Covenant Defeasance of Indenture' below, neither the Board of Directors of
BarTech nor the Trustee may waive the covenant relating to the right of a holder
of Exchange Notes upon a Change of Control.
The New Credit Agreement contains, and other debt that may be incurred in
the future could contain, prohibitions of certain events that would constitute a
Change of Control as well as prohibitions on the making of a Change of Control
Offer. Moreover, the exercise by the holders of their right to require the
Company to repurchase the Exchange Notes could cause a default under such
indebtedness even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. In the event that a Change of Control
occurs at a time when the Company is prohibited from purchasing Exchange Notes
under the terms of any such indebtedness, the Company could seek the consent of
its lenders to purchase the Exchange Notes or could attempt to refinance such
indebtedness. If the Company does not obtain such consent or refinance such
indebtedness, the Company will remain prohibited from purchasing the Exchange
Notes and/or making the Change of Control Offer. In such case, the Company's
failure to make the Change of Control Offer or purchase tendered Exchange Notes
would constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the New Credit Agreement.
If BarTech is required to make a Change of Control Offer, BarTech will
comply with all applicable tender offer laws and regulations, including, to the
extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any
other applicable securities laws and regulations and any applicable requirements
of any securities exchange on which the Exchange Notes are listed.
101
<PAGE>
THE GUARANTEES
Each of the Guarantors will fully and unconditionally guarantee (each, a
'Guarantee') on a joint and several basis all of BarTech's obligations under the
Exchange Notes and the Indenture, including its obligations to pay principal,
premium, if any, and interest with respect to the Exchange Notes. Except as
provided in '--Certain Covenants' below, BarTech is not restricted from selling
or otherwise disposing of any of the Guarantors.
Pursuant to the Guarantees, if BarTech defaults in payment of any amount
owing in respect of any Exchange Notes, each Guarantor will be obligated to duly
and punctually pay the same. Pursuant to the terms of the Indenture, each of the
Guarantors has agreed that its obligations under its Guarantee will be
unconditional, irrespective of the validity, regularity or enforceability of the
Exchange Notes or the Indenture, the absence of any action to enforce the same
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Guarantor (other than a
transaction subject to the provisions described under '--Consolidation, Merger,
Sale of Assets, Etc.') by BarTech or a Restricted Subsidiary to any person that
is not an Affiliate of BarTech or any of the Restricted Subsidiaries which is in
compliance with the terms of the Indenture, such Guarantor and each Subsidiary
of such Guarantor that is also a Guarantor will automatically and
unconditionally be released from all obligations under its Guarantee.
RANKING
The Indebtedness of BarTech evidenced by the Exchange Notes will rank
senior in right of payment to all subordinated Indebtedness of BarTech and will
rank pari passu in right of payment with all other existing or future
unsubordinated Indebtedness of BarTech. The Indebtedness of each Guarantor
evidenced by its Guarantee will rank senior in right of payment to all
subordinated Indebtedness of such Guarantor and will rank pari passu in right of
payment with all other existing and future unsubordinated Indebtedness of such
Guarantor.
The Exchange Notes will be effectively subordinate in right of payment to
all existing and future liabilities, including trade payables, of any of
BarTech's future subsidiaries which are not Guarantors.
See 'Summary of Collateral and Intercreditor Agreement' for a discussion of
the relative priority of the Trustee's claims against the Collateral securing
the Exchange Notes as compared with that of certain other creditors.
INTEREST ESCROW ACCOUNT
The Indenture provides that on the Issue Date BarTech place approximately
$18.5 million of the net proceeds realized from the Offering, representing funds
that will be sufficient to pay interest (exclusive of any increased interest
required by the provisions described under 'Notes Registration Rights') on the
Notes and Exchange Notes due on the first three interest payment dates, in the
Interest Escrow Account held by the Collateral Agent in accordance with an
Escrow Agreement dated as of the Issue Date among BarTech, the Trustee and the
Collateral Agent (the 'Escrow Agreement'). The Escrow Agreement provides, among
other things, that funds may be disbursed from the Interest Escrow Account only
to pay interest on the Notes and Exchange Notes (or, if a portion of the Notes
or Exchange Notes has been retired by BarTech, funds representing the amount of
interest payments that would have been required on such retired Notes or
Exchange Notes may be released to BarTech at the time such Notes or Exchange
Notes are retired). Upon the acceleration of the maturity of the Exchange Notes
or the failure to pay principal at maturity, the Escrow Agreement provides for
the foreclosure by the Collateral Agent upon the net proceeds of the Interest
Escrow Account. Pending such disbursement, all funds contained in the Interest
Escrow Account will be invested in Cash Equivalents. Absent a Default, interest
earned on these Cash Equivalents will be released to BarTech on each interest
payment date and upon termination of the Escrow Agreement. In addition to the
other Collateral, the Exchange Notes will be secured by a security interest in
all funds contained in the
102
<PAGE>
Interest Escrow Account, pending disbursement or release pursuant to the Escrow
Agreement. Absent a Default, the Escrow Agreement terminates following the third
interest payment date after the Issue Date.
SECURITY
For a summary description of certain of the Collateral securing the
Exchange Notes and the Guarantees and the Intercreditor Agreements which
establish among certain creditors the relative rights and priorities of such
creditors, including Noteholders, in and to the Collateral, see 'Summary of
Collateral and Intercreditor Agreements.'
CERTAIN COVENANTS
Set forth below are certain covenants which will be contained in the
Indenture.
Limitation on Additional Indebtedness. The Indenture provides that BarTech
shall not, and shall not permit any of the Restricted Subsidiaries to, create,
incur, assume, issue, guarantee or in any manner become, directly or indirectly,
liable for or with respect to the payment of any Indebtedness (including any
Acquired Indebtedness); provided that (i) BarTech and the Guarantors will be
permitted to incur Indebtedness (including Acquired Indebtedness) and (ii) a
Restricted Subsidiary will be permitted to incur Acquired Indebtedness if,
immediately after giving pro forma effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of BarTech would be greater than or
equal to (a) 2.00:1.00, if such Indebtedness is to be incurred on or prior to
December 31, 1996, and (b) 2.25:1.00, if such Indebtedness is to be incurred
after December 31, 1996.
Notwithstanding the foregoing, BarTech and the Restricted Subsidiaries, as
applicable, may incur each and all of the following (each of which shall be
given independent effect):
(a) Indebtedness under the Exchange Notes, the Guarantees and the
Indenture;
(b) Indebtedness of BarTech and the Restricted Subsidiaries
outstanding on the Issue Date or incurred pursuant to facilities in
existence on the Issue Date;
(c) Indebtedness of BarTech and the Restricted Subsidiaries
outstanding from time to time pursuant to the New Credit Agreement in a
principal amount not to exceed the greater of (i) $90.0 million and (ii)
the sum of (x) 85% of eligible accounts receivable of BarTech and the
Guarantors and (y) 60% of eligible inventory of BarTech and the Guarantors;
(d) Indebtedness of a Restricted Subsidiary owed to and held by
BarTech or another Restricted Subsidiary, in each case which is not
subordinated in right of payment to any Indebtedness of such Restricted
Subsidiary, except that (i) any transfer of such Indebtedness by BarTech or
a Restricted Subsidiary (other than to BarTech or to a Restricted
Subsidiary) and (ii) the sale, transfer or other disposition by BarTech or
any Restricted Subsidiary of Capital Stock of a Restricted Subsidiary which
is owed Indebtedness of another Restricted Subsidiary such that it ceases
to be a Restricted Subsidiary shall, in each such event, be an incurrence
of Indebtedness by such Restricted Subsidiary subject to the other
provisions of the covenant 'Limitation on Additional Indebtedness';
(e) Indebtedness of BarTech owed to and held by a Restricted
Subsidiary which, if owed to and held by a Restricted Subsidiary that is
not a Guarantor, is unsecured and subordinated in right of payment to the
payment and performance of BarTech's obligations under the Indenture and
the Exchange Notes, except, in any such case, that (i) any transfer of such
Indebtedness by a Restricted Subsidiary (other than to another Restricted
Subsidiary) and (ii) the sale, transfer or other disposition by BarTech or
any Restricted Subsidiary of Capital Stock of the Restricted Subsidiary
which holds Indebtedness of BarTech such that it ceases to be a Restricted
Subsidiary shall, in each such event, be an incurrence of Indebtedness by
BarTech, subject to the other provisions of the covenant 'Limitation on
Additional Indebtedness';
103
<PAGE>
(f) (i) Interest Rate Protection Obligations of BarTech relating to
Indebtedness of BarTech or a Restricted Subsidiary and (ii) Interest Rate
Protection Obligations of any Restricted Subsidiary covering Indebtedness
of such Restricted Subsidiary; provided that, in the case of either clause
(i) or (ii), (x) any Indebtedness to which any such Interest Rate
Protection Obligations relate is otherwise permitted to be incurred under
this covenant and (y) the notional principal amount of any such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(g) Indebtedness of BarTech or any of the Restricted Subsidiaries
under Currency Agreements; provided that (i) such Currency Agreements
relate to Indebtedness or the purchase price of goods purchased or sold by
BarTech or one of the Restricted Subsidiaries in the ordinary course of
their business and (ii) such Currency Agreements do not increase the
Indebtedness or other obligations of BarTech and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(h) Indebtedness of BarTech or any of the Restricted Subsidiaries
represented by letters of credit for the account of BarTech or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(i) Indebtedness of BarTech or any of the Restricted Subsidiaries, in
addition to that described in clauses (a) through (h) above and clause (j)
below, in an aggregate principal amount outstanding at any time not
exceeding $10.0 million;
(j) Indebtedness of BarTech or any of its Restricted Subsidiaries
incurred from any Commonwealth of Pennsylvania or State of New York
governmental authority, agency or instrumentality, or for which any such
authority, agency or instrumentality provides direct or indirect credit
support, in an aggregate principal amount outstanding at any time not
exceeding $10.0 million: and
(k) Refinancing Indebtedness.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Indenture provides that BarTech (a) will not permit any of
the Restricted Subsidiaries to issue any Preferred Stock (other than to BarTech
or a Wholly-Owned Restricted Subsidiary) and (b) will not permit any person
(other than BarTech or a Wholly-Owned Restricted Subsidiary) to own any
Preferred Stock of any Restricted Subsidiary.
Limitation on Restricted Payments. The Indenture provides that BarTech
will not, and will not permit any of the Restricted Subsidiaries to, directly or
indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of BarTech or any payment made to
the direct or indirect holders (in their capacities as such) of Capital
Stock of BarTech (other than dividends or distributions payable solely in
Capital Stock of BarTech (other than Disqualified Capital Stock of BarTech)
or in options, warrants or other rights to purchase Capital Stock of
BarTech (other than Disqualified Capital Stock of BarTech));
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of BarTech (other than any such Capital Stock owned by a
Restricted Subsidiary);
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Subordinated Indebtedness owned by BarTech or one of its Restricted
Subsidiaries); or
(d) make any Investment (other than any Permitted Investment) in any
person;
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as 'Restricted Payments'), unless, at the
time of and after giving effect to the proposed
104
<PAGE>
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, shall be the Fair Market Value on the date of such Restricted Payment of
the asset(s) proposed to be transferred by BarTech or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment), (A) no
Default shall have occurred and be continuing, (B) immediately prior to and
after giving effect to such Restricted Payment, BarTech would be able to incur
$1.00 of additional Indebtedness pursuant to the proviso of the covenant
described under '--Limitation on Additional Indebtedness' above and (C) the
aggregate amount of all Restricted Payments declared or made from and after the
Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net
Income of BarTech accrued on a cumulative basis during the period beginning on
the Issue Date and ending on the last day of the fiscal quarter of BarTech
immediately preceding the date of such proposed Restricted Payment, which period
shall be treated as a single accounting period (or, if such aggregate cumulative
Consolidated Net Income of BarTech for such period shall be a deficit, minus
100% of such deficit) plus (2) the aggregate net cash proceeds received by
BarTech (excluding (i) net cash proceeds referred to in clause (viii) of the
following paragraph and (ii) net cash proceeds from the Blackstone Investment)
from the issuance or sale of Capital Stock (excluding Disqualified Capital
Stock, but including Capital Stock issued upon the conversion of convertible
Indebtedness or from the exercise of options, warrants or rights to purchase
Capital Stock (other than Disqualified Capital Stock)) of BarTech to any person
(other than (i) to a Restricted Subsidiary or (ii) to any employee, officer,
director or employee stock ownership trust qualified under the Internal Revenue
Code to the extent the issuance and sale was funded by a loan or advance by
BarTech or any Subsidiary of BarTech to such trust or such persons) after the
Issue Date plus (3) in the case of the disposition or repayment of any
Investment made after the Issue Date constituting a Restricted Payment
(including any Investment made pursuant to clause (ix) of the following
paragraph), an amount equal to the lesser of the return of capital with respect
to such Investment and the initial amount of such Investment, in either case,
less the cost of the disposition of such Investment. For purposes of the
preceding clause (C)(2), upon the issuance of Capital Stock either from the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights, the amount
counted as net cash proceeds received will be the cash amount received by
BarTech at the original issuance of the Indebtedness that is so converted or
exchanged or from the issuance of options, warrants or rights, as the case may
be, plus the incremental amount of cash received by BarTech, if any, upon the
conversion, exchange or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default shall have occurred and be continuing, the redemption, the
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock of BarTech or any Restricted Subsidiary in exchange for, or out of
the net cash proceeds of, a substantially concurrent issue and sale of other
shares of Capital Stock (other than Disqualified Capital Stock) of BarTech to
any person (other than to a Subsidiary of BarTech); provided that the amount of
any such net cash proceeds that are utilized for any such redemption, repurchase
or other acquisition or retirement shall be excluded from clause (C)(2) of the
preceding paragraph; (iii) so long as no Default shall have occurred and be
continuing, any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (1) Capital Stock (other than
Disqualified Capital Stock) of BarTech to any person (other than to a Subsidiary
of BarTech); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase or other acquisition or retirement
shall be excluded from clause (C)(2) of the preceding paragraph; or (2)
Indebtedness of BarTech issued to any person (other than a Subsidiary of
BarTech), so long as such Indebtedness is Subordinated Indebtedness which (x)
has no scheduled principal payments earlier than the 91st day after the final
maturity date of the Exchange Notes and (y) is subordinated to the Exchange
Notes in the same manner and at least to the same extent as the Subordinated
Indebtedness so purchased, exchanged, redeemed, acquired or retired; (iv) so
long as no Default has occurred and is continuing, Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the covenant
described under '--Disposition of Proceeds of Asset
105
<PAGE>
Sales' below; (v) to the extent required by the applicable plan documents or
applicable law, to fund purchases by BarTech of Common Stock of BarTech from an
employee stock ownership trust qualified under the Internal Revenue Code for the
account of employees of BarTech or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees; (vi) regularly scheduled dividend payments on and mandatory
redemptions of the 1,100 shares of Bethlehem Preferred Stock outstanding on the
Issue Date in accordance with the terms of the Bethlehem Preferred Stock as in
effect on the Issue Date; (vii) Investments made in Utility Unrestricted
Subsidiaries in an amount not to exceed $2.0 million in aggregate, provided such
Investments are made in connection with the acquisition of all of the
outstanding Capital Stock of such Utility Unrestricted Subsidiaries; (viii) so
long as no Default has occurred and is continuing, Investments in Unrestricted
Subsidiaries in an amount not to exceed $2.5 million; and (ix) so long as no
Default has occurred and is continuing, Investments made in Unrestricted
Subsidiaries out of the net cash proceeds (excluding net cash proceeds from the
Blackstone Investment) of a substantially concurrent issue and sale of shares of
Capital Stock (other than Disqualified Capital Stock of BarTech) to any person
(other than to a Subsidiary of BarTech); provided that the amount of any such
net cash proceeds shall be excluded from clause (C)(2) of the preceding
paragraph. In computing the amount of Restricted Payments previously made for
purposes of clause (C) of the preceding paragraph, Restricted Payments made
under the preceding clauses (i), (iv), (v), (vi), (vii) and (viii) shall be
included and clauses (ii), (iii) and (ix) shall not be so included. In addition,
any management fees paid by BarTech or any Restricted Subsidiary to Blackstone
and/or Johnstown Advisors Corp. shall be included in computing the amount of
Restricted Payments made for purposes of clause (C) of the preceding paragraph.
Limitation on Liens. The Indenture provides that BarTech will not, and
will not cause or permit any of the Restricted Subsidiaries (including the
Pledgors that are Subsidiaries of BarTech) to, directly or indirectly, create,
incur, assume, affirm or permit or suffer to exist or remain in effect any
Liens:
(a) upon any item of Collateral other than Permitted Collateral Liens
and
(b) upon any other properties or assets of BarTech or of any of the
Restricted Subsidiaries, whether owned on the Issue Date or acquired after
the Issue Date, or on any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits thereon, except for
the following permitted Liens on non-Collateral: (i) Liens existing on the
Issue Date to the extent and in the manner such Liens are in effect on the
Issue Date; and (ii) Permitted Liens.
BarTech and the Pledgors will be permitted to incur and suffer to exist
purchase money Liens to finance the acquisition or construction of personal
property or fixtures of BarTech or any Restricted Subsidiary located at the real
properties constituting Collateral free of the Liens securing the Exchange Notes
under the Security Documents for so long as the related Indebtedness shall be
outstanding, notwithstanding any contrary provision of the Security Documents or
the Indenture; provided that (i) the aggregate principal amount of all related
purchase money Indebtedness (and refinancings thereof) contemplated by this
sentence shall not exceed $5.0 million, (ii) the related Indebtedness shall not
be secured by any property or assets of BarTech or any of its Subsidiaries other
than the property or assets so acquired or constructed and (iii) each such
purchase money Lien shall either (x) exist at the time of acquisition or
construction or (y) be created within 90 days of such acquisition or
construction.
Limitation on Sale-Leaseback Transactions. The Indenture provides that
BarTech will not, and will not permit any of the Restricted Subsidiaries to,
enter into any Sale-Leaseback Transaction with respect to any property of
BarTech or any of the Restricted Subsidiaries. Notwithstanding the foregoing,
BarTech and the Restricted Subsidiaries may enter into Sale-Leaseback
Transactions with respect to property not constituting Collateral which is
acquired or constructed after the Issue Date; provided that (a) the Attributable
Value of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of
BarTech or such Restricted Subsidiary, as the case may be, (b) after giving pro
forma effect to any such Sale-Leaseback Transaction and the foregoing clause
(a), BarTech would be able to incur $1.00 of additional Indebtedness pursuant to
the first paragraph of the covenant described under '--Limitation on Additional
Indebtedness' above and (c) such Sale-Leaseback Transaction shall be in
compliance with the covenant 'Limitation on Liens.'
106
<PAGE>
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that BarTech will not, and will not permit
any of the Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to BarTech or any other Restricted
Subsidiary, (c) make loans or advances to, or any investment in, BarTech or any
other Restricted Subsidiary, (d) transfer any of its properties or assets to
BarTech or any other Restricted Subsidiary or (e) guarantee any Indebtedness of
BarTech or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of BarTech or any Restricted Subsidiary, (iii) customary restrictions
on transfers of property subject to a Lien permitted under the Indenture which
could not materially adversely affect BarTech's ability to satisfy its
obligations under the Indenture and the Exchange Notes, (iv) any agreement or
other instrument of a person acquired by BarTech or any Restricted Subsidiary
(or a Subsidiary of such person) in existence at the time of such acquisition
(but not created in contemplation thereof), which encumbrance or restriction is
not applicable to any person, or the properties or assets of any person, other
than the person, or the properties or assets of the person, so acquired, (v)
provisions contained in agreements or instruments relating to Indebtedness which
prohibit the transfer of all or substantially all of the assets of the obligor
thereunder unless the transferee shall assume the obligations of the obligor
under such agreement or instrument and (vi) encumbrances and restrictions under
and as contemplated by agreements governing Indebtedness in effect on the Issue
Date and encumbrances and restrictions in permitted refinancings or replacements
thereof which are no less favorable to the holders of the Exchange Notes than
those contained in the Indebtedness so refinanced or replaced.
Disposition of Proceeds of Asset Sales. The Indenture provides that
BarTech will not, and will not permit any of the Restricted Subsidiaries to,
make any Asset Sale unless (i) such Asset Sale is for Fair Market Value (which
shall be as determined by BarTech's Board of Directors), (ii) if such Asset Sale
involves the sale, transfer or other disposition of any Collateral, at least 85%
of the proceeds therefrom consist of cash and/or Cash Equivalents (with
Indebtedness of BarTech or any of the Restricted Subsidiaries assumed by the
purchaser being counted as cash for such purposes if BarTech and the Restricted
Subsidiaries are unconditionally released from any liability therefor), (iii) if
such Asset Sale involves the sale, transfer or other disposition of any
Collateral, it shall be in compliance with the provisions described under
'--Possession, Use and Release of Collateral' and (iv) BarTech shall apply the
Net Cash Proceeds of such Asset Sale within 180 days of receipt thereof, as
follows:
(i) first, to the extent such Net Cash Proceeds are received from an
Asset Sale (x) not involving the sale, transfer or disposition of any
Collateral ('Non-Collateral Proceeds') or (y) involving the sale, transfer
or disposition of Collateral which is subject to a permitted Lien which is
prior to the Lien granted to the Collateral Agent for the benefit of the
Trustee and the holders of the Exchange Notes ('Senior Collateral
Proceeds'), to satisfy all mandatory repayment obligations arising by
reason of such Asset Sale under the terms of any instrument (or related
security agreement) governing any Indebtedness which is secured by the
assets which are the subject of such Asset Sale; provided that the
available borrowings (if applicable) under, and the outstanding amount of
such Indebtedness, shall be permanently reduced to the extent such
Non-Collateral Proceeds or Senior Collateral Proceeds are so applied;
(ii) second, to the extent such Net Cash Proceeds are received from an
Asset Sale involving the sale, transfer or disposition of Collateral which
is subject to a Permitted Collateral Lien which ranks pari passu with the
Lien granted to the Collateral Agent for the benefit of the Trustee and the
holders of the Exchange Notes and, if such Collateral is Capital Stock of
BarTech, the purchaser or transferee does not (A) become a party to the
applicable Security Documents to which such Collateral was pledged to the
Collateral Agent for the benefit of the holders of the Exchange Notes and
the applicable Intercreditor Agreement or (B) such Collateral is not sold
or transferred subject to the Lien of the Collateral Agent on such
Collateral for the benefit of the holders of the Exchange
107
<PAGE>
Notes ('Pari Passu Proceeds'), that portion of the Pari Passu Proceeds not
constituting the Noteholders' Pro Rata Share thereof to satisfy all
mandatory prepayment obligations arising by reason of such Asset Sale under
the terms of the New Credit Agreement; provided that the available
borrowings under, and the outstanding amount of, such Indebtedness shall be
permanently reduced to the extent such Pari Passu Proceeds are so applied;
and
(iii) third, with respect to any Non-Collateral Proceeds, Senior
Collateral Proceeds and Pari Passu Proceeds remaining after application
pursuant to the preceding paragraphs (i) and (ii) and any Net Cash Proceeds
received from an Asset Sale involving the sale, transfer or other
disposition of any Collateral (other than Net Cash Proceeds from an Asset
Sale of Collateral in which a Secured Party has a Permitted Collateral Lien
prior to or pari passu with the Lien of the Trustee and the holders of the
Exchange Notes ('Junior Collateral Proceeds')) (any such remaining Non-
Collateral Proceeds, remaining Senior Collateral Proceeds, Junior
Collateral Proceeds and Pari Passu Proceeds are referred to herein as the
'Available Amount'), BarTech shall make an offer to purchase (the 'Asset
Sale Offer') from all holders of Notes and Exchange Notes, up to a maximum
principal amount (expressed as a multiple of $1,000) of Notes and Exchange
Notes, plus accrued and unpaid interest thereon, if any, equal to the
Available Amount at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided that BarTech will not be required to apply pursuant to
this paragraph (iii) any Available Amount received from any Asset Sale if,
and only to the extent that, (x) such Net Cash Proceeds are applied by
BarTech or any Guarantor to acquire or construct property or assets in
lines of business related to BarTech's and the Guarantors' business at such
time (a 'Permitted Related Acquisition') and (y) if any of the Available
Amount so invested pursuant to a Permitted Related Acquisition derived from
an Asset Sale of Collateral, the property and assets so acquired are made
subject to a Lien securing the Exchange Notes and any other Indebtedness
secured by such Collateral having the same relative priorities pursuant to
the Intercreditor Agreements as the Lien on the Collateral subject to the
Asset Sale pursuant to, and subject to, the provisions described under
'--Possession, Use and Release of Collateral--Substitute Collateral' below.
BarTech may defer the Asset Sale Offer until there is an aggregate
unutilized Available Amount equal to or in excess of $10.0 million
resulting from one or more Asset Sales (at which time, the entire
unutilized Available Amount, and not just the amount in excess of $10.0
million, shall be applied as required pursuant to this paragraph). The
Asset Sale Offer shall remain open for a period of at least 20 business
days. To the extent the Asset Sale Offer is not fully subscribed to by the
holders of Notes and Exchange Notes, BarTech or the Restricted Subsidiary,
as the case may be, may retain such unutilized portion of the Available
Amount free and clear of the Lien of the Security Documents.
Whenever Net Cash Proceeds from an Asset Sale of Collateral are received by
BarTech or any Restricted Subsidiary, BarTech shall deposit such Net Cash
Proceeds with the Collateral Agent as Trust Moneys subject to disposition as
provided in this covenant or as provided under the '--Possession, Use and
Release of Collateral' and '--Use of Trust Moneys' and such Net Cash Proceeds
shall be set aside by the Collateral Agent pending application to either the
purchase of Exchange Notes or its other permitted applications. At the direction
of BarTech, such Net Cash Proceeds shall be required to be invested by the
Collateral Agent in Cash Equivalents. BarTech or the Guarantor, as applicable,
shall be entitled to any interest or dividends accrued, earned or paid on such
investments.
If BarTech is required to make an Asset Sale Offer, BarTech will comply
with all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable securities laws and regulations and any applicable requirements of
any securities exchange on which the Exchange Notes are listed.
Limitation on Transactions with Interested Persons. BarTech will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, transfer, disposition, purchase,
exchange or lease of assets, property or services) with, or for the benefit of,
any executive officer, director or Affiliate of BarTech or any beneficial holder
of 5% or more of the outstanding Voting Stock of BarTech
108
<PAGE>
(an 'Interested Person'), unless (a) such transaction or series of related
transactions is on terms that are no less favorable to BarTech or such
Restricted Subsidiary, as the case may be, than those which could have been
obtained in a comparable transaction at such time from persons who are not
Interested Persons, (b) with respect to a transaction or series of related
transactions involving aggregate payments or Fair Market Value equal to or
greater than $250,000, BarTech shall have delivered an officers' certificate to
the Trustee certifying that such transaction or series of related transactions
complies with the preceding clause (a) and that such transaction or series of
related transactions has been approved by a majority of the Board of Directors
of BarTech (including a majority of Disinterested Directors) and (c) with
respect to a transaction or series of related transactions involving aggregate
payments or Fair Market Value equal to or greater than $5.0 million, BarTech has
complied with the requirements of clauses (a) and (b) above and has obtained a
written opinion from an Independent Financial Advisor stating that the terms of
such transaction or series of transactions are fair to BarTech or such
Restricted Subsidiary, as the case may be, from a financial point of view;
provided that (A) so long as no Default shall have occurred and be continuing,
there shall be no need to obtain the approval of a majority of Disinterested
Directors for the payment of customary investment banking and advisory fees to
Blackstone in connection with any transaction involving BarTech or any of its
Subsidiaries and (B) this covenant will not restrict BarTech or the Restricted
Subsidiaries from (i) paying dividends in respect of its Capital Stock permitted
under the covenant described under '--Limitation on Restricted Payments' above,
(ii) paying reasonable and customary fees to directors of BarTech and the
Restricted Subsidiaries who are not employees of BarTech, (iii) making loans or
advances to officers or employees of BarTech and the Restricted Subsidiaries
(including travel and moving expenses) in the ordinary course of business for
bona fide business purposes of BarTech or such Restricted Subsidiary not in
excess of $500,000 in the aggregate at any one time outstanding, (iv) entering
into or consummating any transaction between or among BarTech and Restricted
Subsidiaries (other than Restricted Subsidiaries whose Capital Stock is owned by
an Affiliate of BarTech (other than another Restricted Subsidiary)), (v) making
payments for services required in the ordinary course of business to any Utility
Unrestricted Subsidiary pursuant to supply or service agreements existing on the
Issue Date or (vi) so long as no Default shall have occurred and be continuing,
paying (1) transaction fees on the Issue Date consisting of a financial advisory
fee in an amount not to exceed $2.0 million to Blackstone and a financing fee in
an amount not to exceed $2.0 million to Johnstown Advisors Corp. and (2)
management fees to Blackstone and/or Johnstown Advisors Corp. in an amount not
to exceed $875,000 in aggregate in any fiscal year; provided that if any Asset
Acquisition for consideration of at least $10.0 million is consummated after the
Issue Date, such management fees may be increased to an amount not to exceed
$1.25 million in any fiscal year. Notwithstanding any other provision to the
contrary, in no event shall BarTech or any Restricted Subsidiary pay any
management fees to Blackstone and/or Johnstown Advisors Corp. if, after payment
of any such fee made on or prior to September 30, 1997, BarTech shall have less
than $1.00 of Consolidated Net Income (calculated, solely for purposes of this
sentence, without deduction for the amortization of original issue discount on
the Notes) for the 12 full months immediately preceding such payment (the '12
Month Test'); provided that unpaid amounts shall accrue and be payable on the
earlier of (i) January 1, 1998 (or such later date as the interest coverage
covenant under the New Credit Agreement is in effect) or (ii) such time
subsequent to September 30, 1997 as BarTech meets the foregoing 12 Month Test.
Limitation on Designations of Unrestricted Subsidiaries. The Indenture
provides that BarTech may designate any Subsidiary of BarTech (other than a
Guarantor or any Subsidiary which owns or holds any Collateral) as an
'Unrestricted Subsidiary' under the Indenture (a 'Designation') only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) BarTech would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the 'Designation Amount') equal to the Fair
Market Value of the Capital Stock of such Subsidiary on such date; and
109
<PAGE>
(c) BarTech would be permitted under the Indenture to incur $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
described under '--Limitation on Additional Indebtedness' at the time of
Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, BarTech shall be deemed to have made
an Investment constituting a Restricted Payment pursuant to the covenant
'--Limitation on Restricted Payments' for all purposes of the Indenture in the
Designation Amount. The Indenture further provides that (i) BarTech shall not
and shall not permit any Restricted Subsidiary to, at any time (x) provide
credit support for, or a guarantee of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except in the case of clause (x) or (y) to the extent permitted
under the covenant described under '--Limitation on Restricted Payments,' and
(ii) no Unrestricted Subsidiary shall at any time guarantee or otherwise provide
credit support for any obligation of BarTech or any Restricted Subsidiary.
The Indenture further provides that BarTech may revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary (a 'Revocation') if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
BarTech delivered to the Trustee certifying compliance with the foregoing
provisions.
Reports. From and after the date on which an Exchange Offer Registration
Statement is required to be effective, BarTech will file with the Commission the
annual reports, quarterly reports and other documents required to be filed with
the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or
not BarTech has a class of securities registered under the Exchange Act. BarTech
will be required to file with the Trustee and provide to each holder of Exchange
Notes within 15 days after it files them with the Commission (or, if any such
filing is not permitted under the Exchange Act, 15 days after BarTech would have
been required to make such filing) copies of such reports and documents.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
BarTech will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any person or persons, and BarTech will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of BarTech and the Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, BarTech or a Guarantor
shall be the surviving person of such merger or consolidation, or (ii) the
person formed by any such consolidation or into which BarTech, such Guarantor or
such Restricted Subsidiary is merged or to which the properties and assets of
BarTech and/or any Restricted Subsidiary, as the case may be, are transferred
(any such surviving person or transferee person being a 'Surviving Entity')
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee in form reasonably satisfactory to the Trustee, all the obligations
110
<PAGE>
of BarTech under the Exchange Notes, the Indenture and the Security Documents,
and in each case, the Indenture shall remain in full force and effect; (b)
immediately before and immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default shall have
occurred and be continuing; and (c) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
BarTech or the Surviving Entity, as the case may be, could incur $1.00 of
additional Indebtedness pursuant to the proviso of the first paragraph of the
covenant described under '--Certain Covenants--Limitation on Additional
Indebtedness' above.
In connection with any consolidation, merger, transfer, lease, assignment
or other disposition contemplated hereby, BarTech shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease, assignment or other disposition and
the supplemental indenture in respect thereof comply with the requirements under
the Indenture.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of BarTech or BarTech and the Restricted Subsidiaries, taken
as a whole, in accordance with the foregoing, in which BarTech is not the
continuing corporation, the Surviving Entity formed by such a Consolidation or
into which BarTech is merged or to which such transfer is made shall succeed to
and be substituted for, and may exercise every right and power of, BarTech under
the Indenture with the same effect as if such successor corporation had been
named as BarTech therein; provided that solely for purposes of computing amounts
described in subclause (C) of the covenant described under '--Limitation on
Restricted Payments' above, any such successor person shall only be deemed to
have succeeded to and be substituted for BarTech with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
The Indenture provides that for all purposes of the Indenture and the
Exchange Notes (including the provisions of this covenant and the covenants
described in '--Limitation on Additional Indebtedness,' '--Limitation on
Restricted Payments' and '--Limitation on Liens'), Subsidiaries of any Surviving
Entity will, upon such transaction or series of transactions, become Restricted
Subsidiaries or Unrestricted Subsidiaries as provided pursuant to the covenant
described under '--Limitation on Designations of Unrestricted Subsidiaries' and
all Indebtedness, and all Liens on property or assets, of BarTech and the
Restricted Subsidiaries immediately prior to such transaction or series of
transactions will be deemed to have been incurred upon such transaction or
series of transactions.
EVENTS OF DEFAULT
The following will be 'Events of Default' under the Indenture:
(a) default in the payment of any interest on the Exchange Notes when
it becomes due and payable and continuance of such default for a period of
30 days; or
(b) default in the payment of the principal of, or premium, if any, on
the Exchange Notes when due and payable, at maturity, upon acceleration,
redemption, pursuant to a required offer to purchase or otherwise; or
(c) default in the performance of or compliance with, or breach of,
any term, covenant, condition or provision of the Exchange Notes, the
Indenture, the Escrow Agreement or the Intercreditor Agreements (other than
defaults specified in clause (a) or (b) above), and continuance of such
default or breach for a period of 30 days after written notice to BarTech
by the Trustee or to BarTech and the Trustee by the holders of at least 25%
in aggregate principal amount of the outstanding Notes and Exchange Notes;
or
(d) default in the performance of or compliance with, or breach of,
any term, covenant, condition, or provision of the Security Documents,
which default or breach shall continue unremedied for 45 days after written
notice to BarTech and the applicable Pledgor by the Trustee
111
<PAGE>
or to BarTech and the applicable Pledgor and the Trustee by holders of at
least 25% in aggregate principal amount of the outstanding Notes and
Exchange Notes unless the remedy or cure of such default requires work to
be performed, acts to be done or conditions to be removed which cannot, by
their nature, reasonably be performed, done or removed within such 45-day
period, or if such remedy or cure is prevented by causes outside of the
control or responsibility of BarTech, in which case no 'Event of Default'
shall be deemed to exist so long as BarTech shall have commenced cure
within such 45-day period and shall diligently prosecute the same to
completion, but in no event longer than 90 days thereafter; or
(e) either (i) default or defaults in the payment of any principal,
premium or interest under one or more agreements, instruments, mortgages,
bonds, debentures or other evidences of Indebtedness (a 'Debt Instrument')
under which BarTech or one or more Restricted Subsidiaries or BarTech and
one or more Restricted Subsidiaries then have outstanding Indebtedness in
excess of $7.5 million, individually or in the aggregate, or (ii) any other
default or defaults under one or more Debt Instruments under which BarTech
or one or more Restricted Subsidiaries or BarTech and one or more
Restricted Subsidiaries then have outstanding Indebtedness in excess of
$7.5 million, individually or in the aggregate, and in the case of this
clause (ii) either (x) such Indebtedness is already due and payable in full
or (y) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness; or
(f) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $7.5 million, either individually or in the
aggregate, shall be entered against BarTech or any Restricted Subsidiary of
BarTech or any of their respective properties and shall not be discharged
or fully bonded and there shall have been a period of 60 days after the
date on which any period for appeal has expired and during which a stay of
enforcement of such judgment, order or decree shall not be in effect; or
(g) either (i) the collateral agent under the New Credit Agreement,
(ii) any holder of Indebtedness secured by any of the Collateral or (iii)
any holder of at least $7.5 million in aggregate principal amount of
Indebtedness of BarTech or any of its Restricted Subsidiaries shall
commence (or have commenced on its behalf) judicial proceedings to
foreclose upon assets of BarTech or any of its Restricted Subsidiaries
having an aggregate Fair Market Value, individually or in the aggregate, in
excess of $7.5 million or shall have exercised any right under applicable
law or applicable security documents to take ownership of any such assets
in lieu of foreclosure; or
(h) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee or gives notice to such effect (other than by reason of
the termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture); or
(i) except as contemplated by their terms, any of the Security
Documents or the Intercreditor Agreements ceases to be in full force and
effect or any of the Security Documents or the Intercreditor Agreements
ceases to give the Collateral Agent or the Trustee, in any material
respect, the Liens, rights, powers and privileges purported to be created
thereby; or
(j) the Escrow Agreement ceases to be in full force and effect (other
than pursuant to its terms) or is declared null and void, or BarTech shall
deny or fail to perform any of its obligations under the Escrow Agreement;
or
(k) certain events of bankruptcy, insolvency or reorganization with
respect to BarTech, any Guarantor, any Significant Subsidiary of BarTech
or, so long as it has pledged shares of Capital Stock of BarTech, a
Partnership shall have occurred.
If an Event of Default (other than an Event of Default with respect to
BarTech, any Guarantor or a Partnership specified in clause (k) above) occurs
and is continuing, then the holders of at least 25% in aggregate principal
amount of the outstanding Notes and Exchange Notes may, by written notice, and
the Trustee upon the request of the holders of not less than 25% in aggregate
principal amount of the
112
<PAGE>
outstanding Notes and Exchange Notes shall, declare the principal of, premium,
if any, and accrued interest on, all the Notes and Exchange Notes to be due and
payable immediately. Upon any such declaration such principal shall become due
and payable immediately. If an Event of Default specified in clause (k) above
with respect to BarTech, any Guarantor or a Partnership occurs and is
continuing, then the principal of, premium, if any, and accrued interest on, all
the Exchange Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holder of
Exchange Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the Trustee
and before any foreclosure (whether pursuant to judicial proceedings or
otherwise), or the taking of ownership in lieu of foreclosure, upon any
Collateral by the Collateral Agent (on behalf of the Trustee or Noteholders), by
the Trustee or at the direction of the holders of Notes and Exchange Notes, the
holders of not less than a majority in aggregate principal amount of outstanding
Notes and Exchange Notes, by written notice to BarTech and the Trustee, may
rescind such declaration if (a) BarTech has paid or deposited with the Trustee
or the Collateral Agent a sum sufficient to pay (i) all sums paid or advanced by
the Trustee or the Collateral Agent under the Indenture, the Security Documents
and the Intercreditor Agreements and the reasonable compensation, expenses,
disbursements and advances of the Trustee and the Collateral Agent and their
respective agents and counsel, (ii) all overdue interest on all Notes and
Exchange Notes, (iii) the principal of and premium, if any, on any Notes and
Exchange Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Exchange Notes, and
(iv) to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the Exchange Notes
which has become due otherwise than by such declaration of acceleration; (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the non-
payment of principal of, premium, if any, and interest on the Notes and Exchange
Notes that have become due solely by such declaration of acceleration, have been
cured or waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes and Exchange Notes may on behalf of the holders of all the
Notes and Exchange Notes waive any past Defaults under the Indenture, except a
Default in the payment of the principal of, premium, if any, or interest on any
Note or Exchange Note, or in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each Note and Exchange Note outstanding.
No holder of any of the Notes or Exchange Notes has any right to institute
any proceeding with respect to the Indenture, the Security Documents, the
Intercreditor Agreements, the Notes, the Exchange Notes or the Guarantees or any
remedy thereunder, unless the holders of at least 25% (or, in the case of the
Security Documents and the Intercreditor Agreements only, a majority) in
aggregate principal amount of the outstanding Notes and Exchange Notes have made
written request, and offered reasonable security or indemnity, to the Trustee
and, if requested, the Collateral Agent to institute such proceeding as Trustee
or Collateral Agent, as applicable, the Trustee or Collateral Agent, as
applicable, has failed to institute such proceeding within 60 days after receipt
of such notice and the Trustee, within such 60-day period, has not received
directions inconsistent with such written request by holders of a majority in
aggregate principal amount of the outstanding Notes and Exchange Notes and, if
applicable, the Collateral Agent, within such 60-day period, has not received
directions inconsistent with such written request by the Trustee. Such
limitations do not apply, however, to a suit instituted by a holder of an
Exchange Note for the enforcement of the payment of the principal of, premium,
if any, or interest on such Exchange Note on or after the respective due dates
expressed in such Exchange Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not a Default shall occur and be continuing, the Trustee
under the Indenture is not under any obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the holders
113
<PAGE>
unless such holders shall have offered to such Trustee reasonable security or
indemnity. Subject to certain provisions concerning the rights of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding Notes
and Exchange Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture.
If a Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each holder of the Exchange Notes notice of the Default
within 30 days after obtaining knowledge thereof. Except in the case of a
Default in payment of principal of, premium, if any, or interest on any Exchange
Notes, the Trustee may withhold the notice to the holders of such Exchange Notes
if a committee of its trust officers in good faith determines that withholding
the notice is in the interest of the holders of the Exchange Notes.
BarTech is required to furnish to the Trustee annual and quarterly
statements as to the performance by BarTech of its obligations under the
Indenture and as to any default in such performance. BarTech is also required to
notify the Trustee within ten days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
BarTech may, at its option and at any time, terminate the obligations of
BarTech and the Guarantors with respect to the outstanding Exchange Notes and
Guarantees ('defeasance'). Such defeasance means that BarTech shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Exchange Notes, except for (a) the rights of holders of outstanding Exchange
Notes to receive payment in respect of the principal of, premium, if any, and
interest on such Exchange Notes when such payments are due, (b) BarTech's
obligations to issue temporary Exchange Notes, register the transfer or exchange
of any Exchange Notes, replace mutilated, destroyed, lost or stolen Exchange
Notes and maintain an office or agency for payments in respect of the Exchange
Notes, (c) the rights, powers, trusts, duties and immunities of the Trustee, and
(d) the defeasance provisions of the Indenture. In addition, BarTech may, at its
option and at any time, elect to terminate the obligations of BarTech and the
Guarantors with respect to certain covenants that are set forth in the
Indenture, some of which are described under '--Certain Covenants' above and any
subsequent failure to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Exchange Notes ('covenant
defeasance').
In order to exercise either defeasance or covenant defeasance, (a) BarTech
must irrevocably deposit with the Trustee, in trust, for the benefit of the
holders of the Exchange Notes, cash in United States dollars, U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of an Independent Financial Adviser, to pay the principal of,
premium, if any, and interest on the outstanding Exchange Notes to redemption or
maturity (except lost, stolen or destroyed Exchange Notes which have been
replaced or paid); (b) BarTech shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the outstanding Exchange Notes will
not recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (in the
case of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable Federal income tax laws); (c)
no Default shall have occurred and be continuing on the date of such deposit;
(d) such defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of BarTech; (e) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, any material agreement or instrument to which
BarTech or any of its Subsidiaries is a party or by which it is bound; (f)
BarTech shall have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally or to the rights of any
creditor of BarTech or any Guarantor other than those continuing rights of the
Noteholders; and (g) BarTech shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture to
114
<PAGE>
either defeasance or covenant defeasance, as the case may be, have been complied
with. In the event of a defeasance or covenant defeasance, all rights of the
Trustee and the Noteholders in and to the Collateral under the Security
Documents and the Intercreditor Agreement shall be released, except those
related to the deposit provided above.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
and Exchange Notes and all rights of the Trustee and the Noteholders in and to
the Collateral under the Security Documents and the Intercreditor Agreement
shall be released when (a) either (i) all the Notes and Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
and Exchange Notes which have been replaced or repaid and Notes and Exchange
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by BarTech and thereafter repaid to BarTech or
discharged from such trust) have been delivered to the Trustee for cancellation
or (ii) all Notes and Exchange Notes not theretofore delivered to the Trustee
for cancellation (except lost, stolen or destroyed Notes and Exchange Notes
which have been replaced or paid) have been called for redemption pursuant to
the terms of the Notes and Exchange Notes or have otherwise become due and
payable and BarTech has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes and Exchange Notes theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Notes and Exchange Notes to the date of deposit together with irrevocable
instructions from BarTech directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be; (b) BarTech and
the Guarantors have paid all other sums payable under the Indenture, the Notes,
the Exchange Notes, the Guarantees, the Security Documents and the Intercreditor
Agreement (so long as such agreements relate to the Exchange Notes) by BarTech
and the Guarantors; (c) there exists no Default under the Indenture; and (d)
BarTech has delivered to the Trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
satisfaction and discharge of the Indenture, the Notes and the Guarantees have
been complied with.
AMENDMENTS AND WAIVERS
From time to time, BarTech and the Guarantors, when authorized by Board
Resolutions of their respective Boards of Directors, and the Trustee may,
without the consent of the holders of any outstanding Exchange Notes, amend,
waive or supplement (or, if applicable, authorize the Collateral Agent to amend,
waive or supplement) the Indenture, the Exchange Notes, the Guarantees, the
Escrow Agreement, the Security Documents and/or the Intercreditor Agreements for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act or making any other change that does not
adversely affect the rights of any holder of Exchange Notes; provided that
BarTech has delivered to the Trustee an opinion of counsel stating that such
change does not adversely affect the legal rights of any holder of Exchange
Notes. Other amendments and modifications of the Indenture, the Notes, the
Exchange Notes, the Guarantees, the Escrow Agreement, the Security Documents and
the Intercreditor Agreements may be made by BarTech, the Guarantors, the Trustee
and, if applicable, the Collateral Agent with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding Notes
and Exchange Notes; provided that no such modification or amendment may, without
the consent of the holder of each outstanding Exchange Note affected thereby,
(a) reduce the principal amount of, extend the fixed maturity of or alter the
redemption provisions of, the Exchange Notes, (b) change the currency in which
any Exchange Notes or any premium or the interest thereon is payable or make the
principal of, premium, if any, or interest on any Exchange Note payable in a
currency other than that stated in the Exchange Note, (c) reduce the percentage
in principal amount of outstanding Exchange Notes that must consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture, any Guarantee, the Exchange Notes, the Security Documents or the
Intercreditor Agreements, (d) impair the right to institute suit for the
enforcement of any payment on
115
<PAGE>
or with respect to the Exchange Notes or any Guarantee, (e) waive a default in
payment with respect to the Exchange Notes or any Guarantee, (f) following the
occurrence of a Change of Control or the execution of a definitive agreement
with respect to a Change of Control or an Asset Sale (subject to clause ( j)
below) or with respect to prior Excess Cash Flow, as applicable, amend, change
or modify the obligations of BarTech to make and consummate a Change of Control
Offer with respect to such Change of Control or make an Excess Cash Flow Offer
with respect to such Excess Cash Flow or make and consummate the Asset Sale
Offer with respect to such Asset Sale or modify any of the provisions or
definitions with respect thereto, (g) reduce or change the rate or time for
payment of interest on the Exchange Notes, (h) modify or change any provision of
the Indenture, the Escrow Agreement, the Security Documents or the Intercreditor
Agreements affecting the ranking of the Exchange Notes or any Guarantee or the
priority of the claims of the Noteholders in and to the Collateral in any manner
adverse to the holders of the Exchange Notes, (i) release any Guarantor from any
of its obligations under its Guarantee or the Indenture other than in compliance
with the Indenture or ( j) directly or indirectly release any Lien on the
Collateral except in compliance with the terms of the Indenture, the Exchange
Notes, the Escrow Agreement, the Security Documents and the Intercreditor
Agreements (for so long as such agreements relate to the Exchange Notes).
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the
Pledgors will have the right to remain in possession and retain exclusive
control of the Collateral securing the Exchange Notes (other than any cash,
securities, obligations and Cash Equivalents constituting part of the Collateral
and deposited or required to be deposited with the Collateral Agent and other
than as set forth in the Security Documents and the Intercreditor Agreements),
to freely operate the Collateral and to collect, invest and dispose of any
income therefrom.
Release of Collateral. The Pledgors will have the right to sell, exchange
or otherwise dispose of any of the Collateral (other than Trust Moneys (but not
other than Trust Moneys constituting Net Cash Proceeds from an Asset Sale),
which Trust Moneys are subject to release from the Lien of the Security
Documents as provided under '--Use of Trust Moneys' below or upon substituting
Substitute Collateral therefor as provided under 'Substitute Collateral' below),
upon compliance with the requirements and conditions of the provisions described
below, and the Trustee shall promptly instruct the Collateral Agent to promptly
release the same from the Lien of any of the Security Documents upon receipt by
the Trustee (other than in the case of paragraph (d) below) and the Collateral
Agent of a notice requesting such release and describing the property to be so
released, together with delivery of the following, among other matters:
(a) If the property to be released has a book value of at least $1.0
million, a Board Resolution of BarTech and any other Pledgor, if
applicable, requesting such release and authorizing an application to the
Trustee and the Collateral Agent therefor.
(b) An officers' certificate of BarTech and any other Pledgor, as
applicable, dated not more than 30 days prior to the date of the
application for such release, and signed also, in the case of the
following, clauses (ii) and (iv), by an Independent Appraiser or, if such
property consists of securities, by an Independent Financial Advisor, in
each case stating in substance as to certain matters, including the
following:
(i) that, in the opinion of the signers, the security afforded by
the Security Documents will not be impaired by such release in
contravention of the provisions of the Indenture, and that either (1)
other property (including, in the case of a Permitted Related
Acquisition, the property so acquired) is to be substituted as
Substitute Collateral in accordance with the 'Substitute Collateral'
provisions described below or (2) the Collateral to be released is not
Net Cash Proceeds from an Asset Sale and is not being replaced by
comparable property, has a book value of less than $250,000 and is not
necessary for the efficient operation of the remaining property of
BarTech and the Restricted Subsidiaries or in the conduct of the
business of BarTech and the Restricted Subsidiaries as conducted
immediately prior thereto or (3) the
116
<PAGE>
Collateral to be released is Trust Moneys representing Net Cash Proceeds
from an Asset Sale that are not required, or cannot be required through
the passage of time or otherwise, to be used to purchase Notes or
Exchange Notes under the covenant described under '--Certain
Covenants--Disposition of Proceeds of Asset Sales' or (4) the Collateral
to be released is being released in connection with an Asset Sale of
such Collateral and the net proceeds (as defined in paragraph (d) below)
from such Asset Sale are being delivered to the Collateral Agent (if
required by the covenant described under '--Certain
Covenants--Disposition of Proceeds of Asset Sales') in accordance with,
and to the extent required by, the provisions of clause (ii) of
paragraph (d) below;
(ii) except in the case of a release referred to in the preceding
paragraph (b)(i)(3), that BarTech or any other Pledgor, as applicable,
has either disposed of or will dispose of the Collateral so to be
released in compliance with all applicable terms of the Indenture and
for a consideration representing, in the opinion of the signers, its
Fair Market Value, which consideration may, subject to any other
provision of the Indenture, consist of any one or more of the following:
(A) cash or Cash Equivalents, (B) obligations secured by a purchase
money Lien upon the property so to be released and (C) any other
property or assets that in each case, upon acquisition thereof by
BarTech or the applicable other Pledgor, would be subject to the Lien of
the Security Documents (except as provided in clause (ii) of paragraph
(d) below), and subject to no Lien other than certain Liens which, under
the applicable provisions of the Security Documents and Intercreditor
Agreements relating thereto, are permitted to be superior to the Lien of
the Collateral Agent for the benefit of the Trustee and the holders of
Exchange Notes therein, all of such consideration to be briefly
described in the certificate;
(iii) that no Default has occurred and is continuing;
(iv) the Fair Market Value, in the opinion of the signers, of the
property to be released at the date of such application for release;
provided that it shall not be necessary under this clause (iv) to state
the Fair Market Value of any property whose Fair Market Value is
certified in a certificate of an Independent Appraiser or Independent
Financial Advisor under paragraph (c) below; and
(v) that all conditions precedent in the Indenture, the Security
Documents and the Intercreditor Agreements relating to the release of
the Collateral in question have been complied with.
(c) If (i) the Fair Market Value of the property to be released and of
all other property released from the Lien of the Security Documents since
the commencement of the then current calendar year is 10% or more of the
aggregate principal amount of the Notes and Exchange Notes outstanding on
the date of the application and (ii) the Fair Market Value of the
Collateral to be so released is at least $25,000 and at least 1% of the
aggregate principal amount of the Notes and Exchange Notes outstanding on
the date of the application, a certificate of an Independent Appraiser or,
if such property consists of securities, a certificate of an Independent
Financial Advisor stating (1) the then Fair Market Value, in the opinion of
the signer, of the property to be released; and (2) that such release, in
the opinion of the signer, will not impair the security interests under any
of the Security Documents in contravention of their terms.
(d) Either (i) possession of the Substitute Collateral (if and to the
extent the Substitute Collateral consists of property the possession of
which is necessary for the perfection by the Collateral Agent of a Lien
thereon) and all documents required by the 'Substitute Collateral'
provisions below or (ii) the net proceeds (excluding any Net Cash Proceeds
from any Asset Sale which are not required, or cannot be required through
the passage of time or otherwise, to be used to purchase or redeem Notes or
Exchange Notes under the covenant described under '--Certain
Covenants--Disposition of Proceeds of Asset Sales') or, if the Collateral
so to be released is subject to a prior Lien permitted by the Security
Documents (other than a prior Lien in favor of a Secured Creditor), a
certificate of the trustee, mortgagee or other holder of such prior Lien
that it has received such net proceeds and has been irrevocably authorized
by the applicable Pledgor to
117
<PAGE>
pay over to the Collateral Agent any balance of such net proceeds remaining
after the discharge of such Indebtedness secured by such prior Lien; and,
if any property other than cash, Cash Equivalents or obligations is
included in such net proceeds, such instruments of conveyance, assignment
and transfer, if any, as may be necessary, in the opinion of counsel, to
subject to the Lien of the Security Documents all the right, title and
interest of BarTech or any other Pledgor, as applicable, in and to such
property. For purposes of this paragraph (d), 'net proceeds' shall mean any
cash, Cash Equivalents, obligations or other property received on the sale,
transfer, exchange or other disposition of Collateral to be released, less
a proportionate share of (i) brokerage commissions and other reasonable
fees and expenses related to such transaction and (ii) any provision for
Federal, state or local taxes payable as a result of such sale, transfer,
exchange or other disposition.
(e) One or more opinions of counsel which, when considered
collectively, shall be substantially to the effect (i) that any obligation
included in the consideration for any property so to be released and to be
received by the Collateral Agent pursuant to paragraph (d) above is a valid
and binding obligation enforceable in accordance with its terms, subject to
such customary exceptions regarding equitable principles and creditors'
rights generally as shall be reasonably acceptable to the Trustee in its
sole judgment, and is effectively pledged under the Security Documents,
(ii) that any Lien granted by a purchaser to secure a purchase money
obligation is a fully perfected first priority Lien and such instrument
granting such Lien is enforceable in accordance with its terms, (iii)
either (x) that such instruments of conveyance, assignment and transfer as
have been or are then delivered to the Collateral Agent are sufficient to
subject to the Lien of the Security Documents all the right, title and
interest of BarTech or any other Pledgor, as applicable, in and to any
property, other than cash, Cash Equivalents and obligations, that is
included in the consideration for the Collateral so to be released and to
be received by the Collateral Agent pursuant to paragraph (d) above,
subject to no Lien other than Liens permitted on Collateral by the covenant
described under '--Certain Covenants--Limitation on Liens,' or (y) that no
instruments of conveyance, assignment or transfer are necessary for such
purpose, (iv) that BarTech or any other Pledgor, as applicable, has
corporate power to own all property included in the consideration for such
release, (v) in case any part of the money or obligations referred to in
paragraph (d) above has been deposited with a trustee or other holder of
any prior Lien permitted by the Security Documents, that the Collateral to
be released, or a specified portion thereof, is or immediately before such
release was subject to such prior Lien and that such deposit is required by
such prior Lien and (vi) that all conditions precedent provided in the
Indenture, the Security Documents and the Intercreditor Agreements relating
to the release of such Collateral have been complied with; provided that in
the case of clauses (i) and (ii) above, such opinion of counsel may be
subject to such qualifications as to Liens which may be imposed as a matter
of law or such assumptions as to the actual knowledge of any person as may
be reasonably acceptable to the Trustee and the Collateral Agent.
Notwithstanding the foregoing, BarTech and the other Pledgors may obtain a
release of Available Amounts required to purchase Exchange Notes pursuant to an
Asset Sale Offer by directing the Collateral Agent in writing to cause to be
applied such Available Amounts to such purchase in accordance with the covenant
described under '--Certain Covenants--Disposition of Proceeds of Asset Sales.'
In case an Event of Default shall have occurred and be continuing, BarTech
and the other Pledgors, while in possession of the Collateral (other than cash
and other personal property held by, or required to be deposited or pledged
with, the Collateral Agent under the Indenture or under any Security Document or
any Intercreditor Agreement, or with any trustee, mortgagee or other holder of a
prior Lien permitted under the Security Documents), may do any of the things
enumerated in these 'Release of Collateral' provisions only if the Trustee, in
its discretion, or the holders of a majority in aggregate principal amount of
the outstanding Notes and Exchange Notes shall consent to such action, in which
event any certificate filed under these 'Release of Collateral' provisions shall
omit the statement to the effect that no Default has occurred and is continuing.
118
<PAGE>
All cash or Cash Equivalents received by the Collateral Agent pursuant to
the provisions described under 'Release of Collateral' will be held by the
Collateral Agent as Trust Moneys under the Indenture and the Principal
Intercreditor Agreement subject to application as provided in '--Release of
Collateral' (in the case of any Net Cash Proceeds from Asset Sales) or in '--Use
of Trust Moneys' below. All purchase money and other obligations received by the
Collateral Agent pursuant to these 'Release of Collateral' provisions shall be
held by the Collateral Agent.
Any releases of Collateral made in strict compliance with these 'Release of
Collateral' provisions shall be deemed not to impair the security interests
created by the Security Documents in favor of the Collateral Agent, on behalf of
the Trustee for the benefit of the holders of Exchange Notes, in contravention
of the provisions of the Indenture.
Substitute Collateral. BarTech or any other Pledgor may, at its option,
obtain a release of any of the Collateral (excluding the Capital Stock of
BarTech or of any of the Restricted Subsidiaries but including (x) any Trust
Moneys (other than Trust Moneys representing Net Cash Proceeds which are
required or may, through the passage of time or otherwise, possibly be required
to be used to purchase or redeem Notes or Exchange Notes pursuant to the
covenant described under '--Certain Covenants--Disposition of Proceeds of Asset
Sales') and (y) any Trust Moneys representing Net Cash Proceeds to be applied to
a Permitted Related Acquisition) by subjecting other property related to or used
in the principal businesses of BarTech and the Restricted Subsidiaries, if such
substitute property has a Fair Market Value equal to or greater than the
Collateral to be released (the 'Substitute Collateral'), to the Lien of any
Security Document or a similar instrument in place of and in exchange for any of
the Collateral to be released upon presentation to the Collateral Agent and the
Trustee of, among other things, the following documents:
(a) an application of BarTech and any other Pledgor, as applicable,
requesting such substitution of Substitute Collateral and describing the
property to be so released and the property to be substituted therefor;
(b) the resolutions, certificates, opinions and other statements
required by the 'Release of Collateral' provisions summarized above, as
applicable, in respect of any of the Collateral to be released;
(c) an officers' certificate of BarTech and any other Pledgor, as
applicable, also signed by an Independent Appraiser or, if the property to
be released consists of securities, by an Independent Financial Advisor
stating in substance the fair value, in the opinion of the signers, of the
Substitute Collateral;
(d) if (x) the Collateral to be released is comprised of more than one
Category of Collateral and (y) any particular Class of Secured Creditors
has a priority claim under the terms of any Intercreditor Agreement with
respect to one such Category of Collateral that is different from any other
such Category of Collateral, (i) an officers' certificate to the effect
that, and an amendment to such Intercreditor Agreement reflecting that, the
priorities of the Trustee and the holders of Exchange Notes under the terms
of such Intercreditor Agreement in the Substitute Collateral relative to
all other Secured Creditors either (A) represents percentage interests
determined by the last paragraph of these 'Substitute Collateral'
provisions described below or (B) are identical to that of the Trustee and
the holders of Exchange Notes relative to the other Secured Creditors in
the Collateral to be released under the terms of such Intercreditor
Agreement, or (C) are prior to all other Secured Creditors under the terms
of such Intercreditor Agreement, (ii) one or more opinions of counsel to
the effect of the preceding clause (i)(A), (B) or (C) (to the extent
involving matters of law), as applicable, and (iii) if the foregoing clause
(i)(A) is applicable, a certificate from an Independent Appraiser setting
forth the calculations required by the last paragraph below; and
(e) an instrument or instruments in recordable form sufficient for the
Lien of the Security Documents to cover the Substitute Collateral together
with, in the case of personal property, an opinion of counsel stating that
the Lien of the Security Documents constitutes a direct and valid first
priority Lien on such Substitute Collateral, together with an officers'
certificate stating that any
119
<PAGE>
specific exceptions to such Lien are Liens of the character which, under
the provisions of the Security Documents, are permitted to be prior to the
Lien of the Security Documents and, in the case of real property, a policy
of title insurance (or a commitment to issue title insurance) insuring that
the Lien of the Security Documents constitutes a direct and valid and
perfected mortgage Lien on such Substitute Collateral and certain other
documentation with respect thereto, together with, among other things, an
officers' certificate stating that any specific exceptions to such title
insurance are Liens permitted to be on Collateral pursuant to the covenant
described under '--Certain Covenants--Limitation on Liens.'
Whenever the provisions of the Indenture require a determination of the
Secured Creditors' relative priorities in property or assets which are to be
substituted as Collateral for property or assets being released which are (x)
comprised of more than one Category of Collateral and (y) any particular Class
of Secured Creditors has a priority claim under the terms of such Intercreditor
Agreement with respect to one such Category of Collateral that is different from
any other such Category of Collateral, BarTech or any other Pledgor may rely
upon an opinion of an Independent Appraiser or, to the extent the relevant
property or assets consists, in whole or in part, of securities, an Independent
Financial Advisor, to value the Collateral to be released and the property or
assets to be substituted, determine the relative Fair Market Values of the
different Categories of the Collateral to be released and use that as a basis
for allocating priorities (which shall be accomplished through percentage
allocations) in the property or assets to be substituted; provided that, if the
foregoing is impractical to accomplish the intended purposes, in the opinion of
counsel or such Independent Appraiser or Independent Financial Advisor, then no
substitution shall be permitted pursuant to clause (i)(A) of paragraph (d)
above. In determining relative Fair Market Values pursuant to this paragraph,
the Independent Financial Advisor and/or Independent Appraiser shall make its
determination of the Fair Market Value of each Category of Collateral to be
released assuming each such Category of Collateral was separate and unrelated to
any other Category of Collateral being released. The percentage determinations
referred to in clause (i)(A) of paragraph (d) above shall be made as follows:
The Trustee and the Noteholders shall have an aggregate interest of 100% in the
Substitute Collateral which shall be allocated, by percentage, among the various
priorities in the Substitute Collateral on a basis that is intended to reflect
the priorities of the Trustee and the Noteholders in the Collateral being
released. The percentage interest of the Trustee and the Noteholders assigned to
any particular priority level shall be obtained by dividing the Fair Market
Value of all Categories of Collateral being released in which the Trustee and
Noteholders are entitled to that particular priority under the terms of the
applicable Intercreditor Agreement by the Fair Market Value of all of the
Collateral being released.
Disposition of Collateral Without Release. Notwithstanding the provisions
of '--Release of Collateral' or '--Substitute Collateral' above, so long as no
Event of Default shall have occurred and be continuing, BarTech and any other
Pledgor may, without any release or consent by the Collateral Agent or the
Trustee, do any number of ordinary course activities, in limited dollar amounts
specified by the Trust Indenture Act and not to exceed $4.0 million in aggregate
of Fair Market Value of Collateral during the term of the Exchange Notes, upon
satisfaction of certain conditions. For example, among other things, subject to
such dollar limitations and conditions, BarTech would be permitted to sell or
otherwise dispose of any machinery, equipment, furniture, tools, materials or
supplies or other similar property subject to the Lien of the Security Documents
which may have become worn out or obsolete; grant rights-of-way and easements
over or in respect of any real property; abandon, terminate, cancel, release or
make alterations in or substitutions of any leases, contracts or rights-of-way;
surrender or modify any franchise, license or permit subject to the Lien of any
of the Security Documents which it may own or under which it may be operating;
alter, repair, replace, change the location or position of and add to it plants,
structures, machinery, systems, equipment, fixtures and appurtenances; demolish,
dismantle, tear down or scrap any Collateral or abandon any thereof other than
land or interests in land (other than leases); grant a non-exclusive license of
any intellectual property; and abandon intellectual property under certain
circumstances.
Release of Capital Stock of BarTech. Notwithstanding any provision to the
contrary in the Indenture, the Capital Stock of BarTech pledged pursuant to the
Security Documents will be released
120
<PAGE>
from the Lien of the Security Documents upon receipt by the Collateral Agent
from BarTech of any officers' certificate certifying that (i) no Default has
occurred and is continuing, (ii) either (A) one or more issuances of Capital
Stock (other than Disqualified Capital Stock) by BarTech on a primary basis for
aggregate gross proceeds (before discounts, commissions and expenses) of $40.0
million or more has been consummated or (B) BarTech has made a Change of Control
Offer and has complied with all of its obligations under the Indenture with
respect to such Change of Control Offer and the related Change of Control is
occurring in connection therewith and (iii) the Lien on the Capital Stock
securing the New Credit Agreement shall have been unconditionally released in
connection therewith.
Use of Trust Moneys. All Trust Moneys (including, without limitation, all
Net Cash Proceeds required to be deposited with the Collateral Agent) shall be
held by the Collateral Agent as a part of the Collateral securing the Exchange
Notes and, so long (other than in the case of clause (i)) as no Default shall
have occurred and be continuing, may either (i) if such Trust Moneys are sums
contained in the Interest Escrow Account, be released in accordance with the
terms of the Escrow Agreement, (ii) be released in accordance with '--Release of
Collateral' above if such Trust Moneys represent Net Cash Proceeds from an Asset
Sale or (iii) at the direction of BarTech and any other applicable Pledgor, be
applied by the Collateral Agent from time to time to the acquisition of assets
to be made subject to the Lien of the Security Documents pursuant to the
'Substitute Collateral' provisions above, to the payment of the principal,
premium, if any, and interest on any Exchange Notes at maturity or upon
redemption or to the purchase of Exchange Notes upon tender or in the open
market or at private sale or upon any exchange or in any one or more of such
ways, in each case in accordance with the terms of the Indenture. BarTech and
any other applicable Pledgor may also withdraw Trust Moneys constituting the
proceeds of insurance upon any part of the Collateral or an award for any
Collateral taken by eminent domain to reimburse BarTech or such other Pledgor
for repair or replacement of such Collateral, subject to certain conditions.
REGARDING THE TRUSTEE AND THE COLLATERAL AGENT
United States Trust Company of New York serves as Trustee under the
Indenture and acts as Collateral Agent under the Intercreditor Agreements and
the Security Documents. Neither United States Trust Company of New York nor any
other person is acting as a collateral agent with respect to the inventory,
accounts receivable and related collateral. United States Trust Company of New
York will also, in its capacity as Collateral Agent, be serving as a collateral
agent for the other Secured Creditors under the Intercreditor Agreements. The
Indenture provides that, except during the continuance of an Event of Default,
the Trustee thereunder will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is continuing,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Intercreditor Agreements provide that the Collateral Agent will perform
only such duties as are specifically set forth in the Intercreditor Agreements.
See 'Summary of Collateral and Intercreditor Agreements.'
The Indenture and the provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of BarTech or any Guarantor, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided that if it acquires any conflicting
interest (as defined in the Trust Indenture Act), it must eliminate such
conflict or resign.
GOVERNING LAW
The Indenture, the Exchange Notes, the Guarantees (other than with respect
to Collateral located in Ontario, Canada), the Escrow Agreement and the
Intercreditor Agreements will each be governed by the laws of the State of New
York without regard to the principles of conflicts of law. The Security
121
<PAGE>
Documents will be governed by the laws of the State of New York except to the
extent otherwise set forth therein with respect to matters relating to the
Collateral. The Security Documents relating to Collateral located in Ontario,
Canada, will be governed by the laws of Ontario, Canada without regard to
principles of conflict of law.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
'Acquired Indebtedness' means Indebtedness of a person existing at the time
such person becomes a Subsidiary of BarTech or assumed in connection with an
Asset Acquisition by such person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such person becoming a
Subsidiary of BarTech or such acquisition.
'Affiliate' of any specified person means any other person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with, such specified person. For the purposes of this definition,
'control' when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
'controlling' and 'controlled' have meanings correlative to the foregoing.
'Agent' has the meaning ascribed to that term under 'Summary of Collateral
and Intercreditor Agreements.'
'Asset Acquisition' means (a) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, by BarTech or any of its Subsidiaries in any other
person, in either case pursuant to which such person shall become a Subsidiary
of BarTech or shall be merged with or into BarTech or any of its Subsidiaries or
(b) any acquisition by BarTech or any of its Subsidiaries of the assets of any
person which constitute substantially all of an operating unit or business of
such person.
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than BarTech or a
Restricted Subsidiary, in one or a series of related transactions, of (a) any
Capital Stock of any Restricted Subsidiary (other than in respect of directors'
qualifying shares or investments by foreign nationals mandated by applicable
law); (b) all or substantially all of the properties and assets of any division
or line of business of BarTech or any Restricted Subsidiary; or (c) any other
properties or assets of BarTech or any Restricted Subsidiary other than in the
ordinary course of business.
'Asset Sale Offer' has the meaning ascribed to that term under '--Certain
Covenants--Disposition of Proceeds of Asset Sales.'
'Attributable Value' means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the case
of any lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated. 'Attributable Value' means, as to a
Capitalized Lease Obligation under which any person is at the time liable and at
any
122
<PAGE>
date as of which the amount thereof is to be determined, the capitalized amount
thereof that would appear on the face of a balance sheet of such person in
accordance with GAAP.
'Available Amount' has the meaning ascribed to that term under '--Certain
Covenants--Disposition of Proceeds of Asset Sales.'
'Average Life to Stated Maturity' means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied (ii) the amount of each such principal payment by (b)
the sum of all such principal payments.
'Blackstone' means Blackstone Capital Partners II Merchant Banking Fund
L.P. and its Affiliates.
'Blackstone Investment' means the purchase of Class B Common Stock of
BarTech by Blackstone for gross proceeds of $30.0 million in cash.
'Board Resolution' means with respect to any person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such person, to have
been duly adopted by the Board of Directors of such person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
'Capital Expenditures' means, with respect to any person, for any period,
on a consolidated basis for such person and its Restricted Subsidiaries, the
aggregate of all expenditures during such period which, as determined in
accordance with GAAP, are required to be included in property, plant or
equipment or a similar fixed asset account.
'Capital Stock' means, with respect to any person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
'Capitalized Lease Obligation' means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted as a capital lease obligation under GAAP, and, for the purpose of the
Indenture, the amount of such obligation at any date shall be the capitalized
amount thereof at such date, determined in accordance with GAAP.
'Cash Equivalents' means, at any time, (a) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500.0 million; (c) certificates of deposit with a
maturity of 180 days or less of any financial institution that is organized
under the laws of the United States, any state thereof or the District of
Columbia that are rated at least A-1 by Standard & Poor's Rating Services or at
least P-1 by Moody's Investors Service, Inc.; or (d) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the government of the United States of America
or issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 180 days from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985. For purposes of the Interest Escrow
Account, Cash Equivalents shall include each of the financial instruments
described in clauses (a)-(d) above; provided that the maturities with respect to
all such instruments shall be for such periods of time as shall permit a
sufficient amount of cash to be in the Interest Escrow Account to effect the
required interest payments on the Notes and Exchange Notes when required for the
term of the Escrow Agreement.
123
<PAGE>
'Caster Indebtedness' means Indebtedness of BarTech outstanding on the
Issue Date pursuant to financing arrangements with Rokop Corporation, as such
arrangements exist on the Issue Date.
'Category of Collateral' means those classifications of the Collateral set
forth in the Intercreditor Agreements for priority purposes, which are
summarized under 'Summary of Collateral and Intercreditor Agreements.'
'Change of Control' means the occurrence of any of the following events:
(a) any 'person' or 'group' (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) other than Blackstone or a group controlled by Blackstone
is or becomes the 'beneficial owner' (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have 'beneficial
ownership' of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of more than
40% of the total Voting Stock of BarTech; provided Blackstone or a group
controlled by Blackstone does not own a greater percentage of the total Voting
Stock of such person; (b) BarTech consolidates with, or merges with or into,
another person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any person
consolidates with, or merges with or into, BarTech, in any such event pursuant
to a transaction in which (i) the outstanding Voting Stock of BarTech is
converted into or exchanged for cash, securities or other property, and (ii)
immediately after such transaction no 'person' or 'group' (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) other than Blackstone or a
group controlled by Blackstone is the 'beneficial owner' (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have 'beneficial ownership' of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise), directly or indirectly,
of more than 40% of the total Voting Stock of the surviving or transferee
corporation; provided Blackstone or a group controlled by Blackstone does not
own a greater percentage of the total Voting Stock of such person; or (c) at any
time during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of BarTech (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of BarTech was approved by a vote of a majority of
the directors then still in office either who were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (other than the action of Blackstone) to
constitute a majority of the total voting power Board of Directors of BarTech
then in office.
'Change of Control Date' has the meaning ascribed to that term under
'--Change of Control.'
'Change of Control Offer' has the meaning ascribed to that term under
'--Change of Control.'
'Change of Control Payment Date' has the meaning ascribed to that term
under '--Change of Control.'
'Class of Secured Creditors' means, with respect to each Category of
Collateral, a Secured Creditor or group of Secured Creditors identified in the
priority provisions of the Intercreditor Agreements for purposes of setting
forth relative Lien priorities on each Category of Collateral.
'Collateral' means, collectively, all amounts contained in the Escrow
Agreement and all of the property and assets (including, without limitation,
Trust Moneys) that are from time to time subject to the Lien of the Security
Documents.
'Collateral Agent' means United States Trust Company of New York, as
collateral agent under the Intercreditor Agreements and the Security Documents.
'Commission' has the meaning ascribed to that term under
'--Redemption--Optional Redemption upon Public Equity Offerings.'
'Common Stock' means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and
124
<PAGE>
includes, without limitation, all series and classes of such common stock and,
in the case of BarTech, the Class A Common Stock and Class B Common Stock of
BarTech.
'Consolidated Cash Flow Available for Fixed Charges' means, with respect to
BarTech for any period, (a) the sum of, without duplication, the amounts for
such period, taken as a single accounting period, of (i) Consolidated Net
Income, (ii) Consolidated Non-cash Charges, (iii) Consolidated Interest Expense
and (iv) Consolidated Income Tax Expense less (b) any non-cash items increasing
Consolidated Net Income for such period.
'Consolidated Fixed Charge Coverage Ratio' means, with respect to BarTech,
the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed
Charges of such person for the four full fiscal quarters immediately preceding
the date of the transaction (the 'Transaction Date') giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such four full fiscal
quarter period being referred to herein as the 'Four Quarter Period') to the
aggregate amount of Consolidated Fixed Charges of such person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, 'Consolidated Cash Flow Available for Fixed
Charges' and 'Consolidated Fixed Charges' shall be calculated after giving
effect on a pro forma basis for the period of such calculation to, without
duplication, (a) the incurrence of any Indebtedness of such person or any of its
Restricted Subsidiaries (and the application of the net proceeds thereof) during
the period commencing on the first day of the Four Quarter Period to and
including the Transaction Date (the 'Reference Period'), including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation (and the application of the net proceeds thereof), as if such
incurrence (and application) occurred on the first day of the Reference Period,
(b) an adjustment to eliminate or include, as the case may be, the Consolidated
Cash Flow Available for Fixed Charges and Consolidated Fixed Charges of such
person directly or indirectly attributable to assets which are the subject of
any Asset Sale or Asset Acquisition (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of
BarTech or one of the Restricted Subsidiaries (including any person who becomes
a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness) occurring during
the Reference Period, as if such Asset Sale (after giving effect to any
Designation of Unrestricted Subsidiaries) or Asset Acquisition occurred on the
first day of the Reference Period, (c) the retirement of Indebtedness during the
Reference Period which cannot thereafter be reborrowed occurring as if retired
on the first day of the Reference Period and (d) an adjustment to eliminate any
charges arising out of the Recapitalization. For purposes of calculating
'Consolidated Fixed Charges' for this 'Consolidated Fixed Charge Coverage
Ratio,' interest on Indebtedness incurred during the Four Quarter Period under
any new credit agreement which can be borrowed and repaid without reducing the
commitments thereunder shall be the actual interest during the Four Quarter
Period. Furthermore, in calculating 'Consolidated Fixed Charges' for purposes of
determining the denominator (but not the numerator) of this 'Consolidated Fixed
Charge Coverage Ratio,' (a) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date, (b) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Reference Period and (c) notwithstanding clause (a)
and (b) of this sentence, interest on Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements relating to Interest
Rate Protection Obligations, shall be deemed to have accrued at the rate per
annum resulting after giving effect to the operation of such agreements to the
extent then applicable. If BarTech or any of the Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third person, the above
clause shall give effect to the incurrence of such guaranteed Indebtedness as if
such person or such Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness.
'Consolidated Fixed Charges' means, with respect to BarTech for any period,
the sum of, without duplication, the amounts for such period of (a) the
Consolidated Interest Expense of BarTech and
125
<PAGE>
(b) the aggregate amount of dividends and other distributions paid or accrued
during such period in respect of Disqualified Capital Stock of BarTech and the
Restricted Subsidiaries on a consolidated basis.
'Consolidated Income Tax Expense' means, with respect to BarTech for any
period, the provision for Federal, state, local and foreign income taxes of
BarTech and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
'Consolidated Interest Expense' means, with respect to BarTech for any
period, without duplication, the sum of (a) the interest expense (net of
interest income) of BarTech and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (i) any amortization of debt discount, (ii) the net cost under
Interest Rate Protection Obligations, (iii) the interest portion of any deferred
payment obligation, (iv) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and (v)
all accrued interest, and (b) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by BarTech and
the Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
'Consolidated Net Income' means, with respect to BarTech, for any period,
the consolidated net income (or loss) of BarTech and the Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted, to the extent
included in calculating such net income, by excluding, without duplication, (a)
all extraordinary gains or losses, (b) the portion of net income (but not
losses) of BarTech and the Restricted Subsidiaries allocable to minority
interests in unconsolidated persons to the extent that cash dividends or
distributions have not actually been received by BarTech or one of the
Restricted Subsidiaries, (c) net income (or loss) of any person combined with
BarTech or one of the Restricted Subsidiaries on a 'pooling of interests' basis
attributable to any period prior to the date of combination, (d) any gain or
loss realized upon the termination of any employee pension benefit plan, on an
after-tax basis, (e) gains in respect of any Asset Sales by BarTech or one of
the Restricted Subsidiaries, (f) the cumulative non-cash effect of any change in
any accounting principle, (g) the net income of any Unrestricted Subsidiary,
except, for purposes of the covenant '--Limitation on Restricted Payments,' to
the extent that cash dividends or distributions have been actually received by
BarTech or one of the Restricted Subsidiaries, (h) the non-cash effect of
compensation expense related to the contribution of shares held by any qualified
employee stock ownership trust formed for employees of BarTech and the
Restricted Subsidiaries and (i) the net income of any Restricted Subsidiary of
such person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, law, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholder(s).
'Consolidated Non-cash Charges' means, with respect to BarTech for any
period, the aggregate depreciation, amortization and other non-cash expenses of
BarTech and the Restricted Subsidiaries (including any non-cash charges related
to any employee stock ownership plan) reducing Consolidated Net Income of
BarTech and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which required an
accrual of or a reserve for cash charges for any future period).
'Contribution Agreement' has meaning ascribed to such term under 'Summary
of Collateral and Intercreditor Agreements.'
'covenant defeasance' has the meaning ascribed to such term under
'--Defeasance or Covenant Defeasance of Indenture.'
'Currency Agreement' means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect against
fluctuations in currency values.
'Default' means any event that is, or after notice or passage of time or
both would be, an Event of Default.
126
<PAGE>
'defeasance' has the meaning ascribed to that term under '--Defeasance or
Covenant Defeasance of Indenture.'
'Designation' has the meaning ascribed to that term under '--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries.'
'Designation Amount' has the meaning ascribed to that term under '--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries.'
'Disinterested Director' means, with respect to any transaction or series
of transactions, a member of the Board of Directors of BarTech other than a
director who has any material direct or indirect financial interest in or with
respect to such transaction or series of transactions.
'Disqualified Capital Stock' means, with respect to any person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Exchange Notes.
'Eligible Institution' means a commercial banking institution that has
combined capital and surplus of not less than $250.0 million or its equivalent
in foreign currency, whose debt is rated 'A' (or higher) according to Standard &
Poor's Rating Services or Moody's Investor Services, Inc. at the time as of
which any investment therein is made.
'Escrow Agreement' has the meaning ascribed to that term under '--Interest
Escrow Account.'
'Events of Default' has the meaning ascribed to that term under '--Events
of Default.'
'Exchange Act' means the Securities Act of 1934, as amended.
'Excess Cash Flow' means, with respect to any person for any period, the
amount by which the sum of Consolidated Net Income and other Consolidated
Non-cash Charges reducing Consolidated Net Income exceeds the sum of (i)
consolidated non-cash items increasing Consolidated Net Income, plus (ii)
Capital Expenditures, plus (iii) payments required to be made by BarTech and its
Restricted Subsidiaries pursuant to the scheduled maturities of any Indebtedness
of BarTech and its Restricted Subsidiaries, plus (iv) payments by BarTech with
respect to open market purchases by BarTech of any Notes and Exchange Notes
(other than such open market purchases of Notes and Exchange Notes previously
made by BarTech which are applied as a credit against mandatory repurchase
provisions as provided for in the Indenture) and plus/minus (v) the
increase/decrease in Working Capital in such period.
'Excess Cash Flow Offer' has the meaning ascribed to that term under
'--Excess Cash Flow Offer.'
'Excess Cash Flow Payment Date' has the meaning ascribed to that term under
'--Excess Cash Flow Offer.'
'Existing Liens' has the meaning ascribed to that term under the definition
of 'Permitted Collateral Liens.'
'Existing Secured Creditors' means, collectively, the Commonwealth of
Pennsylvania, acting by and through the Department of Commerce, The Pennsylvania
Industrial Development Authority, Johnstown Industrial Development Corporation,
the County of Cambria, Pennsylvania, The New York Job Development Authority,
Marine Midland Bank, Buffalo and Erie County Regional Development Corporation,
the City of Johnstown, Pennsylvania and Rokop.
'Fair Market Value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors of BarTech acting in good faith and shall
be evidenced by a Board Resolution of BarTech delivered to the Trustee except
(a) any determination of
127
<PAGE>
Fair Market Value made with respect to any parcel of real property and related
fixtures shall be made by an Independent Appraiser and (b) as otherwise
indicated in the Indenture, the Security Documents or the Intercreditor
Agreements.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable on the Issue
Date.
'Government Assisted Refinancing Indebtedness' means Refinancing
Indebtedness borrowed from any Commonwealth of Pennsylvania or State of New York
governmental authority, agency or instrumentality, or for which any such
authority, agency or instrumentality provides direct or indirect credit support.
'Guarantee' has the meaning ascribed to that term under '--The Guarantees.'
'guarantee' means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
'Guarantor' means (a) each of Bliss & Laughlin Industries Inc., Bliss &
Laughlin Steel Company and Canadian Drawn Steel Company Inc., (b) each
Subsidiary of BarTech that owns or holds any Collateral and (c) any other
Subsidiary of BarTech that guarantees the Exchange Notes.
'Indebtedness' means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade accounts payables and other
accrued current liabilities incurred in the ordinary course of business and
which are not overdue by more than 180 days, but including, without limitation,
all obligations, contingent or otherwise, of such person in connection with any
letter of credit, bankers' acceptance or other similar credit transaction, (b)
all obligations of such person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such person, (e)
all Indebtedness referred to in the preceding clauses of other persons and all
dividends of other persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Disqualified
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations under or in respect of foreign exchange contracts, currency swap
agreements and similar hedging arrangements and Interest Rate Protection
Obligations of such person and (i) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (a) through (h) above. For purposes hereof, the 'maximum fixed
repurchase price' of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock. For purposes of the covenant 'Limitation on
Additional
128
<PAGE>
Indebtedness,' in determining the principal amount of any Indebtedness (a) to be
incurred by BarTech or a Restricted Subsidiary or which is outstanding at any
date, (x) the principal amount of any Indebtedness which provides that an amount
less than the principal amount thereof shall be due upon any declaration of
acceleration thereof shall be the accreted value thereof at the date of
determination and (y) effect shall be given to the impact of any Currency
Agreements with respect to such Indebtedness and (b) outstanding at any time
under any Currency Agreement of BarTech or any Restricted Subsidiary shall be
the net payment obligation under such Currency Agreement at such time. When any
person becomes a Restricted Subsidiary, there shall be deemed to have been an
incurrence by such Restricted Subsidiary of all Indebtedness for which it is
liable at the time it becomes a Restricted Subsidiary. If BarTech or any of the
Restricted Subsidiaries, directly or indirectly, guarantees Indebtedness of a
third person, there shall be deemed to be an incurrence of such guaranteed
Indebtedness as if BarTech or such Restricted Subsidiary had directly incurred
or otherwise assumed such guaranteed Indebtedness.
'Independent Appraiser' means a person who in the ordinary course of its
business appraises property and, where real property is involved, is a member in
good standing of the American Institute of Real Estate Appraisers, recognized
and licensed to do business in the jurisdiction where such real property is
situated who (a) does not, and whose directors, officers and employees and
Affiliates do not, have a direct or indirect financial interest in BarTech or
any of its Subsidiaries and (b) in the judgment of the Board of Directors of
BarTech, is otherwise independent and qualified to perform the task for which it
is to be engaged.
'Independent Financial Advisor' means a nationally recognized investment
banking or public accounting firm (a) which does not, and whose directors,
officers and employees and Affiliates do not, have a direct or indirect
financial interest in BarTech or any of its Subsidiaries and (b) which, in the
judgment of the Board of Directors of BarTech, is otherwise independent and
qualified to perform the task for which it is to be engaged.
'Intercreditor Agreements' means, collectively, (i) the Principal
Intercreditor Agreement and (ii) the Stock Intercreditor Agreement, as each may
be amended, modified or waived in accordance with its respective terms.
'Interest Escrow Account' has the meaning ascribed to that term under
'--Interest Escrow Account.'
'Interest Rate Protection Agreement' means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
'Interest Rate Protection Obligations' means the net payment obligations of
any person pursuant to an Interest Rate Protection Agreement.
'Interested Person' has the meaning ascribed to that term under '--Certain
Covenants--Limitation on Transactions with Interested Persons.'
'Investment' means, with respect to any person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. 'Investments' shall
exclude extensions of trade credit by any person in the ordinary course of
business in accordance with normal trade practices of such person. In addition
to the foregoing, any foreign exchange contract, currency swap or similar
agreement shall constitute an Investment hereunder.
'Issue Date' has the meaning ascribed to that term under '--Maturity,
Interest and Principal.'
129
<PAGE>
'Junior Collateral Proceeds' has the meaning ascribed to that term under
'--Certain Covenants--Disposition of Proceeds of Asset Sales.'
'Lien' means any mortgage, lease, lien (statutory or other), pledge,
security interest, encumbrance, claim, hypothecation, assignment for security,
deposit arrangement or preference or other security agreement of any kind or
nature whatsoever. For purposes of the Indenture, a person shall be deemed to
own subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
'Net Cash Proceeds' means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents net of (a) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale; (b) provisions for all taxes payable as a result of such
Asset Sale; and (c) appropriate amounts to be provided by BarTech or any of its
Restricted Subsidiaries, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
BarTech or any of its Restricted Subsidiaries, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
'New Credit Agreement' means, the Credit Agreement, dated as of the Issue
Date, among BarTech, B&L, Chemical Bank, as Agent, the lenders parties thereto,
and their respective successors and assigns, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith that are permitted under the Indenture, each as the same
may at any time be amended, amended and restated, supplemented or otherwise
modified, including any refinancing, refunding, replacement or extension thereof
and whether by the same or any other lender or group of lenders.
'Non-Collateral Proceeds' has the meaning ascribed to that term under
'--Certain Covenants--Disposition of Proceeds of Asset Sales.'
'Noteholders' Pro Rata Share' means a fraction, (i) the numerator of which
is the aggregate principal amount of Notes and Exchange Notes outstanding on the
date the applicable Net Cash Proceeds are received or the date that is two
business days prior to the date that the applicable Excess Cash Flow Offer is
made, as the case may be, and (ii) the denominator of which is the sum of (x)
the aggregate principal amount of Notes and Exchange Notes outstanding on such
applicable date and (y) if the New Credit Agreement requires the applicable
Excess Cash Flow or Net Cash Proceeds, as the case may be, to be applied to
repay or collateralize (in the case of letters of credit) extensions of credit
thereunder, the aggregate principal amount of Indebtedness outstanding under the
New Credit Agreement on such applicable date.
'Pari Passu Proceeds' has the meaning ascribed to that term under 'Certain
Covenants--Disposition of Proceeds of Asset Sales.'
'Permitted Collateral Liens' means (i) the Liens created by the Exchange
Notes, the Guarantees, the Indenture and the Security Documents; (ii) Liens
existing on the Issue Date to the extent and in the manner such Liens are in
effect on the Issue Date ('Existing Liens'); (iii) Liens on Collateral other
than Capital Stock of BarTech or any of its Subsidiaries securing Government
Assisted Refinancing Indebtedness incurred to refinance Indebtedness (other than
Caster Indebtedness) which has been secured by Existing Liens; provided that (x)
such Liens are junior in priority to the Lien on such Collateral of the Trustee
and the holders of the Exchange Notes, and (y) such Liens do not extend to or
cover any property or assets of BarTech or any of the Restricted Subsidiaries
not subject to Existing Liens; (iv) Liens securing Indebtedness incurred in
accordance with clause (j) of the covenant described under '--Certain
Covenants--Limitation on Additional Indebtedness' above; provided that such
Liens are junior in priority to the Lien on such Collateral in favor of the
Trustee and the holders of the
130
<PAGE>
Exchange Notes; (v) Liens set forth in the preceding clauses (ii), (iii) and
(iv) as permitted to be altered under the terms of the Intercreditor Agreements
and the provisions described under '--Possession, Use and Release of
Collateral--Substitute Collateral'; and (vi) any other Liens expressly permitted
by the applicable Security Documents.
'Permitted Investments' means any of the following: (a) Investments in any
Restricted Subsidiary (including any person that pursuant to such Investment
becomes a Restricted Subsidiary) and any person that is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
BarTech or any Restricted Subsidiary at the time such Investment is made; (b)
Investments in Cash Equivalents; (c) Investments in deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business; (d) Investments in the Exchange Notes; (e) Investments in Currency
Agreements and Interest Rate Protection Agreements permitted by clause (f) or
(g) of the covenant '--Limitation on Additional Indebtedness'; (f) loans or
advances to officers or employees of BarTech and its Restricted Subsidiaries in
the ordinary course of business for bona fide business purposes, of BarTech and
its Restricted Subsidiaries (including travel and moving expenses) not in excess
of $500,000 in the aggregate at any one time outstanding; (g) loans or advances
to an employee stock ownership plan or to officers or employees made solely to
fund purchases of Common Stock from BarTech to the extent the proceeds therefrom
are concurrently received by BarTech and (h) Investments in evidences of
Indebtedness, securities or other property received from another person by
BarTech or any of its Restricted Subsidiaries in connection with any bankruptcy
proceeding or by reason of a composition or readjustment of debt or a
reorganization of such person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities or
other property of such person held by BarTech or any of its Restricted
Subsidiaries, or for other liabilities or obligations of such other person to
BarTech or any of its Restricted Subsidiaries that were created in accordance
with the terms of the Indenture.
'Permitted Liens' means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which BarTech or any of its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith by appropriate proceedings, if
such reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
governmental contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property which do not in any
case materially detract from the value of the property subject thereto or
do not interfere in any material respect with the ordinary conduct of the
business of BarTech or any of its Restricted Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
131
<PAGE>
(g) purchase money Liens to finance the acquisition or construction
of property or assets of BarTech or any Restricted Subsidiary of BarTech
acquired in the ordinary course of business; provided that (i) the related
purchase money Indebtedness shall not be secured by any Collateral or any
other property or assets of BarTech or any Restricted Subsidiary other than
the property or assets so acquired or constructed, (ii) the amount of
Indebtedness secured by any such Lien shall not exceed the purchase price
of the property or assets acquired or constructed and (iii) the Lien
securing such Indebtedness either (x) exists at the time of such
acquisition or construction or (y) shall be created within 90 days of such
acquisition or construction;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien or Liens permitted under the
Indenture and which has been incurred in accordance with the provisions of
the Indenture; provided that such Liens do not extend to or cover any
property or assets of BarTech or any of the Restricted Subsidiaries not
securing the Indebtedness so refinanced; and
(j) Liens on property and assets of BarTech and the Restricted
Subsidiaries not comprising Collateral securing Indebtedness under the New
Credit Agreement.
'Permitted Related Acquisition' has the meaning ascribed to that term under
'--Certain Covenants--Disposition of Proceeds of Asset Sales.'
'person' means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
'Pledgor' means each of BarTech, Bliss & Laughlin Industries Inc., Bliss &
Laughlin Steel Company, Canadian Drawn Steel Company Inc. and each other
Restricted Subsidiary and shareholder of BarTech that become a 'Pledgor' under
any Security Document.
'Preferred Stock' means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of preferred or preference Capital Stock of such person.
'Public Equity Offering' has the meaning ascribed to that term under
'--Redemption--Optional Redemption upon Public Equity Offerings.'
'Refinancing Indebtedness' means (a) Indebtedness of BarTech to the extent
the proceeds thereof are used solely to refinance (whether by amendment,
renewal, extension or refunding) Indebtedness of BarTech or any of the
Restricted Subsidiaries and (b) Indebtedness of any Restricted Subsidiary to the
extent the proceeds thereof are used solely to refinance (whether by amendment,
renewal, extension or refunding) Indebtedness of such Restricted Subsidiary, in
each such event, incurred under the first paragraph of the covenant described
under '--Certain Covenants--Limitation on Additional Indebtedness' or clause (a)
or (b) (other than the Indebtedness refinanced, redeemed or retired as described
under '--Use of Proceeds' herein and the Caster Indebtedness) of the second
paragraph of such covenant; provided that (i) the principal amount of
Indebtedness incurred pursuant to this definition (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, the accreted
value of such Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced (less any discount from principal amount due upon
payment pursuant to the terms of such Indebtedness), plus the amount of any
premium required to be paid in connection with such refinancing pursuant to the
terms of such Indebtedness or the amount of any premium reasonably determined by
the Board of Directors of BarTech as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated purchase, plus the amount of
reasonable expenses in connection therewith, (ii) in the case of Indebtedness
incurred pursuant to this definition by BarTech or any Guarantor, such
Indebtedness (x) has no scheduled principal payment prior to the earlier of (A)
the final maturity of the
132
<PAGE>
Indebtedness being refinanced or (B) the 91st day after the final maturity date
of the Exchange Notes and (y) has an Average Life to Stated Maturity greater
than either (A) the Average Life to Stated Maturity of the Indebtedness
refinanced or (B) the remaining Average Life to Stated Maturity of the Exchange
Notes and (iii) if the Indebtedness to be refinanced is Subordinated
Indebtedness, the Indebtedness to be incurred pursuant to this definition shall
also be Subordinated Indebtedness.
'Restricted Payments' has the meaning ascribed to that term under
'--Certain Covenants--Limitation on Restricted Payments.'
'Restricted Subsidiary' means any Subsidiary of BarTech that has not been
designated by the Board of Directors of BarTech, by a Board Resolution of
BarTech delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and
in compliance with the covenant described under '--Certain Covenants--Limitation
on Designations of Unrestricted Subsidiaries.' Any such designation may be
revoked by a Board Resolution of BarTech delivered to the Trustee, subject to
the provisions of such covenant.
'Revocation' has the meaning ascribed to that term under '--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries.'
'Sale-Leaseback Transaction' of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
'Secured Creditors' shall mean, for so long as they are entitled to the
benefits of the security interests in the Collateral pursuant to the terms of
the Principal Intercreditor Agreement, the Trustee, on its behalf and on behalf
of the holders of the Exchange Notes, the Existing Secured Creditors, any
holders of Secured Refinancing Indebtedness and any holders of Secured
Government Assisted Indebtedness.
'Secured Government Assisted Indebtedness' means Indebtedness incurred
pursuant to clause (j) of the covenant described under '--Certain
Covenants--Limitation on Additional Indebtedness' secured by a Lien on
Collateral permitted by the covenant described under '--Certain Covenants--
Limitation on Liens.'
'Secured Refinancing Indebtedness' means Refinancing Indebtedness secured
by a Lien on Collateral permitted by the covenant described under '--Certain
Covenants--Limitation on Liens.'
'Securities Act' means the Securities Act of 1933, as amended.
'Security Documents' means, collectively, (i) the company security
agreement between BarTech and the Collateral Agent, (ii) the master pledge
agreement between BarTech, each Restricted Subsidiary, the Pledgors party
thereto and the Collateral Agent, (iii) the mortgages between BarTech and the
Collateral Agent in respect of the Johnstown real estate and the Lackawanna real
estate, (iv) the subsidiary security agreements between B&L, BLSC or CDSC, as
applicable, and the Collateral Agent, (v) the mortgages between BLSC or CDSC, as
applicable, and the Collateral Agent with respect to the Bliss & Laughlin real
estate and (vi) all security agreements, mortgages, deeds of trust, pledges,
collateral assignments and other instruments evidencing or creating any security
interest in favor of the Collateral Agent (for the benefit of the Trustee and
the holders of the Exchange Notes) in all or any portion of the Collateral, in
each case as amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with their terms.
'Senior Collateral Proceeds' has the meaning ascribed to that term under
'--Certain Covenants--Disposition of Proceeds of Asset Sales.'
133
<PAGE>
'Significant Subsidiary' shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act.
'Stated Maturity' means, when used with respect to any Exchange Note or any
installment of interest thereon, the date specified in such Exchange Note as the
fixed date on which the principal of such Exchange Note or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
'Subordinated Indebtedness' means Indebtedness of BarTech or a Guarantor
which is expressly subordinated in right of payment to the Exchange Notes or the
Guarantee of such Guarantor, as the case may be.
'Subsidiary' means, with respect to any person, (a) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (b) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other persons performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
'Substitute Collateral' has the meaning ascribed to that term under
'--Possession, Use and Release of Collateral.'
'Surviving Entity' has the meaning ascribed to that term under
'--Consolidation, Merger, Sale of Assets, Etc.'
'Trust Moneys' means all cash or Cash Equivalents received by the Trustee
or the Collateral Agent, as the case may be: (a) upon the release of property
from the Lien of any of the Security Documents, including all moneys received in
respect of the principal of all purchase money, governmental and other
obligations; (b) as compensation for, or proceeds of the sale of all or any part
of the Collateral taken by eminent domain or purchased by, or sold pursuant to
any order of, a governmental authority or otherwise disposed of; (c) as proceeds
of insurance upon any, all or part of the Collateral (other than any liability
insurance proceeds payable to the Trustee or the Collateral Agent, as the case
may be, for any loss, liability or expense incurred by it); (d) pursuant to
certain provisions of the Mortgages; (e) as proceeds of any other sale or other
disposition of all or any part of the Collateral by or on behalf of the Trustee
or the Collateral Agent, as the case may be, or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of the
Collateral pursuant to the Security Documents or otherwise; (f) pursuant to the
terms of the Escrow Agreement; or (g) for application under the Indenture as
provided in the Indenture, any Security Document or the Intercreditor
Agreements, or whose disposition is not otherwise specifically provided for in
the Indenture, any Security Document or the Intercreditor Agreements.
'Unrestricted Subsidiary' means any Subsidiary of BarTech (other than a
Guarantor or a Subsidiary of BarTech which owns or holds any Collateral)
designated as such pursuant to and in compliance with the covenant described
under '--Certain Covenants--Limitation on Designations of Unrestricted
Subsidiaries.' Any such designation may be revoked by a Board Resolution of
BarTech delivered to the Trustee, subject to the provisions of such covenant.
'Utility Unrestricted Subsidiary' means an Unrestricted Subsidiary which
(i) operates a shortline railroad providing local service and connection to
ConRail for the Johnstown Facility and/or (ii) provides non-potable water for
industrial use by the Johnstown Facility.
'Voting Stock' means any class or classes of Capital Stock of a person
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority
134
<PAGE>
of the Board of Directors, managers or trustees of such person (irrespective of
whether or not, at the time, Capital Stock of any other class or classes shall
have, or might have, voting power by reason of the happening of any
contingency).
'Wholly-Owned Restricted Subsidiary' means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by BarTech or one or more
Wholly-Owned Restricted Subsidiaries or by BarTech and one or more Wholly-Owned
Restricted Subsidiaries. For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.
'Wholly-Owned Subsidiary' means any Subsidiary of which 100% of the
outstanding Capital Stock is owned by BarTech or another Wholly-Owned
Subsidiary. For purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be disregarded
in determining the ownership of a Subsidiary.
'Working Capital' means, at any date of designation, the consolidated
assets of BarTech and its Restricted Subsidiaries which are classified as
current assets in accordance with GAAP less the consolidated liabilities of
BarTech and the Restricted Subsidiaries which are classified as current
liabilities in accordance with GAAP; provided that current liabilities shall
include any indebtedness outstanding under any revolving credit facility
classified as long-term debt in accordance with GAAP to the extent either
advances are based upon a borrowing base of accounts receivable and inventory of
BarTech and the Restricted Subsidiaries or the proceeds thereof are used to
finance inventory or accounts receivable of BarTech and the Restricted
Subsidiaries.
135
<PAGE>
SUMMARY OF COLLATERAL AND INTERCREDITOR AGREEMENTS
The following summary of the Collateral and the provisions of the
Intercreditor Agreements is subject to, and qualified in its entirety by
reference to, all of the provisions of the Security Documents and the
Intercreditor Agreements, copies of the forms of which may be obtained upon
request to BarTech. In addition, reference is made to 'Description of the
Exchange Notes--Possession, Use and Release of Collateral' for the provisions of
the Indenture relating to releases and substitutions of Collateral. Certain
capitalized terms used below but not defined below are defined in 'Description
of the Exchange Notes--Certain Definitions.'
COLLATERAL
Pursuant to the Security Documents, the Pledgors have granted to the
Collateral Agent, for the benefit of the Trustee and the holders of the Exchange
Notes, security interests in certain of their real and personal property
summarized below. Such security interests will not extend to certain after
acquired property located at the facilities constituting Collateral or any
separable plants or independent facilities acquired or constructed by BarTech or
any of its Subsidiaries after the Issue Date and will generally not extend to
Capital Stock of BarTech issued after the Issue Date, including shares to be
issued to the ESOP and upon exercise of the Warrants. The Collateral for the
Exchange Notes and the Guarantees initially represent substantially all of the
real and personal properties of BarTech and the Guarantors (other than real and
personal property located at the Cartersville, Georgia facility of BLSC and
accounts receivable and inventory), as well as all of the Common Stock of
BarTech and all of the Capital Stock of its subsidiaries outstanding on the
Issue Date.
No appraisals of any of the Collateral have been prepared by or on behalf
of the Company or the Initial Purchaser. As of September 30, 1995, the net book
value of the Collateral pledged by BarTech and the Guarantors, comprised of real
property, fixtures and equipment was approximately $62.9 million, but, in the
opinion of the Company, should not be viewed as representative of the value of
such Collateral. There can be no assurance that the proceeds of any sale of the
Collateral in whole or in part pursuant to the Indenture, the Security Documents
and the Intercreditor Agreements following an Event of Default would be
sufficient to satisfy payments due on the Exchange Notes. In addition, the
ability of the Collateral Agent or the Trustee (for the benefit of the holders
of the Exchange Notes) to realize upon the Collateral may be subject to certain
bankruptcy law limitations in the event of a bankruptcy and other contractual
limitations contained in the Intercreditor Agreements. See '--Certain Bankruptcy
Limitations' below.
The collateral release provisions of the Indenture permit the release of
certain Collateral without substitution of Collateral of equal value under
certain circumstances. See 'Description of the Exchange Notes--Possession, Use
and Release of Collateral.' For example, Collateral may be released in
connection with Asset Sales and new collateral need not be substituted therefor
and the pledged Common Stock of BarTech may under certain circumstances be
released upon certain issuances of Capital Stock of BarTech or a Change of
Control. As described under 'Description of the Exchange Notes--Certain
Covenants--Disposition of Proceeds of Asset Sales,' the Net Cash Proceeds of
such Asset Sales may be required to be utilized to make an offer to purchase
Exchange Notes. To the extent an offer to purchase Exchange Notes is not
subscribed to by holders thereof, the unutilized Net Cash Proceeds may be
retained by the Company, free of the Lien of the Security Documents.
For a description of the priority of the Liens on the Collateral securing
the Exchange Notes and the Indenture under the terms of the Intercreditor
Agreements, which vary based upon the category of Collateral involved, see
'--Intercreditor Agreements' below.
The obligations of BarTech and the Guarantors under the Exchange Notes and
the Guarantees will be secured by liens on all of the following assets:
(a) substantially all of the real property (other than the real
property on which the Cartersviile, Georgia facility of BLSC is located and
the leased real property on which the executive offices of
136
<PAGE>
BarTech are located) owned or leased by BarTech and the Guarantors on the
Issue Date, together with all additions, accessions, improvements,
alterations, replacements and repairs thereto,
(b) machinery and equipment located at the real property referred to
in clause (a) above, whether owned on the Issue Date or thereafter acquired
(other than certain after-acquired equipment securing Indebtedness of up to
$10.0 million in principal amount) of BarTech and the Guarantors, together
with all additions, accessions, improvements, alterations, replacements and
repairs thereto,
(c) all of the shares of Common Stock of BarTech outstanding on the
Issue Date or thereafter acquired by the Partnerships and the Management
Stockholders (which will be pledged on a non-recourse basis), which are
subject to dilution and release as described under 'Description of the
Exchange Notes--Possession, Use and Release of Collateral,'
(d) all of the outstanding shares of Capital Stock of each of
BarTech's existing Restricted Subsidiaries and of each of BarTech's future
Wholly-Owned Restricted Subsidiaries incorporated in the United States, any
state therein or the District of Columbia and 65% of the outstanding
Capital Stock of each of BarTech's future foreign Wholly-Owned Restricted
Subsidiaries, (collectively, with the items of Collateral referred to in
clause (c), the 'Pledged Stock'),
(e) all intellectual property of BarTech and the Guarantors,
including, without limitation, all trademarks, service marks, patents,
copyrights, trade secrets and other proprietary information,
(f) all right, title and interest of BarTech and the Guarantors in, to
and under the documents executed in connection with the acquisition by
BarTech of the Bethlehem BRW Division pursuant to that certain contribution
agreement, dated as of December 22, 1993 (as amended, the 'Contribution
Agreement'), between Bethlehem and BarTech, including, without limitation,
all rights in respect of representations, warranties and indemnities
thereunder,
(g) certain assets deposited in a cash Collateral account pursuant to
the Intercreditor Agreement,
(h) all general intangibles relating to any and all of the foregoing,
(i) all amounts on deposit in the Interest Escrow Account,
(j) proceeds of certain assets pledged and assigned to Marine Midland
Bank, including the Company's right, title and interest in, to and under
the representations, warranties and indemnities relating to the Lackawanna
Facility set forth in the Contribution Agreement, and
(k) all proceeds and products of any and all of the foregoing.
The following sets forth certain summary information with respect to the
facilities included in the Collateral:
Johnstown Facilities. A steelmaking facility and bar rolling mill
facility, each owned by BarTech and located in Johnstown, Pennsylvania, of
approximately 1,916,500 square feet in the aggregate. These facilities are
located on approximately 225 acres. At September 30, 1995, the net book value of
the land, land improvements and building improvements was approximately $5.4
million and the net book value of the other property and equipment located
thereat was approximately $13.6 million.
Lackawanna Facility. A bar rolling mill facility owned by BarTech and
located in Lackawanna, New York, of approximately 1,099,000 square feet. The
facility is located on approximately 81 acres. At September 30, 1995, the net
book value of the land, land improvements and building improvements was
approximately $7.6 million and the net book value of the other property and
equipment located thereat was approximately $11.3 million.
Harvey Facility. A cold finishing facility owned by BLSC and located in
Harvey, Illinois, of approximately 331,000 square feet. The facility is located
on approximately 12 acres. At September 30, 1995, the net book value of the
land, land improvements and building improvements was approximately
137
<PAGE>
$1.9 million and the net book value of the other property and equipment located
thereat was approximately $3.2 million.
Batavia Facility. A cold finishing facility owned by BLSC and located in
Batavia, Illinois, of approximately 61,000 square feet. The facility is located
on approximately five acres. At September 30, 1995, the net book value of the
land, land improvements and building improvements was approximately $0.5 million
and the net book value of the other property and equipment located thereat was
approximately $1.1 million.
Medina Facility. A cold finishing facility owned by BLSC and located in
Medina, Ohio, of approximately 126,000 square feet. The facility is located on
approximately 11 acres. At September 30, 1995, the net book value of the land,
land improvements and building improvements was approximately $1.2 million and
the net book value of the other property and equipment located thereat was
approximately $0.6 million.
Hamilton Facility. A cold finishing facility owned by CDSC and located in
Hamilton, Ontario, Canada, of approximately 135,000 square feet. The facility is
located on approximately five acres. At September 30, 1995, the net book value
of the land, land improvements and building improvements was approximately $2.6
million (U.S. dollars) and the net book value of the other property and
equipment located thereat was approximately $1.7 million (U.S. dollars).
The Pledgors have pledged the personal property Collateral and the Interest
Escrow Account to the Collateral Agent for the benefit of the Collateral Agent,
the Trustee and the holders of the Exchange Notes pursuant to securities pledge
agreements and security agreements (collectively, the 'Security Agreements').
The real property Collateral have been pledged to the Collateral Agent for the
benefit of the Collateral Agent, the Trustee and the holders of the Exchange
Notes pursuant to mortgages, deeds of trust or deeds to secure debt
(collectively, the 'Mortgages'). In general, the liens on the Collateral granted
to the Collateral Agent, for its benefit and the benefit of the Trustee and the
holders of the Exchange Notes, may be subject to (i) in the case of real
property Collateral, certain easements, rights-of-way, zoning restrictions and
other similar charges or encumbrances which do not, in any case, materially
detract from the value of the real property affected thereby or do not interfere
in any material respect with the ordinary conduct of the business of BarTech or
the appropriate Guarantor at such real property, (ii) in the case of personal
property Collateral, certain existing purchase money liens and (iii) in the case
of all Collateral, (a) liens in favor of various Secured Creditors to the extent
permitted and described in the Intercreditor Agreements (see '--Intercreditor
Agreements' below) and (b) certain tax liens and landlords', warehousemen's and
materialmen's liens which may, as a matter of law, have priority over the lien
and security interest granted to the Collateral Agent or the Trustee. The
pledged shares of BarTech may be sold by a shareholder pledger thereof; provided
that (i) such shares are sold subject to the Lien of the applicable Security
Document and (ii) the transferree becomes a party to the applicable Security
Document and the applicable Intercreditor Agreement in the same manner as the
transferor.
If an Event of Default occurs under the Indenture, the Trustee, on behalf
of the holders of the Exchange Notes, in addition to any rights or remedies
available to it under the Indenture, may, subject to the provisions of the
Intercreditor Agreement, cause the Collateral Agent to take such action as the
Trustee deems advisable to protect and enforce its rights in the Collateral,
including the institution of foreclosure proceedings. The proceeds received by
the Collateral Agent, after payment of the expenses of such foreclosure and fees
and other amounts then payable to the Collateral Agent and any prior Lienholder
(whether pursuant to the Intercreditor Agreement or otherwise), to which the
Trustee and the Noteholders are entitled from any foreclosure in respect of any
Collateral by which the Notes and the Exchange Notes are secured will be applied
by the Trustee under the Indenture, first, to pay the expenses and other amounts
payable to the Trustee and, thereafter, to pay the principal of, premium, if
any, and interest on the Notes and the Exchange Notes.
138
<PAGE>
INTERCREDITOR AGREEMENTS
Prior to the issuance of the Notes, the Collateral Agent entered into an
(i) Amended and Restated Intercreditor and Subordination Agreement (the
'Principal Intercreditor Agreement') dated as of April 2, 1996 among BarTech,
the Guarantors, the Trustee, Chemical Bank (the 'Revolver Agent'), and each of
the Existing Secured Lenders and (ii) a Pledge Intercreditor Agreement dated as
of April 2, 1996 among the Trustee, as collateral agent thereunder, and the
Secured Parties named therein (the 'Stock Intercreditor Agreement,' together
with the Principal Intercreditor Agreement, the 'Intercreditor Agreements'). The
Principal Intercreditor Agreement provides that, without the consent of the
Noteholders or the Trustee, future holders of Secured Refinancing Indebtedness
and Secured Government Assisted Indebtedness may become parties to the Principal
Intercreditor Agreement. The principal purposes of the Principal Intercreditor
Agreement are to (i) establish the duties, obligations and rights of the
Collateral Agent thereunder, in its capacity as such, (ii) provide for the
subordination of Bethlehem's claims against BarTech, (iii) provide access rights
to the Revolver Agent with respect to the inventory and books and records
related to accounts receivable located at certain of the Company's facilities,
and (iv) provide for the relative rights, priorities and remedies of the Secured
Lenders with respect to the Collateral (other than the Pledged Shares (as
defined below)). The principal purposes of the Stock Intercreditor Agreement are
to (i) establish the duties, obligations and rights of the Collateral Agent
thereunder, in its capacity as such, and (ii) provide for the relative rights,
priorities and remedies of the lenders under the New Credit Agreement and the
Trustee.
There are an aggregate of 12 Secured Creditors in addition to the Trustee
(for the benefit of itself and the Noteholders) that will have interests in
various categories of Collateral. Pursuant to the applicable Intercreditor
Agreement, the Secured Creditors have agreed that the priority of the claims of
the Trustee (for the benefit of itself and the Noteholders) in respect of the
proceeds of the Collateral relative to the other applicable Secured Creditors
will be as follows for the following categories of Collateral (unless otherwise
specified below, various Secured Creditors owed material sums have priority
claims junior to those of the Trustee and the Noteholders in the particular
category of Collateral):
(1) with respect to Johnstown Real Estate, a second priority claim
(subject to the first priority claim of The Pennsylvania Industrial
Development Authority ('PIDA') in an aggregate principal amount not to
exceed $4.0 million);
(2) with respect to Lackawanna Real Estate and rights under the
Contribution Agreement relating to the Lackawanna Facility, a second
priority claim (subject to the first priority claim of Marine Midland Bank
in an aggregate principal amount not to exceed $10.0 million);
(3) with respect to Bliss & Laughlin Real Estate, Miscellaneous
Collateral pledged by any Pledgor, Bliss & Laughlin Equipment, intellectual
property rights, rights under the Contribution Agreement (other than those
relating to the Lackawanna Facility) and rights under the Escrow Agreement,
a first priority claim;
(4) with respect to the Caster (and related assets) being installed at
the Johnstown Facility, a second priority claim (subject to the first
priority claim of Rokop in an aggregate principal amount not to exceed $7.2
million);
(5) with respect to Other Johnstown Modernization Equipment, Other
Johnstown Equipment, Lackawanna Modernization Equipment and Other
Lackawanna Equipment, a first priority claim; and
(6) with respect to the Common Stock of BarTech and the capital stock
of the Restricted Subsidiaries pledged to secure the Notes (the 'Pledged
Shares'), a claim which is pari passu with that of the Lien securing the
$90.0 million New Credit Agreement.
As of March 31, 1996, after giving effect to the Recapitalization,
approximately $17.7 million of Indebtedness (including the Caster Financing)
would have been secured by Liens ranking prior to the Lien in favor of the
Collateral Agent or the Trustee for the benefit of the Noteholders on certain
Collateral under the terms of the Intercreditor Agreement. In addition, the
Indebtedness under the New
139
<PAGE>
Credit Agreement, which provides for $90.0 million of commitments, will be
secured by Liens ranking pari passu with the Liens in favor of the Noteholders
on the Pledged Shares. As of such date, after giving effect to the
Recapitalization, approximately $136.8 million of Indebtedness in aggregate
would have been secured by Liens on the Collateral and the Indenture permits
junior Liens on the Collateral to secure an additional $10.0 million of
Indebtedness (representing Secured Government Assisted Indebtedness).
As used above, the following capitalized terms have the following general
meanings in the applicable Intercreditor Agreement:
'Bliss & Laughlin Equipment' means, collectively, (i) all equipment of B&L,
BLSC and CDSC, and all interests of B&L, BLSC and CDSC in equipment, whether now
owned or hereafter acquired, which is located at or used in connection with the
operation of the business conducted at any of the Bliss & Laughlin Real Estate,
(ii) all general intangibles to the extent relating thereto, (iii) all documents
to the extent relating thereto and (iv) all proceeds of any of the foregoing.
'Bliss & Laughlin Real Estate' means all of the real estate owned by B&L,
BLSC and CDSC located in Harvey, Illinois, Batavia, Illinois, Medina, Ohio and
Hamilton, Ontario, Canada, each as more particularly identified in the
applicable Security Document relating to the Security Interests therein.
'Johnstown Real Estate' means all of the real estate of BarTech located in
Johnstown, Pennsylvania.
'Lackawanna Modernization Equipment' means, individually and collectively,
(i) all the Modernization Equipment (as defined below) owned by BarTech located
at the Lackawanna Real Estate, (ii) all general intangibles relating thereto,
(iii) all documents relating thereto and (iv) all proceeds relating to any of
the foregoing.
'Lackawanna Real Estate' means all of the real estate owned by BarTech
located in Lackawanna, New York.
'Miscellaneous Collateral' means, collectively, (i) all existing and future
property and assets of the Pledgors, whether tangible or intangible, fixed or
liquid, upon which any other Secured Creditor has been granted a Lien pursuant
to the Security Documents, other than inventory, accounts and other categories
of Collateral specifically identified, (ii) all general intangibles to the
extent relating thereto, (iii) all documents to the extent relating thereto and
(iv) all proceeds of any of the foregoing.
'Modernization Equipment' means, collectively, the Caster, the walking
bloom reheat furnaces and any and all other equipment purchased by BarTech after
September 26, 1994 and to be purchased after the date hereof as part of the
Company's modernization and expansion plan.
'Other Johnstown Equipment' means, collectively, (i) all equipment of
BarTech, whether now owned or hereafter acquired, which is located at or used in
connection with the operation of the business conducted at the Johnstown Real
Estate, other than the Caster (and certain related assets) and Other Johnstown
Modernization Equipment, (ii) all general intangibles to the extent relating
thereto, (iii) all documents to the extent relating thereto and (iv) all
proceeds of any of the foregoing.
'Other Johnstown Modernization Equipment' means, individually and
collectively, (i) all Modernization Equipment of BarTech located at the
Johnstown Real Estate, other than the Caster (and certain related assets), (ii)
all general intangibles to the extent relating thereto, (iii) all documents to
the extent relating thereto and (iv) all proceeds of any of the foregoing.
'Other Lackawanna Equipment' means, individually and collectively, (i) all
equipment of BarTech, whether now owned or hereafter acquired, which is located
at or used in connection with the operation of the business conducted at the
Lackawanna Real Estate, other than the Lackawanna Modernization Equipment, (ii)
all general intangibles to the extent relating thereto, (iii) all documents to
the extent relating thereto and (iv) all proceeds of any of the foregoing.
The Intercreditor Agreements provide that the First Priority Majority
Secured Creditors (as defined below) as to any Collateral shall have the
exclusive right to direct the Collateral Agent to manage,
140
<PAGE>
perform and enforce the terms of the security documents to which they are a
party with respect to such Collateral, to exercise and enforce all privileges
and rights thereunder according to their direction, including to take or retake
control or possession of such Collateral and to hold, prepare for sale, process,
sell, lease, dispose of or liquidate such Collateral. In addition, Secured
Creditors, other than with respect to an item of Collateral, the First Priority
Majority Secured Creditors, by direction to the Collateral Agent, shall not,
directly or indirectly, seek to foreclose or realize upon (judicially or non-
judicially) any Collateral or take any other enforcement action against or in
respect of the Collateral. The Collateral Agent will not be required to take any
action with respect to the Collateral unless it receives indemnity satisfactory
to it in its sole discretion.
'First Priority Majority Secured Creditors' is defined in the Principal
Intercreditor Agreement to mean, (i) with respect to any item of Collateral
(other than the Johnstown Real Estate and the Pledged Shares), Secured Creditors
holding an aggregate principal amount of outstanding Indebtedness under debt
instruments representing a majority of the aggregate principal amount of
outstanding Indebtedness secured by a Lien or Liens on such item of Collateral
entitled to a first priority under the Principal Intercreditor Agreement, (ii)
with respect to the Johnstown Real Estate, Secured Creditors holding a majority
of the aggregate principal amount of outstanding Indebtedness under debt
instruments secured by a Lien or Liens on the Johnstown Real Estate and (iii)
with respect to the Pledged Shares, Secured Creditors holding an aggregate
principal amount of outstanding Indebtedness (or the trustee for, or other
representative of, such holders) under debt instruments representing a majority
of the aggregate principal amount of outstanding Indebtedness secured by a Lien
or Liens on the Pledged Shares entitled to a first priority under the Stock
Intercreditor Agreement; provided that for purposes of this subclause (iii) any
amounts available for borrowing by BarTech under the New Credit Agreement (after
giving effect to any effective waivers of any conditions to borrowing
thereunder) shall be deemed to be outstanding Indebtedness under the New Credit
Agreement.
The Principal Intercreditor Agreement provides that if any sale of
Collateral by the Collateral Agent pursuant to the terms thereof involves (i)
more than one Category of Collateral and (ii) yields proceeds which, depending
upon the allocation of such proceeds, may result in the partial satisfaction of
secured obligations of more than one Class of Secured Creditors, then (x) the
Secured Creditors who may be entitled to have such proceeds applied to their
secured obligations shall, for a period of 30 days following receipt of such
proceeds by the Collateral Agent, negotiate in good faith to reach agreement on
the allocation of such proceeds among their secured obligations and (y) if such
Secured Creditors shall fail to reach agreement during such 30-day period, any
such Secured Creditor may thereafter require the Collateral Agent to select an
Independent Appraiser or, if such Collateral consists in whole or in part of
securities, an Independent Financial Adviser to perform an appraisal of the Fair
Market Value of each Category of Collateral (assuming each such category of
Collateral was sold separately and was unrelated to each other Category of
Collateral). The proceeds of the sale of such Collateral allocated to each
Category of Collateral shall be equal to the percentage obtained by dividing the
Fair Market Value of such Category of Collateral (as determined by the
appraisal) by the Fair Market Value of all the Collateral sold (as determined by
the appraisal).
With respect to a release of Collateral (other than pursuant to actions
taken by a Secured Creditor upon an event of default under its debt instruments
with the Pledgors), the Collateral Agent shall effect such release, or a
substitution of Collateral, in accordance with and upon receipt of (i) written
instructions from the Trustee, on behalf of the holders of Notes and Exchange
Notes, and each other Secured Creditor known to the Collateral Agent to hold a
security interest in such Collateral and (ii) an Officers' Certificate of the
applicable Pledgor to the effect that such release or substitution would be
permitted under the terms of all debt instruments and security documents of the
Secured Creditors.
The Principal Intercreditor Agreement provides that for up to 180 days
following the issuance of a notice by the Revolver Agent that it seeks to
enforce its rights with respect to the accounts receivable or inventory of
BarTech or the Guarantors, the Revolver Agent and its designees are granted the
right and license by the applicable Pledgors and the Collateral Agent to: (i)
enter upon any or all of such Pledgor's premises, either leased or owned;
provided, however, that the Revolver Agent shall compensate the Collateral Agent
in cash for any damage to the Collateral caused by the Revolver Agent in
connection
141
<PAGE>
with its entry into and use of the Collateral and shall pay the Collateral Agent
for all the Collateral Agent's direct and incremental costs relating to the
provision of the access to the Collateral and (ii) use the Collateral to the
extent necessary to complete the manufacture of the inventory, collect the
accounts receivable and to sell or otherwise dispose of the inventory and
accounts receivable.
The Principal Intercreditor Agreement provides that Bethlehem will
subordinate its right to payment and satisfaction of all Indebtedness of BarTech
('Junior Debt') to the indefeasible payment in cash and satisfaction in full of
all Senior Debt (as defined below); provided, however, that unless and until any
holder of Senior Debt sends written notice to Bethlehem of the occurrence of an
event of default under its debt instruments, BarTech may make, and Bethlehem may
receive and retain from BarTech, regularly scheduled payments of principal and
interest, on an unaccelerated basis, in respect of the Junior Debt, and BarTech
may make dividends and distributions to Holdings to fund regularly scheduled
dividend payments on the Bethlehem Preferred Stock in accordance with the terms
thereof as in effect on the Issue Date, but not any prepayments, non-mandatory
payments or any payments pursuant to acceleration or claims of breach or
payments to acquire any Junior Debt or otherwise.
'Senior Debt' is defined in the Principal Intercreditor Agreement to mean
(i) all obligations of the Secured Creditors outstanding on the Issue Date after
giving effect to the Recapitalization ('Secured Obligations'), (ii) all
obligations, liabilities and Indebtedness of BarTech for principal, interest,
premiums, fees, charges, indemnities and expenses at any time and from time to
time owed by BarTech under the New Credit Agreement ('Credit Agreement
Obligations'), (iii) all obligations, liabilities and Indebtedness of BarTech
for principal, interest, premiums, fees, charges, indemnities and expenses at
any time and from time to time owed by BarTech to any person who provides loans,
letters of credit or other financial accommodations used to replace, substitute
for or refinance all or any portion of the Secured Obligations or Credit
Agreement Obligations and (iv) to the extent not referred to in clauses
(i)-(iii) above, all obligations, liabilities and Indebtedness of BarTech for
principal, interest, premium, fees, charges, indemnities and expenses at any
time and from time to time owed by BarTech to (A) financial institutional
lenders, (B) the governments of the United States, the Commonwealth of
Pennsylvania or the State of New York or any department, agency, division or
instrumentality thereof, (C) persons not included in clauses (A) or (B) who
extend credit or make loans to enable BarTech to acquire an interest in real or
personal property to be used in connection with the ownership or operation of
the business of BarTech, and (D) any replacement, substitution or refinancing of
any of the foregoing described in clauses (A), (B) or (C), in each case, as the
same may be modified, extended or supplemented from time to time; provided that
as between the holders of Senior Debt, on the one hand, and Bethlehem, on the
other hand, the Indebtedness or other obligations of BarTech entitled to be
treated as Senior Debt pursuant to this clause (iv) shall not include
Indebtedness and other obligations in an aggregate principal amount outstanding
at the time of commencement of a case by or against BarTech under the United
States Bankruptcy Code in excess of an amount equal to the Maximum Senior Debt
(as defined below) less the amount of Senior Debt outstanding under clauses
(i)-(iii) above at such time. Senior Debt shall not include any obligations of
BarTech to Bethlehem, whether or not secured.
'Maximum Senior Debt' is defined in the Principal Intercreditor Agreement
to mean Senior Debt (i) in the aggregate principal amount of $220.0 million
reduced by the amount of net cash proceeds received by BarTech from either (x)
the issuance, after the Issue Date, of its capital stock or (y) capital
contributions made after the Issue Date, in each case to the extent, and solely
to the extent, net cash proceeds are used, at the option of BarTech or as
required by any of the debt instruments of the holders of Senior Debt, to repay
and permanently retire any Senior Debt, plus (ii) interest thereon (whether or
not such interest is allowed thereon in whole or in part in any case by or
against BarTech under the United States Bankruptcy Code), plus (iii) fees and
charges of the holders of Senior Debt in connection therewith, plus (iv) the
costs and expenses of collection thereof and realization upon any Collateral,
including, without limitation, attorneys' fees and legal expenses.
The Principal Intercreditor Agreement provides that it may be amended and
modified without the consent of the Trustee or the holders of Exchange Notes (a)
to permit the holders of Indebtedness
142
<PAGE>
incurred in accordance with clause (j) of the covenant described under 'Certain
Covenants--Limitation on Additional Indebtedness' and the holders of Government
Assisted Refinancing Indebtedness to become a party thereto and recognize the
Liens of such holders on the Collateral, (b) to provide for the relative
priorities of the Secured Parties in assets and property constituting Substitute
Collateral as provided under 'Possession, Use and Release of
Collateral--Substitute Collateral' and (c) permit changes in the priority of
Liens of Secured Parties with respect to the Collateral, provided, in the case
of this clause (c) that such changes relate only to Liens junior in priority to
the Liens of the Trustee and the holders of the Exchange Notes with respect to
such Collateral. Any other amendment or modification to the Principal
Intercreditor Agreement (other than amendments and modifications for certain
specified purposes, including curing ambiguities, defects or inconsistencies)
shall require the written consent of the Trustee, at the direction of the
holders of a majority of the aggregate principal amount of outstanding Notes and
Exchange Notes.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee or the Collateral Agent, as the case may be, to
repossess and dispose of the Collateral upon the occurrence of an Event of
Default is likely to be significantly impaired by applicable bankruptcy law if a
bankruptcy proceeding were to be commenced by or against BarTech or a Guarantor
or a Shareholder Pledgor, whether by a Noteholder or another creditor (including
a creditor of a Shareholder Pledgor), prior to the Trustee or the Collateral
Agent, as the case may be, having repossessed and disposed of the Collateral.
Under Federal bankruptcy laws, a secured creditor such as the Trustee or the
Collateral Agent is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor to continue to retain and to use collateral even though the debtor is in
default under the applicable debt instruments, provided that the secured
creditor is given 'adequate protection.' The meaning of the term 'adequate
protection' may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in the collateral and
may include cash payments or the granting of additional security, if and at such
times as the court in its discretion determines, for any diminution in the value
of the collateral as a result of the stay of repossession or disposition or any
use of the collateral by the debtor during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term 'adequate protection,'
the broad discretionary powers of a bankruptcy court and issues related to a
Shareholder Pledgor's bankruptcy proceeding, it is impossible to predict (i) if
payments under the Exchange Notes or the Guarantees would be made following
commencement of and during a bankruptcy case, (ii) whether or when the
Collateral Agent or the Trustee, as the case may be, could foreclose upon or
sell any of the Collateral, or (iii) whether or to what extent holders of the
Exchange Notes would be compensated for any delay in payment or loss of value of
the Collateral through the requirement of 'adequate protection.' Furthermore, in
the event that the bankruptcy court determines the value of the Collateral is
not sufficient to repay all amounts due on the Exchange Notes, the holders of
Exchange Notes would hold 'undersecured claims.' Applicable Federal bankruptcy
laws do not permit the payment and/or accrual of interest, costs and attorney's
fees for 'undersecured claims' during the pendency of a debtor's bankruptcy
case. In addition to the foregoing, there would also be doubt as to whether the
Collateral Agent, the Trustee or the Noteholders could effectively make a claim
to preserve their interests in the Pledged Shares pledged by a Shareholder
Pledgor in bankruptcy absent a material claim under the Indenture. To the extent
that principal and interest under the Exchange Notes is current as of the time
of bankruptcy, a bankruptcy court may disallow, in whole or in part, the claim
of the Noteholders against the Shareholder Pledgor and may grant a discharge to
such Shareholder Pledgor that would free the pledged stock of the lien in favor
of the Noteholders, and may authorize the sale or other disposition of such
pledged shares free of such lien.
143
<PAGE>
CERTAIN ENVIRONMENTAL LAW CONSIDERATIONS
Real property pledged as security to a lender may be subject to known and
unforeseen environmental risks. Under CERCLA, a secured lender may be held
liable, in certain limited circumstances, for the costs of remediating or
preventing releases or threatened releases of hazardous substances at a
mortgaged property. There may be similar risks under various state laws and
common law theories. If a lender takes title to property by foreclosure, it may,
under certain circumstances, lose the security interest exemption contained in
CERCLA and may therefore be held liable for remediation costs. Such liability
has seldom been imposed, and finding a lender liable generally has been based on
the lender having become sufficiently involved in the operations of the borrower
so that its 'participation in the management' of the borrower meets the test set
out in CERCLA and elaborated in a number of court decisions.
Under the Indenture and the Principal Intercreditor Agreement, the Trustee
and the Collateral Agent may, prior to taking certain actions, request that
holders of Exchange Notes provide an indemnification against its costs, expenses
and liabilities. It is possible that CERCLA (or similar) remediation costs could
become a liability of the Trustee or the Collateral Agent and cause a loss to
any holders of Notes that provided an indemnification. In addition, such holders
may act directly rather than through the Trustee or the Collateral Agent, in
specified circumstances, in order to pursue a remedy under the Indenture or the
Principal Intercreditor Agreement. If holders of Exchange Notes exercise that
right, they could be deemed to be lenders that are subject to the risks
discussed above. Included in the Collateral are certain indemnification rights
relating to environmental liability at certain real property Collateral
described under '--Collateral' above. However, there can be no assurance as to
their availability to eliminate or mitigate any such costs, expenses or
liabilities.
The EPA promulgated a rule which would have allowed lenders to participate
in work-out situations and foreclosure, and to exercise some control over the
borrower's business following foreclosure, without risking liability under
CERCLA as a current owner or operator. That rule was subsequently declared to be
invalid by the Court of Appeals for the District of Columbia on the grounds that
the rule-making was not within the EPA's statutory authority. While a number of
recent court decisions appear to be consistent with the EPA's interpretation of
CERCLA under this rule, the uncertain state of current law does not provide an
assurance that lenders can avoid the risk of liability under CERCLA if they
foreclose on properties or become involved in work-outs or similar situations
that may entail some involvement in, or influence over, facility operations.
144
<PAGE>
NOTES REGISTRATION RIGHTS
Pursuant to the Notes Registration Rights Agreement, BarTech and the
Guarantors have agreed to file with the Securities and Exchange Commission (the
'Commission') the Exchange Offer Registration Statement on an appropriate form
under the Securities Act with respect to an offer to exchange the Notes for the
Exchange Notes. Upon the effectiveness of the Exchange Offer Registration
Statement, BarTech and the Guarantors will offer to the holders of Notes who are
able to make certain representations the opportunity to exchange their Notes for
Exchange Notes. If (i) BarTech and the Guarantors are not permitted to file the
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any holder of Notes notifies BarTech within a specified time
period that (a) due to a change in law or policy it is not entitled to
participate in the Exchange Offer, (b) due to a change in law or policy it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such holder or (c) it is a broker-dealer and owns Notes acquired directly from
BarTech or any affiliate of BarTech, BarTech and the Guarantors will file with
the Commission the Shelf Registration Statement to cover resales of the Transfer
Restricted Notes (as defined) by the holders thereof. BarTech and the Guarantors
will use their efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, 'Transfer Restricted Notes' means each Note until (i) the date on
which such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement, (iv) the date on which
such Note is distributed to the public pursuant to, or is eligible for sale to
the public without volume or manner of sale restrictions under, Rule 144(k)
under the Securities Act (or any similar provision then in force, but not Rule
144A under the Securities Act) promulgated under the Securities Act, (v) such
Note shall have been otherwise transferred by the holder thereof and a new Note
not bearing a legend restricting further transfer shall have been delivered by
BarTech and subsequent disposition of such Note shall not require registration
or qualification under the Securities Act or any similar state law then in force
or (vi) such Note ceases to be outstanding.
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealers in connection with resales of the Exchange Notes. BarTech and the
Guarantors have agreed, for a period of 180 days after consummation of the
Exchange Offer, to make available a prospectus meeting the requirements of the
Securities Act to any such broker-dealer for use in connection with any resale
of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Notes Registration Rights Agreement
(including certain indemnification rights and obligations).
Each holder of the Notes that wishes to exchange such Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has no arrangement
with any person to participate in the distribution of the Exchange Notes and
(iii) it is not an 'affiliate,' as defined in Rule 405 of the Securities Act, of
BarTech, or if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of
145
<PAGE>
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
The Notes Registration Rights Agreement provides that: (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
BarTech and the Guarantors will file the Exchange Offer Registration Statement
with the Commission on or prior to 30 days after the Issue Date, (ii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
BarTech and the Guarantors will use their best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior to
120 days after the Issue Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, BarTech and the Guarantors
will commence the Exchange Offer and use reasonable efforts to issue, on or
prior to 30 days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange Notes in exchange
for all Notes tendered prior thereto in the Exchange Offer and (iv) if obligated
to file the Shelf Registration Statement, BarTech and the Guarantors will file
prior to the later of (a) 60 days after the Issue Date or (b) 30 days after such
filing obligation arises and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
60 days after such shelf registration statement is required to be filed;
provided that if BarTech and the Guarantors have not consummated the Exchange
Offer within 150 days of the Issue Date, then BarTech and the Guarantors will
file the Shelf Registration Statement with the Commission on or prior to the
151st day after the Issue Date. BarTech and the Guarantors shall use their best
efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended until the third anniversary of the Issue Date or such
shorter period that will terminate when all the Transfer Restricted Notes
covered by the Shelf Registration Statement have been sold pursuant thereto;
provided that BarTech may suspend the effectiveness of the Shelf Registration
Statement, in the event that, and for a period not to exceed an aggregate of 45
days in any calendar year if, (i) an event occurs and is continuing as a result
of which the Shelf Registration Statement would, in BarTech's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and (ii) (a)
BarTech determines in its good faith judgment that the disclosure of such event
at such time would have a material adverse effect on the business, operations or
prospects of BarTech or (b) the disclosure otherwise relates to a pending
material business transaction which has not yet been publicly disclosed. If (i)
BarTech or any Guarantor fails to file any of the registration statements
required by the Notes Registration Rights Agreement on or before the date
specified for such filing, (ii) any of such registration statements are not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the 'Effectiveness Target Date'), (iii) BarTech or any Guarantor
fails to consummate the Exchange Offer within 30 days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (iv)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter, subject to certain exceptions, ceases to be
effective or usable in connection with the Exchange Offer or resales of Transfer
Restricted Notes, as the case may be, during the periods specified in the Notes
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv) above, a 'Registration Default'), then the interest rate on
Transfer Restricted Notes will increase ('Additional Interest'), with respect to
the first 90-day period immediately following the occurrence of such
Registration Default by 0.50% per annum and will increase by an additional 0.50%
per annum with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of 1.50% per annum. Following
the cure of all Registration Defaults, the accrual of Additional Interest will
cease and the interest rate will revert to the original rate.
The Notes Registration Rights Agreement provides that the Projections be
included in the Exchange Offer Registration Statement and any Shelf Registration
Statement unless it is determined by the Company, in good faith, that the
Projections are not material.
146
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is the opinion of Simpson Thacher & Bartlett (a partnership
which includes professional corporations), New York, New York, relating to
certain United States federal income tax consequences of the exchange of Notes
for Exchange Notes as of the date hereof. The discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the 'Code'), and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. PERSONS
CONSIDERING THE EXCHANGE OF NOTES FOR EXCHANGE NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
EXCHANGE OF NOTES
The exchange of the Notes for Exchange Notes pursuant to the Exchange Offer
should not be treated as an 'exchange' for federal income tax purposes because
the Exchange Notes should not be considered to differ materially in kind or
extent from the Notes. Rather, the Exchange Notes received by a holder of Notes
should be treated as a continuation of the Notes in the hands of such holder. As
a result, there should be no federal income tax consequences to a holder
exchanging Notes for the Exchange Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. Bartech and the Guarantors have agreed
that, for a period of 180 days after consummation of the Exchange Offer, they
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
Bartech and the Guarantors will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
'underwriter' within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an 'underwriter' within the meaning of the Securities Act.
For a period of 180 days after consummation of the Exchange Offer, Bartech
and the Guarantors will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal. The Issuers have jointly
and severally agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
147
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the validity of the Exchange Notes will be
passed upon for BarTech and the Guarantors by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements of BarTech included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report, which is included herein.
The audited financial statements of B&L included in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report, which is included herein.
148
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BAR TECHNOLOGIES INC.
Balance Sheets--September 30, 1995 and March 31, 1996 (Unaudited)....... F-2
Statement of Operations (Unaudited)--Six Months Ended March 31, 1995 and
1996.................................................................. F-3
Statement of Cash Flows (Unaudited)--Six Months Ended March 31, 1995 and
1996.................................................................. F-4
Notes to Financial Statements (Unaudited)............................... F-5
Report of Independent Public Accountants................................ F-6
Balance Sheets--September 30, 1994 and 1995............................. F-7
Statement of Operations--Year Ended September 30, 1995.................. F-8
Statements of Stockholders' Equity (Deficit)--The Period from December
2, 1993 (inception) through September 30, 1994 and the Year Ended
September 30, 1995.................................................... F-9
Statements of Cash Flows--The Period from December 2, 1993 (inception)
through September 30, 1994 and the Year Ended September 30, 1995...... F-10
Notes to Financial Statements........................................... F-11
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
Consolidated Balance Sheets--September 30, 1995 and March 31, 1996
(Unaudited)........................................................... F-20
Consolidated Statements of Income and Loss (Unaudited)--Six Months Ended
March 31, 1995 and 1996............................................... F-21
Consolidated Statements of Cash Flows (Unaudited)--Six Months Ended
March 31, 1995 and 1996............................................... F-22
Notes to Consolidated Financial Statements (Unaudited).................. F-23
Report of Independent Public Accountants................................ F-27
Consolidated Balance Sheets--September 30, 1994 and 1995................ F-28
Consolidated Statements of Income and Loss--Years Ended September 30,
1993, 1994 and 1995................................................... F-29
Consolidated Statements of Common Stockholders' Equity--Years Ended
September 30, 1993, 1994 and 1995..................................... F-30
Consolidated Statements of Cash Flows--Years ended September 30, 1993,
1994 and 1995......................................................... F-31
Notes to Consolidated Financial Statements.............................. F-32
</TABLE>
F-1
<PAGE>
BAR TECHNOLOGIES INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
----------------------------
SEPTEMBER 30, MARCH 31,
1995 1996
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 1,650 $ 3,415
Accounts receivable.................................. 952 1,803
Inventories.......................................... 1,000 5,296
Prepaid expenses..................................... 464 536
------------- -----------
Total current assets............................ 4,066 11,050
------------- -----------
Property, plant and equipment:
Land................................................. 1,071 1,071
Buildings and improvements........................... 12,258 12,258
Machinery and equipment.............................. 15,681 14,004
Construction-in-progress............................. 9,210 16,914
------------- -----------
Total property, plant and equipment............. 38,220 44,247
Accumulated depreciation............................... (306) (557)
------------- -----------
Net property, plant and equipment............... 37,914 43,690
Other Assets, including restricted debt service fund of
$1,550 and $1,551, respectively...................... 4,021 4,090
------------- -----------
$46,001 $58,830
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ 1,713 $ 2,532
Accounts payable..................................... 948 11,892
Accrued transaction costs............................ 500 --
Other current liabilities............................ 2,013 3,629
------------- -----------
Total current liabilities....................... 5,174 18,053
------------- -----------
Long-Term Debt, less current maturities................ 44,952 56,581
------------- -----------
Total liabilities............................... 50,126 74,634
------------- -----------
Redeemable Stock:
Series A Preferred Stock $.001 par value--Authorized,
5,000 shares
Issued and outstanding, 1,100 shares.............. 5,500 5,500
------------- -----------
Stockholders' equity (deficit):
Series B Preferred Stock $.001 par value--
Authorized, issued and outstanding, 1 share....... -- --
Common Stock, $.001 par value--Authorized, 195,000
shares
Issued and outstanding, 66,600 shares............. -- --
Additional paid-in capital........................... 3,704 3,704
Retained deficit..................................... (13,217) (24,924)
Deferred compensation................................ (112) (84)
------------- -----------
Total stockholders' equity (deficit)............ (9,625) (21,304)
------------- -----------
$46,001 $58,830
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
BAR TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Net Sales.............................................. $ -- $ 588
Cost of Sales.......................................... -- 8,111
Depreciation and amortization.......................... 181 279
Selling, general and administrative expense............ 5,360 1,852
-------- --------
Loss from operations................................. (5,541) (9,654)
Interest expense....................................... (1,458) (1,850)
Interest income........................................ 160 168
Other income (Expense)................................. 188 (179)
-------- --------
Loss before income taxes............................. (6,651) (11,515)
Income tax provision................................... -- --
-------- --------
Net loss............................................... (6,651) (11,515)
-------- --------
Less--Preferred stock dividend requirement............. 193 193
-------- --------
Net loss applicable to common shares................... $ (6,844) $(11,708)
-------- --------
-------- --------
Net loss per common share.............................. $(102.76) $(175.80)
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BAR TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1995 1996
------- --------
<S> <C> <C>
Cash flows from operating activities--
Net loss............................................. $(6,651) $(11,515)
Adjustments to reconcile net loss to net cash used by
operating activities--
Depreciation and amortization..................... 181 279
Accretion of original issue discount.............. 82 82
Increase in accounts receivable................... (575) (851)
Increase in prepaid expenses...................... (29) (72)
Increase in inventory............................. -- (4,296)
Decrease in other noncurrent assets............... 206 207
Increase in accounts payable...................... 824 10,944
Increase in accrued expenses...................... 505 1,115
------- --------
Net cash flows used by operating activities..... (5,457) (4,107)
------- --------
Cash flows from investing activities--
Capital expenditures.............................. (631) (7,941)
Disposition of non operating assets............... 156 1,915
------- --------
Net cash flows used by investing activities..... (475) (6,026)
------- --------
Cash flows from financing activities--
Borrowings of debt................................ -- 13,025
Repayment of debt................................. (1,057) (659)
Dividends on preferred stock...................... (193) (193)
Deferred debt financing costs..................... -- (275)
------- --------
Net cash flows provided by financing
activities..................................... (1,250) 11,898
------- --------
Net (decrease) increase in cash and cash equivalents... (7,182) 1,765
Cash and cash equivalents, beginning of period......... 9,178 1,650
------- --------
Cash and cash equivalents, end of period............... $ 1,996 $ 3,415
------- --------
------- --------
Supplemental cash flow information--
Interest paid..................................... $ 798 $ 1,232
------- --------
------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1. FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Bar
Technologies Inc. ('BarTech') and are unaudited. Certain information and
footnote disclosures normally prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Although management
believes that all adjustments, including normal recurring adjustments, necessary
for a fair presentation have been made, interim periods are not necessarily
indicative of the results of operations for a full year. As such, these
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the fiscal year ended September 30, 1995.
After start-up of commercial steel production at its facilities, BarTech
will produce hot rolled engineered bar products.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. MERGER AGREEMENT
On April 2, 1996, BarTech consummated an amended merger agreement with
Bliss & Laughlin Industries Inc. ('B&L'), a major independent cold finished
processor of steel bars. BarTech acquired B&L for $9.50 per common share in cash
for an aggregate purchase price of $37,980. The terms of the merger agreement
also provide that, under certain circumstances, holders of B&L common stock will
receive additional consideration if the Company sells all or substantially all
of the stock or assets of B&L or merges B&L into an unaffiliated third party
within one year of the date of the merger agreement. BarTech financed the
acquisition, as well as repayment of certain existing BarTech and B&L
indebtedness of approximately $28,700, and pre-funding of Phase II of BarTech's
capitalization and modernization plan of approximately $20,000, with a portion
of the proceeds of a $30,000 equity investment by Blackstone Capital Partners II
Merchant Banking Fund L.P. and its affiliates and $91,609 aggregate principal
amount of Senior Secured Notes due 2001.
In October, 1995, BarTech received a payment of $1,000 from B&L in
accordance with the provisions of the amended merger agreement. Such amount has
been recorded as other current liabilities in the March 31, 1996 balance sheet.
The deferred merger consideration will be included in the allocation of the
purchase price of B&L.
As part of these transactions, the authorized capital stock of BarTech was
amended and now consists of 1,000,000 shares of Class A Common Stock, 600,000
shares of Special Class B Common Stock and 5,000 shares of Preferred Stock, each
with a par value of $0.001 per share. The Special Class B Common Stock allows
the holders to designate directors who will hold 50% of the voting power of the
board of directors. The Special Class B Common Stock will also have certain
rights in the event of a liquidation, dissolution or winding up of BarTech.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1996
------------- ---------
<S> <C> <C>
Raw materials.............................................................. $ 1,000 $ 3,498
Work-in-process............................................................ -- 1,417
Finished goods............................................................. -- 381
------------- ---------
$ 1,000 $ 5,296
------------- ---------
------------- ---------
</TABLE>
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bar Technologies Inc.:
We have audited the accompanying balance sheets of Bar Technologies Inc. (a
Delaware corporation) as of September 30, 1994 and 1995, and the related
statements of income, stockholders' equity (deficit) and cash flows for the year
ended September 30, 1995, and the statements of stockholders' equity (deficit)
and cash flows for the period from December 2, 1993 (inception) through
September 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bar Technologies Inc. as of
September 30, 1994 and 1995, and the results of its operations and its cash
flows for the year ended September 30, 1995, and its cash flows for the period
from December 2, 1993 (inception) through September 30, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
October 26, 1995 (except with respect to the matter
discussed in Note 9, as to which the date is April 2,1996)
F-6
<PAGE>
BAR TECHNOLOGIES INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30,
------------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash
of $1,000 and $0, respectively.................... $ 9,178 $ 1,650
Accounts receivable.................................. 20 952
Inventories.......................................... 1,000 1,000
Prepaid expenses..................................... 518 464
------- -------
Total current assets.............................. 10,716 4,066
------- -------
Property, plant and equipment:
Land................................................. 1,071 1,071
Buildings and improvements........................... 12,258 12,258
Machinery and equipment.............................. 18,370 15,681
Construction-in-progress............................. -- 9,210
------- -------
Total property, plant and equipment............... 31,699 38,220
Accumulated depreciation............................... -- (306)
------- -------
Net property, plant and equipment................. 31,699 37,914
Other assets, including restricted debt service fund of
$1,548 and $1,550, respectively...................... 4,434 4,021
------- -------
$46,849 $46,001
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................. $ 86 $ 1,713
Notes payable........................................ 1,000 --
Accounts payable..................................... -- 948
Accrued transaction costs............................ 991 500
Other accrued liabilities............................ 977 2,013
------- -------
Total current liabilities......................... 3,054 5,174
------- -------
Long-term debt, less current maturities................ 34,759 44,952
------- -------
Total Liabilities................................. 37,813 50,126
------- -------
Redeemable stock:
Series A Preferred Stock $.001 par value--Authorized,
5,000 shares
Issued and outstanding, 1,100 shares.............. 5,500 5,500
------- -------
Stockholders' equity (deficit):
Series B Preferred Stock $.001 par value--
Authorized, issued and outstanding, 1 share....... -- --
Common Stock, $.001 par value--Authorized, 195,000
shares
Issued and outstanding, 66,600 shares............. -- --
Additional paid-in capital........................... 3,536 3,704
Retained deficit..................................... -- (13,217)
Deferred compensation................................ -- (112)
------- -------
Total stockholders' equity (deficit).............. 3,536 (9,625)
------- -------
$46,849 $46,001
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
BAR TECHNOLOGIES INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Depreciation and amortization.......................... $ 362
Selling, general and administrative expense............ 10,296
--------
Loss from operations................................. (10,658)
Interest expense....................................... (3,151)
Interest income........................................ 507
Other income........................................... 470
--------
Loss before income taxes............................. (12,832)
Income tax provision................................... --
--------
Net loss............................................... (12,832)
--------
Less--Preferred stock dividend requirement............. 385
--------
Net loss applicable to common shares................... $(13,217)
--------
--------
Net loss per common share.............................. $(198.45)
--------
--------
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
BAR TECHNOLOGIES INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 2, 1993 (INCEPTION) THROUGH SEPTEMBER 30, 1994
AND THE YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SERIES B
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- --------------- PAID-IN ACCUMULATED DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
------ ------ ------ ------ ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock........... 1 $ -- 66,600 $ -- $3,536 $ -- $ -- $ 3,536
--
------ ------ ------ ---------- ----------- ------ --------
BALANCE,
SEPTEMBER 30, 1994............... 1 -- 66,600 -- 3,536 -- -- 3,536
Net loss........................... -- -- -- -- -- (12,832) -- (12,832)
Dividends on Series A Preferred
stock ($350 per share)........... -- -- -- -- -- (385) -- (385)
Common stock grants................ -- -- -- -- 168 -- (168) --
Amortization of deferred
compensation..................... -- -- -- -- -- -- 56 56
--
------ ------ ------ ---------- ----------- ------ --------
BALANCE,
SEPTEMBER 30, 1995............... 1 $ -- 66,600 $ -- $3,704 $ (13,217) $ (112) $ (9,625)
--
--
------ ------ ------ ---------- ----------- ------ --------
------ ------ ------ ---------- ----------- ------ --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE>
BAR TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 2, 1993 (INCEPTION) THROUGH SEPTEMBER 30, 1994
AND THE YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Cash flows from operating activities--
Net loss............................................. $ -- $(12,832)
Adjustments to reconcile net loss to net cash used by
operating activities--
Depreciation and amortization..................... -- 362
Accretion of original issue discount.............. -- 165
Increase in accounts receivable................... (20) (932)
(Increase) decrease in prepaid expenses........... (518) 53
(Increase) decrease in other noncurrent assets.... (1,548) 414
Increase in accounts payable...................... -- 756
Increase in accrued expenses...................... 1,968 546
------- --------
Net cash flows used by operating activities..... (118) (11,468)
------- --------
Cash flows from investing activities--
Capital expenditures.............................. (32,854) (9,210)
Disposition of non operating assets............... -- 2,689
------- --------
Net cash flows used by investing activities..... (32,854) (6,521)
------- --------
Cash flows from financing activities--
Borrowings of debt................................ 42,000 11,770
Repayment of debt................................. (6,000) (1,116)
Proceeds from issuance of common stock............ 3,536 --
Proceeds from issuance of preferred stock......... 5,500 --
Dividends on preferred stock...................... -- (193)
Deferred debt financing costs..................... (2,886) --
------- --------
Net cash flows provided by financing
activities..................................... 42,150 10,461
------- --------
Net increase (decrease) in cash and cash equivalents... 9,178 (7,528)
Cash and cash equivalents, beginning of year........... -- 9,178
------- --------
Cash and cash equivalents, end of year................. $ 9,178 $ 1,650
------- --------
------- --------
Supplemental cash flow information--
Interest paid..................................... $ -- $ 2,328
------- --------
------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION
Bar Technologies Inc. ('BarTech') purchased certain assets of the former
Bar Rod and Wire Division (the 'Bethlehem BRW Division') of Bethlehem Steel
Corporation ('Bethlehem') in accordance with a Contribution Agreement (the
'Contribution Agreement') dated December 23, 1993. The transaction closed on
September 26, 1994. The assets will primarily be used to produce engineered
steel products.
The transaction was accounted for as a purchase with the assets acquired
and liabilities assumed recorded at their estimated fair values. The purchase
price was approximately $26,500, which consisted of $15,500 in cash paid to
Bethlehem, the issuance of $5,500 of preferred stock and a $5,500 note payable
to Bethlehem. In addition, BarTech incurred transaction costs of $8,200 in
completing the acquisition, and acquired inventory from Bethlehem for $1,000.
BarTech did not assume past service cost for pension and retiree medical
benefits arising from the operations of the Bethlehem BRW Division. In addition,
pursuant to the Contribution Agreement between BarTech and Bethlehem, BarTech
successfully negotiated for the limitation of its liability for and the
retention by Bethlehem of any environmental liabilities relating to Bethlehem's
operations at the BarTech Facilities. Pursuant to the Contribution Agreement,
Bethlehem has agreed to indemnify BarTech for environmental damages related to
the Bethlehem BRW Division's operations as follows: (i) if such damages are
incurred by BarTech prior to January 1, 1997, Bethlehem would pay 50% of the
first $2,000 of damages and 100% of all damages in excess of $2,000; and (ii) if
such damages are incurred by BarTech on or after January 1, 1997, Bethlehem
would pay 50% of the first $10,000 of damages and 100% of all damages in excess
of $10,000. Therefore, through December 1997, BarTech's liability for such
damages is capped at $1,000 and is capped at $5,000 thereafter.
The accounting principles for a purchase business transaction, as set forth
in Accounting Principles Board Opinion No. 16, were used as a basis for certain
purchase accounting adjustments. As a result, the purchase price, including
transaction costs, has been allocated to property, plant and equipment based
upon their fair market value at the date of acquisition.
The transaction with Bethlehem was consummated on September 26, 1994.
BarTech had no income statement activity prior to the acquisition and such
activity was insignificant for the period from September 26, 1994, through
September 30, 1994. Accordingly, no 1994 activity is disclosed in the financial
statements. During 1995, BarTech assembled its management team and has been
engaged in activities directed towards the start-up of commercial steel
production, which BarTech expects to commence in the first quarter of calendar
1996. These activities included the purchasing, engineering and commencement of
installation of a combination bloom/billet continuous casting machine, the
development and installation of a management information system, negotiations
with vendors, discussions and meetings with potential customers and separations
of utilities from Bethlehem.
F-11
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of the
following significant accounting policies:
Cash Equivalents
BarTech considers all short-term investments with maturities of three
months or less when acquired to be cash equivalents.
Restricted Cash
The current portion in 1994 consisted of funds held in escrow until a
keyman life insurance policy was established.
The non-current portion included in other assets consists of a debt service
fund required by the Marine Midland Term Loan (see Note 4).
Accounts Receivable
Accounts receivable primarily represent amounts due in connection with the
leasing of facilities.
Inventories
Inventories consist of materials, which are stated at the lower of cost
(first-in, first-out) or market (net realizable value).
Property, Plant and Equipment
Property, plant and equipment is stated at cost. BarTech provides for
depreciation on the straight-line method based upon the estimated useful lives
of the assets. The estimated useful lives of assets are approximately as
follows:
<TABLE>
<S> <C>
Buildings and improvements.... 40 years
Machinery and equipment....... 7-20 years
</TABLE>
Expenditures for maintenance and repairs are charged against income as
incurred. Significant expenditures for betterments are capitalized. Capital
expenditures which are not able to be put into use immediately are included in
construction-in-process. As these projects are completed, they are transferred
to depreciable assets. Retirements and disposals are removed from the cost and
accumulated depreciation accounts, with the gain or loss reflected in income.
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding, which was 66,600 for the year ended September 30, 1995.
Income Taxes
BarTech provides for deferred income tax differences that arise when items
are reported for financial statement purposes in years different from those for
income tax reporting purposes in the accompanying balance sheets in conformity
with Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes.'
F-12
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.' The statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement is effective for financial statements for fiscal
years beginning after December 15, 1995. BarTech has not decided on an adoption
date, but does not believe that adoption will have a material impact on its
financial statements.
Risk Factors
The discussion under the caption 'Risk Factors' contained in the Prospectus
is incorporated herein by reference.
3. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1994 1995
------ ------
<S> <C> <C>
Deferred financing costs, net of amortization of $0.00
and $415, respectively............................... $2,886 $2,471
Restricted debt service fund (Note 4).................. 1,548 1,550
------ ------
Total other assets................................ $4,434 $4,021
------ ------
------ ------
</TABLE>
4. FINANCING ARRANGEMENTS
BarTech had the following long-term debt obligations outstanding:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1994 1995
------- -------
<S> <C> <C>
Marine Midland Term Loan, interest at prime or LIBOR,
monthly principal payments of $93 beginning November
1, 1995, maturity date October 1, 2004............... $10,000 $10,000
Congress Term Loan I, interest at prime plus 1.75%, or
Eurodollar plus 3.50%, monthly principal payments of
$69 beginning July 1, 1996, maturity date July 1,
2001................................................. -- 4,125
RDC Loan, interest at 7.75%, quarterly principal
payments of $18 beginning October 1, 1997, maturity
date July 1, 2004.................................... 500 500
Economic Development Partnership ('EDP I'), total
commitment of $6,000, interest at 3%, quarterly
principal payments of $118 beginning April 1, 1997,
maturity date October 1, 2009........................ 6,000 6,000
Sunny Day Fund I ('SDF I'), total commitment of $7,000,
interest at 3%, quarterly principal payments of $137
beginning April 1, 1997, maturity date October 1,
2009................................................. 7,000 7,000
</TABLE>
F-13
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. FINANCING ARRANGEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1994 1995
------- -------
<S> <C> <C>
Community Development Block Grant Program ('CDBG'),
total commitment of $700, interest at 3%, quarterly
principal payments of $7 beginning July 1, 1998,
maturity date August 17, 2010........................ -- 345
Economic Development Partnership ('EDP II'), total
commitment of $5,600, interest at 3%, quarterly
principal payments of $27 beginning July 1, 1998,
maturity date July 1, 2010........................... -- 1,300
Sunny Day Fund II ('SDF II'), total commitment of
$6,000, interest at 3%, quarterly principal payments
of $429 beginning July 1, 1998, maturity date October
1, 2001.............................................. -- 6,000
Housing and Urban Development ('HUD') Bond, total
commitment of $8,500, interest at 8.12%, six payments
ranging from $400 to $1,300 beginning October 1,
1996, maturity date September 26, 2003............... 5,000 5,000
Pennsylvania Industrial Development Authority Note
('PIDA'), total commitment of $4,000, interest at 2%,
quarterly principal and interest payments of $36,
maturity date October 1, 2009........................ 2,000 1,885
Bethlehem Subordinated Note, interest at 7%, annual
principal payments of $1,833 beginning October 1,
2000, maturity date October 1, 2002.................. 5,500 5,500
Business Infrastructure Development ('BID') Program,
total commitment of $2,650, interest at 3% paid
quarterly in arrears, beginning on the first day of
the month following the ninetieth day after such Loan
is made, principal paid in quarterly installments.... -- --
Enterprise Zone Competitive Program ('ECP'), total
commitment of $1,000, interest at 3% paid quarterly
in arrears, beginning on the first day of the month
following the ninetieth day after such Loan is made,
principal paid in quarterly installments............. $ -- $ --
------- -------
36,000 47,655
Less--Original issue discount..................... 1,155 990
------- -------
34,845 46,665
Less--Current maturities.......................... 86 1,713
------- -------
$34,759 $44,952
------- -------
------- -------
</TABLE>
F-14
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. FINANCING ARRANGEMENTS--(CONTINUED)
Congress Loan and Security Agreement
BarTech entered into a Loan and Security Agreement (the 'Congress Loan and
Security Agreement') with Congress Financial Corporation ('Congress') on
September 21, 1994. The Loan and Security Agreement provides that BarTech may
borrow up to $55,000 under (i) a term loan in the amount of $4,125 ('Term Loan
I'), (ii) a term loan in the amount of $4,125 minus a percentage of the orderly
liquidation value of certain of BarTech's equipment ('Term Loan II') (Term Loan
I and Term Loan II, collectively, the 'Term Loans'), and (iii) Revolving Loans
up to an amount equal to $46,750 (the 'Revolving Loans'). The Revolving Loans
are limited by the amount of eligible receivables and inventories, as defined.
The Congress Loan and Security Agreement will expire on September 21, 1998, and
will automatically be renewed from year to year unless sooner terminated. The
term of each of the Term Loans is 60 months.
As of September 30, 1995, $4,125 in principal was outstanding under the
Loan and Security Agreement. No amounts have been advanced under Term Loan II,
and no amounts are outstanding under the Revolving Loans.
BarTech pays interest on outstanding amounts under the Term Loans and the
Revolving Loans at a rate per annum equal to the Prime Rate plus 1 3/4%. BarTech
pays interest on amounts outstanding under the Term Loans and the Revolving
Loans comprising any Eurodollar Rate Loan at a rate per annum equal to the
Adjusted Eurodollar Rate plus 3 1/2%.
The Term Loans and the Revolving Loans are secured by a first position lien
on BarTech's inventory, accounts receivable and equipment at the Johnstown and
Lackawanna facilities (other than with respect to the Johnstown Modernization
Equipment and the Lackawanna Modernization Equipment) and other miscellaneous
collateral. Congress holds a second position security interest in the Johnstown
Modernization Equipment, the Lackawanna Modernization Equipment, Johnstown real
estate, Lackawanna real estate and other ancillary Lackawanna collateral.
Congress is a party, along with BarTech's other creditors, to an Intercreditor
Agreement, which governs lien priority positions and disposition of collateral
as among the creditors.
The Congress Loan and Security Agreement contains certain affirmative and
negative covenants, including, among others, covenants requiring BarTech,
subject to certain exceptions to: (i) not merge, consolidate with any other
person or sell, assign, lease, abandon or otherwise dispose of any stock or
indebtedness or any of its assets, other than as permitted by the Congress Loan
and Security Agreement; (ii) not create or incur additional liens, encumbrances
or indebtedness, other than as permitted by the Congress Loan and Security
Agreement; (iii) not make any loans or advance any money, except as provided by
the Congress Loan and Security Agreement; (iv) not pay any dividends or make any
other distributions to stockholders; (v) maintain certain levels of working
capital; and (vi) avoid cumulative losses in excess of certain amounts.
Economic Development Financing
In connection with the acquisition of the assets of the Bethlehem BRW
Division and Phase One of its modernization and expansion plan, BarTech entered
into loan agreements with lenders in Pennsylvania and New York to procure
financing for the transaction.
F-15
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. FINANCING ARRANGEMENTS--(CONTINUED)
Pennsylvania
BarTech entered into a Master Agreement with the Commonwealth of
Pennsylvania and various of its agencies (collectively, the 'Commonwealth') on
July 18, 1994 (the 'Master Agreement'). Pursuant to the Master Agreement,
BarTech has and will continue to enter into loan agreements with the
Commonwealth, through its Department of Commerce ('Commerce') and Department of
Community Affairs. The total amount committed to BarTech by the Commonwealth
pursuant to the Master Agreement is $32,950. The loans have been or will be made
through the Sunny Day Fund ('SDF'), the Johnstown Industrial Development
Corporation ('JIDC'), the Pennsylvania Industrial Development Authority
('PIDA'), the Business Infrastructure Development Program ('BID'), the Economic
Development Partnership ('EDP'), the Community Development Block Grant Program
('CDBG') and the Enterprise Zone Competitive Program ('ECP'). (The loans
governed by the Master Agreement are collectively referred to herein as the
'Commonwealth Loans'). As of September 30, 1995, approximately $22,530 in
aggregate principal amount of Commonwealth Loans was outstanding.
New York
JDA Guaranteed Marine Midland Term Loan. BarTech is party to a Loan and
Use Agreement, dated September 21, 1994, with Marine Midland Bank ('Marine
Midland') (the 'Marine Midland Loan'), whereby Marine Midland loaned $10,000 to
BarTech for use in connection with the acquisition of Lackawanna, Pennsylvania
real estate from Bethlehem. The Marine Midland Loan is guaranteed by the New
York Job Development Authority ('JDA'). The Marine Midland Loan is payable in
equal monthly principal installments of $93 commencing on November 1, 1995,
together with interest thereon, and matures on October 1, 2004. Interest on the
Marine Midland Loan accrues at a rate based on a Prime Rate, or the LIBOR Rate,
as selected by BarTech, which rate was 6.81% as of September 30, 1995.
RDC Loan. BarTech is party to a Loan Agreement with the Buffalo and Erie
County Regional Development Corporation ('RDC') providing for a loan in the
amount of $500 to be used by BarTech for working capital needs (the 'RDC Loan').
The RDC Loan bears interest at a rate of 7.75% per annum until July 1, 1999, and
at an adjustable rate thereafter. The RDC Note matures on July 1, 2004. The RDC
Loan is secured by a Security Agreement which grants RDC a security interest in
equipment, fixtures, inventory, accounts, chattel paper, documents, instruments
and general intangibles.
Bethlehem Subordinated Loan Agreement
Pursuant to the terms of a Subordinated Loan Agreement, dated September
21,1994, Bethlehem loaned to BarTech $5,500 (the 'Bethlehem Loan'). The
outstanding principal balance under the Bethlehem Loan is payable in three equal
installments on the first day of October in each of 2000, 2001, and 2002 at a
rate of 7% per annum and matures on October 1, 2002. The Bethlehem Loan is
secured by a subordinated security interest in certain real and personal
property of BarTech and any and all proceeds therefrom. The outstanding
principal amount under the Bethlehem Loan has been reduced by an original issue
discount.
Rokop Financing Commitment
BarTech is party to an agreement dated July 19, 1995, with Rokop
Corporation (the 'Rokop Agreement'), whereby Rokop has agreed to modify and
install for BarTech one five-stand bloom/billet continuous casting machine and
perform the construction related thereto, for a total contract price of $19,875.
Rokop agreed to make a financing commitment of $7,200 for this project. In
connection with
F-16
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. FINANCING ARRANGEMENTS--(CONTINUED)
the Rokop Agreement, BarTech executed in advance and delivered two promissory
notes in the amounts of $3,300 and $1,000, which will mature 51 months after the
start-up date and 21 months after the start-up date, respectively ('Term Note A'
and 'Term Note B', respectively), and agreed to execute and deliver no later
than December 15, 1995, a third note in the principal amount of $2,900 which
will mature 10 months from the start-up date ('Term Note C'). These notes become
effective and begin to accrue interest at the start up date of the continuous
caster machine. Each of the notes bears interest at a rate per annum of 6.5%.
Term Notes A and B are secured by a first priority lien and a purchase money
security interest in the caster, and Term Note C will be secured by a first
priority lien on certain collateral having a value of at least $2,900.
Principal installments required under the long-term debt obligations are
summarized as follows for the years ending September 30:
1996.......... $ 1,713
1997.......... 3,166
1998.......... 4,861
1999.......... 6,250
2000.......... 6,353
Thereafter.... 25,312
-------
$47,655
-------
-------
At September 30, 1994, notes payable reflects a $1,000 note to Bethlehem
issued in exchange for raw materials and supplies purchased as part of the
acquisition. The note was repaid on December 20, 1994.
5. INCOME TAXES
BarTech adopted the provisions of Statement of Financial Accounting
Standards No. 109, 'Accounting for Income Taxes,' which requires use of an asset
and liability method of accounting for income taxes.
The components of BarTech's deferred income tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1995
------- --------
<S> <C> <C>
Deferred tax assets (liabilities)--
Net operating loss carryforwards.................. $ 102 $ 7,751
Property basis differences........................ 6,288 4,346
Other............................................. (400) (400)
------- --------
Total........................................... 5,990 11,697
Less--Valuation allowance.............................. (5,990) (11,697)
------- --------
Net deferred tax assets................................ $ -- $ --
------- --------
------- --------
</TABLE>
As of September 30, 1995, BarTech had available for federal and state
income tax purposes, net operating loss carryforwards of approximately $19,800
expiring in 2010.
The realization of the above tax benefits depends upon BarTech's ability to
generate future taxable income. BarTech has established a valuation allowance to
offset this deferred tax benefit.
F-17
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. PREFERRED STOCK
On September 26, 1994, BarTech issued 1,100 shares of Series A cumulative
Preferred Stock with a $.001 par value to Bethlehem in connection with the
Contribution Agreement. The shares were issued at $5,000 per share or $5,500 in
total.
In each year, the Series A Preferred Stock is entitled to receive, whether
or not declared by the Board of Directors, cash dividends equal to $350 per
share, which such dividends are cumulative. In the event BarTech is liquidated,
the holders of Series A Preferred Stock are entitled to a liquidation
preference, prior to any payment on the Common Stock, of $5,000 per share plus
any unpaid dividends. BarTech is required to redeem all shares of Series A
Preferred Stock on the sixth anniversary of the date of original issuance of
such shares (September 26, 2000) for a total of $5,000 per share plus all
accrued or declared but unpaid dividends, and BarTech may, at its option, redeem
shares of Series A Preferred Stock at an earlier date at the mandatory
redemption price, plus accrued but unpaid dividends. Holders of Series A
Preferred Stock do not generally vote on stockholders' matters. However, the
consent or vote of 66 2/3% in voting power of the Series A Preferred Stock is
required on certain matters, including the issuance of senior equity securities.
The shares of Series A Preferred Stock are only transferable by a holder of
Series A Preferred Stock to an affiliate of such holder or upon the prior
written consent of BarTech. Upon redemption or repurchase by BarTech, shares of
Series A Preferred Stock will not be reissued and will be cancelled.
One share of Series B Preferred Stock was issued to BarTech's union. The
Series B Preferred Stock is not entitled to receive dividends and is
nonredeemable. In the event that BarTech is liquidated, the holder of Series B
Preferred Stock is to be entitled to a liquidation preference, after payment to
the holders of the Series A Preferred Stock and prior to any payment on the
Common Stock, of $100 per share. The Series B Preferred Stock does not generally
vote on stockholder matters; however, the holder of Series B Preferred Stock has
the right to nominate and elect two directors to the Board of Directors, and to
remove such directors as provided in the By-Laws.
7. STOCK PLANS
As part of its collective bargaining agreement, BarTech agreed to grant its
employees a minimum of 20% equity interest in BarTech's common stock through one
or more employee stock ownership plans ('ESOP') (subject to dilution for events
occurring subsequent to February 1994). The allocation methodology and timing
has not yet been determined by the parties. Distributions will commence within a
specified period of time after the end of the year in which a participant's
employment terminates. The ESOP has not been established as of September 30,
1995.
In the event that no public market exists for its common stock, BarTech
will be obligated to repurchase the shares distributed to an employee under the
ESOPs. The price of the shares shall be the price reflected in the most recent
applicable valuation.
Under Equity Award Agreements with certain executive employees, BarTech is
committed to award common stock grants which, in the aggregate, represent 5.75%
of BarTech's common stock after giving effect to the issuance of common stock to
the ESOP (subject to further dilution for events occurring subsequent to the
execution of such agreements). The awards vest over three year periods from the
date of initial employment. The value of these awards on the date of commitment
was recorded as deferred compensation and will be amortized over the terms of
the employment agreements.
F-18
<PAGE>
BAR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. RELATED PARTY TRANSACTIONS
On September 21, 1994, BarTech entered a management agreement with
Johnstown Advisors Corp. ('Advisors'). Advisors is owned by the principals of
BRW Partners Inc., the general partner of BRW Steel Holdings LP, which owns 100%
of the common stock of BarTech. Under this agreement, Advisors provides certain
management and financial services relating to the transition, modernization, and
operation of BarTech. Advisors' management fee for its services are $500 per
year plus out-of-pocket expenses. BarTech paid $500 to Advisors for the year
ended September 30, 1995.
9. SUBSEQUENT EVENT
On April 2, 1996, BarTech consummated an amended merger agreement with
Bliss & Laughlin Industries Inc. ('B&L'), a major independent cold finished
processor of steel bars. BarTech acquired B&L for $9.50 per common share in cash
for an aggregate purchase price of $37,980. The terms of the merger agreement
also provide that, under certain circumstances, holders of B&L common stock will
receive additional consideration if the Company sells all or substantially all
of the stock or assets of B&L or merges B&L into an unaffiliated third party
within one year of the date of the merger agreement. BarTech financed the
acquisition, as well as repayment of certain existing BarTech and B&L
indebtedness of approximately $28,700, and pre-funding of Phase II of BarTech's
capitalization and modernization plan of approximately $20,000, with a portion
of a $30,000 equity investment by Blackstone Capital Partners II Merchant
Banking Fund L.P. and its affiliates and $91,609 aggregate principal amount of
Senior Secured Notes due 2001.
As part of these transactions, the authorized capital stock of BarTech was
amended and now consists of 1,000,000 shares of Class A Common Stock, 600,000
shares of Special Class B Common Stock and 5,000 shares of Preferred Stock, each
with a par value of $0.001 per share. The Special Class B Common Stock allows
the holders to designate directors who will hold 50% of the voting power of the
board of directors. The Special Class B Common Stock will also have certain
rights in the event of a liquidation, dissolution or winding up of BarTech.
F-19
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 MARCH 31, 1996
------------------ --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash & Cash Equivalents.............................. $ 918 $ 912
Accounts Receivable, Net............................. 18,670 18,219
Inventories (Note 2)................................. 30,001 30,385
Prepaid Expenses & Other............................. 1,389 1,603
------------------ --------------
Total current assets......................... 50,978 51,119
------------------ --------------
Property, plant and equipment, at cost................. 32,026 32,551
Less--Accumulated Depreciation....................... (14,804) (15,842)
------------------ --------------
Property, plant and equipment, net................... 17,222 16,709
------------------ --------------
Other assets......................................... 3,670 3,774
------------------ --------------
$ 71,870 $ 71,602
------------------ --------------
------------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving Credit (Note 3)............................ $ 13,900 $ 16,700
Accounts Payable..................................... 14,379 13,671
Accounts Payable--Stelco............................. 1,031 1,919
Accrued Liabilities.................................. 5,182 4,150
Income Taxes Payable................................. 514 --
------------------ --------------
Total current liabilities.................... 35,006 36,440
------------------ --------------
Non-current retirement benefits liability (Note 8)..... 1,948 4,415
------------------ --------------
Deferred income taxes.................................. 1,348 1,343
------------------ --------------
Long term debt (Note 4)................................ 3,600 3,600
------------------ --------------
Stockholders' equity (Note 5)
Preferred Stock, $1.00 Par Value; 1,500,000 Shares
Authorized, No Shares Outstanding in 1995 and
1996.............................................. -- --
Common Stock, Par Value $.01; Authorized 6,000,000
Shares Issued & Outstanding, 3,969,518 at
September 30, 1995 and March 31, 1996............. 40 40
Additional Paid-ln Capital, Common Stock............. 25,229 25,229
Retained Earnings.................................... 6,183 2,147
Cumulative Translation Adjustment.................... (1,484) (1,612)
------------------ --------------
Total stockholders' equity................... 29,968 25,804
------------------ --------------
$ 71,870 $ 71,602
------------------ --------------
------------------ --------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND LOSS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
------- -------
<S> <C> <C>
Net sales.............................................. $88,041 $77,102
Cost of sales.......................................... 76,779 70,578
------- -------
Gross profit......................................... 11,262 6,524
Selling expenses....................................... 1,363 1,378
Administrative expenses................................ 5,359 3,959
------- -------
Operating income..................................... 4,540 1,187
Interest expense, net.................................. (791) (715)
Other income (expense), net............................ 1 (1,897)
------- -------
Income (loss) before income taxes...................... 3,750 (1,425)
Income tax provision................................... (770) (243)
------- -------
Net income (loss) before cumulative effect of a change
in accounting principle.............................. 2,980 (1,668)
Cumulative effect of change in accounting principle.... -- (2,368)
------- -------
Net income (loss)...................................... $ 2,980 $(4,036)
------- -------
------- -------
Per share data
Net income (loss) before cumulative effect of a
change in accounting principle.................... $ .75 $ (.42)
Cumulative effect of change in accounting
principle......................................... -- (.59)
------- -------
Net income (loss).................................... $ .75 $ (1.01)
------- -------
Average shares outstanding........................... 3,969,518 3,969,518
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-21
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1995, AND 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss).................................... $ 2,980 $(4,036)
Adjustments to Reconcile Net Income (Loss) to net
cash provided by operating activities:
Depreciation...................................... 912 1,053
Gain on Sale of Equipment......................... -- 3
Provision For Losses on Accounts Receivables...... 93 36
Increase (Decrease) In Prepaid Pension Benefits...... (20) 56
(Increase) Decrease in Current Assets:
Accounts Receivables.............................. (5,771) 360
Inventories....................................... (6,220) (458)
Prepaid Expenses.................................. 67 (215)
(Increase) Decrease in Other Assets............... 71 (169)
Increase (Decrease) in Current Liabilities:
Accounts Payable.................................. 4,799 203
Accrued Liabilities............................... 548 (1,026)
Income Taxes Payable.............................. 75 (507)
Increase (Decrease) in Non-Current Retirement
Benefit........................................... (9) 2,457
Increase (Decrease) in Deferred Income Taxes......... -- --
------- -------
Net Cash Provided by (Used For) Operating Activities... (2,475) (2,243)
------- -------
Cash flows from investing activities:
Property, Plant & Equipment Additions................ (951) (585)
Proceeds from Sale of Equipment...................... -- 1
------- -------
Net Cash Used For Investing Activities............... (951) (584)
------- -------
Cash flows from financing activities:
Net Borrowing (Payments) Under Revolving Credit
Agreement......................................... 3,350 2,800
------- -------
Net Cash Provided by Financing Activities............ 3,350 2,800
------- -------
Effect of exchange rate changes........................ 232 21
------- -------
Net increase (decrease) in cash and cash equivalents... 156 (6)
Cash and cash equivalents, Beginning of Period......... 926 918
------- -------
Cash and cash equivalent, End of Period................ $ 1,082 $ 912
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-22
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND MARCH 31, 1996
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
Bliss & Laughlin Industries Inc. (the 'Company'), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although management
believes that the disclosures are adequate and make the information presented
not misleading.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's financial statements for its fiscal year ended September 30,
1995, included elsewhere in this Prospectus.
In the opinion of management, all adjustments consisting of normal
recurring adjustments necessary to present fairly the consolidated financial
position of Bliss & Laughlin Industries Inc. and Subsidiaries as of March 31,
1996, and the consolidated results of operations and consolidated statements of
cash flows for the three months then ended, have been included. The results of
operations for this period are not necessarily indicative of the operating
results for a full year.
Inventories for Bliss & Laughlin Steel Company ('BLSC'), a subsidiary of
Bliss & Laughlin Industries Inc., are valued at LIFO. Because the inventory
value determination under the LIFO method can only be made at the end of each
year based on the inventory levels and costs at that point, interim LIFO
determinations must necessarily be based upon management's estimates of expected
year-end inventory levels and costs. Since future estimates of inventory levels
and prices are subject to many forces beyond the control of management, interim
financial results are subject to final year-end LIFO inventory adjustments.
2. INVENTORIES
Inventories for BLSC are valued at LIFO; inventories at Canadian Drawn
Steel Company Inc. ('CDSC') are valued at FIFO. Inventories include the
following amounts (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1996
------------- ---------
<S> <C> <C>
Raw Material............. $15,457 $14,987
Finished Goods........... 17,592 18,446
LIFO Reserve............. (3,048) (3,048)
------------- ---------
Total Inventories........ $30,001 $30,385
------------- ---------
------------- ---------
</TABLE>
The amount of inventory valued at LIFO at March 31, 1996 amounted to
$22,885,000 and represents 75% of total inventory.
3. FINANCING ARRANGEMENTS
On December 9, 1994, the Company entered into an amendment to its revolving
credit agreement with The Northern Trust Company ('Northern') and LaSalle
National Bank ('LaSalle'), which provides up to $20,000,000 under a revolving
credit facility. The revolving credit facility is secured by the Company's
accounts receivable, inventories and certain equipment, excluding CDSC's assets,
and a first mortgage on the Company's Batavia, Illinois property. Among other
things, the restrictive covenants include limits on capital expenditures, a
minimum tangible net worth (excluding cumulative translation adjustments) of at
least $28,250,000 at September 30, 1995 and at all times thereafter, a maximum
F-23
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1995 AND MARCH 31, 1996
(UNAUDITED)
3. FINANCING ARRANGEMENTS--(CONTINUED)
ratio of total liabilities to tangible net worth is limited to at least 1.8 to 1
at September 30, 1995 and at all times thereafter, and prohibitions on paying
cash dividends in an amount that exceeds 25 percent of the Company's net income
for the preceding fiscal year. Interest on the revolving credit facility is
computed at the prime rate and/or a LIBOR based rate at the option of the
Company. Funds available but unused bear interest at the rate of 1/2% per annum.
Advances of credit under this credit facility were payable on January 26, 1996.
On January 26, 1996, the Company entered into an amendment with Northern and
LaSalle to extend the termination date of the Revolving Credit Agreement to
February 26, 1996. Subsequent amendments extended the termination date through
April 2, 1996.
On April 28, 1994, the Company's CDSC subsidiary entered into an agreement
with NBD Bank, Canada ('NBD'), which provided up to $5,800,000 (U.S.) under a
revolving demand credit facility. On March 28, 1995, the agreement was renewed
through April 30, 1996, and the available facility was increased $7,000,000
(U.S.). The facility is unsecured; however, the agreement contains a negative
pledge clause which prohibits CDSC from encumbering its assets to secure any
other indebtedness, excepting specific liens that are limited to the property
financed by the lien holder. The restrictive covenants in the agreement include
a CDSC minimum tangible net worth, computed based on Canadian GAAP, of
$10,000,000 (Canadian), a maximum ratio of total liabilities to tangible net
worth of 1.2 to 1, and a minimum working capital of $3,000,000 (Canadian). Under
the agreement, NBD must approve all mergers, acquisitions or changes in
ownership. Interest rates for Canadian dollars are at the Canadian prime rate or
NBD's cost of funds plus 1%. Interest rates for U.S. dollars are at the U.S.
prime rate or LIBOR based rates.
Of the total loans outstanding at March 31, 1996 against the revolving
credit agreements, all was borrowed at the prime rate.
In accordance with the loan agreement between BLSC and the Development
Authority of Cartersville, Georgia ('Authority'), Northern has issued an
irrevocable letter of credit in the amount of $3,852,000. Of this total amount,
$3,600,000 is available to pay principal on the Authority's outstanding Tax
Exempt Industrial Revenue Bonds and $252,000 is available to pay interest when
it becomes due. Northern has also issued a $666,000 irrevocable letter of credit
to support workers compensation insurance reserves in 1994. In 1995, Northern
increased the letter of credit to $775,000.
At March 31, 1996 the Company was not in full compliance with all covenants
of each credit agreement due to the adoption by CDSC of SFAS No. 106: Employers
Accounting for Post-Retirement Benefits other than Pensions. NBD has issued a
waiver due to this non-compliance.
4. LONG TERM DEBT
In December 1988, the Company secured $3,600,000 of borrowings by the
issuance of Tax Exempt Industrial Revenue Bonds ('Bonds') through the
Development Authority of Cartersville, Georgia, to partially finance the
construction and equipping of BLSC's Cartersville plant. The interest rate on
the Bonds is a weekly interest rate representing the minimum rate of interest
which, in the opinion of the Remarketing Agent, would be necessary to sell the
Bonds in a secondary market. The interest rates paid on these Bonds varied from
3.50% to 3.85% during the 1996 Second Quarter and was 3.75% at March 31, 1996.
The Company must fund a bond sinking fund for purposes of retiring the Bonds.
Principal payments of $300,000 are due on each December 1 beginning in the year
2009 and continuing through 2012. Payments of $400,000 are then due on each
December 1 through the year 2018.
F-24
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1995 AND MARCH 31, 1996
(UNAUDITED)
5. STOCKHOLDERS' EQUITY
On December 15, 1988, the Company sold 704,559 shares of common stock to
the public at $10.50 per share. On May 11, 1990, the Company sold 1,559,759
shares of common stock to Stelco Inc. for $12.00 per share. No dividends were
declared during the quarter.
6. STOCK OPTION PLANS
Effective December 15, 1988 (the date of the initial public offering), the
Company established an Employees' Incentive Stock Option Plan ('ISOP') and a
nonstatutory Directors' Stock Option Plan ('DSOP'). A total of up to 130,000 and
65,000 shares of common stock of the Company are reserved for issuance upon
exercise of options under the IOSP and DSOP, respectively.
For both plans, any options granted to employees and directors become
exercisable on the first anniversary date of the grant date, and shall vest and
become exercisable over a four-year period from the grant date. Twenty-five
percent (25%) of the options become exercisable on each anniversary of the grant
date, and to the extent vested, shall be exercisable for a term of ten years
from the grant date.
Below is a summary of both plans as of March 31, 1996:
<TABLE>
<CAPTION>
ISOP DSOP
------ ------
<S> <C> <C>
Outstanding, October 1, 1995...................... 86,500 45,000
Forfeitures....................................... 0 --
Outstanding, March 31, 1996....................... 86,500 45,000
Exercisable, March 31, 1996:
Options @ $10.50................................ 49,000 30,000
Options @ $5.50................................. 37,500 15,000
------ ------
Total exercisable............................... 86,500 45,000
Available for Grant, March 31, 1996............... 43,500 20,000
</TABLE>
7. INCOME TAXES
Effective October 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards ('SFAS') No. 109: Accounting for Income Taxes.
8. POST EMPLOYMENT RETIREMENT BENEFITS
BLSC and CDSC sponsor defined benefit post retirement plans for health care
and life insurance that covers most full-time employees. The plans pay stated
percentages of most necessary medical expenses incurred by retirees, after
subtracting payments by Medicare or other providers and for BLSC, after a stated
deductible has been met. Participants become eligible for the benefits if they
retire from BLSC or CDSC and after reaching age 55 with 10 or more years of
service for BLSC. The BLSC plan is contributory, with retiree contributions
adjusted annually. The CDSC plan is non-contributory. Neither plan is funded.
The Company adopted SFAS No. 106: Employers' Accounting for Post-retirement
Benefits Other Than Pensions ('SFAS No. 106'), as of October 1, 1992 for BLSC.
This standard requires that the expected cost of these post-retirement benefits
must be charged to expense during the years that the employees render service.
The Company elected to immediately recognize the transition obligation as of
October 1, 1992. Accordingly, the Company recognized a cumulative effect of a
change in accounting principle of $1,789,000 ($.45 per share). The effect of
this change in accounting was to
F-25
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1995 AND MARCH 31, 1996
(UNAUDITED)
8. POST EMPLOYMENT RETIREMENT BENEFITS--(CONTINUED)
decrease 1993 pretax income by $142,000. Prior to fiscal 1993, BLSC recognized
post-retirement health care costs in the year that the benefits were paid.
For measurement purposes, a 14.0% annual rate of increase in the per capita
cost of BLSC's covered health care claims was assumed for 1996; the rate was
assumed to decrease by 1/2 of 1% per year to 7%, and remain at that level
thereafter. To illustrate the health care cost trend on amounts reported,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated post-retirement benefit obligation as
of September 30, 1995, by approximately $158,000 and the aggregate of the
service and interest cost components of net post-retirement health care cost for
the year then ended by $22,000. The weighted-average discount rate used in
determining the accumulated post-retirement benefit obligation was 7.75%.
As of October 1, 1995, the Company has adopted SFAS No. 106 for its foreign
subsidiary CDSC. The Company has elected to immediately recognize the
transaction obligation and accordingly has recognized a cumulative effect of a
change in accounting principle of $2,368,000 (U.S.) ($.59 per share). The
$2,368,000 expense was not tax effected since any tax benefit would be offset by
a valuation reserve due to the long-term nature of their realization.
For measurement purposes, a 14% annual rate of increase per capita cost of
CDSC's covered health care claims was assumed for 1996; the rate was assumed to
decrease to 5% after seven years, and remain at that level thereafter. To
illustrate the health care cost trend on amounts reported, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated post-retirement benefit obligation as of October 1,
1995 by approximately $482,000 (U.S.) and the aggregate of the service and
interest cost components of net post-retirement health care costs for the 1996
fiscal year by $329,000 (U.S.). The weighted average discount rate used in
determining the accumulated post-retirement benefit obligation was 8.5%. Prior
to the 1996 fiscal year, CDSC recognized post-retirement health care costs in
the year that the benefits were paid.
9. TRANSLATION OF FOREIGN CURRENCIES
All balance sheet asset and liability accounts of CDSC, a foreign
subsidiary, are translated into U.S. Dollars using the rates of exchange in
effect at the balance sheet date. Results of operations are translated using the
weighted average exchange rate during the period. Adjustments arising from
foreign currency translations are recorded in a separate component of
Stockholders' Equity, 'Cumulative Translation Adjustment'.
10. MERGER AGREEMENT
On April 2, 1996, the Company consummated an amended agreement and plan of
merger by and among the Company, Bar Technologies, Inc. ('BarTech'), a Delaware
corporation, and B&L Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of BarTech, whereby BarTech acquired the Company for
$9.50 per common share in cash for an aggregate purchase price of $37,980,000.
The terms of the merger agreement also provide that, under certain
circumstances, holders of the Company's common stock will receive additional
consideration if all or substantially all of the stock or assets are sold or
merged into an unaffiliated third party of BarTech within one year of the date
of the merger agreement. Other Income for the six months ended March 31, 1996
includes a $1,000,000 payment to BarTech in connection with entering into the
merger agreement and $897,000 of expenses incurred by the Company related to the
merger for, among other things, legal expenses and professional fees.
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Bliss & Laughlin Industries Inc.:
We have audited the accompanying consolidated balance sheets of Bliss & Laughlin
Industries Inc. (a Delaware corporation) and Subsidiaries as of September 30,
1994 and 1995, and the related consolidated statements of income and loss,
common stockholders' equity and cash flows for each of the three years in the
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bliss & Laughlin Industries
Inc. and Subsidiaries as of September 30, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 8 to the financial statements, effective October 1, 1993,
the Company changed its method of accounting for income taxes. Additionally, as
discussed in Note 7 to the financial statements, effective October 1, 1992, the
Company changed its method of accounting for postretirement benefits other than
pensions.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 10, 1995 (except with respect to the matter
discussed in Note 17, as to which the date is April 2, 1996)
F-27
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 926 $ 918
Accounts receivable, less allowances of $355 in 1994
and $397 in 1995.................................. 18,466 18,670
Inventories.......................................... 27,255 30,001
Prepaid expenses..................................... 837 1,389
-------- --------
Total current assets.............................. 47,484 50,978
-------- --------
Property, Plant and Equipment:
Land and land improvements........................... 1,680 1,720
Buildings and building improvements.................. 9,165 9,623
Machinery and other equipment........................ 19,030 20,683
-------- --------
29,875 32,026
Accumulated depreciation............................. (13,032) (14,804)
-------- --------
Net property, plant and equipment.................... 16,843 17,222
-------- --------
Other assets........................................... 3,412 3,670
-------- --------
Total assets...................................... $ 67,739 $ 71,870
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit..................................... $ 16,550 $ 13,900
Accounts payable..................................... 13,965 14,379
Accounts payable--Stelco............................. 1,203 1,031
Payroll and other accrued liabilities................ 4,530 5,182
Income taxes payable................................. 799 514
-------- --------
Total current liabilities......................... 37,047 35,006
-------- --------
Noncurrent Retirement Benefits Liability............... 1,959 1,948
-------- --------
Deferred Income Taxes.................................. 411 1,348
-------- --------
Long-Term Debt......................................... 3,600 3,600
-------- --------
Commitments and Contingencies..........................
Stockholders' Equity...................................
Preferred stock, $1.00 par value; authorized
1,500,000 shares; no shares outstanding in 1994 or
1995.............................................. -- --
Common stock, $.01 par value; authorized 6,000,000
shares issued and outstanding, 3,969,518 in 1994
and 1995.......................................... 40 40
Additional paid-in capital--common stock............. 25,229 25,229
Retained earnings.................................... 971 6,183
Cumulative translation adjustment.................... (1,518) (1,484)
-------- --------
Total stockholders' equity........................ 24,722 29,968
-------- --------
Total liabilities and stockholders' equity........ $ 67,739 $ 71,870
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND LOSS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales.............................................. $ 136,923 $ 152,435 $ 169,372
Cost of sales.......................................... (127,923) (136,173) (148,093)
--------- --------- ---------
Gross Profit......................................... 9,000 16,262 21,279
Selling expenses....................................... (2,462) (2,672) (2,759)
Administrative expenses................................ (7,345) (8,695) (8,928)
--------- --------- ---------
Operating income (loss).............................. (807) 4,895 9,592
Interest expense, net.................................. (1,035) (1,266) (1,508)
Other income (expense), net............................ 6 2 (264)
--------- --------- ---------
Income (loss) before provision for income taxes and
cumulative effect of change in accounting
principle......................................... (1,836) 3,631 7,820
Income tax provision................................... (594) (866) (2,608)
Net income (loss) before cumulative effect of change in
accounting principle................................. (2,430) 2,765 5,212
Cumulative effect of change in accounting principle.... (1,789) 813 --
--------- --------- ---------
Net income (loss).................................... $ (4,219) $ 3,578 $ 5,212
--------- --------- ---------
--------- --------- ---------
Per share data:
Net income (loss) per share before cumulative effect
of change in Accounting Principle................. $ (.61) $ .70 $ 1.31
Cumulative effect of change in Accounting
Principle......................................... (.45) .20 --
--------- --------- ---------
Net income (loss) per share.......................... $ (1.06) $ .90 $ 1.31
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-29
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARES OUTSTANDING)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------- PREFERRED STOCK
ADDITIONAL -------------------- CUMULATIVE
SHARES PAID-IN SHARES RETAINED TRANSLATION
OUTSTANDING AMOUNT CAPITAL OUTSTANDING AMOUNT EARNINGS ADJUSTMENT TOTAL
----------- ------ ---------- ----------- ------ -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 30, 1992............ 3,969,518 $ 40 $ 25,229 -- $ -- $ 1,612 $ (766) $26,115
1993 net loss................... -- -- -- -- -- (4,219) -- (4,219)
Cumulative translation
adjustment.................... -- -- -- -- -- -- (677) (677)
--
----------- ------ ---------- ------ -------- ------------- -------
BALANCE,
SEPTEMBER 30, 1993............ 3,969,518 $ 40 $ 25,229 -- $ -- $(2,607) $ (1,443) $21,219
1994 net income................. -- -- -- -- -- 3,578 -- 3,578
Cumulative translation
adjustment.................... -- -- -- -- -- -- (75) (75)
--
----------- ------ ---------- ------ -------- ------------- -------
BALANCE,
SEPTEMBER 30, 1994............ 3,969,518 $ 40 $ 25,229 -- $ -- $ 971 $ (1,518) $24,722
1995 net income................. -- -- -- -- -- 5,212 -- 5,212
Cumulative translation
adjustment.................... -- -- -- -- -- -- 34 34
--
----------- ------ ---------- ------ -------- ------------- -------
BALANCE,
SEPTEMBER 30, 1995............ 3,969,518 $ 40 $ 25,229 -- $ -- $ 6,183 $ (1,484) $29,968
--
--
----------- ------ ---------- ------ -------- ------------- -------
----------- ------ ---------- ------ -------- ------------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-30
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss).................................... $(4,219) $ 3,578 $ 5,212
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities--
Depreciation and amortization..................... 1,506 1,616 1,764
Provision for losses on accounts receivable....... 97 99 (72)
Decrease (increase) in prepaid pension cost....... 12 (14) 23
Decrease (increase) in current assets--
Accounts receivable.................................. (3,247) (486) (127)
Inventories....................................... (8,441) 2,310 (2,733)
Prepaid expenses.................................. (290) 40 (550)
(Increase) in other assets........................... (91) (362) (281)
Increase (Decrease) in current liabilities--
Accounts payable.................................. 4,206 (3,241) 237
Payroll and other accrued liabilities............. 436 1,567 651
Income taxes payable.............................. 582 (46) (286)
(Decrease) increase in noncurrent retirement benefits
liability......................................... 1,901 (73) (11)
Increase (Decrease) in deferred income taxes......... 83 (481) 934
------- ------- -------
Net cash provided for (used for) operating
activities................................. (7,465) 4,507 4,761
------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment............ (1,612) (1,949) (2,144)
------- ------- -------
Net cash used for investing activities....... (1,612) (1,949) (2,144)
------- ------- -------
Cash flows from financing activities:
Net (payments) receipts under revolving credit
agreements........................................ 9,000 (2,448) (2,650)
------- ------- -------
Net cash (used for) provided by financing
activities................................. 9,000 (2,448) (2,650)
------- ------- -------
Effect of exchange rate changes........................ 185 (11) 25
Net (decrease) increase in cash and cash equivalents... 108 99 (8)
Cash and cash equivalents, beginning of year........... 719 827 926
------- ------- -------
Cash and cash equivalents, end of year................. $ 827 $ 926 $ 918
------- ------- -------
------- ------- -------
Supplemental cash flow disclosures:
Interest paid during the year........................ $ 1,079 $ 1,277 $ 1,942
Income taxes paid (refunds received) during the
year.............................................. (63) 16 2,537
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-31
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993, 1994 AND 1995
1. THE COMPANY
In 1990, Bliss & Laughlin Industries Inc. ('BLI') created Canadian Drawn
Steel Company Inc. ('CDSC') as a wholly owned subsidiary. On May 11, 1990, BLI,
through CDSC, purchased substantially all the assets of the Canadian Drawn Steel
Company business unit of Stelco Inc. ('Canadian Drawn'). After the purchase, BLI
owned 100% of the common stock of Bliss & Laughlin Steel Company ('BLSC') (an
Illinois corporation) and CDSC (a Canadian corporation). The financial
statements reflect the consolidated financial position and results of operations
of BLI, BLSC and, since May 11, 1990, the results of operations for CDSC
(collectively, the 'Company'). Substantially all of the assets of the Company
are in BLSC and CDSC, the operating subsidiaries.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents includes primarily cash as well as highly liquid
investments purchased with maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market and include the costs
of material, labor and factory overhead. The last-in, first-out ('LIFO') method
is used to determine the cost of BLSC inventories. Under the LIFO method,
current costs are charged to cost of sales for the year. The first-in, first-out
('FIFO') method is used to determine the cost of CDSC inventories. Inventories
recorded under the LIFO method were $19,557,000, or 72%, in 1994 and
$22,181,000, or 74%, in 1995; the remainder of inventory is recorded under the
FIFO method.
Property and Depreciation
Property, plant and equipment are stated at cost. Depreciation for
financial reporting purposes is provided principally on the straight-line method
over the estimated useful lives of the assets. The average life of plant and
equipment acquired before October 30, 1984, is 25 years for buildings and 7
years for machinery and equipment. For assets acquired after October 30, 1984,
the average lives are 40 years for buildings and 12 years for machinery and
equipment. Purchased software is capitalized and amortized over 5 years.
Accelerated methods and lives are used for income tax purposes.
Expenditures for maintenance and repairs which do not significantly
increase the life or efficiency of the asset are charged to expense when
incurred. Expenditures for renewals and betterments are capitalized and
depreciated over the shorter of their estimated useful lives or the remaining
useful life of the asset to which they relate. The net gain or loss on property
replaced, retired or otherwise disposed of is recognized in the period incurred.
Income Taxes
The provision for income taxes is based on pretax income in the
consolidated financial statements, including those items for which actual tax
payment or tax benefit is deferred to future years. Effective October 1, 1993,
the Company adopted the provisions of Statement of Financial Accounting
Standards ('SFAS') No. 109: Accounting for Income Taxes. SFAS No. 109 utilizes
the liability method of accounting for deferred income taxes.
F-32
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Earnings (Loss) Per Share
Earnings (loss) per common share is computed based on the weighted average
number of shares of common stock outstanding and common stock equivalents during
the respective years. The weighted average number of shares used for computing
earnings (loss) per share was 3,969,518 for fiscal years 1994 and 1993 and
3,975,153 for fiscal year 1995, respectively. Common stock equivalents were
anti-dilutive in fiscal years 1993 and 1994.
Line of Business Segments
Substantially all of the Company's business is the production and
distribution of cold finished steel bars through regional facilities in the
United States and Canada.
Translation of Foreign Currencies
The Company translates foreign currency financial statements of its
Canadian subsidiary by translating balance sheet accounts at the current
exchange rate and income statement accounts at the weighted average exchange
rate for the year. The resulting translation adjustments are included in
stockholders' equity. Gains and losses on foreign currency transactions and the
related tax effects are immaterial and are reflected in net income (loss).
Consolidation
The consolidated financial statements include all majority-owned
subsidiaries. All significant intercompany transactions of consolidated
subsidiaries have been eliminated.
Dividends
The Company has not paid cash dividends on its common stock and currently
intends to retain all anticipated earnings for the foreseeable future to support
the development of its business. Under the terms of its financing agreement (see
note 6), the Company is prohibited from paying cash dividends in an amount that
exceeds 25% of the Company's net income for the preceding fiscal year.
3. PENSIONS
BLSC maintains pension plans covering substantially all hourly employees of
the Harvey, Illinois, and Media, Ohio, plants. Employees ot the Batavia,
Illinois, and Cartersville, Georgia, plants are not covered. Benefits are based
on years of service and employee's age at termination. CDSC maintains pension
plans covering substantially all employees. Benefits for the salaried employees'
plan are based on an average salary for the five most recent years prior to
retirement. Benefits for the bargaining unit employees' plan are based on years
of service. The Company's policy is to fund pension cost in accordance with the
requirements of the Employee Retirement Income Security Act of 1974.
F-33
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
3. PENSIONS--(CONTINUED)
The components of the net periodic pension cost are summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................... $ 417,000 $ 408,000 $ 300,000
Interest cost on projected benefit obligations......... 1,051,000 1,088,000 1,152,000
Actual return on plan assets........................... (1,538,000) (1,195,000) (1,209,000)
Net amortization (deferral)............................ 323,000 (153,000) (169,000)
----------- ----------- -----------
Net periodic pension cost.............................. $ 253,000 $ 148,000 $ 74,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The following table set forth the plan's funded status and amount of
prepaid (accrued) pension cost recognized in the Company's consolidated balance
sheets at September 30, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulated benefit obligation--
Vested............................................... $11,918,000 $ 608,000 $13,009,000 $ 834,000
Non vested........................................... 428,000 70,000 379,000 82,000
----------- ----------- ----------- -----------
Total............................................. 12,346,000 678,000 13,388,000 916,000
Effect of projected future salary increases............ 600,000 0 736,000 22,000
----------- ----------- ----------- -----------
Projected benefit obligation........................... 12,946,000 678,000 14,124,000 938,000
Plan assets, at fair market value...................... 14,000,000 651,000 15,742,000 789,000
----------- ----------- ----------- -----------
Plan assets in excess of (less than) projected benefit
obligation........................................... 1,054,000 (27,000) 1,618,000 (149,000)
Unrecognized prior service cost........................ 844,000 88,000 520,000 159,000
Unrecognized transition net assets being amortized over
10 years............................................. (278,000) (35,000) (64,000) (23,000)
Unrecognized actuarial and investment losses........... 809,000 33,000 471,000 63,000
Additional minimum liability........................... -- (85,000) -- (178,000)
----------- ----------- ----------- -----------
Prepaid (accrued) pension cost recognized in the
consolidated balance sheet........................... $ 2,429,000 $ (26,000) $ 2,545,000 $ (128,000)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
For the BLSC plans, the weighted averaged assumed discount rate used in
determining the actuarial present value of projected benefit obligations was
8.75% and 7.75% in 1994 and 1995, respectively; the long-term anticipated rate
of return was 8.5% in 1994 and 1995. For the CDSC plans, the weighted average
assumed discount rate was 8.5% and the long-term anticipated rate of return was
8.5% in 1994 and 1995. The assumed rate of increase in future compensation
levels for determining the actuarial present value of projected benefit
obligation for CDSC's salaried employees' plan was 6% in 1994 and 1995. At
September 30, 1995, the plan assets for all plans were invested in units of
various trust funds administered by a trustee.
F-34
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
3. PENSIONS--(CONTINUED)
In accordance with SFAS No. 87: Employers' Accounting for Pensions, the
Company has recorded an additional minimum pension liability of $178,000 at
September 30, 1995.
4. COMMITMENTS AND CONTINGENCIES
The Company, as any other manufacturing company, is from time to time
subject to investigations, claims, and lawsuits arising out of the normal course
of its business, including those which may relate to commercial transactions as
well as environmental matters.
In the opinion of management, none of the current legal proceedings will
have a material adverse effect on the Company's consolidated financial position
or results of operations. Additionally, the Company does not believe its
exposure to material expenditures is substantial with respect to any known
environmental claims or liabilities.
On September 29, 1995, a class action suit was filed by an alleged
stockholder against the Company and each member of the Company's Board of
Directors for alleged breach of fiduciary duty in approving the merger agreement
publicly announced on September 18, 1995 by and among the Company, BRW Steel
Corporation ('BRW') and B&L Acquisition Corporation, a wholly-owned subsidiary
of BRW ('Merger Sub'). The suit alleges that the merger agreement was being
advanced through unfair procedures and that the Company's Board of Directors had
not sought to maximize stockholder value. Additionally, the complaint alleges
that an $8.25 per share offer received from international Metals Acquisition
Corporation was inadequate. The suit was amended on October 20, 1995, to include
the provisions of the amended merger agreement which was entered into as of
October 4, 1995, by and among the Company, BRW and Merger Sub and provides for a
$9.50 price per share in the merger. The amended complaint alleges the same
grounds as the original complaint and in addition alleges that the directors had
breached their fiduciary duty by agreeing to the termination fee provision in
the amended merger agreement. The plaintiff seeks injunctive relief against the
proposed merger and unspecified damages.
The directors believe they have meritorious defenses to the lawsuit and
intend to defend the lawsuit vigorously. While the Company and its directors
believe strongly that the plaintiff will be unsuccessful in gaining any form of
relief, there can be no assurance that the court will not grant relief,
including damages. Moreover, it is currently not possible to estimate reasonably
the amount of any such damages.
On September 29, 1995, Stelco filed a lawsuit against certain present and
former officers and key employees of the Company and their respective beneficial
owners of shares of common stock of the Company. The lawsuit was subsequently
dismissed without prejudice. The Company was not named as a defendant in this
lawsuit.
5. INVENTORIES
Inventories consisted of the following at September 30:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Rough steel and work in process.... $14,188,000 $15,457,000
Finished steel..................... 15,779,000 17,592,000
LIFO reserve....................... (2,712,000) (3,048,000)
----------- -----------
$27,255,000 $30,001,000
----------- -----------
----------- -----------
</TABLE>
F-35
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
5. INVENTORIES--(CONTINUED)
During 1995, certain inventory quantities were increased resulting in the
creation of a new LIFO cost layer. Had the LIFO method not been used, cost of
sales would have been higher by approximately $10,000 in 1994 and lower by
approximately $53,000 in 1995. Capitalized costs included in inventory consist
of material, labor and factory overhead. Factory overhead is calculated using
uniform capitalization rules.
6. FINANCING ARRANGEMENTS
The Company's indebtedness as of September 30, 1994 and 1995, was composed
of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Revolving credit............................. $16,550,000 $13,900,000
----------- -----------
----------- -----------
Long-term debt--lndustrial Revenue Bonds..... $ 3,600,000 $ 3,600,000
----------- -----------
----------- -----------
</TABLE>
Borrowings during the years were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Short-term bank borrowings--
Maximum month-end borrowings......................... $19,000,000 $20,150,000 $20,643,000
Average month-end borrowings......................... 15,137,000 18,379,000 18,066,000
Weighted average interest rate for the fiscal year... 4.4% 6.4% 7.4%
Weighted average interest rate at year-end........... 4.6% 7.1% 7.1%
----------- ----------- -----------
----------- ----------- -----------
Total borrowings--
Average month-end borrowings....................... $18,737,000 $21,979,000 $21,666,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
On January 28 and December 9, 1994, the Company entered into amendments to
its revolving credit agreement with The Northern Trust Company ('Northern') and
LaSalle National Bank, which provides up to $20,000,000 under a revolving credit
facility. The revolving credit facility is secured by the Company's accounts
receivable, inventories and equipment, excluding CDSC's assets, and a first
mortgage on the Company's Batavia, Illinois property. Among other things, the
restrictive covenants include limits on capital expenditures, a minimum tangible
net worth (excluding cumulative translation adjustments) of at least $28,250,000
at September 30, 1995 and at all times thereafter, a maximum ratio of total
liabilities to tangible net worth is limited to at least 1.8 to 1 at September
30, 1995 and at all times thereafter, and prohibitions on paying cash dividends
in an amount that exceeds 25 percent of the Company's net income for the
preceding fiscal year. Interest on the revolving credit facility is computed at
the prime rate and/or a LIBOR based rate at the option of the Company. Funds
available but unused bear interest at the rate of 1/2% per annum. Advances of
credit under this credit facility are payable on January 26, 1996.
On April 28, 1994, the Company's CDSC subsidiary entered into an agreement
with NBD Bank Canada ('NBD'), which provided up to $5,800,000 (U.S.) under a
revolving demand credit facility. On March 28, 1995, the agreement was renewed
through April 30, 1996, and the available facility was increased to $7,000,000
(U.S.). The facility is unsecured; however, the agreement contains a negative
pledge clause which prohibits CDSC from encumbering its assets to secure any
other indebtedness, excepting specific liens that are limited to the property
financed by the lienholder. The restrictive covenants in the agreement include a
CDSC minimum tangible net worth, computed based on
F-36
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
6. FINANCING ARRANGEMENTS--(CONTINUED)
Canadian GAAP, of $10,000,000 (Canadian), a maximum ratio of total liabilities
to tangible net worth of 1.2 to 1, and a minimum working capital of $3,000,000
(Canadian). Under the agreement, NBD must approve all mergers, acquisitions or
changes in ownership. Interest rates for Canadian dollars are at the Canadian
prime rate or NBD's cost of funds plus 1%. Interest rates for U.S. dollars are
at the U.S. prime rate or LIBOR based rates.
The interest rate on loans outstanding at September 30, 1995, ranged from
6.91% to 7.125% on loans based on LIBOR. Of the total loans outstanding at
September 30, 1995 against the revolving credit agreements, $300,000 was
borrowed at prime rate.
In December 1988, BLSC secured $3,600,000 of borrowings by the issuance of
Tax Exempt Industrial Revenue Bonds through the Development Authority of
Cartersville, Georgia, to partially finance the construction and equipping of
the Cartersville plant. The interest rate on the bonds is a weekly interest rate
representing the minimum rate of interest which, in the opinion of the
Remarketing Agent, would be necessary to sell the bonds in a secondary market.
The interest rates paid on these bonds varied from 3.15% to 5.85% during fiscal
year 1995 and was 4.65% at September 30, 1995. The Company must fund a bond
sinking fund for purposes of retiring the bonds. Principal payments of $300,000
are due on each December 1 beginning in the year 2009 and continuing through
2012. Payments of $400,000 are then due on each December 1 through the year
2018.
In accordance with the loan agreement between BLSC and the Development
Authority of Cartersville, Georgia, Northern has issued an irrevocable letter of
credit in the amount of $3,852,000. Of this total amount, $3,600,000 is
available to pay principal on the Bonds and $252,000 is available to pay
interest when it becomes due. Northern has also issued a $666,000 irrevocable
letter of credit to support workers compensation insurance reserves in 1994. In
1995, Northern increased the letter of credit to $775,000.
At September 30, 1995, the available portion of all revolving credit
facilities after adjusting for outstanding letters of credit amounted to
$8,473,000. In the aggregate, $58,686,000 of assets are utilized to secure all
borrowings.
The Company is in full compliance with all covenants of each credit
agreement.
7. POST EMPLOYMENT RETIREMENT BENEFIT
The Company sponsors a defined benefit post retirement plan for health care
and life insurance that covers most full-time employees. The plan pays stated
percentages of most necessary medical expenses incurred by retirees, after
subtracting payments by Medicare or other providers and after a stated
deductible has been met. Participants become eligible for the benefits if they
retire from the Company after reaching age 55 with 10 or more years of service.
The plan is contributory, with retiree contributions adjusted annually. The
Company does not fund this plan.
The Company adopted SFAS No. 106: Employers' Accounting for Post-retirement
Benefits Other Than Pensions, as of October 1, 1992 for BLSC. This standard
requires that the expected cost of these post-retirement benefits must be
charged to expense during the years that the employees render service. The
Company elected to immediately recognize the transition obligation as of October
1,1992. Accordingly, the Company recognized a cumulative effect of a change in
accounting principle of $1,789,000 ($.45 per share). The effect of this change
in accounting was to decrease 1993 pretax income by $142,000. Prior to fiscal
1993, the Company recognized post-retirement health care costs in the year that
the benefits were paid.
F-37
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
7. POST EMPLOYMENT RETIREMENT BENEFIT--(CONTINUED)
The following table sets forth the funded status of the plan, reconciled to
the accrued post-retirement benefit cost recognized in the Company's
consolidated balance sheet as of September 30, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Accumulated post-retirement benefit obligation
('APBO')--
Retirees............................................. $1,142,000 $ 952,000
Fully eligible active plan participants.............. 219,000 244,000
Other active plan participants....................... 891,000 1,145,000
---------- ----------
Accrued post-retirement benefit costs.................. $2,252,000 $2,341,000
---------- ----------
---------- ----------
</TABLE>
Net periodic post-retirement benefit cost for 1994 and 1995 included the
following components:
<TABLE>
<S> <C> <C>
Service cost of benefits and earned.................... $ 60,000 $ 57,000
Interest on APBO....................................... 177,000 188,000
-------- --------
Net periodic post-retirement benefit cost.............. $237,000 $245,000
-------- --------
-------- --------
</TABLE>
For measurement purposes, a 14.0% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1996; the rate was assumed to
decrease by 1/2 of 1% per year to 7%, and remain at that level thereafter. To
illustrate the health care cost trend on amounts reported, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated post-retirement benefit obligation as of September 30,
1995, by approximately $158,000 and the aggregate of the service and interest
cost components of net post-retirement health care cost for the year then ended
by $22,000. The weighted-average discount rate used in determining the
accumulated post-retirement benefit obligation was 7.75%.
Additionally, the CDSC subsidiary of the Company is required to adopt the
provisions of SFAS No. 106 for the 1996 fiscal year. Based on preliminary
actuarial estimates, the Company expects the accumulated post-retirement benefit
obligation to be approximately $2,000,000. The cost of providing these benefits,
which was not significant for the years 1993, 1994 and 1995, is currently
recognized as expense when paid. The Company has not yet determined the method
of adoption.
8. INCOME TAXES
Effective October 1, 1993, the Company adopted SFAS No. 109: Accounting for
Income Taxes. SFAS No. 109 requires financial statements to reflect deferred
income taxes for the future tax consequences of events recognized in different
years for financial reporting and tax reporting purposes. This accounting change
increased 1994 net income by $813,000 ($.20 per share). The financial statements
for years prior to 1994 have not been restated to reflect the adoption of this
standard.
F-38
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
8. INCOME TAXES--(CONTINUED)
Components of deferred income taxes as of September 30, 1994 and 1995 were
as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES) 1994 1995
- ------------------------------------------------------- ----------- -----------
<S> <C> <C>
Federal Net Operating Loss Carryforwards............... $ 756,000 $ --
Post-retirement benefits............................... 754,000 743,000
Tax in excess of Book depreciation..................... (1,228,000) (1,299,000)
Other, net............................................. 67,000 235,000
Canadian Deferred Income Tax........................... (411,000) (538,000)
----------- -----------
(62,000) (859,000)
Less: Valuation allowance.............................. (349,000) --
----------- -----------
Deferred Income Taxes, Net............................. $ (411,000) $ (859,000)
----------- -----------
----------- -----------
</TABLE>
The Company recorded a valuation allowance as of September 30, 1994 equal
to 100% of the domestic portion of the net deferred tax asset. During 1995, the
valuation allowance decreased by $349,000 due to management's belief that the
net deferred tax assets will reverse during periods in which the Company will
generate net taxable income and fully utilize the remaining net operating loss
carryforward.
The income tax provision (benefit) components for the fiscal years 1993,
1994 and 1995, were composed of:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- ----------
<S> <C> <C> <C>
Current provision (benefit)--
Federal.............................................. $ -- $ 24,000 $1,620,000
State................................................ (25,000) -- 128,000
Foreign.............................................. 480,000 842,000 1,208,000
-------- -------- ----------
455,000 866,000 2,956,000
Deferred (prepaid) provision relating to--
Tax over book depreciation........................... 94,000 271,000 207,000
Prepaid pension benefits............................. 2,000 (10,000) (66,000)
Uniform cost capitalization.......................... 22,000 32,000 --
Accrued vacation benefits............................ (24,000) (2,000) (111,000)
Other, net........................................... 45,000 (18,000) (29,000)
Valuation Allowance.................................. -- (273,000) (349,000)
-------- -------- ----------
139,000 -- (348,000)
-------- -------- ----------
Income tax provision (benefit)....................... $594,000 $866,000 $2,608,000
-------- -------- ----------
-------- -------- ----------
</TABLE>
F-39
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
8. INCOME TAXES--(CONTINUED)
A reconciliation between the statutory federal income tax rate and the
effective income tax rate recorded is shown below:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rates..................... 35% 35% 35%
---------- ---------- ----------
---------- ---------- ----------
Statutory federal provision (benefit).................. $ (643,000) $1,271,000 $2,737,000
State provision (benefit), net of federal tax effect... (16,000) -- 83,000
Utilization of NOL carryforward and valuation allowance
change............................................... -- (552,000) (349,000)
Foreign tax rate differential.......................... 60,000 123,000 79,000
Unbenefitted NOL carryforward.......................... 1,062,000 -- --
Other, net............................................. 131,000 24,000 58,000
---------- ---------- ----------
$ 594,000 $ 866,000 $2,608,000
---------- ---------- ----------
---------- ---------- ----------
Effective income taxes rates........................... -- 23.9% 33.4%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
9. LEASES
The Company leases trucks and other miscellaneous equipment for various
lease terms, none of which exceeds five years. Lease agreements frequently
include renewal options and usually require that the Company pay for insurance
and maintenance expense.
Property, plant and equipment includes costs associated with capital leases
of $0 and $59,000 as of September 30, 1994 and 1995, respectively. Accumulated
depreciation includes amortization associated with these capital leases of $0
and $12,000 as of September 30, 1994 and 1995, respectively. Capital lease
amortization is included in depreciation expense.
Rental payments for operating leases are charged to cost of operations in
the period incurred. Rental expense for operating leases were $344,000, $278,000
and $265,000 for the years ended September 30, 1993, 1994 and 1995,
respectively. Future minimum lease payments for all leases at September 30,
1995, total $547,000.
10. SUPPLEMENTAL INFORMATION
Interest income in each of the three years ended September 30, 1995, is
insignificant and has been netted against interest expense on the consolidated
statements of income. The following additional supplemental information is
provided for the three years ended September 30:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Depreciation............................ $1,440,000 $1,486,000 $1,594,000
Amortization on Capitalized Software.... 66,000 130,000 170,000
Maintenance and repairs................. 3,252,000 3,157,000 3,866,000
</TABLE>
11. SALARY SAVINGS AND PROFIT SHARING PLANS
The Company maintains a Salary Savings Plan for all nonbargaining unit
domestic employees. The Company contributes $200 per participant per plan year
plus 60% of the first $1,000 of a participant's contribution and 40% of the
second $1,000 of the participant's contribution. The Company also maintains a
Salary Savings Plan for all Harvey, Illinois, bargaining unit employees.
F-40
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
11. SALARY SAVINGS AND PROFIT SHARING PLANS--(CONTINUED)
The Company contributes $100 per participant per plan year. Provisions
under both of these plans were $102,000, $138,000 and $163,000 for the years
ended September 30, 1993, 1994 and 1995, respectively.
Effective December 1988, the Company established a salary savings plan for
all Medina, Ohio, bargaining unit employees. The Company does not make
contributions to this plan.
Effective October 1, 1987, the Company established a profit sharing plan
for all nonbargaining unit employees. The profit sharing amount is based upon
the Company's income before taxes and profit sharing expenses and may range up
to 10% of each participant's base salary. Provisions under this plan were $0,
$558,000 and $663,000, for the years ended September 30, 1993, 1994 and 1995,
respectively.
12. STOCK OPTION PLANS
Effective December 15, 1988, the Company established an Employee Incentive
Stock Option Plan ('ISOP') and a nonstatutory Directors' Stock Option Plan
('DSOP'). A total of up to 130,000 and 65,000 shares of common stock of the
Company are reserved for issuance upon exercise of options under the ISOP and
DSOP, respectively. On December 15, 1988, pursuant to the ISOP, 30 key employees
were granted options to purchase a specific number of shares. The number of
shares exercisable per employee ranges from 1,000 to 4,000. On December 15,
1988, pursuant to the DSOP, the three directors of the Company who are not
employees of the Company were granted options to purchase 10,000 shares each.
Effective May 11, 1990, the Company granted additional options to 36 key
employees to purchase shares of common stock pursuant to the ISOP. The number of
shares exercisable per employee ranges from 500 to 5,000. Also effective May 11,
1990, the Company granted options to the three directors of the Company, who are
not employees, to purchase 5,000 shares each of common stock pursuant to the
DSOP.
For both plans, the options granted to employees and directors became
exercisable on the first anniversary date of the grant dates, December 15, 1989,
and May 11, 1991, respectively, and vested and became exercisable over a
four-year period from the grant dates, with 25% of the options becoming
exercisable on each anniversary of the grant dates. To the extent vested, the
options shall be exercisable for a term of 10 years from the grant dates. The
exercise price per share of common stock for the 1988 options is $10.50, the
initial offering price per share of the Company's common stock. The exercise
price per share of common stock for the 1990 options is $5.50, the closing price
per share of the Company's common stock as reported on the NASDAQ National
Market System on May 11, 1990. No options were granted or exercised in 1994 or
1995.
F-41
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
12. STOCK OPTION PLANS--(CONTINUED)
Below is a summary of options for both plans as of September 30, 1994 and
1995:
<TABLE>
<CAPTION>
ISOP DSOP
---------------- ----------------
FISCAL YEAR FISCAL YEAR
---------------- ----------------
1994 1995 1994 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Outstanding, October 1................ 97,000 97,000 45,000 45,000
Forfeited............................. -- 10,500 -- --
Outstanding, September 30............. 97,000 86,500 45,000 45,000
Exercisable, September 30:
Options @ $10.50.................... 56,000 49,000 30,000 30,000
Options @ $5.50..................... 41,000 37,500 15,000 15,000
Total exercisable................... 97,000 86,500 45,000 45,000
Available for grant, September 30..... 33,000 43,500 20,000 20,000
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
13. SUPPLEMENTAL INCENTIVE COMPENSATION PLAN
Approximately 28 key management employees of the Company, including all
executive officers of the Company, participate in the Company's Supplemental
Incentive Compensation Plan (the 'Incentive Plan'). The Incentive Plan provides
for payment of cash awards depending upon, among other factors, the degree to
which certain specified income levels have been attained during the Company's
fiscal year. Provisions under this plan were $0, $472,000 and $468,000 for the
years ended September 30, 1993, 1994 and 1995.
14. SPLIT DOLLAR LIFE INSURANCE
In September 1988, BLSC entered into a split dollar life insurance
agreement with each of the three executive officers of the Company and certain
other officers and key employees of BLSC whereby the premiums on the
corresponding insurance policies are paid by BLSC. Under the agreement, such
persons have each executed a collateral assignment of their policies, BLSC, as
assignee, is entitled to recover the aggregate premium payments made by it
through any combination of (1) borrowing against the policies, (2) the cash
surrender value of the policies if the policies should be surrendered and (3)
payment in the event of the insured's death. Premiums paid for the coverage were
$253,000 in 1994 and 1993 and $211,000 in 1995.
15. ALLOWANCE FOR DOUBTFUL ACCOUNTS
An analysis of the allowance for doubtful accounts for fiscal years 1993,
1994 and 1995, is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- --------
<S> <C> <C> <C>
Balance, beginning of year........................ $507,000 $ 533,000 $355,000
Provision charged to income..................... 72,000 (41,000) (72,000)
Accounts written off, net of recoveries......... (46,000) (137,000) 114,000
-------- --------- --------
Balance, end of year............................ $533,000 $ 355,000 $397,000
-------- --------- --------
-------- --------- --------
</TABLE>
F-42
<PAGE>
BLISS & LAUGHLIN INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1993, 1994 AND 1995
16. GEOGRAPHIC INFORMATION
The majority of the Company's business is conducted in the Great Lakes
Region. The Company operates four plants in that region, three in the United
States and one in Canada. The decision on which plant to use to source a product
sale is based on the nature of the product, the availability of each plant to
produce the product, the relative proximity of the plant to the source of raw
material and the ultimate customer and other factors.
Summary financial information by geographic area included in the
consolidated financial statements for the years ended September 30, 1993, 1994
and 1995, is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales--
United States........................................ $108,909 $120,327 $130,860
Canada............................................... 28,014 32,108 38,512
-------- -------- --------
Total consolidated................................ $136,923 $152,435 $169,372
-------- -------- --------
-------- -------- --------
Income (loss) before income taxes and cumulative effect
of change in accounting principle--
Income (loss) from North American operations......... $ (260) $ 5,495 $ 10,213
General Corporate expense............................ (1,576) (1,864) (2,393)
-------- -------- --------
Total consolidated................................ $ (1,836) $ 3,631 $ 7,820
-------- -------- --------
-------- -------- --------
Identifiable assets--
United States........................................ $ 51,878 $ 49,654 $ 52,896
Canada............................................... 17,117 18,085 18,974
-------- -------- --------
Total consolidated................................ $ 68,995 $ 67,739 $ 71,870
-------- -------- --------
-------- -------- --------
</TABLE>
Export sales included in the United States sales approximated $551,000,
$2,319,000 and $2,710,000, for 1993, 1994 and 1995, respectively. Export sales
included in Canada sales approximated $2,979,000, $7,126,000 and $9,041,000, for
1993, 1994 and 1995, respectively. Intercompany sales were insignificant in all
years presented and have been eliminated from the above totals. In fiscal year
1995, there were no sales to one customer which exceeded 10% of total sales.
17. SUBSEQUENT EVENT
On April 2, 1996, the Company consummated an amended agreement and plan of
merger by and among the Company, Bar Technologies, Inc. ('BarTech'), a Delaware
corporation, and B&L Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of BarTech, whereby BarTech acquired the Company for
$9.50 per common share in cash for an aggregate purchase price of $37,980,000.
The terms of the merger agreement also provide that, under certain
circumstances, holders of the Company's common stock will receive additional
consideration if all or substantially all of the stock or assets are sold or
merged into an unaffiliated third party of BarTech within one year of the date
of the merger agreement.
F-43
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Additional Information................................................ 2
Summary............................................................... 3
Risk Factors.......................................................... 14
The Company........................................................... 25
Use of Proceeds....................................................... 26
The Exchange Offer.................................................... 27
Capitalization........................................................ 35
Pro Forma Financial Information....................................... 37
Selected Financial Information........................................ 42
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 45
Business.............................................................. 51
Projections........................................................... 69
Management............................................................ 82
Certain Transactions.................................................. 89
Principal Stockholders................................................ 90
Description of Other Indebtedness..................................... 93
Description of Exchange Notes......................................... 98
Summary of Collateral and Intercreditor Agreements.................... 136
Notes Registration Rights............................................. 145
Certain Federal Income Tax Considerations............................. 147
Plan of Distribution.................................................. 147
Legal Matters......................................................... 148
Independent Public Accountants........................................ 148
Index to Financial Statements......................................... F-1
</TABLE>
---------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
PROSPECTUS
BAR TECHNOLOGIES INC.
OFFER TO EXCHANGE $91,609,000 OF ITS
13 1/2% SENIOR SECURED NOTES DUE 2001
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT FOR $91,609,000 OF ITS
OUTSTANDING 13 1/2% SENIOR SECURED
NOTES DUE 2001
[LOGO]
BARTECH
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
1. The diagram illustrates in summary form the process steps that will be
eliminated as a result of the replacement of the ingot based process used by
the Bethlehem BRW Division with the continuous casting process. (Page 55)
2. The diagram illustrates the layout of the Johnstown Facility after Phase One
has been completed and shows in summary form the installation of new
equipment and reactivation of existing facilities proposed in Phase Two.
(Page 58)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
'Law') provides as follows:
'(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in
II-1
<PAGE>
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to 'the corporation'
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to 'other enterprises'
shall include employee benefit plans; references to 'fines' shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to 'serving at the request of the corporation' shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner 'not opposed to the best interests of the
corporation' as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).'
Section 102(b)(7) of the Law provides as follows:
'(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under section 174 of this
title; or (iv) for any transaction from which the director derived an
improper personal benefit. No such
II-2
<PAGE>
provision shall eliminate or limit the liability of a director for any act
or omission occurring prior to the date when such provision becomes
effective. All references in this paragraph to a director shall also be
deemed to refer (x) to a member of the governing body of a corporation
which is not authorized to issue capital stock, and (y) to such other
person or persons, if any, who, pursuant to a provision of the certificate
of incorporation in accordance with Section 141(a) of this title, exercise
or perform any of the powers or duties otherwise conferred or imposed upon
the board of directors by this title.'
Directors and officers of the registrants may be entitled to
indemnification under the charter documents, by-laws or contractual
arrangements.
In addition, the answer to this Item 20 is incorporated by reference to:
Articles Seventh and Eighth of the Amended and Restated Certificate of
Incorporation of BarTech in substantially the form included as Exhibit 3.1 to
this Registration Statement; and Article V of the Amended and Restated By-Laws
of BarTech in substantially the form included as Exhibit 3.2 to this
Registration Statement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------------------
<S> <C>
2.1* -- Stock Subscription Agreement, dated as of March 1, 1996, among
Blackstone/BarTech Acquisition Corporation, BarTech and BRW Steel
Holdings, L.P.
2.2* -- Amendment No. 1 to Stock Subscription Agreement, dated as of April 1,
1996, among Blackstone/BarTech Acquisition Corporation, BarTech and
BRW Steel Holdings, L.P.
2.3* -- Assignment and Subscription Agreement, dated as of April 2, 1996, by
and among Blackstone/BarTech Acquisition Corporation, BarTech and BRW
Steel Holdings, L.P.
2.4* -- Stockholders' Agreement, dated as of April 2, 1996, among Blackstone
Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore
Capital Partners II L.P., Blackstone Family Investment Partnership II
L.P., BRW Steel Holdings, L.P., BRW Steel Offshore Holdings, L.P. and
BarTech.
3.1* -- Amended and Restated Certificate of Incorporation of BarTech.
3.2* -- Amended and Restated By-Laws of BarTech.
4.1* -- Indenture, dated as of April 1, 1996, among BarTech, B&L Acquisition
Corporation, Bliss & Laughlin Industries Inc., Bliss & Laughlin Steel
Company, Canadian Drawn Steel Company Inc. and United States Trust
Company of New York.
4.2* -- Form of Note.
4.3* -- Form of Exchange Note.
4.4* -- Registration Rights Agreement, dated as of April 1, 1996, by and
among BarTech, Bliss & Laughlin Industries Inc., Bliss & Laughlin
Steel Company, Canadian Drawn Steel Company Inc. and Chase Securities
Inc.
4.5* -- Common Stock Registration Rights Agreement, dated as of April 1,
1996, among BarTech, BRW Steel Holdings, L.P., BRW Steel Offshore
Holdings, L.P., Blackstone Capital Partners II Merchant Banking Fund
L.P. and Chase Securities Inc.
4.6* -- Warrant Agreement, dated as of April 1, 1996, between BarTech and
United States Trust Company of New York.
5.1 -- Opinion of Simpson Thacher & Bartlett regarding legality of the
securities being registered.
8.1 -- Opinion of Simpson Thacher & Bartlett regarding certain tax matters.
10.1* -- Credit Agreement, dated as of April 2, 1996, among BarTech, Bliss &
Laughlin Steel Company and Chemical Bank.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------------------
<S> <C>
10.2* -- Master Pledge Agreement, dated as of April 2, 1996, among BRW Steel
Holdings, L.P., BRW Steel Offshore Holdings, L.P., BarTech, Bliss &
Laughlin Industries Inc., Bliss & Laughlin Steel Company and United
States Trust Company of New York.
10.3* -- Agreement, dated July 18, 1995, by and between Rokop Corporation and
BRW Steel Corporation.
10.4* -- Employment Agreement, dated September 15, 1994, between BarTech and
James R. Powers.
10.5* -- Employment Agreement, dated September 15, 1994, between BarTech and
Denny Bozic.
10.6* -- Memorandum of Understanding, dated October 19, 1994, between BarTech
and Birchel S. Brown.
10.7* -- Employment Agreement, dated May 11, 1990, between Bliss & Laughlin
Industries Inc. and Gregory H. Parker (incorporated by reference to
Bliss & Laughlin Industries Inc.'s Annual Report on Form 10-K for the
year ended September 30, 1990).
10.8* -- Employment Agreement, dated May 11, 1990, between Bliss & Laughlin
Industries Inc. and Anthony J. Romanovich (incorporated by reference
to Bliss & Laughlin Industries Inc.'s Annual Report on Form 10-K for
the year ended September 30, 1990).
10.9* -- Bliss & Laughlin Industries Inc. Employees' Incentive Stock Option
Plan (incorporated by reference to Exhibit 10.13 to Bliss & Laughlin
Industries Inc.'s Registration Statement on Form S-1, Registration
No. 33-25421).
10.10* -- First Amendment to Bliss & Laughlin Industries Inc. Employees'
Incentive Stock Option Plan, dated February 5, 1992.
10.11* -- Bliss & Laughlin Industries Inc. Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.14 to Bliss & Laughlin
Industries Inc.'s Registration Statement on Form S-1, Registration
No. 33-25421).
10.12* -- Bliss & Laughlin Industries Inc. Directors' Deferred Compensation
Plan effective as of March 1, 1994 (incorporated by reference to
Bliss & Laughlin Industries Inc.'s Annual Report on Form 10-K for the
year ended September 30, 1994).
10.13* -- Letter Agreement, dated September 22, 1994, between Johnstown
Advisory Corp. and BarTech.
10.14* -- Letter Agreement, dated April 2, 1996, among BarTech, Johnstown
Acquisition Corp., Johnstown Advisors Corp. and Blackstone Management
Partners L.P.
10.15* -- Master Agreement, dated July 18, 1994, by and among the Commonwealth
of Pennsylvania, acting by and through the Department of Commerce,
the Pennsylvania Industrial Development Authority, the Commonwealth
of Pennsylvania, acting by and through the Department of Community
Affairs, the Johnstown Industrial Development Corporation, the County
of Cambria, the City of Johnstown, BarTech and BRW Steel
Corporation--Johnstown.
10.16* -- Amendment No. 1 to the Master Agreement, dated September 21, 1994, by
and among the Commonwealth of Pennsylvania, acting by and through the
Department of Commerce, the Pennsylvania Industrial Development
Authority, the Commonwealth of Pennsylvania, acting by and through
the Department of Community Affairs, the Johnstown Industrial
Development Corporation, the County of Cambria, the City of Johnstown
and BarTech.
10.17* -- Sunny Day Fund Loan Agreement, dated September 21, 1994, by and
between BarTech and the Commonwealth of Pennsylvania acting by and
through its Department of Commerce.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------------------
<S> <C>
10.18* -- Pennsylvania Industrial Development Authority Consent, Subordination
and Assumption Agreement, dated August 4, 1994, effective as of
September 21, 1994, by BarTech and Johnstown Industrial Development
Corporation in favor of the Pennsylvania Industrial Development
Authority.
10.19* -- Economic Development Partnership Loan Agreement, dated September 21,
1994, between the City of Johnstown and BarTech.
10.20* -- Economic Development Set-Aside Loan Agreement, dated as of July 6,
1995, between the City of Johnstown and BarTech.
10.21* -- Economic Development Set-Aside Loan Agreement, dated as of November
6, 1995, between the City of Johnstown and BarTech.
10.22* -- Section 108 Loan Agreement, dated July 20, 1994, by and between the
City of Johnstown, the County of Cambria and BarTech.
10.23* -- Amendment No. 1 to Section 108 Loan Agreement, dated August 1994, by
and among the City of Johnstown, the County of Cambria and BarTech.
10.24* -- Loan and Use Agreement, dated September 21, 1994, by and between
Marine Midland Bank and BarTech.
10.25* -- Loan Agreement, dated August 12, 1994, by and between BarTech and
Buffalo and Erie County Regional Development Corporation.
10.26* -- Community Development Block Grant Loan Agreement, dated as of
November 3, 1995, between Cambria County and BarTech.
10.27* -- BID Loan Agreement, dated March 12, 1996, between Johnstown
Industrial Development Corporation and BarTech.
10.28* -- Contribution Agreement, dated December 1993, by and between BarTech
and Bethlehem Steel Corporation.
10.29* -- Amendment No. 1 to Contribution Agreement, dated January 1994, by and
between BarTech and Bethlehem Steel Corporation.
10.30* -- Amendment No. 2 to Contribution Agreement, dated January 7, 1994, by
and between BarTech and Bethlehem Steel Corporation.
10.31* -- Amendment No. 3 to Contribution Agreement, dated June 7, 1994, by and
between BarTech and Bethlehem Steel Corporation.
10.32* -- Amendment No. 4 to Contribution Agreement, dated June 29, 1994, by
and between BarTech and Bethlehem Steel Corporation.
10.33* -- Amendment No. 5 to Contribution Agreement, dated September 21, 1994,
by and between BarTech and Bethlehem Steel Corporation.
10.34* -- Subordinated Loan Agreement, dated September 21, 1994, by and between
BarTech and Bethlehem Steel Corporation.
10.35* -- Loan Agreement, dated as of December 1, 1988, between Development
Authority of Cartersville and Bliss & Laughlin Steel Company
(incorporated by reference to Exhibit 10(e) to Bliss & Laughlin
Industries Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1989).
10.36* -- Collective Bargaining Agreement, dated February 15, 1994, by and
between the United Steelworkers of America, AFL-CIO and BarTech.
10.37* -- Amendment No. 1 to the Collective Bargaining Agreement, dated
September 21, 1994, by and between the United Steelworkers of
America, AFL-CIO and BRW Steel Corporation.
10.38* -- Letter Agreement, dated March 28, 1996, among BRW Steel Holdings,
L.P., BarTech and the United Steel Workers of America.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ------------------------------------------------------------------------
<S> <C>
10.39* -- Amended and Restated Intercreditor and Subordination Agreement, dated
as of April 2, 1996, by and among United States Trust Company of New
York, Bethlehem Steel Corporation, the Pennsylvania Lenders (as
defined therein), the Lackawanna Lenders (as defined therein),
Chemical Bank, Rokop Corporation, those parties who in the future
become Government Lenders (as defined therein), those parties who in
the future become Notes Refinancing Lenders (as defined therein),
BarTech, Bliss & Laughlin Steel Company, Canadian Drawn Steel
Company, and each of the other Pledgors (as defined therein) from
time to time made party thereto.
10.40* -- Memorandum of Understanding, dated March 6, 1996, between
Pennsylvania Electric Company and BarTech.
12.1* -- Computation of ratio of earnings to fixed charges.
21.1* -- List of subsidiaries of BarTech.
23.1 -- Consent of Simpson Thacher & Bartlett (included in their opinions
previously filed as Exhibits 5.1 and 8.1).
23.2 -- Consent of Simpson Thacher & Bartlett
23.3 -- Consent of Arthur Andersen LLP (Pittsburgh office).
23.4 -- Consent of Arthur Andersen LLP (Chicago office).
24.1 -- Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1* -- Statement on Form T-1 of the eligibility of United States Trust
Company of New York.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
99.3* -- Exchange Agreement to be entered into between BarTech and United
States Trust Company of New York.
</TABLE>
- ------------------
* Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted as the required information is presented in the
registrants' consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of a registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which,
II-6
<PAGE>
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of New York,
State of New York on the 29th day of July, 1996.
BAR TECHNOLOGIES INC.
By: /s/ JAMES R. POWERS
___________________________________
Name: James R. Powers
Title: President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1993, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------------------------- -------------
<S> <C> <C>
/s/ JAMES R. POWERS President, Chief Executive Officer and July 29, 1996
- ------------------------- Director
James R. Powers (Principal Executive Officer)
* Secretary and Director July 29, 1996
- -------------------------
Kenneth R. Brotman
* Class B Director July 29, 1996
- -------------------------
David A. Stockman
/s/ MIKAEL SALOVAARA Class B Director July 29, 1996
- -------------------------
Mikael Salovaara
/s/ ROBERT B. MCKEON Chairman and Director July 29, 1996
- -------------------------
Robert B. McKeon
* Director July 29, 1996
- -------------------------
Thomas J. Campbell
* Director July 29, 1996
- -------------------------
Edward N. Ney
Director
- -------------------------
Harold A. Poling
* Director July 29, 1996
- -------------------------
Daniel R. DeVos
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------------------------- -------------
<S> <C> <C>
* Director July 29, 1996
- -------------------------
Anthony Rainaldi
* Director July 29, 1996
- -------------------------
Buddy W. Davis
/s/ MARY ANN LINK Controller July 29, 1996
- ------------------------- (Principal Financial and Accounting
Mary Ann Link Officer)
*By: /s/ ROBERT B. MCKEON
- -------------------------
Robert B. McKeon
Attorney-In-Fact
/s/ MIKAEL SALOVAARA
- -------------------------
Mikael Salovaara
Attorney-In-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of Chicago,
State of Illinois on the 29th day of July, 1996.
BLISS & LAUGHLIN INDUSTRIES INC.
By: /s/ PAUL J. AUSTGEN
___________________________________
Name: Paul J. Austgen
Title: Vice President, Finance,
Secretary and Treasurer
Pursuant to the requirements of the Securities Act of 1993, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------------------------- -------------
<S> <C> <C>
/s/ ANTHONY J. ROMANOVICH Senior Vice President July 29, 1996
- ------------------------- (Principal Executive Officer)
Anthony J. Romanovich
* Director July 29, 1996
- -------------------------
Kenneth R. Brotman
/s/ PAUL J. AUSTGEN Vice President, Finance, Secretary and July 29, 1996
- ------------------------- Treasurer
Paul J. Austgen (Principal Financial and Accounting
Officer)
/s/ MIKAEL SALOVAARA Director July 29, 1996
- -------------------------
Mikael Salovaara
/s/ ROBERT B. MCKEON Director July 29, 1996
- -------------------------
Robert B. McKeon
* Director July 29, 1996
- -------------------------
Thomas J. Campbell
*By: /s/ ROBERT B. MCKEON
- -------------------------
Robert B. McKeon
Attorney-In-Fact
/s/ MIKAEL SALOVAARA
- -------------------------
Mikael Salovaara
Attorney-In-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of Chicago,
State of Illinois on the 29th day of July, 1996.
BLISS & LAUGHLIN STEEL COMPANY
By: /s/ PAUL J. AUSTGEN
______________________________________
Name: Paul J. Austgen
Title: Vice President, Finance,
Secretary and Treasurer
Pursuant to the requirements of the Securities Act of 1993, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------------------------- -------------
<S> <C> <C>
/s/ ANTHONY J. ROMANOVICH Senior Vice President July 29, 1996
- ------------------------- (Principal Executive Officer)
Anthony J. Romanovich
* Director July 29, 1996
- -------------------------
Kenneth R. Brotman
/s/ PAUL J. AUSTGEN Vice President, Finance, Secretary and July 29, 1996
- ------------------------- Treasurer
Paul J. Austgen (Principal Financial and Accounting
Officer)
/s/ MIKAEL SALOVAARA Director July 29, 1996
- -------------------------
Mikael Salovaara
/s/ ROBERT B. MCKEON Director July 29, 1996
- -------------------------
Robert B. McKeon
* Director July 29, 1996
- -------------------------
Thomas J. Campbell
*By: /s/ ROBERT B. MCKEON
- -------------------------
Robert B. McKeon
Attorney-In-Fact
/s/ MIKAEL SALOVAARA
- -------------------------
Mikael Salovaara
Attorney-In-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of Chicago,
State of Illinois on the 29th day of July, 1996.
CANADIAN DRAWN STEEL COMPANY INC.
By: /s/ JAMES BARNETT
---------------------------------
Name: James Barnett
Title: President
Pursuant to the requirements of the Securities Act of 1993, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------------------------- -------------
<S> <C> <C>
/s/ JAMES BARNETT President and Sole Director July 29, 1996
- ------------------------- (Principal Executive Officer)
James Barnett
/s/ MARTYN DURHAM Accounting Manager July 29, 1996
- ------------------------- (Principal Financial and Accounting
Martyn Durham Officer)
*By: /s/ ROBERT B. MCKEON
- -------------------------
Robert B. McKeon
Attorney-In-Fact
/s/ MIKAEL SALOVAARA
- -------------------------
Mikael Salovaara
Attorney-In-Fact
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NO.
- ---------- ------------------------------------------------------------------------------------------------ ----
<S> <C> <C> <C>
2.1* -- Stock Subscription Agreement, dated as of March 1, 1996, among Blackstone/BarTech
Acquisition Corporation, BarTech and BRW Steel Holdings, L.P.
2.2* -- Amendment No. 1 to Stock Subscription Agreement, dated as of April 1, 1996, among
Blackstone/BarTech Acquisition Corporation, BarTech and BRW Steel Holdings, L.P.
2.3* -- Assignment and Subscription Agreement, dated as of April 2, 1996, by and among
Blackstone/BarTech Acquisition Corporation, BarTech and BRW Steel Holdings, L.P.
2.4* -- Stockholders' Agreement, dated as of April 2, 1996, among Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., BRW Steel Holdings, L.P., BRW Steel Offshore
Holdings, L.P. and BarTech.
3.1* -- Amended and Restated Certificate of Incorporation of BarTech.
3.2* -- Amended and Restated By-Laws of BarTech.
4.1* -- Indenture, dated as of April 1, 1996, among BarTech, B&L Acquisition Corporation, Bliss &
Laughlin Industries Inc., Bliss & Laughlin Steel Company, Canadian Drawn Steel Company
Inc. and United States Trust Company of New York.
4.2* -- Form of Note.
4.3* -- Form of Exchange Note.
4.4* -- Registration Rights Agreement, dated as of April 1, 1996, by and among BarTech, Bliss &
Laughlin Industries Inc., Bliss & Laughlin Steel Company, Canadian Drawn Steel Company
Inc. and Chase Securities Inc.
4.5* -- Common Stock Registration Rights Agreement, dated as of April 1, 1996, among BarTech, BRW
Steel Holdings, L.P., BRW Steel Offshore Holdings, L.P., Blackstone Capital Partners II
Merchant Banking Fund L.P. and Chase Securities Inc.
4.6* -- Warrant Agreement, dated as of April 1, 1996, between BarTech and United States Trust
Company of New York.
5.1 -- Opinion of Simpson Thacher & Bartlett regarding legality of the securities being
registered.
8.1 -- Opinion of Simpson Thacher & Bartlett regarding certain tax matters.
10.1* -- Credit Agreement, dated as of April 2, 1996, among BarTech, Bliss & Laughlin Steel Company
and Chemical Bank.
10.2* -- Master Pledge Agreement, dated as of April 2, 1996, among BRW Steel Holdings, L.P., BRW
Steel Offshore Holdings, L.P., BarTech, Bliss & Laughlin Industries Inc., Bliss & Laughlin
Steel Company and United States Trust Company of New York.
10.3* -- Agreement, dated July 18, 1995, by and between Rokop Corporation and BRW Steel
Corporation.
10.4* -- Employment Agreement, dated September 15, 1994, between BarTech and James R. Powers.
10.5* -- Employment Agreement, dated September 15, 1994, between BarTech and Denny Bozic.
10.6* -- Memorandum of Understanding, dated October 19, 1994, between BarTech and Birchel S. Brown.
10.7* -- Employment Agreement, dated May 11, 1990, between Bliss & Laughlin Industries Inc. and
Gregory H. Parker (incorporated by reference to Bliss & Laughlin Industries Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1990).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NO.
- ---------- ------------------------------------------------------------------------------------------------ ----
<S> <C> <C> <C>
10.8* -- Employment Agreement, dated May 11, 1990, between Bliss & Laughlin Industries Inc. and
Anthony J. Romanovich (incorporated by reference to Bliss & Laughlin Industries Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1990).
10.9* -- Bliss & Laughlin Industries Inc. Employees' Incentive Stock Option Plan (incorporated by
reference to Exhibit 10.13 to Bliss & Laughlin Industries Inc.'s Registration Statement on
Form S-1, Registration No. 33-25421).
10.10* -- First Amendment to Bliss & Laughlin Industries Inc. Employees' Incentive Stock Option
Plan, dated February 5, 1992.
10.11* -- Bliss & Laughlin Industries Inc. Directors' Stock Option Plan (incorporated by reference
to Exhibit 10.14 to Bliss & Laughlin Industries Inc.'s Registration Statement on Form S-1,
Registration No. 33-25421).
10.12* -- Bliss & Laughlin Industries Inc. Directors' Deferred Compensation Plan effective as of
March 1, 1994 (incorporated by reference to Bliss & Laughlin Industries Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1994).
10.13* -- Letter Agreement, dated September 22, 1994, between Johnstown Advisory Corp. and BarTech.
10.14* -- Letter Agreement, dated April 2, 1996, among BarTech, Johnstown Acquisition Corp.,
Johnstown Advisors Corp. and Blackstone Management Partners L.P.
10.15* -- Master Agreement, dated July 18, 1994, by and among the Commonwealth of Pennsylvania,
acting by and through the Department of Commerce, the Pennsylvania Industrial Development
Authority, the Commonwealth of Pennsylvania, acting by and through the Department of
Community Affairs, the Johnstown Industrial Development Corporation, the County of
Cambria, the City of Johnstown, BarTech and BRW Steel Corporation--Johnstown.
10.16* -- Amendment No. 1 to the Master Agreement, dated September 21, 1994, by and among the
Commonwealth of Pennsylvania, acting by and through the Department of Commerce, the
Pennsylvania Industrial Development Authority, the Commonwealth of Pennsylvania, acting by
and through the Department of Community Affairs, the Johnstown Industrial Development
Corporation, the County of Cambria, the City of Johnstown and BarTech.
10.17* -- Sunny Day Fund Loan Agreement, dated September 21, 1994, by and between BarTech and the
Commonwealth of Pennsylvania acting by and through its Department of Commerce.
10.18* -- Pennsylvania Industrial Development Authority Consent, Subordination and Assumption
Agreement, dated August 4, 1994, effective as of September 21, 1994, by BarTech and
Johnstown Industrial Development Corporation in favor of the Pennsylvania Industrial
Development Authority.
10.19* -- Economic Development Partnership Loan Agreement, dated September 21, 1994, between the
City of Johnstown and BarTech.
10.20* -- Economic Development Set-Aside Loan Agreement, dated as of July 6, 1995, between the City
of Johnstown and BarTech.
10.21* -- Economic Development Set-Aside Loan Agreement, dated as of November 6, 1995, between the
City of Johnstown and BarTech.
10.22* -- Section 108 Loan Agreement, dated July 20, 1994, by and between the City of Johnstown, the
County of Cambria and BarTech.
10.23* -- Amendment No. 1 to Section 108 Loan Agreement, dated August 1994, by and among the City of
Johnstown, the County of Cambria and BarTech.
10.24* -- Loan and Use Agreement, dated September 21, 1994, by and between Marine Midland Bank and
BarTech.
10.25* -- Loan Agreement, dated August 12, 1994, by and between BarTech and Buffalo and Erie County
Regional Development Corporation.
10.26* -- Community Development Block Grant Loan Agreement, dated as of November 3, 1995, between
Cambria County and BarTech.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NO.
- ---------- ------------------------------------------------------------------------------------------------ ----
<S> <C> <C> <C>
10.27* -- BID Loan Agreement, dated March 12, 1996, between Johnstown Industrial Development
Corporation and BarTech.
10.28* -- Contribution Agreement, dated December 1993, by and between BarTech and Bethlehem Steel
Corporation.
10.29* -- Amendment No. 1 to Contribution Agreement, dated January 1994, by and between BarTech and
Bethlehem Steel Corporation.
10.30* -- Amendment No. 2 to Contribution Agreement, dated January 7, 1994, by and between BarTech
and Bethlehem Steel Corporation.
10.31* -- Amendment No. 3 to Contribution Agreement, dated June 7, 1994, by and between BarTech and
Bethlehem Steel Corporation.
10.32* -- Amendment No. 4 to Contribution Agreement, dated June 29, 1994, by and between BarTech and
Bethlehem Steel Corporation.
10.33* -- Amendment No. 5 to Contribution Agreement, dated September 21, 1994, by and between
BarTech and Bethlehem Steel Corporation.
10.34* -- Subordinated Loan Agreement, dated September 21, 1994, by and between BarTech and
Bethlehem Steel Corporation.
10.35* -- Loan Agreement, dated as of December 1, 1988, between Development Authority of
Cartersville and Bliss & Laughlin Steel Company (incorporated by reference to Exhibit
10(e) to Bliss & Laughlin Industries Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1989).
10.36* -- Collective Bargaining Agreement, dated February 15, 1994, by and between the United
Steelworkers of America, AFL-CIO and BarTech.
10.37* -- Amendment No. 1 to the Collective Bargaining Agreement, dated September 21, 1994, by and
between the United Steelworkers of America, AFL-CIO and BRW Steel Corporation.
10.38* -- Letter Agreement, dated March 28, 1996, among BRW Steel Holdings, L.P., BarTech and the
United Steel Workers of America.
10.39* -- Amended and Restated Intercreditor and Subordination Agreement, dated as of April 2, 1996,
by and among United States Trust Company of New York, Bethlehem Steel Corporation, the
Pennsylvania Lenders (as defined therein), the Lackawanna Lenders (as defined therein),
Chemical Bank, Rokop Corporation, those parties who in the future become Government
Lenders (as defined therein), those parties who in the future become Notes Refinancing
Lenders (as defined therein), BarTech, Bliss & Laughlin Steel Company, Canadian Drawn
Steel Company, and each of the other Pledgors (as defined therein) from time to time made
party thereto.
10.40* -- Memorandum of Understanding, dated March 6, 1996, between Pennsylvania Electric Company
and BarTech.
12.1* -- Computation of ratio of earnings to fixed charges.
21.1* -- List of subsidiaries of BarTech.
23.1 -- Consent of Simpson Thacher & Bartlett (included in their opinions filed as Exhibits 5.1
and 8.1).
23.2 -- Consent of Simpson Thacher & Bartlett.
23.3 -- Consent of Arthur Andersen LLP (Pittsburgh office).
23.4 -- Consent of Arthur Andersen LLP (Chicago office).
24.1 -- Powers of Attorney (included in the signature pages to the Registration Statement).
25.1* -- Statement on Form T-1 of the eligibility of United States Trust Company of New York.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
99.3* -- Exchange Agreement to be entered into between BarTech and United States Trust Company of
New York.
</TABLE>
* Previously filed.
<PAGE>
July 29, 1996
Bar Technologies Inc.
227 Franklin Street, Suite 300
Johnstown, Pennsylvania 15901
Dear Sirs:
We have acted as special counsel for Bar Technologies Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to (i) the issuance by
the Company of $91,609,000 aggregate principal amount of its 13 1/2% Senior
Secured Notes due 2001 (the "Exchange Notes") and (ii) the unconditional
guarantees (the "Guarantees") of the Exchange Notes by the Guarantors named
below. The Exchange Notes are to be offered by the Company in exchange for
$91,609,000 aggregate principal amount of its outstanding 13 1/2% Senior Secured
Notes due 2001 (the "Notes").
We have examined the Registration Statement and the Indenture dated
as of April 1, 1996 (the "Indenture") among the Company, B&L Acquisition
Corporation, Bliss & Laughlin Industries Inc. ("B&L"), Bliss & Laughlin Steel
Company ("BLSC"), Canadian Drawn Steel Company Inc. ("CDSC"; together with B&L
and BLSC, the "Guarantors") and
<PAGE>
Bar Technologies Inc. -2- July 29, 1996
United States Trust Company of New York, as Trustee (the "Trustee"), which has
been filed with the Commission as an Exhibit to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed that the Indenture has been duly
authorized, executed and delivered by the Trustee. In addition, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we hereby advise you that in our opinion (i) the
Exchange Notes, when executed and authenticated in accordance with the
provisions of the Indenture and delivered in exchange for the Notes as
contemplated in the Registration Statement and the Indenture, will constitute
valid and legally binding obligations of the Company and (ii) the Guarantees,
when executed and authenticated in accordance with the provisions of the
Indenture and when the Exchange Notes are delivered in exchange for the Notes as
contemplated in the
<PAGE>
Bar Technologies Inc. -3- July 29, 1996
Registration Statement and the Indenture, will constitute valid and legally
binding obligations of the Guarantors in accordance with and subject to the
terms thereof and of the Indenture.
Our opinion set forth above is subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
Insofar as the opinion expressed herein relate to or are dependent
upon matters governed by laws of the State of Illinois or the Province of
Ontario, we have assumed the correctness of the opinions of Wildman, Harrold,
Allen & Dixon and Borden & Elliot, respectively, copies of which are attached
hereto.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the federal law of the United States. This opinion is rendered to
you in connection with the above-described transaction. This opinion may not be
relied upon by you for any other purpose, or relied upon by, or furnished to,
any other person, firm or corporation without our prior written consent.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
<PAGE>
Bar Technologies Inc. -4- July 29, 1996
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
July 29, 1996
Bar Technologies Inc.
227 Franklin Street
Suite 300
Johnstown, Pennsylvania 15901
Ladies and Gentlemen:
Reference is made to an Indenture dated as of April 1, 1996 (the
"Indenture"), among Bar Technologies Inc., a Delaware corporation, as issuer,
B&L Acquisition Corporation, a Delaware corporation, as initial guarantor, Bliss
& Laughlin Industries Inc., at Delaware corporation ("B&L") , Bliss & Laughlin
Steel Company, an Illinois corporation ("BLSC"), Canadian Drawn Steel Company
Inc., a corporation organized under the federal laws of Canada (together with
B&L and BLSC, as additional guarantors), and United States Trust Company of New
York, a bank and trust company organized under the New York Banking Law, as
Trustee, without regard to any amendments thereto.
Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed to such terms in the Indenture.
This opinion letter is being furnished to you pursuant to your
request.
For the purpose of rendering the opinions set forth below, we have
examined and relied upon the following documents:
(i) the Certificate of Incorporation and By-laws of B&L, as
in effect on April 2, 1996;
(ii) the Articles of Incorporation and By-laws of BLSC, as in
effect on April 2, 1996;
(iii) a supporting certificate of B&L;
(iv) a supporting certificate of BLSC;
(v) certain resolutions of the Board of Directors of B&L;
and
(vi) certain resolutions of the Board of Directors of BLSC.
<PAGE>
Bar Technologies Inc. -6- July 29, 1996
As to all factual matters, material to the opinions expressed below,
we have, with your permission and without "independent investigation or
confirmation, relied upon, and assumed the accuracy of, the representations and
warranties of B&L and BLSC contained in the above-reference documents, and all
factual matters contained in the documents we have examined. We have also
examined such certificates of public officials (including the attachments
thereto), corporate documents and records and other certificates (together with
the instruments and agreements described in subparagraphs (i) through (vi)
above, the "documents examined by us"), and have made such investigations of
law, as we have deemed appropriate or advisable in order to give the opinions
hereinafter set forth.
For purposes of the opinions expressed below, we have assumed, with
your permission and without independent verification: (i) the genuineness of all
signatures on all documents examined by us (or on the originals of documents of
which we have examined copies); (ii) the legal capacity of all natural persons
who have signed the documents examined by us (or the originals of documents of
which we have examined copies); (iii) the authenticity of all documents examined
by us submitted to us as originals; (iv) the conformity with the original
documents of all documents examined by us submitted to us as certified,
photostatic or reproduced copies; (v) the authenticity of the originals of all
such documents; (vi) the due, binding and valid authorization, execution and
delivery of the Indenture and the documents and instruments referred to therein
(the "Transaction Documents") on behalf of persons other than B&L and BLSC; and
(vii) that the Transaction Documents constitute valid, binding and enforceable
obligations of all parties thereto.
Based upon the foregoing, and subject to the assumptions,
limitations, qualifications and exceptions contained herein, we are of the
opinion that:
1. as of April 2, 1996, the guarantee executed and delivered by B&L
in connection with the Series A Securities was duly and validly
authorized; and
2. as of April 2, 1996, the guarantee executed and delivered by
BLSC in connection with the Series A Securities was duly and
validly authorized.
In rendering the opinions set forth above, we express no opinion as
to, or as to the effect or applicability of, any laws other than the Business
Corporation Act of the State of Illinois and the General Corporation Law of the
State of Delaware.
The opinions set forth above are being delivered solely in connection
with a Registration Statement on Form S-4 (the "Registration Statement") filed
by you with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, relating to the issuance by you of
$91,609,000 aggregate principal amount of 13 1/2% Senior Secured Notes due 2001,
and may not be relied upon for any other purpose. These opinions may only be
relied on by you and your counsel. These opinions are not to
<PAGE>
Bar Technologies Inc. -7- July 29, 1996
be quoted in whole or in part or otherwise referred to in any financial
statements or other public releases, nor are they to be filed with any
governmental agency or other person, without the prior written authorization of
this firm; provided however, you are hereby authorized to file this opinion
letter as an exhibit to your counsel's opinion letter filed with the Commission
in connection with the Registration Statement. These opinions are limited to the
specific issues addressed and are limited in all respects to laws and facts
existing on the date hereof. By rendering these opinions, we assume no
obligation to advise you of any changes in such laws or facts that may hereafter
be brought to our attention.
Very truly yours,
/s/ Wildman, Harrold, Allen & Dixon
Wildman, Harrold, Allen & Dixon
<PAGE>
July 29, 1996
Canadian Drawn Steel Company Inc.
155 Chatham Street
Hamilton, Ontario
L8P 2B7
Dear Sirs/Mesdames:
Re: Bar Technologies Inc. - Offering of 91,609 Units consisting
of $91,609,000 13 1/2% Senior Secured Notes due 2001 of
Bar Technologies Inc. and 91,609 Warrants to purchase shares
of Class A Common Stock
We have acted as special counsel in the Province of Ontario to
Canadian Drawn Steel Company Inc. (the "Subsidiary"), a corporation incorporated
under the laws of Canada, in connection with certain transactions relating to
(i) the purchase agreement dated 28 March 1996 (the "Purchase Agreement") among
Bar Technologies Inc. ("Bartech"), the Subsidiary, the other guarantors listed
on the signature pages thereof and the Initial Purchaser signatory thereto (the
"Initial Purchaser"); and (ii) certain documents in favour of United States
Trust Company of New York, as collateral agent and/or secured party and/or
trustee thereunder.
In that connection, we have examined, among other documents,
originals, or copies certified or otherwise identified to our satisfaction of
the following executed documents which, we were informed by Messrs. Cahill
Gordon & Reindel, (and we so assume) were delivered on or prior to the date
hereof.
1. the indenture (the "Indenture") dated as of 1 April 1996 among
Bartech, as issuer, the Subsidiary, as guarantor, and others;
2. the guarantee made by the Subsidiary in favour of the Initial
Purchaser pursuant to the Indenture; and
3. the certificate of the secretary of the Subsidiary (the
"Certificate of the Secretary") dated 2 April 1996 (a photocopy
of an executed copy of
<PAGE>
Canadian Drawn Steel Company Inc. -9- July 29, 1996
which is attached hereto as Appendix "A") (i) confirming that
each of the resolutions of the sole shareholder of the
Subsidiary of the execution, delivery and performance of the
Documents has been duly passed, and (ii) setting forth the names
and specimen signatures of the officers of the Subsidiary
authorized to execute and deliver the Documents;
(the documents described in numbers 1 and 2 above being hereinafter collectively
referred to as the "Documents").
We have also examined such statutes, certificates and other
documents, and have considered such questions of law, as we have deemed
necessary or appropriate to enable us to render the opinions hereinafter set
forth. In all such examinations, we have assumed the genuineness of all
signatures, the legal capacity at all relevant times of any natural persons
signing any documents, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
certified or true copies or as reproductions (including documents received by
facsimile machine) and the accuracy of all certificates of public officials and
officers of the Subsidiary.
We are qualified to practise law only in the Province of Ontario. We
have made no investigation of the laws of any jurisdiction other than, and the
opinions hereinafter set forth are confined to, the laws of the Province of
Ontario and the federal laws of Canada applicable in Ontario, as in force at the
date hereof.
In expressing our opinion set forth in paragraph 2 below we have,
with your permission, relied solely upon the Certificate of the Secretary as to
(i) the due authorization by the Subsidiary of the execution, delivery and
performance of the Documents and (ii) the due execution by the Subsidiary of the
Documents.
Based and relying upon, and subject to, the foregoing and to the
assumptions hereinafter expressed, we are of the opinion that:
1. The Subsidiary has all necessary corporate power and corporate
authority to execute and deliver, and to perform its obligations
under the Documents.
2. The execution, delivery and performance by the Subsidiary of the
Documents has been duly authorized by all necessary corporate
action on the Subsidiary's part and the Documents have been duly
executed and delivered by the Subsidiary.
3. No consent, approval, authorization, license, qualification or
order of, or filing or registration with, any court,
governmental department or
<PAGE>
Canadian Drawn Steel Company Inc. -10- July 29, 1996
regulatory authority, is necessary under the federal laws of
Canada or the laws of the Province of Ontario as a condition to
the lawful execution and delivery by the Subsidiary of the
Documents or the performance of its obligations thereunder.
In rendering the opinions set forth above, we have assumed without
independent enquiry that:
(a) there has occurred due execution and delivery of both of the
Documents by each of the parties thereto, other than the
Subsidiary, and of all other documentation in connection
therewith; and
(b) Both Documents have been duly authorized, executed and delivered
by, and are enforceable in accordance with their respective
terms against every party thereto, other than the Subsidiary.
We express no opinion as to the enforceability of any of the
Documents and we express no opinion on the Documents to the extent that they may
constitute or give rise to financial assistance by the Subsidiary (within the
meaning of Section 44 of the Canada Business Corporations Act) to any party
related to the Subsidiary other than Bartech.
This opinion speaks only as of the date of the execution of the
Documents. This opinion is intended solely for the use of the person(s) to whom
it is addressed, Bartech, and their respective successors and assigns, their
respective legal counsel including Messrs. Simpson Thacher & Bartlett, and only
in connection with the transaction described above and the filing by Bartech of
a registration statement on Form S-4 with the Securities and Exchange Commission
of the United States of America in connection with the transaction described
above, and should not be relied upon by any other person or for any other
purpose, nor quoted from or referred to in any other document, without our prior
written consent.
Very truly yours,
/s/ Borden & Elliot
Borden & Elliot
<PAGE>
July 29, 1996
Bar Technologies Inc.
227 Franklin Street, Suite 300
Johnstown, Pennsylvania 15901
Dear Sirs:
We have acted as special counsel for Bar Technologies Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to (i) the issuance by
the Company of $91,609,000 aggregate principal amount of its 13 1/2% Senior
Secured Notes due 2001 (the "Exchange Notes") and (ii) the unconditional
guarantees (the "Guarantees") of the Exchange Notes by the Guarantors named
below. The Exchange Notes are to be offered by the Company in exchange for
$91,609,000 aggregate principal amount of its outstanding 13 1/2% Senior Secured
Notes due 2001 (the "Notes").
We have examined the Registration Statement and the Indenture dated
as of April 1, 1996 (the "Indenture") among the Company, B&L Acquisition
Corporation, Bliss & Laughlin Industries Inc. ("B&L"), Bliss & Laughlin Steel
Company ("BLSC"), Canadian Drawn Steel Company Inc. ("CDSC"; together with B&L
and BLSC, the "Guarantors")
<PAGE>
Bar Technologies Inc. -2- July 29, 1996
and United States Trust Company of New York, as Trustee (the "Trustee"), which
has been filed with the Commission as an Exhibit to the Registration Statement.
In addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed that the Indenture has been duly
authorized, executed and delivered by the Trustee. In addition, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we hereby advise you that the statements made in the
Registration Statement under the caption "Certain Federal Income Tax
Considerations," insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with respect
thereto, constitute our opinion.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the
<PAGE>
Bar Technologies Inc. -3- July 29, 1996
federal law of the United States. This opinion is rendered to you in connection
with the above-described transaction. This opinion may not be relied upon by you
for any other purpose, or relied upon by, or furnished to, any other person,
firm or corporation without our prior written consent.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
[LETTERHEAD OF SIMPSON THACHER & BARTLETT]
July 29, 1996
Bar Technologies Inc.
227 Franklin Street, Suite 300
Johnstown, PA 15901
Dear Sirs:
We hereby consent to the reference to our firm under the caption
'Certain Federal Income Tax Considerations' in the Prospectus included
in your Registration Statement on Form S-4 (File No. 333-4254).
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
----------------------------------
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 23.3
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
----------------------------------
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
July 29, 1996
<PAGE>
EXHIBIT 23.4
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
----------------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois,
July 29, 1996
