UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended December 31, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _____ to _____
Commission File No. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes [x] No[ ].
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at February 12, 2002
Common Stock, $.01 par value 31,548,544 shares
Item 1 - Financial Statements (unaudited)
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, June 30,
2001 2001
------------- ------------
(Unaudited) (Restated)
ASSETS
Current assets:
Cash and cash equivalents $ 935 $ 935
Accounts receivable, net of allowance for doubtful accounts of
$2,262 at December 31, 2001 and $2,146 at June 30, 2001 35,605 58,261
Inventories 76,034 71,708
Other current assets 3,849 2,986
Current assets of discontinued operations 32,074 71,979
------------- ------------
Total current assets 148,497 205,869
Property, plant and equipment:
Land and buildings 111,838 111,773
Machinery and equipment 385,098 384,411
Construction in progress 10,587 12,369
------------- ------------
507,523 508,553
Less accumulated depreciation (271,497) (256,807)
------------- ------------
Net property, plant and equipment 236,026 251,746
Excess of cost over net assets acquired 6,211 13,515
Other 16,586 16,957
Non-current assets of discontinued operations 90,782 213,258
------------- ------------
Total assets $ 498,102 $ 701,345
============= ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,595 $ 37,692
Accrued interest payable 4,892 3,365
Accrued payroll expenses 3,056 4,884
Accrued operating expenses 5,774 8,568
Other current liabilities 14,264 17,484
Current maturities of long-term debt 393,002 293,500
Current liabilities of discontinued operations 9,905 25,312
Reserve for operating losses of discontinued operations 9,040 10,136
------------- ------------
Total current liabilities 463,528 400,941
Deferred liabilities 7,909 7,701
Long-term debt, less current portion 158,500 254,000
Non-current liabilities of discontinued operations 45,175 45,207
Stockholders' equity:
Preferred stock, par value $.01; authorized: 5,000,000 shares - -
Common stock, par value $.01; authorized: 195,000,000 shares;
issued: 31,429,539 at December 31, 2001 and 31,142,113 at June 30, 2001 314 311
Additional paid-in capital 344,183 343,908
Unearned compensation (199) (317)
Accumulated deficit (521,308) (350,406)
------------- -------------
Total stockholders' deficit (177,010) (6,504)
------------- -------------
Total liabilities and stockholders' equity $ 498,102 $ 701,345
============= =============
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2001 2000 2001 2000
----------- ----------- ---------- ----------
(Restated) (Restated)
Net sales $ 115,438 $ 136,173 $ 253,160 $ 307,297
Cost of sales:
Other than depreciation and amortization 95,797 117,467 203,824 262,411
Depreciation and amortization 7,775 8,683 15,501 17,378
----------- ----------- ---------- ----------
Gross profit 11,866 10,023 33,835 27,508
Selling, general and administrative expense 8,083 7,694 15,894 16,112
----------- --------------- ---------- ----------
Operating income 3,783 2,329 17,941 11,396
Interest expense, including amortization of
debt issue costs 10,016 8,493 20,273 16,757
Other income, net 88 704 167 610
----------- ----------- ---------- ----------
Loss from continuing operations before income taxes (6,145) (5,460) (2,165) (4,751)
Provision for (benefit from) income taxes (171) 65 (171) 130
----------- ----------- ---------- ----------
Net loss from continuing operations (5,974) (5,525) (1,994) (4,881)
Discontinued operations:
Operating losses from discontinued operations (11,028) (36,035) (26,315) (51,708)
Loss on disposal of Cartersville assets (142,593) - (142,593) -
Reserve for loss on disposal of SBQ assets - (77,600) - (77,600)
----------- ----------- ---------- ----------
Net loss from discontinued operations (153,621) (113,635) (168,908) (129,308)
=========== =========== ========== ==========
Net loss $ (159,595) $ (119,160) $ (170,902) $ (134,189)
=========== =========== ========== ==========
Weighted average shares outstanding 31,327 30,987 31,247 30,939
=========== =========== ========== ==========
Basic and diluted per share amounts:
Loss from continuing operations $ (0.19) $ (0.18) $ (0.06) $ (0.16)
Loss from discontinued operations (4.90) (3.67) (5.41) (4.18)
----------- ----------- ---------- ----------
Net loss per share $ (5.09) $ (3.85) $ (5.47) $ (4.34)
=========== =========== ========== ==========
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Six Months Ended
December 31,
------------------------------
2001 2000
------------ -----------
(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations $ (1,994) $ (4,881)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 15,501 17,378
Other
4,084 3,449
Changes in operating assets and liabilities:
Accounts receivable 22,446 11,864
Inventories (4,327) 17,089
Other current assets (863) 190
Accounts payable (14,097) (17,881)
Accrued liabilities (3,095) (8,083)
Deferred liabilities (2,895) 1,366
------------ ------------
Net cash provided by operating activities of continuing operations 14,760 20,491
Net cash used in operating activities of discontinued operations (5,374) (23,914)
------------ ------------
Net cash provided by (used in) operating activities 9,386 (3,423)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,143) (4,271)
Other non-current assets (235) 238
------------ ------------
Net cash used in investing activities of continuing operations (1,378) (4,033)
Net cash used in investing activities of discontinued operations (313) (237)
------------ ------------
Net cash used in investing activities (1,691) (4,270)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (2,500) -
Borrowings under revolving credit facilities 934,158 983,471
Payments on revolving credit facilities (937,657) (975,119)
Other, net (1,628) (594)
------------ ------------
Net cash (used in) provided by financing activities of continuing operations (7,627) 7,758
Net cash used in financing activities of discontinued operations (68) (65)
------------ ------------
Net cash (used in) provided by financing activities (7,695) 7,693
------------ ------------
Net increase (decrease) in cash and cash equivalents
- -
Cash and cash equivalents at:
Beginning of period 935 935
------------ ------------
End of period $ 935 $ 935
============ ============
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying unaudited Consolidated Financial Statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Birmingham Steel
Corporation (the Company) has substantial debt maturities due April 1, 2002, and
those maturities are classified as current liabilities in the unaudited
Consolidated Balance Sheet at December 31, 2001. The Company is in discussions
with its lenders regarding a possible refinancing, restructuring, extending or
amending of its obligations under the Revolving Credit Facility and Senior
Notes. The Company also continues to pursue alternatives to reduce the existing
debt, including the sale of its Special Bar Quality (SBQ) assets or other core
assets, which management believes could facilitate a refinance or restructure of
debt. During the current period of economic uncertainty in the U.S. economy and
steel industry, the Company also continues to investigate the possibility of
refinancing its debt with new lenders. However, there can be no assurance that
discussions with the Company's current lenders will be successful or that
alternative financing can be obtained from other sources on or prior to April 1,
2002.
On November 14, 2001, the Company announced that the New York Stock Exchange
(NYSE) had initiated procedures to delist the common stock of the Company. The
NYSE decision was reached in view of the fact that the Company had fallen below
the following NYSE continued listing standards: average global market
capitalization over a consecutive 30 trading-day period of less than $50.0
million, total stockholders' equity of less than $50.0 million, and the average
closing price of the Company's common stock below one dollar over a consecutive
30 trading-day period. Effective with the market opening on November 18, 2001,
the Company's common stock began trading on the OTC Bulletin Board under the
symbol BIRS.
Description of the Business
The Company owns and operates facilities in the mini-mill sector of the steel
industry. The Company's facilities produce a variety of steel products including
reinforcing bars and merchant products such as rounds, flats, squares, strips,
angles and channels. These products are sold primarily to customers in the steel
fabrication, manufacturing and construction industries. The Company has regional
warehouses and distribution facilities, which are used to distribute its rebar
and merchant products. The Company also owns an equity interest in a scrap
collection and processing operation. On December 28, 2001, the Company sold the
assets of its Cartersville, Georgia merchant product facility. The results for
Cartersville for all periods presented are included in discontinued operations.
The Company formerly participated in the SBQ segment of the steel industry,
which is reported in discontinued operations. The SBQ segment produced high
quality rod, bar and wire that was sold primarily to customers in the
automotive, agricultural, industrial fastener, welding, appliance and aerospace
industries in the United States and Canada. These facilities are currently
classified as assets held for disposal.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements are prepared in
accordance with accounting principles generally accepted in the United States
(GAAP) for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
The Consolidated Balance Sheet at June 30, 2001 has been derived from the
audited financial statements at that date as adjusted to reflect the assets and
liabilities of the Cartersville facility as discontinued, and to reflect all
assets and liabilities based on their natural classification, (not netted), as
required by a new accounting pronouncement (FAS 144) adopted in fiscal 2002.
In addition, the unaudited Consolidated Financial Statements for the three and
six months ended December 31, 2000 have been restated to reflect the operating
results of the Cartersville facility within discontinued operations. In prior
periods, the Company presented segment information in a note to the unaudited
Consolidated Financial Statements. Since the Company now operates in a single
segment due to the discontinuance of the SBQ segment, separate segment
information is not presented.
In the opinion of management, all material adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the accompanying unaudited Consolidated Financial Statements.
Operating results for the interim periods reflected herein are not necessarily
indicative of the results that may be expected for full fiscal year periods.
Therefore, these unaudited Consolidated Financial Statements, and footnotes
thereto, should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended June 30, 2001.
Recent Accounting Pronouncements
EITF 00-10
The Company adopted the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 00-10, "Accounting for Shipping and Handling
Fees and Costs", in the fourth quarter of fiscal 2001. Application of this EITF
resulted in the restatement of prior period financial results to reflect
shipping and handling fees billed to customers as revenue. These amounts were
previously recorded in cost of sales. The effect of the restatement increased
net sales and cost of sales in the three and six months ended December 31, 2000
by $11.1 million and $23.3 million, respectively. Operating results were not
affected by this reclassification.
SFAS No.142 In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" (FAS 142), establishing new accounting and reporting
requirements for goodwill and other intangible assets. Under FAS 142, goodwill
and indefinite-lived intangible assets will no longer be amortized but will be
assessed for impairment each year, and more frequently if circumstances indicate
a possible impairment. The provisions of this standard require the completion of
a transitional impairment test within six months of adoption, with any
impairment recognized upon adoption to be treated as a cumulative effect of a
change in accounting principle. Impairment adjustments recognized after
adoption, if any, generally are required to be recognized as operating expenses.
The Company adopted FAS 142 in the first quarter of fiscal 2002. Effective July
1, 2001, the Company no longer recognized goodwill amortization in the
Consolidated Financial Statements which positively impacted pre-tax earnings
from continuing operations by $532 thousand and $1.1 million in the three and
six months ended December 31, 2001, respectively. In addition, the amounts of
goodwill attributable to each of the Company's reporting units was tested for
impairment as of July 1, 2001, by comparing the estimated fair value of each
reporting unit with its carrying value. Except for the write-off of $7.3 million
goodwill on the Cartersville facility that was included in the loss on sale in
the second quarter of fiscal 2002, the carrying value of the Company's other
goodwill was not impaired as of July 1, 2001, the date of the initial test for
impairment.
SFAS No. 144
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (FAS 144), which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". This new statement also supersedes certain aspects of the
Accounting Principles Board Opinion (APB) 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions", with
regard to reporting the effects of a disposal of a segment of a business and
will require expected future operating losses from discontinued operations to be
reported in discontinued operations in the period incurred (rather than
estimated as of the measurement date as presently required by APB 30). In
addition, more dispositions may qualify for discontinued operations treatment.
The Company adopted the provisions of FAS 144 in the second quarter of fiscal
2002 and reflected the loss on sale and operating losses from the Cartersville
facility in discontinued operations in the accompanying interim financial
statements. Under the transition provisions of FAS 144, any segment previously
reported in discontinued operations will continue to be accounted for under
provisions of APB 30. As such, the SBQ segment will continue to be accounted for
under APB 30.
Reclassifications
Amounts for all periods presented have been reclassified to include the
Cartersville, Georgia mini-mill financial position and operating results in
discontinued operations.
2. DISCONTINUED OPERATIONS
The following table sets forth events that have occurred in connection with the
disposal of the SBQ segment (recorded under provisions of APB 30) and the sale
of the Cartersville facility (recorded under the provisions of FAS 144), and the
related recording and reversal of discontinued operations accounting treatment.
See further discussion of each event below:
- -------------------------------------------------------------------------------
Reported in
Financial
Statements
Date Event Dated
- -------------- ------------------------------------------------- --------------
August 1999 o Prior Board of Directors adopts plan of Fiscal year
disposal for SBQ segment ended June 30,
o SBQ segment presented as discontinued 1999
operations
- -------------- ------------------------------------------------- --------------
January 2000 o Following proxy contest reconstituted Board of Fiscal quarter
Directors elects to re-establish SBQ segment ended December
o Discontinued operations accounting treatment 31, 1999
recorded in June 1999 reversed
o Memphis facility shut-down-reserve for impairment
established
- -------------- ------------------------------------------------- --------------
February 2001 o Board of Directors authorizes sale of SBQ assets Fiscal quarter
(Cleveland and Memphis) to North American Metals ended
(NAM) December 31,
o Discontinued operations accounting treatment 2000
re-established, $89.9 million reserve for loss
on disposal established
- -------------- ------------------------------------------------- --------------
March 2001 o Definitive agreement with NAM for the sale of Fiscal
SBQ assets is terminated because NAM is unable quarter ended
to secure financing for the purchase by March 31, 2001
March 23, 2001 deadline
- -------------- ------------------------------------------------- --------------
April 2001 o Management announces decision to close the Fiscal
Cleveland, Ohio plant unless the facility is quarter ended
sold by June 22, 2001 March 31, 2001
o Estimated loss on SBQ segment is increased by
$12.3 million to reflect extension of disposal
period
- -------------- ------------------------------------------------- --------------
September 2001 o Management announces intent to sell Cleveland Fiscal quarter
facility to Sidenor, S.A. ended
o Estimated loss on sale of SBQ segment is June 30, 2001
increased by $36.1 million to reflect
additional loss on sale, disposal period
losses and adjustment to previous reserve
for loss on purchase commitment.
- -------------- ------------------------------------------------- --------------
September 2001 o Reserve for disposal period lossesis increased Fiscal quarter
by $9.0 million to reflect longer anticipated ended
disposal period for Memphis facility. September 30,
2001
- -------------- ------------------------------------------------- --------------
December 2001 o Sale of Cartersville, Georgia mini-mill is Fiscal quarter
completed. Results of discontinued operations ended
restated to include the Cartersville facility. December 31,
Loss on sale of $142.6 million recorded on sale 2001
of Cartersville assets.
- ------------ ------------------------------------------------- --------------
January 2002 o Management announces intent to sell Cleveland Fiscal quarter
facility to Charter Manufacturing, Inc. Reserve ended
for disposal period losses are increased by December 31,
$1.6 million to reflect revised anticipated 2001
disposal date.
Discontinued operations - SBQ Segment
Fiscal 1999
In fiscal 1999, prior to the conclusion of a proxy contest and change in
management, the Company announced plans to sell its SBQ segment, which included
rod, bar and wire facilities in Cleveland, Ohio; a high quality melt shop in
Memphis, Tennessee; and the Company's 50% interest in American Iron Reduction,
L.L.C. (AIR), a facility in Louisiana which produced direct reduced iron (DRI).
Accordingly, the operating results of the SBQ segment were reflected as
discontinued operations in the Company's annual Consolidated Financial
Statements for fiscal 1999 and in the first quarter of fiscal 2000, in
accordance with APB 30.
Fiscal 2000
In January 2000, subsequent to a change in management which occurred after a
proxy contest, the Company re-established its Cleveland-based American Steel &
Wire (AS&W) SBQ operations because new management believed there was a viable
SBQ market to support operations at the Cleveland facility and efforts to sell
the SBQ facilities up to that time had not been successful. In accordance with
EITF 90-16, Accounting for Discontinued Operations Subsequently Retained, the
results of operations of the SBQ segment were reported within continuing
operations from the second quarter of fiscal 2000 through the first fiscal
quarter of 2001. Consequently, in the quarter ended December 31, 1999, the
operating results of the SBQ segment for all periods prior to October 1, 1999
were reclassified from discontinued operations to continuing operations.
Fiscal 2001
In September 2000, the Company signed a definitive agreement with North American
Metals, Ltd. (NAM) to sell the Cleveland and Memphis facilities of the SBQ
segment by March 23, 2001. Accordingly, as required by APB 30 (as interpreted by
EITF 95-18), the operating results of the SBQ segment for the second quarter of
fiscal 2001 and prior periods were restated and reported in discontinued
operations in the unaudited Consolidated Financial Statements for the period
ended December 31, 2000. In addition, the Company recorded an $89.9 million
reserve for estimated loss on disposal and estimated disposal period losses in
the second quarter of fiscal 2001. The proceeds expected to be realized on the
sale of the SBQ segment, and the expected operating losses during the disposal
period, were based on management's estimates of the most likely outcome based on
the terms of the definitive agreement between the Company and NAM at that time.
Subsequently, management reported that the definitive agreement with NAM for the
sale of the SBQ assets had been terminated because NAM was unable to complete
financing arrangements by the March 23, 2001 deadline. The Company continued to
pursue discussions with other interested parties; however, due to a general
economic slowdown in the U.S. steel industry, which impacted demand for all
steel products, shipments for the Cleveland facility fell precipitously in the
third fiscal quarter of 2001. As a result, operations at the Cleveland facility
were suspended in June 2001.
In September 2001, the Company announced that a letter of intent had been signed
to sell the idled Cleveland facility to Corporacion Sidenor, S.A. (Sidenor), an
SBQ producer headquartered in Bilbao, Spain. Based on the terms of the letter of
intent, the Company established an additional $61.2 million reserve for loss on
sale in the quarter ended June 30, 2001 (offset by reversal of $36.6 million
loss reserve for the Company's purchase commitment to AIR). In addition, the
Company recorded additional reserves for estimated losses through the
anticipated disposal period of $10.1 million.
Fiscal 2002
In the quarter ended September 30, 2001, management increased the reserve for
disposal period losses for the SBQ segment by $9.0 million to reflect a longer
anticipated disposal period for the Memphis facility. On an accrual basis, these
losses are expected to be approximately $1.0 million per month. The expected
loss on sale and disposal period losses are based on management's estimates of
the most likely outcome based on the carrying costs of the SBQ assets and
anticipated costs to complete the sale of the facilities. Additionally, the
Company continues to discuss the disposition of the Memphis facility with
interested parties.
On November 9, 2001, the previously signed letter of intent with Sidenor
regarding sale of the SBQ facility in Cleveland, Ohio expired. On January 10,
2002, the Company announced it had signed an option agreement with Charter
Manufacturing, Inc. of Mequon, Wisconsin (Charter), pursuant to which Charter
has exclusive rights to purchase the SBQ facility in Cleveland, Ohio, until
February 28, 2002. Pursuant to the option agreement, the Company is now engaged
in exclusive discussions with Charter. The transaction with Charter is expected
to close by February 28, 2002.
In the second quarter of fiscal 2002 the Company increased the reserve for
estimated disposal period losses by $1.6 million to reflect the revised
disposition date of the Cleveland facility. For the six months ended December
31, 2001, operating losses of $11.7 million have been charged against the
reserve. As of December 31, 2001, the Company has a $9.0 million reserve for
estimated (pre-tax) disposal period losses. Such amount excludes corporate
overhead but includes approximately $2.5 million of direct and allocated
interest expense.
The Company will continually assess the adequacy of the remaining $145.8 million
reserves ($136.8 reserve for loss on disposal and $9.0 million for expected
operating losses). As with all estimates of future events and circumstances, the
actual loss on disposal of the SBQ segment, including operating losses and
carrying costs through the disposal period, will most likely be different from
the estimates reflected in these unaudited Consolidated Financial Statements and
the difference could be material. To the extent actual proceeds from the
eventual sale of the remaining assets of the SBQ segment and operating losses
during the disposal period differ from the estimates reflected in these
unaudited Consolidated Financial Statements, the variance will be reported
within discontinued operations in future periods.
Discontinued operations - Cartersville Facility
In the quarter ended December 31, 2001, the Company announced and completed the
sale of its mini-mill facility in Cartersville, Georgia to AmeriSteel
Corporation (AmeriSteel), a U.S. subsidiary of Gerdau S.A. (NYSE: GGB) of Rio de
Janeiro, Brazil. Accordingly, as required by FAS 144, the operating results for
the Cartersville facility for the second quarter of fiscal 2002 and prior
periods have been restated in discontinued operations.
As a result of the sale, the Company recorded a $142.6 million loss on disposal
of the assets, which included $7.3 million to write off remaining goodwill.
Terms of the transaction provided consideration of $86.6 million as follows: (1)
approximately $17.7 million in cash proceeds from the sale of working capital;
(2) release from $68.7 million future operating lease obligations; (3)
collection of retained trade accounts receivable of $12.3 million; and (4)
proceeds from retained inventory of $0.9 million which were offset by (1)
issuance of a $10.0 million unsecured, non-interest bearing (until December 2004
when the note will bear 9% compounded monthly) note payable to the former
lessors due in December 2005; and (2) payment of approximately $3.0 million of
retained liabilities. Proceeds from the collection of retained trade accounts
receivable subsequent to December 28, 2001, the closing date, in excess of
payment of retained liabilities, will be used to further reduce debt under the
Company's Revolving Credit Facility. The Company does not anticipate any future
material obligations related to the Cartersville facility.
Unaudited operating results of the discontinued operations, which include the
SBQ segment and Cartersville facility, were as follows (in thousands):
Three Months Ended Six Months Ended
December 31, December 31,
2001 2000 2001 2000
--------- --------- --------- ----------
Net sales $ 27,906 $ 43,816 $ 62,215 $ 96,328
Cost of sales 35,413 57,908 75,580 117,015
--------- --------- --------- ----------
Gross loss (7,507) (14,092) (13,365) (20,687)
Selling, general and
administrative expense 4,831 2,420 8,651 4,706
--------- --------- --------- ----------
Operating loss (12,338) (16,512) (22,016) (25,393)
Interest expense 2,471 7,051 5,423 14,327
Other income (expense), net 8 (221) 28 263
--------- --------- --------- ----------
Loss before use reserve
adjustments (14,801) (23,784) (27,411) (39,457)
Change in reserve for operating
losses on discontinued
operations (3,773) 12,251 (1,096) 12,251
Loss on disposal of assets 142,593 77,600 142,593 77,600
--------- --------- --------- ----------
Loss from discontinued
operations, net of tax $(153,621) $(113,635) $(168,908) $(129,308)
========= ========= ========= ==========
Interest expense attributable to discontinued operations includes interest on
industrial revenue bonds and other debt specifically associated with the assets
to be sold plus an allocation of interest on general corporate credit
facilities.
Assets and liabilities of the discontinued operations have been reflected in the
unaudited Consolidated Balance Sheets as current or non-current based on the
original classification of the accounts. Non-current assets at December 31, 2001
and June 30, 2001 reflect a valuation allowance of $136.8 million to recognize
the estimated loss on disposal of the Cleveland and Memphis SBQ facilities. The
following is a summary of assets and liabilities of discontinued operations (in
thousands):
December 31, June 30,
2001 2001
------------ -----------
(Unaudited) (Restated)
Current assets:
Accounts receivable $ 13,984 $ 21,603
Inventories 15,468 49,215
Other 2,622 1,161
------------ -----------
32,074 71,979
Non-current assets:
Property, plant and equipment, net of
accumulated depreciation 223,906 348,792
Other non-current assets 3,712 1,302
Provision for estimated loss on disposal
of discontinued operations (136,836) (136,836)
------------ -----------
90,782 213,258
------------ -----------
Total assets of discontinued operations $ 122,856 $ 285,237
============ ===========
Current liabilities:
Accounts payable $ 1,095 $ 8,515
Other accrued expenses 8,810 16,797
------------ -----------
9,905 25,312
Non-current liabilities:
Long term debt 41,916 41,988
Deferred rent 3,259 3,219
------------ -----------
45,175 45,207
------------ -----------
Total liabilities of discontinued operations $ 55,080 $ 70,519
============= ===========
There are no known material contingent liabilities related to discontinued
operations, such as product or environmental liabilities or litigation, that are
expected to remain with the Company after the disposal of the SBQ segment or
Cartersville facility other than remaining reserves for claims under the
Company's workers' compensation and health insurance plans and contingencies
associated with AIR, as discussed in Footnote 2 in the Notes to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended June 30, 2001.
3. INVENTORIES
Inventories of continuing operations are valued at the lower of cost (first-in,
first-out) or market, as summarized in the following table (in thousands):
December 31, 2001 June 30, 2001
----------------- -------------
Raw Materials and Mill Supplies $ 17,159 $ 17,120
Work-in-Process 8,457 6,844
Finished Goods 50,418 47,744
----------------- -------------
$ 76,034 $ 71,708
================= =============
4. LONG-TERM DEBT
On December 28, 2001, the Company completed the sale of its Cartersville
facility to AmeriSteel. Terms of the transaction provided consideration of $86.6
million as follows: (1) approximately $17.7 million in cash proceeds from the
sale of working capital; (2) release from $68.7 million future operating lease
obligations; (3) collection of retained trade accounts receivable of $12.3
million; and (4) proceeds from retained inventory of $0.9 million which were
offset by (1) issuance of a $10.0 million unsecured, non-interest bearing (until
December 2004 when the note will bear 9% compounded monthly) note payable to the
former lessors due in December 2005; and (2) payment of approximately $3.0
million of retained liabilities. Proceeds from the sale and collection of
retained trade receivables, net of payment of retained liabilities, were used to
retire $10.0 million in debt specifically related to Birmingham Southeast LLC
(BSE), and to reduce borrowings under the Company's Revolving Credit Facility.
In addition, $3.0 million of the sale proceeds will be held in escrow until
December 2007. As a result of the collection of proceeds from the Cartersville
transaction at December 31, 2001, total commitment under the Revolving Credit
Facility was permanently reduced to $287.0 million from $290.0 million. As
accounts receivable from Cartersville are collected, the borrowings and the
lenders commitment under the Revolving Credit Facility will be reduced by equal
amounts.
The Company is in discussions with its lenders regarding a possible refinancing,
restructuring, extending or amending its obligations under the Revolving Credit
Facility and Senior Notes. The Company also continues to pursue alternatives to
reduce the existing debt, including the sale of SBQ assets or other core assets,
which management believes could facilitate a refinance or restructure of debt.
During the current period of economic uncertainty in the U.S. economy and steel
industry, the Company also continues to investigate the possibility of
refinancing its debt with new lenders. However, there can be no assurance that
discussions will be successful or that alternative financing can be obtained
from other sources on or prior to April 1, 2002.
5. CONTINGENCIES
Environmental
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, waste water effluents, air
emissions and furnace dust management and disposal. The Company believes that it
is currently in compliance with all known material and applicable environmental
regulations.
Legal Proceedings
The Company is involved in litigation relating to claims arising out of its
operations in the normal course of business. Various forms of insurance
generally cover such claims. In the opinion of management, substantially all
uninsured or unindemnified liability resulting from existing litigation would
not have a material effect on the Company's business, its financial position,
liquidity or results of operations.
The Company has been named as a defendant in a number of lawsuits arising out of
an accident that occurred on March 15, 1999 involving an Amtrak passenger train
and a truck carrying steel reinforcing bar produced by the Company's Kankakee
plant. There were approximately 122 injuries and 11 deaths in the accident. The
plaintiffs in these lawsuits claim that at the time of the accident, the driver
of the truck was acting as an employee or agent of the Company; that the Company
was negligent in loading the trailer; that the load placed on the trailer
exceeded the weight limit allowed by statute; and that the Company negligently
allowed some rail cars to be parked on a side track near the intersection. The
Company is being defended in all of the cases by counsel provided by its
liability insurance carrier. The Company denies all liability and is vigorously
defending all of these cases. At this time, however, the cases remain in their
early stages and discovery is incomplete. Although the Company believes its
defenses should prevail in these actions, the Company cannot predict the
ultimate outcome of these cases or the probability of recovery from insurance
with certainty. However, no amount of loss is considered probable at this time,
and accordingly no reserve has been provided for these actions.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Recent Developments
On Thursday, February 14, 2002, Nucor Corporation (Nucor) issued a press release
which reported that Nucor had offered to purchase substantially all of the
operating assets of the Company for $500.0 million. The Company was unaware that
an offer from Nucor was forthcoming until the issuance of the press release.
Although the Company and its advisors have not had ample time to fully assess
the Nucor offer, the proposed purchase price is less than the Company's total
debt obligations and management believes the proposal provides no value to the
Company's shareholders.
The Company recently engaged CIBC World Markets Corporation to assist in
evaluating offers as well as to advise the Company with respect to other
financial and strategic alternatives that the Company is considering. With
respect to Nucor's offer, the Board of Directors will rely upon the expertise of
its financial and legal advisors and act in accordance with its fiduciary
responsibilities to all of the Company's stakeholders.
General
In July 1999, The United Company Shareholder Group (the United Group), a
dissident shareholder group, initiated a proxy contest to replace the Company's
Chief Executive Officer and Board of Directors and certain members of
management. In December 1999, the Company and the United Group reached a
settlement appointing John D. Correnti as Chairman and Chief Executive Officer
and reconstituting the Board of Directors. Since the conclusion of the proxy
contest in December 1999, new management has accomplished a number of
significant achievements, which it believes have improved the overall financial
condition of the Company and positioned the Company for improved financial
results in the future. These accomplishments have been achieved notwithstanding
the Company's high level of debt and the fact that, in the opinion of
management, the past 26 months represent the worst business conditions in the
U.S. steel industry in nearly 30 years. During this period, more than 25 steel
companies have filed for bankruptcy under either Chapter 11 or Chapter 7 of the
United States Bankruptcy Code.
In January 2000, one month after joining the Company, new management publicly
articulated a strategy for returning to profitability and providing a platform
for the Company to refinance or restructure its debt. A refinancing or
restructuring of the Company's debt is an integral remaining element of
management's turnaround plan, because the Company is currently over-leveraged
and the maturity dates of the Company's debt are not aligned with its cash flow
capabilities. The Company has been actively pursuing strategies to reduce its
debt, including completion of the sale of the Cartersville facility in December
2001, which will reduce debt and operating lease obligations by approximately
$86.6 million. However, a major portion of the Company's debt (approximately
$295.0 million) is currently scheduled to mature on April 1, 2002. The Company
is currently in discussions with its existing lender group regarding an overall
debt restructure or extension of maturity dates under existing financing
arrangements. On several occasions during the past 26 months, the Company's
lenders have accommodated the Company's requests to relax certain covenants,
extend certain maturity dates and provide adequate liquidity for management to
implement its turnaround plan; however, there can be no assurance that current
discussions will be successful or that alternative financing can be obtained
from other sources. The Company is pursuing financing alternatives with new
lenders, however, alternatives are limited with new lenders because of softness
in the current financial markets. However, as the Company's financial
performance continues to improve and the general financial markets recover,
management believes additional opportunities to improve the debt structure could
become available.
Notwithstanding the Company's debt level, the actions of the new management team
have essentially returned the Company to the proven and profitable business
platforms of its core operations under which the Company was previously
successful. Significant measures implemented by the Correnti management team
during the past 26 months include the following:
o Shutdown of operations at the Memphis melt shop, resulting in cash savings
of approximately $2 million per month (January 2000);
o Shutdown of operations at Cleveland, resulting in cash savings of $2
million to $3 million per month (completed July 2001);
o Shutdown of operations of the Convent, Louisiana DRI facility (AIR),
resulting in cash savings of approximately $1 million per month (October
2000);
o Sale of the Company's interest in the California scrap processing joint
venture, eliminating $34 million in contingent liabilities (June 2000);
o Reduction of corporate headquarters personnel by more than 31%, resulting
in annual savings of approximately $2 million per year (December 1999 to
December 2001);
o Hiring of highly experienced steel operations and sales individuals from
other steel companies to join the Correnti management team;
o Reduction in inventories by $108 million (from December 1999 to December
2001);
o Reduction in trade accounts payable by $75 million (from December 1999 to
December 2001), and improvement in vendor relationships, which had been
impaired under prior management; and
o Sale of the Cartersville facility in December 2001 providing approximately
$86.6 million reduction in total debt and operating lease obligations and
elimination of $1 million to $2 million monthly operating losses.
The actions above indicate the aggressive steps the Correnti management team has
taken to facilitate a turnaround of the Company, and demonstrate management's
ability to implement changes as needed. Also, during the extremely challenging
business conditions, which have prevailed in the U.S. steel industry during the
past 26 months, the Company has reduced costs, improved margins, reduced debt,
improved vendor relations and maintained sufficient availability under its
revolving credit facility. However, deteriorating conditions in the domestic
steel industry, a surge in steel imports and a general decline in U.S. economic
conditions have offset the positive financial impact of management's actions.
The Correnti management team has implemented numerous measures to reduce costs,
enhance margins, improve cash flow and reduce debt. Management's goal is to
position the Company to actively participate in the consolidation of the U.S.
steel industry, which a broad consensus of industry experts agrees must occur in
order for the domestic industry to remain viable. Experts anticipate that a wave
of consolidation will occur over the next three to five years, as the U.S. steel
industry adjusts to the impact of a global economy. In fact, consolidation
activity is already underway in Europe, and, in management's view, consolidation
of the U.S. industry is inevitable if the U.S. industry is to compete globally.
Furthermore, the drastic decline in steel company market capitalization over the
past two years is indicative of the prevailing view of the financial and
investment communities that industry consolidation is inevitable.
According to available industry data, total demand for all steel products in the
U.S. is approximately 130 million tons per year. Currently, domestic steel
producers have the capacity to produce approximately 100 million tons per year,
which mandates the necessity for at least 30 million tons of annual steel
imports. However, during fiscal year 2001, import levels reached a record 45
million tons. The domestic steel industry is highly fragmented with a number of
high-cost, inefficient operations. The industry is divided into two segments:
integrated steel and mini-mill steel companies. Today, there are approximately
ten domestic integrated steel producers and twenty-five mini-mill companies.
Along with many others, management believes the eventual consolidation activity
will ultimately result in three to four domestic integrated producers and ten to
eleven mini-mill companies. As is the usual case in consolidation, the survivors
will be the efficient, low-cost producers. With the recent sale of the
Cartersville operation, the Company's remaining core operations are low-cost,
highly efficient, state-of-the-art facilities.
According to published industry reports, the Company is recognized as having one
of the most experienced and capable management teams in the industry. During the
past 26 months, the Company has attracted experienced sales and operations
managers from other steel companies to join the Birmingham Steel management
team. Because of the quality of its core assets and management team, management
believes the Company is viewed as a key participant in the prospective
consolidation of the domestic industry. Other mini-mill companies have strong
asset bases, viewed desirable for consolidation, but many lack the management
and operational bench strength to effectively lead the industry consolidation.
In order to participate in the pending industry consolidation, the primary
obstacle the Company must overcome is its aforementioned large debt level.
Upon assuming office in December 1999, management set forth the following key
elements of its turnaround strategy as a platform to return to profitability and
to refinance or restructure its debt:
o Completing start-up operations at Cartersville;
o Rationalization of the Cleveland and Memphis operations;
o Sale of the Company's interest in the California scrap joint venture;
o Reducing and limiting the Company's liability with respect to the Louisiana
DRI joint venture;
o Reducing overall spending;
o Reducing selling, general and administrative expenses and headcount at the
corporate headquarters;
o Strengthening and reorganizing of the Company's sales and marketing
functions; and
o Stabilizing the Company's management and workforce.
During the past 26 months, the Company has successfully completed most of the
key elements of its turnaround strategy. As a result the Company recorded its
best financial performance from continuing operations in the first quarter of
fiscal 2002 since the first quarter of fiscal 2000. In response to declining
market conditions, the Company sold the Cartersville facility in December 2001,
which reduced debt and lease obligations by approximately $86.6 million and
reduced operating losses by $1.0 million to $2.0 million per month.
Unfortunately, the benefits of these accomplishments have been overshadowed in
the second fiscal quarter of 2002 by a continued deterioration of economic
conditions in the U.S. steel industry, which began in 1998 and was further
impacted by the September 11, 2001 terrorist attack on the U.S. While some U.S.
economists have indicated the U.S. economy is beginning to improve, the steel
industry typically lags a recovery by six to nine months subsequent to the
initial improvement. Despite signs of a possible economic recovery, management
believes business conditions will remain difficult through the remainder of
fiscal 2002.
Recent Announcements
On November 14, 2001, the Company announced that the New York Stock Exchange
(NYSE) had initiated procedures to delist the common stock of the Company. The
NYSE decision was reached in view of the fact that the Company had fallen below
the following NYSE continued listing standards: average global market
capitalization over a consecutive 30 trading-day period of less than $50.0
million, total stockholders' equity of less than $50.0 million, and the average
closing price of the Company's common stock below one dollar over a consecutive
30 trading-day period. Effective with the market opening on November 18, 2001,
the Company's common stock began trading on the OTC Bulletin Board under the
symbol BIRS.
On January 24, 2002, the Company announced that Michael J. Wagner, age 40, had
been appointed Executive Vice President and Chief Operating Officer. Wagner
previously served as the Company's Vice President - Sales for Merchant Products.
Before joining Birmingham Steel in 2000, Wagner worked for Nucor Corporation and
Bethlehem Steel Corporation.
Results from Continuing Operations
Sales
The following table compares shipments and average selling prices per ton for
continuing operations for the three and six months ended December 31, 2001 and
2000:
Three months ended December 31, Six months ended December 31,
2001 2000 2001 2000
------------------------------------------------ --------------------------------------------------
Product Tons Average Tons Average Tons Average Tons Average
Shipped Sales Price Shipped Sales Price Shipped Sales Price Shipped Sales Price
------------------------------------------------ --------------------------------------------------
Rebar Products 275,016 $ 259 315,487 $ 256 619,431 $ 263 683,770 $ 259
Merchant Products 115,500 274 150,088 284 252,613 276 326,518 290
Billets/Other 19,056 213 21,906 233 43,294 214 58,341 235
------------------------------------------------ --------------------------------------------------
Totals 409,572 $ 261 487,481 $ 263 915,338 $ 265 1,068,629 $ 267
------------------------------------------------ --------------------------------------------------
Sales from continuing operations for the second quarter of fiscal 2002 were
$115.4 million, down 15.2% compared to the second quarter of fiscal 2001 sales
of $136.2 million. The change was due to a 16% decrease in tons shipped and an
average decrease in selling price of $10 per ton in merchant products partially
offset by a $3 per ton average selling price increase for rebar products. Sales
from continuing operations for the six months ended December 31, 2001 were
$253.2 million, down 17.6% compared to sales of $307.3 million in the six months
ended December 31, 2000. The change was due to a 14.3% decrease in tons shipped
and an average decrease in selling price of $14 per ton in merchant products
partially offset by a $4 per ton average selling price increase for rebar
products.
Shipments and selling prices have declined in the three and six months ended
December 31, 2001 primarily because of continuing pressure of steel imports and
uncertainty in United States economic conditions. While the Company announced
various price increases in the peak summer seasonal period in fiscal 2001,
continued industry pressure has kept prices relatively flat. Economic conditions
generally slowed in calendar 2001 and the tragic events of September 11, 2001
could cause this trend to continue through the remainder of fiscal 2002, until
consumer confidence is restored. The Company has announced seasonal selling
price increases for rebar and merchant products of $15 to $20 per ton, to take
effect at the end of the third fiscal quarter of 2002. If increased demand from
seasonal market conditions returns as anticipated, the price increases will help
improve future financial results. If the anticipated increased seasonal demand
does not materialize, some or all of the price increases may not be realized.
Cost of Sales
As a percentage of net sales, cost of sales for continuing operations (other
than depreciation and amortization) decreased to 83.0% in the second quarter of
fiscal 2002 compared to 86.3% in the second quarter of fiscal 2001. For the six
months ended December 31, 2001, costs of sales from continuing operations (other
than depreciation and amortization) decreased to 80.5% compared to 85.4% in the
six months ended December 31, 2000. The improvement in cost of sales as a
percentage of sales is due to a $5 per ton reduction in average scrap cost (5%),
an 11% improvement in total production cost at the Jackson mill due to
production efficiencies and a more favorable production mix, and suspension of
production at the Joliet rolling mill in June 2001 which was one of the highest
production cost facilities.
Selling, General and Administrative (SG&A)
SG&A expenses for continuing operations were $8.1 million in the second quarter
of fiscal 2002 compared to $7.7 million in the second quarter of fiscal 2001, up
5.2% from the same period last year. The increase in the current quarter SG&A
expenses is primarily attributable to severance expenses incurred with changes
in operational management offset by lower computer related and other office
expenses compared to the same period last year. For the six months ended
December 31, 2001, SG&A expenses for continuing operations were $15.9 million
compared to $16.1 million in the six months ended December 31, 2000, down 1.4%
from the same period last year. The decrease in current year SG&A expenses is
the result of decreased overall spending levels in salaries and wages, computer
related, and other office expenses as a result of the Company's turnaround
efforts.
Interest Expense
Interest expense for continuing operations increased to $10.0 million in the
second quarter of fiscal 2002 from $8.5 million in the same period last year.
Interest expense for continuing operations increased to $20.3 million in the six
months of fiscal 2002 from $16.8 million in the same period last year. The
increase in interest expense in fiscal 2002 compared to fiscal 2001 is primarily
due to higher debt cost amortization and a provision for deferred interest
expense, due to be paid upon the earlier of the completion of the sale of the
SBQ segment or April 1, 2002. The Company's average borrowing rate decreased to
7.15% in the second quarter of fiscal 2002, from 9.08% in the same period last
year. For the six months of fiscal 2002, the average borrowing rate decreased to
7.42% from 9.05% in the same period last year.
Included in results from discontinued operations for the Cartersville facility
is an allocation of interest expense for the three and six months ended December
31, 2001 of $2.9 million and $6.3 million, respectively. Intercompany interest
allocation among the continuing operating divisions of the Company is based on
assets employed at the respective facility to total Company assets. Therefore,
the allocation of interest expense to the continuing operating facilities will
increase in future quarters as a result of the sale of Cartersville since the
proceeds from the sale were less than the net book value of the assets of the
Cartersville facility.
Discontinued Operations
As of June 30, 2001, all SBQ facilities have either been idled or shutdown and
have been reported in discontinued operations since December 2000. In addition,
the Cartersville facility, which was the only operating facility that was not
profitable during the first six months of fiscal 2002, was sold on December 28,
2001 to AmeriSteel Corporation (AmeriSteel), a U.S. subsidiary of Gerdau S.A.
(NYSE: GGB) of Rio de Janeiro, Brazil. The results of operations for the
Cartersville facility have been restated in discontinued operations in the
second quarter of fiscal 2002 and all prior periods. The Company reported net
loss from discontinued operations of $153.6 million or $4.90 per share, basic
and diluted, in the second quarter of fiscal 2002 compared to a loss of $113.6
million, or $3.67 per share, basic and diluted in the same period last year. The
current period loss includes $142.6 million loss on sale of assets of
Cartersville, $9.4 million in operating losses at the Cartersville facility, and
$1.6 million additional provision to the reserve for operating losses for the
revised disposal date for the Cleveland facility. The loss incurred in the three
months ended December 31, 2000, included $77.6 million estimated loss on sale of
the Cleveland facility, $12.2 million provision for future operating losses for
the SBQ segment, $12.0 million operating losses for the SBQ segment, and $11.8
million operating losses for the Cartersville facility.
The Company reported net loss from discontinued operations of $168.9 million or
$5.41 per share, basic and diluted, in the six months ended December 31, 2001
compared to a loss of $129.3 million, or $4.18 per share, basic and diluted in
the same period last year. The loss for the six months ended December 31, 2001
includes $142.6 million loss on sale of assets of Cartersville, $15.7 million in
operating losses at the Cartersville facility, and $10.6 million additional
provision to the reserve for operating losses for the revised disposal date for
the Cleveland and Memphis facilities of the SBQ segment. The loss incurred in
the six months ended December 31, 2000, included $77.6 million estimated loss on
sale of the Cleveland facility, $12.2 million provision for future operating
losses for the SBQ segment, $20.2 million operating losses for the SBQ segment,
and $19.3 million operating losses at the Cartersville facility.
Actual operating losses from discontinued SBQ operations of $5.4 million and
$11.7 million for the three and six months ended December 31, 2001,
respectively, were charged to the reserve for disposal period losses and did not
impact current period results. Losses for the first half of fiscal 2002 reflect
liquidation of inventories at the Cleveland facility at selling prices below
cost through the first quarter of fiscal 2002 and carrying costs for the Memphis
facility (shutdown December 1999) and the Cleveland facility (shutdown June
2001). Management expects to incur approximately $1.5 million per month to
maintain the Cleveland and Memphis facilities and service outstanding lease and
debt obligations until the facilities are sold or disposed of otherwise. The
Company currently is not incurring any costs associated with the AIR facility.
As a result of the sale of the Cartersville facility, the Company will reduce
total debt and off balance sheet operating lease obligations by approximately
$86.6 million comprised as follows: (1) approximately $17.7 million in cash
proceeds from the sale of working capital; (2) release from $68.7 million future
operating lease obligations; (3) collection of retained trade accounts
receivable of $12.3 million; and (4) proceeds from retained inventory of $0.9
million which were offset by (1) issuance of a $10.0 million unsecured,
non-interest bearing (until December 2004 when the note will bear 9% compounded
monthly) note payable to the former lessors due in December 2005; and (2)
payment of approximately $3.0 million of retained liabilities. An escrow of $3.0
million of the proceeds from the sale will be maintained for a period of six
years through December 2007. Management does not expect to incur any future
costs associated with the Cartersville facility other than any final transaction
costs, cost of sales related to the sale of the consigned inventory, and
collection costs associated with collecting the final trade accounts receivable
balances.
There are no known material contingent liabilities related to discontinued
operations, such as product or environmental liabilities or litigation, that are
expected to remain with the Company after the disposal of the SBQ segment or
subsequent to the Cartersville sale other than remaining reserves for claims
under the Company's workers' compensation and health insurance plans and
contingencies associated with AIR, as discussed in Footnote 2 in the Notes to
the Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the year ended June 30, 2001.
Liquidity and Capital Resources
Operating Activities
Net cash provided by operating activities of continuing operations was $14.8
million for the six months ended December 31, 2001 compared to $20.5 million in
the same period last year. The $5.7 million decrease in cash provided from
operating activities of continuing operations compared to the prior year is
primarily attributable to a $2.8 million use of cash in changes in operating
assets compared to $4.5 million cash provided from changes in operating assets
in the prior year. The current year use of cash is due to increased inventory at
December 2001, due to a higher than expected seasonal decrease in shipments. The
increase in inventory is partially offset by lower receivable and payable
balances. The use of cash in operating assets is partially offset by an
improvement in operating margins in the current fiscal year compared to the
prior fiscal year due to lower average scrap prices and other improvements in
cost of sales. Management continues to believe there is uncertainty in the U.S.
economy, which could impact the demand for steel products and as a result, the
Company will manage production and inventory levels to meet product demand in
the coming months.
Investing Activities
Net cash used in investing activities of continuing operations was $1.4 million
for the six months ended December 31, 2001 compared to $4.0 million in the same
period last year. The change was primarily attributable to reduced capital
spending for major projects in the current fiscal year. The Company's
expenditures related to capital projects of continuing operations in the first
half of fiscal 2002 were $1.1 million compared to $4.3 million in the first half
of the prior year. Debt covenants in the Company's financing agreements restrict
capital expenditures to $25.0 million in fiscal 2002; however, the Company may
carryover unused capital expenditures to succeeding fiscal years. The Company
believes the level of capital expenditures allowed in the financing agreements
is adequate to support management's plans for ongoing operations.
Financing Activities
Net cash used by financing activities of continuing operations was $7.6 million
for the six months ended December 31, 2001 compared to net cash provided of $7.8
million in the same period last year. Net outstanding borrowings on the
Company's Revolving Credit Facility decreased $3.5 million during the first half
of fiscal 2002, compared with an increase of $8.4 million during the first half
of fiscal 2001. Payments on long-term debt totaled $2.5 million for the period
ending December 31, 2001, with no comparable payments in same period of fiscal
2001.
The following table sets forth information about the Company's debt and lease
obligations and due dates:
--------------------------------------------------------------------------
Payments Due by Period
--------------------------------------------------------------------------
Less than
Total 1 year 1-3 years After 3
--------- --------- ------------ -----------
Continuing operations
Long term debt $551,502 $393,002 $148,500 $10,000
Discontinued operations
Long term debt $42,057 $141 $458 $41,458
Memphis operating
lease $64,994 $3,168 $11,734 $50,092
The Company is currently in compliance with the restrictive debt covenants
governing its loan agreements, which were amended on February 20, 2001. Among
other things, the February 2001 amendments changed the financial covenants and
extended the maturity dates for principal payments previously due before March
31, 2002. The agreements increased the interest rates or spreads previously in
effect for the Company's debt by 1.0% for a deferred interest rate charge to be
paid on the earlier of the sale of the SBQ segment, or April 1, 2002. The
amendments also limited the borrowings under the Company's Revolving Credit
Facility and Birmingham Southeast (BSE) Credit Facility to $290.0 million and
$10.0 million, respectively.
Terms of the sale of the Cartersville facility provided total consideration of
approximately $86.6 million comprised as follows: (1) approximately $17.7
million in cash proceeds from the sale of working capital; (2) release from
$68.7 million future operating lease obligations; (3) collection of retained
trade accounts receivable of $12.3 million; and (4) proceeds from retained
inventory of $0.9 million which were offset by (1) issuance of a $10.0 million
unsecured, non-interest bearing (until December 2004 when the note will bear 9%
compounded monthly) note payable to the former lessors due in December 2005; and
(2) payment of approximately $3.0 million of retained liabilities. Proceeds from
the sale were used to retire $10.0 million in debt specifically related to BSE,
and to reduce debt under the Company's Revolving Credit Facility. Terms of the
transaction require that the lenders' commitment under the Company's Revolving
Credit Facility be permanently reduced in an amount equal to the proceeds of
accounts receivable collections in excess of the retirement of the BSE Credit
Facility and payment of retained liabilities up to $3.0 million. Also, $3.0
million of sale proceeds will be held in escrow until December 2007.
The Company has substantial debt maturities due April 1, 2002, which have been
classified as current liabilities in the unaudited Consolidated Balance Sheet at
December 31, 2001. The Company also is continuing discussions with its existing
lenders to obtain an extension of the current maturities or otherwise to
restructure its debt. However, there can be no assurance that the Company will
be able to refinance, restructure, extend or amend its obligations under the
Revolving Credit Facility, and Senior Notes. The Company continues to
investigate the possibility of refinancing its debt with new lenders. The
Company also continues to pursue alternatives to reduce the existing debt,
including the sale of SBQ assets or other core assets, which management believes
could facilitate a refinance or restructure. However, there can be no assurance
that negotiations with the Company's existing lenders will be successful or that
alternative financing can be obtained from other sources on or prior to April 1,
2002.
Market Risk Sensitive Instruments
There have been no material changes in the Company's inherent market risks since
the disclosures made as of June 30, 2001, in the Company's annual report on Form
10-K.
Risk Factors That May Affect Future Results; Forward Looking Statements
Certain statements contained in this report are forward-looking statements based
on the Company's current expectations and projections about future events. The
words "believe," "expect," "anticipate" and similar expressions identify
forward-looking statements. These forward-looking statements include statements
concerning market conditions, financial performance, potential growth, future
cash sources and requirements, competition, production costs, strategic plans
(including asset sales and potential acquisitions), environmental matters, labor
relations and other matters. These forward-looking statements are subject to a
number of risks and uncertainties, which could cause the Company's actual
results to differ materially from those expected results described in the
forward-looking statements. Due to such risks and uncertainties, readers are
urged not to place undue reliance on forward-looking statements. All
forward-looking statements included in this document are based upon information
available to the Company on the date hereof, and the Company undertakes no
obligation to publicly update or revise any forward-looking statement. Moreover,
new risk factors emerge from time to time and it is not possible for the Company
to predict all such risk factors, nor can the Company assess the impact of all
such risk factors on its business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
described or implied in any forward-looking statement. All forward-looking
statements contained in this report are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
Risks that could cause actual results to differ materially from expected results
include, but are not limited to, the following:
o Changes in market supply and demand for steel, including the effect of
changes in general economic conditions;
o Changes in U.S. or foreign trade policies affecting steel imports or
exports;
o Changes in the availability and costs of steel scrap, steel scrap
substitute materials, steel billets and other raw materials or supplies
used by the Company, as well as the availability and cost of electricity
and other utilities;
o Unplanned equipment failures and plant outages;
o Actions by the Company's domestic and foreign competitors;
o Excess production capacity at the Company or within the steel industry;
o Costs of environmental compliance and the impact of governmental
regulations;
o Changes in the Company's relationship with its workforce;
o The Company's highly leveraged capital structure and the effect of
restrictive covenants in the Company's debt instruments on the Company's
operating and financial flexibility;
o Changes in interest rates or other borrowing costs, or the availability of
credit;
o Uncertainties associated with refinancing or extending the Company's debt
obligations due on April 1, 2002 under its revolving credit facility and
senior notes;
o Changes in the Company's business strategies or development plans, and any
difficulty or inability to successfully consummate or implement as planned
any projects, acquisitions, dispositions, joint ventures or strategic
alliances;
o The effect of unanticipated delays or cost overruns on the Company's
ability to complete or start-up a project when expected, or to operate it
as anticipated; and
o The effect of existing and possible future litigation filed by or against
the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Refer to the information in MANAGEMENT'S DICUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS under the caption MARKET RISK SENSITIVE
INSTRUMENTS
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report:
1.1 Note Purchase agreement between Birmingham Steel Corporation and
Birmingham Southeast, LLC dated December 28, 2001
2.1 Asset Purchase agreement by and among AmeriSteel Corporation,
Birmingham Southeast, LLC, and Birmingham Steel Corporation dated
November 14, 2001.
2.2 First Amendment to Asset Purchase Agreement by and among
AmeriSteel Corporation, Birmingham Southeast, LLC, and Birmingham
Steel Corporation dated December 28, 2001.
2.3 Second Amendment to Asset Purchase Agreement by and among
AmeriSteel Corporation, Birmingham Southeast, LLC, and Birmingham
Steel Corporation dated January 2002.
(b) Reports on Form 8-K
On November 14, 2001, the Company filed a Current Report on Form 8-K announcing
the signing of a definitive agreement to sell the mini-mill facility in
Cartersville, Georgia to AmeriSteel Corporation, a U.S. subsidiary of Gerdau
S.A. of Rio de Janeiro, Brazil.
On November 14, 2001, the Company filed a Current Report on Form 8-K regarding
the delisting of its shares from the New York Stock Exchange and subsequent
trading of its shares on the OTC Bulletin Board.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Birmingham Steel Corporation
February 19, 2002
/s/ J. Daniel Garrett
-------------------------------
J. Daniel Garrett
Executive Vice President &
Chief Financial Officer
Exhibit 1.1
BIRMINGHAM STEEL CORPORATION
BIRMINGHAM SOUTHEAST, LLC
$10,000,000 Aggregate Principal Amount Notes Due December 16, 2005
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
December 28, 2001
BIRMINGHAM STEEL CORPORATION
BIRMINGHAM SOUTHEAST, LLC
1000 Urban Center Drive
Birmingham, Alabama 35242
December 28, 2001
The Purchasers Named on Schedule I Hereto
Ladies and Gentlemen:
BIRMINGHAM STEEL CORPORATION, a Delaware corporation ("BSC"), and
BIRMINGHAM SOUTHEAST, LLC, a Delaware limited liability company, and a
Subsidiary of BSC ("BSE" and, collectively with BSC, the "Companies" and each, a
"Company"), jointly and severally agree with each of you as follows:
1. Authorization of Notes; Other Purchasers.
(a) The Companies have authorized the issue and sale of their Notes due
December 16, 2005 (together with any notes issued in exchange therefor or
replacement thereof, the "Notes") in the original aggregate principal amount of
$10,000,000. The Notes are to be substantially in the form of Exhibit 1(a)
attached hereto. Interest will not accrue on the principal amount of the Notes
prior to the date (the "Interest Commencement Date") which is the earlier of (i)
the third anniversary of the Closing Date and (ii) the date, if any, on which
the Notes have been accelerated. Interest shall accrue on the principal amount
of the Notes from and after the Interest Commencement Date at a rate per annum
equal to 9.0%, compounded monthly . The principal amount of the Notes plus all
accrued and unpaid interest thereon, if any, shall be due and payable in full in
cash on the earlier of the Maturity Date and the date, if any, on which the
Notes have been accelerated.
(b) The Notes are to be issued under this Agreement and separate Note
Purchase Agreements (the "Other Note Agreements") identical herewith (except as
to the name and address of the other purchasers of the Notes) being entered into
concurrently by the Companies with each of such other purchasers named in
Schedule I attached hereto (the "Other Purchasers" and, collectively with you,
the "Purchasers"). The issue of Notes to you and the issue of Notes to each of
the Other Purchasers are separate transactions and you shall not be liable or
responsible for the acts or defaults of any of the Other Purchasers.
2. Sale and Purchase of Securities.
(a) The Companies will issue and sell to you and, subject to the terms and
conditions hereof and in reliance upon the representations and warranties of the
Companies contained herein and in the other Operative Documents, you will
purchase from the Companies, at the Closing, as specified in section 3, such
Notes as are specified on that portion of Schedule I attached hereto as is
applicable to you. The consideration for the purchase of the Notes by the
Purchasers is (i) the termination pursuant to the Termination and Sale Agreement
(as defined below) of (x) the Equipment Lease Agreement dated as of June 29,
1999, Equipment Schedule 1 and Riders No. 1 and No. 2 thereto (as amended from
time to time, the "Rolling Mill Lease") among the Companies, as Lessees, and
Wells Fargo Bank Northwest, N.A., as Owner Trustee (the "Owner Trustee"), as
Lessor, (y) the Equipment Lease Agreement dated as of December 31, 1998,
Equipment Schedule No. 1 and Riders No.1 and No.2 thereto (as amended from time
to time, the "Melt Shop Lease" and, collectively with the Rolling Mill Lease,
the "Leases") among the Companies, as Lessees, and Banc of America Leasing &
Capital, LLC, as Lessor (in such capacity, the "Melt Shop Lessor") and (z)
certain other agreements, documents and instruments related to the Leases (all
as specified in the Termination and Sale Agreement), and (iii) the release
pursuant to the Termination and Sale Agreement of the claims against the
Companies under the Leases, except as expressly provided in the Termination and
Sale Agreement.
(b) You and the Other Purchasers (other than the Melt Shop Lessor) are all
of the owner participants in the Rolling Mill Lease pursuant to a Trust
Agreement dated as of June 29, 1999 among the Owner Trustee and the Purchasers
(other than the Melt Shop Lessor) (as amended from time to time, the "Trust
Agreement"). The Melt Shop Lessor is the sole lessor under the Melt Shop Lease.
Pursuant to a Lease Termination and Equipment Sale Agreement of even date (as
amended from time to time, the "Termination and Sale Agreement") among the
Companies, AmeriSteel Corporation ("AmeriSteel"), the Owner Trustee, and the
Purchasers, (i) the Purchasers (other than the Melt Shop Lessor) and the Owner
Trustee are terminating the Rolling Mill Lease and the Melt Shop Lessor is
terminating the Melt Shop Lease, (ii) the Melt Shop Lessor is transferring to
the Owner Trustee all of its right, title and interest in the equipment subject
to the Melt Shop Lease, and (iii) the Owner Trustee is selling certain of the
equipment which had been subject to the Rolling Mill Lease and the Melt Shop
Lease to AmeriSteel. Pursuant to a Lease Agreement of even date (as amended from
time to time, the "AmeriSteel Lease") among AmeriSteel and the Owner Trustee, on
behalf of each of the Purchasers, the Owner Trustee is leasing certain of the
equipment which had been subject to the Leases to AmeriSteel.
3. Closing.
The closing of the sale and purchase of the Notes hereunder (the "Closing")
shall take place at the offices of Burr & Forman LLP, 3100 South Trust Tower,
420 North Street, Birmingham, Alabama on December 28, 2001 (the "Closing Date")
not later than 12:00 P.M. local time. At the Closing, the Companies will deliver
to you the Notes to be purchased by you thereat against payment of the
consideration therefor by execution and delivery by you of the Termination and
Sale Agreement. Delivery of the Notes to be purchased by you at Closing shall be
made in the form of one Note dated the Closing Date and registered in your name.
If at the Closing the Companies shall fail to tender the Notes to be delivered
to you thereat as provided herein, or if at the Closing any of the conditions
specified in section 4 shall not have been fulfilled to your reasonable
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights you
may have by reason of such failure or such non-fulfillment.
4. Conditions to Closing.
(a) Conditions to Obligation of Purchaser. Your obligation to acquire the
Notes to be acquired by you hereunder is subject to the fulfillment to your
reasonable satisfaction, prior to or at the Closing, of the following
conditions:
(i) Representations and Warranties Correct. The representations and
warranties made by the Companies herein and in the other Operative
Documents shall have been correct when made and shall be correct at and as
of the time of the Closing.
(ii) Performance; No Default. The Companies shall have performed all
agreements and complied with all conditions contained herein and in the
other Operative Documents required to be performed or complied with by them
prior to or at the Closing, and at the time of the Closing no Default or
Event of Default shall exist.
(iii) Contemporaneous Transactions. The transactions contemplated by
the Termination and Sale Agreement and the AmeriSteel Lease shall close
simultaneously, and you or your special counsel shall have received true
and correct copies of all agreements relating thereto.
(iv) Opinion of Counsel. You (or your special counsel) shall have
received an opinion satisfactory to you, dated the Closing Date, from Burr
& Forman LLP, counsel for the Companies, in form and substance satisfactory
to the Purchasers and their special counsel covering the issuance of the
Notes and such other matters incident to the transactions contemplated by
the Operative Documents as the Purchasers may reasonably request.
(v) Sale and Purchase Not Forbidden by Law. The offer and sale by the
Companies of the Notes to be issued pursuant hereto and your purchase of
such Notes at the Closing shall not be prohibited by and shall not subject
you to any tax (excluding taxes based on income or profits or taxes in lieu
thereof), penalty or liability under or pursuant to any law, statute, rule
or regulation.
(vi) Sale of Notes to Other Purchasers. At the Closing, the Companies
shall sell to the Other Purchasers the Notes to be purchased at the Closing
by the Other Purchasers.
(b) Condition to Obligations of the Companies. The obligations of the
Companies to issue the Notes to be issued by the Companies hereunder are subject
to the fulfillment to the Companies' reasonable satisfaction, prior to or at the
Closing, of the following conditions:
(i) Representations and Warranties Correct. The representations and
warranties made by you herein and in the other Operative Documents shall
have been correct when made and shall be correct at and as of the time of
the Closing.
(ii) Performance. You shall have performed all agreements and complied
with all conditions contained herein and in the other Operative Documents
required to be performed or complied with by you prior to or at the
Closing.
(iii) Contemporaneous Transactions. The transactions contemplated by
the Termination and Sale Agreement and the AmeriSteel Lease shall close
simultaneously, and you or your special counsel shall have received true
and correct copies of all agreements relating thereto.
(iv) Sale and Purchase Not Forbidden by Law. The offer and issuance by
the Companies of the Notes to be issued pursuant hereto and your
acquisition of such Notes at the Closing shall not be prohibited by and
shall not subject the Companies to any tax (excluding taxes based on income
or profits), penalty or liability under or pursuant to any law, statute,
rule or regulation.
5. Representations and Warranties.
The Companies jointly and severally represent and warrant that:
(a) Organization, Standing, etc. of the Companies. Each of the Companies is
a corporation or limited liability company, as applicable, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties, to carry on its business as now conducted, and
now proposed to be conducted as described in the Disclosure Documents, to
execute, deliver and perform each of the Operative Documents to which it is (or
is to be) a party and to consummate the transactions contemplated by the
Operative Documents. No approval of the stockholders or members of either of the
Companies or any class thereof is required in connection therewith, other than
such approvals as have been obtained and are in full force and effect on the
Closing Date.
(b) Valid and Binding Obligations; Compliance with Other Instruments.
(i) This Agreement has been duly authorized, executed and delivered by
each Company and constitutes a valid and binding obligation of each Company
enforceable against such Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and equitable principles of general applicability. Each of
the other Operative Documents to which either Company is (or is to be) a
party has been duly authorized by such Company and, when executed and
delivered, will constitute the valid and binding obligation of such
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and equitable principles of general applicability.
(ii) The execution, delivery and performance of and the consummation
of the transactions contemplated by the Operative Documents will not
violate or constitute a default under, or permit any Person to accelerate
or to require the prepayment or repurchase of, any indebtedness or other
obligation or security or equity interests of either Company, or any of
their respective Subsidiaries or to terminate any material lease or
material agreement of either Company or any of their respective
Subsidiaries pursuant to, or result in the creation of any lien upon any of
the respective properties or assets of either Company or any of their
respective Subsidiaries pursuant to, any term of the charter, by-laws or
other organizational document of either Company or any of their respective
Subsidiaries or of any agreement, document, instrument, judgment, decree,
order, law, statute, rule or regulation applicable to either Company or any
of their respective Subsidiaries or any of such properties and assets.
(c) Offer of Securities; Investment Bankers, etc. Neither of the Companies
nor any Person acting on their behalf has directly or indirectly offered the
Notes or any part thereof or any similar securities for issue or sale to, or
solicited any offer to buy any of the same from, anyone other than the
Purchasers. Neither of the Companies nor any Person acting on their behalf has
taken or will take any action which would cause the issuance and sale of the
Notes to violate the provisions of Section 5 of the Securities Act or the
registration or qualification provisions of any applicable blue sky or other
securities laws. Neither of the Companies nor any Person acting on their behalf
has dealt with any broker, finder, commission agent or other similar Person in
connection with the sale of the Notes and the other transactions contemplated by
the Operative Documents. Neither of the Companies nor any other Person acting on
their behalf is under any obligation to pay to any Person any broker's fee,
finder's fee or commission in connection with such transactions.
(d) Government Regulation. None of the Companies or any of their respective
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, the Federal Power Act, as amended, the Investment
Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as
amended.
(e) Disclosure. This Agreement, the other Operative Documents and the other
written statements furnished to you by or on behalf of either Company in
connection with the transactions contemplated by the Operative Documents
(including, without limitation, the Disclosure Documents), taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein and therein,
taken as a whole, not misleading in the light of the circumstances under which
such statements were made.
6. Notice of Default.
The Companies will furnish to each holder of any of the Notes as promptly
as practicable (but in any event not later than five days) after the occurrence
of any Default or Event of Default, written notice of such Default or Event of
Default specifying in reasonable detail the nature and period of existence
thereof.
7. Information.
The Companies will furnish to each holder of any of the Notes as promptly
as practicable such information as from time to time may reasonably be requested
by such holder.
8. Inspection.
During any period that a Default or Event of Default has occurred and is
continuing, the Companies will permit any Person designated by a holder of any
of the Notes on reasonable notice to visit and inspect any of the properties of
either Company and any of their respective Subsidiaries, to examine its and
their books and records (and to make copies thereof and take extracts therefrom)
and to discuss its and their affairs, finances and accounts with, its and their
officers, consultants, counsel and accountants, all at such reasonable times and
intervals as such holder may desire.
9. Purchase for Investment.
Each Purchaser represents and warrants severally and not jointly (i) that
such Purchaser has been furnished with all information that such Purchaser has
requested for the purpose of evaluating its proposed acquisition of the Notes to
be issued to such Purchaser pursuant hereto and (ii) that such Purchaser will
acquire such Notes for its own account for investment and not for distribution
thereof, provided that the disposition of such Purchaser's property shall at all
times be within such Purchaser's control. Such Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and
otherwise in accordance with any other applicable securities laws and the
provisions of section 12 hereof, and that the Companies are not required to
register the Notes.
10. Purchase of Notes.
The Companies will not, and will not permit any Subsidiary of either
Company to, directly or indirectly, purchase or otherwise acquire, or offer to
purchase or otherwise acquire, any of the outstanding Notes except by way of
payment or prepayment in accordance with the provisions of the Notes and this
Agreement or pursuant to identical offers made to all holders of the Notes to
repurchase a pro rata portion of the Notes from each such holder.
11. Payment on Non-Business Days.
If any amount hereunder or under the Notes shall become due on a day which
is not a Business Day, such payment shall be due on the next succeeding Business
Day.
12. Registration, Transfer and Exchange of Notes.
(a) Notes issued hereunder shall be issued in registered form. The
Companies shall keep at their principal executive offices (which are now located
at the address set forth at the beginning of this Agreement), a register in
which the Companies shall provide for the registration and transfer of the
Notes. The name and address of each holder of the Notes shall be registered in
such register.
(b) Whenever any Note shall be surrendered for transfer or exchange, the
Companies at their expense will execute and deliver in exchange therefor a new
Note or Notes in registered form as may be requested by the holder of the
surrendered Note, in the same aggregate principal amount as that of the Note so
surrendered.
(c) The Companies may treat the Person in whose name any Note is registered
as the owner of such Note for all purposes.
13. Replacement of Securities.
Upon receipt by the Companies of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of any Note and (in the case of
loss, theft or destruction) of indemnity reasonably satisfactory to them, and
(in the case of mutilation) upon surrender of such Note, the Companies at their
expense will execute and deliver in lieu of such Note a new Note of like tenor
and dated the date of such lost or mutilated Note. The unsecured agreement to
indemnify and affidavit of loss, theft, destruction or mutilation of any
Purchaser or of any other institutional holder shall constitute indemnity and
evidence of loss, theft, destruction or mutilation satisfactory to the Companies
for the purpose of this section 13.
14. Definitions.
(a) Definitions of Capitalized Terms. The terms defined in this section 14(a),
whenever used in this Agreement, shall, except to the extent otherwise specified
in this Agreement, have the following respective meanings:
"Affiliate" of any Person shall mean any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
first-mentioned Person, or any individual, in the case of a Person who is an
individual, who has a relationship by blood, marriage or adoption to such
first-mentioned Person not more remote than first cousin, and, without limiting
the generality of the foregoing, shall include (a) any Person beneficially
owning, holding or controlling, directly or indirectly, 10% or more of any class
of voting equity securities of such first-mentioned Person, (b) any Person of
which such first-mentioned Person owns, holds or controls, directly or
indirectly, 10% or more of any class of voting equity securities or (c) any
director or officer of such first-mentioned Person; provided, that in no event
shall any Purchaser or any other institutional holder of Notes be deemed to be
an Affiliate of either Company. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting equity securities or by contract or otherwise; provided that
in no event shall the fact that a Person is a holder of indebtedness of such
Person be considered sufficient by itself to enable such Person to direct or
cause the direction of the management and policies of such Person.
"AmeriSteel" shall have the meaning specified in section 2(b).
"AmeriSteel Lease" shall have the meaning specified in section 2(b).
"BSC" and "BSE" shall have the respective meanings specified in the
preamble to this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day which shall be in Birmingham, Alabama and New York City a legal holiday or a
day on which banking institutions therein are authorized by law to close.
"Closing" and "Closing Date" shall have the respective meanings specified
in section 3.
"Code" shall mean the Internal Revenue Code of 1986, or any successor
federal statute, and the rules and regulations promulgated thereunder, all as
amended, modified or supplemented from time to time.
"Commission" shall mean the Securities and Exchange Commission and shall
also mean any successor thereto.
"Company" or "Companies" shall mean each of BSC and BSE, and any successor
thereto.
"Default" shall mean any condition or event which constitutes or, after
notice or lapse of time or both, would constitute an Event of Default.
"Disclosure Documents" shall mean the filings made by BSC with the
Commission pursuant to the Exchange Act.
"Events of Default" shall have the meaning specified in section 15(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations promulgated
thereunder, all as amended, modified or supplemented from time to time.
"GAAP" shall mean 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 that are applicable to the
circumstances as of the date of determination, consistently applied.
"Indemnified Costs" and "Indemnitee" shall have the respective meanings
specified in section 18.
"Interest Commencement Date: shall have the meaning specified in section
1(a).
"Leases" shall have the meaning specified in section 2(a).
"Maturity Date" shall mean the earliest of (i) December 16, 2005, (ii) the
sale, transfer or other disposition of all or substantially all of the business
of the Companies (on a consolidated basis), provided that the grant of (as
opposed to a foreclosure of or other transfer of title pursuant to the
enforcement of) a lien, security interest, pledge or mortgage shall not be
deemed a sale, transfer or other disposition for purposes of this clause (ii),
and (iii) the liquidation or dissolution of BSC.
"Melt Shop Lease" shall have the meaning specified in section 2(a).
"Melt Shop Lessor " shall have the meaning specified in section 2(a).
"Notes" shall have the meaning specified in section 1.
"Operative Documents" shall mean this Agreement, the Other Note Agreements,
the Termination and Sale Agreement, the AmeriSteel Lease, the Notes and each of
the other agreements, documents and instruments executed in connection herewith
and therewith, and all exhibits and schedules hereto and thereto, each as it may
from time to time be amended, modified or supplemented.
"Other Note Agreements" and "Other Purchasers" shall have the respective
meanings specified in section 1.
"Owner Trustee" shall have the meaning specified in section 2.
"Person" shall mean an individual, a corporation, an association, a
joint-stock company, a business trust or other similar organization, a
partnership, a joint venture, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Purchasers" and "Purchaser" shall have the respective meanings specified
in section 1(b).
"Required Holders" shall mean, at any date, the holder or holders of more
than 50% of the principal amount of the Notes at the time outstanding (excluding
all Notes at the time owned by either Company or any Affiliate of either
Company).
"Restricted Subsidiary" of any Person at any date shall mean any Subsidiary
of such first mentioned Person which is (i) organized under the laws of the
United States, Puerto Rico or Canada or a jurisdiction thereof at such time,
(ii) that conducts substantially all of its business and has substantially all
of its property within the United States or Canada or a jurisdiction thereof at
such time, and (iii) at least eighty percent (80%) (by number of votes) of each
class of voting equity securities of which and one hundred percent (100%) of all
preferred stock and other equity securities of which are legally and
beneficially by BSC and its Wholly-Owned Restricted Subsidiaries at such time.
"Rolling Mill Lease" shall have the meaning specified in section 2(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations promulgated thereunder,
all as amended, modified or supplemented from time to time.
"Subsidiary" of any Person at any date shall mean (a) any other Person more
than 50% (by number of votes) of the voting equity interests of which is owned
by such first-mentioned Person and/or by one or more other Subsidiaries of such
first-mentioned Person; (b) any other Person of which such first-mentioned
Person or any of its other Subsidiaries is a general partner; and (c) any other
Person with respect to which such first-mentioned Person and/or any one or more
other Subsidiaries of such first-mentioned Person (i) is entitled, other than as
a creditor of such Person, to more than 50% of such Person's profits or losses
or more than 50% of such Person's assets on liquidation or (ii) holds an equity
interest in such Person of more than 50%,
"Termination and Sale Agreement" shall have the meaning specified in
section 2(b).
"Trust Agreement" shall have the meaning specified in section 2(b).
"Wholly-Owned Restricted Subsidiary" of any Person at any date shall mean
any Restricted Subsidiary of such first mentioned Person one hundred percent
(100%) of all of the debt and equity securities (except directors' qualifying
shares) of which are owned by one or more of BSC and BSC's other Wholly-Owned
Restricted Subsidiaries at such time.
(b) Other Definitions. The terms defined in this section 14(b), whenever
used in the Agreement, shall, except to the extent otherwise specified in this
Agreement, have the respective meanings hereinafter specified.
"this Agreement" (and similar references to any of the other Operative
Documents to which the holders of the Securities are parties) shall mean, and
the words "herein" (and "therein"), "hereof" (and "thereof"), "hereunder" (and
"thereunder") and words of similar import shall refer to, such instruments as
they may from time to time be amended, modified or supplemented.
"corporation" shall include an association, joint stock company, business
trust or other similar organization.
(c) Accounting Terms and Principles; Laws. For purposes of this Agreement,
all accounting terms not otherwise defined herein shall have the meanings
assigned to such terms in conformity with GAAP. All references herein to laws,
statutes, rules, regulations and/or to other governmental restrictions,
standards and/or requirements shall, unless the context clearly requires
otherwise, be deemed to refer to those promulgated, issued and/or enforced by
any domestic or foreign federal, state or local government, governmental agency,
authority, court, instrumentality or regulatory body, including, without
limitation, those of the United States of America or any state thereof or the
District of Columbia.
15. Remedies.
(a) Events of Default Defined; Acceleration of Maturity. If any one or more
of the following events ("Events of Default") shall occur (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body), that is to say:
(i) if default shall be made in the due and punctual payment of all or
any part of the principal of, or interest on, any Note, when and as the
same shall become due and payable, whether at the stated maturity thereof,
by notice of or demand for prepayment, or otherwise;
(ii) if default shall be made in the performance or observance of any
of the covenants, agreements or conditions contained in this Agreement and
such default shall have continued for a period of 30 days after the earlier
to occur of (A) either Company's obtaining actual knowledge of such default
or (B) either Company's receipt of written notice of such default;
(iii) if either Company or any of their respective Restricted
Subsidiaries shall make a general assignment for the benefit of creditors,
or shall not pay its debts as they become due, or shall admit in writing
its inability to pay its debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated bankrupt or
insolvent, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against it in any such proceeding,
or shall seek or consent to or acquiesce in the appointment of any trustee,
custodian, receiver, liquidator or fiscal agent for it or for all or any
substantial part of its properties;
(iv) if, within 60 days after the commencement of an action against
either Company or any of their respective Restricted Subsidiaries seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of either
Company or such Restricted Subsidiary stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within 60 days
after the appointment without the consent or acquiescence of such Company
or such Restricted Subsidiary of any trustee, custodian, receiver,
liquidator or fiscal agent for either Company or any of their respective
Restricted Subsidiaries or for all or any substantial part of their
respective properties, such appointment shall not have been vacated;
(v) if, under the provisions of any law for the relief or aid of
debtors, any court or governmental agency of competent jurisdiction shall
assume custody or control of either Company or of any of their respective
Restricted Subsidiaries or of all or any substantial part of their
respective properties and such custody or control shall not be terminated
or stayed within 30 days from the date of assumption of such custody or
control;
(vi) (x) either Company or any of their respective Restricted
Subsidiaries shall fail to pay any indebtedness or security in an aggregate
amount equal to or exceeding $10,000,000 at its stated maturity; (y) any
event shall occur or any condition shall exist in respect of any
indebtedness or security of either Company or any of their respective
Restricted Subsidiaries in an aggregate amount equal to or exceeding
$10,000,000, or under any agreement securing or relating to such
indebtedness or security, that immediately or with any one or more of (I)
the passage of time, or (II) the giving of notice, or (III) the expiration
of waivers or modifications granted in respect of such event or condition:
(A) causes such indebtedness or security, or a portion thereof,
to become due prior to its stated maturity or prior to its regularly
scheduled date or dates of payment (which shall not be deemed to
include the mandatory application of all or a portion of the proceeds
of the sale of collateral or issuance of equity securities in
prepayment of indebtedness or a security); or
(B) permits any one or more of the holders thereof or a trustee
therefor to require either Company or any of their respective
Restricted Subsidiaries to repurchase such indebtedness or security,or
(z) any holder or holders of any indebtedness or security in an
aggregate amount equal to or exceeding $10,000,000 shall commence
foreclosure proceedings or otherwise pursue remedies against either
Company or any of their respective Restricted Subsidiaries or their
respective assets;
(vii) if a final judgment or judgments for the payment of money which,
together with all other outstanding final judgments for the payment of
money against the Companies and/or any of their respective Restricted
Subsidiaries, exceeds an aggregate of $10,000,000 shall be rendered against
either Company or any such Restricted Subsidiary, which judgments are not,
within 30 days after entry thereof, discharged or stayed pending appeal, or
are not discharged within 30 days after the expiration of such stay;
(viii) if any representation or warranty made by or on behalf of
either Company in this Agreement or in any of the other Operative Documents
or in any agreement, document or instrument delivered under or pursuant to
any provision hereof or thereof shall prove to have been false or incorrect
in any material respect on the date as of which made; or
(ix) if, at any time, this Agreement or any of the Notes shall for any
reason (other than the scheduled termination thereof in accordance with its
terms) expire, fail to be in full force and effect or be disaffirmed,
repudiated, cancelled, terminated or declared to be unenforceable, null and
void other than by a holder of any Note in its capacity as holder of a
Note; then, in the case of any Event of Default (other than one with
respect to either Company of the character described in subdivisions (iii),
(iv) or (v) of this section 15(a)) and at the option of the holder or
holders of 25% or more in aggregate principal amount of all Notes at the
time outstanding (excluding any Notes at the time owned by either Company
or any of their respective Affiliates), exercised by written notice to the
Companies, the principal amount of all Notes shall forthwith become due and
payable, together with interest accrued thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived, and the Companies shall forthwith upon any such
acceleration pay to the holder or holders of all the Notes then outstanding
the principal amount of and interest accrued on the Notes, if any;
provided, that, in the case of an Event of Default of the character
described in subdivisions (iii), (iv) or (v) of this section 15(a) with
respect to either Company, the principal amount of all Notes shall
forthwith become due and payable, together with interest accrued thereon,
if any, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived, and the Companies shall forthwith
upon any such acceleration pay to the holder or holders of all the Notes
then outstanding the principal amount of and interest accrued on the Notes.
(b) Suits for Enforcement, etc. In case any one or more of the Events of
Default shall have occurred, and irrespective of whether any Notes have become
or have been declared immediately due and payable under section 15(a), the
Required Holders of the Notes may proceed to protect and enforce the rights of
the holders of the Notes either by suit in equity or by action at law, or both.
The Companies stipulate that the remedies at law of the holder or holders of the
Notes in the event of any default or threatened default by either Company in the
performance of or compliance with any covenant or agreement in this Agreement
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance thereof, whether by an injunction against a violation thereof or
otherwise.
(c) No Election of Remedies. No remedy conferred in this Agreement or the
Notes upon the Required Holders of the Notes is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or thereunder or now or hereafter
existing at law or in equity or by statute or otherwise.
(d) Remedies Not Waived. No course of dealing between the Companies and any
of their respective Subsidiaries, on the one hand, and any holder of any Note,
on the other hand, and no delay by any such holder in exercising any rights
hereunder or under any of the Notes shall operate as a waiver of any rights of
any such holder.
16. Amendment and Waiver.
(a) Any term of this Agreement and of the Notes may, with the consent of
the Companies, be amended, or compliance therewith may be waived, in writing
only, by the Required Holders of the Notes, provided that (i) without the
consent of the holders of all of the Notes at the time outstanding, no such
amendment or waiver shall (x) change the principal amount of or any rate of
interest on any of the Notes, or change the payment terms of any of the Notes,
or (y) change the percentage of holders of Notes required to approve any such
amendment, effectuate any such waiver or accelerate payment of the Notes; and
(ii) no such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon. The
Companies will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this section 16 to each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the Required Holders
required therefor.
(b) The Companies will not, directly or indirectly, request or negotiate
for, or offer or pay any remuneration as an inducement for, any proposed
amendment or waiver of any of the provisions of this Agreement or the Notes
unless each holder of the Notes (irrespective of the amount of Notes then owned
by it) shall be informed thereof by the Companies and, if such holder is
entitled to the benefit of any such provision proposed to be amended or waived,
shall be afforded the opportunity of considering the same, shall be supplied by
the Companies with sufficient information to enable it to make an informed
decision with respect thereto and shall be offered and paid such remuneration on
the same terms.
(c) In determining whether the requisite holders of Notes have given any
authorization, consent or waiver under this section 16, any Notes owned by
either Company or any of their respective Affiliates shall be disregarded and
deemed not to be outstanding.
17. Method of Payment of Securities.
Irrespective of any provision hereof or of the other Operative Documents to
the contrary, so long as any Purchaser (or a nominee of a Purchaser) or any
other institutional holder shall hold any Note, the Companies will make all
payments on such Note to such Purchaser or such other institutional holder by
the method and at the address for such purpose specified in Schedule I attached
hereto or by wire transfer to any account in the United States, in each case as
such Purchaser or such institutional holder may designate in writing, without
requiring any presentation or surrender of such Note.
18. Expenses; Indemnity.
The Companies, jointly and severally, will pay or cause to be paid (or
reimbursed, as the case may be) and will defend, indemnify and hold each
Purchaser and each other Person who becomes a holder of any of the Notes and the
directors, officers, employees, agents, advisors and Affiliates of each
Purchaser and each such other holder (each, an "Indemnitee") harmless (on an
after tax basis) in respect of all costs, losses, expenses (including, without
limitation, the reasonable fees, expenses and disbursements of special counsel)
and damages (collectively, "Indemnified Costs") incurred by or asserted against
any Indemnitee after the Closing in connection with the amendment and/or
enforcement of this Agreement or the Notes (including, without limitation,
so-called work-outs and/or restructurings) or which may otherwise be related in
any way to such Indemnitee's relationship to either Company or any of their
respective Subsidiaries or Affiliates or any of their respective properties and
assets.
19. Taxes.
The Companies will pay all taxes and fees (including interest and
penalties), including, without limitation, all recording and filing fees,
issuance and documentary stamp and similar taxes, which may be payable in
respect of the execution and delivery of this Agreement and the Notes.
20. Communications.
All communications provided for herein and shall be in writing and sent (a)
by telecopy (receipt confirmed by the recipient thereof), (b) by a recognized
overnight delivery service (charges prepaid), or (c) by messenger. Any such
communication must be sent (i) if to the Companies, to the Companies at their
address set forth at the beginning hereof to the attention of President (or at
such other address as may be furnished in writing by a Company to each holder of
any Note) with a copy (which shall not constitute notice) to
Burr & Forman LLP
3100 South Trust Tower
420 North Street
Birmingham, Alabama 35283-0719
P.O. Box 306
Birmingham, Alabama 35201
Attn: Gene T. Price, Esq.
Telecopy No.: (205) 458-5100
and (ii) if to any Purchaser, at its address set forth in Schedule I attached
hereto, with copies (which shall not constitute notice) to
Choate, Hall & Stewart
Exchange Place
53 State Street,
Boston, Massachusetts 02109
Attention: Laura C. Glynn, Esq.
Telecopy No.: (617) 248-4000
and
Parker, Hudson, Rainer & Dobbs
1500 Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, GA 30303
Attn: Edward Dobbs, Esq.
Telecopy No.: (404) 522-8409
and if to any other holder of any Security, at the address of such holder as it
appears on the applicable register maintained pursuant to section 12, or at such
other address as may be furnished in writing by you or by any other holder to
the Companies. Communications under this section 20 shall be deemed given only
when received (a delivery receipt signed by the addressee or an employee or
agent of the addressee being conclusive evidence of receipt).
21. Survival of Agreements, Representations and Warranties, etc.
All agreements, representations and warranties contained herein shall be
deemed to have been relied upon by the Purchasers or the Companies, as the case
may be, and shall survive the execution and delivery of this Agreement and each
of the other Operative Documents, the issue, sale and delivery of the Notes and
payment therefor and any disposition of the Notes by any Purchaser, whether or
not any investigation at any time is made by any Purchaser or the Companies, as
the case may be, or on behalf of any Purchaser or the Companies, as the case may
be. The covenants contained in sections 18 and 19 shall survive the date upon
which none of the Notes shall be outstanding and the termination of this
Agreement and each of the other Operative Documents.
22. Successors and Assigns; Rights of Other Holders.
This Agreement shall bind and inure to the benefit of and be enforceable by the
Companies and each of the Purchasers, the respective successors to the Companies
and the respective successors and assigns of the Purchasers, and, in addition,
shall inure to the benefit of and be enforceable by each holder from time to
time of any Notes who, upon acceptance thereof, shall, without further action,
be entitled to enforce the applicable provisions and enjoy the applicable
benefits hereof and thereof. The Companies may not assign any of their rights or
obligations hereunder or under any of the other Operative Documents without the
written consent of the Required Holders.
23. Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement and the Notes, including the validity hereof and thereof and
the rights and obligations of the parties hereunder and thereunder, and all
amendments and supplements hereof and thereof and all waivers and consents
hereunder and thereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The State of New York without giving effect to
any choice of law or conflicts of law provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction. Each
Company, to the extent that it may lawfully do so, hereby consents to service of
process, and to be sued, in The State of New York and consents to the
jurisdiction of the courts of The State of New York and the United States
District Court for the Southern District of New York, as well as to the
jurisdiction of all courts to which an appeal may be taken from such courts, for
the purpose of any suit, action or other proceeding arising out of any of its
obligations hereunder or thereunder or with respect to the transactions
contemplated hereby or thereby, and expressly waives any and all objections it
may have as to venue in any such courts. Each Company further agrees that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address referred to in section 20
or as otherwise provided under the laws of The State of New York.
Notwithstanding the foregoing, each Company agrees that nothing contained in
this section 23 shall preclude the institution of any such suit, action or other
proceeding in any jurisdiction other than The State of New York. EACH OF BSC,
BSE AND YOU IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION
OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
24. Miscellaneous.
The headings in this Agreement and in each of the other Operative Documents
are for purposes of reference only and shall not limit or otherwise affect the
meaning hereof or thereof. This Agreement (together with the other Operative
Documents) embodies the entire agreement and understanding among you and the
Companies and supersedes all prior agreements and understandings relating to the
subject matter hereof. Each covenant contained herein and in each of the other
Operative Documents shall be construed (absent an express provision to the
contrary) as being independent of each other covenant contained herein and
therein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. If any provision in this Agreement or in any of the other Operative
Documents refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable, whether
such action is taken directly or indirectly by such Person. In case any
provision in this Agreement or any of the other Operative Documents shall be
invalid, illegal or unenforceable, to the extent permitted by applicable law,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. This Agreement and, unless
explicitly provided otherwise therein, each of the other Operative Documents,
may be executed in any number of counterparts and by the parties hereto or
thereto, as the case may be, on separate counterparts but all such counterparts
of this Agreement or any other such Operative Document shall together constitute
but one and the same instrument.
[The remainder of this page is left blank intentionally.]
Signature Page to Note Purchase Agreement
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement, whereupon it shall
become a binding agreement under seal among you and each of the Companies.
Please then return one of such counterparts to the Companies.
Very truly yours,
BIRMINGHAM STEEL CORPORATION
By: /s/ James A. Todd, Jr.
------------------
James A. Todd, Jr.
Vice Chairman and Chief
Administrative Officer
Duly Authorized
BIRMINGHAM SOUTHEAST, LLC
By: /s/ James A. Todd, Jr.
------------------
James A. Todd, Jr.
Vice Chairman and Chief
Administrative Officer
Duly Authorized
The foregoing Agreement is hereby agreed to as of the date thereof.
BANC OF AMERICA LEASING & CAPITAL, LLC
(as successor to NationsBanc Leasing Corporation)
By: /s/ Dawn L. Kinney
-------------------------
Dawn L. Kinney, Principal
Duly Authorized
ASSOCIATES LEASING, INC. NOW KNOWN
AS CITICAPITAL COMMERCIAL CORPORATION
By: /s/ Garry Stigger
------------------
Garry Stigger, Senior Vice President
Duly Authorized
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ W. B. Stoebig
-----------------
W. B. Stoebig, Vice President - Credit
Duly Authorized
CITIZENS LEASING CORPORATION
By: /s/ Anne B. Hemner
------------------
Anne E. Hemner, Vice President
Duly Authorized
FIFTH THIRD LEASING COMPANY
By: /s/ William M. Thurman
----------------------
William M. Thurman, Vice President
Duly Authorized
ICX CORPORATION
By: /s/ James T. Lovins
--------------------
James T. Lovins, Senior Vice President and Treasurer
Duly Authorized
JOHN HANCOCK LEASING CORPORATION
By: /s/ David Santom
-----------------
David Santom, Vice President
Duly Authorized
GENERAL ELECTRIC CAPITAL CORPORATION
AS AGENT FOR SAGE CAPITAL CORPORATION
FKA SAFECO CREDIT COMPANY, INC.
By: /s/ Kevin G. Wortman
--------------------
Kevin G. Wortman, Senior Vice President - Strategic Asset Financing
Duly Authorized
TRANSAMERICA EQUIPMENT FINANCIAL
SERVICES CORPORATION
By: /s/ Dan Rouse
-------------
Dan Rouse, Vice President
Duly Authorized
Exhibit 1(a)
Form of Note
BIRMINGHAM STEEL CORPORATION
BIRMINGHAM SOUTHEAST, LLC
9.0% Note due December 16, 2005
No. [ ]
$[----------] ------- --, ----
BIRMINGHAM STEEL CORPORATION, a Delaware corporation, and BIRMINGHAM
SOUTHEAST, LLC, a Delaware limited liability company (collectively, the
"Companies"), for value received, hereby jointly and severally promise to pay to
[_________________________], or registered assigns, the principal amount of
[_________________________] ($[_______________]), together with all accrued and
unpaid interest thereon, on the Maturity Date (as defined in the Note Purchase
Agreements hereinafter referred to). Interest will not accrue on this Note prior
to the date (the "Interest Commencement Date") which is the earlier of (i)
December 28, 2004 and (ii) the date on which the Notes have become due and
payable, whether on the Maturity Date, by acceleration or otherwise. Interest
shall accrue on this Note from and after the Interest Commencement Date through
the date this Note has been paid in full in cash, at a rate per annum equal to
9.0%, compounded monthly (computed on the basis of a 360-day year of twelve
30-day months). The principal amount of this Note plus all accrued and unpaid
interest thereon, if any, shall be due and payable in full in cash on the
earlier of the Maturity Date and the date, if any, on which the Notes have
become due and payable by acceleration or otherwise. In no event shall the
amount payable by the Companies as interest on this Note exceed the highest
lawful rate permissible under any law applicable hereto. Payments of principal
and interest hereon shall be made in lawful money of the United States of
America by the method and at the address for such purpose specified in the Note
Purchase Agreements hereinafter referred to.
This Note is one of the Companies' 9.0% Notes due December 16, 2005, in the
original aggregate principal amount of $10,000,000, issued pursuant to those
certain Note Purchase Agreements dated December 28, 2001 (such agreements, as
amended, modified and supplemented from time to time, the "Note Purchase
Agreements") among the Companies and the institutional investors named therein,
and the holder hereof is entitled to the benefits of the Note Purchase
Agreements and the other Operative Documents referred to in the Note Purchase
Agreements and may enforce the agreements contained herein and therein and
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and thereof.
This Note is subject to prepayment only as specified in the Note Purchase
Agreements.
Capitalized terms used herein without definition have the meanings ascribed
to them in the Note Purchase Agreements.
This Note is in registered form and is transferable only by surrender
hereof at the principal executive office of the Companies as provided in the
Note Purchase Agreements. The Companies may treat the Person in whose name this
Note is registered on the Note register maintained at such office pursuant to
the Note Purchase Agreements as the owner hereof for all purposes, and the
Companies shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the unpaid
balance of the principal of this Note may be declared and become due and payable
in the manner and with the effect provided in the Note Purchase Agreements.
The parties hereto, including the maker and all guarantors and endorsers of
this Note, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance or
enforcement of this Note.
This Note shall be construed in accordance with and governed by the
domestic substantive laws of the State of New York without giving effect to any
choice of law or conflicts of law provision or rule that would cause the
application of domestic substantive laws of any other jurisdiction.
[The remainder of this page is left blankintentionally.]
IN WITNESS WHEREOF, the Companies have executed this Note as an
instrument under seal as of the date first above written.
BIRMINGHAM STEEL CORPORATION
By:_______________________________
Name:_________________________
Title:__________________________
BIRMINGHAM SOUTHEAST, LLC
By:_______________________________
Name:_________________________
Title:__________________________
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and transfers
unto the within Note, and appoints Attorney to transfer such Note on the books
of BIRMINGHAM STEEL CORPORATION and BIRMINGHAM SOUTHEAST, LLC with full power of
substitution in the premises.
Date: , .
---------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Note)
Signed in the presence of
-----------------------------
Schedule I
Schedule of Purchasers - Notice Addresses
Associates Leasing, Inc. Now Known as CitiCapital Commercial Leasing Corporation
Notice Address:
- ---------------
CitiCapital Commercial Leasing Corporation
300 East Carpenter Freeway
17th Floor
Irving, Texas 75062-2726
Banc of America Leasing & Capital, LLC
Notice Address:
- --------------
Banc of America Leasing & Capital, LLC Please see next page for notice
information.
CA5-705-04-01
555 California Street, 4th Floor
San Francisco, CA 94104-1503
Citizens Leasing Corporation
Notice Address:
- --------------
Citizens Leasing Corporation
c/o Citizens Bank
53 State Street, 9th Floor
Boston, Massachusetts 02108
Attn: Anne R. Hemmer, Vice President
The CIT Group/Equipment Financing, Inc.
Notice Address:
- ---------------
The CIT Group/Equipment Financing, Inc.
1540 West Fountainhead Parkway
Tempe, Arizona 85285-7248
Fifth Third Leasing Company
Notice Address:
- ---------------
Fifth Third Leasing Company
38 Fountain Square
Cincinnati, Ohio 45263
Attn: William M. Thurman
Fax No.: (513) 579-6089
ICX Corporation
Notice Address:
- ---------------
ICX Corporation
3 Summit Park Drive, Suite 200
Cleveland, OHio 44131
Attn: General Counsel, Senior Vice President and Chief Financial Officer
John Hancock Leasing Corporation
Notice Address:
- ---------------
Please see next page for notice information
7
General Electric Capital Corporation, as agent for SAGE Capital Corporation, fka
SAFECO Credit Company, Inc.
Notice Address:
- ---------------
SAFECO Credit Company, Inc., a GE Company
10865 Willows Road, N.E. #E-3
Redmond, Washington 98052
Transamerica Equipment Financial Services Corporation
Notice Address:
- ---------------
Transamerica Equipment Financial Services Corporation
5800 Spectrum, Suite 1100W
Addison, Texas 75001
Attn: Andrew Fletcher, Esq. Senior Counsel
Notice information for John Hancock Leasing Corporation
All notices shall be sent via fax AND mail according to the instructions below:
- -------------------------- ----------------------------------------------------
o Scheduled Payments John Hancock Leasing Corporation
o Unscheduled Prepayments 200 Clarendon St.
o Notice of Maturity Boston, MA 02117
Attn: President
Fax: (617) 572-4799
Include:
(a) full name, interest rate and maturity date of the
Notes or other obligations
(b) allocation of payment between principal and
interest and any special payment
(c) name and address of Bank (or Trustee) from which
the wire transfer was sent
- -------------------------------------------------------------------------------
o Financial Statements John Hancock Leasing Corporation
o Certificates of 200 Clarendon St.
Compliance with Boston, MA 02117
financial covenants Attn: President
Fax: (617) 572-4799
- -------------------------- -----------------------------------------------------
o Change in Issuer's name, John Hancock Life Insurance Company
address or principal 200 Clarendon St.
place of business Boston, MA 02117
o Change in location of Attn: Investment Law Division, T-30
collateral Fax: (617) 572-9269
o Copy of legal opinions
- ------------------------------------ ------------------------------------------
Schedule of Purchasers - Notes Purchased
Note Registered in the Name of: Principal Amount of Note
--------------------------
(R-1) Banc of America Leasing & Capital, LLC $1,272,200.00
(R-2) Associates Leasing, Inc. Now Known As
CitiCapital Commercial Leasing Corporation $648,184.18
(R-3) Citizens Leasing Corporation $1,296,368.36
(R-4) The CIT Group/Equipment Financing, Inc. $1,296,368.36
(R-5) Fifth Third Leasing Company $1,296,368.36
(R-6) ICX Corporation $1,296,368.36
(R-7) John Hancock Leasing Corporation $949,589.84
(R-8) General Electric Capital Corporation, as agent for SAGE
Capital Corporation, fka SAFECO Credit Company, Inc. $648,184.18
(R-9) Transamerica Equipment Financial Services Corporation $1,296,368.36
Table of Contents
(continued)
Table of Contents
1. Authorization of Notes; Other Purchaser....................................1
2. Sale and Purchase of Securities............................................1
3. Closing....................................................................2
4. Conditions to Closing......................................................3
5. Representations and Warranties.............................................4
6. Notice of Default..........................................................5
7. Information................................................................5
8. Inspection.................................................................5
9. Purchase for Investment....................................................6
10. Purchase of Notes..........................................................6
11. Payment on Non-Business Days...............................................6
12. Registration, Transfer and Exchange of Notes...............................6
13. Replacement of Securities..................................................7
14. Definitions................................................................7
15. Remedies..................................................................10
16. Amendment and Waiver......................................................13
17. Method of Payment of Securities...........................................14
18. Expenses; Indemnity.......................................................14
19. Taxes.....................................................................14
20. Communications............................................................14
21. Survival of Agreements, Representations and Warranties, etc...............15
22. Successors and Assigns; Rights of Other Holders...........................16
23. Governing Law; Jurisdiction; Waiver of Jury Trial.........................16
24. Miscellaneous.............................................................16
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
AMERISTEEL CORPORATION
BIRMINGHAM SOUTHEAST, LLC
AND
BIRMINGHAM STEEL CORPORATION
November 14, 2001
TABLE OF CONTENTS
Page #
ARTICLE I PURCHASE AND SALE OF ASSETS..................................2
1.1 Assets, Properties and Business to be Transferred.....................2
1.2 Excluded Assets.......................................................5
ARTICLE II PURCHASE PRICE, PAYMENT AND ALLOCATION.......................6
2.1 Purchase Price........................................................6
2.2 Determination of Cash Consideration...................................6
2.3 Assumption of Assumed Liabilities.....................................7
2.4 No Other Liabilities Assumed..........................................8
2.5 Settlement Statement, Adjustment Escrow Fund and
Post-Closing Reconciliation of Purchase Price.......................8
2.6 Allocation of Purchase Price.........................................10
ARTICLE III CLOSING OF PURCHASE AND SALE................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER....................11
4.1 Due Organization, Good Standing and Qualification....................11
4.2 Authority of Seller..................................................11
4.3 Liens and Good Title.................................................13
4.4 Financial Statements.................................................13
4.5 Recent Developments..................................................14
4.6 Litigation...........................................................15
4.7 Taxes 15
4.8 Inventory............................................................16
4.9 Compliance ith Laws..................................................17
4.10 Environmental Matters................................................19
4.11 Contracts and Other Agreements.......................................21
4.12 Real Party Leases....................................................23
4.13 Fixed Assets.........................................................24
4.14 Trade Name and Other Intangibles.....................................24
4.15 Major Suppliers and Customers........................................24
4.16 Labor Relations; Employees...........................................25
4.17 Employee Benefit Plans...............................................26
4.18 Insurance............................................................27
4.19 Warranties...........................................................27
4.20 Key Employees........................................................28
4.21 Purchased Assets Complete............................................28
4.22 Utilities............................................................28
4.23 Broker's or Finder's Fees............................................29
4.24 Products Liability...................................................29
4.25 Disclosure...........................................................29
ARTICLE V REPRESENTATIONS OF BUYER....................................30
5.1 Existence and Good Standing of Buyer.................................30
5.2 Authority of Buyer...................................................30
5.3 Litigation...........................................................30
5.4 Broker's or Finder's Fees............................................31
5.5 Disclosure...........................................................31
ARTICLE VI COVENANTS OF SELLER AND BUYER...............................31
6.1 Operation in Ordinary Course.........................................31
6.2 Notice of Events.....................................................33
6.3 Exclusive Dealing....................................................33
6.4 Right of First Refusal...............................................34
6.5 Examinations and Investigations......................................34
6.6 Payment of Seller's Obligations......................................35
6.7 Employee Matters.....................................................35
6.8 Consents; Cooperation................................................36
6.9 Further Assurances...................................................37
6.10 Bulk Transfer Laws...................................................37
6.11 Publicity............................................................37
6.12 Collection of Accounts Receivable....................................38
6.13 Outstanding Vacation Benefits........................................39
6.14 Customer Rebates.....................................................39
6.15 Utility and Other Prorations.........................................39
6.16 Fees and Expenses....................................................39
6.17 Duty to Update Schedules.............................................40
6.18 HSR Act 40
6.19 Consummation of Lease Agreements.....................................41
6.20 Environmental Restrictions...........................................41
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE..........41
7.1 Representations and Covenants........................................41
7.2 Seller's Assurances and COBRA Compliance.............................42
7.3 Condition of Property, Plant and Equipment; Location of
Purchased Assets..................................................42
7.4 Environmental Status of Facility.....................................42
7.5 Litigation...........................................................42
7.6 Governmental Permits and Approvals...................................43
7.7 Resolutions..........................................................43
7.8 Good Standing Certificates, etc......................................43
7.9 Third Party Consents.................................................43
7.10 Estoppel Certificates................................................44
7.11 Opinions of Seller's Counsel.........................................44
7.12 No Material Adverse Change...........................................44
7.13 Lenders Consent......................................................44
7.14 Agreements With Lessors..................................................44
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE...45
8.1 Representations and Covenants........................................45
8.2 Litigation...........................................................45
8.3 Governmental and Third Party Permits and Approvals...................45
8.4 Resolutions..........................................................46
8.5 Good Standing Certificates, etc......................................46
8.6 Opinion of Buyer's Counsel...........................................46
8.6 Lender Consent.......................................................46
- -------------------------------------------------------------------------------
ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PARTIES TO CLOSE.....46
ARTICLE X ACTIONS TO BE TAKEN AT THE CLOSING..........................48
10.1 Instruments of Conveyance............................................48
10.2 Instruments of Assumption............................................48
10.3 Closing Settlement Statement.........................................48
10.4 Adjustment Escrow Agreement and Indemnification Escrow Agreement.....48
10.5 Closing Certificate of Seller........................................49
10.6 Closing Certificate of Buyer.........................................49
10.7 Open Orders..........................................................49
10.8 Other Documents and Certificates.....................................49
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION........50
11.1 Survival of Representations and Warranties...........................50
11.2 Indemnity Agreement of Seller........................................51
11.3 Indemnification Escrow Fund..........................................52
11.4 Indemnity Agreement of Buyer.........................................53
11.5 Indemnification Procedure............................................54
ARTICLE XII TERMINATION OF AGREEMENT....................................56
12.1 Termination..........................................................56
12.2 Survival 57
ARTICLE XIII COVENANTS AGAINST COMPETITION...............................57
13.1 RestrictiveCovenants.................................................57
13.2 Protection of Confidential Information...............................58
13.3 Remedies 59
13.4 Definitions..........................................................59
ARTICLE XIV MISCELLANEOUS...............................................60
14.1 Gender...............................................................60
14.2 Business Day.........................................................60
14.3 Notices..............................................................60
14.4 Rights of Third Parties..............................................62
14.5 Entire Agreement.....................................................62
14.6 Right to Open Mail...................................................62
14.7 Headings............................................................ 63
14.8 Governing Law........................................................63
14.9 Parties in Interest..................................................63
14.10 Counterparts.........................................................63
14.11 Amendments...........................................................63
14.12 Severability.........................................................64
14.13 Interpretation.......................................................64
14.14 Waivers and Consents.................................................64
14.15 Article and Section References.......................................64
14.16 Attorneys' Fees......................................................65
14.17 Joint and Several Liability..........................................65
14.18 Arbitration..........................................................65
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LIST OF EXHIBITS
Description Section Reference
- ----------- -----------------
A Legal Description of Facility Recitals
B Assignment and Bill of Sale 1.1
C Accounts Payable Detail as of July 31, 2001 2.2
D Seller's Wire Transfer Instructions 2.2
E Assignment and Assumption Agreement 2.3
F Adjustment Escrow Agreement 2.5(a)
G Allocation of Purchase Price 2.6
H intentionally omitted n/a
I Form of opinion of Seller's counsel 7.11
J Form of opinion of Buyer's counsel 8.6
K Indemnification Escrow Agreement 11.3
LIST OF SCHEDULES
Schedule Description
1.1(g) Intellectual Property Rights
1.1(i) Licenses and Permits
1.1(k) Industrial Development Bonds
1.2(h) Excluded Assets
2.3 Other Assumed Obligations
4.2 Authority of Seller
4.3 Permitted Liens
4.4 Seller Financial Documents
4.5 Recent Developments
4.6 Litigation
4.7 Taxes
4.9(a) Compliance with Laws
4.9(b) Permit
4.10(a) Environmental Permits
4.10 (c) Compliance With Environmental Laws and Permits
4.10 (d) Outstanding or Pending Orders
4.10(e) Underground Storage Tanks
4.10(g) Impoundments, Lagoons
4.11 Contracts
4.12 Real Property Leases
4.13 Fixed Assets
4.14 Trade Name and Other Intangibles
4.15 Major Suppliers and Customers
4.16 Labor Relations; Employees
4.17(a) Employee Benefit Plans
4.18 Insurance
4.19 Warranties
4.20 Key Employees
4.24 Products Liability
6.7 Employee Matters
7.6 Governmental Permits and Approvals as to Seller
7.9 Third Party Consents
8.3 Governmental and Third Party Permits and Approvals as to Buyer
INDEX OF DEFINED TERMS
Defined Term Section Reference
AAA 14.18(b)
Adjustment Escrow Agreement 2.5(a)
Adjustment Escrow Fund 2.5(a)
Agreement Preamble
Assignment and Assumption Agreement 2.3
Assignment and Bill of Sale 1.1
Assumed Liabilities 2.3
Assumed Payables 2.2
Big 5 Accounting Firm 2.2
Birmingham Southeast Preamble
Birmingham Steel Preamble
Buyer Preamble
Buyer's Documents 5.2
Cash Consideration 2.2
Claims 11.2
Closing Article III
Closing Date Article III
Closing Settlement Statement 2.5(a)
Code 2.6
Competing Business 13.4(b)
Competitive Product 13.4(c)
Confidential Information 13.4(a)
Continuous Caster Lease Article IX
Contracts 4.11
Development Authority Equipment Lease Article IX
Development Authority Leases Article IX
Development Authority Real Property Lease Article IX
Disputed Purchase Price Amount 2.5(a)
Employee Plan/Agreement 4.17(a)
Employee Plans/Agreements 4.17(a)
Environmental Claim 4.10
Environmental Law 4.10
Environmental Permits 4.10
Equipment Leases Article IX
ERISA 4.17(a)
Excluded Assets 1.2
Facility Recitals
Fixed Assets 4.13
GAAP 2.2
Governmental Authority 4.10
Hazardous Materials 4.10
HSR Act 4.2
Indemnification Escrow Agreement 11.3
Indemnification Escrow Fund 11.3
Indemnitee 11.5(a)
Indemnitor 11.5(a)
Inventory 1.1(a)
Laws 4.9(a)
Liens 4.3
Material 4.5
Material Adverse Change 4.5
Material Adverse Effect 4.5
Materially 4.5
Modified Schedules 6.17
Notice of Claim 11.5(a)
Other Assumed Obligations 2.3
Permits 4.9(b)
Product 4.19
Products Liability 4.24
Purchased Assets 1.1
Purchased Inventory Value 2.2
Rolling Mill Lease Article IX
Seller Preamble
Seller Facility Accounts Receivable 6.12
Seller Financial Documents 4.4
Seller's Documents 4.2
Tax Returns 4.7
Taxes 4.7
Territory 13.4(e)
12
CORP/834477.6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is dated as of the 14th
day of November, 2001, by and among AMERISTEEL CORPORATION, a Florida
corporation, or an assign thereof as permitted by Section 13.9 below ("Buyer"),
BIRMINGHAM SOUTHEAST, LLC, a Delaware limited liability company ("Birmingham
Southeast") and BIRMINGHAM STEEL CORPORATION, a Delaware corporation (Birmingham
Steel"). Birmingham Southeast and Birmingham Steel are jointly and severally
referred to in this Agreement as "Seller".
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller is engaged in the business of the manufacture and
distribution of various steel products from facilities located at 384 Old
Grassdale Road, N.E. Cartersville, Bartow County, Georgia and more particularly
described on Exhibit A annexed hereto (the "Facility"); and
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to sell,
transfer, assign, convey and deliver to Buyer the Purchased Assets pertaining to
the Facility as set forth in this Agreement; and
WHEREAS, Seller wishes to transfer and assign to Buyer, and Buyer is
willing to receive and assume from Seller the Assumed Liabilities pertaining to
the Facility as set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets, Properties and Business to be Transferred. Subject to the terms and
conditions of this Agreement, and on the basis of the representations,
warranties, covenants and conditions hereinafter set forth, at the Closing
Seller shall sell, transfer, assign, convey and deliver to Buyer, and Buyer
shall purchase from Seller, substantially all of the net working capital assets,
certain production facilities, and other assets of Seller (other than the
Excluded Assets) used in or usable at or by the Facility as follows:
(a) all raw material inventories, work-in-process, finished products, mill
rolls, alloys, refractories, operating supplies (including those supplies
relating to tooling and similar items) located at the Facility or otherwise
owned, used or assembled by Seller in connection with the business conducted at
the Facility to the extent included in the Purchased Inventory Value (the
"Inventory"); and
(b) all packaging material, parts, furnishings, fixtures, machinery,
rolling stock, equipment, furniture, office supplies, maintenance and operating
supplies and spare parts for such machinery and equipment and other tangible
personal property, including but not limited to leasehold improvements; and
(c) all tools, shop supplies, tooling and similar items owned or used by
Seller in connection with the operations at the Facility; and
(d) all of the books and records of Seller (including but not limited to
all customer, distributor, dealer and supplier lists) relating to the business
conducted at the Facility and (to the extent permitted by law) records relating
to the employment of persons employed at the Facility immediately prior to the
Closing which Buyer has elected to hire immediately subsequent to the Closing as
provided in Section 6.7 below, together with all of the prints, blueprints,
written specifications, work standards and manufacturing, assembling and process
information relating to the business conducted at the Facility whether in
electronic or tangible form (provided, however, that to the extent that any of
the foregoing also relates to business of Seller conducted both at the Facility
and other facilities or operations of Seller, then the foregoing shall be
construed to be Buyer's right to a complete and accurate copy thereof as of the
Closing Date,; and
(e) any security deposits held by Seller relating to the business conducted
at the Facility (including but not limited to any customer down payments for
work-in-process); and
(f) all claims and rights against third parties of Seller under
manufacturers' and vendors' warranties, guarantees or similar obligations
relating to the other items included in the Purchased Assets to the extent such
claims and rights are transferable; and
(g) all intellectual property rights, if any, with regard to the business
of Seller conducted at the Facility and set forth in Schedule 1.1(g) annexed
hereto; and
(h) all of Seller's rights under those commitments, customer orders,
leases, contracts, supplier contracts and purchase orders and other agreements
relating to the Facility, but only to the extent the foregoing are identified as
part of the Assumed Liabilities; and
(i) all right, title, and interest of Seller in and to all
certificates of occupancy and other transferable licenses, permits and
authorizations of governmental or quasi-governmental agencies and
authorities or private parties relating to the construction, use, operation
or enjoyment of other items included in the Purchased Assets including but
not limited to the Permits listed in Schedule 1.1(i) annexed hereto (and if
any of the foregoing are not transferable, they shall be identified as such
in Schedule 1.1(i)); and
(j) all right, title and interest of Seller in and to all bonds or
deposits made by Seller with any governmental or quasi-governmental
agencies or authorities or with any utility company or third party relating
to the Facility or construction, use, operation and enjoyment of the items
included in the Purchased Assets; and
(k) all right, title and interest of Seller in and to any industrial
development bonds owned by or issued to Seller and which were issued in
connection with the operations of the Facility, including but not limited
to those industrial development bonds set forth in Schedule 1.1(k) annexed
hereto; and
(l) to the extent not included in the foregoing, all assets of
Seller used in or usable at or by the Facility in connection with the
melt shop, rolling mill and continuous casting operations conducted at
the Facility.
The foregoing are collectively referred to in this Agreement as the "Purchased
Assets." All of the Purchased Assets will be transferred free and clear of any
and all encumbrances as more particularly provided in Section 4.3 below. At the
Closing, the Purchased Assets will be transferred and delivered to Buyer
pursuant to the terms of this Agreement together with an assignment and bill of
sale in substantially the form attached hereto as Exhibit B (the "Assignment and
Bill of Sale").
1.2 Excluded Assets.
Unless expressly identified in Section 1.1 above, the following assets of Seller
are excluded from this transaction:
(a) cash and cash equivalents of Seller; and
(b) all accounts receivable of Seller; and
(c) all Inventory not included in the Purchased Inventory Value; and
(d) any asset of Seller not pertaining to the operation of the Facility;
and
(e) the minute books and corporate and limited liability company records
of Birmingham Southeast and Birmingham Steel; and
(f) inventory located at or consigned to Butler Manufacturing Company; and
(g) assets located at facilities of Seller other than the Facility, and
necessary for and used by Seller's operations at these other
facilities (provided, however, that this Subsection (g) shall not
diminish Buyer's rights under Subsection 1.1(d) above as to Buyer's
right to complete and accurate copies as of the Closing Date of those
items described in Subsection 1.1(d) above); and
(h) those assets, if any, listed on Schedule 1.2(h) annexed hereto.
The foregoing are collectively referred to as the "Excluded Assets."
ARTICLE II
PURCHASE PRICE, PAYMENT AND ALLOCATION
2.1 Purchase Price. In full consideration for the purchase by Buyer of the
Purchased Assets, Buyer will pay the Cash Consideration, and
assume the Assumed Liabilities at the Closing.
2.2 Determination of Cash Consideration. Immediately prior to the Closing,
Buyer, with the cooperation of Seller, will take an inventory of all raw
material, work-in-process, finished products, mill rolls, alloys, refractories
and operating supplies (including those supplies relating to tooling and similar
items) inventories located at the Facility or otherwise owned, used or assembled
by Seller in connection with the business conducted at the Facility (other than
consigned inventory, including but not limited to inventory located at or
consigned to Butler Manufacturing Company). The inventory so counted shall be
valued in accordance with Seller's existing inventory valuation practices and
generally accepted accounting principles, consistently applied ("GAAP"). If
Buyer disputes Seller's existing inventory valuation practices, Ernst & Young
LLP shall determine whether such practices are contrary to GAAP and if so, shall
determine the necessary modifications to bring such practices into compliance
with GAAP. Ernst & Young LLP shall be referred to in this Agreement (for any
purpose for which the involvement of such firm is called for) as the "Big 5
Accounting Firm". Unless otherwise agreed to by the parties, the Big 5
Accounting Firm thus selected shall be the sole public accounting firm utilized
in this Agreement for the resolution of disputes for which involvement of an
independent accountant is so provided by the terms of this Agreement. The value
of the inventory as thus determined shall be referred to hereafter as the
"Purchased Inventory Value." Next, the value of the accounts payable relating to
the Facility for the following categories shown on the Facility's "Accounts
Payable Detail" sheet as of July 31, 2001 (a copy of which is attached hereto as
Exhibit C) shall be determined by Buyer with the cooperation of Seller, also in
accordance with Seller's existing accounting practices and GAAP:
Accounts Payable - Trade
Goods Received Not Invoiced
Accounts Payable - Affiliates
Accrued Utilities
Accrued Taxes & Licenses
Accrued Freight Expenses
Other Accrued Expenses
Accrued Mill Services
Deferred Rent - Current
Allowance For Annual Repairs
If Buyer disputes Seller's existing valuation practices, the Big 5 Accounting
Firm shall determine whether such practices are contrary to GAAP and if so,
shall determine the value in accordance with GAAP. The value of these payables,
as thus determined, shall be the "Assumed Payables." Subject to funding the
Indemnification Escrow Fund (as more particularly set forth in Section 11.3
below), Buyer will pay Seller at the Closing the sum equal to the Purchased
Inventory Value, less the Assumed Payables, less the amount of Three Million
Forty-Seven Thousand Eight Hundred Seventeen Dollars ($3,047,817.00) and less
any credits due Buyer pursuant to Section 6.13, 6.14 and 6.15 hereof (the "Cash
Consideration"). Subject to Section 2.5 below with regard to disputes as to the
amount of the Cash Consideration, the Cash Consideration shall be paid to Seller
at the Closing by wire transfer of immediately available funds pursuant to the
wire transfer instructions set forth in Exhibit D hereto.
2.3 Assumption of Assumed Liabilities. In addition to the payment of the Cash
Consideration, at the Closing Buyer will assume (i) the Assumed Payables and
(ii) those specific obligations owed by Seller to its customers, vendors,
suppliers and other third parties relating to Seller's business at the Facility
and expressly set forth in Schedule 2.3 annexed hereto (the "Other Assumed
Obligations"). The Assumed Payables together with the Other Assumed Obligations
are collectively referred to as the "Assumed Liabilities". At the Closing, the
Assumed Liabilities will be assigned by Seller and assumed by Buyer pursuant to
the terms of this Agreement together with an assignment and assumption agreement
in substantially the form attached hereto as Exhibit E (the "Assignment and
Assumption Agreement").
2.4 No Other Liabilities Assumed. Except for the Assumed Liabilities, Buyer will
have no liability or responsibility for any other liability of Seller
whatsoever, whether arising out of or relating to the Facility, the Purchased
Assets or otherwise. In furtherance but not in limitation of the foregoing,
Buyer will not be assuming and will have no liability or responsibility for any
of the following:
(a) except as set forth in Schedule 2.3, obligations owed by Seller to its
customers, vendors or suppliers whether or not arising under written
contract, purchase order or otherwise; and
(b) liabilities for taxes; and
(c) any employee related liabilities, including but not limited to "COBRA"
responsibilities arising through the Closing Date; and
(d) any other contingent or non-balance sheet liabilities.
2.5 Settlement Statement, Adjustment Escrow Fund and Post-Closing Reconciliation
of Purchase Price. As stated above, the calculation of the Cash Consideration
and Assumed Payables shall be made at the Closing. This calculation shall be set
forth as part of a settlement statement to be prepared by Buyer and signed by
the parties in connection with the Closing deliveries (the "Closing Settlement
Statement"). The parties acknowledge the possibility that (i) it may not be
possible to determine a definitive value for the Purchased Inventory and/or the
Assumed Payables at the Closing (and hence the Cash Consideration), and that
(ii) Seller may not agree with other valuations determined by Buyer for the
Closing Settlement Statement. Accordingly, Buyer and Seller agree on the
following procedure:
(a) If Seller disagrees with the valuations determined by Buyer for the
Closing Settlement Statement as to the Cash Consideration, and if the net amount
in disagreement is less than Five Hundred Thousand Dollars ($500,000), then the
Closing shall nevertheless occur with this amount (the "Disputed Purchase Price
Amount") reflected on the Closing Settlement Statement and paid by Buyer, in
cash, by wire transfer of immediately available funds into an escrow fund (the
"Adjustment Escrow Fund") to be held pursuant to the terms of an Adjustment
Escrow Agreement in substantially the form attached hereto as Exhibit F (the
"Adjustment Escrow Agreement"). The resolution of the Disputed Purchase Price
Amount shall be as provided in Subsection 2.5(c) below.
(b) Within thirty (30) calendar days subsequent to the Closing Date, Buyer
will provide to Seller, Buyer's final determination of the Cash Consideration as
of the Closing Date, and any adjustments necessary to the Closing Settlement
Statement. Seller will review these determinations and adjustments and inform
Buyer, in writing, of its agreement or disagreement with such determinations and
adjustment within fifteen (15) calendar days following its receipt of such
determinations and adjustments from Buyer. If Seller is providing notice of
disagreement, then the nature of such disagreement shall be given with
reasonable specificity. Seller's failure to provide timely notice of its
agreement or disagreement shall be deemed to constitute Seller's agreement with
the determinations and adjustments provided by Buyer. If Seller agrees with
Buyer's final determination and adjustments, then the parties shall promptly
execute an amendment to the Closing Settlement Statement which shall
henceforward be deemed to be the definitive Closing Settlement Statement for all
purposes. Any adjustments in the Cash Consideration due to a party shall first
be paid by release of the requisite amount of the Adjustment Escrow Funds (if
any) to the applicable party or parties, and then in cash by the applicable
party to the other party. As a non-exclusive example, if the final adjustments
and determination show that only a portion of the Disputed Purchase Price Amount
which was deposited by Buyer into the Adjustment Escrow Fund is actually due to
Seller, then the portion of the Disputed Purchase Price Amount which the parties
agree is owed to Seller shall be paid to Seller from the Adjustment Escrow Fund,
and the balance of the Adjustment Escrow Fund shall be returned to Buyer. As an
additional non-exclusive example, if the final adjustments and determinations as
agreed to by the parties show that the Cash Consideration paid by Buyer directly
to Seller at the Closing was in excess of what should have been paid, then (i)
all of the Adjustment Escrow Fund (including interest earned thereon) shall be
returned to Buyer and (ii) the amount of the excess shall be promptly refunded
by Seller to Buyer, in cash.
(c) In the event that Seller provides to Buyer a timely notice of
disagreement with Buyer's calculations of its determination of the Cash
Consideration and adjustments to the Closing Settlement Statement as provided in
Subsection 2.5(b) above, then Seller and Buyer shall discuss the disagreement,
and if they are unable to reach an agreement as to all aspects of the
calculations and adjustments within fifteen (15) calendar days after Buyer's
receipt of the notice of Seller's disagreement, then the Big 5 Accounting Firm
shall make the calculations of the Cash Consideration, adjustments to the
Closing Settlement Statement, and amounts to be distributed from the Adjustment
Escrow Fund (if applicable). The Big 5 Accounting Firm's determination shall be
final and binding on all parties. The cost of such determination shall be borne
equally by Seller and Buyer.
2.6 Allocation of Purchase Price. The parties hereto acknowledge and agree that
the transactions contemplated hereunder must be reported in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). The
parties hereto agree to report the transactions contemplated hereunder in a
manner consistent with Exhibit G hereto.
ARTICLE III
CLOSING OF PURCHASE AND SALE
The closing of the purchase and sale provided for herein (the "Closing") shall
take place at the offices of Smith, Gambrell & Russell, LLP Suite 3100, 1230
Peachtree Street, N.E., Atlanta, Georgia 30309, beginning at 10:00 A.M. on third
(3rd) business day after all conditions to the Closing specified in Articles VII
and VIII have been fulfilled but in no event later than December 31, 2001 (other
than for matters which are by necessity to be completed at the Closing), or at
such other time and place as the parties shall mutually agree upon (the "Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer entering into this Agreement and consummating the
transactions contemplated hereby, and with the knowledge that Buyer shall rely
thereon, Seller makes the following representations and warranties to Buyer,
each of which is true and correct on the date hereof and will be true and
correct as of the Closing Date, shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer, and shall
survive the Closing of the transactions as provided for in Section 10.1 below.
All statements and information contained in any certificate, instrument,
schedule or document delivered by or on behalf of Seller shall be deemed
representations or warranties by Seller.
4.1 Due Organization, Good Standing and Qualification Birmingham Steel is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Birmingham Southeast is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Birmingham Steel has the corporate (and Birmingham Southeast
has the limited liability company) power and lawful authority to carry on their
business as now being conducted, and to own or lease and operate their
properties and assets as now owned, leased, or operated by them. Birmingham
Steel and Birmingham Southeast are, respectively, duly qualified or otherwise
authorized as a foreign corporation or a foreign limited liability company to
transact business in the State of Georgia.
4.2 Authority of Seller. Birmingham Steel has all requisite corporate (and
Birmingham Southeast has all requisite limited liability company) power and
authority to execute and deliver this Agreement and the other agreements
required to be executed and delivered by it hereunder (this Agreement and such
other agreements being hereinafter called the "Seller's Documents") and to carry
out the transactions contemplated hereby. The Seller's Documents are valid and
binding agreements of Seller, enforceable against Seller in accordance with
their respective terms. Except as set forth in Schedule 4.2 annexed hereto, and
except for compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") no consent, authorization or approval of, or declaration,
filing or registration with, any governmental or regulatory authority, or any
consent, authorization or approval of any other third party, is necessary in
order to enable Seller to enter into and perform its obligations under the
Seller's Documents, and neither the execution and delivery of the Seller's
Documents nor the consummation of the transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the violation of,
or constitute a breach of any provision of the Articles or Certificate of
Incorporation or By-Laws of Birmingham Steel, or the Articles of Organization or
Operating Agreement of Birmingham Southeast;
(b) conflict with, require any consent under, result in the violation of,
constitute a breach of, or accelerate the performance required on the part of
Seller by the terms of, any evidence of indebtedness or agreement to which
Seller is a party, in each case with or without notice or lapse of time or both,
including any mortgage or deed of trust or other agreement creating a Lien to
which any property of Seller is subject, or permit the termination of any such
agreement by another person, other than any of the foregoing which would not
constitute a Material Adverse Effect upon the Purchased Assets or Buyer's use
and enjoyment thereof subsequent to the Closing.
(c) result in the creation or imposition of any Lien on any property or
asset of Seller constituting any portion of the Purchased Assets;
(d) accelerate, or constitute an event entitling, or which would, on notice
or lapse of time or both, entitle the holder of any indebtedness of Seller to
accelerate the maturity of any such indebtedness;
(e) conflict with or result in the breach or violation of any writ,
judgment, order, injunction, decree or award of any court or governmental body
or agency or arbitration tribunal that is binding on Seller;
(f) constitute a violation by Seller of any statute, law or regulation of
any jurisdiction (other than such violation which would not constitute a
Material Adverse Effect upon the Purchased Assets or Buyer's use and enjoyment
thereof subsequent to the Closing; or
(g) violate or cause any revocation of or limitation on any Permit, other
than such revocation or limitation which would not constitute a Material Adverse
Effect upon the Purchased Assets or Buyer's use and enjoyment thereof subsequent
to the Closing.
4.3 Liens and Good Title . At the Closing, Buyer will receive good and
marketable title to all of the Purchased Assets free and clear of all mortgages,
liens (statutory or otherwise), security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions, limitations,
charges or encumbrances of any nature whatsoever (collectively, "Liens") other
than those Liens disclosed in Schedule 4.3 annexed hereto, and other than those
Liens which would not constitute a Material Adverse Effect upon the Purchased
Assets or Buyer's use and enjoyment thereof subsequent to the Closing.
4.4 Financial Statements. Seller has heretofore furnished Buyer with (i) true
and complete copies of the unaudited balance sheet and accounts payable detail
as of July 31, 2001 together with the other financial statements of Seller's
business at the Facility, true and correct copies of which are attached hereto
as Schedule 4.4 annexed hereto (the "Seller Financial Documents"). The Seller
Financial Documents, including any footnotes thereto, have been prepared in
accordance with GAAP for the periods indicated thereon. The Seller Financial
Documents fairly present the financial condition of Seller for the periods
indicated. All aspects of the net working capital assets are reflected on the
Seller Financial Documents in accordance with GAAP.
4.5 Recent Developments. Except as set forth on Schedule 4.5 annexed hereto,
since July 31, 2001 there has not been, and no fact or condition is contemplated
by Seller or threatened, or to the knowledge of Seller otherwise exists, which
would be reasonably expected to cause any Material Adverse Change in or to (i)
the Purchased Assets, (ii) the Assumed Liabilities, or (iii) the business
historically conducted at the Facility, other than changes in the ordinary
course of business the effect of which, individually or in the aggregate, do not
have a Material Adverse Effect on (i) the Purchased Assets, (ii) the Assumed
Liabilities, or (iii) the business historically conducted at the Facility. For
purposes of this Agreement a matter shall not be deemed to have a "Material
Adverse Effect" or a "Material Adverse Change" unless it involves an adverse
change of more than $500,000 individually, or $500,000 in the aggregate as to
gross revenue items and $250,000 individually, or $250,000 in the aggregate as
to all other items, and a matter shall not be deemed "Material" (inclusive of
the term "Materially") unless it involves more than $500,000 individually, or
$500,000 in the aggregate as to gross revenue items and $250,000 individually or
$250,000 in the aggregate as to all other items. This aggregate threshold amount
of $500,000 for gross revenue items and $250,000 as to all other items is
collectively for all matters under this Agreement subject to a Materiality test,
and shall not be applied duplicatively. Except as set forth on Schedule 4.5
annexed hereto, since July 31, 2001 and with regard to the Facility or the
business conducted by Seller at the Facility, there has not been any notice of
termination of any Material agreement given by a third party to Seller or any
relinquishment by Seller of any rights of Material value, or any Material
Adverse Change in the relations of Seller with its key employees, lessors,
customers, suppliers, or others having business relations with Seller concerning
the Facility. Except as set forth on Schedule 4.5 annexed hereto, since July 31,
2001 and with regard to the Facility or the business conducted by Seller at the
Facility, there has not been any claim against Seller for, or any liability
incurred by Seller in respect of, any damages or alleged damages for any actual
or alleged negligence or other tort, breach of contract or violation of property
rights.
4.6 Litigation. Except as set forth in Schedule 4.6 annexed hereto, there is no
action, suit, proceeding at law or in equity by any person or entity, or any
arbitration, investigation, or any administrative or other proceeding by or
before any governmental, quasi-governmental or other instrumentality or agency,
pending, or, to the knowledge of Seller, threatened, against or affecting Seller
with regard to any of the Purchased Assets, or relating to any of the business
conducted at the Facility or any of the Assumed Liabilities which if adversely
decided, would have a Material Adverse Effect upon (i) the Purchased Assets,
(ii) the Assumed Liabilities, (iii) the business conducted at the Facility, (iv)
Buyer's use and enjoyment of the Purchased Assets, or (v) the transactions
contemplated by this Agreement. Seller does not know of any valid basis for any
of the foregoing. Seller is not subject to any judgment, order or decree entered
in any lawsuit or proceeding which would have a Material Adverse Effect upon (i)
the Purchased Assets, (ii) the Assumed Liabilities, (iii) the business conducted
at the Facility, (iv) Buyer's use and enjoyment of the Purchased Assets, or (v)
the transactions contemplated by this Agreement.
4.7 Taxes. Seller has filed or caused to be filed, within the times and within
the manner prescribed by law, all Tax Returns which are required to be filed by,
or with respect to, the business and assets of Seller relating to the Facility.
To the best of Seller's knowledge, such Tax Returns are true, correct and
complete in all Material respects, reflect accurately all liability for Taxes of
Seller for the period covered thereby. All Taxes or other amounts shown as owing
thereon or otherwise due from or payable by Seller have been fully paid or
adequately disclosed and fully provided for by adequate reserves on the books
and on the Seller Financial Documents, and as of the Closing Date all Tax
Returns required to be filed by Seller prior to such date will have been filed
and all amounts shown as owing thereon will have been paid, and Seller has no
liability for the Taxes of any other person by contract as a successor or
transferee, except for and only to the extent of the "Accrued Taxes and
Licenses" comprising the Assumed Payables. Except as set forth in Schedule 4.7
annexed hereto, there has been no prior examination of any Tax Return of Seller
and no such examination or investigation is in progress, and Seller has not
received any notice advising it of the commencement of an examination or
investigation of any Tax Return. Except as set forth on Schedule 4.7 annexed
hereto, there are no outstanding agreements or waivers in effect with respect to
any Tax Returns including any agreements or waivers extending the statutory
period of limitations applicable to any Tax Return or permitting the deferral of
the assessment or payment of any Taxes now due to be paid or assessed to any
future period. Seller has delivered to Buyer true, correct and complete copies
of all franchise and sales and use Tax Returns and reports filed by Seller with
respect to the Facility and all agreements, consents, waivers and elections
relating to such Tax Returns. For purposes of this Agreement, "Taxes" shall mean
all Federal, state, local and foreign income, gross receipts, profits, windfall
profits, capital gains, franchise, sales, use, license, occupation, property,
property transfer, capital stock, premium, excise, employment, payroll,
withholding, estimated, severance, stamp, environmental, customs duties,
franchise, social security, unemployment, disability, sales, use, registration,
value added, alternative or add-on minimum and other taxes, assessments or
governmental charges of any nature, kind or character, and including any
interest, additions to tax and penalties thereon, whether disputed or not; and
"Tax Returns" shall mean all returns, declarations, reports and forms, claims
for refunds, or information returns and reports relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
4.8 Inventory. Except to the extent reflected or reserved against on the Seller
Financial Documents, the Inventory comprising the Purchased Assets consists of,
and as of the Closing Date will consist of, products which are of a quality and
quantity usable and saleable in the ordinary course of business as presently
conducted by Seller at the Facility and at prices generally prevailing in the
marketplace for such goods at the time of their sale in the ordinary course of
business. Such Inventories do not exceed the level of Inventory customarily
maintained by Seller in the ordinary course of its business for the time period
involved. The amounts at which inventory is carried on Seller Financial
Documents are determined in accordance with GAAP and Seller's existing inventory
practices. Seller has consistently used the first in first out method of
accounting for its inventory (including the Inventory). The books and records of
Seller relating to the Inventory are complete and up to date.
4.9 Compliance with Laws.
(a) Except as set forth on Schedule 4.9(a) annexed hereto, Seller with
regard to its operation of the Facility (including each and all of its
respective operations, practices, properties, real or personal, owned or leased,
and assets used in or usable by Seller's business conducted at the Facility
whether or not comprising the Purchased Assets) is and has been in compliance
with all applicable federal, state, local and foreign laws, ordinances, orders,
rules and regulations (collectively, "Laws"), including, without limitation,
those applicable to discrimination in employment, the Americans with
Disabilities Act, occupational safety and health, trade practices, competition
and pricing, product warranties, zoning, building and sanitation, employment,
retirement and labor relations, and product advertising, except where the
failure to be in compliance would not have a Material Adverse Effect upon the
Purchased Assets or Buyer's use and enjoyment thereof subsequent to the Closing.
Any real property owned or leased by Seller used in or usable by Seller's
business conducted at the Facility is unconditionally zoned a classification
that allows its current use, and such zoning is not being challenged by legal
process, and no change or modification thereof is being sought by any person or
entity, including, without limitation, governmental or quasi-governmental
authorities. Except as set forth on Schedule 4.9(a) annexed hereto, neither
Seller nor, to the knowledge of Seller, any landlord of Seller, has received
notice of any proceeding, inquiry, investigation, violation or alleged violation
of, or is subject to liability (whether accrued, absolute, contingent, direct or
indirect) for past or continuing violation of any Laws. To the knowledge of
Seller, no event has occurred or conditions or state of facts exists that is
reasonably likely to give rise to any violation of any Laws. Seller has received
no notice of any past violations of such Laws that could result in future claims
against Buyer or the Facility, and Seller knows of no basis therefor. All
reports and returns required to be filed by Seller with any governmental
authority have been filed and were accurate and complete when filed, other than
such reports or returns where the failure to file, or any inaccurate or
incomplete filing, would not have a Material Adverse Effect upon the Purchased
Assets or Buyer's use and enjoyment thereof subsequent to the Closing. Without
limiting the generality of the foregoing:
(i) the operation of the business at the Facility as now conducted does
not, nor does any condition existing at the Facility in any manner
constitute a breach or violation of any lease or other agreement
governing the use of such Facilities in compliance with all Laws, or a
nuisance or other tortious interference with the rights of any person
or persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such person or
persons seeking compensation or damages or seeking to restrain, enjoin
or otherwise prohibit any aspect of the conduct of such business or
the manner in which it is now conducted;
(ii) Seller has made all required payments to its unemployment compensation
reserve accounts with the appropriate governmental departments of the
states where it is required to maintain such accounts, and each of
such accounts has a positive balance; and
(iii)Seller has delivered to Buyer copies of all reports of Seller for the
past three (3) years required under the federal Occupational Safety
and Health Act of 1970, as amended, and under all other applicable
health and safety laws and regulations. The deficiencies, if any,
noted on such reports have been corrected.
(b) Seller has all licenses, permits, franchises, concessions, approvals,
authorizations and consents of all governmental and regulatory authorities and
all certification organizations required for the conduct of the business at the
Facility (collectively "Permits") which are Materially necessary for the
operation of the Facility, or where the failure to have such Permit would not
have a Material Adverse Effect upon the Purchased Assets or Buyer's use and
enjoyment thereof subsequent to the Closing. All such Permits are described on
Schedule 4.9(b) annexed hereto, are in full force and effect, and will not be
affected or made subject to loss, limitation or any obligation to reapply as a
result of the transactions contemplated hereby except as set forth on Schedule
4.9(b), other than any of the foregoing listed in this sentence which would not
have a Material Adverse Effect upon the Purchased Assets or Buyer's use and
enjoyment thereof subsequent to the Closing. Except as set forth on Schedule
4.9(b), Seller (including its operations, properties, whether owned or leased,
and assets) is and has been in compliance with all such Permits. Seller has not
received any notice of non-renewal of any Permit.
4.10 Environmental Matters. Other than matters that would not have a Material
Adverse Effect, Seller represents and warrants the following:
(a) Schedule 4.10(a) sets forth all Environmental Permits required under
the Environmental Laws applicable to the ownership and operation of the
Facility.
(b) Seller has not been notified in writing by any Governmental Authority
that any Environmental Permit may be modified, suspended, reissued or revoked or
may not be renewed or otherwise obtained in the ordinary course of business.
(c) Except as provided in Schedule 4.10(c), the Facility is in compliance
with all applicable Environmental Laws and Environmental Permits and there are
no Superfund liens, claims, charges, arbitrations, actions, suits or proceedings
pending, or to the knowledge of Seller, threatened, against or affecting the
Facility before any tribunal or court in law or equity, or before any
Governmental Authority with respect to Environmental Laws or Environmental
Permits.
(d) Except as provided in Schedule 4.10(d), there are no outstanding or
pending orders (unilateral or by consent), decrees, notices of violation, fines
or penalties affecting the Facility under the Environmental Laws as of the
Closing Date.
(e) Except as provided in Schedule 4.10(e), prior to December 2, 1996 to
the knowledge of Seller, and since December 2, 1996 no underground storage tanks
used for the storage of Hazardous Materials are located on the Facility; prior
to December 2, 1996 to the knowledge of Seller, and since December 2, 1996 there
has not been a spill, leak, discharge or disposal of the contents of any
underground storage tank to soils or groundwater.
(f) Prior to December 2, 1996 to the knowledge of Seller, and since
December 2, 1996 no spill, release, disposal, burial or placement of any
Hazardous Material on, upon, into or from the Facility requires remedial action
under any Environmental Law or Environmental Permit.
(g) Except as provided in Schedule 4.10 (g), there are no surface
impoundments, lagoons, injection wells, waste piles or landfills at the Facility
that have been used to treat, store or dispose of Hazardous Materials.
(h) Seller has not received any notice that the Facility has been listed or
is proposed for listing on the "Hazardous Site Inventory" maintained by the
State of Georgia.
(i) For purposes of this Agreement, all representations and warranties made
by Buyer which address environmental matters or Environmental Laws are contained
solely in this Section 4.10 and no other provision of this Agreement shall be
interpreted to include any representation or warranty which addresses an
environmental matter.
As used herein,
"Environmental Claim" means any and all administrative, regulatory or judicial
actions, orders, decrees, suits, demands, demand letters, directives, claims,
Liens, investigations, proceedings or notices of noncompliance, potential
responsibility or violation by any Governmental Authority or other person
asserted against the Seller or any of its subsidiaries alleging liability of any
Seller arising out of, based on or relating to (i) the presence, release or
threatened release of, or exposure to, any Hazardous Materials at the Facility,
or (ii) circumstances forming the basis of any violations or alleged violation
of any Environmental Law or Environment Permit.
"Environmental Permits" means all permits, licenses, registrations, approvals
(including waivers, exemptions and amendments) and other authorizations required
to be held by Seller under the Environmental Laws.
"Environmental Law" means any foreign, multinational, federal, state, provincial
or local statute, law, constitutional provision, judgement, decree, order,
regulation, ordinance or rule relating to pollution, the protection of the
environment, or the storage, management, treatment, disposal, release, or threat
of a release of Hazardous Materials in the environment.
"Governmental Authority" means any government or governmental, regulatory or
other administrative agency, commission, body, court, entity or authority
(whether federal, state, local, foreign or other).
"Hazardous Materials" means all hazardous, toxic, explosive, or radioactive
substances or materials, wastes, pollutants and contaminants including without
limitation, petroleum, petroleum distillates and derivatives, asbestos and
asbestos containing materials, and all other substances of any nature regulated
pursuant to any Environmental Law.
4.11 Contracts and Other Agreements. Schedule 4.11 annexed hereto sets forth a
complete and accurate list of all of the following contracts and other
agreements oral or written to which Seller is a party or by or to which it or
its assets or properties are bound or subject and which are related to and
Material to Seller's business at the Facility as presently conducted (the
"Contracts"): (i) The Other Assumed Obligations, (ii) contracts and other
agreements with Seller or any current or former officer, director, employee,
consultant, agent or other representative or with any person or entity in which
any of the foregoing has an interest, including any "Affiliate" or "Associate"
of such person or entity, as such terms are defined in the Securities Act of
1933 and the rules and regulations published thereunder; (iii) contracts and
other agreements with any labor union or association representing any employee;
(iv) contracts and other agreements for the supply to any person of all or a
portion of such person's requirements of a product sold by Seller; (v) contracts
and other agreements for the sale of any of its assets or properties other than
in the ordinary course of business or for the grant to any person of any
preferential rights to purchase any of its assets or properties; (vi) joint
venture and partnership agreements; (vii) contracts or other agreements under
which Seller agrees to indemnify any party or to share tax liability of any
party; (viii) contracts or other agreements of guaranty or relating to matters
of suretyship to which Seller is a party or by which its assets or properties
are subject or bound, (ix) contracts and other agreements calling for an
aggregate purchase price, or payments in any one year, of more than Fifty
Thousand Dollar ($50,000) excluding purchase or sales orders entered into by
Seller as a purchaser or a seller in the ordinary course of business; (x)
contracts and other agreements that cannot be cancelled without liability,
premium or penalty upon thirty (30) days' notice; (xi) contracts and other
agreements with customers or suppliers for the sharing of fees, the rebating of
charges or other similar arrangements; (xii) contracts and other agreements
containing obligations or liabilities of any kind to holders of Seller's
securities as such (including, without limitation, an obligation to register any
of such securities under any federal or state securities laws); (xiii) contracts
and other agreements containing covenants of Seller not to compete in any line
of business or with any person in any geographical area or covenants of any
other person or entity not to compete with Seller in any line of business or in
any geographical area; (xiv) contracts and other agreements relating to the
acquisition by Seller of any operating business or the capital stock of any
other person, corporation or other entity; (xv) contracts or agreements,
including options, for the purchase of any asset, tangible or intangible, for
any aggregate purchase price of more than Fifty Thousand Dollars ($50,000);
(xvi) contracts and other agreements requiring the payment to any person of a
royalty, override or similar commission or fee; (xvii) contracts and other
agreements relating to the borrowing of money by Seller or subjecting any assets
or properties of Seller to security interests, Liens or other liabilities or
obligations, or (xviii) any contract or other agreement not made in the ordinary
course of business, or (xix) any other material contract or other agreement
whether or not made in the ordinary course of business. There have been
delivered or made available to Buyer true and complete copies of all of the
written Contracts. All of such Contracts are valid and binding upon Seller in
accordance with their terms, and Seller has performed in all material respects
all contractual obligations required to be performed by it to date and is not in
default under any such Contracts and has not taken any action which constitutes
or with notice or lapse of time or both would constitute a default under such
Contracts, except for defaults under Contracts, if any, which singly or in the
aggregate, do not have a Material Adverse Effect. To the best knowledge of
Seller, no other party to any such Contract is in default in the performance of
its obligations thereunder or has taken any action which constitutes, or with
notice or lapse of time or both would constitute, a Material breach or
anticipatory Material breach thereof. Except as separately identified on
Schedule 4.11, no approval or consent of any person is needed in order that the
Contracts comprising the Purchased Assets or the Other Assumed Obligations
continue in full force and effect following the consummation of the transactions
contemplated by this Agreement. As used in this Agreement, the term "contract"
or "agreement" includes any written or oral agreement, commitment, understanding
or arrangement to which Seller is a party with respect to the business of Seller
or by which Seller's assets are bound.
4.12 Real Property Leases. Schedule 4.12 annexed hereto is a complete and
accurate list of any real property lease to which Seller is a party that relates
to the Facility. Each such lease is in full force and effect. Seller has
performed in all material respects all obligations on its part to be performed
to date under said leases and is current with respect to the payment of all
rents and other charges due thereunder and its use and occupancy of the demised
premises which are the subject matter of such leases does not violate any of the
terms of such leases, is in conformity with all applicable Laws and is not
violative of the conditions of any of Seller's policies of insurance. No lessor
or landlord under any lease is in Material default in the performance of its
obligations thereunder and Seller has not received notice from any such lessor
or landlord of its intention to exercise any option thereunder which would
terminate Seller's use or occupancy of the demised premises under such lease.
Except as specifically disclosed in Schedule 4.12, the consummation of the
transactions contemplated hereby will not require the consent of the applicable
lessor or landlord.
4.13 Fixed Assets. Except as set forth on Schedule 4.13 annexed hereto all
machinery, equipment, tools, furniture, leasehold improvements, trade fixtures,
vehicles, structures, or any related capitalized items and other tangible
property Material to the operation of the business of Seller at the Facility
(the "Fixed Assets") are either included as part of the Purchased Assets or are
leased by Seller pursuant to the Rolling Mill Lease or the Continuous Caster
Lease. The Fixed Assets are, in all Material respects, in good operating
condition and repair, subject to normal wear and tear from normal use thereof,
and Seller has not received notice that any of the Fixed Assets is in violation
of any existing Law. Except as set forth on Schedule 4.13, during the past three
(3) years there has not been any significant interruption of the operations of
Seller at the Facility due to inadequate maintenance of the Fixed Assets.
4.14 Trade Name and Other Intangibles. Except as set forth on Schedule 4.14
annexed hereto, no person or entity, other than Seller, has asserted any rights
under or in respect of, and to the knowledge of Seller, no person is infringing
or otherwise acting adversely with respect to Seller's rights under or in
respect of, the intellectual property rights set forth on Schedule 1.1(g)
hereof. To the knowledge of Seller, Seller is not infringing or otherwise acting
adversely to the right of any person under or in respect to any patent, license,
trademark, trade name, service mark, copyright or similar intangible right and
there is no claim for damages or any proceeding pending, or to the knowledge of
Seller threatened against Seller, with respect thereto.
4.15 Major Suppliers and Customers. With regard to the operations of the
Facility and except as disclosed on Schedule 4.15, Seller has no unwritten
commitment to buy any goods or services in amounts which exceed customary needs
of Seller or at prices which exceed prevailing market prices, and Seller has no
unwritten commitment to supply any goods or services at prices below Seller's
customary prices or profit margins. Schedule 4.15 also accurately identifies
which of the items so disclosed are part of the Other Assumed Obligations.
Seller has no knowledge or reason to believe that any supplier or customer
listed in Schedule 4.15 will refrain from transacting business with Buyer for
the goods and services produced or rendered by the Facility subsequent to the
Closing.
4.16 Labor Relations; Employees. Other than amounts which have not yet become
payable in accordance with Seller's customary practices, which will be paid in a
timely manner (including payment subsequent to the Closing for all work
performed through the Closing Date) and with regard to Seller's operations at
the Facility, (a) Seller has paid in full to its employees employed at the
Facility all wages, salaries, commissions, bonuses and other direct compensation
for all services performed by them to date hereof, and (b) Seller has paid, or
will pay in a timely manner, all severance pay, if any, and benefits, FICA,
withholding taxes and vacation pay, if any, for all of its employees and is not
subject to any claim for non-payment or non-performance of any of the foregoing.
Seller is in material compliance with all federal, state and local laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours with regard to its operations at the Facility.
There is no unfair labor practice complaint against Seller, with regard to its
operations at the Facility, pending before the National Labor Relations Board or
any comparable state or local agency. There is no labor strike, dispute,
slowdown or stoppage pending, or to the knowledge of Seller, threatened, against
Seller, with regard to its operations at the Facility. Except as set forth on
Schedule 4.16 annexed hereto, no grievance which might have a Material Adverse
Effect or proceeding alleging discriminatory practices is pending and no claim
therefor has been asserted against Seller, with regard to its operations at the
Facility. Except as set forth on Schedule 4.16 annexed hereto and with regard to
Seller's operations at the Facility, no collective bargaining representative is
certified to represent any group of employees of Seller under the
Labor-Management Relations Act of 1947; no petition for election of a collective
bargaining representative for all or any portion of the business of Seller is
pending or in respect of any other group of employees; Seller is not aware of
any organizational effort or campaign by any labor union that affects or might
affect employment of any employee of Seller; and Seller is not a party to any
collective bargaining agreement with respect to any of its employees at the
Facility.
4.17 Employee Benefit Plans.
(a) Schedule 4.17(a) sets forth all pension, thrift, savings, profit
sharing, retirement, incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability, group insurance,
stock purchase, stock option, stock appreciation, stock bonus, executive or
deferred compensation, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, and any employment or consulting
contracts, "golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), all employee manuals and all written or binding oral
statements of policies, practices or understandings relating to employment,
which are provided to, for the benefit of, or relate to, any persons employed by
Seller at the Facility. The items described in the foregoing sentence are
hereinafter sometimes referred to collectively as "Employee Plans/Agreements,"
and each individually as an "Employee Plan/Agreement." True and correct copies
of all the Employee Plans/Agreements, including all amendments thereto, have
heretofore been provided to Buyer. No Employee Plan/Agreement is a
"multiemployer plan" (as defined in Section 401 of ERISA), and Seller has never
contributed or been obligated to contribute to any such multiemployer plan.
(b) There have been no "prohibited transactions" within the meaning of
Section 406 or 407 of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any Employee
Plan/Agreement, and no event or omission has occurred which would subject Buyer
or any of the Purchased Assets to any liability under ERISA or the Code.
(c) With respect to each Employee Plan/Agreement, (i) all payments due from
Seller to date have been made and (ii) all amounts properly accrued to date as
liabilities of Seller which have not been paid have been properly recorded on
the books of Seller.
(d) Buyer will incur no liability for any Employee Plan/Agreement of Seller
in connection with the execution of this Agreement, the Closing of the
transaction contemplated hereby, or the operation of the Facility subsequent to
the Closing.
4.18 Insurance. Schedule 4.18 annexed hereto sets forth a list and brief
description (specifying the insurer, the policy number or covering note number
with respect to binders and the amount of any deductible, describing each
pending claim thereunder of more than $50,000, setting forth the aggregate
amounts paid out under each such policy through the date hereof and the
aggregate limit, if any, of the insurer's liability thereunder) of all policies
or binders of fire, liability, product liability, workmen's compensation,
vehicular, unemployment and other insurance held by or on behalf of Seller with
regard to the Facility. Seller has paid all premiums due thereon and is not in
default with respect to any provision contained in any such policy or binder.
Except for claims set forth on Schedule 4.18, there are no outstanding unpaid
claims under any such policy or binder. Seller has received no written notice of
cancellation or non-renewal of any such policy or binder. Seller has received no
notice from any of their insurance carriers that any insurance premiums will be
increased in the future or that any insurance coverage listed on Schedule 4.18
will not be available in the future on the same terms as now in effect.
4.19 Warranties. Schedule 4.19 annexed hereto sets forth a list of all standard
written warranties which are currently in effect and provided by Seller in
connection with the sale or distribution of its products, copies of which
warranties have been furnished to Buyer. Except as set forth on Schedule 4.19,
(i) no claims are pending or to Seller's knowledge threatened against Seller for
product liability with respect to products sold by Seller which were
manufactured at or shipped from the Facility, (ii) Seller has not received any
written communications from or citations or decisions by any governmental or
regulatory body that any product manufactured, marketed or distributed at any
time by Seller in connection with its operations at the Facility ("Product") is
defective or fails to meet any standards promulgated by any such governmental or
regulatory body where such defect or failure can reasonably be expected to
result in future claims against Buyer and (iii) there has been no recall ordered
by any such governmental or regulatory body with respect to any Product. To the
knowledge of Seller, there is no (i) fact relating to any Product that is
reasonably likely to impose upon Seller or Buyer a duty to recall any Product or
a duty to warn customers of a defect in any Product, or (ii) latent or overt
manufacturing or other material defect in any Product.
4.20 Key Employees. Schedule 4.20 annexed hereto sets forth the name and total
annual compensation from Seller of each current employee, consultant or agent of
Seller whose current annual rate of compensation is in the top twelve (12) of
all such employees, consultants or agents of Seller at the Facility (measured
for the last twelve full calendar months or annualized if for a period of less
than twelve full calendar months) and which could reasonably be considered a key
employee at the Facility. Seller has not made a commitment or agreement to
increase the compensation or to modify the conditions or terms of employment of
any such person, except increases occurring in the customary practices or in
accordance with existing employment agreements or plans. None of such persons
has communicated to Seller or to any of its officers or directors that such
person intends to cancel or otherwise terminate such person's employment at the
Facility as a result of the consummation of the transactions contemplated
hereby.
4.21 Purchased Assets Complete. The Purchased Assets constitute all of the
material assets and rights used by Seller in the conduct of its business at the
Facility (exclusive of the Excluded Assets).
4.22 Utilities. All utilities that are required for the full and complete
occupancy and use of the Facility for the purposes for which such properties are
presently being used by Seller, including, without limitation, electric, natural
gas, water, sewer, telephone, and similar services, have been connected and are
in good working order. As of the Closing Date, Seller will have paid all charges
for such utilities, including, without limitation any "tie-in" charges or
connection fees except for those charges that will not become due until after
the Closing Date and that are to be prorated between Buyer and Seller pursuant
to Section 6.15 hereof.
4.23 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of Seller is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
4.24 Products Liability. Except as set forth on Schedule 4.24, Seller has no
notice, and has no knowledge that the owner and operator of the Facility (Seller
or Buyer, as applicable) is or may reasonably be expected to be subject to any
Material Products Liability arising at any time with respect to any product
manufactured or distributed by Seller on or before the Closing Date. For the
purposes of this Agreement, "Products Liability" means any liability to which
Seller or its successors or assigns (or Buyer or any affiliate thereof and their
respective successors or assigns) may become subject insofar as such liability
is based upon, arises out of or is otherwise in respect of any express or
implied representation, warranty, agreement or guaranty to a customer, user or
purchaser made or claimed to have been made by Seller or arising out of or due
to, or asserted to be arising out of or due to, any product manufactured or
distributed by Seller prior to the Closing Date.
4.25 Disclosure. No representation or warranty by Seller in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of Seller pursuant to this Agreement, nor any document
or certificate delivered to Buyer by Seller pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
ARTICLE V
REPRESENTATIONS OF BUYER
5.1 Existence and Good Standing of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
Buyer has full corporate power and corporate authority to make, execute, deliver
and perform this Agreement, and this Agreement has been duly authorized and
approved by all required corporate action of Buyer.
5.2 Authority of Buyer. Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other agreements required to be
executed and delivered by it hereunder (this Agreement and such other agreements
being hereinafter called the "Buyer's Documents") and to carry out the
transactions contemplated hereby. The Buyer's Documents will be valid and
binding agreements of Buyer enforceable against Buyer in accordance with their
respective terms. No consent, authorization or approval of, or declaration,
filing or registration with, any governmental or regulatory authority, or any
consent, authorization or approval of any other third party, is necessary in
order to enable Buyer to enter into and perform its obligations under the
Buyer's Documents, and neither the execution and delivery of Seller's Documents
nor the consummation of the transactions contemplated thereby will conflict
with, result in a violation of, or constitute a breach of any provision of the
Certificate of Incorporation or By-Laws of Buyer.
5.3 Litigation. There is no claim, action, proceeding or investigation pending
or threatened against or relating to Buyer before any court or governmental or
regulatory authority or body with respect to which there is a substantial
possibility of a determination which would (a) have a Material Adverse Effect on
the operations or financial condition of Buyer, or (b) prevent or delay the
transactions contemplated by this Agreement; and Buyer is not subject to any
outstanding order, writ, injunction or decree which (x) materially affects its
operations or (y) would prevent or delay the transactions contemplated by this
Agreement.
5.4 Broker's or Finder's Fees. No agent, broker, person or firm acting on behalf
of Buyer is, or will be, entitled to any commission or broker's or finder's fees
from any of the parties hereto, or from any person controlling, controlled by or
under common control with any of the parties hereto, in connection with any of
the transactions contemplated herein.
5.5 Disclosure. No representation or warranty by Buyer in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of Buyer pursuant to this Agreement, nor any document
or certificate delivered to Seller by Buyer pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
ARTICLE VI
COVENANTS OF SELLER AND BUYER
Seller and Buyer hereby represent and covenant as follows:
6.1 Operation in Ordinary Course. From the date hereof to the Closing Date,
Seller shall, with regard to its operations at the Facility (i) conduct its
business only in the ordinary course and in substantially the same manner as
conducted as of July 31, 2001, (ii) preserve its business organization intact
and use reasonable efforts to retain the services of its present key employees,
purchasing and sales personnel and representatives, (iii) use reasonable efforts
to preserve its favorable relation with its employees, customers, suppliers and
others having business relations with it, (iv) comply with all Laws in all
Material respects, (v) not enter into, amend in any Material respect or
terminate any Material lease, contract, or agreement absent the written consent
of Buyer (and as to any such lease, contract, or agreement which is not
Material, to only do so in the ordinary course of business), (vi) conduct its
business in such a manner so that the representations and warranties contained
in Article IV shall continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date, (vii) refrain from incurring any
Material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except in the ordinary course of business, (viii)
prevent any of the Purchased Assets from being subjected to any Lien, (ix)
refrain from selling, transferring, encumbering or otherwise disposing of any of
the Purchased Assets as reflected in Seller Financial Documents except product
Inventory sold in the ordinary course of business or other inventory consumed in
the ordinary course, (x) maintain all of the property, plant and equipment at
the Facility that is included as part of the Purchased Assets in good operating
condition, normal wear and tear excluded, (xi) refrain from making or permitting
any amendment or termination of any Material contract, agreement or license
which is included within the Purchased Assets or Other Assumed Obligations
absent the prior written consent of Buyer (and as to any of the foregoing in
this clause (xi) which is not Material, to only do so in the ordinary course of
business), (xii) refrain from entering into any Material agreement or
arrangement granting any preferential rights to purchase any of Seller's assets
or properties which constitute any of the Purchased Assets or requiring the
consent of any party to the transfer and assignment of any of Seller's assets or
properties which constitute any of the Purchased Assets (and as to any of the
foregoing in this clause (xii) which is not Material, to only do so in the
ordinary course of business), (xiii) refrain from granting any increase in the
rate of wages, salaries, bonuses or other remuneration of any employee, except
in the ordinary course of business, (xiv) refrain from canceling or waiving any
claims or rights of substantial value, (xviii) refrain from making any change in
any method of accounting or auditing practice, or (xix) refrain from agreeing,
whether or not in writing, to do any of the foregoing.
6.2 Notice of Events. Prior to the Closing, Seller shall promptly notify Buyer
of (i) any event, occurrence, transaction or other item which would have been
required to have been disclosed on any Schedule hereunder, had such event,
occurrence, transaction or item existed on the date hereof, other than items
arising in the ordinary course of business which would not render any
representation or warranty of Seller false or incorrect, and (ii) any lawsuits,
claims, proceedings or investigations which after the date hereof are threatened
or commenced against Seller or any officer, director, employee, consultant,
agent or shareholder of Seller with respect to the affairs of Seller relating to
the Facility.
6.3 Exclusive Dealing. During the period from the date of this Agreement to the
Closing Date, neither Seller nor any of its representatives, directors,
officers, stockholders, agents or affiliates will (i) entertain or discuss a
possible sale, lease or other disposition of the Facility or any of the
Purchased Assets thereof or any material business opportunity (individually or
collectively) historically engaged in by Seller at the Facility or any interest
therein with any other party or provide any information to any other party in
connection therewith other than as required in the discharge of the fiduciary
duties of Birmingham Steel's Board of Directors under Delaware law and with
prior notice to Buyer, or (ii) disclose to any other party (other than Ivaco,
Inc., Seller's lenders, and as required for compliance with the HSR Act and
securities laws applicable to Birmingham Steel) the contents of this Agreement
or the details of the transactions set forth herein. In addition but not in
substitution of the exclusivity provisions of this Section, Seller acknowledges
the substantial resources that Buyer has and will continue to expend to work
towards the consummation of this transaction, and that Buyer may forego or defer
other strategic opportunities in the interim. Accordingly, as a material
inducement to Buyer entering into this Agreement, expending the resources
necessary to work towards the consummation of this transaction, and Buyer's
possible foregoing or deferring of other strategic opportunities, Seller agrees
that if it sells or transfers all or a material part of the Facility or its
assets, or transfers or sells Birmingham Southeast or a material interest
therein to any third party (or enters into an agreement (including a term sheet,
memorandum of understanding, letter of intent or similar document) to do any of
the foregoing) on or before June 30, 2002, and where the anticipated
consideration is greater than the consideration to be paid under Article II of
this Agreement, then Seller will owe Buyer the sum of Three Million Dollars ($3
million); provided, however, that such fee shall be payable only if Seller
actually closes such transaction (even if such closing occurs after June 30,
2002). The foregoing will not be payable by Seller if Buyer terminates this
Agreement without cause. Seller acknowledges and agrees that this sum represents
the reasonable value of the effort that Buyer will expend in this transaction (a
determination of an exact value being difficult or impossible to calculate),
that this sum is not a penalty or forfeiture of any kind, and that Buyer would
not have entered into this Agreement but for Seller's agreement with this
provision.
6.4 Right of First Refusal. In the event that prior to the Closing, (i) Seller
terminates this Agreement without cause, and (ii) within one (1) year subsequent
to the date of termination Seller receives an offer from a third party, which
Seller is willing to accept, for the acquisition of all or a material part of
the Facility or its assets, or the acquisition of Birmingham Southeast or a
material interest therein, then prior to such offer being accepted, Seller shall
provide prompt written notice to Buyer of such offer, including all terms
thereof. Then, in addition to (and not in election of) any other remedy
available to Buyer, Buyer shall have fifteen (15) days following its receipt of
such notice from Seller to notify Seller that it will effect such purchase on
the terms contained in the offer, in which case Seller will enter into the
transaction with Buyer on such terms. In the event that Buyer fails to deliver
to Seller notice of its exercise of this right of first refusal prior to
midnight on the fifteenth (15th) day (such delivery to be in conformity with
Section 13.3 below), then this right of first refusal shall expire.
6.5 Examinations and Investigations. Prior to the Closing Date, Seller agrees
that Buyer shall be entitled, through its employees and representatives,
including, without limitation, Smith, Gambrell & Russell, LLP and Buyer's
accountants, to make such investigation of the assets, properties, business and
operations of Seller relating to the Facility and the business of Seller
conducted therefrom, and such examination of the books, records and financial
condition of Seller relating to the Facility and the business of Seller
conducted therefrom, as Buyer wishes. Any such investigation and examination
shall be conducted at reasonable times and under reasonable circumstances with
reasonable notice and in accordance with Seller's normal operating schedule, and
Seller shall cooperate fully therein. No investigation by Buyer shall diminish
or obviate any of the representations, warranties, covenants or agreements of
Seller under this Agreement. In order that Buyer may have full opportunity to
make such business, accounting and legal review, examination or investigation as
it may wish of the business and affairs of Seller, Seller shall furnish, and
shall cause Seller to furnish, the representatives of Buyer during such period
with all such information and copies of such documents concerning the affairs of
Seller as such representatives may reasonably request and cause its officers,
employees, consultants, agents, accountants and attorneys to cooperate fully
with such representatives in connection with such review and examination. If
this Agreement terminates, Buyer and its respective affiliates shall keep
confidential and shall not use in any manner any information or documents
obtained from Seller concerning its assets, properties, business and operations,
for a period of twenty-four (24) months. If this Agreement terminates, any
documents obtained from Seller shall be returned to Seller or destroyed.
6.6 Payment of Seller's Obligations. With the exception of the Assumed
Liabilities, Seller covenants to pay, fulfill, perform, and discharge as and
when the same are due, all indebtedness, payables, duties and obligations of
every and any nature whatsoever arising from the acts and omissions of Seller,
its business activities and transactions whether relating to the Facility or
otherwise, and from any state of facts in existence prior to the Closing which
could in any way give rise to a claim against Buyer, its assets, or the
Purchased Assets.
6.7 Employee Matters. Seller and Buyer contemplate that this Agreement will not
interrupt operations at the Facility and that Buyer will continue to operate the
Facility after Closing with substantially the same workforce Seller employed at
the Facility on the date of Closing. From the date hereof through the Closing
Date, Seller will provide Buyer with the opportunity to conduct interviews and
extend offers of employment to the employees of Seller who are employed at the
Facility. On or prior to the Closing, Buyer shall provide Seller with a list of
such employees that Buyer desires to employ at the Facility. Effective as of the
Closing, Seller will release all such employees except the employees listed on
Schedule 6.7 annexed hereto, such that they will be available for hire by Buyer.
All employer responsibilities arising prior to such release pursuant to the
Worker Adjustment and Retraining Notification Act (and any other applicable law,
rule or regulation pertaining to the termination of any of its employees) shall
be the responsibility of Seller, and Seller agrees to discharge all such
responsibilities. Nothing herein express or implied confers upon any employee or
former employee of Seller any right to become employed by Buyer or to continue
in Buyer's employment for any period. Nothing herein express or implied confers
upon any employee or former employee of Seller any rights or remedies of any
nature, kind or character whatsoever under or by reason of this provision.
Seller covenants to hold Buyer harmless from and against all direct and indirect
costs, expenses and liabilities of any sort arising from or relating to any
claims by or on behalf of present or former employees of Seller employed at the
Facility in respect to any and all matters arising or incurred prior to the
release of employees contemplated hereby and in respect to severance pay or
termination pay and similar obligations relating to the termination of such
employees' employment with Seller. Buyer covenants to hire sufficient numbers of
Seller's personnel at the Facility such that Seller shall not have been subject
to the notification requirements of the Worker Adjustment and Retraining
Notification Act in connection with the transactions contemplated hereby. In
addition, Buyer covenants to hold Seller harmless from and against all direct
and indirect costs, expenses and liabilities of any sort arising from or
relating to any claims by or on behalf of employees hired by Buyer at the
Facility (and which arise out of the course and scope of their employment by
Buyer), where the claim is against Buyer, and the claim first accrues subsequent
to the hiring of the applicable employee by Buyer.
6.8 Consents; Cooperation.
(a) Seller will use its reasonable efforts and Buyer will provide
reasonable cooperation to Seller such that Seller may obtain all consents that
may be required from parties to those Contracts listed on Schedule 4.11 annexed
hereto and those leases listed on Schedule 4.12 annexed hereto which are being
assigned to Buyer by Seller either as part of the Purchased Assets or the Other
Assumed Obligations. In addition, Seller will provide reasonable cooperation to
Buyer with regard to Buyer's efforts to buy-out or assume the Rolling Mill
Lease, the Continuous Caster Lease, the Development Authority Equipment Lease
and the Development Authority Real Property Lease as defined and set forth in
Section 7.5 below.
(b) Buyer and Seller will cooperate with each other and will cause their
respective officers, employees, agents, auditors and representatives to
cooperate with each other to ensure the orderly transition of ownership of the
Purchased Assets and Other Assumed Obligations from Seller to Buyer and to
minimize any disruption to the business being conducted at the Facility that
might result from the transfer contemplated hereby.
6.9 Further Assurances. Seller covenants and agrees that from and after the
Closing it will execute, deliver and acknowledge (or cause to be executed,
delivered and acknowledged), from time to time at the request of Buyer and
without further consideration, all such further instruments and take all such
further action as may be reasonably necessary or appropriate to transfer more
effectively to Buyer, or to perfect or record Buyer's title to or interest in or
to enable Buyer to use, the Purchased Assets, or otherwise to confirm or carry
out the provisions and intent of this Agreement.
6.10 Bulk Transfer Laws. Buyer agrees to waive compliance with any applicable
bulk transfer laws.
6.11 Publicity. Prior to the Closing neither Seller nor Buyer, nor their
respective affiliates, shareholders or representatives will make any press
release or public announcement concerning the existence of this Agreement or of
the transactions contemplated hereby without the prior written approval of the
other parties hereto, except as required by law, regulation, or stock exchange
rule; provided that any party required to make a press release or public
announcement pursuant to law, regulation or stock exchange rule shall give prior
notice to the other party and a reasonable opportunity for the other party to
review and comment on such press release or public announcement.
6.12 Collection of Accounts Receivable. Buyer will agree to act as Seller's
agent to collect Seller's accounts receivable that exist on the Closing Date
related to the Facility (the "Seller Facility Accounts Receivable") provided
that Buyer's activities (i) would not include pursuing any trade debtors for the
judicial collection of any disputed or delinquent accounts receivable or (ii)
continuing to collect any accounts receivable that remain outstanding more than
one hundred twenty (120) days subsequent to the Closing. To the extent Buyer
receives any payments on such accounts receivable (including but not limited to
payments based on the sale of consigned inventory), Buyer will promptly remit
such amounts to Seller. Upon the expiration of the one hundred twenty (120) day
period, Buyer shall return any data and information relating to the Seller
Facility Accounts Receivable to Seller. Seller agrees to notify Buyer, in
writing, of all amounts Seller receives on a daily basis from the Seller
Facility Accounts Receivable. To the extent Seller receives any payments
pertaining to the operations of the Facility that are not part of the Seller
Facility Accounts Receivable, or that are due Buyer on accounts receivable that
arise after the Closing Date, Seller will promptly remit them to Buyer, in cash
and without charge. For purposes of determining whether any payments received by
a party belong to Buyer or Seller, if the remittance advice accompanying such
payment specifies that it is for a particular invoice, then the payment belongs
to the party (Buyer or Seller, as applicable) who generated that invoice
regardless of when Buyer or Seller receives the payment. If the payment contains
no remittance advice from which it can be determined whether the payment is for
a Buyer generated invoice (for goods and/or services sold or rendered on or
subsequent to the Closing) or a Seller generated invoice (for goods and/or
services sold or rendered prior to the Closing), then, during the aforesaid one
hundred twenty (120) day period, any payments received by either Buyer or Seller
from customers of both Buyer and Seller who obtained goods and/or services from
the Facility shall be deemed to belong to Seller if Seller has outstanding and
unpaid invoices with such customer (that are not subject to a bona fide dispute
with such customer), and otherwise to Buyer; provided, however, if, during the
aforesaid one hundred twenty (120) day period, Seller notifies Buyer that
customers of the Facility accounts receivable are past due (that is, they have
not been paid within sixty (60) days of their invoice date), then all amounts
received by Buyer for shipments made after receipt of such notice for the
remaining portion of said one hundred twenty (120) day period shall be deemed to
belong to Seller so long as Seller has outstanding and unpaid invoices with such
customer (that are not subject to a bona fide dispute with such customer). After
such one hundred twenty (120) day period, any payments received by either Buyer
or Seller from customers of either Buyer or Seller who obtained goods and/or
services from the Facility shall be deemed to belong to the recipient if the
recipient has outstanding and unpaid invoices (that are not subject to a bona
fide dispute with such customer), and otherwise to Buyer.
6.13 Outstanding Vacation Benefits. Seller will pay, prior to the Closing, all
outstanding vacation benefits to its employees at the Facility earned for
periods prior to January 1, 2001. In the Closing Settlement Statement, Buyer
will receive a pro-rata credit for all outstanding vacation benefits for the
period commencing January 1, 2001 through the Closing Date with regard to all
employees at the Facility which Buyer chooses to hire as of the Closing Date.
6.14 Customer Rebates. The parties agree that the Closing Settlement Statement
will also provide an equitable allocation of customer rebates between Seller and
Buyer. The allocation in favor of Buyer shall be a purchase price credit on the
Closing Settlement Statement.
6.15 Utility and Other Prorations. The parties acknowledge their intent that
various utility and other service provider charges for services rendered to the
Facility will be prorated between Buyer and Seller as of the Closing Date, but
that the exact amount of this proration will not be known. Accordingly, these
prorations will be reflected on the Closing Settlement Statement based on the
preceding invoices for utility and service providers with an appropriate
adjustment being made when the adjustment calculations and determinations under
Section 2.5(b) above are prepared.
6.16 Fees and Expenses. Seller and Buyer will each pay their respective fees and
expenses (including the fees and expenses of legal counsel, investment bankers,
brokers or other representatives or consultants) in connection with the
transaction contemplated hereby, except for the fees and expenses in connection
with compliance with the HSR Act (which are paid as provided in Section 6.18
below), and the payment by Seller to Buyer of the inducement fee as provided in
Section 6.3 above.
6.17 Duty to Update Schedules. Seller shall have a continuing obligation to
promptly notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules. The delivery of any
information pursuant to this Section 6.17 shall not constitute a waiver by Buyer
of any of its conditions to its obligations to close under Article VII below,
and any and all adverse changes contained in any such notices shall be
considered in the determination of whether the conditions set forth in Article
VII are met. If any fact, circumstance or development so disclosed requires any
change in the Schedules, or if any such fact, circumstance or development would
require such a change assuming the Schedules were dated as of the date of the
occurrence, existence or discovery of such fact, circumstance or development,
then Seller shall promptly deliver to Buyer a modification to the Schedules
specifying such change (the "Modified Schedules"). Upon receipt of any such
Modified Schedules from Seller, Buyer shall have the right to terminate this
Agreement by giving notice in accordance with Section 13.3 hereof within ten
(10) business days following delivery of the Modified Schedules to Buyer,
provided, however, that Buyer shall have such a termination right only if the
updated information contained on the Modified Schedules creates a Materially
adverse exception to the representations and warranties of Seller under this
Agreement or results in a Materially adverse burden on Buyer as to the
operations of the Facility or the use and enjoyment thereof, or otherwise
results in a Material Adverse Effect on Buyer as a result of changes in the
Purchased Assets or Assumed Liabilities.
6.18 HSR Act. If necessary, each party agrees to cause its representatives to
file all documents and information required under the HSR Act, and to take such
actions as are necessary and reasonably practicable to cause the early
termination of the applicable waiting period under the HSR Act. In connection
therewith, all filing fees and expenses of such compliance shall be shared by
Seller and Buyer on a 50:50 basis. All other non-filing fees and expenses of
such compliance shall be borne by the party incurring same.
6.19 Consummation of Lease Agreements. Buyer and Seller agree to take all
reasonable efforts to consummate the agreements with the lessors with regard to
the Equipment Leases and the Development Authority Leases.
6.20 Environmental Restrictions. Buyer recognizes and acknowledges that the
Facility has been and is currently used for industrial purposes. Buyer agrees to
indemnify Seller for any environmental remediation obligations accruing to
Seller resulting from (i) Buyer's change of the use of the Facility (e.g., to
commercial or residential) subsequent to the Closing; or (ii) Buyer's voluntary
election to treat, store, or dispose of "hazardous waste" (as that term is
defined under the Environmental Laws) in a manner that would require the
issuance of a hazardous waste management permit or require corrective action at
the Facility under Section 3004(u) of the Resource Conservation and Recovery Act
of 1976, as amended or the Georgia Hazardous Waste Management Act, as amended at
any time subsequent to the Closing. Buyer agrees that it will not take any
action with the intent or purpose of imposing upon Seller environmental
obligations or costs.
ARTICLE VII
CONDITIONS PRECEDENT
TO THE OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to enter into and complete the Closing is subject,
at its option, to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by it only in
writing:
7.1 Representations and Covenants. The representations and warranties of Seller
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date. Seller shall
have performed and complied with all covenants and agreements (including,
without limitation, those contained in Article VI) required by this Agreement to
be performed or complied with by Seller on or prior to the Closing Date. Seller
shall have each delivered to Buyer a certificate, dated the Closing Date, to the
foregoing effect signed by the Chief Executive Officer and President of Seller.
7.2 Seller's Assurances and COBRA Compliance. Seller shall provide assurances to
Buyer, which are satisfactory to Buyer in Buyer's reasonable discretion that (i)
adequate provisions have been made by Seller to discharge all run-out medical
claims for employees at the Facility whether or not hired by Buyer, and (ii)
that Seller or a member of its control group will be able to discharge all
"COBRA" responsibilities for those persons who were employed by Seller at the
Facility as of the Closing Date.
7.3 Condition of Property, Plant and Equipment; Location of Purchased Assets.
All of the Purchased Assets comprised of property, plant and equipment are
Materially the same as reflected in Seller Financial Documents, and there is no
Materially adverse change in the value of such property, plant and equipment
(other than accumulated depreciation) from the date of Seller Financial
Documents to the Closing Date. All of the Purchased Assets shall be located at
the Facility as of the Closing Date.
7.4 Environmental Status of Facility. There is no environmental condition
concerning the Facility that would reasonably be expected to impose a Material
liability upon Buyer, or Materially impact Buyer's use and enjoyment of the
Facility subsequent to Closing.
7.5 Litigation. No action, suit or proceeding shall have been instituted before
any court or governmental or regulatory body, or instituted or threatened by any
governmental or regulatory body, to restrain, modify or prevent the carrying out
of the transactions contemplated by this Agreement or to seek damages or a
discovery order in connection with such transactions, or that has or could
reasonably be expected to have, in the opinion of Buyer, a Materially Adverse
Effect on the assets, properties, business, operations or financial condition of
the business operated at the Facility which is being acquired by Buyer pursuant
to this Agreement.
7.6 Governmental Permits and Approvals. All Permits and approvals from the
governmental or regulatory bodies required for the lawful consummation of the
Closing and the continued operation of the Facility by Buyer after the Closing
(and set forth on Schedule 7.6 annexed hereto) shall have been obtained,
including termination or early termination of the waiting period prescribed by
the HSR Act, and all necessary governmental consents to the continuation of
operational Permits (environmental or otherwise) which otherwise may be affected
by Buyer's acquisition of the Purchased Assets, except where the failure to be
so obtained would not be expected to have a Material Adverse Effect upon the
Purchased Assets or Buyer's use and enjoyment thereof subsequent to Closing.
7.7 Resolutions. There shall have been delivered to Buyer a copy of the
resolutions duly adopted by the board of directors of each Seller, certified
accurate by an executive officer of each Seller as of the Closing Date,
authorizing and approving the execution and delivery by each Seller of this
Agreement, and the consummation by Seller of the transactions contemplated
hereby. Buyer's board of directors shall have also authorized and approved the
execution and delivery by Buyer of this Agreement and the consummation by Buyer
of the transactions contemplated hereby.
7.8 Good Standing Certificates, etc. Seller shall have delivered all such
certified resolutions, certificates, documents or instruments with respect to
Seller's corporate existence and authority as Buyer's counsel may have
reasonably requested on or prior to the Closing Date.
7.9 Third Party Consents. All consents, permits, waivers and approvals from
parties that may be required to transfer to Buyer the Contracts and leases
included in the Purchased Assets and Assumed Liabilities (without material
modification after the Closing) shall have been obtained (with satisfactory
written evidence thereof, and in recordable form where necessary, to be
furnished to Buyer at the Closing). A list of all such consents and approvals
deemed applicable to this Section is set forth in Schedule 7.9 annexed hereto.
7.10 Estoppel Certificates. Buyer shall have received such estoppel certificates
from parties to any or all of the leases, purchase options and options to sell
as Buyer may reasonably request.
7.11 Opinions of Seller's Counsel. Buyer shall have received the opinion of
Seller's counsel, Burr & Forman, LLP, substantially in the form attached hereto
as Exhibit I.
7.12 No Material Adverse Change. In addition to the provisions of Section 7.3
above, prior to the Closing Date, and since the date hereof, there shall be no
Material Adverse Change in the assets or liabilities, the business or condition,
(financial or otherwise) of the business conducted at the Facility regardless of
reason, including, but not limited, to those changes that are as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, failure to obtain any environmental permits at the normal time or in
the manner applied for by Seller, fire, explosion, accident, casualty, storm,
condemnation, or act of God or other public force or otherwise, including but
not limited to any accident or casualty from radioactive sources. Seller shall
have delivered to Buyer a certificate, dated the Closing Date, to the foregoing
effect signed by the chief executives and chief financial officers of Seller.
7.13 Lenders Consent. To the extent said consent is required, Buyer shall have
received the consent of its lenders to consummate the transaction contemplated
hereby; provided, however, Buyer agrees to use its best efforts to obtain such
consent.
7.14 Agreements With Lessor. Buyer shall have received the unconditional consent
from the lessor under the Development Authority Leases to the transfer by Seller
to Buyer of all of Seller's interest in the Development Authority Leases.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to enter into and complete the Closing is subject,
at Seller's option, to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by Seller only in
writing:
8.1 Representations and Covenants. The representations and warranties of Buyer
contained in this Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date. Buyer shall
have performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Buyer shall deliver to Seller a certificate dated the Closing Date to the
foregoing effect signed by an executive officer of Buyer.
8.2 Litigation. No action, suit or proceeding shall have been instituted before
any court or governmental or regulatory body, or instituted or threatened by any
governmental or regulatory body, to restrain, modify or prevent the carrying out
of the transactions contemplated hereby, or to seek damages or a discovery order
in connection with such transaction, or that has or is reasonably expected to
have, in the opinion of Seller, a Material Adverse Effect on the assets,
properties, business, operations or financial condition of Seller.
8.3 Governmental and Third Party Permits and Approvals. All permits and
approvals set forth on Schedules 7.6 and 7.9, along with those additional
approvals set forth on Schedule 8.3, annexed hereto shall have been obtained,
including termination or early termination of the waiting period prescribed by
the HSR Act.
8.4 Resolutions. There shall have been delivered to Seller a copy of the
resolutions duly adopted by the board of directors of Buyer, certified accurate
by the Secretary of Buyer as of the Closing Date, authorizing and approving the
execution and delivery by Buyer of this Agreement, and the consummation by Buyer
of the transactions contemplated hereby.
8.5 Good Standing Certificates, etc. Buyer shall have delivered all such
certified resolutions, certificates, documents or instruments with respect to
Buyer's corporate existence and authority as Seller's counsel may have
reasonably requested prior to the Closing Date.
8.6 Opinion of Buyer's Counsel. Seller shall have received an opinion of Smith,
Gambrell & Russell, LLP, counsel to Buyer, substantially in the form attached
hereto as Exhibit J.
8.7 Lender Consent. The Seller shall have received the consent of its lenders to
consummate the transactions contemplated hereby; provided, however, Seller shall
use its best efforts to obtain such consent.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PARTIES TO CLOSE
The obligations of Buyer and Seller to close the transactions contemplated by
this Agreement are also subject to the contemporaneous closing of the
transactions for the re-negotiation or pay-off of the following leases with the
lessors specified below:
(i) That certain Equipment Lease Agreement dated as of June 29, 1999 by
and among First Security Bank, National Association, Birmingham
Southeast, LLC and Birmingham Steel Corporation along with the Trust
and Participation Agreements relating thereto (the "Rolling Mill
Lease");
(ii) That certain Equipment Lease Agreement dated as of December 31, 1998
by and among Nationsbanc Leasing Corporation, Birmingham Southeast,
LLC and Birmingham Steel Corporation (the "Continuous Caster Lease");
(iii)That certain Lease Agreement (Equipment) between the Development
Authority of Bartow County and Birmingham Southeast, LLC dated as of
December 1, 1998, as amended by that certain Amendment to Equipment
Lease Agreement dated as of June 17, 1999 (the "Development Authority
Equipment Lease"); and
(iv) That certain Lease Agreement (Real Property) between the Development
Authority of Bartow County and Birmingham Southeast, LLC dated as of
December 1, 1998 (the "Development Authority Real Property Lease").
The Rolling Mill Lease and the Continuous Caster Lease are collectively referred
to as the "Equipment Leases." The Development Authority Equipment Lease and the
Development Authority Real Property Lease are collectively referred to as the
"Development Authority Leases." In the event that any of the Equipment Leases or
the Development Authority Leases are renegotiated or assumed rather than paid
off, and if such renegotiation or assumption does not include the full release
of Birmingham Steel from liability under the Equipment Leases and the
Development Authority Leases, then Buyer will agree to indemnify and hold Seller
harmless for any liabilities under such leases first arising subsequent to the
Closing Date as set forth in Section 11.4 below.
ARTICLE X
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
10.1 Instruments of Conveyance. Seller shall have executed and delivered, or
caused to be executed and delivered, to Buyer the Assignment and Bill of Sale,
and such other vehicle titles, bills of sale, assignments of contracts and other
such documents and instruments as Buyer's counsel may deem necessary to convey
the Purchased Assets to Buyer.
10.2 Instruments of Assumption. Buyer shall have executed and delivered, or
caused to be executed and delivered, to Seller the Assignment and Assumption
Agreement whereby Buyer assumes the Assumed Liabilities.
10.3 Closing Settlement Statement. The Closing Settlement Statement shall have
been determined and executed by the parties, and the Cash Consideration shall be
paid to Seller and, as applicable, to the Indemnification Escrow Agent as
provided for in Section 11.3 below. In addition, if applicable, the Disputed
Purchase Price Amount shall be paid to the Adjustment Escrow Agent (as defined
in the Adjustment Escrow Agreement).
10.4 Adjustment Escrow Agreement and Indemnification Escrow Agreement. If
required by the terms of Section 2.5 above the Adjustment Escrow Agreement shall
be executed and delivered. In addition, the Indemnification Escrow Agreement
shall be executed and delivered.
10.5 Closing Certificate of Seller. Each Seller shall deliver to Buyer a closing
certificate signed by an executive officer of Seller, dated the Closing Date,
confirming the matters referred to in Sections 7.1 and 7.8.
10.6 Closing Certificate of Buyer. Buyer shall deliver to Seller a closing
certificate signed by an executive officer of Buyer, dated the Closing Date,
confirming the matters referred to in Sections 8.1 and 8.4.
10.7 Open Orders. Seller shall deliver to Buyer a complete and accurate list
describing all open purchase orders, as of the close of business on the date
preceding the Closing Date pursuant to which Seller is obligated to purchase
goods with respect to the operations at the Facility, and a complete and
accurate list describing all open sales orders issued by Seller and all open
purchase orders issued by third parties and accepted by Seller, as of the close
of business on the date preceding the Closing Date, pursuant to which Seller is
obligated to sell any of its inventory, each list being certified accurate by
Seller.
10.8 Other Documents and Certificates. Buyer and Seller shall deliver, or with
respect to Seller cause Seller to deliver, certificates, agreements, permits,
approvals and other documents reasonably requested by counsel for Buyer or
Seller, as the case may be, to satisfy, or to evidence the satisfaction of, as
the case may be, the conditions precedent to the Closing set forth in Articles
VII and VIII.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties.
(a) The representations and warranties of Seller contained in Article IV of
this Agreement (other than those made in Sections 4.2, 4.7, and 4.9 (but only as
to environmental matters)), shall survive for a period of twenty-four (24)
months subsequent the Closing. The representations and warranties of Seller
contained in Sections 4.2 and 4.7 shall survive the Closing until the expiration
of the applicable statutory period of limitations. The representations and
warranties of Seller contained in Section 4.10 as to environmental matters shall
survive the Closing until December 31, 2006.
(b) The representations and warranties of Buyer contained in Article V of
this Agreement (other than those made in Section 5.2) shall survive for a period
of twenty-four (24) months subsequent the Closing. The representations and
warranties of Buyer contained in Section 5.2 shall survive the Closing until the
expiration of the applicable statutory period of limitations.
(c) Any Notice of Claims for indemnification with respect to any breach of
any representation or warranty contained in Articles IV or V will be given
within the period specified therefor in clause (a) or (b) above, as applicable,
and will specifically identify the particular breach and the underlying facts on
which the claim is based and certify that a loss relating to, resulting from or
arising out of such breach has been or may reasonably be expected to be suffered
by one or more of the party or its representative giving such notice. Any claim
with respect to any breach of any representation or warranty contained in
Articles IV or V as to which timely notice complying with the foregoing sentence
has not been given may not be pursued and is hereby irrevocably waived.
(d) Nothing contained in this Section 11.1 shall be read to impose any time
limitation on either parties' right to seek indemnification on a basis other
than the breach of a representation or warranty contained in Articles IV or V.
(e) Any claim timely made will not be affected by the subsequent expiration
of the period of survival.
11.2 Indemnity Agreement of Seller. From and after the Closing, Seller shall
defend, indemnify and hold harmless Buyer, its affiliates (and their respective
directors, officers, employees, agents, successors and assigns) from and against
any and all direct or indirect requests, demands, claims, payments, defenses,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, liens, causes of action, suits, proceedings, judgments, losses,
damages, liabilities, costs, and expenses of any nature, kind or character,
including court costs and attorneys' fees (collectively, "Claims") asserted
against, imposed upon or incurred by Buyer, its affiliates or any of their
respective directors, officers, employees, agents, successors or assigns by
reason of, resulting from, arising out of, based upon, awarded or asserted
against in respect of or otherwise in respect of:
(a) (i) The operation of Seller's business at the Facility or the use of
the Purchased Assets at any time on or before the Closing Date unless
specifically assumed by Buyer pursuant to this Agreement, (ii) any actual or
alleged negligent, illegal, unjustified or wrongful act or omission of Seller,
or (iii) any other liabilities of Seller that are not specifically assumed by
Buyer pursuant to this Agreement;
(b) any breach of any representation or warranty or nonfulfillment of any
covenant or agreement on the part of Seller contained in this Agreement, or any
misrepresentation in or omission from or nonfulfillment of any covenant on the
part of Seller contained in any other agreement, certificate or other instrument
furnished or to be furnished to Buyer by Seller pursuant to this Agreement; and
(c) any intentional or unintentional failure to comply with any bulk sales
laws applicable to the transactions contemplated hereby.
Additionally, Seller shall defend, indemnify and hold Buyer harmless from and
against any and all liabilities or obligations relating to the Facility or the
operation thereof (whether long term or current, and whether accrued, absolute
or contingent, and regardless of Materiality) that imposes any transferee or
successor liability upon Buyer other than the Assumed Liabilities.
Buyer's remedies under this Section 11.2 constitute the sole and exclusive
remedies available to Buyer for claims against Seller with respect to matters
addressed in this Agreement. Buyer expressly waives any rights it may have to
make a claim against Seller pursuant to any constitutional, statutory, or common
law authorities. The foregoing shall not apply to claims arising out of or
relating to: (i) fraud or intentional misrepresentation, (ii) claims made by
Buyer arising out of or relating to a breach or alleged breach by Seller of the
representations and warranties of Seller contained in Sections 4.2 (Authority of
Seller) and 4.3 (Liens and Good Title) hereof.
Nothing in this Agreement shall limit, compromise or preclude any claims that
Seller may have under statutory or common law or by contract against any third
party for any contamination at the Facility.
11.3 Indemnification Escrow Fund. In order to provide a non-exclusive source of
funds for purposes of Seller's indemnification obligations, at the Closing,
Three Million Dollars ($3,000,000) of the Cash Consideration (which shall be the
non-exclusive "Indemnification Escrow Fund") shall be withheld from Seller and
instead shall be paid to the Indemnification Escrow Agent as defined and
identified in the Indemnification Escrow Agreement. The Indemnification Escrow
Fund shall be held and administered pursuant to the terms of this Agreement and
the Indemnification Escrow Agreement in substantially the form attached hereto
as Exhibit K (the "Indemnification Escrow Agreement").
11.4 Indemnity Agreement of Buyer From and after the Closing, Buyer shall
defend, indemnify and hold harmless Seller, its affiliates (and their respective
directors, officers, employees, agents, successors and assigns) from and against
any and all Claims asserted against, imposed upon or incurred by Seller or its
directors, officers, employees, agents, affiliates, successors or assigns, by
reason of, resulting from, arising out of, based upon, awarded or asserted
against in respect of or otherwise in respect of:
(a) Any breach of any representation and warranty or non-fulfillment of any
covenant or agreement on the part of Buyer contained in this Agreement, or any
misrepresentation in or omission from or non-fulfillment of any covenant on the
part of Buyer contained in any other agreement, certificate or other instrument
furnished or to be furnished to Seller by Buyer pursuant to this Agreement; or
(b) Buyer's failure to comply, pay, perform or otherwise comply with the
Assumed Liabilities or any other liability or obligation specifically and
expressly assumed by Buyer at the Closing;
(c) Buyer's failure to indemnify and hold Seller harmless for any
liabilities under the Equipment Leases and the Development Authority Leases; or
(d) any event or circumstance first arising out of or relating to Buyer's
conduct of its business at the Facility subsequent to the Closing Date,
including but not limited to matters dealing with Buyer's employees at the
Facility.
11.5 Indemnification Procedure.
(a) Upon obtaining knowledge thereof, the party to be indemnified hereunder
(the "Indemnitee") shall promptly notify the indemnifying party hereunder (the
"Indemnitor") in writing of any Claim which the Indemnitee has determined has
given or could give rise to a claim for which indemnification rights are granted
hereunder (such written notice referred to as the "Notice of Claim"); provided,
however, that the giving of a Notice of Claim shall not be a condition precedent
to any liability of the Indemnitor under the provisions for indemnification
contained in this Agreement, unless (and only to the extent that) failure to
give such notice materially prejudices the rights of the Indemnitor with respect
to the applicable matter. The Notice of Claim shall specify, in all reasonable
detail, the nature and estimated amount of any such claim giving rise to a right
of indemnification.
(b) With respect to any matter set forth in a Notice of Claim relating to a
third party claim, the Indemnitor may compromise or defend, at the Indemnitor's
own expense, and by the Indemnitor's own counsel (which counsel shall be subject
to the Indemnitee's reasonable approval), any such manner involving the asserted
liability of the Indemnitee; provided, however, that no compromise or settlement
thereof may be effected by the Indemnitor without the Indemnitee's consent
(which shall in any event not be unreasonably withheld) unless there is no
finding or admission of any violation of law by the Indemnitee or any violation
of the rights of any person by the Indemnitee and no effect on any other claims
that may be made against the Indemnitee and the sole relief provided is monetary
damages that are paid in full by the Indemnitor. If the Indemnitor elects not to
compromise or defend such matter, then the Indemnitee, at the Indemnitor's
expense but by the Indemnitee's own counsel, may defend such matter but
regardless of whether or not the Indemnitor assumes the defense of any such
action the Indemnitee may not compromise the defense of any such matter without
the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld, and the Indemnitor shall have no liability with respect
to any such matter, the defense of which is compromised without the Indemnitor's
consent (unless such consent was unreasonably withheld). In any event, the
Indemnitee, the Indemnitor and the Indemnitor's counsel (and, if applicable, the
Indemnitee's counsel) shall cooperate in good faith in the compromise of, or the
defense against, any such asserted liability. If the Indemnitor chooses to
defend any claim, the Indemnitee shall make available to the Indemnitor any
books, records, or other documents within its control that are reasonably
necessary or appropriate for such defense.
(c) Notwithstanding the foregoing, if there is a reasonable probability
that a third party claim for which Seller has granted indemnification rights to
Buyer hereunder will materially and adversely affect Buyer or Buyer's use and
enjoyment of the Facility after the Closing Date other than as a result of money
damages or other payments Buyer shall be entitled to conduct the defense of such
claim at Seller's expense.
(d) Limitations on Liability of Seller and Buyer. Seller shall have no
liability with respect to losses of Buyer subject to indemnification hereunder
until the total of all losses of Buyer (in the aggregate and not per occurrence)
exceeds Two Hundred Fifty Thousand Dollars ($250,000) (excluding Seller's breach
of the representations and warranties set forth in Section 4.22 above ("Broker's
or Finder's Fees"). For purposes of this Subsection (d), the entire amount of
the loss shall be counted, and not just the portion that exceeds any applicable
threshold of Materiality. The maximum monetary indemnification liability of
Buyer and Seller (other than for breaches of Seller's representations and
warranties set forth in Section 4.2 and 4.3 of this Agreement) shall be equal to
Twelve Million Dollars ($12,000,000).
ARTICLE XII
TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated prior to the Closing as
follows:
(a) at the election of Seller, if any one or more of the conditions to its
obligations to close has not been fulfilled as of the Closing Date, or if Buyer
has breached any representation, warranty, covenant or agreement contained in
this Agreement or in any other of Buyer's Documents;
(b) at the election of Buyer, if any one or more of the conditions to its
obligations to close has not been fulfilled as of the Closing Date, or if Seller
has breached any representation, warranty, covenant or agreement contained in
this Agreement or in any other of Seller's Documents;
(c) at the election of Seller or Buyer, if any legal proceeding is
commenced or threatened by any governmental or regulatory body directed against
the consummation of the Closing or any other transaction contemplated under this
Agreement and any one Seller or Buyer, as the case may be, reasonably and in
good faith deem it impractical or inadvisable to proceed in view of such legal
proceeding or threat thereof;
(d) at any time on or prior to the Closing Date, by mutual written consent
of the parties hereto; or
(e) at the election of either Buyer or Seller; provided the party so
terminating is not in default under this Agreement, at the later of (i) Buyer's
completion of its environmental assessment of the Facility, (ii) the receipt of
all permits and approvals from governmental or regulatory bodies as required by
Section 7.6 hereof and (iii) November 30, 2001; provided however this date may
be extended for a period of 30 additional days upon the mutual consent of Buyer
and Seller which consent shall not be unreasonably withheld. Notwithstanding the
foregoing sentence, either Buyer or Seller may terminate this Agreement at any
time after December 31, 2001 if said party is not in default of this Agreement.
12.2 Survival. If this Agreement is terminated pursuant to Section 11.1, this
Agreement shall become void and of no further force and effect, except for the
provisions of Section 6.5 (as to only the confidentiality provisions), Section
6.11, and Section 6.16 and none of the parties hereto shall have any liability
in respect of such termination except that any party shall be liable to the
extent that failure to satisfy the conditions of Article VII, VIII or X results
from the violation or breach of any of the representations, warranties,
covenants or agreements of such party under this Agreement.
ARTICLE XIII
COVENANTS AGAINST COMPETITION
13.1 Restrictive Covenants. Recognizing Buyer's need to protect the business and
Purchased Assets being purchased and to induce Buyer to purchase the Purchased
Assets and assume the Assumed Liabilities, Seller covenants and agrees with
Buyer that, if the transactions contemplated hereby are closed, it will not for
a period of two (2) years following the Closing Date:
(a) Within the Territory, manufacture, produce, market, sell or solicit the
sale of, either directly or indirectly, on its own behalf, in the service of or
on behalf of any Competing Business, any Competitive Product provided that this
clause (a) shall not apply to the extent (but only to the extent) such
activities are conducted by a third party who has merged with Seller, or who has
acquired all of the equity or substantially all of the assets of Seller or all
of the equity or substantially all of the assets of such third party have been
acquired by Seller; or
(b) Within the Territory, engage in or render services to or have an
interest in any Competing Business in the capacity of a shareholder, partner,
principal, consultant or any other relationship or capacity; provided, however,
that the foregoing shall not restrict Seller from owning up to two percent of
the outstanding voting securities of any company which is listed on any
recognized public stock exchange; or
(c) Within the Territory, solicit, divert, or take away or attempt to
solicit, divert or take away from Buyer, for the benefit of any other person or
entity, any customer of Buyer that was a customer of the Facility as of the
Closing Date or at anytime within eighteen (18) months prior to the Closing Date
(provided, however, that the foregoing shall not apply to products sold to such
customers prior to the Closing Date from other facilities owned or operated by
Seller prior to the Closing Date); or
(d) Directly or indirectly solicit the employment of, or encourage to leave
the employment of Buyer any employee of Seller at the Facility which is hired by
Buyer on or immediately after the Closing.
13.2 Protection of Confidential Information. Recognizing Buyer's need to protect
its business to be conducted at and from the Facility, and to induce Buyer to
purchase the Purchased Assets and assume the Assumed Liabilities, Seller
covenants and agrees with Buyer that, if the transactions contemplated hereby
are closed, it will not disclose or use or otherwise exploit for its own
benefit, for the benefit of any other person, or for the benefit of any
Competing Business, or to harm or damage Buyer or the business conducted at or
from the Facility, any Confidential Information. The covenant contained in this
Section 13.2 shall survive for a period of two (2) years following the Closing
Date; provided, however, that with respect to those items of Confidential
Information which constitute trade secrets under applicable law, the obligations
of confidentiality and nondisclosure as set forth in this Section 13.2 shall
continue to survive after said two (2) year period to the greatest extent
permitted by applicable law. These rights of Buyer are in addition to those
rights Buyer has under the common law or applicable statutes for the protection
of trade secrets.
13.3 Remedies. Seller acknowledges that irreparable loss and injury would result
to Buyer and its business upon any breach of any of the covenants contained in
Section 13.1 or Section 13.2 and that damages arising out of such breach would
be difficult to ascertain. Seller agrees that, in addition to all the remedies
provided at law or at equity, Buyer may petition and obtain from a court of law
or equity both temporary and permanent injunctive relief to prevent a breach by
Seller of any such covenant. Seller agrees that, in addition to all other
remedies provided in this Agreement or at law or at equity, Buyer may withhold
any and all payments otherwise due the breaching party under any agreement
between Buyer and the breaching party during the existence of the breach of any
of the covenants contained in this Agreement and may set off against such
payments any damages incurred by Buyer as a result of such breach.
13.4 Definitions. For purposes of this Article XIII the following terms
shall have the meanings set forth below:
(a) The term "Confidential Information" shall mean and include all
information, data and know-how of Seller which is included in the Purchased
Assets, including without limitation, inventions, product formulations, product
and manufacturing know-how and methods, processes, specifications, computations,
applications, methods, testing methods, computer programs, blueprints, drawings,
designs, information and documents (including log books) relating to research
and development (whether or not completed), administrative procedures, sales or
marketing programs or techniques, payment plans, existing or new products of the
subject business, unpublished list of current or prospective customers,
information relating to the solicitation of customers serviced by or from the
Facility, pricing, quotations, financial information and any other information
(whether or not constituting a trade secret) not generally known by a Competing
Business which has value to business conducted from the Facility. Confidential
Information shall not include any data or information that has been voluntarily
disclosed to the public by Buyer (except where such public disclosure has been
made without authorization), or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through lawful
means.
(b) The term "Competing Business" shall mean and include any
proprietorship, partnership, joint venture, business trust, corporation,
association or other entity or person (exclusive of Buyer and any successor or
assign of Buyer) engaged at the time of such determination in the distribution,
sales and marketing of Competitive Products.
(c) The term "Competitive Product" shall mean and include mid-range
merchant products exceeding six (6) inches.
(d) The term "Territory" shall mean and include a five hundred mile (500)
radius around the Facility.
ARTICLE XIV
MISCELLANEOUS
14.1 Gender. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person or persons
may require.
14.2 Business Day. For purposes of this Agreement a business day shall be any
day when the New York Stock Exchange is open for business.
14.3 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given only if and when (i) personally
delivered, or (ii) three (3) business days after mailing, postage prepaid, by
certified mail, or (iii) when delivered (and receipted for) by an overnight
delivery service, or (iv) when first sent by telex, telecopier or other means of
instantaneous communication provided such communication is promptly confirmed by
personal delivery, mail or an overnight delivery service as provided above,
addressed in each case as follows:
If to Seller:
Birmingham Southeast, LLC
Birmingham Steel Corporation
1000 Urban Center Drive
Suite 300 Birmingham, AL 35242 Facsimile: 205-970-1353
Attention: John D. Correnti, Chairman and CEO
with a copy to:
---------------
Gene T. Price, Esq.
Burr & Forman LLP
3100 SouthTrust Tower
420 North 20th Street
Birmingham, AL 35283-0719
Facsimile: 205-458-5100
If to Buyer to:
AmeriSteel Corporation 5100 West Lemon Street Suite
312 Tampa, FL 33609 Facsimile: 813-207-2251
Attention: Phil Casey, Chief Executive Officer
with a copy to:
---------------
Arthur Jay Schwartz, Jr.
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, Promenade II
Suite 3100
Atlanta, Georgia 30309-3592
Facsimile: 404-685-6932
Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.
14.4 Rights of Third Parties. All conditions of the obligations of the parties
hereto, and all undertakings herein, are solely and exclusively for the benefit
of the parties hereto and their respective successors and assigns, and no other
person or entity shall have standing to require satisfaction of such conditions
or to enforce such undertakings in accordance with their terms, or be entitled
to assume that any party hereto will refuse to consummate the purchase and sale
contemplated hereby in the absence of strict compliance with any or all thereof,
and no other person or entity shall, under any circumstances, be deemed a
beneficiary of such conditions or undertakings, any or all of which may be
freely waived in whole or in part, by mutual consent of the parties hereto at
any time, if in their sole discretion they deem it desirable to do so.
14.5 Entire Agreement. Except as specifically stated herein, this Agreement,
including all schedules and exhibits attached hereto, constitute the entire
agreement of the parties with respect to the subject matter hereof. There are no
oral agreements, understandings, promises, representations or warranties between
the parties hereto with respect to the subject matter of this Agreement. All
prior negotiations and understanding, if any, between the parties hereto with
respect to the subject matter of this Agreement have been superseded by this
Agreement. This Agreement may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by the party
to be so bound by such modification, amendment or termination. The course of
conduct or course of dealing of the parties shall not operate to amend, modify,
terminate or waive the provisions of this Section 14.5.
14.6 Right to Open Mail. Seller agrees and hereby authorizes and empowers Buyer
from and after the Closing, (i) to receive and open mail addressed to Seller;
and (ii) to deal with the contents thereof in any manner as Buyer sees fit,
provided that such mail and the contents thereof relate to Facility, any of the
Purchased Assets, or to any of the liabilities or obligations assumed by Buyer
pursuant to this Agreement. Any mail received by Buyer and addressed to Seller
that does not relate to the Facility, the Purchased Assets, or any of the
liabilities or obligations assumed by Buyer pursuant to the terms of this
Agreement, shall be forwarded to Seller at the place designated in Section 14.3
for the sending of notices.
14.7 Headings. The Table of Contents and Article and Section headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
14.8 Governing Law. The interpretation and construction of this Agreement, and
all matters relating hereto, shall be governed by the internal laws of the State
of Georgia, without giving effect to the principles of conflict of law.
14.9 Parties in Interest. Prior to or after the Closing Buyer may transfer and
assign this Agreement and its rights hereunder to any affiliate of Buyer without
the consent of Seller, provided that Buyer shall not be released from its
obligations as a result of any such assignment. After the Closing Buyer may
transfer and assign this Agreement and its rights hereunder to any purchaser of
the stock of Buyer, or any purchaser of, or other successor to, the business or
substantially all of the assets of Buyer. Except as expressly stated above, this
Agreement may not be transferred, assigned, pledged or hypothecated by either
party hereto, other than by operation of law or with the consent of the other
party. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
14.10 Counterparts. This Agreement may be executed in two or more counterparts,
all of which taken together shall constitute one instrument.
14.11 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by Buyer and Seller.
14.12 Severability. If any term or other provision of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal or incapable of being
enforced under any rule of law in any particular respect or under any particular
circumstances, such term or provision shall nevertheless remain in full force
and effect in all other respects and under all other circumstances, and all
other terms, conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner, to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
14.13 Interpretation. Should any provisions of this Agreement require judicial
or arbitral interpretation, it is agreed that the court or arbitrator
interpreting or construing the same shall not apply a presumption that the terms
of any such provision shall be more strictly construed against one party or the
other by reason of the rule of construction that a document is to be construed
most strictly against the party who itself or through its agent prepared the
same, it being agreed that the agents of all parties hereto have participated in
the preparation of this Agreement.
14.14 Waivers and Consents. All waivers and consents given hereunder shall be in
writing. No waiver by any party hereto of any breach or anticipated breach of
any provision hereof by any other party shall be deemed a waiver of any other
contemporaneous, preceding or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
14.15 Article and Section References. Any reference in this Agreement to an
article or section shall be deemed to include a reference to any subsidiary
sections or subsections whenever the context requires.
14.16 Attorneys' Fees. If any legal proceeding is brought for the enforcement of
this Agreement, or because of an alleged breach, default or misrepresentation in
connection with any provision of this Agreement or other dispute concerning this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that proceeding, in
addition to any other relief to which it may be entitled.
14.17 Joint and Several Liability. The obligations of Birmingham Southeast and
Birmingham Steel in this Agreement and the transactions contemplated hereby are
joint and several for all purposes.
14.18 Arbitration.
(a) Any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the interpretation thereof, the agreements to be
entered into between or among the parties to this Agreement, or any arrangements
relating hereto or contemplated herein or the breach, termination or invalidity
thereof shall be settled exclusively and finally by arbitration. It is
specifically understood and agreed that any disagreement, dispute or controversy
which cannot be resolved between the parties, including any matter relating to
the interpretation of this Agreement and any technical matters arising
hereunder, may be submitted to arbitration irrespective of the magnitude
thereof, the amount in controversy or whether such disagreement, dispute or
controversy would otherwise be considered justiciable or ripe for resolution by
a court or arbitral tribunal.
(b) The arbitration shall be conducted in accordance with the International
Arbitration Rules of the American Arbitration Association ("AAA") and the
Supplementary Procedure for Large, Complex Disputes, as in effect on the date of
this Agreement, except as those Rules conflict with the provisions of this
Article XIV in which event the provisions of this Article XIV shall control.
(c) The arbitration shall be administered by the AAA. The language of the
arbitration shall be English.
(d) The arbitral tribunal shall consist of three arbitrators agreed to by
both parties to the dispute or, if the parties to the dispute shall not have
agreed upon three arbitrators within sixty (60) days after receipt by the
respondent of the notice of arbitration, by an arbitral tribunal consisting of
three independent and impartial arbitrators appointed by the AAA. In making the
appointments, the AAA shall use the following list procedure unless the parties
to the dispute agree that the list procedure should not be used:
(i) at the request of any of the parties to the dispute, the AAA shall
communicate to both parties to the dispute an identical list of
arbitrators containing at least nine names;
(ii) within fifteen (15) days after the receipt of this list, each party to
the dispute may return the list to the AAA after having deleted the
name or names to which it objects and having numbered the remaining
names on the list in the order of its preference;
(iii)after the expiration of the above period of time, the AAA shall
appoint the three arbitrators from among the names approved on the
lists returned to it, to the extent possible in accordance with the
order of preference indicated by the parties to the dispute
(consistent with the last sentence of Section 14.18(b) hereof); and
(iv) if for any reason the appointments cannot be made according to this
list procedure and the parties do not agree upon an alternative
procedure the AAA may exercise its discretion in appointing the three
arbitrators.
From among the three arbitrators appointed through the foregoing procedure, the
AAA shall elect a chairman.
(e) In proposing arbitrators the AAA shall endeavor to nominate persons of
reputation and experience in the matters in controversy who are competent in
English, but no claim that the AAA has failed to do so shall be admissible to
delay the arbitration or deny confirmation or enforcement of any award. No
person shall be nominated who is or at any time was an employee of or recipient
of compensation from, or the holder of any material pecuniary interest in,
either party or any affiliate of either party.
(f) The arbitration shall be conducted in Atlanta, Georgia, or in such
other city as the parties to the dispute may designate by mutual consent.
(g)At any time after an arbitration has commenced, either party may serve
on the other party a request (a) to produce and permit the party making the
request, or its representative, to inspect and copy any designated documents
(including writings, drawings, graphs, charts, photographs and other data
compilations from which information can be obtained) or to inspect and copy,
test or sample any tangible things which constitute or contain matters which are
relevant to the subject matter involved in the arbitration and which are in the
possession, custody or control of the responding party, or (b) to permit entry
upon designated land or other property in the possession or control of the
responding party for the purpose of inspection, measuring, surveying,
photographing, testing or sampling the property or any designated object or
operation thereon which is relevant to the subject matter involved in the
arbitration. The request shall set forth the items to be inspected either by
individual item or by category, shall describe each item with reasonable
particularity, and shall specify a reasonable time, place and manner of making
the inspection and performing the related acts. The party upon whom the request
is served shall serve a written response within thirty days, unless the arbitral
tribunal allows a longer or shorter time. The response shall specify each item
or category, if any, to which an objection is made and the reasons for such
objection. The party submitting the request may request the arbitral tribunal to
require the responding party to produce any document or permit any inspection as
to which an objection has been made and the arbitral tribunal shall so require
unless, in its discretion, it determines that such document or inspection is not
relevant to the subject matter of the arbitration, that such production or
inspection would unduly and unnecessarily prolong the proceedings or that such
production or inspection would be unduly annoying, embarrassing, oppressive,
burdensome or expensive for the responding party. The arbitral tribunal shall
have sole discretion (but in accordance with the foregoing standards) to
determine all matters relating to production or inspection as aforesaid,
including matters as to timing and procedure. In the event of a failure by a
party to comply with an order of the arbitral tribunal or to produce a document
or to permit inspection, the arbitral tribunal shall be entitled (a) to draw any
reasonable inference as to the contents of such document or the probable results
of such inspection unfavorable to the defaulting party and to rely upon that
inference in reaching its decision and (b) to preclude the defaulting party from
presenting testimony or other evidence with respect to the subject matter to
which such document or inspection relates.
(h)Each party shall extend to the arbitral tribunal all facilities for
obtaining any information required by the tribunal.
(i) In the event of the occurrence of a disagreement, dispute or
controversy during the period of performance of this Agreement, the arbitral
tribunal may establish such expedited or informal procedures for their
resolution and take such interim measures (subject to later modification, if
appropriate) as it deems appropriate in order to avoid delays to the extent
possible. Pending the issuance of a decision or award, the parties shall
continue performance under this Agreement, and the operations or activities
which may have given rise to the arbitration shall not be discontinued.
(j) At any oral hearing of evidence in connection with the arbitration,
each party hereto or its legal counsel shall have the right to examine its
witnesses and to cross-examine the witnesses of an opposing party. No evidence
of witnesses shall be presented in written form unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties to the dispute otherwise agree or except under extraordinary
circumstances where the interests of justice require a different procedure.
(k)No award or other decision of the arbitral tribunal whether substantive
or procedural shall be made by less than a majority of the arbitral tribunal.
The award shall grant the relief, if any, determined by the arbitral tribunal to
be appropriate and may, without limitation, direct the payment of damages, grant
rescission or reformation, and direct or prohibit action by any party to the
dispute. Whenever appropriate, the award shall specify a time for compliance
therewith.
(l) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties hereto
hereby waive any rights to appeal or to review of such award by any court or
tribunal. The award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found. Judgment upon the award
may be entered in any court having jurisdiction thereof.
(m) Except as the arbitral tribunal may otherwise determine in its
discretion or in the case of disputes arising out of a breach or alleged breach
of this Agreement, each party to an arbitration shall bear its own costs
including the costs and expenses of its witnesses and the parties shall share
equally the fees, costs and expenses of the arbitral tribunal and the
administering authority.
[Signatures on following page]
IN WITNESS WHEREOF, the parties have executed this Agreement, under
seal, as of the date first above written.
"BUYER"
AmeriSteel Corporation
By: /s/ Phillip E. Casey
------------------------
Phillip E. Casey
Title: President
"SELLER"
Birmingham Southeast LLC
By: /s/ James A. Todd, Jr.
---------------------------
James A. Todd, Jr.
Title: Manager
Birmingham Steel Corporation
By: /s/ James A. Todd, Jr.
--------------------------
James A. Todd, Jr.
Title: Chief Administrative Officer
Exhibit 2.2
Asset Purchase Agreement By and Among AmeriSteel Corporation,
Birmingham Southeast, LLC and Birmingham Steel Corporation
Dated as of November 14, 2001
(the "Asset Purchase Agreement")
Amendment to Asset Purchase Agreement
This Amendment to the Asset Purchase Agreement (this "Amendment") is entered
into as of the 28th day of December, 2001 by and among Birmingham Southeast, LLC
and Birmingham Steel Corporation (jointly and severally "Seller") and AmeriSteel
Corporation ("Buyer") in conjunction with the Closing of the Asset Purchase
Agreement. All capitalized terms used herein (unless otherwise defined herein)
shall have the meanings ascribed to such terms in the Asset Purchase Agreement.
In consideration of the mutual agreements set forth herein, the parties state
and agree as follows:
1. Section 11.5(d) of the Asset Purchase Agreement is hereby deleted and the
following shall be substituted in lieu thereof:
(d) Limitations on Liability of Seller and Buyer.
(i) Seller shall have no liability with respect to losses of Buyer
subject to indemnification hereunder until the total of all
losses of Buyer (in the aggregate and not per occurrence) exceeds
Two Hundred Fifty Thousand Dollars ($250,000). For purposes of
this Subsection (d), the entire amount of the loss shall be
counted, and not just the portion that exceeds any applicable
threshold of Materiality.
(ii) The provisions of Subsection (d)(i) immediately above shall not
apply to the following provisions of this Agreement: (A) the
first two (2) sentences of the introductory paragraph of Section
4.2 of this Agreement, (B) the provisions of Section 4.2(a), (C)
the provisions of Section 4.2(c), and (D) the provisions of
Section 4.22. As to each of the foregoing, Buyer's losses shall
be subject to indemnification from the first dollar of loss.
(iii)The maximum monetary indemnification liability of Buyer and
Seller (other than for breaches of Seller's representations and
warranties set forth in Section 4.2 and 4.3 of this Agreement)
shall be equal to Twelve Million Dollars ($12,000,000).
3. Exhibits "D" (Seller's Wire Transfer Instructions) and "I"(Form of Opinion
of Seller's Counsel) to the Asset Purchase Agreement are hereby deleted and
replaced with the Exhibits "D" and "I" as attached hereto.
4. This Amendment shall constitute an amendment to the Asset Purchase
Agreement as contemplated by Section 14.11 thereof; provided, however, that
except as expressly stated in this Amendment, no other amendment to the
terms and conditions of the Asset Purchase Agreement are to be implied by
the terms of this Amendment.
IN WITNESS WHEREOF, the parties hereby set forth their hands as of the 28th day
of December, 2001 by their duly authorized representatives.
SELLER:
Birmingham Southeast, LLC Birmingham Steel Corporation
By: /s/ James A. Todd, Jr. By: /s/ James A. Todd, Jr.
--------------------- ----------------------
James A. Todd, Jr., James A. Todd, Jr.,
Vice President and Chief Vice Chairman and Chief
Administration Officer Administrative Officer
BUYER:
AmeriSteel Corporation
By: /s/ Tom J. Landa
----------------
Tom J. Landa,
CFO and Secretary
Replacement Exhibit "D"
SouthTrust Bank
ABA# 062000080
DDA# 69639388
Corporate Trust
Ref: Birmingham Steel
Please contact Linda Moore at Birmingham Steel Corporation with any questions.
Ph (205) 970-1239 Fax (205) 968-4757
Linda.Moore@birsteel.com
Replacement Exhibit "I"
EXHIBIT I
(Form of Opinion Letter of Sellers' Counsel)
December 28, 2001
AmeriSteel Corporation
5100 West Lemon Street
Suite 312
Tampa, Florida 33609
Re: Asset Purchase Agreement By and Among AmeriSteel Corporation, Birmingham
Southeast, LLC and Birmingham Steel Corporation.
Ladies and Gentlemen:
We have acted as counsel to Birmingham Southeast, LLC, a Delaware limited
liability company ("Birmingham Southeast"), and Birmingham Steel Corporation, a
Delaware corporation ("Birmingham Steel"), in connection with the transactions
contemplated by that certain Asset Purchase Agreement dated as of November 14,
2001 by and among Birmingham Southeast, Birmingham Steel, and AmeriSteel
Corporation, a Florida corporation (the "Asset Purchase Agreement"). In the
Asset Purchase Agreement, AmeriSteel Corporation is defined as "Buyer", and
Birmingham Southeast and Birmingham Steel are jointly and severally defined as
"Seller", and are also jointly and severally referred to in this opinion letter
as "Seller." This opinion letter is being furnished to Buyer pursuant to the
requirements of Section 7.11 of the Asset Purchase Agreement.
This opinion letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (1991) (the "Accord") adopted by the Section of
Business Law of the American Bar Association, which is incorporated in this
opinion letter by this reference. As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this opinion
letter should be read in conjunction therewith. Capitalized terms used in this
opinion letter and not otherwise defined herein shall have the meanings assigned
to such terms in the Accord and in the Asset Purchase Agreement. If there should
be any conflict between the definitions contained in the Accord and the
definitions in the Asset Purchase Agreement, the definition in the Accord shall
control. Notwithstanding anything in the Accord to the contrary, the Accord
shall not be deemed to limit or otherwise qualify any of the express
qualifications, exceptions and limitations that are set forth herein, each of
which shall be cumulative of the Accord.
The opinions expressed herein are limited to the federal laws of the United
States, the General Corporation Law of the State of Delaware, the Delaware
Limited Liability Company Act and the laws of the State of Georgia.
For the purpose of rendering the opinions set forth herein, we have
examined executed counterpart originals of the following documents (collectively
the "Transaction Documents"):
(a) the Asset Purchase Agreement;
(b) the Adjustment Escrow Agreement;
(c) the Assignment and Assumption Agreement;
(d) the Assignment and Bill of Sale; and
(e) the Indemnification Agreement.
In our examination of documents, we have assumed the genuineness of all
signatures, other than those of Seller, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies, the authenticity of such latter documents, and the
legal competence of natural persons. As to questions of fact material to our
opinions, we have relied, with your permission, and without independent
verification of the accuracy or completeness thereof, solely upon (a)certified
copies of the Certificate of Incorporation and the By-Laws of Birmingham Steel;
(b) certified copies of the Certificate of Formation and the Operating Agreement
of Birmingham Southeast; (c) copies of resolutions of the Board of Directors of
Birmingham Steel adopted at a board meeting held on November 16, 2001 with
respect to the consummation of the transactions contemplated by the Asset
Purchase Agreement, certified to us as true and correct by an officer of
Birmingham Steel; (d) copies of resolutions of the Members and Managers of
Birmingham Southeast adopted at Member and Manager meetings both held on
December 4, 2001 with respect to the consummation of the transactions
contemplated by the Asset Purchase Agreement, certified to us as true and
correct by an officer or other duly authorized person on behalf of Birmingham
Southeast; (e) the corporate minute books of Birmingham Steel, certified to us
as true and correct by an officer of Birmingham Steel; (f) the company minute
books of Birmingham Southeast, certified to us as true and correct by an officer
or other duly authorized person on behalf of Birmingham Southeast; (g) the
representations and warranties of Seller contained in the Asset Purchase
Agreement; (h) the information contained in the Delaware Certificates of Good
Standing for each Seller; (i) the information contained in the Georgia
Certificates of Good Standing for each Seller; and (j) the reports of CT
Corporation System, copies of which have been delivered to Buyer with respect to
searches of certain public records relating to liens, judgements and litigation
pending against Seller.
Whenever our opinions herein are qualified by the phrase "to our
knowledge," or any other phrase of similar import, it is intended to indicate
that the current actual knowledge of the attorneys within this firm actively
engaged in the representation of Seller in this transaction is not inconsistent
with that portion of the opinion which such phrase qualifies; our use of such
phrases shall not indicate that we have made, and, in fact we have not made, any
independent investigation of matters of fact other than as set forth in the
preceding paragraph. In particular, and without limitation, we have not made any
independent investigation concerning the accuracy or veracity of the
representations or warranties or statements of fact contained in any of the
Transaction Documents. We have not made any independent review or investigation
of orders, judgments or decrees by which Seller is or may be bound, nor have we
made any independent investigation as to the existence of actions, suits,
investigations or proceedings, if any, pending or threatened against Seller, and
we have made no independent searches of any litigation dockets or any other
public records.
Based upon and subject to the foregoing and such qualifications as are
hereinafter set forth, we are of the opinion that:
1. Birmingham Steel is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Birmingham
Southeast is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Each Seller has the full power and authority to conduct their
business, as is relevant to the performance of its obligations under
the Transaction Documents. Each Seller is duly licensed and qualified
to do business and is in good standing as a foreign entity (a foreign
corporation in the case of Birmingham Steel and a foreign limited
liability company in the case of Birmingham Southeast) in the State of
Georgia. As used herein, the term "good standing" shall mean that all
filings have been made as required under applicable filing and
registration provisions of the business corporation law of the
jurisdiction in question, and that all applicable filing fees that are
due and payable thereunder have been paid.
2. Birmingham Steel has full corporate power and authority to execute and
deliver each of the Transaction Documents to which it is a party, to
perform its respective obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by
Birmingham Steel of each of the Transaction Documents to which it is a
party, and its performance of its respective obligations thereunder,
and the consummation of the transactions contemplated thereunder, have
been duly authorized by Birmingham Steel. The Transaction Documents
have been duly executed and delivered by Birmingham Steel, and
constitute the legal, valid and binding obligations of Birmingham
Steel enforceable against Birmingham Steel in accordance with their
respective terms.
3. Birmingham Southeast has full company power and, subject to the
qualification set forth in paragraph a., below, authority to execute
and deliver each of the Transaction Documents to which it is a party,
to perform its respective obligations thereunder, and to consummate
the transactions contemplated thereby. Subject to the qualification
set forth in paragraph a., below, the execution and delivery by
Birmingham Southeast of each of the Transaction Documents to which it
is a party, and its performance of its respective obligations
thereunder, and the consummation of the transactions contemplated
thereby have been duly authorized by Birmingham Southeast. Each of the
Transaction Documents to which it is a party has been duly executed by
Birmingham Southeast and, subject to the qualification set forth in
paragraph a., below, each constitutes the legal, valid and binding
obligation of Birmingham Southeast, enforceable against Birmingham
Southeast in accordance with its respective terms.
4. Neither Birmingham Steel's execution and delivery of the Transaction
Documents, nor its consummation of the transactions contemplated
thereby will: (a) conflict with or constitute a breach of either the
Certificate of Incorporation or By-Laws of Birmingham Steel; (b) to
our knowledge, result in a breach or other violation of the terms,
conditions, or provisions of any order, writ, judgment or decree of
any court or governmental or regulatory authority applicable to
Birmingham Steel; (c) conflict with or constitute a violation of any
existing State of Georgia or federal law; or (d) except as identified
in any Transaction Document, to our knowledge, require the consent or
approval of any person or entity by virtue of any agreement,
instrument or document of which we are aware and which is binding on
Birmingham Steel.
5. Neither Birmingham Southeast's execution and delivery of the
Transaction Documents, nor its consummation of the transactions
contemplated thereby will: (a) to our knowledge, result in a breach or
other violation of the terms, conditions, or provisions of any order,
writ, judgment or decree of any court or governmental or regulatory
authority applicable to Birmingham Southeast; (b) conflict with or
constitute a violation of any existing State of Georgia or federal
law; (c) conflict with or constitute a breach of the Certificate of
Formation of Birmingham Southeast; (d) subject to the qualification
set forth in paragraph a., below, conflict with or constitute a breach
of the Operating Agreement of Birmingham Southeast; or (e) except as
otherwise identified in any Transaction Documents, require the consent
or approval of any person or entity by virtue of any agreement (other
than the Operating Agreement of Birmingham Southeast), instrument or
document of which we are aware which is binding on Birmingham
Southeast.
6. Except as identified or contemplated in any Transaction Document, no
authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required in
order to enable Seller to enter into and perform its obligations under
the Transaction Documents to which it is a party.
7. To our knowledge except as may be disclosed in the Transaction
Documents: (a) no judgments are outstanding against Seller; (b) there
is not now pending or threatened any litigation, contested claim or
governmental proceeding by or against Seller or affecting Seller; and
(c) neither Seller is subject to any order, writ, injunction or decree
of any court or governmental or regulatory authority where the
foregoing would prevent Seller from entering into and consummating the
transactions contemplated by the Transaction Documents and performing
its obligations thereunder.
The General Qualifications, set forth in the Accord shall apply to the
opinions set forth in this opinion letter. Our opinions set forth in this
opinion letter are further limited by the following exceptions, qualifications
and assumptions:
a. As disclosed by Seller in the Asset Purchase Agreement and the
schedules thereto, on November 16, 2001, Seller received a letter from
Fried, Frank, Harris, Shriver & Jacobsen, counsel for Atlantic Steel
Company ("Atlantic Steel"), a minority member of Birmingham Southeast. In
the November 16, 2001 letter, Atlantic Steel alleges that the proposed sale
of the Cartersville Facility to Buyer violates the rights of Atlantic Steel
under the limited liability company operating agreement of Birmingham
Southeast (the "Operating Agreement") as well as Atlantic Steel's rights as
a minority member of Birmingham Southeast. Specifically, Atlantic Steel
references Section 7.6(b)(iii) of the Operating Agreement of Birmingham
Southeast which requires the prior written approval of all of the members
of Birmingham Southeast to "change the purpose of the Company set forth in
Section 1.4". Among other things, the purpose of Birmingham Southeast as
set forth in Section 1.4 of the Operating Agreement is to "own, operate,
and manage the Project". The "Project" is further defined as "the steel
making facility located in Cartersville, Georgia and the steel making
facility located in Jackson, Mississippi. . . together with any other steel
making facilities owned by the Company in the future". However, Section
1.5(b) of the Operating Agreement specifically provides that Birmingham
Southeast shall have the power and authority to accomplish this purpose
"including, without limitation, the power and authority . . . to . . .
lease, sell, convey, mortgage, transfer or dispose of any real or personal
property that may be necessary or incidental to the accomplishment of the
purpose of the Company". In addition, Section 7.6(a)(i) of the Operating
Agreement specifically gives Birmingham Southeast the right, upon the
written approval of holders of only a majority of the membership interests
to "sell, transfer, assign . . . or dispose of, whether in a single
transaction or series thereof, all or substantially all of the assets of
the Company". In our opinion, the plain wording of the Operating Agreement
contemplates that the parties thereto intended that holders of a majority
of the membership interests in Birmingham Southeast would have the right to
approve the sale of assets of Birmingham Southeast, even assets
constituting all or substantially all of the assets of Birmingham
Southeast, so long as those assets are being sold to an unaffiliated party.
Buyer qualifies as an unaffiliated party. A duly called special meeting of
the managers and a duly called special meeting of the members of Birmingham
Southeast were held on December 4, 2001 at which meetings the sale of the
Cartersville Facility to AmeriSteel and the transactions contemplated in
connection therewith were approved by a majority of the managers of
Birmingham Southeast and a majority of the members of Birmingham Southeast,
respectively. Based upon the foregoing, we are of the opinion that a
Georgia court, or a Delaware court, appropriately applying Delaware law in
a properly briefed and argued case addressing this issue, would find that
(i) Birmingham Southeast has full company authority to execute and deliver
each of the Transaction Documents to which it is a party, to perform its
respective obligations thereunder and to consummate the transactions
contemplated thereby; (ii) the execution and delivery by Birmingham
Southeast of each of the Transaction Documents to which it is a party, and
its performance of its respective obligations thereunder, and the
consummation of the transactions contemplated thereunder, have been duly
authorized by Birmingham Southeast; (iii) each of the Transaction Documents
to which Birmingham Southeast is a party constitutes the legal, valid and
binding obligation of Birmingham Southeast enforceable against Birmingham
Southeast in accordance with its respective terms; and (iv) neither
Birmingham Southeast's execution and delivery of the Transaction Documents,
nor its consummation of the transactions contemplated thereby will conflict
with or constitute a breach of the Operating Agreement of Birmingham
Southeast.
b. Our opinion with respect to the enforceability of the Transaction
Documents is qualified further to the extent enforcement may be limited by
certain other laws and legal and equitable principles of the law in the
State of Georgia and federal law which may limit or render ineffective
certain of the rights, remedies and waivers contained in the Transaction
Documents, none of which other laws or legal or equitable principles should
substantially interfere with the practical realization by Buyer of the
benefits intended to be afforded under the Transaction Documents.
c. We express no opinion as to the enforceability of those portions of
the indemnity or confidentiality provisions of the Transaction Documents
which purport by their terms to survive for an indeterminate time period.
d. We express no opinion as to the enforceability of the choice of law
provisions of the Transaction Documents.
e. We further express no opinion with respect to: (i) the possible
unenforceability of provisions, prohibiting competition, the solicitation
or acceptance of customers, business relationships of employees; (ii) the
possible unenforceability of provisions providing that the provisions of an
agreement are severable in all circumstances; (iii) the possible
unenforceability of provisions permitting the exercise, under certain
circumstances, of rights without notice or without providing opportunity to
cure failing to perform; (iv) the effect of agreements as to rights of
set-off otherwise, than in accordance with applicable law; (vi) the
possible unenforceability of provisions that are in the nature of an
arbitration clause; and(vii) the statute, administrative decisions and
rules and regulations of any county, municipal or special political
subdivision.
This opinion letter has been delivered solely for the benefit of the
addressee hereof in connection with the transactions contemplated by the
Agreement and may not be relied upon by any other person or entity or for any
other purpose without our express written permission. We expressly disclaim any
duty to update this opinion letter in the future in the event that there are any
changes in the relevant fact or law that may change or otherwise affect any of
the opinions expressed herein.
Very truly yours,
BURR & FORMAN LLP
Exhibit 2.3
Asset Purchase Agreement By and Among AmeriSteel Corporation,
Birmingham Southeast, LLC and Birmingham Steel Corporation
Dated as of November 14, 2001
(the "Asset Purchase Agreement")
Amendment to Asset Purchase Agreement
This Amendment to the Asset Purchase Agreement (this "Amendment") is entered
into as of the ___th day of January, 2002 by and among Birmingham Southeast, LLC
and Birmingham Steel Corporation (jointly and severally "Seller") and AmeriSteel
Corporation ("Buyer") in conjunction with the Closing of the Asset Purchase
Agreement. All capitalized terms used herein (unless otherwise defined herein)
shall have the meanings ascribed to such terms in the Asset Purchase Agreement.
In consideration of the mutual agreements set forth herein, the parties state
and agree as follows:
1. The first sentence of Section 2.5(b) of the Asset Purchase Agreement is
hereby amended by changing the reference of 30 days to 60 days, such that the
first sentence shall now read as follows:
(b) Within sixty (60) calendar days subsequent to the Closing Date, Buyer
will provide to Seller, Buyer's final determination of the Cash
Consideration as of the Closing Date, and any adjustments necessary to
the Closing Settlement Statement.
2. This Amendment shall constitute an amendment to the Asset Purchase
Agreement as contemplated by Section 14.11 thereof; provided, however, that
except as expressly stated in this Amendment, no other amendment to the terms
and conditions of the Asset Purchase Agreement are to be implied by the terms of
this Amendment.
IN WITNESS WHEREOF, the parties hereby set forth their hands as of the ____th
day of January, 2002 by their duly authorized representatives.
SELLER:
Birmingham Southeast, LLC Birmingham Steel Corporation
By: /s/ J. Daniel Garrett By: /s/ J. Daniel Garrett
--------------------- ----------------------
J. Daniel Garrett, J. Daniel Garrett,
Chief Financial Officer Chief Financial Officer
and Vice President - Finance and Vice President- Finance
BUYER:
AmeriSteel Corporation
By: /s/ Tom J. Landa
----------------
Tom J. Landa,
CFO and Secretary