8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: September 27, 2002

Birmingham Steel Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-9820
(Commission File Number) 13 -3213634
(I.R.S. Employer Identification No.)

1000 Urban Center Drive
Suite 300
Birmingham, AL 35242
(Address of principal executive offices)

(205) 970-1200

(Registrant’s Telephone Number, Including Area Code)

Index to Exhibits on Page 4 Page 1 of 4 Pages

TABLE OF CONTENTS

THIRD AMENDED PLAN OF REORGANIZATION

DISCLOSURE STATEMENT

CONFIRMATION ORDER

Item 3. Bankruptcy or receivership

On September 17, 2002 (the “Confirmation Date”) the United States Bankruptcy Court for the District of Delaware (the “Court”) entered an order (the “Confirmation Order”) confirming the Third Amended and Restated Joint Plan of Reorganization as modified (“Plan of Reorganization”), of Birmingham Steel Corporation (the “Company”) under Chapter 11 (“Chapter 11”) of Title 11 of the United States Code (“the Bankruptcy Code”) (Case No.02-11586) (the “Case”).

Material features of the Plan of Reorganization are:

The Plan of Reorganization provides for the sale of substantially all of the Company’s assets to Nucor, Inc. (“Nucor”) pursuant to the Asset Purchase Agreement. The Plan of Reorganization provides for the liquidation of the Excluded Assets that are not being sold to Nucor. The liens of the secured creditors in Class 2 (as defined below) will attach to the proceeds of the sale. Such secured creditors hold liens in substantially all the assets of the debtors and the aggregate amount of their claims exceeds the expected amount of the proceeds of the sale of the Company’s assets. Although secured parties are not being paid in full, pursuant to the Plan Support Agreement the secured creditors have agreed to pay certain sums to unsecured and other creditors and interest holders in the Company. For a more complete description of the Plan Support Agreement and its effect on the distribution of the proceeds of the sale of the Debtor’s assets, see Section IV of Exhibit 2, the Disclosure Statement for Joint Plan of Reorganization of Birmingham Steel Corporation (the “Disclosure Statement”).

The plan places Claims against the Company and Interests in the Company in the following classes:

Class 1 consists of Allowed Priority Claims, other than Priority Tax Claims. Each holder of a Class 1 Claim shall be paid Cash on or before the fifteenth day after the Confirmation Date. Cash from existing proceeds after the Confirmation Date shall be paid in an amount equal to the amount of such Class 1 Claim. Claims in Class 1 are not impaired under the Plan of Reorganization. Therefore, pursuant to section 1126(f) of the Bankruptcy Code, the holders of Claims in Class 1 conclusively are presumed to have accepted the Plan of Reorganization.

Class 2 consists of the Allowed Secured Claims of each party to the Omnibus Collateral Agreement and the Intercreditor Agreement, in their capacities as such, including the 1993 Noteholders, the Bank Group, the Indenture Trustee (as assignee of the Owner Trustee for the benefit of the Memphis Equipment Noteholders), PNC and the Collateral Agent. The holders of Claims in Class 2 shall retain the liens securing such Claims to the extent of the Allowed amount of such Claims. Upon the closing of the Sale, such Liens shall attach to the Class 2 Distribution Amount, subject to the terms and conditions set forth in the Plan of Reorganization. In full and final settlement and discharge of Class 2 Claims, the Collateral Agent on account of each holder of an Allowed Class 2 Claim shall receive on the Closing Date, and from time to time thereafter (if applicable) the Class 2 Distribution Amount. Pursuant to section 1126(a) of the Bankruptcy Code, holders of Claims in Class 2 are entitled to vote to accept or reject the Plan of Reorganization. Notwithstanding any other provisions of the Plan, as of the Confirmation Date, the Secured Claims of each holder of a Class 2 Claim shall be deemed Allowed without defense, set off, offset, right of recoupment or counterclaim.

2

Class 3 consists of Other Secured Claims not defined in any of the other Classes. In full and final satisfaction and discharge of all Class 3 Claims, if any, each holder of an Allowed Class 3 Claim shall receive on the fifteenth (15th) day after such Claim becomes an Allowed Claim, at the Company’s election (i) the Collateral securing such Claim, without representation, warranty or recourse, to the extent such Collateral is included in the Excluded Assets and to the extent not already received by such holder; or (ii) Cash not to exceed $500,000 from (I) the proceeds of the Cash Collateral or the DIP Facility to the extent such Claim becomes an allowed Claim before the Closing Date and the (II) the Administrative Claim Reserve.

Class 4 consists of Allowed Claims of (a) the Cartersville Noteholders; (b) the AIR Lenders; (c) the holders of the Rejection Damages Claims; and (d) the holders of any other Allowed Unsecured Claims, including, without limitation, the Claims of each party to the Omnibus Collateral Agreement and the Intercreditor Agreement to the extent such Claims are Unsecured Claims by operation of Section 506(a) of the Bankruptcy Code. On the Confirmation Date, Class 4 Creditors will receive a Pro Rata payment of the Class 4 dividend, with a retention in an amount sufficient to distribute to any contested but unresolved Class 4 Claims in accordance with Section VIIB of the Plan; provided however, (i) that the claims of each of the Secured Parties (as defined in the Intercreditor Agreement and solely in their capacity as Secured Parties pursuant to that agreement) who are parties to the Omnibus Collateral Agreement and the Intercreditor Agreement included in Class 4 by operation of Section 506(a) of the Bankruptcy Code shall be subordinated to all other Allowed Claims in Class 4 for the purposes of distribution of the Class 4 Dividend only from the Liquidation Trust; (ii) there shall be no distribution of the Class 4 Dividend on account of Severance and Retirement Claims or on account of any portion of any Class 4 Claim paid after the Filing Date.

Class 5 consists of Interests in Birmingham Steel other than the Lender Warrants. The Class 5 Interests shall be cancelled as of the Confirmation Date; however, according to terms of the Plan Support Agreement, Claims relating to Class 5 Interests shall receive, Pro Rata, a portion of the Plan Support Agreement Equity Dividend equal to $7.7 million.

Class 6 consists of Interests in Birmingham Steel that are Lender Warrants. The Lender Warrants shall be cancelled as of the Confirmation Date. The holders of Interests in Class 6 shall not receive or retain any Distribution or other property on account of such Interests.

Class 7 consists of Intercompany Claims. The holders of Class 7 Claims shall not receive or retain any Distribution or other property on account of such Claims. Pursuant to Section 1126(g) of the Bankruptcy Code, holders of Claims in Class 7 are deemed to have rejected the Plan and are not entitled to vote to accept or reject the Plan of Reorganization.

Class 8 consists of Intercompany Interests. The holders of Class 8 interests shall not receive or retain any Distribution or other property on account of such Interests. Pursuant to Section 1126(g) of the Bankruptcy Code, holders of Interest in Class 8 are deemed to have rejected the Plan of Reorganization and are not entitled to accept or reject the Plan of Reorganization.

3

Sale of Assets:

On February 14, 2002, Nucor announced an unsolicited offer to purchase substantially all of Birmingham Steel’s assets for $500 million. On May 30, 2002, Birmingham Steel signed an asset purchase agreement with Nucor whereby Nucor would purchase substantially all of Birmingham Steel’s assets for $615 million in cash. Birmingham Steel also entered into an agreement, dated May 30, 2002, with Birmingham Steel’s secured lenders in support of the transaction. These agreements require that the transaction with Nucor have been approved pursuant to a pre-arranged chapter 11 bankruptcy filing by the bankruptcy court in Delaware. The $615 million purchase price proposed by Nucor is less than the full value of Birmingham Steel’s secured debt. Birmingham Steel and its secured lenders negotiated a pre-arranged plan agreement which provides that secured lenders distribute a portion of the proceeds from the transaction to unsecured creditors and shareholders. The agreements contemplate payments to shareholders of approximately $15 million. The plan contemplated by Birmingham Steel, its secured lenders and Nucor would also provide for the continued and uninterrupted payments to Birmingham Steel’s critical vendors from operating cash flows and a proposed interim financing arrangement.

Item 7.     Financial Statements and Exhibits

Exhibits

1.	Third Amended Plan of Reorganization
2.	Disclosure Statement for the Joint Plan of Reorganization
3.	Confirmation Order entered by the Court on September 17, 2002

Signatures

Pursuant to the requirements of the Securities and Exchange of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

4

SIGNATURES

Pursuant to the requirements of the Securities and Exchange of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BIRMINGHAM STEEL CORPORATION
Date: September 27, 2002	By: /s/ Catherine W. Pecher Name: Catherine W. Pecher Its: Vice President — Administration and        Corporate Secretary

EX-1

                                                                       EXHIBIT 1

                      IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

- -------------------------------------
                                    )
In re:                              )    Chapter 11
                                    )
BIRMINGHAM STEEL CORPORATION,       )    Case No. 02-11586 (RSB)
BIRMINGHAM SOUTHEAST, L.L.C.,       )    Case No. 02-11587 (RSB)
AMERICAN STEEL & WIRE CORPORATION,  )    Case No. 02-11588 (RSB)
PORT EVERGLADES STEEL CORPORATION,  )    Case No. 02-11589 (RSB)
BIRMINGHAM RECYCLING INVESTMENT     )    Case No. 02-11590 (RSB)
COMPANY,                            )
                                    )    Jointly Administered
                  Debtors.          )
                                    )
- -------------------------------------

             THIRD AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION
                   OF BIRMINGHAM STEEL CORPORATION, BIRMINGHAM
              SOUTHEAST, L.L.C, AMERICAN STEEL & WIRE CORPORATION,
                PORT EVERGLADES STEEL CORPORATION AND BIRMINGHAM
                       RECYCLING INVESTMENT COMPANY, UNDER
                       CHAPTER 11 OF THE BANKRUPTCY CODE


                                       John P. Whittington
                                       Patrick Darby
                                       Lloyd C. Peeples, III
                                       Christopher L. Hawkins
                                       BRADLEY ARANT ROSE & WHITE LLP
                                       One Federal Place
                                       1819 Fifth Avenue North
                                       Birmingham, Alabama 35203
                                       (205) 521-8000

                                       - and -

                                       James L. Patton, Jr. (No. 2202)
                                       Michael R. Nestor (No. 3526)
                                       YOUNG CONAWAY STARGATT
                                       & TAYLOR, LLP
                                       The Brandywine Building
                                       1000 West Street, 17th Floor
                                       Wilmington, Delaware 19801
                                       Telephone: (302) 571-6600

                                       Attorneys for Debtors in Possession





         Birmingham Steel Corporation, Birmingham Southeast, L.L.C., American
Steel & Wire Corporation, Port Everglades Steel Corporation and Birmingham
Recycling Investment Company, debtors and debtors-in-possession (the "Debtors")
propose the following Joint Chapter 11 Plan (as amended from time to time, the
"Plan"). The Plan provides for the sale of substantially all the Debtors'
assets, with the liens of the secured creditors in Class 2 (as defined below) to
attach to the sale proceeds. Such secured creditors hold liens on substantially
all of the assets of the Debtors and the aggregate amount of their claims
exceeds the expected amount of the proceeds of the sale of the Debtors' assets.
Even though secured parties are not being paid in full pursuant to the Plan,
such secured creditors have agreed to pay certain sums to unsecured and other
creditors of the Debtors and interest holders of BSC.

                                  INTRODUCTION

         For a discussion of the Debtors' history, business, operations, assets
and financial information, and for a summary and analysis of the Plan, all
creditors and shareholders should consult the Disclosure Statement accompanying
the Plan, including the Exhibits thereto (the "Disclosure Statement").

         No solicitation materials, other than the Disclosure Statement and
related materials transmitted therewith, have been approved for use in
soliciting acceptances and rejections of the Plan. Nothing in the Plan should be
construed as constituting a solicitation of acceptances of the Plan unless and
until the Disclosure Statement has been approved and distributed to all holders
of Claims and Interests to the extent required by 11 U.S.C ss. 1125.

         All holders of Claims and Interests are encouraged to read carefully
the Disclosure Statement and the Plan, each in its entirety, before voting to
accept or reject the Plan.


                                   SECTION I.
                     DEFINITIONS AND RULES OF INTERPRETATION

A.       DEFINITIONS. A TERM USED AND NOT DEFINED IN THE PLAN AND DEFINED IN THE
BANKRUPTCY CODE OR IN THE BANKRUPTCY RULES SHALL HAVE THE MEANING ASSIGNED TO
SUCH TERM IN THE BANKRUPTCY CODE OR IN THE BANKRUPTCY RULES. AS USED IN THE
PLAN, THE FOLLOWING TERMS HAVE THE RESPECTIVE MEANINGS SPECIFIED BELOW:

         1.       1993 NOTEHOLDERS means entities holding Claims (in their
capacities as such) under those certain 10.03% senior notes due December 15,
2005 issued by BSC pursuant to certain Amended and Restated Note Purchase
Agreements dated as of October 12, 1999, as amended, in substitution of notes
initially issued in 1993, and each of them.

         2.       1995 NOTEHOLDERS means entities holding Claims (in their
capacities as such) under those certain (a) 9.71% series A senior notes due
December 15, 2002; (b) 9.82% series B senior notes due December 15, 2005; and
(c) 9.92% series C senior notes due December 15, 2005 issued by BSC pursuant to
certain Amended and Restated Note Purchase Agreements dated as of October 12,
1999, as amended, in substitution of notes initially issued in 1995, and each of
them.


                                       2





         3.       ADMINISTRATIVE EXPENSE CLAIM means a Claim against any Debtor
for costs and expenses of administration under section 503(b) or 507(b) of the
Bankruptcy Code, including: (a) all Claims for the actual and necessary costs
and expenses incurred after the Filing Date of preserving the Estates and
operating the businesses of the Debtors (such as wages, salaries or commissions
for services and payments for goods and other services and leased premises); (b)
all fees and charges assessed against the Debtors' Estates under section 1930,
chapter 123 of Title 28, United States Code; (c) all DIP Facility Claims; (d)
all Bonus Claims; and (e) all Fee Claims.

         4.       ADMINISTRATIVE CLAIM RESERVE means a portion of the Gross
Proceeds equal to $12,500,000, less the aggregate amount of fees, if any, paid
by the Debtors during the pendency of the Cases prior to the Closing Date to
CIBC World Markets Corp.

         5.       AIR LENDERS means collectively, Bank of America, N.A., Bank of
Nova Scotia, General Electric Capital Corporation, Gulf International Bank,
Regions Bank, Sumitomo Mitsui Banking Corporation, and UFJ Bank Limited in their
capacity as lenders to American Iron Reduction, L.L.C., and each of them.

         6.       ALLOWED means, with reference to any Claim or Interest and
with respect to the Debtors, (a) any Claim against or Interest in the Debtors
that (i) has been listed by the Debtors in their Schedules, as such Schedules
may be amended by the Debtors from time to time in accordance with Bankruptcy
Rule 1009, as liquidated in amount and not disputed or contingent and for which
no contrary proof of claim or interest has been filed, or (ii) has been allowed
under the Plan, or (iii) has been allowed by Final Order of the Bankruptcy
Court, or (iv) as to which a proof of claim has been timely filed in a
liquidated amount with the Bankruptcy Court pursuant to the Bankruptcy Code or
any order of the Bankruptcy Court, or filed late with leave of the Bankruptcy
Court after notice and a hearing, and (b) in respect of which no objection to
the allowance of such Claim or Interest has been interposed within any
applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy
Rules, a Final Order or other applicable law.

         7.       ALLOWED OTHER SECURED CLAIM means an Allowed Secured Claim,
other than Allowed Claims in Class 2, determined and Allowed pursuant to section
III.C.3 of the Plan.

         8.       ASSET PURCHASE AGREEMENT means the Asset Purchase Agreement
dated May 30, 2002 by and between Buyer, Nucor Corporation as guarantor and BSC,
Birmingham Southeast, L.L.C. and Port Everglades Steel Corporation as sellers, a
copy of which (without schedules) is attached as Exhibit A to the Plan and
incorporated by reference.(1)

         9.       ASSIGNED CONTRACTS means the executory contracts and unexpired
leases of the Debtors to be assigned to Buyer pursuant to the Asset Purchase
Agreement, as defined in Section 2.01(f) of the Asset Purchase Agreement. A copy
of Schedule 2.01(f) of the Asset Purchase Agreement is attached as Exhibit B to
the Plan and incorporated by reference.

         10.      AVOIDANCE ACTION means any claim or cause of action of the
Debtors, or any of them, or the Estates, or any of them, that is or may be the
subject of an adversary proceeding under


- --------
(1) A copy of the to the Asset Purchase Agreement's schedules are available upon
written request to the Debtors' counsel.

                                       3




sections 510, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, or 553 of the
Bankruptcy Code, or other applicable law.

         11.      BANK GROUP means the entities holding claims as lenders (in
their capacities as such) under the Pre-Petition Credit Agreement.

         12.      BANKRUPTCY CODE means title 11 of the United States Code, 11
U.S.C.ss.ss. 101-1330 as amended from time to time.

         13.      BANKRUPTCY COURT means the United States Bankruptcy Court for
the District of Delaware or any other United States District Court, or unit
thereof, exercising jurisdiction over the Cases.

         14.      BANKRUPTCY RULES means the Federal Rules of Bankruptcy
Procedure as promulgated by the United States Supreme Court under 28 U.S.C.ss.
2075, and the local rules of the Bankruptcy Court, as amended from time to time.

         15.      BAR DATE means the date(s) established by the Plan or by a
Final Order of the Bankruptcy Court as the final date(s) to file proofs of
claim, requests for allowance of an Administrative Expense Claim, or any other
notice, objection or other document to evidence, support or seek Allowance of
any Claim.

         16.      BONUS CLAIMS means Claims entitled to Distributions from the
Bonus Reserve Amount.

         17.      BONUS RESERVE AMOUNT means an amount up to $1,000,000 for
distribution to certain employees of the Debtors, subject to the terms set forth
on Exhibit B-5 to the Plan Support Agreement.

         18.      BSC means Birmingham Steel Corporation, a Delaware corporation
and one of the Debtors.

         19.      BUDGET has the meaning set forth in the Financing Order.

         20.      BUSINESS DAY means any day other than a Saturday, Sunday or
Legal Holiday.

         21.      BUYER means JAR Acquisition Corporation, a Delaware
corporation.

         22.      CARTERSVILLE ESCROW means the escrow of funds of $3.0 million
held by SouthTrust Bank, as Escrow Agent, in connection with the sale of the
Cartersville, Georgia facility, pursuant to that certain Indemnification Escrow
Agreement dated December 28, 2001, by and among SouthTrust Bank, BSC, BSE and
Ameristeel Corporation.

         23.      CARTERSVILLE ESCROW CONTRIBUTION means $1.5 million of the
funds held in the Cartersville Escrow.

         24.      CASES means, collectively, the Debtors' respective cases under
chapter 11 of the Bankruptcy Code.

                                       4





         25.      CASH means legal tender of the United States of America, which
may be conveyed by check or wire transfer.

         26.      CASH COLLATERAL has the meaning set forth in the Financing
Order.

         27.      CAUSES OF ACTION means all Claims and causes of action now
owned or hereafter acquired by the Debtors or the Estates, or any of them, or
which may be maintained by the Debtors or the Estates, or any of them, for the
benefit of creditors, whether arising under any contract or under the Bankruptcy
Code or other federal or state law, including, without limitation, Avoidance
Actions, but excluding claims and causes of action and related recoveries (a)
transferred to the Buyer under the terms of the Asset Purchase Agreement; (b)
released or waived pursuant to the Plan; (c) constituting a defense,
counterclaim or offset to or against any Claim; and (d) constituting rights of
recharacterization or subordination released pursuant to the Plan.

         28.      CLAIM has the meaning set forth in section 101(5) of the
Bankruptcy Code.

         29.      CLAIMS OBJECTION BAR DATE means the final date to object to
the allowance of Claims pursuant to Section VII.A of the Plan.

         30.      CLASS means a category of holders of Claims or Interests as
set forth in Section II of the Plan.

         31.      CLASS 2 DISTRIBUTION means a distribution by the Distribution
Agent from the Class 2 Distribution Amount pursuant to the Plan.

         32.      CLASS 2 DISTRIBUTION AMOUNT means (a) the Gross Sale Proceeds;
plus (b) the Debtors' Cash as of the Closing Date; plus (c) any amounts paid
after the Closing Date under the Asset Purchase Agreement; plus (d) the Secured
Party Trust Assets (and the Net Proceeds thereof to the extent liquidated after
the Filing Date), plus (e) any assets described in subsections I.58(i), (ii),
(iii) and (iv) of the Plan (and any proceeds thereof); plus (f) any amount of
the Cartersville Escrow in excess of the Cartersville Escrow Contribution; plus
(g) the Excess Assets less; (w) the amount required to pay the DIP Facility
Claims as set forth in Section III.A of the Plan; (x) the Cure Amounts; (y) the
amounts required to pay the Debtors' post-Filing Date payables incurred in
accordance with the Budget and unpaid as of the Closing Date pursuant to Section
2(a)(i)(E) of the Plan Support Agreement, as set forth in Section III.A of the
Plan; and (z) the Administrative Claim Reserve.

         33.      CLASS 4 DIVIDEND means the sum of $17.5 million Cash funded as
set forth in Section VI.A.1 of the Plan.

         34.      CLASS 5 DIVIDEND has the meaning set forth in Section VI.B.3
of the Plan.

         35.      CLOSING DATE means the Effective Date.

         36.      COLLATERAL means any property or interest in property of the
estates or the Debtors subject to a Lien to secure the payment or performance of
a Claim, to the extent such Lien is not subject to avoidance under the
Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable
state law.


                                       5





         37.      COLLATERAL AGENT means SouthTrust Bank, in its capacity as
collateral agent under the Omnibus Collateral Agreement.

         38.      COMMITTEES means, collectively, each official committee, if
any, appointed by the United States Trustee in the Cases pursuant to Section
1102(a) of the Bankruptcy Code.

         39.      CONFIRMATION means entry of the Confirmation Order on the
Bankruptcy Court's docket in the Cases.

         40.      CONFIRMATION DATE means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on the Bankruptcy Court's docket
in the Cases.

         41.      CONFIRMATION HEARING means the hearing held by the Bankruptcy
Court to consider confirmation of the Plan pursuant to section 1129 of the
Bankruptcy Code, as such hearing may be adjourned or continued from time to
time.

         42.      CONFIRMATION ORDER means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

         43.      CURE AMOUNTS means respective amounts, if any, necessary to
cure defaults under the Assigned Contracts pursuant to Section 365(b) of the
Bankruptcy Code, as listed in a Schedule to be filed by the Debtors prior to
Confirmation as set forth in Section V of the Plan, but excluding any amounts
for which the Buyer is obligated, as set forth in the Asset Purchase Agreement,
to pay amounts necessary to cure defaults, if any, under certain Assigned
Contracts related to the Debtors' Memphis facility.

         44.      DEBTORS means the entities identified as debtors and
debtors-in-possession on the cover page and in the preamble of the Plan;
provided that to the extent Distributions under the Plan occur after the
Effective Date, any reference to the Debtors making a Distribution shall be
construed as a reference to the Distribution Agent or the Liquidation Trustee,
as the case may be.

         45.      DIP FACILITY means, collectively, (a) the credit facility
arising under the Post-Petition Credit Agreement; and (b) all agreements,
instruments and other documents evidencing such indebtedness.

         46.      DIP FACILITY CLAIMS means Claims arising from or related to
the DIP Facility.

         47.      DIP ORDER means that certain Final Order, dated July 12, 2002,
authorizing debtors to (i) enter into post-petition financing agreement, (ii)
use cash collateral, and (iii) provide adequate protection, grant liens,
security interests and superpriority claims.

         48.      DISCLOSURE STATEMENT means the disclosure statement that
relates to the Plan and is approved by the Court pursuant to section 1125 of the
Bankruptcy Code, as such Disclosure Statement may be amended, modified, or
supplemented (and all exhibits and schedules annexed thereto or referred to
therein).

         49.      DISCLOSURE STATEMENT ORDER means the order of the Court
approving the Disclosure Statement as containing adequate information pursuant
to section 1125 of the Bankruptcy Code.


                                       6




         50.      DISPUTED CLAIM means a Claim against the Debtors that is not
Allowed, including:

                  a.       if no proof of Claim has been filed by the applicable
                           Bar Date or has otherwise been deemed timely Filed
                           under applicable law: (i) a Claim that is listed on a
                           Debtor's Schedules as disputed, contingent or
                           unliquidated; or (ii) a Claim that is listed on a
                           Debtor's Schedules as other than disputed, contingent
                           or unliquidated, but as to which the applicable
                           Debtor, or any other party in interest with standing
                           to object to claims under the Plan or applicable law,
                           has Filed an objection by the Claims Objection Bar
                           Date, unless such objection has been withdrawn or
                           denied by a Final Order; or

                  b.       if a proof of Claim or request for payment of an
                           Administrative Claim has been Filed by the Bar Date
                           or has otherwise been deemed timely Filed under
                           applicable law: (i) a Claim for which a corresponding
                           Claim is listed on a Debtor's Schedules as disputed,
                           contingent or unliquidated; or (ii) a Claim for which
                           an objection has been Filed by the applicable Debtor,
                           or any other party in interest with standing to
                           object to Claims under the Plan or applicable law, by
                           the Claims Objections Bar Date, unless such objection
                           has been withdrawn or denied by a Final Order.

         51.      DISTRIBUTION means any distribution pursuant to the Plan to
the holders of Allowed Claims or Allowed Interests.

         52.      DISTRIBUTION AGENT means the Person designated by the Debtors
and approved by the Bankruptcy Court in the Confirmation Order to make
distributions pursuant to the Plan and the Plan Support Agreement, and any
successor thereto.

         53.      DISTRIBUTION ACCOUNT means an account to be established and
maintained by the Distribution Agent for the purpose of depositing and making
distributions pursuant to the Plan and the Plan Support Agreement.

         54.      DISTRIBUTION DATE means any date on which a Distribution is
made pursuant to the Plan.

         55.      EFFECTIVE DATE means the day the Sale is closed.

         56.      ESTATES means the respective estates created by the
commencement of the Cases pursuant to Section 541 of the Bankruptcy Code,
including, without limitation, any and all rights, claims and interests of the
Debtors and any and all interests in their property, whether real, personal or
mixed, rights, causes of action, Avoidance Actions, avoidance powers or
extensions of time that the Debtors or their estates shall have had effective as
of the commencement of either of the Cases, or which such estate acquired after
the commencement of the Cases, whether by virtue of sections 544, 545, 546, 547,
548, 549, 550, 551, and 553 of the Bankruptcy Code or otherwise.

         57.      EXCESS ASSETS has the meaning set forth in Section VI.B.3 of
the Plan.

         58.      EXCLUDED ASSETS has the meaning set forth in the Asset
Purchase Agreement; provided, however, that Excluded Assets as used in this Plan
does not include (i) claims and rights


                                       7




related to Excluded Liabilities (as defined in the Asset Purchase Agreement),
(ii) rights of Sellers (as defined in the Asset Purchase Agreement) under the
Asset Purchase Agreement and the Plan Support Agreement, (iii) cash and bank
accounts, and (iv) corporate minute books, stock records and related documents
and tax records.

         59.      EXCULPATED PARTIES has the meaning set forth in Section VI.C.4
of the Plan.

         60.      FEE CLAIM means a Claim for compensation or reimbursement of
expenses under Sections 327, 328, 330, 331 503(b) or 1103 of the Bankruptcy Code
including compensation requested pursuant to section 503(b)(3) and (4) of the
Bankruptcy Code for substantial contribution in the Cases.

         61.      FILED, FILED OR FILING means filed, filed, or filing with the
Bankruptcy Court or its designee in the Cases.

         62.      FILING DATE means June 3, 2002, the date of the Filing of the
petitions commencing the Cases.

         63.      FINAL CLASS 4 DISTRIBUTION DATE means the date of the last
Distribution of the Class 4 Dividend under the Plan for and on account of any
Allowed Class 4 Claim.

         64.      FINAL ORDER means an order or judgment (a) as to which the
time to appeal, petition for certiorari, or move for reargument or rehearing has
expired and as to which no appeal, petition for certiorari, or other proceedings
for reargument or rehearing shall then be pending; or (b) as to which any right
to appeal, move for a stay pending appeal, petition for certiorari, reargue, or
rehear shall have been waived in writing in form and substance satisfactory to
the Debtors or, (c) in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought, such order shall have been
denied by the highest court to which such order was appealed, or certiorari,
reargument or rehearing shall have been taken and the time to take any further
appeal, petition for certiorari or move for reargument or rehearing shall have
expired; provided, however, that the possibility that a motion under Rule 59 or
Rule 60 of the Federal Rules of Civil Procedure or Bankruptcy Rules 9023 or 9024
may be filed with respect to such order shall not cause such order not to be a
final order.

         65.      FINANCING ORDERS means the Interim and Final Orders of the
Bankruptcy Court approving the Post-Petition Credit Agreement and authorizing
the Debtors to use cash collateral and incur indebtedness under the DIP
Facility, as amended or supplemented from time to time prior to the Confirmation
Date.

         66.      FIRST DISTRIBUTION DATE means a Business Day, as determined by
the Debtors, as soon as practicable after the Closing Date, but at least one (1)
Business Day after the Collateral Agent makes the Class 2 Distribution to the
holders of Allowed Claims in Class 2 pursuant to the Plan.

         67.      GROSS SALE PROCEEDS means the actual Cash proceeds paid by the
Buyer upon closing of the Sale.


                                       8




         68.      INDENTURE TRUSTEE means First Union Bank in its capacity as
trustee under the Trust Indenture, and its successors in such capacity.

         69.      INFORMAL GROUP has the meaning set forth in the Plan Support
Agreement.

         70.      INITIAL TRUST DISTRIBUTION DATE means a Business Day, as
determined by the Liquidation Trustee, as soon as practical after the Closing
Date, but at least one (1) Business Day after the funding of the Class 4
Dividend in the Liquidation Trust pursuant to Section VI.B of the Plan.

         71.      INSURED PARTIES has the meaning set forth in Section X.B of
the Plan.

         72.      INTERCREDITOR AGREEMENT means (i) that certain Amended and
Restated Collateral Agency and Intercreditor Agreement (re: October 12, 1999)
dated as of May 15, 2000 among BSC, the Collateral Agent named therein and the
Secured Parties named therein, as amended, and (ii) that certain Amended and
Restated Collateral Agency and Intercreditor Agreement (re: November 12, 1999)
dated as of November 12, 1999 among BSC, the Collateral Agent named therein and
the Secured Parties named therein, as amended.

         73.      INTERCOMPANY CLAIMS means any and all Claims of one of the
Debtors against any other of the Debtors, whether or not evidenced by an
instrument or other writing and including, without limitation, any account
reflecting intercompany book entries as between the Debtors or any of them.

         74.      INTERCOMPANY INTERESTS means any and all Interests of one of
the Debtors in any other of the Debtors

         75.      INTEREST means any ownership interest in the Debtors,
including but not limited to the rights of the holders of common stock or
preferred stock (in their capacities as such), or other equity in the Debtors,
including the rights of any entity to purchase or demand the issuance of any of
the foregoing, including: (a) conversion, exchange, voting, participation, and
dividend rights; (b) liquidation preferences; (c) stock options, call rights,
warrants and put rights; and (d) share-appreciation rights and restricted stock
purchase rights.

         76.      LENDER WARRANTS means the warrants to purchase shares of BSC
treasury stock for the purchase price of one cent ($0.01) per share under that
certain Warrant Agreement dated as of May 15, 2000, as amended.

         77.      LEGAL HOLIDAY has the meaning set forth in Bankruptcy Rule
9006(a).

         78.      LIEN has the meaning set forth in section 101(37) of the
Bankruptcy Code.

         79.      LIQUIDATION TRUST means the trust established on the Effective
Date pursuant to Section VI.A of the Plan.

         80.      LIQUIDATION TRUSTEE means the Person appointed by the Debtor
pursuant to Section VI.A.3 of the Plan to administer and act as trustee of the
Liquidation Trust.


                                       9




         81.      MEMPHIS EQUIPMENT means the equipment leased by BSC from the
Owner Trustee pursuant to the Memphis Equipment Lease.

         82.      MEMPHIS EQUIPMENT LEASE means that certain Equipment Lease
Agreement dated as of September 30, 1997 by and between BSC and the Owner
Trustee, as amended and supplemented.

         83.      MEMPHIS EQUIPMENT NOTEHOLDERS means entities holding Claims
(in their capacities as such) under those certain notes dues November 10, 2012
issued by the Owner Trustee

         84.      MEMPHIS IDB BONDHOLDERS means entities holding Claims (in
their capacities as such) under those certain revenue bonds in the aggregate
amount of $26.0 million issued by the Industrial Development Board of the City
of Memphis and the County of Shelby, Tennessee under Section 7-53-1, et. seq. of
the Tennessee Code Annotated pursuant to that certain Loan Agreement dated as of
October 1, 1996 between BSC and the Industrial Development Board of the City of
Memphis and the County of Shelby, Tennessee.

         85.      NET PROCEEDS means such amounts collected from the sale or
liquidation of assets after payment of all costs and expenses of such sale or
liquidation, including, without limitation, attorney's fees.

         86.      OFFICERS mean, collectively, the officers and directors of the
Debtors at any time prior to or after the Confirmation Date, and each of them,
together with any officer of the Debtors appointed to discharge the Debtors'
duties under the Plan.

         87.      OFFICERS' AND DIRECTORS' CONTRIBUTION has the meaning set
forth in Section VI.B.3 of the Plan.

         88.      OMNIBUS COLLATERAL AGREEMENT means that certain Omnibus
Collateral Agreement dated as of October 12, 1999 together with that certain
Omnibus Collateral Agreement dated as of November 12, 1999, as amended,
including all supporting all guaranty, security, pledge, mortgage and other
agreements.

         89.      OTHER PRIORITY CLAIM means any Claim against any Debtor that
is entitled to priority under Section 507(a) of the Bankruptcy Code (other than
Administrative Expense Claims or Priority Tax Claims).

         90.      OTHER SECURED CLAIM means a Secured Claim identified on the
Other Secured Claim Schedule or any supplement thereto; provided, however, that
to the extent such Claim is secured by collateral to which the Collateral Agent
holds a security interest, such Claim shall be an Other Secured Claim only if
the Lien of the holder of such Claim is entitled to priority over the Lien of
Collateral Agent under applicable law.

         91.      OTHER SECURED CLAIM ESTIMATE means, with respect to each Other
Secured Claim, the related Collateral and the estimated amount thereof as set
forth on the Other Secured Claim Schedule.


                                       10





         92.      OTHER SECURED CLAIM SCHEDULE means Exhibit B to this Plan, as
it may be modified, amended, or supplemented from time to time.

         93.      OWNER TRUSTEE means J.P. Morgan Trust Co., in its capacity as
owner trustee under the Memphis Equipment Lease, the Trust Indenture and related
documents, as amended, and its successors in such capacity.

         94.      PERSON has the meaning set forth in section 101(41) of the
Bankruptcy Code.

         95.      PLAN means this joint chapter 11 plan of the Debtors,
including, without limitation, all documents referenced herein and all exhibits,
supplements, appendices and schedules hereto, either in its present form or as
the same may be altered, amended or modified from time to time.

         96.      PLAN SUPPORT AGREEMENT means that certain Plan Support
Agreement dated as of May 30, 2002 attached to the Plan as Exhibit C and
incorporated by reference, as may be amended from time to time pursuant to its
terms.

         97.      PNC means PNC Bank, Kentucky, Inc. in its capacity as issuer
of that certain letter of credit dated October 8, 1996 for the benefit of the
Memphis IDB Bondholders and as the holder of a Claim under that certain
Reimbursement Agreement with BSC dated October 1, 1996, as amended, pursuant to
which BSC agreed to reimburse any draws on such letter of credit.

         98.      POST-EFFECTIVE DATE RESERVE means (i) the sum of $500,000.00
to pay the reasonable fees, costs and expenses of the Liquidation Trust and the
Distribution Agent in accordance with the Plan including, without limitation,
all fees and expenses of professionals retained by the Liquidation Trust and
(ii) the right to use the claims and rights related to Excluded Liabilities (as
defined in the Asset Purchase Agreement) and corporate minute books, stock
records and related documents and tax records, without prejudice to the rights
of holders of Allowed Claims in Class 2 to use such assets as more particularly
described in Section VI.B.6 of the Plan.

         99.      POST-PETITION AGENT means Bank of America as the
administrative agent under the Post-Petition Credit Agreement.

         100.     POST-PETITION CREDIT AGREEMENT means that certain
Post-Petition Credit Agreement among BSC, certain of its subsidiaries, Bank of
America, N.A., as Administrative Agent, and the lenders party thereto, dated as
of May 30, 2002.

         101.     PRE-PETITION AGENT means Bank of America as the administrative
agent under the Pre-Petition Credit Agreement.

         102.     PRE-PETITION CREDIT AGREEMENT means that certain Credit
Agreement dated as of March 17, 1997 by and between the Pre-Petition Agent, the
Bank Group and BSC, as amended.

         103.     PRIORITY TAX CLAIM means any Claim against any Debtor of a
governmental unit of the kind specified in sections 502(i) or 507(a)(8) of the
Bankruptcy Code.


                                       11





         104.     PRO RATA means proportionally, so that with respect to an
Allowed Claim or Allowed Interest, the ratio of (a)(i) the amount of property
distributed on account of a particular Allowed Claim or Allowed Interest to (ii)
the amount of the Allowed Claim or Allowed Interest is equal to the ratio of
(b)(i) the amount of property distributed on account of all Allowed Claims or
Allowed Interests of the Class in which the particular Allowed Claim or Allowed
Interest is included to (ii) the amount of all Claims or Interests in that Class
(including Disputed Claims and Disputed Interests, until disallowed).

         105.     REJECTION DAMAGES CLAIMS means all Claims against any Debtor
for damages arising or asserted under Section 365(g) of the Bankruptcy Code or
Bankruptcy Rule 3002(c)(4) as a result of the rejection of an executory contract
or unexpired lease by the Debtors, or any of them, pursuant to Section 365(a) of
the Bankruptcy Code, excluding (a) Claims of the Memphis Equipment Noteholders
arising from the rejection of the Memphis Equipment Lease; and (b) Severance and
Retirement Claims.

         106.     RELEASORS has the meaning set forth in Section VI.C of the
Plan.

         107.     RELEASED CLAIMS has the meaning set forth in Section VI.C of
the Plan.

         108.     RELEASED PARTIES has the meaning set forth in Section VI.C of
the Plan.

         109.     SALE means the sale of substantially all of the assets of the
Debtors (excluding the Excluded Assets) to Buyer pursuant to the Asset Purchase
Agreement.

         110.     SCHEDULES means the schedules of assets and liabilities, the
list of holders of Interests and the statements of financial affairs filed by
the Debtors under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007,
and all amendments and modifications thereto through the Confirmation Date.

         111.     SECURED CLAIM means the portion of any Claim against any
Debtor, determined in accordance with section 506(a) of the Bankruptcy Code, as
of the Confirmation Date, that is (a) secured by a valid, perfected and
unavoidable Lien, to the extent of the value of the creditor's interest in the
Debtor's interest in the subject Collateral or (b) subject to offset under
Section 553 of the Bankruptcy Code, to the extent of the amount subject to
offset.

         112.     SECURED PARTY TRUST ASSETS means the Excluded Assets (other
than Unencumbered Causes of Action) plus the Cartersville Escrow Contribution.
For the avoidance of doubt, the Secured Party Trust assets shall include,
without limitation, the proceeds of any class action lawsuit described in
Section VI.B.4 of the Plan.

         113.     SEVERANCE AND RETIREMENT CLAIMS means all executive and
employee severance, and executive and employee benefit and retiree Claims,
including any Claims in respect of stay or retention programs, incentive plans,
accelerated vesting, accelerated benefits of any other kind, any other payments
not part of recurring salaries and wages, and any payments made with respects to
accrued vacation claims that have to be paid at Closing in excess of $250,000
(other than (i) the ordinary course bonuses payable in August 2002 and not to
exceed $1,800,000 in cash, as further described on Exhibit B-2 to the Plan
Support Agreement, (ii) the ordinary course bonuses payable


                                       12




in Company stock, and (iii) such payments made with respect to Section 2
(a)(i)(E)(4) to the Plan Support Agreement, subject to the terms set forth on
Exhibit B-3 to the Plan Support Agreement).

         114.     TRADE CLAIM means a Claim arising from the provision of goods
or services to the Debtors in the ordinary course of the Debtors' business.

         115.     TRUST AGREEMENT means the agreement to be executed as of the
Effective Date establishing the Liquidation Trust pursuant to the Plan, which
shall be filed with the Bankruptcy Court not later than ten (10) days prior to
the hearing on the Disclosure Statement.

         116.     TRUST INDENTURE means that certain Trust Indenture and
Security Agreement (Birmingham Steel Trust No. 97-1) dated as of September 30,
1997 by and between the Owner Trustee and the Indenture Trustee, as amended,
pursuant to which the Owner Trustee collaterally assigned its payment rights
under the Memphis Equipment Lease and the Memphis Equipment to the Memphis
Equipment Noteholders.

         117.     UNENCUMBERED CAUSES OF ACTION means Avoidance Actions and all
other Causes of Action, if any, not subject to the Liens securing Claims in
Class 2.

         118.     UNSECURED CLAIM means any Claim against the Debtor that is not
an Administrative Expense Claim, Other Priority Claim, Priority Tax Claim, or
Secured Claim.

B.       RULES OF INTERPRETATION.

         1.       COMPUTATION OF TIME. In computing any period of time
prescribed or allowed by the Plan, the provisions of Bankruptcy Rule 9006(a)
shall apply.

         2.       RULES OF CONSTRUCTION. Unless otherwise provided herein, for
purposes of the Plan: (a) whenever appropriate from the context, each term,
whether stated in the singular or the plural, shall include both the singular
and the plural; (b) any reference in the Plan to a contract, instrument, release
or other agreement or document being in a particular form or on particular terms
and conditions means that such document shall be substantially in such form or
substantially on such terms and conditions; (c) any reference in the Plan to an
existing document or exhibit means such document or exhibit as it may have been
or may be amended, modified or supplemented from time to time and shall include
all addenda, exhibits and schedules attached thereto or referenced therein; (d)
unless otherwise specified, any reference to an entity as a holder of a Claim or
an Interest includes that entity's successors, assigns and affiliates; (e)
unless otherwise specified, all references to sections and articles are
references to sections of or to the Plan; (f) unless otherwise specified, all
references in the Plan to exhibits are references to exhibits of or to the Plan
or the Disclosure Statement; (g) the words "herein," "hereunder" or "hereto"
refer to the Plan in its entirety rather than to a particular portion of the
Plan; (h) captions and headings to articles, sections and exhibits are inserted
for convenience of reference only and are not intended to be a part of or to
affect the interpretations of the Plan; and (i) unless otherwise specified, the
rules of construction set forth in section 102 of the Bankruptcy Code shall
apply.

         3.       GOVERNING LAW. Except to the extent that the Bankruptcy Code
or Bankruptcy Rules are applicable, and subject to the provisions of any
contract, instrument, release, indenture


                                       13




or other agreement or document entered into in connection with the Plan, the
rights and obligations arising under the Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State in which the
Bankruptcy Court resides, without giving effect to the principles of conflicts
of laws thereof.

                                  SECTION II.
                     CLASSIFICATION OF CLAIMS AND INTERESTS

         Claims and Interests (excluding unclassified Administrative Expense
Claims and Priority Tax Claims) shall be classified as set forth in this Section
II of the Plan.

         A Claim or Interest shall be deemed classified in a particular Class
only to the extent that the Claim or Interest qualifies within the description
of that Class and shall be deemed classified in a different Class to the extent
that any remainder of the Claim or Interest qualifies within the description of
such different Class. A Claim or Interest is in a particular Class only to the
extent that such Claim or Interest is Allowed in that Class and has not been
paid or otherwise settled prior to the Effective Date. In accordance with
section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims, and
Priority Tax Claims have not been classified but shall be treated as set forth
in Section III.A of the Plan.

A.       UNIMPAIRED CLASSES.

         1.       CLASS 1 - ALLOWED OTHER PRIORITY CLAIMS. Class 1 shall consist
of Allowed Other Priority Claims.

B.       IMPAIRED CLASSES.

         1.       CLASS 2 - SECURED CLAIMS OF PARTIES TO THE OMNIBUS COLLATERAL
AGREEMENT AND THE INTERCREDITOR AGREEMENT. Class 2 shall consist of the Allowed
Secured Claims of each party to the Omnibus Collateral Agreement and the
Intercreditor Agreement, in their capacities as such, including the 1993
Noteholders, the 1995 Noteholders, the Bank Group, the Indenture Trustee (as
assignee of the Owner Trustee for the benefit of the Memphis Equipment
Noteholders), the Owner Trustee, PNC and the Collateral Agent.

         2.       CLASS 3 - OTHER SECURED CLAIMS. Class 3 shall consist of all
Allowed Secured Claims other than Allowed Secured Claims in Class 2, including
the Claims identified on the Other Secured Claim Schedule.

         3.       CLASS 4 -UNSECURED CLAIMS. Class 4 shall consist of Allowed
Claims of (a) the AIR Lenders; (b) the holders of Rejection Damages Claims; and
(c) the holders of any other Allowed Unsecured Claim, including, without
limitation, the Claims of each party to the Omnibus Collateral Agreement and the
Intercreditor Agreement to the extent such Claims are Unsecured Claims by
operation of Section 506(a) of the Bankruptcy Code.

         4.       CLASS 5 - INTERESTS. Class 5 shall consist of Interests in
BSC, other than the Lender Warrants.


                                       14





         5.       CLASS 6 - LENDER WARRANTS. Class 6 shall consist of Interests
in BSC that are Lender Warrants.

         6.       CLASS 7 - INTERCOMPANY CLAIMS. Class 7 shall consist of
Intercompany Claims.

         7.       CLASS 8 - INTERCOMPANY INTERESTS. Class 8 shall consist of
Intercompany Interests.

                                  SECTION III.
                        TREATMENT OF CLAIMS AND INTERESTS

         No Claim or Interest shall entitle the holder thereof to a Distribution
of Cash or to other consideration pursuant to the Plan unless, and only to the
extent that, such Claim or Interest is an Allowed Claim or Allowed Interest.
Except as otherwise provided in the Plan or an order of the Bankruptcy Court,
all Distributions of Cash on account of Allowed Claims and Allowed Interests
shall be made on the Distribution Date(s). NOTWITHSTANDING THE TREATMENT OF
HOLDERS OF CLAIMS AND INTERESTS AGAINST OR IN THE DEBTORS UNDER THE PLAN,
CERTAIN SUMS WILL BE PAID TO HOLDERS OF UNSECURED CLAIMS AND HOLDERS OF
INTERESTS IN BSC FROM THE PROCEEDS OF THE SALE RECEIVED BY THE HOLDERS OF
ALLOWED CLAIMS IN CLASS 2. SUCH PAYMENTS ARE PAID BY THE HOLDERS OF ALLOWED
CLASS 2 CLAIMS FROM THEIR RECOVERIES IN THESE CASES, AS MORE PARTICULARLY SET
FORTH IN SECTION VI OF THE PLAN.

A.       UNCLASSIFIED CLAIMS.

         1.       ADMINISTRATIVE EXPENSE CLAIMS.

                  (a)      ORDINARY COURSE LIABILITIES. Allowed Administrative
Expense Claims arising from liabilities incurred by the Debtors, or any of them,
in the ordinary course of business (including, without limitation, Trade Claims
arising after the Filing Date, employee wage and benefit Claims arising after
the Filing Date, Fee Claims accruing monthly under any order of the Bankruptcy
Court approving the employment of a professional or approving the employment of
professionals in the ordinary course of business, claims of utilities arising
after the Filing Date, Claims of government units for taxes, fees, licenses and
other similar charges arising after the Filing Date, and Claims arising after
the Filing Date under executory contracts and unexpired leases with respect to
which the Debtors have not filed a motion to reject, if any) shall be paid by
the Debtors, on and after the Confirmation Date (to the extent not already paid
by the Debtors in the ordinary course of their businesses), from (i) the
proceeds of Cash Collateral or (ii) the proceeds of the DIP Facility or (iii) to
the extent unpaid as of the Closing Date, subject to the allowance provisions in
Section III.A.1(f) of the Plan, Cash on the Closing Date from the Gross Sale
Proceeds pursuant to Section 2(a)(i)(E) of the Plan Support Agreement; in each
event, according to the terms and conditions of the particular transaction or
agreement giving rise to such Administrative Expense Claims without further
order or proceedings or other action by the holders of such Administrative
Expense Claims, the Debtors or any other party in interest. Without limitation
of the foregoing, the Debtors shall pay current all amounts coming due after the
Confirmation Date and before the Closing Date under the Assigned Contracts in
the ordinary course of business from the proceeds of Cash Collateral or the
proceeds of the DIP Facility.


                                       15




                  (b)      STATUTORY FEES. Administrative Expense Claims for
fees payable pursuant to 28 U.S.C. ss. 1930 arising before the Confirmation
Date, as determined by the Bankruptcy Court at the Confirmation Hearing, will be
paid in full in Cash by the Debtors, on or before the Effective Date, from the
proceeds of Cash Collateral or the proceeds of the DIP Facility. Administrative
Expense Claims for statutory fees payable pursuant to 28 U.S.C. ss. 1930 arising
after the Confirmation Date, if any, will be paid by the Debtors, on or before
the Closing Date, from the proceeds of Cash Collateral or the proceeds of the
DIP Facility.

                  (c)      DIP FACILITY CLAIMS. Unless otherwise agreed to by
the holder of an Allowed Administrative Expense Claim that consists of a DIP
Facility Claim (in which event, such other agreement shall govern), each holder
of an Allowed DIP Facility Claim shall be paid by the Debtors Cash on the
Closing Date equal to the amount of such Allowed DIP Facility Claim. Claims for
payment pursuant to paragraph 26 of the DIP Order, including estimates for fees
and expenses to be incurred after the Closing Date, shall be deemed Allowed DIP
Facility Claims and Allowed Administrative Expense Claims.

                  (d)      BONUS CLAIMS. Unless less favorable treatment is
otherwise agreed to by the holder of an Allowed Administrative Expense Claim
that consists of a Bonus Claim (in which event, such other agreement shall
govern), each holder of a Bonus Claim shall be paid by the Distribution Agent
from the Bonus Reserve Amount in accordance with the terms of the Plan Support
Agreement.

                  (e)      FEE CLAIMS. Except as provided by prior order of the
Bankruptcy Court allowing the employment of professionals in the ordinary course
of business, professionals or other entities asserting a Fee Claim must file and
serve on the Debtors and such other entities as are designated by the Bankruptcy
Rules, the Confirmation Order or other Final Order of the Bankruptcy Court, an
application for final allowance of compensation and reimbursement of expenses no
later than thirty (30) days after the Confirmation Date. Holders of Fee Claims
that are required to file and serve applications for final allowance of their
Fee Claims and that do not file and serve such applications by the required
deadline shall be forever barred from asserting such Claims against the Debtors
or their respective property, and such Fee Claims shall be deemed discharged as
of the Effective Date. Objections to an application for allowance of a Fee Claim
must be filed and served on the Debtors, the Informal Group, each of the
Committees and the applicant no later than twenty (20) days after the filing of
the application for allowance of such Fee Claim. Allowed Fee Claims shall be
paid by the Debtors from the proceeds of Cash Collateral or the proceeds of the
DIP Facility no later than fifteen (15) Business Days after the allowance of
such Fee Claims in accordance with the Bankruptcy Court order allowing such Fee
Claim and any other applicable order of the Bankruptcy Court, including, without
limitation, the Financing Order; provided, however, any Allowed Fee Claim unpaid
as of the Effective Date shall be paid on the Effective Date or, if later, the
fifteenth (15th) Business Day after such Fee Claim becomes Allowed, Cash from
the Administrative Claim Reserve in an amount equal to such Allowed Fee Claim.

                  (f)      OTHER ADMINISTRATIVE EXPENSE CLAIMS. Subject to the
allowance procedures set forth herein, unless less favorable treatment is
otherwise agreed to by the holder of an Allowed Administrative Expense Claim (in
which event, such other agreement shall govern), each holder of an Allowed
Administrative Expense Claim not otherwise paid pursuant to this


                                       16




Section III.A of the Plan or pursuant to applicable orders of the Bankruptcy
Court, shall be paid by the Debtors on the Closing Date or, if later, no later
than the fifteenth (15th) Business Day after such Claim becomes Allowed, Cash
from the Administrative Claim Reserve in an amount equal to such Allowed
Administrative Expense Claim.

                  Requests for payment of an Administrative Expense Claim under
this Section III.A.1(f) other than Fee Claims arising before the Effective Date
must be filed and served on the Debtors, the Informal Group, and each of the
Committees, pursuant to procedures set forth in the Confirmation Order, no later
than ten (10) days after the Effective Date. Each such request for payment of an
Administrative Expense Claim must include, at a minimum, (i) the name of the
holder of the Claim, (ii) the amount of the Claim, (iii) the basis for the
Claim, and (iv) documents evidencing or supporting the Claim. Failure to timely
and properly file a request for payment of an Administrative Expense Claim as
set forth herein shall result in the Administrative Expense Claim being forever
barred and discharged. Objections to any such request may be made by the Debtors
or any party in interest and such objections, if any, must be filed and served
on the Debtors, the Informal Group, each of the Committees and the requesting
party by the later of twenty (20) days after the Effective Date or twenty (20)
days after the filing of the applicable request for payment.

         2.       PRIORITY TAX CLAIMS. Unless less favorable treatments is
otherwise agreed to by the holder of an Allowed Priority Tax Claim (in which
event, such other agreement shall govern), each holder of an Allowed Priority
Tax Claim shall be paid by the Distribution Agent on the Effective Date or, if
later, on the fifteenth (15th) Business Day after such Claim becomes Allowed,
Cash from the Administrative Claim Reserve in an amount equal to such Allowed
Priority Tax Claim.

B.       TREATMENT OF UNIMPAIRED CLASS.

         1.       CLASS 1 -- ALLOWED OTHER PRIORITY CLAIMS. Unless less
favorable treatment is otherwise agreed to by the holder of an Allowed Other
Priority Claim (in which event, such other agreement shall govern), each holder
of an Allowed Class 1 Claim shall be paid by the Distribution Agent on the
Effective Date or, if later, on the fifteenth (15th) Business Day after such
Claim becomes Allowed, Cash from the Administrative Claim Reserve in an amount
equal to the amount of such Allowed Class 1 Claim. Claims in Class 1 are not
impaired under the Plan. Therefore, pursuant to section 1126(f) of the
Bankruptcy Code, the holders of Claims in Class 1 conclusively are presumed to
have accepted the Plan and are not entitled to vote.

C.       TREATMENT OF IMPAIRED CLASSES.

         1.       CLASS 2-- SECURED CLAIMS OF PARTIES TO THE OMNIBUS COLLATERAL
AGREEMENT AND INTERCREDITOR AGREEMENT.

                  (a)      After confirmation, the holders of Claims in Class 2
shall retain the Liens securing such Claims to the extent of the Allowed amount
of such Claims, including without limitation the Liens on (i) claims and rights
related to Excluded Liabilities (as defined in the Asset Purchase Agreement),
(ii) rights of Sellers (as defined in the Asset Purchase Agreement) under the
Asset Purchase Agreement and the Plan Support Agreement, (iii) cash and bank
accounts, and (iv)


                                       17




corporate minute books, stock records and related documents and tax records.
Upon the closing of the Sale, such Liens shall also attach to the Class 2
Distribution Amount, subject to the terms and conditions set forth in the Plan.

                  (b)      In full and final settlement and discharge of Class 2
Claims against the Debtors, the Collateral Agent on account of each holder of an
Allowed Class 2 Claim, shall receive (i) on the Closing Date, and from time to
time thereafter (if applicable), the Class 2 Distribution Amount; and (ii) upon
payment of all Claims payable from such reserve in accordance with the Plan, the
unused portions, if any, of the Administrative Claim Reserve.

                  (c)      Pursuant to section 1126(a) of the Bankruptcy Code,
holders of Claims in Class 2 are entitled to vote to accept or reject the Plan.

                  (d)      Notwithstanding any other provisions of the Plan, as
of the Effective Date, the Claims of each holder of a Class 2 Claim shall be
deemed Allowed without defense, set off, offset, right of recoupment or
counterclaim.

         2.       CLASS 3 -- OTHER SECURED CLAIMS.

                  (a)      Each holder of an Other Secured Claim shall, on or
before ten (10) days prior to the Confirmation Hearing, File and serve on the
Debtors and the Informal Group a written objection to the Other Secured Claim
Estimate, attaching all back-up and supporting documentation, to the extent that
the holder of such Claim asserts that such holder's Claim is secured by any
other or additional property of the Estates or the amount of the Other Secured
Claim Estimate is incorrect. If no objection is timely Filed and served, the
description of the Collateral in the Other Secured Claim Schedule and the Other
Secured Claim Estimate shall be binding for all purposes in these Cases upon the
holder of such Claim and shall be an Allowed Secured Claim in the amount set
forth in the Other Secured Claim Schedule. Each Person that holds a Claim that
is not set forth in the Other Secured Claim Schedule that asserts an interest in
any property of the Estates or otherwise asserts a Secured Claim shall, on or
before ten (10) days prior to the Confirmation Hearing, File and serve on the
Debtors and the Informal Group a written objection to the exclusion of such
Person from the Other Secured Claim Schedule, attaching all back-up and
supporting documentation, to the extent that such Person asserts that such
Person's Secured Claim is secured by any property of the Estates. If a Person
asserts an interest in any property of the Estates and such Person is not set
forth in the Other Secured Claim Schedule and such Person shall have failed to
File and serve an objection to the Other Secured Claim Schedule as set forth
herein at least ten (10) days prior to the Confirmation Hearing, (i) such Person
shall be deemed for all purposes in these Cases to have waived and released its
interest in any property of the Debtors' estates; and (ii) such Person shall be
deemed to be a holder of a Class 6 Claim.

                  (b)      In full and final satisfaction and discharge of all
Class 3 Claims, if any, to the extent not previously paid, each holder of an
Allowed Class 3 Secured Claim shall receive on the Effective Date or, if later,
the fifteenth (15th) Business Day after such Claim becomes an Allowed Claim:

                           (i)      if the Collateral securing such Claim is in
                                    the Excluded Assets (and to the extent not
                                    already received by such holder), the
                                    Collateral securing such Claim without
                                    representation, warranty or recourse; or


                                       18





                           (ii)     if the Collateral securing such Claim is not
                                    included in the Excluded Assets, Cash equal
                                    to the amount of such Allowed Claim from the
                                    Administrative Claim Reserve; provided the
                                    aggregate amount of payments pursuant to
                                    this Section III.C.2(b)(ii) of the Plan
                                    shall not exceed $500,000.00 without the
                                    consent of the Informal Group.

         3.       CLASS 4 - UNSECURED CLAIMS.

                  (a)      On the Initial Trust Distribution Date, holders of
Allowed Class 4 Claims will receive a Pro Rata payment of the Class 4 Dividend,
with a retention in an amount sufficient to distribute to any contested but
unresolved Class 4 Claims in accordance with Sections VII.A.2 and VII.B.8 of the
Plan; provided however, (i) that the claims of each of the Secured Parties (as
defined in the Intercreditor Agreement and solely in their capacity as Secured
Parties pursuant to that agreement) who are parties to the Omnibus Collateral
Agreement and the Intercreditor Agreement included in Class 4 by operation of
Section 506(a) of the Bankruptcy Code shall be subordinated to all other Allowed
Claims in Class 4 for the purposes of distribution of the Class 4 Dividend only
from the Liquidation Trust; (ii) there shall be no distribution of the Class 4
Dividend on account of Severance and Retirement Claims or on account of any
portion of any Class 4 Claim paid after the Filing Date.

                  (b)      Pursuant to Section 1126(a) of the Bankruptcy Code,
holders of Allowed Claims in Class 4 are entitled to vote to accept or reject
the Plan.

                  (c)      Notwithstanding any other provisions of the Plan,
conditioned upon the compliance of the AIR Lenders with the Stipulation By and
Between the Debtors, the AIR Lenders and the Official Committee of Unsecured
Creditors and Filed with the Bankruptcy Court September 9, 2002, as of the
Effective Date, the Claims of the AIR Lenders shall be deemed Allowed unsecured
claims without defense, setoff, offset, right of recoupment or counterclaim, in
the total, aggregate amount of $115.0 million.

         4.       CLASS 5--INTERESTS.

                  (a)      The Class 5 Interests shall be cancelled as of the
Effective Date. The holders of Interests in Class 5 shall not receive or retain
any Distribution or other property on account of such Interests.

                  (b)      Pursuant to Section 1126(g) of the Bankruptcy Code,
holders of Allowed Interests in Class 5 are deemed to have rejected the Plan and
are not entitled to vote to accept or reject the Plan.

         5.       CLASS 6 --LENDER WARRANTS.

                  (a)      The Lender Warrants shall be cancelled as of the
Effective Date. The holders of Interests in Class 6 shall not receive or retain
any Distribution or other property on account of such Interests.


                                       19




                  (b)      Pursuant to Section 1126(g) of the Bankruptcy Code,
holders of Interests in Class 6 are deemed to have rejected the Plan and are not
entitled to vote to accept or reject the Plan.

         6.       CLASS 7 - INTERCOMPANY CLAIMS.

                  (a)      The holders of Class 7 Claims shall not receive or
retain any Distribution or other property on account of such Claims.

                  (b) Pursuant to Section 1126(g) of the Bankruptcy Code,
holders of Claims in Class 7 are deemed to have rejected the Plan and are not
entitled to vote to accept or reject the Plan.

         7.       CLASS 8 - INTERCOMPANY INTERESTS.

                  (a)      The holders of Class 8 interests shall not receive or
retain any Distribution or other property on account of such Interests.

                  (b)      Pursuant to Section 1126(g) of the Bankruptcy Code,
holders of Interests in Class 8 are deemed to have rejected the Plan and are not
entitled to accept or reject the Plan.

                                   SECTION IV.
               SALE OF ASSETS PURSUANT TO ASSET PURCHASE AGREEMENT

         Confirmation of the Plan shall constitute approval of the Sale pursuant
to the terms of the Asset Purchase Agreement, which terms are incorporated into
the Plan by reference. Without limitation, the Sale shall be free and clear of
all liens, claims, encumbrances and other interest pursuant to Section 363(f) of
the Bankruptcy Code, with all such liens, claims, encumbrances and other
interests attaching to the Gross Proceeds subject to the terms and conditions of
the Plan. The Confirmation Order shall contain such terms and provisions as
necessary to effectuate the Sale pursuant to Section 363(f) of the Bankruptcy
Code in accordance with the terms and conditions of the Plan. The Confirmation
Order shall authorize and direct the Debtors to take all actions and steps
necessary or appropriate to consummate the Sale as soon as reasonably
practicable on the terms and conditions set forth in the Asset Purchase
Agreement and the Plan. The Sale shall occur on the Closing Date. The only
conditions to the closing of the Sale shall be as set forth in the Asset
Purchase Agreement. At closing, the Debtors shall direct the Buyer to pay the
Gross Sale Proceeds as follows: (1) an amount equal to the DIP Facility Claims
to the Post-Petition Agent for the account of the lenders party to the
Post-Petition Credit Agreement; (2) an amount equal to the Administrative Claim
Reserve to the Distribution Agent; (3) an amount equal to the Cure Amounts to
the Distribution Agent; (4) the amounts required to pay the Debtors' post-Filing
Date payables incurred in accordance with the Budget and unpaid as of the
Closing Date pursuant to Section 2(a)(i)(E) of the Plan Support Agreement to the
Distribution Agent; and (5) the balance to the Collateral Agent on account of
each holder of an Allowed Class 2 Claim. The Debtors further shall direct the
Buyer to pay to the Collateral Agent on account of each holder of an Allowed
Class 2 Claim any amounts paid after the Closing Date under the Asset Purchase
Agreement.


                                       20




                                   SECTION V.
              TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A.       ASSUMPTION.

         1.       ASSET PURCHASE AGREEMENT. Pursuant to Section 1123(b)(2) of
the Bankruptcy Code, Confirmation of the Plan shall constitute the assumption by
the Debtors of the Asset Purchase Agreement pursuant to Section 365(a) of the
Bankruptcy Code, which assumption shall be referenced by an order separate from
the Confirmation Order.

         2.       PLAN SUPPORT AGREEMENT. If the Bankruptcy Court has not
approved the assumption of the Plan Support Agreement prior to Confirmation,
pursuant to Section 1123(b)(2) of the Bankruptcy Code, Confirmation of the Plan
shall constitute the assumption by the Debtors of the Plan Support Agreement
pursuant to Section 365(a) of the Bankruptcy Code, which assumption shall be
referenced by an order separate from the Confirmation Order.

         3.       ASSIGNED CONTRACTS. Pursuant to Section 1123(b)(2) of the
Bankruptcy Code, the Assigned Contracts shall be deemed assumed by the Debtors
pursuant to Section 365(a) of the Bankruptcy Code as of the Effective Date and
assigned to the Buyer pursuant to Section 365(f) of the Bankruptcy Code as of
the Effective Date. Before the hearing on approval of the Disclosure Statement,
the Debtors shall file a schedule of Cure Amounts. The schedule of Cure Amounts
is attached as Exhibit C to the Disclosure Statement and shall be served with
the Disclosure Statement and Plan on (a) all counterparties to the Assigned
Contracts and (b) all other parties receiving service of the Disclosure
Statement pursuant to Bankruptcy Rule 3017(d). Objections to the assumption and
assignment of the Assigned Contracts, including any objection to the Cure
Amounts, shall be Filed and served in accordance with the time limits and
procedures set forth in the order approving the Disclosure Statement. Failure to
File and serve an objection as set forth in the order approving the Disclosure
Statement shall constitute a waiver of any objection and consent to assumption
and assignment of the Assigned Contracts, including any objection to the Cure
Amounts (which shall be deemed conclusive, except to the extent amended by the
Debtors in writing prior to the Confirmation Hearing).

B.       REJECTION.

         Pursuant to section 1123(b)(2) of the Bankruptcy Code, except for those
executory contracts and unexpired leases assumed pursuant to the Plan or as to
which the Debtors have filed prior to the Confirmation Date a motion to assume
and assign or a motion to reject, all executory contracts and unexpired leases
to which the Debtors are or were a party and not previously rejected or assumed
and assigned pursuant to prior order of the Bankruptcy Court, including, without
limitation, all executive and employee severance, benefit and retiree plans,
contracts and agreements (including, but not limited to all stay or retention
programs, incentive plans, accelerated vesting plans, accelerated benefit plans,
and any other plan, agreement, contract or document relating to or providing for
payments to executives or employees not part of recurring salaries and wages),
are deemed rejected pursuant to Section 365(a) of the Bankruptcy Code as of the
Effective Date.


                                       21





         Each party to an executory contract or unexpired lease rejected
pursuant to the Plan (and only such entities) asserting a Rejection Damages
Claim shall file, not later than thirty (30) days following the Confirmation
Date, a proof of such Claim; provided, however, that (1) the Bar Date
established for Rejection Damages Claims in this Section V.B of the Plan shall
not apply to Persons that may assert a Claim on account of an executory contract
or unexpired lease that was rejected by the Debtors before Confirmation for
which a prior Bar Date was established; (2) any Person asserting a Rejection
Damages Claim that does not timely file a proof of claim in accordance with the
Plan shall be forever enjoined and barred from asserting such Claim against any
of the Debtors or any property of the Estates; and (3) the Severance and
Retirement Claims shall be deemed Allowed as general, unsecured Class 4 Claims
arising prior to the Filing Date under Section 365(g) of the Bankruptcy Code,
subject, however, to the provisions of Sections VI.B.1(b) and III.C.3(a) of the
Plan and the Plan Support Agreement.


                                   SECTION VI.
                             IMPLEMENTATION OF PLAN

A.       LIQUIDATION TRUST.

         1.       LIQUIDATION TRUST. The Liquidation Trust shall be established
and shall become effective on the Effective Date. All Distributions to the
holders of Allowed Class 4 Claims shall be from the Liquidation Trust. The
Liquidation Trust shall hold and administer the following assets:

                  (a)      the Unencumbered Causes of Action and the Secured
Party Trust Assets (and the Net Proceeds thereof to the extent liquidated after
the Filing Date), which shall be deemed assigned by the Collateral Agent or the
Debtors, as applicable, to the Liquidation Trust on the Effective Date for
distribution in accordance with this Section VI; and

                  (b)      the Class 4 Dividend, which shall be funded only in
accordance with this Section VI.A.1 of the Plan, for the benefit of the holders
of Allowed Class 4 Claims and for distribution in accordance with this Section
VI of the Plan.

                  The Class 4 Dividend shall be (a) held by the Liquidation
Trustee in the Liquidation Trust for the exclusive benefit of the holders of
Allowed Class 4 Claims; (b) distributed Pro Rata exclusively to the holders of
Allowed Class 4 Claims (other than Severance and Retirement Claims, Claims to
the extent paid after the Filing Date, and the Claims of each of the Secured
Parties - as defined in the Intercreditor Agreement and solely in their capacity
as Secured Parties pursuant to that Agreement - who are parties to the Omnibus
Collateral Agreement and the Intercreditor Agreement included in Class 4 by
operation of Section 506(a) of the Bankruptcy Code) on the terms and conditions
set forth in the Plan; and (c) shall be funded as follows: (i) $10.0 million
Cash from the Plan Support Payment; (ii) $7.3 million Cash from the PSA Equity
Dividend pursuant to Section VI.B.3 of the Plan; and (iii) $200,000.00 Cash from
the Officers' and Directors' Contribution.

                                       22




         2.       TRUST DISTRIBUTIONS. Distributions from the Liquidation Trust
shall be made by the Liquidation Trustee as follows:

                  (a)      as soon as reasonably practicable after the
liquidation thereof, the Net Proceeds from the liquidation of the Unencumbered
Causes of Action and the Secured Party Trust Assets shall be distributed Pro
Rata to the holders of rights or Claims arising out of Class 5 Interests as they
existed immediately prior to the Effective Date; provided, however, that such
Net Proceeds in excess of $7.3 million, if any, shall be paid to the Collateral
Agent for distribution to the holders of Allowed Class 2 Claims in accordance
with the Intercreditor Agreement; and

                  (b)      on the Initial Trust Distribution Date, the Class 4
Dividend shall be distributed Pro Rata to the holders of Allowed Class 4 Claims,
subject to Section III.C.3 of the Plan.

                  The claims of each of the Secured Parties (as defined in the
Intercreditor Agreement and solely in their capacity as Secured Parties pursuant
to that agreement) who are parties to the Omnibus Collateral Agreement and the
Intercreditor Agreement included in Class 4 by operation of Section 506(a) of
the Bankruptcy Code shall be subordinated to all other Allowed Claims in Class 4
for the purposes of distribution only from the Liquidation Trust of the net
proceeds of the assets assigned to the Liquidation Trust for the benefit of the
holders of Allowed Class 4 Claims. There shall be no distribution of the Class 4
Dividend on account of Severance and Retirement Claims or on account of any
portion of any Class 4 Claim paid after the Filing Date.

         3.       LIQUIDATION TRUSTEE.

                  (a)      APPOINTMENT. Not less than ten (10) days before the
hearing on the Disclosure Statement, the Debtors shall appoint the Liquidation
Trustee. The Debtors shall have sole authority to designate the Person to serve
as Liquidation Trustee. The appointment of the Liquidation Trustee shall be
effective as of the Effective Date. Successor Liquidation Trustee(s) shall be
appointed as set forth in the Trust Agreement.

                  (b)      TERM. Unless the Liquidation Trustee resigns or dies
earlier, the Liquidating Trustee's term shall expire upon the distribution of
all assets of the Liquidation Trust.

                  (c)      POWERS AND DUTIES. The Liquidation Trustee shall have
the rights and powers set forth in the Trust Agreement, a copy of which shall be
filed no later than ten (10) days prior to the hearing on the Disclosure
Statement including, but not limited to, the powers of a debtor-in-possession
under Sections 1107 and 1108 of the Bankruptcy Code; provided, however, the
Liquidation Trustee shall have no authority to operate the Debtors' business.
The Liquidation Trustee shall be governed in all things by the terms of the
Trust Agreement and the Plan. Without limitation, the Liquidation Trustee shall
administer the Liquidation Trust, and its assets, and make Distributions from
the proceeds of the Liquidation Trust in accordance with the Plan and the Plan
Support Agreement. In addition, the Liquidation Trustee shall, in accordance
with the terms of the Plan, take all actions necessary to wind down the affairs
of the Debtors consistent with the Plan and applicable non-bankruptcy law.
Without limitation, the Liquidation Trustee shall (a) file final federal, state
and, to the extent applicable, local, tax returns; (b) dissolve the Debtors and
their


                                       23




subsidiaries in accordance with state law; and (c) take such steps as necessary
under the Securities Act of 1933 in the Securities and Exchange Act of 1934, or
other applicable state securities laws, to discontinue BSC's status as a
publicly traded company and to finally discharge any and all reporting
requirements and other obligations to the Securities and Exchange Commission.
The fees and expenses of the Liquidation Trustee related to winding down the
affairs of the Debtor pursuant to the Plan shall be paid from the Post-Effective
Date Reserve.

                  (d)      FEES AND EXPENSES. From the Effective Date forward,
the Liquidation Trustee's compensation shall be as agreed to by the Debtors, the
Informal Group and the Liquidation Trustee. Compensation of the Liquidation
Trustee and the Liquidation Trustee's costs and expenses (including, without
limitation, professional fees and expenses) shall be paid (i) from the
Post-Effective Date Reserve to the extent such costs and expenses arise out of
or relate to winding down the affairs of the Debtor pursuant to the Plan; and
(ii) from the proceeds of the liquidation of the Unencumbered Causes of Action
and the Secured Party Trust Assets to the extent such costs and expenses arise
out of or relate to the liquidation of such assets. Without limitation of the
forgoing, the Liquidation Trustee shall pay, without further order, notice or
application to the Court, the reasonable fees and expenses of the Debtors'
professionals, as necessary to discharge the Liquidation Trustee's duties under
the Plan, and the Committee's counsel, to the extent necessary to discharge the
Committee's remaining duties, if any, under Section VII.A.1 of the Plan.
Payments to the Liquidation Trustee shall not require notice to any party, or an
order of the Bankruptcy Court approving such payments. No portion of the Class 4
Dividend shall be used to pay any fees or expenses of the Liquidation Trustee or
the Liquidation Trust.

                  (e)      RETENTION OF PROFESSIONALS AND COMPENSATION
PROCEDURE. Upon the Effective Date, the Liquidation Trustee may engage such
professionals and experts as may be deemed necessary and appropriate by the
Liquidation Trustee to assist the Liquidation Trustee in carrying out the
provisions of the Plan. For services performed from and after the Effective
Date, professional Persons engaged by the Liquidation Trustee shall receive
compensation and reimbursement of expenses in a manner to be determined by the
Liquidation Trustee.

                  (f)      DURATION OF EXISTENCE. The Liquidation Trust under
this Plan shall continue to exist until entry of a Final Order by the Bankruptcy
Court closing the Bankruptcy Cases pursuant to Section 350(a) of the Bankruptcy
Code. As soon as practicable after the last distribution under the Plan is made,
the Liquidation Trustee shall seek entry of a Final Order closing the Bankruptcy
Cases pursuant to Section 350 of the Bankruptcy Code.

                  (g)      COMPROMISING CLAIMS. Pursuant to Bankruptcy Rule
9019(b) and the Plan, the Liquidation Trustee is authorized to approve,
compromises of the Causes of Action and Disputed Claims or other Claims or
actions against the Debtors or their affiliates in accordance with the following
conditions:


                                       24




                           (i)      The Liquidation Trustee shall be authorized
                                    and empowered to settle a Claim or Cause of
                                    Action and execute necessary documents,
                                    including a stipulation of settlement or
                                    release, without notice to any party and
                                    without further order of the Bankruptcy
                                    Court if the Allowed amount of such Claim or
                                    proceeds from such Cause of Action will be
                                    less than $75,000.

                           (ii)     If the Allowed amount of a Claim or proceeds
                                    from a Cause of Action is to be greater than
                                    $75,000, the Liquidation Trustee shall be
                                    authorized and empowered to settle such
                                    Claim and execute necessary documents,
                                    including a stipulation of settlement or a
                                    release, only upon motion to and approval by
                                    the Bankruptcy Court, with not less than ten
                                    (10) Business Days notice of the hearing on
                                    such motion to the parties required by
                                    Bankruptcy Rule 2002.

                  (h)      OTHER TRANSFERS. Except as expressly set forth in the
Plan, the Liquidation Trustee shall administer the Class 4 Dividend for the
exclusive benefit of the holders of Allowed Class 4 Claims and the Unencumbered
Causes of Action and the Secured Party Trust Assets for the benefit of the
holders of rights and Claims arising out of Class 5 Interests as they existed
immediately prior to the Effective Date and the holders of Allowed Class 2
Claims on the terms and conditions set forth in the Plan; provided, however, on
the Effective Date, any Secured Party Trust Assets in which a holder of a Class
3 Claim holds an interest senior to the Liens securing Class 2 Claims shall be
assigned by the Liquidation Trustee to the Distribution Agent for administration
in accordance with Section III.C.2 of the Plan.

         4.       CANCELLATION OF EQUITY INTERESTS. Upon the Effective Date all
outstanding shares of the Debtors shall be cancelled and extinguished and all
certificates representing Interests in the Debtors, their subsidiaries, and any
of them, shall become void without the need for further action. Immediately
following such cancellation and extinguishment, one (1) share of each of the
Debtor's common stock shall be issued to the Liquidation Trustee.

         5.       VESTING OF ASSETS. On the Effective Date, any assets of the
Estates not otherwise treated by the Plan shall vest in the Liquidation Trust
and shall thereafter be administered, liquidated (by sale, collection, recovery
or other disposition), and/or distributed by the Liquidation Trust in accordance
with the terms of the Trust Agreement and the Plan.

         6.       BOARD OF DIRECTORS. On the Effective Date, except as
contemplated by Exhibit B-5 to the Plan Support Agreement, all officers,
directors and managers of the Debtors, as applicable, shall resign and shall be
discharged from any further duties and responsibilities in such capacity and the
Liquidation Trustee shall assume all such duties and responsibilities. The cost
of the employment as contemplated by Exhibit B-5 to the Plan Support Agreement
(and any necessary related overhead) shall be paid out of the Post Effective
Date Reserve and the Liquidation Trustee is directed to make such payments when
due.


                                       25




         7.       CORPORATE AUTHORITY. The Confirmation Order shall constitute
full and complete corporate authority for the Debtors, and the Liquidation
Trustee to the extent acting for the Debtors, to take all other actions which
may be necessary, useful or appropriate to consummate the Plan without any
further corporate or judicial authority.

         8.       DEBTORS' EXISTENCE. Following the Effective Date, the Debtors
shall continue in existence solely for the purpose of effectuating the Plan.
After the final distribution is made with respect to a Debtor, the Liquidating
Trustee shall take whatever actions are necessary to dissolve or permit the
dissolution of the Debtor in question as soon as practicable. On and after the
Effective Date, the Debtors' remaining assets and affairs shall be managed by
the Liquidation Trustee. After the Effective Date, the Liquidation Trustee shall
cooperate with the Debtors, holders of Allowed Claims in Class 2 and the Secured
Party Representative (as defined in the Plan Support Agreement), with respect to
preserving and protecting any rights of Debtors, the Collateral Agent and the
holders of Allowed Claims in Class 2 under the Asset Purchase Agreement.

B.       DISPOSITION OF PROPERTY.

         1.       SECURED PARTIES PAYMENTS PURSUANT TO PLAN SUPPORT AGREEMENT.
Immediately upon receipt by the Collateral Agent of the initial payout of the
Class 2 Distribution Amount to the Collateral Agent, the Collateral Agent shall
distribute to the holders of Allowed Class 2 Claims according to the terms of
the Intercreditor Agreement the initial payout of the Class 2 Distribution
Amount less $43.5 million (such $43.5 million being the "Plan Support Payment"),
Upon the receipt by the Collateral Agent of the initial payout of the Class 2
Distribution Amount, the Collateral Agent shall deliver the Plan Support Payment
to the Distribution Agent.


                  Simultaneously with the distribution of the Class 2
Distribution Amount (less the Plan Support Payment) by the Collateral Agent to
the holders of Allowed Class 2 Claims according to the terms of the
Intercreditor Agreement (provided, however, that any delay in distributions to
the holders of Allowed Class 2 Claims arising out of or related to any disputes
by or among the holders of Allowed Class 2 Claims or the Collateral Agent shall
not delay any distribution by the Distribution Agent), or as soon as practicable
thereafter, the Distribution Agent shall distribute:

                  (a)      the sum of $10.0 million to the Liquidation Trustee
to be held in the Liquidation Trust for the benefit of the holders of Class 4
Claims and to fund, in part, the Class 4 Dividend;

                  (b)      the sum of $17 million for the account of and for
distributions to holders of Severance and Retirement Claims on the terms and
conditions set forth in Section 2(a)(i)(E)(1)(b) of the Plan Support Agreement
and in satisfaction of such Claims; provided, however, any Cash not paid to
holders of such Claims as allocated pursuant to Section 2(a)(i)(E)(1)(b) of the
Plan Support Agreement shall be paid to the Collateral Agent for the benefit of
holders of Allowed Class 2 Claims twenty-five (25) months after the Effective
Date;


                                       26




                  (c)      the sum of $15.0 million (the "PSA Equity Dividend")
to the Distribution Agent for the account of all rights and Claims related to or
arising out of Class 5 Interests as they existed immediately prior to the
Effective Date and for distribution pursuant to Section VI.B.3 of the Plan;

                  (d)      the Post-Effective Date Reserve to the Liquidation
Trustee (to be held in a segregated account that shall not be part of the
Liquidation Trust) to be administered pursuant to the Plan; provided, however,
upon payment of all Claims payable from the Post-Effective Date Reserve, any
unused portion of the Post-Effective Date Reserve shall be paid to the
Collateral Agent for the benefit of holders of Allowed Class 2 Claims; and

                  (e)      the sum of up to $1.0 million to the holders of Bonus
Claims in accordance with the terms of the Plan and the Plan Support Agreement;
provided, that, if not all of the Bonus Reserve Amount is earned pursuant to
Exhibit B-5 of the Plan Support Agreement, any remaining amount after all
required payments are made shall be turned over to the Collateral Agent for
distribution to the holders of Allowed Class 2 Claims.

         2.       ASSIGNMENT OF TRUST AND OTHER ASSETS. On the Effective Date
the Debtors and the Collateral Agent, as applicable, shall be deemed to have
assigned to the Liquidation Trust for the benefit of the holders of rights and
Claims related to or arising out of Class 5 Interests as they existed
immediately prior to the Filing Date and the holders of Allowed Class 2 Claims,
without representation, warranty or recourse, (a) the Net Proceeds of the
liquidation, after the Filing Date, of the Unencumbered Causes of Action; (b) to
the extent not liquidated before the Effective Date the Unencumbered Causes of
Action; (c) the Net Proceeds of the liquidation, after the Filing Date, of the
Secured Party Trust Assets; and (d) to the extent not liquidated before the
Effective Date, the Secured Party Trust Assets.

         3.       DISTRIBUTIONS FOR THE ACCOUNT OF RIGHTS AND CLAIMS RELATED TO
OR ARISING OUT OF CANCELLED CLASS 5 INTERESTS.

                  (a)      Notwithstanding any other provision of the Plan, and
subject to the terms and conditions of the Plan Support Agreement, the following
shall be distributed Pro Rata on account of and in full and final satisfaction
of all rights and Claims related to or arising out of Class 5 Interests as they
existed immediately prior to the Effective date: (a) on the Initial Trust
Distribution Date, the Distribution Agent shall distribute Pro Rata to the
holders of such rights and Claims a portion of the PSA Equity Dividend equal to
$7.7 million (the "Class 5 Dividend"), subject to the Officer and Director
Contribution, as defined below; and (b) as soon as practicable after the
liquidation of the Unencumbered Causes of Action and the Secured Party Trust
Assets, the Liquidation Trustee shall distribute Pro Rata to the holders of such
rights and Claims, the Net Proceeds of the liquidation of the Unencumbered
Causes of Action and the Secured Party Trust Assets; provided, however, that
such Net Proceeds in excess of $7.3 million and all assets of any non-debtor
Affiliate (as defined in Section 101 of the Bankruptcy Code) of the Debtors and
the Net Proceeds thereof, if any, (the "Excess Assets"), if any, shall be paid
to the Collateral Agent pursuant to Section VI.A.2(a) of the Plan.
Notwithstanding anything to the contrary in the preceding sentence, the
Liquidation Trustee shall pay to the Collateral Agent the Net Proceeds of


                                       27




the Cartersville Escrow to the extent that such proceeds exceed the amount of
the Cartersville Escrow Contribution.

         (b)      Simultaneously with the distribution of the Class 2
Distribution Amount (less the Plan Support Payment) by the Collateral Agent to
the holders of Allowed Class 2 Claims according to the terms of the
Intercreditor Agreement (provided, however, that any delay in distributions to
the holders of Allowed Class 2 Claims arising out of or related to any disputes
by or among the holders of Allowed Class 2 Claims or the Collateral Agent shall
not delay any distribution by the Distribution Agent), or as soon as practicable
thereafter, the Distribution Agent shall pay a portion of the PSA Equity
Dividend equal to $7.3 million to the Liquidation Trustee for the benefit of the
holders of Allowed Class 4 Claims and to fund, in part, the Class 4 Dividend.
The Officers and Directors that are Released Parties shall pay the aggregate sum
of $200,000.00 (the "Officers and Directors Contribution") to the Liquidation
Trustee for the benefit of holders of Allowed Class 4 Claims to fund, in part,
the Class 4 Dividend. As additional consideration for the releases provided in
the Plan, such Officers and Directors shall further waive Claims with respect to
certain ordinary course bonuses earned after the Filing Date (not including
Bonus Claims) in the aggregate amount of $436,000.00.

         4.       RETENTION OF CLASS ACTION CLAIMS. Notwithstanding any other
provision of the Plan, the Debtors shall retain as their own property any cause
of action in which the Debtors, or any of them, is a named class representative,
or a putative named class representative, in any pending Cause of Action. Upon
confirmation of the Plan, Debtor shall designate one or more of its officers or
directors (the "Designee") to be responsible for and make all decisions
concerning the prosecution and settlement of any such Cause of Action. The
Designee shall have full authority to act as the Debtor and shall be the Debtor
for such limited purposes. The Designee shall pay over all proceeds of such
cause of action payable to Debtor to the Liquidation Trustee, but only after
such Causes of Action are fully litigated or otherwise resolved. The Liquidation
Trustee shall then disburse those proceeds in accordance with the other
provisions of this Plan. The Designee shall be entitled to reasonable
compensation for his services in this regard, but only from the proceeds payable
to the Debtor from any such Causes of Action.

         5.       SALE OF ASSETS BY LIQUIDATION TRUST. Notwithstanding any other
provision of the Plan, on the Effective Date or as soon as practicable
thereafter, the Liquidation Trustee, on behalf of the Liquidation Trust for the
benefit of the holders of Claims arising out of or related to Class 5 Interests
as they existed immediately prior to the Effective Date and for the benefit of
holders of Allowed Class 2 Claims, shall sell (a) the Unencumbered Causes of
Action, excluding only those class actions in which the Debtors, or any of them,
is a named class representative or putative class representative as described in
Section VI.B.4 of the Plan; (b) the Secured Party Trust Assets; and (c) the Net
Proceeds collected by the Designee pursuant to Section VI.B.4 of the Plan.


                                       28





         6.       REMAINING SECURED PARTY ASSETS. Subject to the rights and
duties of the Liquidation Trustee in the Plan and the Trust Agreement, as and to
the extent instructed by the Informal Group, the Liquidation Trustee shall hold
and assert for the benefit of holders of Allowed Class 2 Claims any rights of
the Debtors in respect of the assets described in Subsection I.58(i), (ii),
(iii) and (iv) of the Plan (except for rights pertaining to the Debtors' Cash as
of the Closing Date). The members of the Informal Group (including, each of
their predecessors and successors in interest and their respective general and
limited partners, officers, directors, employees, agents, attorneys,
professionals and other representatives) shall neither have nor incur any
liability to any Person or Entity for any act taken or omitted to be taken in
connection with this Section VI.B.6 of the Plan.

C.       DISCHARGE, RELEASE, WAIVER AND INJUNCTION.

         1.       FULL AND FINAL SATISFACTION. The treatment of Claims and
Interests provided in the Plan shall be in full and final satisfaction,
settlement and discharge of all liabilities of, Claims against, or Interests in
the Debtors, and each of them, and their respective present Officers, directors,
employees, agents, advisors, attorneys, accountants, insurers and other
representatives. Except as provided in the Plan or the Confirmation Order, the
rights afforded under the plan will be in exchange for and in complete
satisfaction, discharge and release of all Claims and liabilities and
termination of all Interests arising on or before the Effective Date, including
any interest accrued after the Filing Date. Without limitation of the foregoing,
Confirmation shall constitute a judicial determination that the Debtors, and
each of them, have made provision for all Claims of such entities within the
meaning of Delaware Code Annotated, title 8, section 281, and all similar
provisions in any other state or federal statute applicable to the dissolution
of the Debtors.

         2.       MUTUAL RELEASE. In consideration of the funding of the Plan
and the other mutual covenants and agreements contained in the Plan and in the
Plan Support Agreement (and with regard to the releases in favor of the relevant
officers and directors, specifically conditioned upon the payment of the
Officers' and Directors' Contribution as provided herein), as of the Effective
Date, the Debtors, each holder of an Allowed Claim in Class 2, the Buyer, their
respective predecessors and successors in interest, general and limited
partners, other affiliates and each and every Person claiming a right in a
derivative capacity in their behalf, and each of the officers, directors,
shareholders, members, agents, employees, professionals and other
representatives of the foregoing, but excluding officers and directors of the
Debtors who resigned before the Filing Date (collectively, the "Released
Parties"), irrevocably and unconditionally release, remise and forever discharge
one another from any and all direct, indirect or derivative Claims, obligations,
suits, actions, causes of actions, liabilities, obligations, demands, damages,
judgments, orders, decrees, rights of contribution and indemnification or other
right to payment, and other disputes or controversies of every kind, type,
nature, description, whether known or unknown, foreseen or unforeseen, fixed or
contingent, matured or unmatured, liquidated or unliquidated, existing or
hereafter arising in law, equity or otherwise, related to or connected with the
Debtors, or any of them, the Cases, Sale, the Plan, the Plan Support Agreement,
or the management, operation, business, legal or financial affairs of the
Debtors, or any of them, before or after the Filing Date, including, without
limitation, Avoidance Actions and any legal or equitable Claim for Tort, Fraud,
Contract, Breach of Fiduciary or other duty or violation of federal securities
law, but excluding rights under the Plan, the Plan Support Agreement and the
Asset Purchase Agreement, and rights and claims of holders of Claims in Class 2
against non-debtor affiliates of the Debtors (the "Released Claims").


                                       29





         3.       WAIVER AND RELEASE. In consideration of Distributions and
other treatment provided under the Plan, the Plan shall, as of the Effective
Date, constitute a waiver and release of the Released Parties in respect of the
Released Claims by any and all Persons who have accepted the Plan or have
received a Distribution or other treatment under the Plan and their respective
officers, directors, shareholders, members, agents, employees, representatives,
predecessors, successors, heirs, assigns and any Person claiming a right in a
derivative capacity in their behalf (the "Releasors"), and each Releasor shall
(a) irrevocably and unconditionally release, remise and forever discharge each
Released Party from any and all Released Claims; and (b) waive the Released
Claims and be deemed to have forever covenanted with each Released Party not to
sue, make demand or claim, commence, conduct or continue any suit, action, cause
of action, or proceeding of any kind, or otherwise seek any payment, damages or
other recovery from any Released Party for the Released Claims.

         4.       EXCULPATION. From and after the Confirmation Date, (a) the
Debtors; (b) all Officers, and all other agents, employees, professionals, and
representatives of the Debtors; (c) each holder of an Allowed Class 2 Claim (in
their capacities as such); (d) the parties to the Plan Support Agreement (in
their capacities as such); (e) the Buyer (in its capacity as such); (f) the
Collateral Agent; (g) the Liquidation Trustee; (h) the Distribution Agent; and
(i) the Committee, all its members and its professionals (collectively, with
each of their predecessors and successors in interest and their respective
general and limited partners, officers, directors, employees, agents,
professionals and other representatives, the "Exculpated Parties") shall neither
have nor incur any liability to any Person or Entity for any act taken or
omitted to be taken in connection with or related to the formulation,
preparation, dissemination, implementation, administration, Confirmation or
Consummation of the Plan, the Disclosure Statement or any contract, instrument,
release or other agreement or document created or entered into in connection
with the Plan, including the Plan Support Agreement, or any other act taken or
omitted to be taken in connection with the Cases or the Sale; provided, however,
that the foregoing provisions of the Article X.E shall have no effect on the
liability of any Person or Entity that results from any such act or omission
that is determined in a Final Order to have constituted gross negligence or
willful misconduct. From and after the Confirmation Date, all Persons are
permanently enjoined from commencing or continuing in any manner, any suit,
action or other proceeding, on account of or respecting any claim, obligation,
debt, right, cause of action, remedy or liability released or to be released
against an Exculpated Party pursuant to the Plan.

         5.       INJUNCTION. The Confirmation Order will provide that all
Persons are enjoined from and after the Confirmation Date from, in each case,
with respect to the Released Claims (a) suing, making demand or claim,
commencing, conducting or continuing in any manner, directly or indirectly, any
suit, action, cause of action, or other proceeding of any kind against or
affecting the Released Parties, or otherwise seek any payment, damages, or other
recovery from the Released Parties, or any of them, any property of the Released
Parties, any direct or indirect transferee or successor of the Released Parties,
and any property of any such transferee or successor, except for the payment and
other obligations under the Plan; (b) enforcing, levying, attaching, collecting
or otherwise recovering by any manner or means, whether directly or indirectly,
any judgment, award, decree or order against the Released Parties, and each of
them, any property of the Released Parties, any direct or indirect transferee or
successor of the Released Parties and any


                                       30




property of any such transferee or successor, except for the payment and other
obligations under the Plan; (c) asserting any right of setoff or subrogation
directly or indirectly, against any obligation due the Released Parties; (d)
creating, perfecting, or enforcing any Lien, encumbrance or charge against
property with respect to the Released Claims; (e) acting or proceeding in any
manner that does not conform or comply with the provisions of the Plan; or (f)
attempting to enjoin or otherwise prevent the Collateral Agent, the Distribution
Agent or the Liquidation Trustee from making any distribution or payment
required by the Plan or the Plan Support Agreement or challenging any such
distribution or payment after it is made, except that the holders of Allowed
Claims in Class 2 may enforce the Intercreditor Agreement.

         6.       RESERVATION OF POLICE AND REGULATORY POWERS OF GOVERNMENTAL
UNITS. Notwithstanding any other provision in the Plan, the discharges,
releases, exculpations and injunctions provided in the Plan shall not preclude
any action or proceeding by a governmental unit to enforce such governmental
unit's police or regulatory power.

         7.       INSURANCE CLAIMS FOR PERSONAL INJURY OR WRONGFUL DEATH CLAIMS.
Notwithstanding any other provision of the Plan, the discharges and injunctions
contained in the Plan shall not prejudice or impair any right of the holder of
any personal injury or wrongful death Claim to collect from any insurer of the
Debtor or the insurer of any agent of the Debtor under any applicable property,
liability or casualty insurance policy.

D.       POST-CLOSING ADMINISTRATION.

         From and after the Effective Date, the Liquidation Trustee shall
fulfill the specific duties assigned in accordance with the Plan. The Debtors or
the Liquidation Trustee shall execute, deliver, file or record such documents,
instruments, releases and other agreements, and take such actions as may be
necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan.

E.       DISTRIBUTION AGENT.

         The Distribution Agent shall be appointed as of the Effective Date and
perform the duties set forth in the Plan. The Distribution Agent shall be
compensated from the Post-Effective Date Reserve on terms agreed to by the
Debtors, the Informal Group and the Distribution Agent.


                                       31




                                  SECTION VII.
                       PROVISIONS GOVERNING DISTRIBUTIONS

A.       PROCEDURE FOR DETERMINATION OF CLAIMS.

         1.       OBJECTIONS TO CLAIMS. Notwithstanding the occurrence of the
Confirmation Date, and except as to the Claims in Class 2, the Allowed Claims of
the AIR Lenders, and any other Claim that has been Allowed prior to such date or
pursuant to this Plan, the Debtors, the Committees, or any other Person
authorized under Section 502(a) of the Bankruptcy Code may object to the
allowance of any Claim against the Debtors or seek estimation thereof on any
grounds permitted by the Bankruptcy Code by filing the appropriate pleading with
the Bankruptcy Court at any time prior to the earlier of (a) first Business Day
that is ninety (90) days after the Confirmation Date and (b) the Effective Date;
provided, however, that after the Effective Date the Liquidation Trustee shall
have exclusive authority and responsibility to prosecute objections to Claims.

         2.       DISPUTED CLAIMS. Payments or Distributions under the Plan on
Account of Disputed Claims shall be held in reserve pending the allowance or
disallowance of the Claim. To the extent any property is distributed to an
entity on account of a Claim that is not an Allowed Claim, such property shall
promptly be returned for deposit in the Distribution Account, the Liquidation
Trust, or to the Collateral Agent, as appropriate. To the extent that a Disputed
Claim ultimately becomes an Allowed Claim, payments and distributions on account
of such Allowed Claim shall be made in accordance with the provisions of the
Plan. As soon as practicable after the date that the order or judgment of the
Bankruptcy Court allowing such Claim becomes a Final Order, any property held in
reserve as pursuant to the Plan that would have been distributed prior to the
date on which a Disputed Claim becomes an Allowed Claim shall be distributed,
together with any dividends, payments or other distributions made on account of
such property from the date such distributions would have been due had such
Claim then been an Allowed Claim to the date such distributions are made.

B.       DISTRIBUTIONS.

         1.       DISTRIBUTIONS ON ALLOWED CLAIMS. The Distribution Account
shall be funded as follows: (a) on the Effective Date the following shall be
paid from the Gross Sales Proceeds (i) the Administrative Claim Reserve (ii) an
amount equal to the Cure Amounts, and (iii) the amounts required to pay the
Debtors' Post-Filing Date payables incurred in accordance with the Budget and
unpaid as of the Closing Date pursuant to Section 2(a)(i)(E) of the Plan Support
Agreement; and (b) the Collateral Agent shall make the Plan Support Payment to
the Distribution Agent in accordance with the terms of the Plan and the Plan
Support Agreement. Except as otherwise provided in the Plan or by a Final Order
of the Bankruptcy Court, the Distribution Agent shall make Distributions to
holders of Allowed Administrative Expense Claims, Allowed Priority Tax Claims,
and Allowed Priority Claims outstanding as of the Closing Date, if any, from the
Administrative Claim Reserve. After all such Claims have been paid, any unused
portion of the Administrative Claim Reserve shall be paid to the Collateral
Agent for the benefit of the holders of Allowed Claims in Class 2, on the terms
and conditions set forth in the Plan. As provided in the Plan, the Distribution
Agent shall distribute the Bonus Reserve Amount pursuant to the Plan


                                       32





Support Agreement and shall pay the Cure Amounts to cure defaults under the
Assigned Contracts pursuant to Section 365(b) of the Bankruptcy Code and shall
pay the Debtors' post-Filing Date payables incurred in accordance with the
Budget and unpaid as of the Closing Date pursuant to Section 2(a)(i)(E) of the
Plan Support Agreement.

         2.       UNDELIVERABLE DISTRIBUTIONS. Except as otherwise provided
herein, distributions to holders of Allowed Claims shall be made: (a) at the
addresses set forth on the respective proofs of Claim filed by such holders; (b)
at the addresses set forth in any written notice of address change delivered to
the Debtors, or the Collateral Agent after the date of the filing of any related
proof of Claim; or (c) at the address reflected in the Schedules or the Debtors'
books and records if no proof of Claim has been filed and if the Debtors or the
Collateral Agent has not received written notice of a change of address, as set
forth herein. If a Distribution is returned as undeliverable, the maker of such
Distribution (the Liquidation Trustee or the Distribution Agent, as appropriate,
and for the purposes of this section VII of the Plan, the "Transferor") shall
hold such Distribution and shall not be required to take any further action with
respect to the delivery of the Distribution unless and until the earlier of (1)
the date on which Transferor is notified in writing of the then current address
of the holder entitled to receive the Distribution or (2) March 1, 2003 except
as the Bankruptcy Court may otherwise order. If the Transferor is notified in
writing of the then current address of the holder prior to March 1, 2003 the
Transferor shall promptly make the Distribution required by the Plan to the
holder at the then current address. If the Transferor is not so notified by
March 1, 2003, and the holder of the Claim does not by such date assert a right
to such undeliverable Distribution, the holder shall be forever barred from
asserting a Claim to such undeliverable Distribution, which shall become
available for distribution to holders of other Allowed Claims as provided in the
Plan.

         3.       MANNER OF PAYMENT. Distributions by the Distribution Agent may
be made, at their option, in Cash, by wire transfer or by a check drawn on the
Distribution Account. Distributions by the Liquidation Trustee may be made, at
the option of the Liquidation Trustee, in cash, by wire transfer or by check
drawn on such accounts established by the Liquidation Trustee as necessary to
effectuate the Plan.

         4.       INTEREST. Unless otherwise required by Final Order of the
Bankruptcy Court or applicable bankruptcy law, interest shall not accrue or be
paid after the Filing Date on any Claims, and no holder of a Claim shall be
entitled to interest accruing on or after the Filing Date on any Claim.

         5.       FRACTIONAL DOLLARS; DE MINIMIS DISTRIBUTIONS.

                  (a)      Whenever any payment of a fraction of a cent would
otherwise be called for, the actual payment shall reflect a rounding of such
fraction to the nearest whole cent.

                  (b)      No Distribution will be made on account of any
Allowed Claim to the holder of any such Allowed Claim if the amount of such
Distribution for the Allowed Claim is less than $25.00. Immediately before the
Final Distribution Date, the Transferor shall (i) aggregate the amount of all
Distributions that would have been made on account of an Allowed Claim but for
this de minimis provision and (ii) on the Final Distribution Date, make a
Distribution on account of such Allowed Claim if the aggregate amount meets or
exceeds $25.00.


                                       33




         6.       DISTRIBUTIONS ON CLAIMS ALLOWED PURSUANT TO SECTION 502(H) OF
THE BANKRUPTCY CODE. Except as otherwise provided in the Plan, no Distributions
shall be made on account of a Claim arising as a result of a Final Order entered
in an Avoidance Action until such Claim becomes an Allowed Claim. Any Claim that
is Allowed pursuant to Section 502(h) of the Bankruptcy Code prior to the
initial Distribution Date as a result of the entry of a Final Order in any
Avoidance Action will be treated in accordance with the provisions of the Plan.
All holders of such Claims that become Allowed Claims after the initial
Distribution Date will receive an initial distribution on the Distribution Date
next following the date on which their Claim becomes an Allowed Claim and shall
receive subsequent Distributions, if any, in accordance with the provisions of
the Plan. Distributions under the Plan on account of anticipated Claims that may
arise or become allowable as a result of the entry of a Final Order in any
Avoidance Action that are not Allowed Claims as of the initial Distribution Date
may be held in reserve, at the discretion of the Collateral Agent, pending the
allowance or disallowance of such Claims.

         7.       COMPLIANCE WITH TAX REQUIREMENTS. In compliance with Section
346 of the Bankruptcy Code, to the extent applicable, the Transferor shall
comply with all withholding and reporting requirements imposed by federal, state
or local taxing authorities in connection with making Distributions pursuant to
the Plan. The Transferor shall be authorized to take any and all action
necessary and appropriate to comply with such requirements. As a condition to
making any Distribution under the Plan, the Transferor of a Distribution may
require the holder of an Allowed Claim to provide such holder's taxpayer
identification number, and such other information, certification or forms as
necessary to comply with applicable tax reporting and withholding laws.
Notwithstanding any other provision of this Plan, each entity receiving a
Distribution of Cash pursuant to this Plan shall have sole and exclusive
responsibility for the satisfaction and payment of tax obligations imposed by
any governmental unit, including income, withholding and other tax obligations,
on account of any such Distribution.

         8.       RESERVE FOR DISPUTED CLAIMS. Except as otherwise provided in
the Plan, no Distributions shall be made on account of a Disputed Claim until
such claim becomes an Allowed Claim. In making any Distribution on Allowed
Claims, the Transferor shall calculate the amount of such Distribution (for
purposes of making a Pro Rata calculation) as if each Disputed Claim were an
Allowed Claim, unless the Bankruptcy Court enters an order specifying that the
Disputed Claim should be treated as being a different amount for purposes of
such calculation. The Transferor shall reserve from Distributions a sufficient
amount to make a Distribution on a Disputed Claim in the event it becomes an
Allowed Claim (unless the Bankruptcy Court orders otherwise). To the extent a
Disputed Claim is disallowed pursuant to a Final Order, any reserves
attributable to the disallowed portion of the Disputed Claim shall be
distributed on account of Allowed Claims pursuant to the terms of the Plan.

         9.       SETOFFS. Subject to Section 553 of the Bankruptcy Code, in the
event the Debtors have a claim of any nature whatsoever against a holder of a
Claim other than an Allowed Claim in Class 2, 4 or 5, the Transferor may, but is
not required to, set off the Debtors' claim against such Claim (and any
Distributions or other rights to receive property arising out of such Claim
under the Plan) unless any such claim of the Debtors is or will be released
under the Plan. Neither the failure to set off nor the allowance of any Claim
under the Plan shall constitute a waiver or release of any claim of the Debtors.


                                       34




         10.      RELIANCE ON CLAIMS REGISTER. In making Distributions under the
Plan, the Transferor may rely upon the accuracy of the claims register
maintained by the Bankruptcy Court or its designee as claims agent in the Cases,
as modified by any Final Order of the Bankruptcy Court disallowing Claims in
whole or in part.

C.       CANCELLATION OF NOTES/STOCK INSTRUMENTS/AGREEMENTS.

         1.       Except as specifically provided below, all Interests in the
Debtors, or either of them, and all notes, bonds, indentures, agreements,
contracts or other instruments or documents evidencing or creating any
indebtedness, obligation or liability of any of the Debtors shall be deemed
canceled on the Effective Date and shall have no force and effect against the
Debtors, except for the purpose of evidencing the right to participate in the
Distributions and other treatment provided by the Plan.

         2.       Notwithstanding any other provisions in the Plan, each trust
indenture or other agreement that governs the rights of the holder of an Allowed
Claim that is administered by an indenture trustee shall continue in effect
solely for the purposes of permitting such indenture trustee (a) to maintain any
rights and liens it may have for fees, costs, expenses, and indemnification
under such indenture or other agreement, provided, however, such rights and
liens are limited to the Distributions, if any, to holders such Allowed Claims;
and (b) to be paid or reimbursed for such pre-petition and post-petition fees,
costs, expenses, and indemnification (to the extent not paid as an
administrative claim or otherwise) from the Distributions, if any, to holders of
such Allowed Claims (until payment in full of such fees, costs, expenses or
indemnification) on the terms and conditions set forth by the respective trust
indenture, other agreement, or applicable law; provided, however, that the
forgoing shall not affect the liability of the Debtors, the Estates, or other
parties in interest under the Bankruptcy Code and the Confirmation Order, except
as specifically set forth in the Plan. With respect to each such lien and
security interest, (a) the lien and security interest of the respective
indenture trustee shall be for and in the amount of all payment and indemnity
obligations of the Issuer (as defined in the governing trust indenture) pursuant
to the governing trust indenture, and any other applicable agreement or
applicable law, including (but not limited to) such indenture trustees'
pre-petition and post-petition fees, costs and expenses for which such indenture
trustee has not received payment as an administrative claim or otherwise.

         3.       The indenture trustees set forth in sub-section 2 above,
together with any securities intermediaries holding nominal or other positions
in the notes or bonds treated by the Plan, shall provide the Collateral Agent
with reasonable cooperation to obtain the identity of such notes or bonds. All
Distributions from the Liquidation Trust shall be made directly to the holder of
the beneficial interests.


                                       35




D.       RESERVATION OF RIGHTS OF THE ESTATE.

                  All claims, rights to payment, causes of action, cross-claims
and counterclaims of the Debtors of any kind or nature whatsoever including,
without limitation, Causes of Action and Avoidance Actions, against third
parties arising before the Confirmation Date that have not been disposed of
prior to the Effective Date shall be preserved and treated in accordance with
the Plan, except to the extent (a) transferred to the Buyer pursuant to the
Sale; or (b) released or enjoined by the Plan (including those against the
Released Parties or the Exculpated Parties) or pursuant to a Final Order.
Without limitation of the foregoing, except as otherwise provided in the Plan,
pursuant to section 1123(b) of the Bankruptcy Code, the Debtors shall assign to
the Liquidation Trustee for enforcement for the benefit of the holders of
Allowed Class 5 Interests and Allowed Class 2 Claims, the Causes of Action and
Avoidance Actions; (y) all Claims, causes of action, and related recoveries
against any person other than the Released Parties or the Exculpated Parties;
and (z) all other claims, rights to payment and causes of action, cross claims
and counterclaims of any nature or type whatsoever, at law or in equity, against
any Person or entity other than the Released Parties or the Exculpated Parties
or any other Person released pursuant to a Final Order, whether or not filed
prior to the Effective Date.


                                  SECTION VIII.
                         CONTINUED CORPORATE EXISTENCE;
                         DISSOLUTION OF CERTAIN DEBTORS.

         1.       On the Effective Date:

                  (a)      The Collateral Agent and the Debtors, as applicable,
shall assign the Net Proceeds of the Unencumbered Causes of Action and the
Secured Party Trust Assets and, to the extent not liquidated by the Closing
Date, the Unencumbered Causes of Action and the Secured Party Trust Assets as
set forth in the Plan;

                  (b)      the Distribution Agent shall pay outstanding Allowed
Administrative Expense Claims, Allowed Priority Tax Claims and Allowed Other
Priority Claims, if any, from the Administrative Claim Reserve pursuant to the
terms and conditions of the Plan;

                  (c)      the Distribution Agent shall pay Allowed Class 3
Claims or return the collateral securing such Allowed Class 3 Claims pursuant to
Section III.C.2 of the Plan; and

                  (d)      the Distribution Agent shall pay outstanding Bonus
Claims from the Bonus Reserve Amount pursuant to the terms and conditions of the
Plan and the Plan Support Agreement.

         2.       After the Closing Date and on the dates set forth in the Plan
and the Plan Support Agreement


                                       36




                  (a)      the Distribution Agent shall pay to the Collateral
Agent balances remaining, if any, of the Administrative Claim Reserve;

                  (b)      the Distribution Agent and the Liquidation Trustee
shall make such other Distributions the Plan requires the Debtors to make; and

                  (c)      as soon as practicable, the Liquidation Trustee shall
wind up the affairs of the Debtors consistent with the Plan and applicable
non-bankruptcy law including, but not limited to, the filing of federal, state
and to the extent applicable, local, final tax returns.

         3.       After the Effective Date the Liquidation Trustee shall not
engage in any ongoing business.

         4.       The entry of the Confirmation Order shall constitute a
direction and authorization to and of the Debtors and the Officers to take or
cause to be taken any corporate action necessary or appropriate to consummate
the provisions of this Plan without any requirement of further approval or other
action by the stockholders, officers or directors of the Debtors (including,
without limitation, the filing of or amending or restating the certificates of
incorporation of the Debtors) and all such actions taken or caused to be taken
shall be deemed to have been authorized and approved by the Bankruptcy Court.

                                   SECTION IX.
                                  MISCELLANEOUS

A.       RETENTION OF JURISDICTION.

         1.       Following the Effective Date, the Bankruptcy Court shall
retain such jurisdiction as is set forth in the Plan. Without limitation, the
Bankruptcy Court shall retain jurisdiction for the following purposes:

                  (a)      Except as otherwise provided in the Plan, to
determine the allowance, classification, priority or subordination of Claims and
Interests upon objection, or to estimate, pursuant to section 502(c) of the
Bankruptcy Code, the amount of any Claim that is or is anticipated to be
contingent or unliquidated as of the Effective Date, or to determine the
allowance or classification of any payment made pursuant to the Plan Support
Agreement, or to hear proceedings to subordinate Claims or Interests brought by
any party in interest with standing to bring such objection or proceeding,
including, without limitation, the Distribution Agent and the Liquidation
Trustee;

                  (b)      To construe and enforce the Plan, the Plan Support
Agreement, and the documents and agreements filed in connection with the Plan
and issue such orders as may be necessary for the implementation, execution and
consummation of the Plan, including, but not limited to, issuing orders
enforcing the releases and injunctions contained in the Plan;

                  (c)      To determine any and all applications for allowance
of Fee Claims for periods on or before the Effective Date, and to determine any
other request for payment of administrative expenses;


                                       37




                  (d)      To determine all matters that may be pending before
the Bankruptcy Court on or before the Effective Date;

                  (e)      To resolve any dispute regarding the implementation
or interpretation of the Plan that arises at any time before the Cases are
closed, including, without limitation, determination, to the extent a dispute
arises, of the entities entitled to a Distribution within any particular Class
of Claims;

                  (f)      To determine all applications, adversary proceedings,
contested matters and other litigated matters that were brought or that could
have been brought on or before the Effective Date;

                  (g)      To determine all disputes, controversies, or claims
related to or arising in connection with the Asset Purchase Agreement or the
Sale;

                  (h)      To determine matters concerning local, state and
federal taxes in accordance with Sections 106, 346, 505 and 1146 of the
Bankruptcy Code, and to determine any tax claims that may arise against the
Debtors as a result of the transactions contemplated by the Plan;

                  (i)      To determine all disputes, controversies or issues
related to or arising in connection with the interpretation or enforcement of
the Plan, the Plan Support Agreement or the Confirmation Order, including, but
not limited to, the interpretation and enforcement of the releases and
injunctions contained in the Plan;

                  (j)      To determine such other matters, or for such other
purposes, as may be provided in the Confirmation Order;

                  (k)      To modify the Plan pursuant to Section 1127 of the
Bankruptcy Code, or to remedy any apparent defect or omission in the Plan, or to
reconcile any inconsistency in the Plan so as to carry out its intent and
purposes;

                  (l)      To enter a final decree closing the Cases; and

                  (m)      To hear and determine all Causes of Action and other
claims asserted by the Liquidation Trustee on behalf of the Liquidation Trust.

B.       INSURANCE PRESERVATION.

         Any policies of insurance or indemnification escrows that may cover or
apply to any Claims against the Officers or any other officer, director,
employee, agent or other representative of the Debtors (collectively the
"Insured Parties"), including, without limitation, any directors or officers
liability insurance policy, shall be preserved and shall remain in full force
and effect following entry of the Confirmation Order and nothing in the Plan,
including any releases, shall diminish, impair or prejudice the rights, claims,
interests or defenses of any Insured Party.


                                       38



C.       TAX INJUNCTION; EXCULPATION.

         1.       In accordance with Section 346 of the Bankruptcy Code for
purposes of any state or local law imposing a tax, income will not be realized
by the Debtors by reason of forgiveness or discharge or indebtedness resulting
from the Cases. As a result, each state or local taxing authority is permanently
enjoined and restrained, after the Confirmation Date, from commencing,
continuing or taking any act to impose, collect or recover in any manner any tax
against the Debtors arising by reason of the forgiveness or discharge of any
such Person under the Plan.

         2.       Upon entry of the Confirmation Order, the Debtors, the
Committees, the parties to the Plan Support Agreement, the Collateral Agent, and
their respective directors, officers, members, employees, advisors, attorneys,
affiliates, subsidiaries or agents shall not have or incur any liability to the
holder of any Claim or Interest, any other parties in interest in the Cases, or
any of their respective agents, employees, representatives, advisors,
successors, or assigns, for any act or omission relating to or arising out of
the administration of the Cases subsequent to the Petition Date, including but
not limited to, the Sale, the Plan Support Agreement, the formulation of the
Plan, the approval of the Disclosure Statement, the solicitation of votes for or
confirmation of the Plan, the consummation of the Plan, or the administration of
the Plan or the property to be distributed under the Plan, except for willful
misconduct or gross negligence, and in all respects shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan. After entry of the Confirmation Order, all holders of Claims and
Interests shall be enjoined and restrained from commencing or continuing any
action or proceeding arising out of or related to the consummation of the
transactions contemplated by the Plan and the prosecution, directly,
derivatively or otherwise, of any Claim or Cause of Action, demand, right or
liability released pursuant to the Plan shall be permanently enjoined.

D.       DISSOLUTION OF COMMITTEES.

         The Committee shall continue in existence until the Final Class 4
Distribution Date; provided, however, after the Confirmation Date the powers and
duties of the Committees shall be limited to those provided in Section VII.A.1
of the Plan and those necessary to enforcement of the Confirmation Order.
Notwithstanding the forgoing, if the Confirmation Order is vacated pursuant to
Section IX.L of the Plan, the Committee shall have all powers and duties that
existed prior to the Confirmation Date. On the Final Class 4 Distribution Date,
(i) the Committees shall dissolve and their respective members shall be released
of their duties, responsibilities and obligations in connection with the Cases
or the Plan and (ii) the retention or employment of the Committees' respective
professionals and agents shall terminate.

E.       EFFECTUATING DOCUMENTS; FURTHER TRANSACTION; EXCEPTION FROM TRANSFER
         TAXES.

         1.       Upon Confirmation, the Debtors and the Collateral Agent shall
be authorized to (a) execute, deliver, file or record such contracts,
instruments, releases and other agreements or documents contemplated by or
entered into in connection with the Plan; and (b) take such actions as may be
necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan. Pursuant to section 1146(c) of the Bankruptcy Code, the
creation or transfer of any


                                       39




mortgage, deed of trust or other security interest, the making or assignment of
any lease or sublease, or the making or delivery of any deed or other instrument
of transfer under, in furtherance of or in connection with the Plan, and
executed in connection with the liquidation of assets shall not be subject to
any stamp tax, real estate tax or similar tax.

         2.       On the Effective Date, all provisions of the Plan, including
all releases, injunctions, agreements, instruments and other documents filed in
accordance with the Plan, shall be binding and have res judicata, collateral
estoppel, claim preclusion and issue preclusion effect upon the Debtors, all
Claim and Interest holders and all other entities that are affected in any
manner by the Plan. All agreements, instruments and other documents filed in
connection with the Plan shall have full force and effect, and shall bind all
parties thereto as of the Effective Date, whether or not such exhibits actually
shall be executed by parties other than the Debtors or shall be issued,
delivered or recorded on the Effective Date or thereafter.

F.       NONCONSENSUAL CONFIRMATION.

         If all impaired classes do not vote in favor of the Plan, the Debtors
shall seek confirmation of the Plan in accordance with section 1129(b) of the
Bankruptcy Code either under the terms provided herein or upon such terms as may
exist if the Plan is modified in accordance with section 1127(a) of the
Bankruptcy Code.

G.       RESERVATION OF RIGHTS.

         If the Plan is not confirmed by Final Order, or if the Plan is
confirmed and the Effective Date does not occur, the rights of the Debtors and
all parties in interest in the Cases are and will be reserved in full. Any
concessions, settlements or statements reflected therein are made for the
purposes of the Plan only, and if Confirmation or the Effective Date does not
occur, no party in interest in the Cases shall be bound or deemed prejudiced by
any concession, settlement or statement.

H.       MODIFICATION OF PLAN.

         Upon the prior written consent of the Requisite Secured Parties under
the Plan Support Agreement, the Debtors may alter, amend or modify this Plan
pursuant to section 1127 of the Bankruptcy Code at any time prior to the time
that the Bankruptcy Court has signed the Confirmation Order. After such time and
prior to the substantial consummation of the Plan, the Debtors may, so long as
the treatment of holders of Claims and Interests under the Plan is not adversely
affected, institute proceedings in Bankruptcy Court to remedy any defect or
omission or to reconcile any inconsistencies in the Plan, the Disclosure
Statement or the Confirmation Order and any other matters as may be necessary to
carry out the purposes and effects of the Plan; provided, however, that prior
notice of such proceedings shall be served in accordance with Bankruptcy Rule
2002; and provided further that any modification of the Plan or the Asset
Purchase Agreement of the type specified in clause (C) of the definition of Plan
Support Termination Date in the Plan Support Agreement shall require the consent
of the Requisite Secured Parties under the Plan Support Agreement. The Debtors
intend that the provisions of the Plan (including the implementation thereof)
shall be in compliance with all applicable laws and


                                       40




any rules and regulations promulgated thereunder. If the Debtors conclude that
the Plan may not comply with applicable law, then and in such event the Debtors
shall amend the Plan in such respect as they deem necessary to bring the Plan
into compliance therewith.

I.       NOTICE.

         Except as specifically provided otherwise in the order approving the
Disclosure Statement, any notice, pleading, objection or other document required
by the Plan or the Confirmation Order, shall be sent by overnight delivery
service, facsimile transmission or hand delivery to:

         1.       IF TO THE DEBTORS:

                  John P. Whittington, Esq.
                  Bradley Arant Rose & White LLP
                  One Federal Place
                  1819 Fifth Avenue North
                  Birmingham, AL 35203
                  (205) 521-8800

                           and

                  Michael R. Nestor, Esq.
                  Young Conaway Stargatt & Taylor, LLP
                  P.O. Box 391
                  The Brandywine Building
                  1000 West Street, 17th Floor
                  Wilmington, DE 19801
                  (302) 576-3321

         2.       IF TO THE BUYER:

                  Mike Delaney, Esq.
                  Moore & Van Allen, PLLC
                  NationsBank Corporate Center
                  100 North Tryon Street, 47th Floor
                  Charlotte, NC 28202-4003
                  (704) 331-1159


                                       41





         3.       IF TO THE COLLATERAL AGENT:

                  Dawn Helms Sharff, Esq.
                  Walston, Wells, Anderson & Bains
                  Financial Center
                  505 20th Street North, Suite 500
                  Birmingham, AL 35203
                  (205) 251-0700

         4.       IF TO THE COMMITTEES:

                  Claudia Z. Springer, Esq.
                  Reed Smith LLP
                  2500 One Liberty Place
                  Philadelphia, PA 19103-7301
                  (215) 851-1420

                           and

                  Kurt F. Gwynne, Esq.
                  Reed Smith LLP
                  1201 Market Street
                  Suite 1500
                  Wilmington, DE 19801
                  (302) 778-7575

         5.       IF TO THE AGENT:

                  Berry D. Spears, Esq.
                  Winstead Sechrest & Minick, P.C.
                  Suite 800, 100 Congress Avenue
                  Austin, TX 78701
                  (512) 370-2850

                  Phillip L. Lamberson, Esq.
                  Winstead Sechrest & Minick, P.C.
                  1201 Elm Street, Suite 5400
                  Dallas, TX 75270
                  (214) 745-5390

                  Mike Lastowski
                  Duane Morris & Heckshen LLP
                  1100 Market Street, Suite 1200
                  Wilmington, DE 19801
                  (302) 657-4942


                                       42




         6.       IF TO THE INFORMAL GROUP:

                  Stewart A. Kagan, Esq.
                  O'Melveny & Myers LLP
                  30 Rockefeller Plaza
                  New York, NY 10112
                  (212) 728-5950

                  Berry D. Spears, Esq.
                  Winstead Sechrest & Minick, P.C.
                  Suite 800, 100 Congress Avenue
                  Austin, TX 78701
                  (512) 370-2850

                  Ronald J. Silverman, Esq.
                  Bingham McCutchen LLP
                  339 Park Avenue
                  New York, NY 10022
                  (212) 752-5378

                  F. Mark Fucci, Esq.
                  Bingham McCutchen LLP
                  One State Street
                  Hartford, CT 06103
                  (860) 240-2800

                  Phillip L. Lamberson, Esq.
                  Winstead Sechrest & Minick, P.C.
                  1201 Elm Street, Suite 5400
                  Dallas, TX 75270
                  (214) 745-5390

                  Laura Davis Jones, Esq.
                  Pachulski, Stang, Ziehl, Young & Jones
                  919 N. Market Street
                  P.O. Box 8705
                  Wilmington, DE 19899
                  (302) 652-4400

         7.       IF TO THE UNITED STATES TRUSTEE:

                  Mark S. Kenney, Esq.
                  Office of the U.S. Trustee
                  844 King Street
                  Wilmington, DE 19801
                  (302) 573-6497


                                       43




J.       SEVERABILITY; CONFLICT OF TERMS.

         1.       To the extent that any provision of this Plan would, by its
inclusion in this Plan, prevent or preclude the Bankruptcy Court from entering
the Confirmation Order, the Debtors may modify or amend such provision, in whole
or in part as necessary to cure any defect or remove any impediment to the
confirmation of this Plan existing by reason of such provision.

         2.       To the extent the Disclosure Statement and the Plan are
inconsistent, the terms of the Plan shall control.

K.       SUCCESSORS AND ASSIGNS.

         The rights, benefits and obligations of any Person named or referred to
in the Plan shall be binding upon, and shall inure to the benefit of, the heir,
executor, administrator, successor or assignee of such Person.

L.       VACATION OF CONFIRMATION.

         The Confirmation Order shall be vacated and shall be of no further
force or effect (1) if the Effective Date has not occurred on or before the
Outside Termination Date (as defined in the Plan Support Agreement), or (2) if
the Asset Purchase Agreement is terminated.


                                       44





Dated:              , 2002
      --------------
                               BIRMINGHAM STEEL CORPORATION

                               By /s/ James A. Todd
                                 -----------------------------------------------
                               Its  Vice Chairman & Chief Administrative Officer
                                  ----------------------------------------------

                               BIRMINGHAM SOUTHEAST, L.L.C.

                               By /s/ James A. Todd
                                 -----------------------------------------------
                               Its Vice President & Chief Administrative Officer
                                  ----------------------------------------------

                               AMERICAN STEEL & WIRE CORPORATION

                               By /s/ James A. Todd
                                 -----------------------------------------------
                               Its  Vice Chairman & Chief Administrative Officer
                                  ----------------------------------------------

                               PORT EVERGLADES STEEL CORPORATION

                               By /s/ James A. Todd
                                 -----------------------------------------------
                               Its  Vice Chairman & Chief Administrative Officer
                                  ----------------------------------------------

                               BIRMINGHAM RECYCLING INVESTMENT COMPANY

                               By /s/ James A. Todd
                                 -----------------------------------------------
                               Its  Vice Chairman & Chief Administrative Officer
                                  ----------------------------------------------



                                       45



                                ATTACHMENT 16.7-C


                          ADDRESSES FOR COMMUNICATIONS






                                    ADDRESSES


A.       Addresses for General Communications.

         MERCEDES-BENZ U.S. INTERNATIONAL, INC.
         1 MERCEDES DRIVE
         VANCE, ALABAMA 35490
         ATTENTION: MR. KEN ROBERTS, PROJECT DIRECTOR, RUST CONSTRUCTORS, INC.

         PH: (205) 507-2480
         FAX: (205) 507-2474





                               ATTACHMENT 11.2(3)

                               SCHEDULE OF VALUES






                               SCHEDULE OF VALUES


1.       Before the first Application for Payment, the Contractor shall submit
         to the Owner, for review and approval, a Schedule of Values allocated
         to various portions of the Work, prepared in such form and supported by
         such data to substantiate its accuracy as the Owner may require. This
         Schedule of Values, as approved by the Owner, shall be used as the
         basis for the Contractor's Applications for Payment. The Contractor
         agrees that the line item breakdown of the Contract Price, Work
         activity descriptions and line item amounts set forth in the Contract
         shall not be used for the line items in the Schedule of Values unless
         the Owner agrees. Contractor further agrees that each Contract line
         item may contain one or more "Schedule of Value" items; and agrees that
         for the purpose of Applications for Payment, the Schedule of Value
         items shall correspond to the appropriate Contract item(s) as directed
         by the Owner and shall be detailed accordingly in the Contractor's
         Application for Payment in form as required by the Owner. The Schedule
         of Values shall reflect the Retainage requirements of the Contract.

2.       The Contractor represents that the Schedule of Values shall accurately
         represent its costs to perform the Work and its overhead and profit
         related to its Work.

3.       If, at any time, the Owner determines, in its reasonable discretion,
         that the Schedule of Values does not approximate the actual cost then
         being incurred by the Contractor to perform the Work, the Contractor
         shall prepare, for Owner's approval, a revised Schedule of Values
         approximating actual costs, which then shall be used as the basis for
         future progress payments. Without changing the Contract Price, the
         Owner reserves the right to require the Contractor: (i) to increase or
         decrease amounts within the line items in the Schedule of Values; and
         (ii) to conform the price breakdown to the Owner's local accounting
         practice.

4.       The Owner may require the Contractor to furnish additional allocation
         of the Contract Price and Schedule of Values for the purpose of
         allocating the Contract Price among separate buildings, structures
         and/or equipment installations.

EX-2

                                                                       EXHIBIT 2

                         UNITED STATES BANKRUPTCY COURT
                              DISTRICT Of DELAWARE


- ---------------------------------------------
In re:                                       ) Chapter 11
                                             )
BIRMINGHAM STEEL CORPORATION,                ) Case No. 0211586 (RSB)
BIRMINGHAM SOUTHEAST. LLC                    ) Case No. 0211587 (RSB)
AMERICAN STEEL & WIRE CORPORATION.           ) Case No. 0211588 (RSB)
PORT EVERGLADES STEEL CORPORATION.           ) Case No. 0211589 (RSB)
BIRMINGHAM RECYCLING INVESTMENT              ) Case No. 0211590 (RSB)
COMPANY,                                     )
                                             ) Jointly Administered
     Debtors.                                )
                                             )
- ---------------------------------------------


                 AMENDED AND RESTATED DISCLOSURE STATEMENT FOR
                        JOINT PLAN OF REORGANIZATION OF
                    BIRMINGHAM STEEL CORPORATION, BIRMINGHAM
              SOUTHEAST, L.L.C, AMERICAN STEEL & WIRE CORPORATION,
                 PORT EVERGLADES STEEL CORPORATION, BIRMINGHAM
                      RECYCLING INVESTMENT COMPANY, UNDER
                       CHAPTER 11 OF THE BANKRUPTCY CODE
                       ---------------------------------

                                      John P. Whittington
                                      Patrick Darby
                                      Lloyd C. Peeples. III
                                      Christopher L. Hawkins
                                      BRADLEY ARANT ROSE & WHITE LLP
                                      2001 Park Place
                                      Suite 1400
                                      Birmingham, Alabama 35203
                                      (205)521-8000

                                      -and-

                                      James L. Patton, Jr. (No. 2202)
                                      Michael R. Nestor (No. 3526)
                                      YOUNG CONAWAY STARGATT
                                      & TAYLOR, LLP
                                      The Brandywine Building
                                      1000 West Street, 17th Floor
                                      Wilmington. Delaware 19801
                                      Telephone: (302) 571-6600

                                      Attorneys for Debtors in Possession






                    DISCLOSURE STATEMENT DATED JULY 3, 2002

  SOLICITATION OF VOTES WITH RESPECT TO THE AMENDED AND RESTATED JOINT PLAN OF
                                 REORGANIZATION

                                       OF

BIRMINGHAM STEEL CORPORATION, BIRMINGHAM SOUTHEAST, LLC, AMERICAN STEEL, & WIRE
CORPORATION, PORT EVERGLADES STEEL CORPORATION AND BIRMINGHAM RECYCLING
INVESTMENT COMPANY

         THE MANAGEMENT OF BIRMINGHAM STEEL CORPORATION, BIRMINGHAM SOUTHEAST,
LLC, AMERICAN STEEL & WIRE CORPORATION, PORT EVERGLADES STEEL CORPORATION, AND
BIRMINGHAM RECYCLING INVESTMENT COMPANY (THE "DEBTORS") BELIEVES THAT THE
DEBTORS' AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION DATED JULY 3, 2002
(THE "PLAN"), IS IN THE BEST INTERESTS OF CREDITORS. ALL CREDITORS ARE URGED TO
VOTE IN FAVOR OF THE PLAN, VOTING INSTRUCTIONS ARE CONTAINED ON PAGES 4-6 OF
THIS DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED,
EXECUTED, AND RECEIVED BY BANKRUPTCY SERVICES, LLC. 70 EAST 55TH STREET, 6TH
FLOOR. NEW YORK, NEW YORK 10022, ON ____________ (THE "VOTING DEADLINE").

         THE OFFICIAL COMMITTEE OF ________________ AND TIME OFFICIAL COMMITTEE
OF _____________ INDEPENDENTLY HAVE CONCLUDED THAT THE PLAN IS IN THE BEST
INTERESTS OF THE DEBTORS' CREDITORS AND URGE THE DEBTORS' CREDITORS TO VOTE IN
FAVOR OF THE PLAN. ACCOMPANYING THIS DISCLOSURE STATEMENT, ARE LETTERS DETAILING
THE COMMITTEES' RECOMMENDATIONS WITH REGARD TO THE PLAN.

         ALL CREDITORS ARE ENCOURAGED TO READ AND CONSIDER CAREFULLY THIS ENTIRE
DISCLOSURE STATEMENT, INCLUDING THE PLAN ATTACHED AS EXHIBIT A, PRIOR TO
SUBMITTING BALLOTS PURSUANT TO THIS SOLICITATION. THIS DISCLOSURE STATEMENT
CONTAINS ONLY A SUMMARY OF THE PLAN, AND IS NOT INTENDED TO REPLACE CAREFUL AND
DETAILED REVIEW AND ANALYSIS OF THE PLAN.

- ------------------

         ALL CAPITALIZED TERMS IN THIS DISCLOSURE STATEMENT NOT OTHERWISE
DEFINED HEREIN HAVE THE MEANINGS GIVEN TO THEM IN THE PLAN. THE SUMMARIES OF THE
PLAN AND THE OTHER DOCUMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED BY REFERENCE TO THE PLAN AND SUCH OTHER DOCUMENTS THEMSELVES.

- ------------------


                                       2


         THE DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN.

1.       INTRODUCTION

         A.       PRELIMINARY STATEMENT.

         On June 3, 2002 (the "Filing Date"), Birmingham Steel Corporation
("BSC"), Birmingham Southeast, L.L.C. ("BSE"), American Steel & Wire Corporation
("ASW"), Port Everglades Steel Corporation ("PESCO"), and Birmingham Recycling
Investment Company ("BRI"), debtors and debtors-in-possession (the "Debtors"),
filed voluntary petitions for relief under chapter 11 of title 11, United States
Code, 11 U.S.C. ss. 101, et seq. (the "Bankruptcy Code") before the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
This Disclosure Statement and the accompanying Plan relate to all Debtors. The
respective chapter 11 cases of the Debtors (the "Cases") are being jointly
administered, with the Debtors managing their assets, businesses and financial
affairs as debtors-in-possession, subject to the supervision of the Bankruptcy
Court.

         As set forth in more detail below, the Plan provides for the sale of
substantially all of the Debtors' assets, which are subject to the liens and
security interests of the Secured Parties (as defined below). The Plan includes
a compromise between the Debtors and the Secured Parties that allows certain
proceeds of the proposed sale to be paid to constituencies other than the
Secured Parties. Without limitation, the Plan provides for (a) the sale of
substantially all of the Debtors' assets; (b) the payment of net proceeds of the
sale (after the payment of administrative expense claims and certain other costs
and expenses related to the proposed transaction) to the agent for the Secured
Parties with a portion thereof to be delivered to a Distribution Agent for
distribution to various classes of creditors and holders of equity interests;
and (c) releases in favor of the Debtors and the Secured Parties and their
respective officers, directors, employees and other representatives. See Section
VI below for a summary of the Plan.

         Accompanying this Disclosure Statement are copies of the following:

                  1.       The order of the Bankruptcy Court dated________, 2002
                           approving this Disclosure Statement and solicitation
                           and voting procedures related to the Plan and setting
                           the hearing on confirmation of the Plan for
                           ___________, 2002 at ___________.

                  2.       The Plan.

                  3.       A ballot for accepting or rejecting the Plan. Ballots
                           are provided only to holders of Allowed Claims in
                           Classes 2, 3, and 4 because


                                       3


                           only holders of claims in these classes may vote to
                           accept or reject the Plan under the provisions of the
                           Bankruptcy Code. All other classes of claims and
                           interests are deemed to either have accepted the Plan
                           (Class 1) or to have rejected the Plan (Classes 5, 6,
                           7 and 8). See Section I.B.2 ("Voting on the Plan")
                           for additional information regarding ballots and
                           voting procedures.

         B.       PLAN CONFIRMATION PROCESS.

                  1.       APPROVAL OF DISCLOSURE STATEMENT.

         After notice and a hearing held on August 6, 2002, the Bankruptcy Court
approved this Disclosure Statement by order dated ________ as containing
information of a kind, and in sufficient detail, that would enable a
hypothetical reasonable investor typical of holders of claims or interests in
Classes 2, 3, and 4 to make an informed judgment whether to accept or reject the
Plan. The Bankruptcy Court's approval of this Disclosure Statement, however,
does not constitute a determination by the Bankruptcy Court as to the fairness
or merits of the Plan.

         Each holder of a Claim and Interest should carefully read this
Disclosure Statement and the Plan in their entirety before voting on the Plan.

                  2.       VOTING ON THE PLAN

                           A)       WHO MAY VOTE. Pursuant to Section 1126 of
the Bankruptcy Code, holders of Allowed Claims or Interests may vote to accept
or reject the Plan, provided, however, that (i) the holders of Claims or
Interests in classes that are not impaired under the Plan conclusively are
presumed to have accepted the Plan and solicitation of acceptances with respect
to such classes is not required, and (ii) a class is deemed not to have accepted
the Plan if the Plan provides that the Claims or Interests in such class do not
entitle the holders of such Claims or Interests to receive or retain any
property under the Plan on account of such Claims or Interests. Accordingly, the
Debtors are soliciting acceptance of the Plan only from holders of Claims or
Interests in the following classes, which are "impaired" under the Plan and are
entitled to accept or reject the Plan:

                           -        Class 2 (Secured Claims of Parties to the
                                    Omnibus Collateral Agreement and the
                                    Intercreditor Agreement).

                           -        Class 3 (Allowed Secured Claims other than
                                    Allowed Secured Claims in Class 2).

                           -        Class 4 (Allowed Unsecured Claims) other
                                    than Intercompany Claims).


                                       4



         Only Persons who hold Claims or Interests in the foregoing impaired
classes are entitled to vote to accept or reject the Plan, Holders of Claims in
Class 1 (Allowed Other Priority Claims) are not impaired under the Plan and are
deemed to have accepted the plan. Holders of Claims or Interests in Class 5
(Interests in BSC other than the Lender Warrants) or Class G (Interests that are
Lender Warrants) or Class 7 (Intercompany Claims) or Class 8 (Intercompany
Interests) will not receive any distributions under the Plan on account of such
Claims or Interests and are deemed to have rejected the Plan.

         THE DEBTORS BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF HOLDERS OF CLAIMS AND INTERESTS IN ALL IMPAIRED CLASSES. THE
DEBTORS RECOMMEND THAT ALL PERSONS ENTITLED TO VOTE CAST A BALLOT TO ACCEPT THE
PLAN.

                           B)       DEADLINE FOR VOTING. The Bankruptcy Court
has fixed ______ (Eastern Time) on ________ as the deadline for voting. To be
counted, all ballots must be completed and received, as set forth below, before
the Voting Deadline.

                           C)       VOTING PROCEDURES. Holders of Claims in
Classes 2, 3, and 4 should complete and sign the enclosed Ballot and mail it to:

                                    Bankruptcy Services, LLC
                                    70 East 55th Street, 6th Floor
                                    New York, New York 10022
                                    Attn: Ron Jacobs

         TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED BY THE VOTING DEADLINE
OF _______________ P.M. EASTERN TIME ON __________, 2002. YOU MUST ENSURE THE
RECEIPT OF THE BALLOT BEFORE THE VOTING DEADLINE. FACSIMILES WILL NOT BE
ACCEPTED. BALLOTS RECEIVED AFTER THE VOTING DEADLINE WILL NOT BE COUNTED.

                           D)       SIGNIFICANCE OF VOTING. The vote of each
holder of an impaired Claim entitled to vote is important. Acceptance by each
impaired class of claims is a condition to confirmation of the Plan on a
consensual basis. The Bankruptcy Code defines "acceptance" of a plan by a class
of creditors as acceptance by holders of two-thirds in dollar amount and more
than one-half in number of the claims of that class that actually cast ballots
for acceptance or rejection of the plan. If a class or classes of impaired
Claims does not accept the Plan, the Debtors have requested confirmation of the
plan under the "cram down" provisions of Section 1129(b) of the Bankruptcy Code,
which permits confirmation, notwithstanding nonacceptance by one or more
impaired classes, if the Plan does not discriminate unfairly and is "fair and
equitable" with respect to each nonaccepting class. THESE CALCULATIONS ARE BASED
ONLY ON THE CLAIM AMOUNTS AND NUMBER OF CREDITORS WHO ACTUALLY VOTE. ANY BALLOT
THAT IS VALIDLY EXECUTED THAT DOES NOT CLEARLY INDICATE REJECTION OF THE PLAN
SHALL BE DEEMED TO


                                       5



CONSTITUTE A VOTE FOR ACCEPTANCE OF THE PLAN. THE VOTE OF EACH CREDITOR IS
IMPORTANT.

         The Debtors will prepare and file with the Court a certification of the
results of the balloting with respect to the Plan. ANY BALLOTS RECEIVED AFTER
THE VOTING DEADLINE WILL NOT BE COUNTED. NOR WILL ANY BALLOTS RECEIVED BY
FACSIMILE BE ACCEPTED.

         3.       CONFIRMATION HEARING.

         Pursuant to Section 1128 of the Bankruptcy Code, the Bankruptcy Court
has scheduled a hearing to consider confirmation of the Plan commencing at 9:30
a.m. (Eastern time), on September 12, 2002, at 824 Market Street, Wilmington,
Delaware, before the Honorable Ronald S. Barliant, United States Bankruptcy
Judge. The Bankruptcy Court has directed that objections, if any, to
confirmation of the Plan be served and filed with the Bankruptcy Court no later
than August 30, 2002 in the manner described below. The Confirmation Hearing may
be adjourned from time to time without further notice except for the
announcement of the adjourned date made at the Confirmation Hearing or at any
subsequent adjourned Confirmation.

         At the Confirmation Hearing, the Court will (i) determine whether the
requisite vote has been obtained for each Class, (ii) hear and determine
objections, if any, to the Plan and to confirmation of the Plan that have not
been previously disposed of, (iii) determine whether the Plan meets the
confirmation requirements of the Bankruptcy Code, and (iv) determine whether to
confirm the Plan.

         Any objection to confirmation of the Plan must be in writing and filed
and served as required by the Court pursuant to the Order Approving Form of
Notice and Solicitation Procedures with Respect to Hearing on Confirmation of
Joint Plan of Reorganization and Granting Related Relief dated ___________, a
copy of which accompanies this Disclosure Statement. Specifically, all
objections to the confirmation of the Plan must be served in a manner so as to
be received on or before August 30, 2002 at 4:00 p.m. (Eastern time) by:

         (i) Clerk of the Court, United States Bankruptcy Court, 824 Market
         Street. 5th Floor, Wilmington, Delaware 19801;

         (ii) counsel to the Debtors, Bradley Arant Rose & White LLP, 1400 Park
         Place Tower, 2001 Park Place, Birmingham, AL 35203, Attn: John P.
         Whittington and Patrick Darby;

         (iii) counsel to the Debtors, Young Conaway Stargatt & Taylor, LLP, The
         Brandywine Building, 1000 West Street, 17th Floor. Wilmington, DE
         19899-0391, Attn: James L. Patton, Jr., Esq, and Michael R. Nestor;
         Esq.;

         (iv) counsel to Bank of America, N.A., Winstead Sechrest & Minick P.C.,
         5400 Renaissance Tower, 1201 Elm Street, Dallas. TX 75270, Attn. Mike
         Farquhar, Esq. and Phillip L. Lamberson, Esq.;


                                       6


         (v) counsel to 1993 and 1995 Noteholders, Bingham McCutchen LLP, 399
         Park Avenue, New York, NY 10022, Attn: Ronald Silverman. Esq.; Bingham
         McCutchen LLP, One State Street, Hartford, CT 06103, Attn: F. Mark
         Fucci, Esq,;

         (vi) counsel to Capital Funding VII LLC, O'Sullivan LLP, 30
         Rockefeller Plaza, New York, NY 10112, Attn: Stewart A. Kagan, Esq.;

         (vii) counsel to Unsecured Creditors Committee. Reed Smith LLP. 2500
         One Liberty Place, Philadelphia, PA 19103-7301, Attn: Claudia Z.
         Springer, Esq., and

         (viii) Office of the United States Trustee, J, Caleb Boggs Federal
         Building, 844 N. King Street, Wilmington, DE 19801, Attn: Mark Kenney,
         Esq.


II.      BUSINESS AND HISTORY OF DEBTORS.

         A.       CORPORATE STRUCTURE OF DEBTORS AND RELATED ENTITIES.

         Birmingham Steel Corporation ("BSC") is a Delaware corporation whose
shares are publicly traded on the OTC Bulletin Board under the symbol BIBS. As
of May 16, 2002, there were 31,857,083 shares of BSC's common stock, par value
$.01, outstanding. BSC has six (6) direct, wholly owned subsidiaries: American
Steel & Wire Corporation, a Delaware corporation ("ASW"); Birmingham Steel
Management, Inc., a Delaware corporation; Birmingham East Cost Holdings, LLC, a
Delaware limited liability company; Port Everglades Steel Corporation, a
Delaware corporation ("PESCO"); Birmingham Recycling Investment Company, a
Delaware corporation ("BRI"); and Midwest Holdings, Inc., a Delaware
corporation. In addition, BSC (through its wholly owned subsidiary Birmingham
East Coast Holdings, LLC) owns an 85% interest in Birmingham Southeast, LLC, a
Delaware limited liability company ("BSE"), and a 50% interest (through its
wholly owned subsidiaries Birmingham Recycling Investment Company) in Richmond
Steel Recycling, Ltd., a Canadian entity. The remaining 15% of BSE is owned by
Atlantic Steel Company and the remaining 50% interest in Richmond Steel
Recycling, Ltd. is owned by SIMS Canada, Ltd. Birmingham East Coast Holdings,
LLC is also the sole member of Cumberland Recyclers, LLC, a Delaware limited
liability company.

         B.       OVERVIEW OF DEBTORS' BUSINESS.

                  1.       GENERAL.

                  BSC and BSE own and operate facilities in the mini-mill sector
of the steel industry. The facilities produce; a variety of steel products
including reinforcing bars (rebar) and merchant products such as rounds, flats,
squares, strips, angles and


                                       7


channels. These products are sold primarily to customers in the steel
fabrication, manufacturing and construction industries. BSC has regional
warehouses and distribution facilities, which are used to distribute its rebar
and merchant products. BSC also owns an equity interest in Richmond Steel
Recycling, Ltd., a scrap collection and processing operation. BSC's affiliates
Cumberland Recyclers, LLC and Midwest Holdings, Inc. are shell entities that do
not own material assets. Birmingham Steel Management, Inc. provides fee-based
consulting services to third parties.

                  2.       STEEL MANUFACTURING.

                  Steel can be produced at significantly lower costs by
mini-mills than by integrated steel operations, which typically process iron ore
and other raw materials in blast furnaces to produce steel. Integrated steel
mills generally (a) use more costly raw materials; (b) consume more energy; (c)
consist of older and less efficient facilities which are more labor-intensive;
and (d) employ a larger labor force than the mini-mill industry. In general,
mini-mills service geographic markets and produce a limited line of rebar and
merchant products.

                  3.       FACILITIES.

                  BSC operates mini-mills (electric arc furnace melt shops and
finished product rolling mills) in Birmingham, Alabama; Kankakee, Illinois; and
Seattle, Washington. BSC also has a rolling mill in Joliet, Illinois (which was
indefinitely shut-down in June 2001), and has warehouse and distribution
facilities in Fontana and Livermore, California; Baltimore, Maryland; and Ft.
Lauderdale, Florida. Through its wholly owned subsidiary, Birmingham East Coast
Holdings LLC, BSC owns 85% of BSE, a consolidated subsidiary that operates a
mini-mill in Jackson, Mississippi. BSC also owns an SBQ melt shop in Memphis,
Tennessee. The following is a description of BSC's core mini-mill production
facilities:

                           (a)      The Birmingham, Alabama facility produces
primarily rebar and some merchant products.

                           (b)      The Kankakee, Illinois facility is located
approximately 50 miles south of Chicago. The Kankakee operation produces rebar
and a variety of merchant products, including rounds, angles, channels, squares,
flats and strip.

                           (c)      The Joliet, Illinois facility was acquired
with BSC's purchase of ASW in November 1993. In fiscal 1996, BSC transferred the
operation of the Joliet facility from the management in Cleveland to the
operational control of the Kankakee management group. The Joliet operation
obtained its semi-finished steel billet requirements primarily from the Kankakee
facility. Because of deteriorating market conditions, the operations at Joliet
were indefinitely suspended in June 2001.

                           (d)      The Seattle, Washington facility is located
adjacent to the Port of Seattle. BSC began operating in Seattle in 1986 upon the
acquisition of a local



                                       8


steel company. In 1991, BSC purchased the assets of Seattle Steel, Inc., in west
Seattle, and consolidated all of its steel operations to the west Seattle site.
The Seattle operation produces rebar and a variety of merchant products,
including rounds, angles, channels, squares. flats and strip.

                           (e)      The Jackson, Mississippi facility was
originally acquired by BSC in August 1985. In December 1996, upon formation of
BSE, BSC contributed the assets of its Jackson facility to the newly-formed
limited liability company. BSC, through its Birmingham East Coast Holdings
subsidiary owns 85% of BSE. The Jackson facility produces primarily merchant
products including rounds, squares, flats, strip and angles. The Jackson
facility also has the capability to produce rebar.

                           (f)      In December 1994, BSC acquired substantially
all of the assets of PESCO, a Florida-based steel distributor which operates
facilities in Florida and Texas. The PESCO facility obtains the majority of its
steel requirements from the debtors' Birmingham, Jackson and Kankakee mills.

                           (g)      The Memphis, Tennessee facility began
start-up operations in November of 1997. The Memphis SBQ melt shop was designed
to produce 1 million tons of high quality billets per year. BSC ceased
operations of the Memphis facility as of January 1, 2000 and committed to a plan
to sell the assets.

                  4.       RAW MATERIALS.

         The principal raw material used in BSC's mini-mills is ferrous scrap,
generally derived from automobile, industrial and railroad scrap. The market for
scrap steel is highly competitive and its price volatility is influenced by
periodic shortages, freight costs, speculation by scrap brokers and other
conditions largely beyond the control of BSC. BSC purchases its outside scrap
requirements from a number of scrap merchants and is not generally dependent on
any single supplier. In fiscal 2001, scrap costs represented approximately 40%
of BSC's total manufacturing costs at its core mini-mills. Within the commodity
product ranges dominated by the mini-mill industry, fluctuations in scrap market
conditions have an industry-wide impact on manufacturing costs and selling
prices of finished goods. During periods of scrap price escalation, the
mini-mill industry seeks to maintain profit margins and BSC attempts to pass
along increased raw material costs to customers. However temporary reductions in
profit margin spreads frequently occur because of a timing lag between the
escalation of scrap prices and the effective market acceptance of higher selling
prices for finished steel products. Following this delay in margin recovery,
steel industry profitability has historically escalated during periods of
inflated scrap market pricing.

         Until December 1999 (when operations at Memphis were suspended), the
Memphis melt shop used both; high-grade scrap and DRI (direct reduced iron) as
feedstock. Substantially all of the Memphis DRI was obtained from American Iron
Reduction, LLC ("AIR"), a DRI joint venture with GS Industries, Inc.



                                       9



         BSC consumes large amounts of electricity and natural gas. BSC
purchases electricity from regulated utilities under interruptible service
contracts because the costs of interruptible contracts are generally lower than
alternative arrangements. However, under these high volume industrial contracts,
electricity suppliers may periodically interrupt service during peak demand
periods. BSC also consumes substantial amounts of natural gas. Since
deregulation of the natural gas industry, BSC has generally obtained natural gas
through negotiated contract purchases of well-head gas, with transportation
through local pipeline distribution networks.

                  5.       PRODUCTS.

                           (a)      Rebar Products. BSC has the capability to
produce rebar at each of its continuing core mini-mill facilities. Rebar is
generally sold to fabricators and manufacturers who cut, bend, shape and
fabricate the steel to meet engineering, architectural or end-product
specifications. Rebar is used primarily for strengthening concrete in highway
construction, building construction and other construction applications. Unlike
some other manufacturers of rebar, BSC does not engage in the rebar fabrication
business, which could put BSC into direct competition with its major rebar
customers. BSC instead focuses its marketing efforts on independent rebar
fabricators and steel service centers. Rebar is a commodity steel product, which
makes price the primary competitive factor. As a result, freight costs limit
rebar competition to regional producers generally concentrated within a 700 mile
radius of a mill. Except in unusual circumstances, the customer's delivery
expense is limited to freight from the nearest mini-mill. Any incremental
freight charges from another source must be absorbed by the supplier. BSC ships
rebar products to customers primarily via common carrier and, to a lesser
extent, by rail. Rebar is consumed in a wide variety of end uses, divided into
roughly equal portions between private sector applications and public works
projects. Private sector applications include commercial and industrial
buildings, construction of apartments and hotels, utility construction,
agricultural uses and various maintenance and repair applications. Public works
projects include construction of highways and streets, public buildings, water
treatment facilities and other projects. BSC's rebar operations are subject to a
period of moderately reduced sales from November to February, when winter
weather and the holiday season impact construction market demand.

                           (b)      Merchant Products. BSC has the capability to
produce merchant products at each of its continuing core mini-mill facilities.
Merchant products consist of rounds, squares, flats and strip, along with angles
and channels less than three inches wide. Merchant products are generally sold
to fabricators, steel service centers and manufacturers who cut, bend, shape and
fabricate steel to meet engineering or end product specifications. Merchant
products are used to manufacture a wide variety of products, including gratings,
steel floor and roof joists, safety walkways, ornamental furniture, stair
railings and farm equipment. Merchant and structural products typically require
more specialized processing and handling than rebar, including straightening,
stacking and specialized bundling. Because of the greater variety of shapes and
sizes,



                                       10


merchant and structural products are typically produced in shorter production
runs, requiring more frequent changeovers in rolling mill equipment. Merchant
products generally command higher prices and can produce higher profit margins
on a per ton basis than rebar products. As with rebar, BSC generally ships
merchant products to customers by common carrier or by rail and equalizes
freight costs to the nearest competing mill.

                           (c)      SBQ Rod, Bar and Wire Products. BSC formerly
participated in the SBQ (special bar quality) segment of the steel industry. 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. BSC's SBQ
facilities sold high-quality rod, bar and wire products to customers in the
automotive, agricultural, industrial fastener, welding, appliance and aerospace
industries. In February 2001, BSC announced its intention to divest its SBQ
operations in order to focus on its core mini-mill and scrap operations. On
March 1, 2002, BSC and ASW completed the sale of the assets of its Cleveland,
Ohio SBQ facility to Charter Steel-Cleveland, Inc.


                  6.       COMPETITION.

         Price sensitivity in markets for BSC's products is driven by
competitive factors, including the cost and availability of steel in the
marketplace. The geographic marketing areas for BSC's products are principally
the United States and Canada. Because rebar and merchant products are commodity
products, the major factors affecting the sale of finished products are
competitive pricing, inventory availability, facility location and service. BSC
competes in the rebar and merchant markets primarily with numerous regional
domestic mini-mill companies and foreign importers.

         C.       HISTORY.

         BSC was formed in 1983 and commenced operations in 1984. Upon
commencement of operations, BSC owned two mini-mills located in Birmingham,
Alabama and Kankakee, Illinois. Subsequently, BSC has followed a strategy of
growing by acquisition when market and economic conditions warrant. BSC acquired
additional mini-mills in Jackson, Mississippi (1985) and Seattle, Washington
(1986). In 1991, BSC acquired the assets of Seattle Steel, Inc. and consolidated
all of its Seattle operations at the former Seattle Steel site. In 1993, BSC
entered the SBQ market with the acquisition of ASW, which added the Joliet,
Illinois mini-mill as well as rod and wire mill assets at ASW's Cleveland
facility (sold in March of 2002).

         In 1994, BSC acquired a Florida-based steel distributor, PESCO, which
distributes steel products manufactured by BSC and other third parties. In
December 1996, BSC contributed its Jackson, Mississippi mini-mill facility to
BSE. BSE then purchased steel making assets located in Cartersville, Georgia
from Atlantic Steel Industries, Inc., ("Atlantic"), a subsidiary of IVACO, Inc.
At the time of its formation, BSE entered into a tolling agreement with Atlantic
pursuant to which Atlantic converted billets produced by BSE into merchant
product for tolling fee. BSE also entered into a



                                       11


take or pay agreement to supply billets to Atlantic. These agreements expired
January 1, 1999. In March 1999, BSC commenced start-up of a new medium-section
mill to replace the rolling production that was provided under the tolling
arrangement with Atlantic. In March 1999, BSC commenced the start-up phase of
its Cartersville rolling mill. On December 28, 2001, BSE and BSC sold the
Cartersville facility.

         Following its acquisition of ASW in 1993, management sought to build
BSC's SBQ operations using the ASW assets as a platform. In addition to building
additional rolling mill capacity in Cleveland, BSC constructed a melt shop in
Memphis, Tennessee. The Memphis melt shop facility was intended to provide lower
cost raw materials (high grade, low carbon billets) for the Cleveland SBQ rod,
bar and wire operations. During the development and expansion of the Cleveland
and Memphis facilities, industry overcapacity and an increase in imported SBQ
products created unfavorable pricing conditions. In January 2000, BSC decided to
rationalize the SBQ operations by suspending melting operations at the Memphis
facility and continuing operations at the ASW facilities using third-party
billets. In February 2001, BSC announced its intention to divest its SBQ
operations in order to focus oil its core mini-mill and scrap operations. On
March 1, 2002, BSC completed the sale of the Cleveland, Ohio SBQ facility.

         In July 1999, The United Company Shareholder Group (the "United
Group"), a dissident shareholder group, initiated a proxy contest to replace
BSC's Chief Executive Officer and Board of Directors and certain members of
management. On December 2, 1999, BSC and the United Group reached a settlement
appointing John D. Correnti as Chairman and Chief Executive Officer and
reconstituting the Board of Directors to include a total of twelve directors,
nine of which were appointed by the United Group and three of which were
appointed by previous management.

         On November 14, 2001, BSC announced that the New York Stock Exchange
(NYSE) had initiated procedures to delist BSC's common stock. The NYSE decision
was reached in view of the fact that BSC had fallen below the following NYSE
continued listing standards; average global market capitalization over a
consecutive 30 trading-day period of less than $50 million, total stockholders'
equity of less than $50 million, and the average closing price of BSC's common
stock below one dollar over a consecutive 30 trading-day period. Effective with
the market opening on November 18, 2001, BSC's common stock began trading on the
OTC Bulletin Board under the symbol BIRS.

         D.       DEBT STRUCTURE.

         BSC has contingent and non-contingent secured indebtedness totaling
approximately $645.0 million in the aggregate (the "Secured Indebtedness").
Events of default have occurred with respect to the Secured Indebtedness. ASW,
PESCO, BRI, Birmingham East Coast Holdings, LLC, Midwest Holdings, Inc.,
Cumberland Recyclers, LLC, and Birmingham Steel Management, Inc., (the
"Unlimited Recourse Subsidiary Guarantors") have guaranteed the Secured
Indebtedness on a full recourse basis. BSE has guaranteed the Secured
Indebtedness on a limited recourse basis, pursuant to which a lien on the
Jackson, Mississippi facility of BSE has been granted by BSE to secure BSE's



                                       12


guaranty of the Secured Indebtedness. The Secured Indebtedness is secured by (i)
essentially all of BSC's assets, including (x) BSC's equity interests in the
Unlimited Recourse Subsidiary Guarantors and (y) an assignment for the benefit
of the holders of the Secured Indebtedness of a $235.0 million intercompany note
payable by BSE to BSC (the "BSE Note"), which note is secured by all of BSE's
accounts receivable and inventory, (ii) essentially all of the assets of each of
the Unlimited Recourse Subsidiary Guarantors, and (iii) the aforesaid lien on
the Jackson, Mississippi facility of BSE. However, the 85% ownership interest in
BSE held by Birmingham East Coast Holdings LLC (BSC's subsidiary) is not pledged
to secure the Secured Indebtedness. Further, pursuant to the post-petition
financing facility approved by the Bankruptcy Court's order of July __________,
2002 (the "DIP Facility"), the Debtors may incur up to $40.0 million in
post-petition indebtedness secured by liens on essentially all of the Debtors'
property. The liens securing the DIP Facility are senior to all existing liens,
including the liens securing the Secured Indebtedness. As of the date of this
Disclosure Statement, outstanding draws under the DIP Facility totaled
approximately $13.2 million.

                  1.       GENERAL STRUCTURE OF SECURED INDEBTEDNESS.

                  The Secured Indebtedness has five main components, as follows:

                           (A)      1993 NOTES. Pursuant to certain Amended and
Restated Note Purchase Agreements dated as of October 12, 1999, as amended as of
November 12, 1999, May 15, 2000, February 20, 2001, December 15, 2001, March 31,
2002 and May 15, 2002, BSC issued to certain institutions (in substitution of
notes initially issued in 1993) an aggregate principal amount of $130.0 million
of 10.03% senior notes due December 15, 2005 (collectively, the "1993 Notes").
As of the Filing Date, the aggregate principal amount of the 1993 Notes was
approximately $128.40 million. The holders of the 1993 Notes collectively shall
be referred to as the "1993 Noteholders".

                           (B)      1995 NOTES. Pursuant to certain Amended and
Restated Note Purchase Agreements dated as of October 12, 1999, as amended
November 12, 1999, May 15, 2000, February 20, 2001, December 15, 2001, March 31,
2002 and May 15, 2002 BSC issued to certain institutions (in substitution of
notes initially issued in 1995) (i) an aggregate principal amount of $76.0
million of 9.71% series A senior notes due December 15, 2002, (ii) an aggregate
principal amount of $14.0 million of 9.82% series B senior notes due December
15, 2005, and (iii) an aggregate principal amount of $60.0 million of 9.92%
series C senior notes due December 15. 2005 (collectively, the "1995 Notes"). As
of the Filing Date, the aggregate principal amount of the 1995 Notes was
approximately $148.10 million. The holders of the 1995 Notes collectively shall
be referred to as the "1995 Noteholders". The 1993 Noteholders and the 1995
Noteholders shall be referred to collectively herein as the Noteholders".

                           (C)      LOAN FACILITY, Pursuant to that certain
Credit Agreement dated as of March 17, 1997 (the "Credit Agreement"), certain
banks (collectively, the "Bank Group"), including the Bank of America, as agent
(the "Bank Agent"), provided a credit facility to BSC in the initial principal
amount of $300.0 million. The Credit



                                       13


Agreement, as amended (the "Existing Credit Agreement"), establishes a line of
credit facility in favor of BSC with various revolving, letter of credit,
swing-line and other components (the "Credit Facility"). As of the Filing Date,
the aggregate principal outstanding balance of the Credit Facility was
approximately $267.0 million. Pursuant to the Court's interim order approving
post-petition financing and authorizing the Debtors' use of Cash Collateral, the
Debtors reduced the principal amount of the Credit Facility by approximately
$32.0 million.

         Under the Credit Facility the Bank Agent, on behalf of the Bank Group,
agreed to issue for the account of BSC one or more letters of credit up to a
maximum aggregate amount of $15.0 million. Upon any demand for payment under any
such letter of credit, BSC is obligated to pay and reimburse the Bank Agent for
the amount of the draw. The aggregate face amount of letters of credit
outstanding as of the Filing Date totaled approximately $5.52 million.

         Although the total commitment amount of the Credit Facility originally
was $300.0 million, under the Existing Credit Agreement the proceeds of the sale
of certain of the Debtors' assets have been applied to permanently reduce the
Credit Facility and were not subject to reborrowing before maturity. See Section
III.D, below.

                           (D)      MEMPHIS IDB NOTE. Pursuant to that certain
Loan Agreement dated as of October 1, 1996 (the "Memphis IDB Loan Agreement")
between BSC and the Industrial Development Board of the City of Memphis and the
County of Shelby, Tennessee (the "Memphis IDB"), the Memphis IDB issued $26.0
million of revenue bonds (the "Memphis IDB Bonds") pursuant to Section 753-1, et
seq. of the Tennessee Code Annotated and loaned a portion of the proceeds of the
sale of the Memphis IDB Bonds to BSC to finance the acquisition and installation
of certain pollution control systems at BSC's melt shop facility in Memphis. The
Memphis IDB Bonds are due October 1, 2026. The Memphis IDB Loan Agreement, BSC
executed a promissory note dated October 8, 1996 in favor of the Memphis IDB in
the principal amount of $26.0 million (the "Memphis IDB Note"). Pursuant to the
Memphis IDB Note and the Memphis IDB Loan Agreement, obligated BSC to make loan
payments to the Memphis IDB equal to, and in satisfaction of, the Memphis IDB's
obligations under the Memphis IDB Bonds. Moreover, the Memphis IDB bonds were
backed by that certain letter of credit dated October 8, 1996 issued by PNC
Bank, Kentucky, Inc. ("PNC") for the benefit of PNC as trustee for the holders
of the Memphis IDB Bonds (the "PNC L/C"). The Memphis IDB assigned its rights
and interests under the Memphis IDB Loan Agreement and the Memphis IDB Note to
PNC, as trustee for the holders of the Memphis IDB Bonds, pursuant to a Trust
Indenture dated as of October 1, 1996. Pursuant to that certain Reimbursement
Agreement dated October 1, 1996, as subsequently amended (the "Reimbursement
Agreement"), BSC agreed to reimburse PNC for any draws on the PNC L/C.
Subsequent to the Filing Date, PNC, as trustee for the holders of the Memphis
IDB Bonds, drew on the PNC line of credit to satisfy the Memphis IDB Bonds. The
principal amount of BSC's obligations under the Reimbursement Agreement is $26.0
million.


                                       14


                           (E)      MEMPHIS LEVERAGED LEASE TRANSACTION.
Pursuant to that certain Equipment Lease Agreement dated as of September 30,
1997, as amended, modified and supplemented from time to time (the "Memphis
Equipment Lease"), BSC leased certain melt shop equipment (the "Memphis
Equipment") from J.P. Morgan Trust Co., N.A., as successor in interest to PNC
Bank Kentucky, Inc. as owner-trustee (the "Owner Trustee"). Pursuant to a Trust
Indenture and Security Agreement dated as of September 30, 1997, as amended,
modified and supplemented from time to time (the "Trust Indenture"), the Owner
Trustee collaterally assigned its payment rights under the Memphis Equipment
Lease to First Union Bank (the "Indenture Trustee") to secure amounts due under
certain nonrecourse equipment notes due November 10, 2012 (the "Memphis
Equipment Notes"). Further pursuant to the Trust Indenture, the Memphis
Equipment Notes also are secured by the Memphis Equipment.

         Pursuant to a Participation Agreement among BSC, the Indenture Trustee,
NationsBank, N.A. and AmSouth Leasing, Ltd. as owner participants (the "Owner
Participants") and the holders of the Memphis Equipment Notes (the "Memphis
Equipment Noteholders") dated as of September 30, 1997 (the "Participation
Agreement") and a Trust Agreement between the Owner Trustee and the Owner
Participants dated as of September 30, 1997, the Owner Trustee purchased the
Memphis Equipment in trust for the benefit of the Owner Participants as
co-tenants. Pursuant to the Participation Agreement, the Memphis Equipment
Noteholders advanced the funds to purchase the Memphis Equipment. The Owner
Trustee issued the Memphis Equipment Notes, which are nonrecourse notes due
November l0, 2012, pursuant to the Trust Indenture. By a separate transaction,
the Owner Trustee sold the Memphis Equipment to the Memphis IDB. The Memphis IDB
leases the Memphis Equipment back to the Owner Trustee, for the benefit of the
Owner Participants as co-tenants, pursuant to an Industrial Personal Property
Lease Agreement dated as of November 10, 1997. The Owner Trustee then subleases
the Memphis Equipment to BSC pursuant to the Memphis Equipment Lease. The
transaction with the Memphis IDB was designed to provide certain tax benefits to
the Owner Participants and BSC. Pursuant to a Tax Indemnity Agreement dated as
of September 20, 1997, BSC agreed on certain terms and conditions to indemnify
the Owner Participants for the potential the loss of such tax benefits as a
result of defaults under the applicable documents or certain occurrences related
to the Memphis Equipment. The Debtors reserve all rights, claims and defenses.

         The Debtors have filed a motion under Section 365 of the Bankruptcy
Code to reject the Memphis Equipment Lease, which provides that damages from a
breach shall be determined according to a Stipulated Loss Value, as defined in
the Memphis Equipment Lease. The Stipulated Loss Value is expressed as a
percentage of the original cost for the Memphis Equipment, $75.0 million. As of
the Filing Date, the maximum Stipulated Loss Value was approximately $69.0.
Section 15.1 (d) provides that upon a breach of the Memphis Equipment Lease, the
Memphis Equipment Noteholders (as assignees of the Owner Trustee) shall have a
claim equal to all unpaid rent then due and payable plus an amount equal to the
excess, if any, of the Stipulated Loss Value over the fair market sales value of
the Memphis Equipment as determined by an appraiser, plus a make whole amount
for future rents reserved under the Lease. The Memphis



                                       15



Equipment Lease provides that this liquidated damages provision is for loss of
bargain and is not a penalty. The Debtors reserve all rights, claims and
defenses relating to the Memphis Equipment Lease.

                  On information and belief, upon rejection of the Memphis
Equipment Lease, the Indenture Trustee (as assignee of the Owner Trustee) will
assert on behalf of the Memphis Equipment Noteholders a claim for damages in the
approximate gross amount of $69.0 million, plus rent and make whole claims as
provided in the underlying documents. The Debtors reserve all rights, claims and
defenses with respect to the Lease, including, without limitation, the proper
measure of damages arising out of the rejection of the Lease.

         2.       SECURITY FOR SECURED INDEBTEDNESS.

                  Before October 12, 1999, BSC's obligations to the Bank Group,
the Noteholders, PNC, and the Memphis Equipment Noteholders were not secured by
any property of the Debtors. The Memphis Equipment Notes were secured by
property of the Owner Trustee (that is, the Memphis Equipment and the Owner
Trustee's interests under the Memphis Equipment Lease), which was assigned to
the Indenture Trustee for the benefit of the Memphis Equipment Noteholders.
Pursuant to a global debt restructuring (the "Restructuring"), as of October 12,
1999, ASW, PESCO, BRI, Birmingham East Coast Holdings, LLC, Midwest Holdings,
Inc. and Cumberland Recyclers, LLC (collectively, the "Initial Subsidiary
Guarantors") guaranteed BSC's indebtedness to the Bank Group, the Noteholders,
PNC, and the Memphis Equipment Noteholders. Contemporaneously with its
organization in 2000, Birmingham Steel Management, Inc. guaranteed the Secured
Indebtedness. Moreover, BSC and each of the Initial Subsidiary Guarantors (and
subsequently Birmingham Steel Management, Inc.) granted liens and security
interests in essentially all of their property in favor of a collateral agent
for the benefit of the Bank Group, the Noteholders, PNC and the Memphis
Equipment Noteholders and Owner Trustee (collectively referred to hereinafter as
the "Secured Parties").

                  In particular, pursuant to that certain Omnibus Collateral
Agreement dated as of October 12, 1999, BSC and each of the Initial Subsidiary
Guarantors (and subsequently Birmingham Steel Management, Inc.) executed various
guaranty, security, pledge, mortgage and other agreements in favor of the
Secured Parties to secure the Secured Indebtedness. Without limitation, the
Secured Parties' collateral (the "Collateral") includes real property and
improvements, receivables, inventory, equipment, investment property, insurance
policies, contract rights, intellectual property, general intangibles, chattel
paper, documents, instruments, books and records, monies, deposits, common
stock, shares, equity interests, securities, and all products and proceeds of
the foregoing. To the extent the Collateral consists of cash, negotiable
instruments, documents of title, securities, deposit accounts or other cash
equivalents, including proceeds and products, the Collateral is cash collateral
under Section 363(a) of the Bankruptcy Code (the "Cash Collateral").


                                       16


                  The parties were required to execute the initial Omnibus
Collateral Agreement as of October 12, 1999, together with supporting guaranty,
security, pledge, mortgage and other agreements, as a condition precedent to the
effectiveness of the Restructuring. State Street Bank and Trust Company was
collateral agent under the initial Omnibus Collateral Agreement, as well as the
initial Collateral Agency and Intercreditor Agreement dated as of October 12,
1999 (the "Initial Intercreditor Agreement"). Pursuant to a Collateral Agent
Substitution Agreement dated as of November 12, 1999, SouthTrust Bank became the
successor collateral agent. The parties entered into a second Omnibus Collateral
Agreement dated as of November 12, 1999, together with supporting guaranty,
security, pledge, mortgage and other agreements, which substitute SouthTrust
Bank as collateral agent (the "Collateral Agent") but otherwise set forth
identical rights and obligations. The Omnibus Collateral Agreement dated as of
November 12, 1999, together with supporting guaranty, security, pledge, mortgage
and other agreements collectively shall be referred to as the "Collateral
Agreement." The parties also executed a second Collateral Agency and
Intercreditor Agreement dated as of November 12, 1999 (the "Other Intercreditor
Agreement," and together with the Initial Intercreditor Agreement, the
"Intercreditor Agreement"), which substitutes the Collateral Agent but
otherwise sets forth identical rights and obligations. The Intercreditor
Agreement was amended and restated as of May 15, 2000.

                  BSE has guaranteed the Secured Indebtedness on a limited
recourse basis, pursuant to which a lien on the Jackson, Mississippi facility of
the BSE has been granted to BSE to secure BSE's guaranty of the Secured
Indebtedness.

                  3.       LENDER WARRANTS.

                  In addition to the Collateral, pursuant to that certain
Warrant Purchase Agreement between BSC and the Secured Parties dated as of May
15, 2000, the Secured Parties hold warrants to purchase up to 5.0 million shares
of BSC treasury stock for the purchase price of one cent ($0.01) per share (the
"Lender Warrants"). The Lender Warrants will be terminated and cancelled
pursuant to the Plan.

                  4.       CROSS DEFAULT.

                  The Debtors' obligations to the Secured Parties under the
various agreements described above are cross-defaulted, so that a default under
one such agreement constitutes a default under all such agreements.

         E.       OPERATIONAL RESULTS.

         Attached as Exhibit B to this Disclosure Statement and incorporated by
reference are copies of the Debtors' consolidated Statements of Operations for
the nine months ended March 31, 2002, as filed by the Debtors with the
Securities Exchange Commission.



                                       17


         F.       UNSECURED DEBT.

         On June 10, 2002 each of the Debtors filed its schedules and statement
of financial affairs pursuant to Bankruptcy Rule 1007. On a consolidated basis,
the Debtors' schedules show general, unsecured debt in the total, aggregate
amount of approximately $208.0 million. This total, aggregate figure includes
significant claims that the Debtors listed as contingent, disputed or
unliquidated. The Debtors reserve all rights, claims and defenses with respect
to the allowance of unsecured claims.

         Subject to the Debtors reservation of rights, the Debtors' unsecured
debt includes the following components:

         1.       TRADE DEBT. As of the Filing Date, the Debtors' trade debt
totaled approximately $40.0 million. Pursuant to the Bankruptcy Court's order
authorizing the Debtors to pay pre-petition trade claims of certain critical
vendors, the Debtors have reduced the total pre-petition trade debt by
approximately $28.0 million. Accordingly, the Debtors anticipate that aggregate
pre-petition trade debt as of the Confirmation Date will total approximately
$10.0 to $12.0 million.

         2.       CARTERSVILLE NOTES. In connection with the sale of the
Cartersville facility in December 2001, the Debtors issued unsecured,
zero-coupon notes to certain former lessors at the Cartersville facility (the
"Cartersville Notes"). The face amount of the Cartersville Notes is $10.0
million. The Debtors anticipate the holders of the Cartersville Notes (the
"Cartersville Noteholders") will assert aggregate unsecured claims against the
Debtors in the total amount of $10.0 million.

         3.       AIR LENDERS, As set forth in section II.B.4 above, BSC is a
member of American Iron Reduction, L.L.C. ("AIR"). Prior to the Filing Date, AIR
produced DRI (Direct Reduced Iron) from a facility in Convent, Louisiana. AIR
ceased production in October 2000. On information and belief, a group of lenders
to AIR (the "AIR Lenders") assert claims against AIR in the aggregate principal
amount of approximately $180.0 million. On information and belief, the AIR
Lenders assert claims directly against the Debtors based the underlying debt of
AIR. On it schedules BSC listed the AIR Lenders as holding a disputed,
unliquidated claim in the amount of $150.0 million. The Debtors deny any
liability to the AIR Lenders and reserve all rights, claims and defenses.

         4.       CONTRACT REJECTION DAMAGES. The Debtors anticipate rejecting a
number of executory contracts end unexpired leases that the Buyer does not wish
to assume as part of the Sale. On information and belief, one or more of the
counter-parties to certain executory contracts and unexpired leases that the
Debtors do not assume and assign will assert rejection damage claims under
Section 365(g) of the Bankruptcy Code. Without limitation, in December, 1999,
PSC Metals filed suit against BSC in the Court of Common Pleas for Cuyahoga
County, Ohio for the alleged breach of a mill services agreement, including
BSC's termination of operations at its Memphis melt shop facility. The case
subsequently was removed to the United States District Court for the Northern


                                       18



District of Ohio, where it currently is pending (case number 1:02 CV 248). PCS
Metals seeks damages in excess of $38.0 million. The Debtors reserve all rights,
claims and defenses.

         G.       ADMINISTRATIVE AND PRIORITY CLAIMS.

                  At the Closing Date, the Debtors do not anticipate significant
administrative expense claims allowed under Section 503(b) and 507(a)(1) of the
Bankruptcy Code or significant priority claims allowed under Section 507(a)(2)
through (9) of the Bankruptcy Code. Without limitation, pursuant to first day
orders entered by the Bankruptcy Court, the Debtors already have paid
essentially all pre-petition wage and tax claims that otherwise would be
entitled to priority under Section 507(a) of the Bankruptcy Code. See Section
V.B.4, below. In addition, the Debtors have remained current on administrative
expense claims arising in the post-petition operation of their businesses and
administration of their estates. The Plan provides that after Confirmation the
Debtors shall continue to pay administrative expense claims current in the
ordinary course of business with the proceeds of Cash Collateral and the DIP
Facility. The Plan further provides for the payment at closing of Cure Amounts
and accrued payables at closing from the proceeds of the Sale. Further, the Plan
provides for the Administrative Expense Reserve in the amount of $12.5 million
to pay administrative expense claims and priority claims outstanding after the
Closing Date, if any, including, without limitation, the fees of CIBC.

III.     EVENTS LEADING TO CHAPTER 11

         A.       DESCRIPTION OF STEEL INDUSTRY.

         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. Steel can be produced at
significantly lower costs by mini-mills than be integrated steel operations,
which typically process iron ore and other raw materials in blast furnaces to
produce steel. Integrated steel mills generally (a) use more costly raw
materials; (b) consume more energy; (c) consist of older and less efficient
facilities which are more labor-intensive; and (d) employ a larger labor forces
than the mini-mill industry. In general, mini-mills service geographic markets
and produce a limited line of rebar and merchant products. The domestic
mini-mill steel industry currently has excess production products. This
over-capacity, together with competition from foreign producers, has resulted in
competitive product pricing and cyclical pressures on industry profit margins.
In this environment, efficient production and cost controls are critical to the
viability of domestic mini-mill steel producers.

         B.       EFFECT ON DEBTORS.

         During the past three years, foreign steel imports have had a
significant impact on BSC's shipments. Selling prices have decreased in each of
the past three years, primarily because of increased imports. Shipments and
selling prices have also declined in the



                                       19



three and nine month periods ended March 31, 2002 primarily due to continuing
pressure of steel imports and uncertainty in U.S. economic conditions. While BSC
announced various price increases in the peak summer seasonal period in fiscal
2001, continued industry pressure kept prices relatively flat throughout
calendar 2001 and into March 2002. Economic conditions generally slowed in
calendar 2001 and the tragic events of September 11, 2001 could cause this
trend to continue.

         C.       CURRENT MANAGEMENT.

                  1.       MANAGEMENT TEAM AND STRUCTURE.

                  In July 1999, the United Group, a dissident shareholder
group, initiated a proxy contest to replace BSC's Chief Executive Officer and
Board of Directors and certain members of management. On December 2, 1999, BSC
and the United Group reached a settlement appointing John D. Correnti as
Chairman and Chief Executive Officer and reconstituting the Board of Directors
to include a total of twelve directors, nine of which were appointed by the
United Group and three of which were appointed by previous management.

                  For management purposes, BSC's rebar and merchant product
mini-mills are operated as independent business units, reporting directly to
BSC's Chief Executive Officer.

                  The following table sets forth the name of each executive
officer of BSC, the offices they hold, and their ages as of October 1. 2001:



NAME                                       AGE           OFFICE HELD
- ----                                       ---           -----------
                                                   
John D. Correnti                           54            Chairman of the Board and
                                                         Chief Executive Officer

James A. Todd, Jr.                         73            Vice Chairman and Chief
                                                         Administrative Officer

Robert G. Wilson                           64            Vice President - Rebar Sales

Philip L. Oakes                            54            Vice President - Human Resources

J. Daniel Garrett                          43            Chief Financial Officer and Vice
                                                         President



         2.       KEY MANAGEMENT PERSONNEL.

         John D. Correnti joined BSC as Chairman of the Board and Chief
Executive Officer in December 1999. Prior to joining BSC, Mr. Correnti served as
Vice Chairman, President and Chief Executive Officer of Nucor Corporation from
1996 to 1999.



                                       20

                  James A. Todd, Jr. joined BSC as Chief Administrative Officer
in December 1999. Mr. Todd served as Chairman of the Board and Chief Executive
Officer of BSC from 1991 to January 1996.

                  Robert G. Wilson joined BSC in 1988 as Vice President-Sales
and has served as Vice President-Rebar Sales since December 1999.

                  Philip L. Oakes joined BSC in 1996 and serves as Vice
President-Human Resources. Prior to joining BSC, Mr. Oakes served as Vice
President-Human Resources of Waste Management, Inc. from 1992 to 1996.

                  J. Daniel Garrett joined BSC in 1986 and has served as Chief
Financial Officer and Vice President-Finance since June 2000. From October 1997
to June 2000, Mr. Garrett served as Vice President-Finance & Control.

                  3.       SEVERANCE AND RETIREMENT PLANS.

                  BSC maintains a defined contribution 401(k) plan that covers
substantially all non-union employees. BSC makes both discretionary and matching
contributions to the plan based on employee compensation and contributions.
Company contributions charged to continuing operations amounted to $2,248,000,
$5,424,000 and $3,911,000 in fiscal 2001, 2000, and 1999 respectively.
Discontinued operations includes charges of $428,000, $782,000 and $866,000
related to the plan for those same periods.

                  Certain officers and key employees participate in the
Executive Retirement and Compensation Deferral Plan, a non-qualified deferred
compensation plan, which allows participants to defer specified percentages of
base and bonus pay, and provides for company contributions. This plan was
amended effective January 1, 2001 to discontinue the Compensation Deferral Plan
("CDP") component of the plan. As part of the amendment, existing participant
CDP account balances were distributed in the fourth quarter of fiscal 2001.
Under the Executive Retirement Plan, BSC recognizes compensation costs as
contributions become vested. Investment performance gains and losses on each
participant's plan account result in addition compensation costs to BSC. BSC's
obligations to participants in the plan are reported in deferred liabilities.
Other than the plans referred to above, BSC provides no post-retirement or
post-employment benefits to its employees.

         D.       SALE OF ASSETS, EFFORTS TO REDUCE DEBT AND IMPROVED
                  OPERATIONS.

         In response to BSC's over-leveraged financial condition and industry
conditions, management has taken aggressive steps during the past 29 months to
stabilize BSC's operations, manage liquidity and respond to deteriorating
industry conditions, including the following:


         -        Shutdown of operations at the Memphis melt shop. resulting in
                  cash savings of approximately $2 million per month (January
                  2000);


                                       21


         -        Shutdown of operations at Cleveland, resulting in cash savings
                  of $2 million to $3 million per month (completed July 2001);

         -        Shutdown of operations of the Convent, Louisiana DRI facility
                  (AIR), resulting in cash savings of approximately $1 million
                  per month (October 2000);

         -        Sale of BSC's interest in the California scrap processing
                  joint venture, eliminating $34 million in contingent
                  liabilities (June 2000);

         -        Reduction of corporate headquarters personnel by more than
                  31%, resulting in annual savings of more than $2 million per
                  year (December 1999 to March 2002);

         -        Hiring of highly experienced steel operations and sales
                  individuals for other steel companies to join the Correnti
                  management team;

         -        Reduction in inventories by $126 million (from December 1999
                  to March 2002);

         -        Reduction in trade accounts payable by $71 million (from
                  December 1999 to March 2002), and improvement in vendor
                  relationships, which had been impaired under prior management;

         -        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; and

         -        Sale of the Cleveland facility in March 2002 providing
                  approximately $18.6 million debt reduction and relief from
                  approximately $0.5 million monthly carrying costs.

         E.       CRITICAL TRADE VENDORS.

         The highly technical nature of the Debtors' production processes
requires specialized goods and services. Certain goods and services are
essential to the continued operation of the Debtors' businesses. Without
limitation, scrap steel is the Debtors' basic means of production. Without a
steady supply of scrap, the Debtors cannot operate their mills. Similarly, the
mini-mill process requires certain manufacturing components to convert scrap
steel into finished products, including alloys and refractories that are
customized to the Debtors' production. The Debtors cannot continue production
without the specialized components. The Debtors further rely on specially
certified and equipped shipping companies to deliver finished products from the
Debtors plants to the Debtors' customers. Due to the size, shape and weight of
the Debtors' products, uncertified carriers with standard trucking equipment
cannot meet the Debtors' shipping needs. The Debtors also are particularly
dependent on suppliers of electric power, natural gas and


                                       22


other utilities. Without limitation, the arc furnace production method requires
large amounts of electricity.

                  The continued supply of these goods and services are necessary
to the operation of the Debtors' business. The Debtors have limited supply
sources for the specialized goods and services. If suppliers of these goods and
services refuse to deal with the Debtors, the Debtors may not be able to secure
replacement sources quickly enough to avoid an interruption to the Debtors'
production and delivery of steel. To avoid even a momentary interruption in the
supply of essential goods and services (which would result in immediate and
irreparable harm to the Debtors' estates), the Debtors filed a first day motion
to institute a critical vendor program to pay the pre-petition claims of
critical suppliers of essential goods and services on certain terms and
conditions. The Debtors' motion to pay critical vendors is described in Section
V.B.5, below.

         F.       ENGAGEMENT OF CIBC.

         In February 2002, BSC announced it had engaged CIBC World Markets Corp.
to assist in evaluating strategic and financing alternatives available to BSC,
which could include sale of BSC or substantially all of its assets, a merger
with a third party or restructuring of its debt with BSC's lenders. Pursuant to
the terms of its engagement, CIBC conducted a process to determine BSC's viable
options. During this process, BSC engaged in discussions with several parties,
including Nucor Corporation ("Nucor").

         G.       NEGOTIATIONS WITH SECURED PARTIES.

         In January 2000, one month after joining BSC, new management publicly
articulated a strategy for returning to profitability and providing a platform
for BSC to refinance or restructure its debt. Because BSC was over-leveraged and
the maturity dates of BSC's debt were not aligned with its cash flow
capabilities, a refinancing or restructuring of BSC's debt was an integral
element of management's turnaround plan. Since January 2000, BSC has actively
pursued strategies to manage liquidity and reduce its debt (as described in
Section III.D.).

         As of March 31, 2002, BSC was in compliance with the restrictive
debt covenants governing its loan obligations, which were amended February 20,
2001. Among other things, the February 2001 amendments changed the financial
covenants and extended the maturity dated for principal payments previously due
before March 31, 2002. Throughout 2001 and 2002, BSC continued discussions with
the Secured Parties regarding permanent resolution of its obligations under the
Revolving Credit Facility and the Senior Notes.

         As noted in Section III.F., BSC engaged CIBC on January 31, 2002 to
assist in evaluating offers as well as to advise BSC with respect to other
financial and strategic alternatives for consideration by BSC, including the
sale of BSC or substantially all of its assets, a merger with a third party or
restructuring of its debt with the Secured Parties. Pursuant to the terms of its
engagement, CIBC conducted a process to determine BSC's


                                       23


viable options. During this process, BSC engaged in discussions with several
parties, including Nucor.

         On March 27, 2002, 100% of the Secured Parties approved the extension
of approximately $286 million under its Revolving Credit Facility and Senior
Secured Notes previously due April 1, 2002 until May 15, 2002. On May 14, 2002,
100% of the Secured Parties approved a further extension of those maturities
through May 31, 2002. The report of Ernst & Young LLP, BSC's independent
auditors, on the consolidated financial statements for the year ended June 30,
2001, includes and explanatory paragraph expressing substantial doubt about
BSC's ability to continue as a going concern because of the material debt
obligations due May 31, 2002. Simultaneously with the execution of the Asset
Purchase Agreement with Nucor, the Debtors and certain of the Secured Parties
executed a Plan Support Agreement pursuant to which the Debtors and certain of
the Secured Parties have negotiated a pre-arranged plan of reorganization which
provides for a portion of the proceeds of the sale to Nucor to unsecured
creditors and shareholders (See Section III.J).

         H.       PRE-BANKRUPTCY EFFORTS TO SELL ASSETS.

                  1.       SPECIAL COMMITTEE.

                  On February 15, 2002, in response to the unsolicited offer by
Nucor to purchase substantially all of the assets of BSC for $500 million, BSC's
Board of Directors established a Special Committee, consisting of James W.
McGlothlin, Steven R. Berrard and Robert M. Gerrity, all non-management members
of the Board. The Special Committee was formed to review Nucor's offer and other
proposals which would result in a change of control or strategic restructuring
of BSC and to advise the Board with respect to any such transactions regarding
the Board's fiduciary responsibilities to all interested parties. CIBC has been
providing strategic, M&A and restructuring advice to BSC, its managers and Board
of Directors since December 2001 and was formally retained in January 2002.

                  2.       MARKETING.

                  Before the Filing Date the Debtors in an exhaustive marketing
process to determine the sales value of the Debtors' assets and to identify the
potential buyer or buyers that would pay the highest and best price for such
assets. After Nucor's unsolicited proposal, the Debtors thereafter directed CIBC
to run an auction and to solicit offers from any potential interested strategic
or financial buyer for the Debtors. In assembling a list (the "Target List") of
potential acquirors or merger partners, CIBC considered the financial ability
and strategic fit of all domestic and global steel producers and the rates of
return required by the financial sponsor community. Based upon CIBC's extensive
experience in the steel industry, the universe of potential buyers was narrowed
to ten (10) entities, all of whom met the criteria discussed above. As a
courtesy, the secured parties were allowed to review the process undertaken by
CIBC as well as the Target List.


                                       24


                  After assembling the Target List, CIBC and the Debtors
prepared a descriptive memorandum on the Debtors along with a confidentiality
agreement (except where a confidentiality agreement was already in place). CIBC
discussed the situation with each potential acquiror to explain the situation,
the proposed timing of the process and answer any questions. After the initial
discussions, certain parties indicated that they would not have any interest in
pursuing a transaction with the Debtors. The remainder indicated a high level of
interest, signed confidentiality agreements (where appropriate) and received
additional information concerning the Debtors' detailed five year financial
forecasts and operating data. Concurrently, the Debtors and CIBC organized a
data room where potential acquirors could review internal documents that they
would need prior to entering into a transaction.

                  CIBC and the Debtors met with each of the potential acquirors
on an individual basis to answer additional questions they might have, provide
operating assumptions for the projections and to gauge their initial interest in
a transaction. Several potential acquirors expressed interest in transaction
structures other than outright purchases of all of the stock or assets of the
Debtors. Face to face, intensive due diligence sessions were held with five (5)
strategic partners.

                  CIBC coordinated the extensive due diligence activities to be
conducted at the Debtors' plants. Certain potential acquirors visited all
facilities while others toured only certain assets, consistent with their
respective levels of interest. CIBC ensured that potential acquirors had access
to all reasonable data requested - including access to sensitive mill operating
and environmental data. Potential acquirors were also encouraged to visit the
data room and review those materials. If information was requested that was not
in the data room, then efforts were made to produce it for the potential
acquiror's review. Certain materials were copied for potential acquiror's so
that they could review them outside the data room.

                  CIBC on behalf of the Debtors requested that initial
indications of interest from all the potential acquirors who had received
confidential information be submitted by a date certain. The Debtors received
indications of interest from four (4) parties -- each of whom in CIBC's
estimation had the financial and strategic wherewithal to consummate a
transaction.

         -        One domestic party indicated an interest in a reverse merger
                  through which it would merge its steel making subsidiary into
                  Birmingham.

         -        Another domestic mini-mill operator proposed acquiring the
                  Birmingham and Jackson plants only. The acquisition would
                  include the assumption of all current assets and liabilities
                  associated with the two plants.

         -        Nucor increased the value of its indication from its publicly
                  stated value on February 14, 2002.


                                       25


         -        Two domestic mini-mill operators proposed an acquisition of
                  the Company under which one operator would acquire the
                  Company's Kankakee, Memphis and Seattle plants and the other
                  sought to acquire the Birmingham and Jackson plants along with
                  the Company's PESCO and Klean operations.

                  After reviewing all the indications of interest the Debtors
and CIBC encouraged each party to finish its due diligence and submit final
offers. During the next few weeks final discussions were held with all parties
expressing interest. During these discussions, the Debtors and CIBC attempted to
resolve potential issues concerning the structure of a transaction, remove any
contingencies the potential acquiror might have and increase the consideration
for the sale. On or about April 9, 2002, Nucor and two other strategic bidders
(these two bidders acting in combination) submitted their final indications of
interest at a remote location hosted by CIBC. During those meetings, all bidders
again raised their purchase price consideration.

                  On April 10, 2002, Nucor raised its offer to $615 million and
stated it had completed its due diligence and was prepared to sign an agreement.
Final negotiations ensued between the Debtors, the Secured Parties and Nucor and
definitive agreements were prepared. On May 30, 2002 the Company and Nucor
executed a definitive purchase agreement.

                  Based on the foregoing, the Debtors have determined that the
$615 million purchase price from Nucor is the highest and best price possible
for the Debtors' assets. The Debtors' assets have been fully exposed to the
market. After negotiations with each potential buyer for the Debtors' assets,
the Debtors have determined that the sale to Nucor will provide the highest and
possible return to Debtors' estates.

         I.       SALE TO NUCOR CORPORATION.

                  1.       NEGOTIATIONS.

                  On February 14, 2002 Nucor announced an unsolicited offer to
purchase substantially all of BSC's assets for $500 million. On May 30, 2002,
BSC signed an asset purchase agreement with Nucor pursuant to which Nucor would
purchase substantially all of BSC's assets for $615 million in cash. BSC also
entered into an agreement, dated May 30, 2002, with BSC's secured lenders in
support of the transaction. These agreements require that the transaction with
Nucor be approved pursuant to a prearranged chapter 11 bankruptcy filing by the
bankruptcy court in Delaware. The $615 million purchase price proposed by Nucor
is less than the full value of BSC's secured debt. BSC and certain Secured
Parties negotiated a pre-arranged plan agreement that would provide for Secured
Parties distributing a portion of the proceeds from the transaction to unsecured
creditors and shareholders. The agreements contemplate payments to shareholders
of approximately $.47 per share. The plan contemplated by BSC, the Secured
Parties and Nucor would also provide for the continued and


                                       26


uninterrupted payments to BSC's critical vendors from operating cash flows and a
proposed interim financing arrangement.

                  2.       ASSET PURCHASE AGREEMENT.

                  On May 30, 2002 JAR Acquisition Corp. ("Buyer"), Nucor
Corporation ("Nucor") and BSC, BSE, and PESCO (collectively, "Sellers") executed
the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the
Buyer will purchase substantially all of the assets of the Sellers. All of
Buyer's obligations are unconditionally guaranteed by Nucor. Assets excluded
from the Asset Purchase Agreement include cash, rights of Sellers to tax
refunds, ASW and BSC's Joliet Facility, Sellers' ownership interest in American
Iron Reduction, LLC, Birmingham Steel Management, Inc., and claims and causes of
action against third parties. The Buyer assumes only limited liabilities,
primarily contracts related to the acquired assets.

                  The Buyer will pay the Sellers $615 million in cash subject to
adjustment for changes in receivables and inventories pending closing. The
purchase price will be adjusted downward dollar for dollar to the extent
receivables and inventories at closing are less than $117.5 million. The
purchase price will be adjusted upward dollar for dollar to the upward limit of
$5 million. Inventories and receivables will be calculated in accordance with
GAAP consistently applied in accordance with Sellers' past practices.
Inventories will be audited as of the close of business the day before closing
by Ernst & Young with PricewaterhouseCoopers reviewing the procedures. If the
two accounting firms do not agree on the determination of inventories and
receivables, the parties will close based on the PricewaterhouseCoopers number,
and representatives of the Secured Parties and Buyer will seek to agree on the
adjustment. If they cannot agree in five days, Deloitte & Touche will act as
the final arbiter.

                  The Asset Purchase Agreement contains generally customary
representations and warranties of the Sellers, Buyer and Nucor. The
representations and warranties do not survive the closing, and the accuracy of
the representations and warranties at closing are not a condition to Buyer's
obligation to close, other than the representation regarding organization of
Sellers, authorizations and consents of Sellers, the validity and binding effect
of the Agreement, rights of third parties, and title. Failure of these
representations does not trigger a closing condition unless there is a material
adverse effect.

                  The Agreement contemplates that the acquisition will be
effected though a Chapter 11 bankruptcy filing pursuant to a Plan Support
Agreement with the Secured Parties. See Section III.J. The Asset Purchase
Agreement contains additional covenants pending closing customary in
transactions of this type, including continued operation of the business in the
ordinary course. The Sellers are also required to use reasonable efforts to
preserve the business intact and to keep available officers and key employees
and maintain relations and goodwill with suppliers, customers, and others with
which it has relationships. The Sellers are required to confer with Nucor prior
to implementing material operational decisions outside the ordinary course and
to use reasonable efforts to


                                       27


ensure an orderly transition. The Buyer has the right to conduct reasonable
inspections and to obtain information about the acquired assets.

                  The Buyer and Sellers are required to seek all governmental
approvals required to consummate the transaction. Buyer and Nucor are required
to take any and all steps, including divesting or agreeing to divest Assets, to
permit the consummation of the transaction within 270 days after signing at its
own expense and with no reduction in the purchase price.

                  Other closing conditions relate to delivery of deeds,
assignments and other documents necessary to consummate the transaction,
obtaining necessary consents and approvals, and obtaining the bankruptcy order.
Buyer's obligations are also conditioned on there not having occurred an event
that could reasonably be expected to have a material adverse effect on the
condition or the operation of the acquired assets. Buyer's rights to terminate
prior to closing are limited to (1) a breach by Sellers that would create a
failure of a condition precedent that is impossible or impractical to cure prior
to closing, and (2) expiration of 285 days from signing.

         J.       PLAN SUPPORT AGREEMENT.

                  1.       GENERAL. The purpose of the Plan Support Agreement is
to facilitate the consummation of the Sale, with the consent and approval of the
Secured Parties who have executed the Plan Support Agreement. The parties to the
Plan Support Agreement are the Debtors, Nucor and Secured Parties constituting
more than one-half in number of the holders of secured claims against the
Debtors and holding more than two-thirds in amount of such secured claims. The
number of Secured Parties holding this amount of secured claims is referred to
herein as "Requisite Secured Parties."

                           In the Plan Support Agreement, the Debtors have
agreed, among other things, to enter into the Asset Purchase Agreement with
Nucor, to file and seek confirmation of the Plan as promptly as practicable and,
subject to the satisfaction of the closing conditions contained in the Purchase
Agreement, to consummate the Sale. As holders of secured claims against the
Debtors, the Secured Parties are entitled to receive all of the net proceeds
from the Sale. The Sale will not generate Gross Proceeds in an amount sufficient
to satisfy the Allowed Class 2 Claims of the Secured Parties. Accordingly, under
applicable provisions of the Bankruptcy Code, holders of Interests in the
Debtors and holders of pre-petition claims other than Allowed Class 2 Claims are
not entitled to receive any portion of the proceeds from the Sale. Nevertheless,
on the terms and conditions set forth in the Plan Support Agreement, the Secured
Parties have agreed to pay, or to cause the payment of, a portion of their
proceeds derived from the Sale to the holders of Unsecured Claims and to the
holders of Interests in BSC, as described elsewhere in this Disclosure
Statement.

                           If (a) the Plan is not accepted by the requisite
number of creditors, as provided elsewhere in this Disclosure Statement, or if
for any other reason the Confirmation Order is not entered within 120 days from
May 31, 2002, or if extended at Nucor's option, within 180 days from May 31,
2002 (in either case, the "Confirmation


                                       28


Deadline"), (b) the Purchase Agreement is terminated, or (c) the Purchase
Agreement is materially amended without the prior consent of the Requisite
Secured Parties, the Plan Support Agreement requires the Debtors to withdraw the
Plan and, instead, seek approval of the Sale by the Bankruptcy Court pursuant to
motions filed under Sections 363(b) and (f), and other applicable Bankruptcy
Code provisions. In that event, the Secured Parties will be entitled to revoke
their Acceptances of the Plan, but will remain obligated to cooperate with the
Debtors in their effort to obtain Bankruptcy Court approval of the Sale pursuant
to the motions referred to above.

                  2.       SECURED PARTY ALLOCATIONS IF THE PLAN IS CONFIRMED.
As indicated above, under applicable provisions of the Bankruptcy Code, the
Secured Parties are entitled to receive all of the net proceeds derived from the
Sale. Under the Plan, the Class 2 Distribution Amount is to be distributed to
the Collateral Agent on the Closing Date. This amount constitutes, generally,
100% of the net proceeds derived from the Sale, after payment of certain
Administrative Expense Claims, including claims for the Debtors post-petition
financing. Pursuant to the Plan Support Agreement, if the Plan is Confirmed on
or prior to the Confirmation Deadline and the Sale is consummated on or prior to
the Outside Termination Date (as defined in the Plan Support Agreement) at the
purchase price contemplated in the Purchase Agreement, the Secured Parties will
pay the following sums to the Distribution Agent for payment to the holders of
Unsecured Claims and Interests described below:

                  -        $17,000,000 for Severance and Retirement Claims;

                  -        $12,500,000 (less any amounts paid to CIBC before
                           closing) for the Administrative Claim Reserve;

                  -        $500,000 to fund the post-effective date expenses of
                           implementing the Plan and winding up the Debtors'
                           affairs, including the expenses of the Liquidation
                           Trust and the Distribution Agent;

                  -        if Class 4 votes to accept the Plan, $5,000,000 to
                           the Liquidation Trust for the benefit of Allowed
                           Unsecured Claims;

                  -        $15,000,000 for Interests in BSC, as they existed
                           immediately prior to the Closing Date.

                           In addition, the Plan provides for the assignment of
the Causes of Action, the Net proceeds of the Excluded Assets and (to the extent
not liquidated) the Excluded Assets to the Liquidation Trust. These assets also
are subject to the liens of the Secured Parties; however, each holder of an
Allowed Class 4 Claim shall receive a Pro Rata interest in the Liquidation
Trust, although the assets distributed from the Liquidation Trust to holders of
Allowed Class 4 Claims may vary depending on whether Class 4 accepts the Plan.


                                       29


         3.       SECURED PARTY ALLOCATIONS IF THE PLAN IS NOT CONFIRMED, BUT
THE SALE IS CONSUMMATED. If the Plan is not confirmed by the Bankruptcy Court on
or prior to the Confirmation Deadline, the Debtors intend to withdraw the Plan
and to file appropriate motions in the Bankruptcy Court seeking approval of the
Sale pursuant to Sections 363(b) and (f) and other applicable provisions of the
Bankruptcy Code. The Plan Support Agreement provides that, if Bankruptcy Court
approval of the Sale is obtained on or prior to February 28, 2003, and the Sale
is consummated on or prior to the Outside Termination Date (as defined in the
Plan Support Agreement) at the purchase price contemplated in the Purchase
Agreement, the Secured Parties will pay, or cause the Collateral Agent to pay,
the following sums to the holders of Claims and Interests described below:

         -        $17,000,000 for Severance and Retirement Claims;

         -        $12,500,000 (less any amounts paid to CIBC before closing) for
                  the Administrative Claim Reserve;

         -        $500,000 for post-closing expenses; and

         -        $15,000,000 for Interests in BSC, as they existed immediately
                  prior to the Closing Date.

                           In this event, the Plan Support Agreement provides
for no payments or distributions of any kind to the holders of Class 4 Unsecured
Claims.

         4.       EFFECT OF WILLFUL BREACH BY THE DEBTORS OF PLAN SUPPORT
AGREEMENT. As indicated above, the Debtors are obligated under the Plan Support
Agreement to file and seek confirmation of the Plan, to consummate the Sale,
subject to the terms of the Purchase Agreement and, among other things, to
comply with their budgets submitted in connection with the Post-Petition
Financing. In the event of a willful breach by the Debtors of their obligations
under the Plan Support Agreement that causes monetary damage to the Secured
Parties, the amount of that damage, as determined by the Bankruptcy Court, will
be deducted to the amount that the Secured Parties have agreed to pay to the
holders of Interests in BSC. In such event, the Debtors have the option of
terminating the Plan Support Agreement entirely, in lieu of permitting such a
payment reduction.

         5.       TERMINATION OF PLAN SUPPORT AGREEMENT. Under the Plan Support
Agreement, the Secured Parties have agreed to support the Debtors' efforts to
obtain confirmation of the Plan (until the Confirmation Deadline), to consent to
the Sale, to make the payments described above, subject to the terms and
conditions contained in the Plan Support Agreement, and to forbear from seeking
(a) relief from the automatic stay under Section 362 of the Bankruptcy Code, (b)
appointment of a chapter 11 trustee, (c) dismissal of the Cases, and (d)
conversion of the Cases to cases under chapter 7 of the Bankruptcy Code.


                                       30


         (A)      CONFIRMATION DEADLINE. As stated above, the Secured Parties
will no longer be obligated to support the Plan if the Confirmation Order is not
entered on or prior to the Confirmation Deadline.

         (B)      OUTSIDE TERMINATION DATE. The Secured Parties will be relieved
of all of their obligations described above, and the Plan Support Agreement will
terminate on the Outside Termination Date (as defined in the Plan Support
Agreement). Accordingly, the Plan Support Agreement will terminate on the date
on which the first of the following events occurs:

                  (i)      February 28, 2003, if neither the Confirmation Order,
                           nor an Order of the Bankruptcy Court approving the
                           Sale has been entered on or prior to that date (in
                           either case, a "Sale Approval Order");

                  (ii)     May 31, 2003, if a Sale Approval Order has been
                           entered by the Bankruptcy Court on or prior to
                           February 28, 2003, but the Sale or another sale of
                           all or substantially all of the Debtors' assets
                           (under which the gross purchase price is less than
                           the purchase price called for in the Purchase
                           Agreement) has not been consummated;

                  (iii)    August 31, 2003, if a Sale Approval Order has been
                           entered by the Bankruptcy Court on or prior to
                           February 28, 2003, but the Sale or another sale of
                           all or substantially all of the Debtors' assets
                           (under which the gross purchase price is greater than
                           the purchase price called for in the Purchase
                           Agreement, net of topping fees and expense
                           reimbursement) has not been consummated;

                  (iv)     The date on which the Debtors and Nucor enter into
                           any amendment to the Purchase Agreement that requires
                           consent of the Requisite Secured Parties, unless the
                           Requisite Secured Parties have consented to such
                           amendment; or

                  (v)      The date on which the Cases are dismissed or
                           converted to chapter 7 cases, except as otherwise
                           provided in the Plan Support Agreement, or on which
                           the Bankruptcy Court rules that the Sale cannot be
                           approved under applicable law.


                                       31


IV.      FINANCIAL INFORMATION

         A.       ASSETS AND LIABILITIES.

         Attached as Exhibit C to this Disclosure Statement and incorporated by
reference are copies of the Debtors' Consolidated Balance Sheets as of March 31,
2002, as filed by the Debtors with the Securities and Exchange Commission.
Additional information on the Debtors' assets and liabilities is included in
each Debtor's Schedules and Statement of Financial Affairs filed with the
Bankruptcy Court on or about June 10, 2002.

V.       CHAPTER 11 PROCEEDINGS.

         A.       POST-FILING OPERATIONS.

         After the Debtors filed their respective petitions before the
Bankruptcy Court, the Debtors have operated their businesses as
debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
The Debtors have filed monthly reports with the Bankruptcy Code summarizing
their post-petition operating results.

         B.       SIGNIFICANT CHAPTER 11 EVENTS.

         Much of the activity in the Case has centered on the Sale and various
"first day" motions filed by the Debtors on the Filing Date. The Plan, which the
Debtors filed on the Filing Date. Incorporates the Sale into its terms. The
first day motions the Debtors filed include the following:

         1.       MOTION FOR JOINT ADMINISTRATION. On the Filing Date, the
Debtors filed a motion for joint administration of the Cases pursuant to
Bankruptcy Rule 1015. The Bankruptcy Court ordered the joint administration of
the Cases by order dated June 4, 2002. The order did not substantially
consolidate the Cases. The Cases are consolidated for administrative purposes
only.

         2.       MOTION TO APPROVE DIP FINANCING AND TO AUTHORIZE USE OF CASH
COLLATERAL. The Debtors filed a motion to (a) approve the DIP Facility; (b)
authorize the Debtors to enter into the Post-Petition Credit Agreement related
to the DIP Facility; (c) authorize the Debtors to use the Cash Collateral; and
(d) provide adequate protection relating to the foregoing. After an emergency
preliminary hearing on June 4, 2002, the Bankruptcy Court entered an Interim
Order granting the motion and related relief. The Bankruptcy Court entered a
Final Order granting the motion and related relief on ___________ __________.
Since the Filing Date, the Debtors have funded their operations with proceeds of
the DIP Facility and the Cash Collateral pursuant to the Post-Petition Credit
Agreement and the Bankruptcy Court's Orders.

         3.       MOTION TO ASSUME PLAN SUPPORT AGREEMENT. The Debtors filed a
motion to assume the Plan Support Agreement as an executory contract under
section


                                       32


365(a) of the Bankruptcy Code. The terms of the Plan Support Agreement are
summarized in Section III.J, above.

         4.       MOTION TO PAY PRE-PETITION WAGE AND BENEFITS CLAIMS. On the
Filing Date, the Debtors filed a motion for authority to honor and pay all
regular employee obligations, including those that arose before the Filing Date.
The Bankruptcy Court approved the payment of pre-petition wage and benefit
claims by order dated June 4, 2002.

         5.       MOTION TO PAY PRE-PETITION CLAIMS OF CRITICAL VENDORS AND TO
ENTER INTO CRITICAL VENDOR AGREEMENTS. On the Filing Date, the Debtors filed a
motion to pay pre-petition claims of critical vendors. By order dated June 5,
2002, the Bankruptcy Court granted the Debtors discretionary authority pay
pre-petition claims of critical vendors up to the total aggregate amount of
$28.0 million. Payment of any critical vendor's pre-petition claim is
conditioned upon the critical vendor signing a critical vendor agreement.
Without limitation, each critical vendor agreement provides that during the
post-petition period the critical vendor shall supply goods and services to the
Debtors on credit terms at least as good as the credit terms that existed
between the critical vendor and the Debtors before the Filing Date. If the
critical vendor fails or refuses to supply goods or services according to
established credit terms, the critical vendor forfeits the right to the
pre-petition payment and certain other protections provided by the critical
vendor agreement. In such event, the Debtors retain their rights to recover all
payments on account of the critical vendor's pre-petition claim under Section
549 of the Bankruptcy Code.

         6.       APPLICATIONS TO EMPLOY VARIOUS PROFESSIONALS.

         On or about the Filing Date, the Debtors filed several applications to
employ professionals under Section 327 of the Bankruptcy Code. Without
limitation, the Debtors filed Applications to employ Bradley Arant Rose & White
LLP and Young Conaway Stargatt and Taylor as chapter 11 counsel under Section
327(a) of the Bankruptcy Code. The Debtors also filed applications to employ
various law firms as special corporate or litigation counsel under Section
327(e) of the Bankruptcy Code, including, without limitation, Burr & Forman,
Balch & Bingham and Paul Hastings Janofsky & Walker. Non-lawyer professionals
that the Debtors filed applications to hire under Section 327(a) included CIBC
World Markets as financial advisors and investment bankers, Ernst & Young as
auditors, and Sellers, Richardson, Watson, Haley & Logan, LLP as tax
accountants.

         In addition to discreet applications to employ particular
professionals, the Debtors also filed a motion to retain and pay, in the
ordinary course of business and without further applications or orders of the
Bankruptcy Court, various professionals representing the Debtors on matters
arising in the ordinary course of business and not directly related to the
Debtors' reorganization.


                                       33


         7.       MOTION TO SET DISCLOSURE STATEMENT AND PLAN FOR HEARING,
APPROVE SOLICITATION PROCEDURES AND ESTABLISH BAR DATE. On the Filing Date, the
Debtors filed a motion to establish balloting and solicitation procedures with
respect to the Plan, to schedule the Plan and Disclosure Statement for hearing,
and establishing a bar date for filing proofs of claim or interest. The
Bankruptcy Court approved the motion by order dated ________________. In the
order, the Bankruptcy Court set August 12, 2002 as the bar date for filing
proofs of claim. The solicitation procedures approved by the Bankruptcy Court
are outlined in Sections I.B and I.C, above.

         8.       MOTION TO APPROVE ASSURANCE OF PAYMENT TO UTILITIES. On the
Filing Date, the Debtors filed a motion to provide adequate assurance of payment
under Section 366 of the Bankruptcy Code. The Bankruptcy Court granted the
motion by bridge order dated June 4, 2002, pending a final hearing on the
motion.

         9.       MOTION TO REJECT MEMPHIS LEASES. On the Filing Date, BSC filed
a motion to reject leases for its Memphis facility and certain related unexpired
leases and executory contracts. The Bankruptcy Court approved the rejection by
order dated ______________. (See Section II.D.1.e)

         10.      MOTION TO MAINTAIN CASH MANAGEMENT SYSTEM. On the Filing Date,
the Debtors filed a motion seeking authority to maintain their existing cash
management system and pre-petition bank accounts. The Bankruptcy Court granted
the motion by order dated June 4, 2002.

         11.      MOTION TO COLLECT AND PAY PRE-PETITION TAX OBLIGATIONS. On the
Filing Date, the Debtors filed a motion collect and pay certain use, sales, and
similar taxes, and other government fees and charges incurred in the ordinary
course of business, including those that accrued before the Filing Date. The
Bankruptcy Court granted the motion by order dated June 4, 2002.

         On June 18, 2002 the United States Trustee appointed an Official
Committee of Unsecured Creditors (the "Committee"). The chairman of the
Committee is ________________. The Committee has retained Reed Smith, LLP as its
chapter 11 counsel.

VI.      SUMMARY OF PLAN.

         NOTE: The following is a summary of the Plan. Read the Plan itself for
a full disclosure of its contents. The following summary is provided for
convenience only and is not intended as a complete statement of the terms of the
Plan. If the summary conflicts in any way with Plan, the terms of the Plan shall
control. REFERENCE TO THE PLAN IS NECESSARY FOR A FULL UNDERSTANDING OF ITS
TERMS.

         A.       OVERVIEW.

                  The Plan provides for the sale of substantially all of the
Debtors' assets to the Buyer pursuant to the Asset Purchase Agreement. The Plan
also provides for the


                                       34


liquidation of the Excluded Assets that are not being sold to the Buyer. The
liens of the secured creditors in Class 2 (as defined below) will attach to the
proceeds of the sale. Such secured creditors hold liens in substantially all the
assets of the debtors and the aggregate amount of their claims exceeds the
expected amount of the proceeds of the sale of the Debtors' assets. Although
secured parties are not being paid in full, pursuant to the Plan Support
Agreement the secured creditors have agreed to pay certain sums to unsecured and
other creditors and interest holders in BSC. For a more complete description of
the Plan Support Agreement and its effect on the distribution of the proceeds of
the sale of the Debtors' assets, see Section III.J of this Disclosure Statement,
above.

                  All capitalized terms in this summary of the Plan shall have
the meaning set forth in the Plan.

         B.       CLASSIFICATION OF CLAIMS AND INTERESTS.

                  The Plan places Claims against the Debtors and Interests in
the Debtors in the following classes:

                  1.       Class 1 consists of Allowed Priority Claims, other
than Priority Tax Claims.

                  2.       Class 2 consists of the Allowed Secured Claims of
each party to the Omnibus Collateral Agreement and the Intercreditor Agreement,
in their capacities as such, including the 1993 Noteholders, the 1995
Noteholders, the Bank Group, the Indenture Trustee (as assignee of the Owner
Trustee for the benefit of the Memphis Equipment Noteholders), PNC and the
Collateral Agent.

                  3.       Class 3 consists of all Allowed Secured Claims other
than Allowed Secured Claims in Class 2, including the Claims identified on the
Other Secured Claim Schedule.

                  4.       Class 4 consists of Allowed Claims of (a) the
Cartersville Noteholders; (b) the AIR Lenders; (c) the holders of Rejection
Damages Claims; and (d) the holders of any other Allowed Unsecured Claims,
including, without limitation, the Claims of each party to the Omnibus
Collateral Agreement and the Intercreditor Agreement to the extent such Claims
are Unsecured Claims by operation of Section 506(a) of the Bankruptcy Code.

                  5.       Class 5 consists of Interests in BSC, other than the
Lender Warrants.

                  6.       Class 6 consists of Interests in BSC that are Lender
Warrants.

                  7.       Class 7 consists of Intercompany Claims.


                                       35


                  8.       Class 8 consists of Intercompany Interests.

         C.       TREATMENT OF CLAIMS AND INTERESTS.

                  Notwithstanding any other provision of the Plan, certain sums
will be paid to holders of Unsecured Claims and holders of Interests in BSC from
the proceeds of the Sale received by the holders of Allowed Claims in Class 2.
Such payments are set forth in the Plan Support Agreement, as discussed in
Section 6 of the Plan. For further detail on the Plan Support Agreement, see
Section III.J of this Disclosure Statement, above.

                  1.       TREATMENT OF CERTAIN UNCLASSIFIED CLAIMS.

                           Pursuant to Section 1123(a)(1) of the Bankruptcy
Code, Administrative Expense Claims and Priority Tax Claims are not classified
in the Plan. The Plan provides that all such Claims shall be paid in full.
Allowed Administrative Expense Claims arising from liabilities incurred by the
Debtors in the ordinary course of business shall be paid by the Debtors on and
after the Confirmation Date (to the extent not already paid by the Debtors in
the ordinary course of their businesses), from the proceeds of Cash Collateral,
the proceeds of the DIP Facility, or, to the extent unpaid as of the Closing
Date, from the Gross Proceeds pursuant to Section 2(a)(i)(E) of the Plan Support
Agreement. DIP Facility Claims shall be paid Cash on the Closing Date from the
Gross Sale Proceeds. Bonus Claims shall be paid in accordance with the terms of
the Plan Support Agreement. Other Administrative Expense Claims, including,
without limitation, Fee Claims and Claims for statutory fees payable pursuant to
28 U.S.C. ss. 1930, shall be paid as and when Allowed from the proceeds of the
Cash Collateral, the proceeds of the DIP Facility or, to the extent not
otherwise paid from such proceeds or from the Gross Sale Proceeds, from the
Administrative Expense Reserve.

                           Priority tax claims shall be paid by the Debtors on
the Effective Date or, if later, on the fifteenth (15th) day after such Claim
becomes Allowed, to the extent unpaid as of the Closing Date, from the
Administrative Claim Reserve.

                           Notwithstanding the foregoing, to the extent the
holder of an Allowed Administrative Expense Claim or an Allowed Priority Tax
Claim agrees to less favorable treatment than the treatment provided under the
Plan, such other agreement shall control.

                  2.       CLASS 1 - ALLOWED OTHER PRIORITY CLAIMS.

                           Unless less favorable treatment is otherwise agreed
to by the holder of an Allowed Other Priority Claim (in which event, such other
agreement shall govern), each holder of an Allowed Class 1 Claim shall be paid
by the Distribution Agent on the Effective Date or, if later, on the fifteenth
(15th) Business Day after such Claim becomes Allowed, Cash from the
Administrative Claim Reserve in an amount equal to the amount of such Allowed
Class 1 Claim. Claims in Class 1 are not impaired under the Plan. Therefore,
pursuant to section 1126(f) of the Bankruptcy Code, the holders of Claims in
Class 1 conclusively are presumed to have accepted the Plan and are not entitled
to vote.


                                       36


                  3.       CLASS 2 - SECURED CLAIMS OF PARTIES TO THE OMNIBUS
COLLATERAL AGREEMENT AND INTERCREDITOR AGREEMENT.

                           (a)      The holders of Claims in Class 2 shall
retain the Liens securing such Claims to the extent of the Allowed amount of
such Claims. Upon the closing of the Sale, such Liens shall attach to the Class
2 Distribution Amount, subject to the terms and conditions set forth in the
Plan.

                           (b)      In full and final settlement and discharge
of Class 2 Claims, the Collateral Agent on account of each holder of an Allowed
Class 2 Claim shall receive (i) on the Closing Date, and from time to time
thereafter (if applicable), the Class 2 Distribution Amount; and (ii) upon
payment of all Claims payable from such reserve in accordance with the Plan, the
unused portions, if any, of the Administrative Claim Reserve.

                           (c)      Pursuant to section 1126(a) of the
Bankruptcy Code, holders of Claims in Class 2 are entitled to vote to accept or
reject the Plan.

                           (d)      Notwithstanding any other provisions of the
Plan, as of the Effective Date, the Secured Claims of each holder of a Class 2
Claim shall be deemed Allowed without defense, set off, offset, right of
recoupment or counterclaim.

                  4.       CLASS 3 - OTHER SECURED CLAIMS.

                           (a)      Each holder of an Other Secured Claim shall,
within ten (10) days prior to the Confirmation Hearing, File and serve on the
Debtors and the Informal Group a written objection to the Other Secured Claim
Estimate, attaching all back-up and supporting documentation, to the extent that
the holder of such Claim asserts that such holder's Claim is secured by any
other or additional property of the Estates or the amount of the Other Secured
Claim Estimate is incorrect. If no objection is timely Filed and served, the
description of the Collateral in the Other Secured Claim Schedule and the Other
Secured Claim Estimate shall be binding for all purposes in these Cases upon the
holder of such Claim and shall be an Allowed Secured Claim in the amount set
forth in the Other Secured Claim Schedule. Each Person that is not set forth in
the Other Secured Claim Schedule that asserts an interest in any property of the
Estates or otherwise asserts a Secured Claim shall, within ten (10) days prior
to the Confirmation Hearing, File and serve a written objection to the exclusion
of such Person from the Other Secured Claim Schedule, attaching all back-up and
supporting documentation, to the extent that such Person asserts that such
Person's Secured Claim is secured by any property of the Estates. If a Person
asserts an interest in any property of the Estates and Such Person is not set
forth in the Other Secured Claim Schedule and such Person shall have failed to
File and serve an objection to the Other Secured Claim Schedule as set forth
herein at least ten (10) days prior to the Confirmation Hearing, (i) such Person
shall be deemed for all purposes in these Cases to have waived and released its
interest in any


                                       37


property of the Debtors' estates; and (ii) such Person shall be deemed to be a
holder of a Class 6 Claim.

                           (b)      In full and final satisfaction and discharge
of all Class 3 Claims, if any, to the extent not previously paid, each holder of
an Allowed Class 3 Secured Claim shall receive on the Effective Date or, if
later, the fifteenth (15th) Business Day after such Claim becomes an Allowed
Claim:

                                    (i)      if the Collateral securing such
                                             Claim is in the Excluded Assets
                                             (and to the extent not already
                                             received by such holder), the
                                             Collateral securing such Claim
                                             without representation, warranty or
                                             recourse; or

                                    (ii)     if the Collateral securing such
                                             Claim is not included in the
                                             Excluded Assets, Cash equal to the
                                             amount of such Allowed Claim from
                                             the Administrative Claim Reserve;
                                             provided the aggregate amount of
                                             payments pursuant to this Section
                                             III.C.2(b)(ii) of the Plan shall
                                             not exceed $500,000.00 without the
                                             consent of the Informal Group.

                  5.       CLASS 4 - UNSECURED CLAIMS.

                           (a)      On the Effective Date, Class 4 Creditors
will receive an undivided Pro Rata interest in the Liquidation Trust, but
excluding any interest in the Post-Effective Date Reserve.

                           (b)      Pursuant to section 1126(a) of the
Bankruptcy Code, holders of Allowed Claims in Class 4 are entitled to vote to
accept or reject the Plan.

                  6.       CLASS 5 - INTERESTS.

                           (a)      The Class 5 Interests shall be cancelled as
of the Effective Date. The holders of Interests in Class 5 shall not receive or
retain any Distribution or other property on account of such Interests,

                           (b)      Pursuant to section 1126(g) of the
Bankruptcy Code, holders of Allowed Interests in Class 5 are deemed to have
rejected the Plan and are not entitled to vote to accept or reject the Plan.

                  7.       CLASS 6 - LENDER WARRANTS.

                           (a)      The Lender Warrants shall be cancelled as of
the Effective Date. The holders of Interests in Class 6 shall not receive or
retain any Distribution or other property on account of such Interests.

                           (b)      Pursuant to 1126(g) of the Bankruptcy Code,
holders of


                                       38


Interests in Class 6 are deemed to have rejected the Plan and are not entitled
to vote to accept or reject the Plan.

                  8.       Class 7 - INTERCOMPANY CLAIMS.

                           (a)      The holders of Class 7 Claims shall not
receive or retain any Distribution or other property on account of such Claims.

                           (b)      Pursuant to Section 1126(g) of the
Bankruptcy Code, holders of Claims in Class 7 are deemed to have rejected the
Plan and are not entitled to vote to accept or reject the Plan.

                  9.       CLASS 8 - INTERCOMPANY INTERESTS.

                           (a)      The holders of Class 8 interests shall not
receive or retain any Distribution or other property on account of such
Interests.

                           (b)      Pursuant to Section 1126(g) of the
Bankruptcy Code, holders of Interest in Class 8 are deemed to have rejected the
Plan and are not entitled to accept or reject the Plan.

         D.       IMPLEMENTATION OF PLAN.

                  1.       Sale of Assets.

                           Confirmation of the Plan shall constitute approval of
the Sale pursuant to the terms of the Asset Purchase Agreement, which terms are
incorporated into the Plan by reference. Without limitation, the Sale shall be
free and clear of all liens, claims, encumbrances and other interests pursuant
to Section 363(f) of the Bankruptcy Code, with all such liens, claims,
encumbrances and other interests attaching to the Gross Proceeds subject to the
terms and conditions of the Plan. The Confirmation Order shall contain such
terms and provisions as necessary to effectuate the Sale pursuant to Section
363(f) of the Bankruptcy Code in accordance with the terms and conditions of the
Plan. The Confirmation Order shall authorize and direct the Debtors to take all
actions and steps necessary or appropriate to consummate the Sale as soon as
reasonably practicable on the terms and conditions set forth in the Asset
Purchase Agreement and the Plan. The Sale shall occur on the Closing Date. The
only conditions to the closing of the Sale shall be as set forth in Sections 6
and 7 of the Asset Purchase Agreement.

                  2.       TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.

                           (a)      Asset Purchase Agreement. Pursuant to
Section 1123(b)(2) of the Bankruptcy Code, Confirmation of the Plan shall
constitute the assumption by the Debtors of the Asset Purchase Agreement
pursuant to Section 365(a) of the Bankruptcy Code, which shall be referenced by
a separate order.


                                       39

                           (b)      PLAN SUPPORT AGREEMENT. If the Bankruptcy
Court has not approved the assumption of the Plan Support Agreement prior to
Confirmation, pursuant to Section 1123(b)(2) of the Bankruptcy Code,
Confirmation of the Plan shall constitute the assumption by the Debtors of the
Plan Support Agreement pursuant to Section 365(a) of the Bankruptcy Code, which
shall be referenced by a separate order.

                           (c)      ASSIGNED CONTRACTS. Pursuant to Section
1123(b)(2) of the Bankruptcy Code, the Assigned Contracts shall be deemed
assumed by the Debtors pursuant to Section 365(a) of the Bankruptcy Code as of
the Effective Date and assigned to the Buyer pursuant to Section 365(f) of the
Bankruptcy Code as of the Effective Date. Before the hearing on approval of the
Disclosure Statement, the Debtors shall file a schedule of Cure Amounts. The
Schedule of Cure Amounts shall be served with the Disclosure Statement and Plan
on (a) all counterparties to the Assigned Contracts and (b) all other parties
receiving service of the Disclosure Statement pursuant to Bankruptcy Rule
3017(d). Objections to the assumption and assignment of the Assigned Contracts,
including any objection to the Cure Amounts, shall be Filed and served in
accordance with the time limits and procedures set forth in the order approving
the Disclosure Statement. Failure to File and serve an objection as set forth in
the order approving the Disclosure Statement shall constitute a waiver of any
objection and consent to assumption and assignment of the Assigned Contracts,
including any objection to the Cure Amounts (which shall be deemed conclusive,
except to the extent amended by the Debtors in writing prior to the Confirmation
Hearing). The Debtors shall pay all Cure Amounts from the proceeds of Cash
Collateral or the proceeds of the DIP Facility on or before the Closing Date.

                  3.       APPOINTMENT OF LIQUIDATION TRUSTEE AND DISTRIBUTION
AGENT.

                           The Plan provides that the Causes of Action shall be
assigned to a Liquidation Trust, which shall be established and become effective
on the Effective Date. If Class 4 accepts the Plan, the Liquidation Trust
further shall be funded as set forth below. All Distributions under the Plan to
holders of the Allowed Class 4 Claims shall be from the Liquidation Trust. The
Debtors shall appoint the Liquidation Trustee, who will serve on the terms and
conditions set forth in the Plan. The Liquidation Trustee shall have the rights
and powers set forth in the Trust Agreement, a copy of which is attached as
Exhibit D to this Disclosure Statement. Without limitation, the Liquidation
Trustee shall administer the Liquidation Trust, and its assets, and make
Distributions from the proceeds of the Liquidation Trust in accordance with the
Plan and the Plan Support Agreement. In addition, the Liquidation Trustee shall,
in accordance with the terms of the Plan, take all actions necessary to wind
down the affairs of the Debtors consistent with the Plan and applicable
non-bankruptcy law, including, but not limited to, the filing of final tax
returns, the dissolution of the Debtors in accordance with applicable state law,
and to take such steps as necessary to discontinue BSC's status as a publicly
traded company.

                           The Plan further provides for the appointment of a
Distribution Agent to make certain Distributions under the Plan to holders of
Allowed Claims and Interests in BSC.


                                       40



                  4.       LIQUIDATION TRUST.

                           (a)      ASSETS. The Liquidation Trust shall hold and
administer the following assets:

                                    (i)      the Unencumbered Causes of Action;

                                    (ii)     the Secured Party Trust Assets (and
                                             the Net Proceeds thereof to the
                                             extent liquidated after the Filing
                                             Date), which shall be deemed
                                             assigned by the Collateral Agent to
                                             the Liquidation Trust on the
                                             Effective Date for distribution in
                                             accordance with this Section VI;
                                             and

                                    (iii)    if Class 4 accepts the Plan, $5.0
                                             million Cash from the Class 2
                                             Distribution Amount.

                           (b)      DISTRIBUTIONS. Distributions from the
Liquidation Trust shall be made by the Liquidation Trustee as follows:

                                    (i)      the Net Proceeds from the
                                             liquidation of the Unencumbered
                                             Causes of Action shall be
                                             distributed Pro Rata to the holders
                                             of Allowed Class 4 Claims;

                                    (ii)     if Class 4 accepts the Plan, the
                                             Net Proceeds from the liquidation
                                             of the Secured Party Trust Assets
                                             shall be distributed Pro Rata to
                                             the holders of Allowed Class 4
                                             Claims;

                                    (iii)    if Class 4 does not accept the
                                             Plan, the Net Proceeds from the
                                             liquidation of the Secured Party
                                             Trust Assets shall be distributed
                                             to the Collateral Agent on account
                                             of each holder of an Allowed Class
                                             2 Claim;

                                    (iv)     If Class 4 accepts the Plan, the
                                             $5.0 million Cash from the Class 2
                                             Distribution Amount shall be
                                             distributed Pro Rata to the holders
                                             of Allowed Class 4 Claims.


                                       41



                  The Claims of each party to the Omnibus Collateral Agreement
and the Intercreditor Agreement included in Class 4 by operation of Section
506(a) of the Bankruptcy Code shall be subordinated to all other Allowed Claims
in Class 4 for the distributions stated in (i), (ii) and (iv) above. The Claims
of the parties to the Omnibus Collateral Agreement and the Intercreditor
Agreement shall not be subordinated in any way for the distribution stated in
(iii) above.

                  5.       DISPOSITION OF PROPERTY.

                           1.       SECURED PARTIES' PAYMENTS PURSUANT TO PLAN
SUPPORT AGREEMENT. Immediately upon receipt by the Collateral Agent of the
initial payout of the Class 2 Distribution Amount to the Collateral Agent, the
Collateral Agent shall distribute the initial payout of the Class 2 Distribution
Amount less $37.5 million, or $32.5 million in the event Class 4 has not
accepted the Plan (such $32.5 million or $37.5 million, as the case may be, the
"Plan Support Payment"), to the holders of Allowed Class 2 Claims according to
the terms of the Intercreditor Agreement. Within fifteen (15) Business Days of
the receipt by the Collateral Agent of the initial payout of the Class 2
Distribution Amount, the Collateral Agent shall deliver the Plan Support Payment
to the Distribution Agent.

                           Upon receipt of the Plan Support Payment by the
Distribution Agent, the Distribution Agent shall distribute:

                                    (a)      if Class 4 accepts the Plan, the
sum of $5.0 million to the Liquidation Trustee to be held in the Liquidation
Trust for the benefit of unsecured creditors;

                                    (b)      the sum of $17.0 million for the
account of and for distributions to holders of Severance and Retirement Claims
on the terms and conditions set forth in Section 2(a)(i)(E)(1)(b) of the Plan
Support Agreement and in satisfaction of such Claims; provided, however, any
Cash not paid to holders of such Claims as allocated pursuant to Section
2(a)(i)(E)(1)(b) of the Plan Support Agreement shall be paid to the Collateral
Agent for the benefit of holders of Allowed Class 2 Claims twenty-five (25)
months after the Effective Date;

                                    (c)      the sum of $15.0 million for the
account of, for Pro Rata distribution to and in satisfaction of all rights and
Claims related to or arising out of Class 5 Interests as they existed
immediately prior to the Effective Date; and

                                    (d)      the Post-Effective Date Reserve to
the Liquidation Trustee (to be held in a segregated account that shall not be
part of the Liquidation Trust) to be administered pursuant to the Plan;
provided, however, upon payment of all Claims payable from the Post-Effective
Date Reserve any unused portion of the Post-Effective Date Reserve shall be paid
to the Collateral Agent for the benefit of holders of Allowed Class 2 Claims.


                                       42



                           2.       ASSIGNMENT OF TRUST AND OTHER ASSETS. On the
Effective Date (a) if Class 4 has accepted the Plan, the Debtors and the
Collateral Agent, as applicable, shall be deemed to have assigned to the
Liquidation Trust for the benefit of Allowed Class 4 Claims, without
representation, warranty or recourse, (i) the Unencumbered Causes of Action;
(ii) the Net Proceeds of the liquidation, after the Filing Date, of the Secured
Party Trust Assets; and (iii) to the extent not liquidated before the Effective
Date, the Secured Party Trust Assets; or (b) if Class 4 has not accepted the
Plan, the Debtors and the Collateral Agent, as applicable, shall (i) shall be
deemed to have assigned to the Liquidation Trust for benefit of the holders of
Allowed Class 4 Claims, without representation, warranty or recourse, the
Unencumbered Causes of Action and (ii) shall be deemed to have assigned to the
Liquidation Trust for the benefit of the holders of Allowed Class 2 Claims,
without representation, warranty or recourse, the Net Proceeds of the
liquidation, after the Filing Date, of the Secured Party Trust Assets and, to
the extent not liquidated before the Effective Date, the Secured Party Trust
Assets.

                  6.       PROVISIONS GOVERNING DISTRIBUTIONS.

                           The Plan establishes procedures for objections to
Claims and for distributions, including, without limitation, the manner of
payment, the treatment of undeliverable distributions, reserves for disputed
claims, and compliance with tax requirements.

         E.       RELEASES.

                  Section VI.C of the Plan contains various provisions regarding
the discharge of the Debtors, the release and exculpation of the Debtors and
other parties to the Plan, and waiver and injunction provisions relating to the
foregoing.

                  First, the Plan provides that the treatment of Claims and
Interests provided in the Plan shall be in full and final satisfaction,
settlement and discharge of all Claims against or Interest in the Debtors, and
each of them, and their respective present and former officers, directors,
employees, agents, advisors, attorneys, accountants, insurers and other
representatives.

                  Second, in consideration of the funding of the Plan and the
other mutual covenants and agreements contained in the Plan and the Plan Support
Agreement, the Plan provides that the Debtors, each holder of an Allowed Claim
in Class 2 the Buyer, their respective predecessors and successors in interest,
general and limited partners, other affiliates and each and every Person
claiming a right in a derivative capacity in their behalf, and each of the
officers, directors, shareholders, members, agents, employees, professionals and
other representatives of the foregoing (collectively, the "Released Parties"),
irrevocably and unconditionally release, remise and forever discharge one
another from any and all direct, indirect or derivative Claims, obligations,
suits, actions, causes of actions, liabilities, obligations, demands, damages,
judgments, orders, decrees, rights of contribution and indemnification or other
right to payment, and other disputes or controversies of every kind, type,
nature, description, whether known or unknown, foreseen or unforeseen, fixed or
contingent, matured or unmatured, liquidated or


                                       43



unliquidated, existing or hereafter arising in law, equity or otherwise, related
to or connected with the Debtors, or any of them, the Cases, Sale, the Plan, the
Plan Support Agreement, or the management, operation, business, legal or
financial affairs of the Debtors, or any of them, before or after the Filing
Date, including, without limitation, Avoidance Actions and any legal or
equitable Claim for Tort, Fraud, Contract, Breach of Fiduciary or other duty or
violation of federal securities law (the "Released Claims").

                  Third, in consideration of Distributions and other treatment
provided under the Plan, the Plan shall, as of the Effective Date, constitute a
waiver and release of the Released Parties by any and all Persons who have
accepted the Plan or have received a Distribution or other treatment under the
Plan and their respective officers, directors, shareholders, members, agents,
employees, representatives, predecessors, successors, heirs, assigns and any
Person claiming a right in a derivative capacity in their behalf (the
"Releasors"), and each Releasor shall (a) irrevocably and unconditionally
release, remise and forever discharge each Released Party from any and all
Released Claims; and (b) waive the Released Claims and be deemed to have forever
covenanted with each Released Party not to sue, make demand or claim, commence,
conduct or continue any suit, action, cause of action, or proceeding of any
kind, or otherwise seek any payment, damages or other recovery from any Released
Party for the Released Claims.

                  Fourth, the Plan provides that from and after the Confirmation
Date (a) the Debtors; (b) all Officers, and all other agents, employees,
professionals, and representatives of the Debtors; (c) each holder of an Allowed
Class 2 Claim (in their capacities as such); (d) the parties to the Plan Support
Agreement (in their capacities as such); (c) the Buyer (in its capacity as
such); (f) the Collateral Agent; (g) the Liquidation Trustee; and (h) the
Distribution Agent (collectively, with each of their predecessors and successors
in interest and their respective officers, directors, employees, agents,
professionals and other representatives, the "Exculpated Parties") shall neither
have nor incur any liability to any Person or Entity for any act taken or
omitted to be taken in connection with or related to the formulation,
preparation, dissemination, implementation, administration, Confirmation or
Consummation of the Plan, the Disclosure Statement or any contract, instrument,
release or other agreement or document created or entered into in connection
with the Plan, including the Plan Support Agreement, or any other act taken or
omitted to be taken in connection with the Cases or the Sale; provided,
however, that the foregoing provisions of the Article X.E shall have no effect
on the liability of any Person or Entity that results from any such act or
omission that is determined in a Final Order to have constituted gross
negligence or willful misconduct. From and after the Confirmation Date, all
Persons are permanently enjoined from commencing or continuing in any manner,
any suit, action or other proceeding, on account of or respecting any claim,
obligation, debt, right, cause of action, remedy or liability released or to be
released against an Exculpated Party pursuant to Section VI.A.3 of the Plan;
provided, however, that this injunction shall not preclude police or regulatory
agencies from fulfilling their statutory duties.

                  The Confirmation Order will provide that all Persons with
respect to their respective Claims or Interests, permanently are enjoined from
and after the Confirmation Date from (a) suing, making demand or claim,
commencing, conducting or continuing in


                                       44



any manner, directly or indirectly, any suit, action, cause of action, or other
proceeding of any kind against or affecting the Released Parties, or otherwise
seek any payment, damages, or other recovery from the Released Parties, or any
of them, any property of the Released Parties, any direct or indirect transferee
or successor the Released Parties, and any property of any such transferee or
successor; (b) enforcing, levying, attaching, collecting or otherwise recovering
by any manner or means, whether directly or indirectly, any judgment, award,
decree or order against the Released Parties, and each of them, any property of
the Released Parties, any direct or indirect transferee or successor of the
Released Parties and any property of any such transferee or successor; (c)
asserting any right of setoff, subrogation, or recoupment of any kind, directly
or indirectly, against any obligation due the Released Parties, except as
specifically set forth in the Plan; (d) creating, perfecting, or enforcing any
Lien, encumbrance or charge against property with respect to the Released
Claims; and (e) acting or proceeding in any manner that does not conform or
comply with the provisions of the Plan.

VII.     TAX CONSEQUENCES OF PLAN.

         The following summary discusses the material federal income tax
consequences expected to result from the consummation of the Plan. This
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Tax Code"), applicable Treasury Regulations, judicial authority
and current administrative rulings and pronouncements of the Internal Revenue
Service (the "IRS"). There can be no assurance that the IRS will not take a
contrary view, and no ruling from the IRS has been or will be sought by the
Debtors or their advisors. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to, among others, the
Debtors and the holders of Claims.

         The following summary is for general information only. The federal
income tax consequences of the Plan are complex and subject to significant
uncertainties. This summary does not address foreign, state or local tax
consequences of the Plan, nor does it purport to address all of the federal
income tax consequences of the Plan. This summary also does not purport to
address the federal income tax consequences of the Plan to taxpayers subject to
special treatment under the federal income tax laws, such as broker-dealers,
tax-exempt entities, financial institutions, insurance companies,
S corporations, small business investment companies, mutual funds, regulated
investment companies, foreign corporations, and non-resident alien individuals.
EACH HOLDER OF A CLAIM IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE POTENTIAL FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF
THE PLAN.


                                       45



         A.       FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS.

                  1.       LIQUIDATION.

                  The Debtors may realize federal taxable income as the result
of the disposition of their assets pursuant to the Plan to the extent the fair
market value of their assets exceeds their adjusted tax basis. Any such income
resulting from the disposition may be offset by the Debtors' regular tax net
operating losses ("NOLs"), if any, and NOL carryforwards. Any such NOLs,
however, may be subject to audit and possible challenge by the IRS. Income in
excess of the NOLs will subject to tax as determined under the regular federal
income tax rules. The Debtors may also be subject to the alternative minimum tax
("AMT"). However, Section 102 of the recently enacted Job Creation and Worker
Assistance Act of 2002 provides that for taxable years ending in 2001 and 2002,
AMT NOL carryforwards to these taxable years may offset 100 percent, not 90
percent, of the corporation's alternative minimum taxable income ("AMTI").
Accordingly, such carryforwards may eliminate the corporation's AMT liability
in its entirety. Unless this provision is extended for taxable years ending
after December 31, 2002, AMT NOL carryforwards may not offset more than 90% of
the pre-NOL AMTI. The current rate of corporate tax on AMTI is 20 percent. Thus,
a corporation that has taxable income prior to taking into account its AMT NOL
carryforwards may be required to pay federal tax at an effective rate of at
least 2 percent of its pre-NOL AMTI (10 percent of the 20 percent AMT rate),
regardless of the aggregate amount of its NOL carryforwards.

                  2.       CANCELLATION OF INDEBTEDNESS INCOME.

                  Upon the Effective Date of the Plan, the Debtors will be
discharged of some portion of their outstanding indebtedness to the extent such
discharge is allowed by law and such indebtedness is not otherwise satisfied. As
a result, the Debtors generally will realize cancellation of indebtedness
("COI") income to the extent that the Cash and fair market value of any property
paid by the Debtors in return for the discharge of indebtedness is less than the
adjusted issue price (plus the amount of any accrued but unpaid interest) of
such indebtedness discharged thereby. Under Section 108(a) of the Tax Code,
however, COI income will not be recognized if the COI income occurs in a case
brought under the Bankruptcy Code, provided the taxpayer is under the
jurisdiction of a court in such case and the COI is granted by the court or is
pursuant to a plan approved by the court. Accordingly, because the Debtors are
under the jurisdiction of the Bankruptcy Court and the COI will be pursuant to
the Bankruptcy Court's approval of the Plan, the Debtors should not be required
to recognize any COI income realized as a result of the implementation of the
Plan.

                  Under Section 108(b) of the Tax Code, the Debtors will each be
required to reduce certain tax attributes, including regular tax NOLs and NOL
carryforwards as well as AMT NOLs and NOL carryforwards, in an amount (subject
to certain modifications) equal to the amount of COI income excluded from income
as described in the preceding paragraph. Under the Tax Code, however, such tax
attribute reduction occurs after the determination of tax for the taxable year
of the discharge. which includes the Effective Date. Accordingly, the NOLs (both
regular and AMT), if any, of the Debtors should be available to offset income
arising on or before the Effective Date.


                                       46



         B.       FEDERAL TAX CONSEQUENCES TO HOLDERS OF CLAIMS AND INTERESTS.

All holders of Claims and Interests are urged to consult their own tax advisors
with respect to the federal, state, local, and foreign tax consequences of the
Plan. THIS DISCLOSURE STATEMENT IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS
LEGAL OR TAX ADVICE TO ANY CREDITOR.

VIII.    PLAN CONFIRMATION PROCESS.

         A.       CONFIRMATION.

                  At the Confirmation Hearing, the Bankruptcy Court shall
confirm the Plan if the Plan satisfies all requirements of Section 1129(a) of
the Bankruptcy Code. The requirements for confirmation of the Plan under Section
1129(a) include the following: (1) the Plan must be accepted by all impaired
classes, (2) the Plan must be feasible, and (3) with respect to each holder of a
Claim or Interest that does not vote to accept the Plan (even if such holder is
a member of a class that as a whole votes to accept the Plan, the Plan must be
in the "best interest" of such holder in that the Plan provides for a
distribution to the holder that is not less than the amount such holder would
receive in a hypothetical chapter 7 liquidation of the Debtors. With respect to
the requirement that each impaired class votes to accept the Plan, Section
1129(b) provides that if all other requirements of Section 1129(a) are
satisfied, the Plan still may be confirmed if the Plan, with respect to each
impaired class that does not accept the Plan, "does not discriminate unfairly"
and is "fair and equitable" with respect to such class. The acceptance,
feasibility, unfair discrimination and fair and equitable concepts are discussed
in more detail below.

         B.       ACCEPTANCE OF PLAN BY VOTING.

                  For the Plan to be accepted by an impaired Class of Claims, it
must be accepted by holders of Claims in such Class that hold at least
two-thirds in dollar amount and one-half in number of the Claims in such Class
held by creditors that actually vote. For the Plan to be accepted by an impaired
Class of Interests, it must be accepted by holders of Interests in such Class
that hold at least two-thirds in dollar amount of the Interests in such Class
held by interest holders that actually vote. A Class is impaired if the legal,
equitable, or contractual rights of the members of such Class are modified or
altered by the Plan (with an exception, not applicable to the Plan, for curing
defaults, reinstating maturity and compensating certain damages). Unimpaired
Classes are conclusively presumed to have accepted the Plan and are not part of
the vote solicitation process. Only Class 1 is unimpaired under the Plan.

                  If any impaired Class does not accept the Plan, and at least
one impaired Class accepts the Plan, the Debtors may seek confirmation of the
Plan under the "cram down" provisions of section 1129(b) of the Bankruptcy Code.
To obtain confirmation despite non-acceptance by one or more impaired Classes,
the Debtors must show to the


                                       47



Bankruptcy Court that the Plan does not discriminate unfairly and is fair and
equitable with respect to each such Class. Each of these requirements is
discussed further, as follows:

                  1.       UNFAIR DISCRIMINATION.

                  A plan does not discriminate unfairly with respect to a
non-accepting Class if it protects the rights of such Class in manner consistent
with the treatment of other Classes with similar rights. The unfair
discrimination test does not require that similarly situated Classes be treated
in exactly the same way. The test requires that such Classes be treated
substantially similarly or, if not treated substantially similarly, that
differences in treatment be fair.

                  2.       FAIR AND EQUITABLE.

                  A plan does not discriminate unfairly if either (a) each
holder of a Claim or Interest in the non-accepting Class receives or retains
under the Plan property of a value equal to the Allowed amount of such Claim or
Interest; or (b) the holders of Claims or Interests that are junior to such
Class receive or retain nothing under the Plan on account of such Claims or
Interests (the "Absolute Priority Rule"). The Plan complies with the Absolute
Priority Rule. Without limitation, the Debtors' assets are fully encumbered by
the Liens of holders of Allowed Class 2 Claims. Pursuant to the Plan Support
Agreement, the Plan provides for Class 2 Distributions to junior Classes that
otherwise would be paid to holders of Allowed Class 2 Claims as proceeds of
their Collateral. Such holders may allocate the value of their Collateral
pursuant to the Plan without violating the Absolute Priority Rule.

         C.       FEASIBILITY.

                  As a condition to confirmation of the Plan, section 1129(a) of
the Bankruptcy Code requires that Confirmation is not likely to be followed by
the liquidation of the Debtors (except as provided in the Plan) or the need for
further financial reorganization. The Plan provides ultimately for the
liquidation of the Debtors' assets, but the Debtors will continue to operate
their businesses pending the closing of the Sale. The Debtors are not likely to
need further financial reorganization prior to the Closing.

                  Without limitation, the Plan provides for continued funding of
the Debtors through the use of the Cash Collateral and the DIP Facility.
Attached as Exhibit E to this Disclosure Statement and incorporated by reference
are the Debtors' cash flow forecasts, which show that the Debtors will continue
to have sufficient working capital to operate their businesses in the ordinary
course pending the Sale.

                  As shown in the Debtors' forecasts, the Debtors will have
sufficient liquidity, without further reorganization, to meet their pre-Sale
obligations under the Plan and make all Distributions required by the Plan prior
to the closing of the Sale. The


                                       48



closing of the Sale, as provided in the Plan, together with the sale or other
disposition of assets not included in the Sale as provided in the Plan, will
generate the cash proceeds necessary to make all other Distributions provided
for in the Plan. Accordingly, the Plan is feasible and the Debtors are able to
demonstrate that the Plan is not likely to be followed by the liquidation of the
Debtors (except as provided in the Plan) or the need for further financial
reorganization of the Debtors.

         D.       BEST INTEREST OF CREDITORS TEST

                  1.       OVERVIEW

                  Confirmation requires that each holder of an Allowed Claim and
Interest that is included in an impaired Class either (a) accept the Plan or (b)
receive or retain under the Plan property of a value, as of the Effective Date
of the Plan, that is not less than the value such holder would receive or retain
if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. This
requirement applies to all dissenting or nonvoting members of impaired Classes,
even with respect to a Class that has accepted the Plan.

                  To determine what holders of Claims and Interests would
receive in a hypothetical chapter 7 liquidation, the Bankruptcy Court will
consider the dollar amount that would be generated in a straight liquidation of
the Debtors assets and properties. Such amount would be reduced by the costs and
expenses of liquidation and by additional administrative expense claims that
would accrue in chapter 7. Chapter 7 costs and expenses would include, without
limitation, (a) statutory fees payable to the chapter 7 trustee pursuant to
section 326 of the Bankruptcy Code; (b) fees payable to attorneys, accountants,
auctioneers, liquidators and other professional advisors that the chapter 7
trustee would engage to assist in discharging his duties under the Bankruptcy
Code; and (c) any unpaid expenses incurred by the Debtors during the Cases, such
as unpaid vendor invoices and fees and reimbursement of expenses of attorneys,
accountants and other professional advisors retained by the Debtors or statutory
committees or any party asserting a substantial contribution claim under section
503(b)(3) of the Bankruptcy Code.

                  The Debtors' liquidation analysis is set forth in section
VIII.D.2, below. As shown in the liquidation analysis, a liquidation of the
Debtors in chapter 7 would not generate sufficient cash proceeds to pay in full
the Allowed Secured Claims of the Secured Parties. The chapter 7 liquidation
process also would generate an entirely new level of trustee's fees,
professional fees and other administrative expenses that would have priority of
payment over Allowed Unsecured Claims. In addition, a chapter 7 liquidation
likely would leave unpaid chapter 11 Administrative Expense Claims allowable in
the Cases. Further, unpaid Allowed Priority Tax Claims and Allowed Other
Priority Claims, which shall be paid in full under the Plan, would have priority
of payment over Allowed Unsecured Claims in a chapter 7 liquidation.


                                       49



                  Based on the foregoing, holders of Allowed Claims and
Interests in Classes 1, 4, 5, 6, 7 and 8 likely would receive no distribution in
chapter 7. Clearly, therefore, the Plan provides for Distributions not less than
the value that such holders would receive in chapter 7. In addition, the
liquidation analysis shows that holders of Allowed Secured Claims in Class 2
would receive less in chapter 7 than under the Plan. Without limitation, a
chapter 7 liquidation would have a disastrous effect on the value of the
Debtors' assets, which have a higher value sold as a going concern than sold in
a straight liquidation.

                  Accordingly, the Plan meets the best interests of creditors
test with respect to all holders of Claims and Interests. The Debtors believe
the Plan will maximize the potential return to all parties in interest.

                  2.       LIQUIDATION ANALYSIS.

                           Attached as Exhibit F to this Disclosure Statement
and incorporated by reference is the Debtors' analysis of the return on the
Debtors' assets in liquidation.

IX.      ALTERNATIVES TO PLAN.

         As an alternative to confirming the Plan, the Bankruptcy Court could
convert the Cases to cases under chapter 7 of the Bankruptcy Code, dismiss the
Cases, or consider another chapter 11 plan.

         A.       LIQUIDATION UNDER CHAPTER 7.

         If the Plan is not confirmed, and no other alternative plan is
proposed, the Bankruptcy Court could find cause to convert the Cases to cases
under chapter 7 of the Bankruptcy Code. In chapter 7, a trustee would be elected
or appointed to liquidate the assets of the Debtors for distribution to the
Debtors' creditors in accordance with the priorities established by the
Bankruptcy Code.

         The Debtors believe that conversion of the Cases to cases under chapter
7 of the Bankruptcy Code would result in lower distributions to all creditors.
Substantially ail assets of the Debtors are subject to the Liens of the Secured
Parties. In a chapter 7 case, the Secured Parties likely would be able to obtain
relief from the automatic stay under Section 362(d) of the Bankruptcy Code to
foreclose on their Liens. In this event, essentially no assets, other than
Avoidance Actions, would remain to satisfy the claims of creditors other than
the Secured Parties. On information and belief, the liquidation of the Debtors'
assets as part of a foreclosure by the Secured Parties, instead of through the
sale of the Debtors' assets as a going concern, would result in the realization
of a significantly lower value for the Debtors' assets.

         Conversion to chapter 7 also would increase the cost of administration
of the Debtors' estate. Without limitation, administrative expense claims would
accrue for the


                                       50



trustee's statutory fees and the fees and expenses of the various professionals
hired by the chapter 7 trustee. See Section VIII.D.1 above. Conversion of the
case to chapter 7 also would result in a delay in distributions, if any, to
creditors. Based upon the estimated value of Avoidance Actions, the Debtors
believe that a chapter 7 trustee would be without sufficient funds to satisfy
Allowed Administrative Expense Claims and Allowed Priority Claims and,
therefore, would not be able to make any distributions on account of general
Unsecured Claims. Moreover, a chapter 7 trustee likely would not have sufficient
funding to pursue and liquidate Causes of Action.

         Based on the foregoing, the Debtors believe that holders of Claims and
Interests would receive a lower distribution on account of such Claims and
Interests if the Cases are converted to chapter 7.

         B.       DISMISSAL OF CASES.

         Dismissal of the Cases likely would have a disastrous result on the
value of the Debtors' assets and the return to holders of Claims and Interests.
Without limitation, dismissal of the Cases would terminate the automatic stay
and would allow the Secured Parties immediately to foreclose their Liens on
substantially all of the Debtors' assets. Moreover, dismissal of the Cases would
terminate the Debtors' financing and would leave the Debtors without sufficient
working capital to operate their businesses. Accordingly, dismissal of the Cases
drastically would reduce the value of the Debtors' assets, would lower the
return to the Secured Creditors and essentially would eliminate any return to
holders of other Claims and Interests. The Debtors believe that dismissal of the
Cases is not a viable alternative to the Plan.

         C.       ALTERNATIVE CHAPTER 11 PLAN.

         If the Plan is not confirmed, the Debtors and other parties in
interest, including, without limitation, holders of Claims and Interests and any
official statutory committee, could propose an alternative plan. The Debtors
believe, however, that the Plan will provide the greatest and most expeditious
return to holders of Claims and Interests. Without limitation, an alternative
plan would not be covered by the Plan Support Agreement. Because the Claims of
the Secured Parties exceed the expected sale value of the Debtors' assets, an
alternative plan would not likely provide for any distributions to parties other
than the Secured Parties. The formulation, negotiation and confirmation of an
alternative plan also would delay significantly the administration of the
Debtors' cases and would have a negative impact on the Debtors' ability to
operate and its viability as a going concern. Under the circumstances, the
Debtors submit that confirmation of an alternative plan is unlikely on terms and
conditions as favorable to holders of Claims and Interests as those in the Plan.


                                       51



X.       CONCLUSION/RECOMMENDATION.

         Based on the forgoing, the Debtors believe that the Plan is the best
alternative to maximize the value of the Debtors' assets and to maximize the
return to creditors and equity security holders. The Debtors' management
believes confirmation of the Plan is in the best interests of all parties in
interest in the Case.

         The Debtors recommend that all parties entitled to cast ballots vote to
ACCEPT the Plan.



         Dated: July 3, 2002



                                       BIRMINGHAM STEEL CORPORATION



                                       By /s/ J. Daniel Garrett
                                         ---------------------------------------
                                       Its Executive Vice President and CFO
                                          --------------------------------------



                                       BIRMINGHAM SOUTHEAST, LLC



                                       By /s/ J. Daniel Garrett
                                         ---------------------------------------
                                       Its Executive Vice President and CFO
                                          --------------------------------------



                                       AMERICAN STEEL & WIRE CORPORATION



                                       By /s/ J. Daniel Garrett
                                         ---------------------------------------
                                       Its Executive Vice President and CFO
                                          --------------------------------------


                                       52



                                       PORT EVERGLADES STEEL CORPORATION



                                       By /s/ J. Daniel Garrett
                                         ---------------------------------------
                                       Its Executive Vice President and CFO
                                          --------------------------------------



                                       BIRMINGHAM RECYCLING INVESTMENT COMPANY



                                       By /s/ J. Daniel Garrett
                                         ---------------------------------------
                                       Its Executive Vice President and CFO
                                          --------------------------------------


                                       53

EX-3

                                                                       EXHIBIT 3

                      IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

IN RE:                              )    CHAPTER 11
                                    )
BIRMINGHAM STEEL                    )    CASE NO. 02-11586 (RSB)
CORPORATION, ET AL.,                )
                                    )    JOINTLY ADMINISTERED
                  DEBTORS.          )
                                    )    DOCKET REF. NO. 366

                               CONFIRMATION ORDER


                  THIS MATTER came before the Court for hearing on September 12,
2002 on confirmation of the Third Amended and Restated Joint Plan of
Reorganization of Birmingham Steel Corporation, Birmingham Southeast, L.L.C.,
American Steel & Wire Corporation, Port Everglades Steel Corporation and
Birmingham Recycling Investment Company, Under Chapter 11 of the Bankruptcy Code
(the "Plan")(1) filed by Birmingham Steel Corporation ("BSC"), Birmingham
Southeast, L.L.C. ("BSE"), American Steel & Wire Corporation ("ASW"), Port
Everglades Steel Corporation ("PESCO") and Birmingham Recycling Investment
Company ("BRI"), debtors and debtors-in-possession (the "Debtors") filed on
September 13, 2002. Appearances were noted in the record. On September 9, 2002,
the Debtors filed a second amended and restated Plan which contains
modifications affecting the treatment only of Class 2 Claims, Class 4 Claims,
and Class 5 Claims. On September 13, 2002, the Debtors filed a third amended and
restated Plan, which contains certain non-material technical modifications. The
Plan, as amended and restated on September 9, 2002 and September 13, 2002, and
together with the modifications contained in this Confirmation Order
(collectively, the "Modifications"), is the Plan pursuant to 11 U.S.C. ss.
1127(a). On September 11,

- --------------
(1) Capitalized terms in this Order, unless otherwise defined, shall have the
meanings set forth in the Plan.


                                       1


2002, the Debtors filed the Affidavit of Tirzah Gordon certifying the Ballots
Accepting or Rejecting Plan (the "Balloting Results"). On September 9, 2002, the
Debtors filed the affidavits of Mark Henkels and J. Daniel Garrett in support of
confirmation of the Plan. Mr. Henkels and Mr. Garrett were available for
cross-examination at the hearing on confirmation of the Plan, and such
affidavits were admitted into evidence without objection. The Debtors proffered
testimony consistent with such affidavits. The proffer was received and admitted
without objection and is part of the record. After due and proper notice and
hearing, and based on the pleadings and the record in these cases, the Balloting
Results, the evidence presented concerning feasibility and other aspects of the
Plan, the arguments, representations of counsel, the stipulations of the parties
announced on the record at the confirmation hearing, all other matters brought
before the Court, and for good cause shown, the Court finds that the Plan is due
to be confirmed pursuant to 11 U.S.C. ss. 1129. Wherefore, premises considered,
the Court finds, determines and concludes as follows:

         1.       On June 3, 2002 (the "Filing Date") the Debtors filed
petitions under chapter 11 of title 11, United States Code, 11 U.S.C. ss.ss.
101-1330 (the "Bankruptcy Code"). On June 4, 2002, the Court ordered the joint
administration of the Debtors' cases. Pursuant to Sections 1107 and 1108 of the
Bankruptcy Code, the Debtors have continued to operate and manage their assets
and affairs as debtors-in-possession. No trustee or examiner has been appointed
in the Debtors' bankruptcy cases.

         2.       By order entered August 8, 2002, the Court approved the Second
Amended and Restated Disclosure Statement for Joint Plan of Reorganization of
Birmingham Steel Corporation, Birmingham Southeast, L.L.C., American Steel &
Wire Corporation, Port Everglades Steel Corporation and Birmingham Recycling
Investment Company, Under Chapter 11 of the



                                       2


Bankruptcy Code (the "Disclosure Statement") as containing adequate information
under Section 1125(a) of the Bankruptcy Code. Pursuant to the Court's order of
August 8, 2002 approving the Disclosure Statement (the "Disclosure Statement
Order"), and in compliance with Rule 3017(d) of the Federal Rules of Bankruptcy
Procedure (the "Bankruptcy Rules"), the Debtors transmitted to the United States
Trustee, all creditors, all equity security holders, (at the address listed in
their proof of claim, if applicable, or their last known address pursuant to the
Debtors' books and records), all parties requesting notice, and other parties in
interest copies of the Plan, the Disclosure Statement, a ballot to accept or
reject the Plan, and the Disclosure Statement Order, which included good and
sufficient notice of the hearing on confirmation of the Plan and the time within
which acceptances, rejections and objections to the Plan were due to be filed.
The notice provided was sufficient under Bankruptcy Rules 2002 and 3017.
Additionally, on August 14, 2002, notice of the hearing on confirmation of the
Plan was published in the Wall Street Journal, National Edition and the
Birmingham News. Good and sufficient notice has been given of the deadline for
filing ballots accepting or rejecting the Plan, the deadline for filing
objections to confirmation of the Plan, and the hearing scheduled to consider
confirmation of the Plan. No further notice is due or required.

         3. The Plan divides creditors and holders of equity security interests
into eight (8) classes. Class 1 consists of the holders of the Allowed Priority
Claims other than Priority Tax Claims. Class 1 is not impaired under the Plan.
Accordingly, Class 1 is deemed to have accepted the Plan pursuant to Section
1126(f) of the Bankruptcy Code. Class 2 consists of the holders of the Allowed
Secured Claims of each party to the Omnibus Collateral Agreement and the
Intercreditor Agreement, in their capacities as such, including the 1993
Noteholders, the 1995 Noteholders, the Bank Group, the Indenture Trustee (as
assignee of the Owner Trustee for the benefit of the Memphis


                                       3


Noteholders), PNC and the Collateral Agent. Class 2 is impaired. Of the members
of Class 2 casting ballots, 100% in number and 100% in amount voted to accept
the Plan. Accordingly, Class 2 has accepted the Plan. Class 3 consists of the
holders of the Allowed Secured Claims other than Allowed Secured Claims in Class
2. Class 3 is impaired. Of the members of Class 3 casting ballots, 100% in
number and 100% in amount voted to accept the Plan. Accordingly, Class 3 has
voted to accept the Plan. Class 4 consists of the holders Allowed Unsecured
Claims. Class 4 is impaired. Of the members of Class 4 casting ballots, 97.04%
in number and 99.51% in amount voted to accept the Plan. Accordingly, Class 4
has accepted the Plan. Class 5 consists of Interests in BSC, other than Lender
Warrants. Class 5 will receive no Distribution under the Plan and the holders of
Interests in BSC will receive nothing under the Plan on account of their equity
interests. Accordingly, Class 5 is deemed to have rejected the Plan under
Section 1126(g) of the Bankruptcy Code. Class 6 consists of Interests that are
Lender Warrants. Class 6 will receive no Distribution under the Plan and the
holders of Interests that are Lender Warrants will receive nothing on account of
their equity interests. Accordingly, Class 6 is deemed to have rejected the Plan
under Section 1126(g) of the Bankruptcy Code. Class 7 consists of Intercompany
Claims. Class 7 will receive no Distribution under the Plan and the holders of
Intercompany Claims will receive nothing on account of such claims. Accordingly,
Class 7 is deemed to have rejected the Plan under Section 1126(g) of the
Bankruptcy Code. Class 8 consists of Intercompany Interests. Class 8 will
receive no Distribution under the Plan and the holders of Intercompany Interests
will receive nothing on account of their equity interests. Accordingly, Class 8
is deemed to have rejected the Plan under Section 1126(g) of the Bankruptcy
Code.


                                       4


         4.       The following parties filed objections to confirmation of the
Plan: (a) The United States Trustee (the "UST"); (b) the United States, on
behalf of the United States Environmental Protection Agency (the "EPA"); (c) the
United States, on behalf of the Internal Revenue Service (the "IRS"); (d)
Westchester Fire Insurance Company, Century Indemnity Company and U.S. Fire
Insurance Company (the "ACE Insurers"); (e) PSC Metals, Inc. ("PSC"); (f) the
Memphis and Shelby County Port Commission (the "Port Commission"); (g) Norfolk
Southern Railroad Company ("Norfolk"); (h) the State of Mississippi Workers'
Compensation Trust Fund ; (i) Christopher Logan; and (j) Alberto Manriquez and
Carol Manriquez (collectively, the "Objectors," or, in the singular, an
"Objector"). John Burdette filed an informal objection, and the Tennessee Valley
Authority ("TVA") voiced an objection in open court. As announced on the record
at the confirmation hearing, with the exception of the objection of the UST,
John Burdette, and TVA, such objections to confirmation (collectively, the
"Objections") were withdrawn by the Objectors on the terms and conditions set
forth in the Modifications and as set forth in paragraph B of this Order. With
the exception of the UST, John Burdette, and TVA, the Objectors do not object to
confirmation of the Plan as modified.

         5.       The objection of John Burdette is due to be overruled. John
Burdette failed to appear at the hearing and there is no legal basis for his
objection.

         6.       The objection of TVA is due to be overruled. The Plan does not
contain material modifications with respect to TVA's standing as a creditor and
does not adversely affect TVA.

         7.       The objection of the UST relates to provisions in the Plan
releasing and enjoining Claims against non-Debtor entities. Section VI of the
Plan provides for the release of any


                                       5


and all direct, indirect or derivative Claims, obligations, suits, actions,
causes of actions, liabilities, obligations, demands, damages, judgments,
orders, decrees, rights of contribution and indemnification or other right to
payment, and other disputes or controversies of every kind, type, nature,
description, whether known or unknown, foreseen or unforeseen, fixed or
contingent, matured or unmatured, liquidated or unliquidated, existing or
hereafter arising in law, equity or otherwise, related to or connected with the
Debtors, or any of them, the Cases, Sale, the Plan, the Plan Support Agreement,
or the management, operation, business, legal or financial affairs of the
Debtors, or any of them, before or after the Filing Date, including, without
limitation, Avoidance Actions and any legal or equitable Claim for Tort, Fraud,
Contract, Breach of Fiduciary or other duty or violation of federal securities
law, but excluding rights under the Plan, the Plan Support Agreement and the
Asset Purchase Agreement (collectively, the "Released Claims"), against the
Debtors, the holders of Allowed Secured Claims (the "Secured Parties"), the
Buyer, and their respective predecessors and successors in interest, general and
limited partners, other affiliates and each and every person claiming a right in
a derivative capacity in their behalf, and each of the officers, directors,
shareholders, members, agents, employees, professionals and other
representatives of each of them (collectively, the "Released Parties").

         8.       The release provisions of Section VI of the Plan provide for
the settlement and compromise of claims and causes of action against the
Released Parties subject to Section 1123(b)(3)(A) of the Bankruptcy Code.
Accordingly, the Plan does not implicate the provisions of Section 524(e) of the
Bankruptcy Code.

         9.       As consideration for the releases, the Released Parties shall
make substantial contributions of assets to the Debtors' liquidating plan of
reorganization.


                                       6


         10.      Based on the evidence presented, Section VI.C.2 of the Plan
properly provides for mutual releases by and between the Released Parties. There
is an identity of interests between the Debtors and the Released Parties. The
Released Parties have made substantial contributions of assets to the Debtors'
reorganization, and have been actively and continuously involved in the
negotiation of the Plan. The injunction in the Plan is essential to the
reorganization, as there is little likelihood of success without the injunction.
An overwhelming majority of the Class 4 creditors affected by the injunction
have voted to accept the Plan. The Plan provides for payment of Class 4 claims
that are affected by the injunction. In re Zenith Electronics Corporation, 241
B.R. 92, 110-11 (Bankr. D. Del. 1999).

         11.      Based on the evidence presented, Section VI.C.3 of the Plan
properly provides for non-debtor third party releases under Section 1123(b)(6)
of the Bankruptcy Code. The Debtors have presented sufficient facts
demonstrating extraordinary circumstances and the necessity and fairness of the
releases. The releases are appropriate, given the continued involvement and
cooperation of the Secured Parties, the Debtors' officers and directors, and the
Buyers in the negotiation and formulation of the Plan. The Released Parties have
a reasonable expectation of being protected, given their substantial
contributions in this case and the results achieved. Under the circumstances of
this case the non-debtor third party releases are necessary to the Plan and fair
with respect to the non-consenting claimants. In re Continental Airlines, 203 F.
3d 203, 214 (3rd Cir. 1999).

         12.      The Plan and the releases set forth therein constitute a good
faith compromise and settlement of certain disputes, which compromise is fair,
equitable and within the lowest point in


                                       7


the range of reasonableness, and is in the best interests of the Debtors, their
estates and their creditors and satisfies the standards enunciated in In re
Martin, 91 F.3d 389, 393 (3rd Cir. 1996).

         13.      The Plan, as further modified by the Modifications, was
submitted after the deadline for submitting ballots. The Modifications affect
only Class 2, Class 4, and Class 5. Holders of Class 2 Claims in excess of 66%
in amount and 51% in number of those voting on the Plan have executed written
consents to the Modifications. Accordingly, under Rule 3019, no further notice,
re-solicitation or hearing is necessary with respect to Class 2. In re Dow
Corning Corp., 237 B.R. 374, 379 (Bankr. E.D. Mich. 1999). The Plan
substantially improves the position of Class 4. The Plan does not adversely
change the treatment of Class 4 claims. Accordingly, under Rule 3019, no further
notice, re-solicitation or hearing is necessary with respect to Class 4. Dow
Corning Corp., 237 B.R. at 379. The plan does not adversely change the treatment
of Class 3 claims. Accordingly, under Rule 3019, no further notice,
re-solicitation or hearing is necessary with respect to Class 3. Dow Corning
Corp., 237 B.R. at 379. Classes 5, 6, 7 and 8 are deemed to have rejected the
Plan under Section 1126(g) of the Bankruptcy Code. Accordingly, under Rule 3019,
no further notice, re-solicitation or hearing is necessary with respect to
Classes 5, 6, 7 and 8. Holywell Corp. v. Bank of New York, 59 B.R. 340, 352
(S.D. Fla. 1986).

         14.      The Plan, including the Modifications, complies with the
applicable provisions of the Bankruptcy Code.

         15.      The Debtors, as proponents of the Plan, have complied with the
applicable provisions of the Bankruptcy Code.

         16.      The Debtors have proposed the Plan in good faith and not by
any means forbidden by law.


                                       8


         17.      Any payment made or to be made by the Debtors, or by a person
issuing securities or acquiring property under the Plan, for services or costs
and expenses in or in connection with the Debtors' cases, or in connection with
the Plan and incident to the Debtors' cases, has been approved by, or is subject
to the approval of, the Court as reasonable.

         18.      The Plan complies with Section 1123(b)(4) of the Bankruptcy
Code. The Plan provides for the sale of substantially all of the Debtors' assets
to the Buyer free and clear of all liens, claims and encumbrances pursuant to
Section 363(f) of the Bankruptcy Code. The sale to the Buyer is due to be
approved as part of the Plan pursuant to Section 363(f), as the Debtors have
presented an articulated business justification for the proposed sale. The Sale
is necessary to fund and implement the Plan, which has been approved by
creditors. The Sale will realize the full market value of the Debtors' assets
and is for the highest and best price available in the market, maximizing the
return to the Debtors' estate and the benefit to creditors, shareholders and
other parties in interest. The Sale was negotiated at arms-length and is
appropriately documented. The assets have been property marketed, and the Sale's
price represents a fair price for the assets. The Sale will preserve the
enterprise value of the Debtors as a going concern and will support the
fundamental purposes underlying chapter 11 of the Bankruptcy Code. Accordingly,
the Sale is due to be approved pursuant to the Plan.

         19.      The only parties asserting an interest in the assets to be
sold to the Buyer pursuant to the Sale are the Secured Parties. The Secured
Parties consent to the Sale on the terms and conditions set forth in the Plan.
Accordingly, the Sale may be free and clear of such interests pursuant to
Section 363(f)(2) of the Bankruptcy Code. Although the Debtors are informed and
believe that no other entity holds an interest in the subject assets, the
Debtors have provided full and


                                       9


complete notice of the Proposed Sale. No other creditor asserting an interest in
the subject assets has appeared or objected to the Sale free and clear. Any
other entity asserting an interest in the subject assets is deemed to have
consented to the Sale, and the Sale is authorized under Section 363(f)(2). Any
such interest would be junior to the interests of the Secured Parties.
Accordingly, to the extent any such interests exist, it is subject to bona fide
dispute pursuant to Section 506 of the Bankruptcy Code and the Sale is due to be
approved pursuant to Section 363(f)(4) of the Bankruptcy Code.

         20.      The Debtors, as proponents of the Plan, have disclosed the
identity and affiliations of any individual proposed to serve, after
confirmation of the Plan, as a director, officer, or voting trustee of the
Debtors or any successor to the Debtors under the Plan. In addition, the
appointment to, or continuance in, any such office of any such individual, or
entity, is consistent with the interests of creditors and equity security
holders and with public policy. The Debtors, as proponents of the Plan, have
disclosed the identity of any insider that will be employed or retained by the
Debtors, and the nature of any compensation for such insider.

         21.      The Plan does not provide for any rate change that would
require approval of a government regulatory commission with jurisdiction over
the rates of the Debtors. Accordingly, Section 1129(a)(6) of the Bankruptcy Code
is not applicable and has been satisfied.

         22.      With respect to each impaired class of claims or interests
under the Plan:

                  (a)      Each holder of a claim or interest of such class (i)
                           has accepted the Plan; or (ii) will receive or retain
                           under the Plan on account of such claim or interest
                           property of a value, as of the Effective Date, that
                           is not less than the amount that such holder would so
                           receive or retain if


                                       10


                           the Debtors were liquidated under chapter 7 of the
                           Bankruptcy Code on the Effective Date; or

                  (b)      Insofar as Section 1111(b)(2) of the Bankruptcy Code
                           applies to the claims of such class, each holder of a
                           claim of such class will receive or retain under the
                           Plan on account of such claim property of a value, as
                           of the Effective Date, that is not less than the
                           value of such holder's interest in the estate's
                           interest in the property that secures such claims.

         23.      With respect to each class of claims, such class has accepted
the Plan or such class is not impaired under the Plan. Class 5, consisting of
the holders of Interests in BSC other than Lender Warrants, is deemed not to
have accepted the Plan under Section 1126(g) of the Bankruptcy Code. However,
the Plan does not discriminate unfairly, and is fair and equitable, with respect
to Class 5. Without limitation, the holder of any interest that is junior to the
interests of Class 5 will not receive or retain under the Plan on account of
such junior interest any property. Class 6, consisting of Interests in BSC that
are Lender Warrants, is deemed not to have accepted the Plan under Section
1126(g) of the Bankruptcy Code. However, the Plan does not discriminate
unfairly, and is fair and equitable, with respect to Class 6. Without
limitation, the holder of any interest that is junior to the interests of Class
6 will not receive or retain under the Plan on account of such junior interest
any property. Class 7, consisting of Intercompany Claims, is deemed not to have
accepted the Plan under Section 1126(g) of the Bankruptcy Code. However, the
Plan does not discriminate unfairly, and is fair and equitable, with respect to
Class 7. Without limitation, the holder of any interest that is junior to the
interests of Class 7 will not receive or retain under the Plan on account of


                                       11


such junior interest any property. Class 8, consisting of Intercompany
Interests, is deemed not to have accepted the Plan under Section 1126(g) of the
Bankruptcy Code. However, the Plan does not discriminate unfairly, and is fair
and equitable, with respect to Class 8. Without limitation, the holder of any
interest that is junior to the interests of Class 8 will not receive or retain
under the Plan on account of such junior interest any property.

         24.      Except to the extent that a holder of a particular claim has
agreed to different treatment of such claim, the Plan provides that:

                  (a)      Subject to the allowance provisions contained in
                           Section III of the Plan, with respect to a claim of a
                           kind specified in Section 507(a)(1) or 507(a)(2) of
                           the Bankruptcy Code, on the First Distribution Date
                           or, if later, the fifteenth (15th) Business Day after
                           such claim becomes Allowed, the holder of such claim
                           will receive on account of such claim cash equal to
                           the Allowed amount of such claim;

                  (b)      With respect to a class of claims of a kind specified
                           in Sections 507(a)(3), 507(a)(4), 507(a)(5) or
                           507(a)(6) of the Bankruptcy Code, each holder of a
                           claim of such class will receive on the First
                           Distribution Date or, if later, on the fifteenth
                           (15th) Business Day after such claim becomes Allowed,
                           cash equal to the Allowed amount of such claim;

                  (c)      With respect to a claim of a kind specified in
                           Section 507(a)(8) of the Bankruptcy Code, the holder
                           of such claim will receive on the First Distribution
                           Date or, if later, on the fifteenth (15th) Business
                           Day after


                                       12


                           such claim becomes Allowed, cash equal to the Allowed
                           amount of such claim; and

                  (d)      Payment on the Allowed Claims referenced in
                           subparagraphs (a), (b) and (c) above shall be from
                           the Administrative Claim Reserve, which shall be
                           funded on the Effective Date.

         25.      At least one class of claims that is impaired under the Plan
has accepted the Plan, determined without including any acceptance of the Plan
by an insider.

         26.      Confirmation of the Plan is not likely to be followed by
liquidation, or the need for further financial reorganization, of the Debtors or
any successor to the Debtors under the Plan, except to the extent liquidation is
proposed in the Plan.

         27.      All fees payable under 28 U.S.C. ss. 1930, as determined by
the Court at the hearing on confirmation of the Plan, have been paid or the Plan
provides for the payment of all such fees on the Effective Date. Based upon the
Plan and the evidence before the Court, the Debtors have no obligation to
provide any retiree benefits as defined in Section 1114 of the Bankruptcy Code.
Accordingly, the Plan provides for the continuation after the Effective Date of
payment of all such benefits, if any, at the level established pursuant to
subsection (e)(1)(B) or (G) of Section 1114 of the Bankruptcy Code, at any time
prior to confirmation of the Plan, for the duration of the period the Debtors
have obligated themselves to provide such benefits. 25.

         28.      The Plan complies with all requirements of Section 1129(a) of
the Bankruptcy Code, except that Classes 5, 6, 7 and 8, deemed to have rejected
the Plan, did not vote in favor of the Plan as required by Section 1129(a)(8);
however, the Plan does not discriminate unfairly and is fair


                                       13


and equitable with respect to Class 5, 6, 7 and 8 pursuant to Section
1129(b)(2)(C)(ii). Accordingly, the Plan is due to be confirmed under Section
1129(b) of the Bankruptcy Code.

         NOW, THEREFORE, based upon the foregoing findings of fact and
conclusions of law, the representations and stipulations of the parties, and the
record of the confirmation hearing, which is incorporated into this Order by
reference, it is hereby ORDERED, ADJUDGED AND DECREED, as follows:

         A.       The Plan, as modified by the Modifications, is confirmed
                  pursuant to Sections 1129(a) and (b) of the Bankruptcy Code.

         B.       The Objections of the UST, John Burdette and TVA are
                  overruled. The remaining Objections, and each of them, are
                  withdrawn; provided, however, that the Plan is hereby modified
                  and amended as follows:

                           1.       Notwithstanding any other term or provision
                                    in the Plan, this Order shall be without
                                    prejudice to the rights, claims, and
                                    defenses of the Memphis and Shelby County
                                    Port Commission (the "Port Commission") on
                                    any issues relating to the agreement by and
                                    between BSC and the Port Commission dated as
                                    of December 18, 1995, and the lease by and
                                    between the Port Commission and BSC dated as
                                    of November 27, 1996.


                                       14


                           2.       This Order shall be without prejudice to the
                                    Port Commission's objection to the Debtors'
                                    Motion to Assume and Assign Executory
                                    Contracts and Unexpired Leases Pursuant to
                                    11 U.S.C. ss. 365 and To Fix Cure Amounts
                                    Thereunder, which, by agreement of the
                                    parties, has been continued to the next
                                    scheduled Omnibus Hearing Date (or such
                                    other date as may be mutually agreed upon
                                    and acceptable to the Court) and both
                                    parties reserve all rights, claims, and
                                    defenses with respect to any issues relating
                                    to the agreement by and between BSC and the
                                    Port Commission dated as of December 18,
                                    1995, and the lease by and between the Port
                                    Commission and BSC dated as of November 27,
                                    1996.

                           3.       PSC's objection relates to certain personal
                                    property located at BSC's Memphis facility.
                                    Without limitation, there is a dispute as to
                                    whether PSC owns two pieces of personal
                                    property. Notwithstanding any other term or
                                    provision in the Plan, this Order shall be
                                    without prejudice to the rights, claims and
                                    defenses of PSC, including PSC's right to
                                    establish title to and recover personal
                                    property located at


                                       15


                                    BSC's Memphis facility. No provision of the
                                    Asset Purchase Agreement, the Plan, or this
                                    Order shall affect PSC's rights, if any,
                                    under Section 365(h) of the Bankruptcy Code.

                           4.       The Plan provides that the Liquidation
                                    Trustee shall have the powers of a
                                    debtor-in-possession with respect to any
                                    duties imposed on the Debtors under
                                    insurance policies. Notwithstanding any
                                    other term or provision in the Plan, this
                                    Order (i) shall be without prejudice to the
                                    rights, claims, defenses and/or reservations
                                    of rights of the Debtors and Westchester
                                    Fire Insurance Company, Century Indemnity
                                    Company and U.S. Fire Insurance Company
                                    (collectively, the "ACE Insurers") on any
                                    issues relating to the Policies (as that
                                    term is defined, and as such issues are set
                                    forth, in the ACE Insurers' objection to
                                    confirmation) or the terms, conditions,
                                    limitations and/or exclusions of the
                                    Policies; (ii) confirms that the Debtors
                                    shall remain as the insured under the
                                    Policies and that they shall not be
                                    assigned; and (iii) acknowledges that
                                    nothing in the Plan shall be deemed to
                                    create any insurance coverage that does not
                                    otherwise exist, if at all, under the terms
                                    of the Policies.


                                       16


                           5.       This Order and confirmation of the Plan are
                                    not intended to release or nullify any
                                    potential liability to the United States
                                    under environmental statutes or regulations
                                    that Buyer (or any other subsequent owner or
                                    operator) may have as a subsequent owner or
                                    operator of any of the Debtors' property
                                    after the closing date of the Sale, and
                                    shall not abrogate any right of Buyer (or
                                    any other subsequent owner or operator)
                                    under any environmental law to deny such
                                    liability and assert affirmative defenses.

                           6.       The Committee, its constituent members, and
                                    their respective directors, officers,
                                    employees, agents, representatives and
                                    professionals, and each of them, are
                                    included in the definition of Exculpated
                                    Parties in Section VI.C.4 of the Plan.

                           7.       Notwithstanding any provision of the Plan or
                                    this Confirmation Order to the contrary; (a)
                                    unless otherwise agreed by the parties, the
                                    payments of the Allowed Priority Tax Claims
                                    held by the IRS shall be paid in full on the
                                    Effective Date; (b) to the extent that any
                                    IRS claim is not an Allowed Claim on the
                                    Effective Date, interest shall accrue at the
                                    rate set forth in 26 U.S.C. ss.6621 on such
                                    portion of the


                                       17


                                    IRS claim that eventually becomes an Allowed
                                    Priority Tax Claim; (c) confirmation of the
                                    Plan shall not affect the setoff rights of
                                    the United States; (d) confirmation of the
                                    Plan shall not discharge the debtors from
                                    the claims of the United States; and (e)
                                    confirmation of the Plan shall not affect
                                    the rights and remedies of the IRS under 26
                                    U.S.C. 6672.

                           8.       Notwithstanding anything in the Plan or this
                                    Confirmation Order to the contrary and
                                    despite any discharge granted under Section
                                    1141 of the Bankruptcy Code, or the effect
                                    thereof as set forth in Section 524 of the
                                    Bankruptcy Code, Norfolk Southern Railway
                                    Company shall retain its right to raise any
                                    and all defenses or counterclaims,
                                    including, but not limited to, its rights of
                                    setoff and recoupment, in response to any
                                    claim or Cause of Action brought against it
                                    by the Debtors, the Liquidation Trust, or
                                    any person.

                  C.       Except as specifically modified herein, this
                           Confirmation Order incorporates, approves, ratifies
                           and authorizes each term and condition of the Plan
                           and the transactions contemplated therein.

                  D.       As required by Section III.C.3(c) of the Plan, the
                           Committee and the AIR Lenders have complied with the
                           Stipulation By and Between the Debtors, the


                                       18


                           AIR Lenders and the Official Committee of Unsecured
                           Creditors dated and filed on September 9, 2002.

                  E.       The Sale, including the Debtors' assumption and
                           assignment of certain executory contracts and
                           unexpired leases, and each of them, is approved under
                           Section 363(f) of the Bankruptcy Code, as set forth
                           under separate orders.

                  F.       Under the Plan, the First Distribution Date is hereby
                           designated as a Business Day, as determined by the
                           Debtors, as soon as practicable after the Closing
                           Date, but at least one (1) Business Day after the
                           Collateral Agent makes the Class 2 Distribution to
                           the holders of Allowed Claims in Class 2 pursuant to
                           the Plan.

                  G.       Except for payments under the Post Petition Credit
                           Agreement with Bank of America, as agent, and the
                           Final Order Authorizing Debtors in Possession to (i)
                           Enter into Post Petition Financing Agreement and
                           Obtain Post-Petition Financing Pursuant to Sections
                           363 and 364 of the Bankruptcy Code; (ii) Use Cash
                           Collateral Pursuant to Section 363 of the Bankruptcy
                           Code; and (iii) Provide Adequate Protection and Grant
                           Liens, Security Interests and Superpriority Claims,
                           all requests for payment of Administrative Expense
                           Claims arising prior to the date of this Confirmation
                           Order must be filed and served on the Debtors, the
                           Informal Group and each of the Committees no


                                       19


                           later than ten (10) days after the Confirmation Date
                           on the terms and conditions set forth in the Plan.
                           Except as provided by prior order of the Court
                           allowing the employment of professionals in the
                           ordinary course of business, professionals or other
                           entities asserting a Fee Claim must file and serve on
                           the Debtors, the Agent, the Committees, and the
                           United States Trustee an application for final
                           allowance of compensation and reimbursement of
                           expenses no later than thirty (30) days after the
                           Confirmation Date on the terms and conditions set
                           forth in the Plan. All requests for payment of an
                           Administrative Expense Claim and all requests for
                           payment of a Fee Claim shall comply with the
                           Bankruptcy Rules.

                  H.       The Debtors are authorized and directed to execute
                           and enter into such agreements, assumptions,
                           assignments, instruments, documents of title, and
                           releases as may be necessary or appropriate to
                           effectuate the terms of the Plan. As provided in
                           Section 1146(c) of the Bankruptcy Code, the delivery
                           of any instrument of transfer under the Plan shall
                           not be taxed under any law imposing a stamp tax or
                           similar tax.

                  I.       Except as set forth in Sections VI.B.4 and 6 of the
                           Plan, all Causes of Action shall vest in the
                           Liquidation Trust on the Effective Date. Without
                           limitation of, and subject to, the foregoing, in
                           accordance with the terms of the Plan, the
                           Liquidation Trust shall retain and may enforce (1)
                           all Avoidance Actions,


                                       20


                           whether or not filed prior to the Effective Date,
                           including, without limitation, all claims and causes
                           of action under Sections 547 and 548 of the
                           Bankruptcy Code against any person or entity
                           receiving payments or other transfers from the
                           Debtors during the 90 days before the Filing Date;
                           (2) all claims and Causes of Action listed or
                           disclosed in the Plan, the Disclosure Statement, the
                           Debtors' Schedules and all claims and causes of
                           action against any person or entity listed in the
                           Plan, the Disclosure Statement or the Debtors'
                           Schedules; (3) all claims and causes of action
                           related to accounts receivable and any other right to
                           payment that arises from or outside the ordinary
                           course of the Debtors' businesses; (4) all claims and
                           causes of action related to the Debtors' purchase or
                           sale of goods or collection of accounts, including,
                           without limitation, claims for collection, charge
                           backs or defective goods against the persons and
                           entities listed in the Plan, the Disclosure Statement
                           or the Debtors' Schedules; (5) all Causes of Action
                           (as defined in the Plan); and (6) all other claims
                           and causes of action of any nature or type
                           whatsoever, at law or in equity, against any person
                           or entity. The foregoing enumeration of potential
                           claims and causes of action is nonexclusive and shall
                           not constitute a limitation or waiver of any claim,
                           right to payment, demand or cause of action not so
                           enumerated. Such claims and causes of action shall
                           not, under any circumstances, be waived, deemed
                           waived or otherwise limited as a result


                                       21


                           of the failure of the Debtors to describe a
                           particular cause of action with more specificity in
                           the Plan or the Disclosure Statement or the omission
                           of a specific reference to such claim or cause of
                           action in this Confirmation Order. Except as provided
                           in the Plan, the Liquidation Trust shall retain at
                           least the same rights that a trustee under chapter 7
                           of the Bankruptcy Code would have with respect to all
                           claims and causes of action. Except as provided in
                           the Plan (including with respect to the allowance of
                           the AIR Lenders' Claims), confirmation of the Plan,
                           approval of the Disclosure Statement, entry of this
                           Confirmation Order, and the consummation of the Plan
                           shall not constitute res judicata, collateral
                           estoppel, claim preclusion or issue preclusion so as
                           to preclude prosecution by the Liquidation Trust of
                           any claim or cause of action of the Debtors or the
                           Estate after the Confirmation Date and will not in
                           any way estop the Liquidation Trust (judicially or
                           otherwise) from pursuing any such claim or cause of
                           action.

                  J.       All settlements contained in the Plan, as may be
                           modified and amended pursuant to this Confirmation
                           Order, including, without limitation, releases and
                           injunctions in favor of the Released Parties, are
                           hereby approved.

                  K.       The Liquidation Trust Agreement substantially in the
                           form set forth as Exhibit D to the Disclosure
                           Statement, subject to such modifications as agreed
                           upon between the Debtors and holders of Claims in
                           Class 2 so as to


                                       22


                           conform the Liquidation Trust to the Plan, is hereby
                           approved and shall be effective as of the Effective
                           Date, provided, however, that any dispute between the
                           Debtors and holders of Claims in Class 2 in this
                           regard may be submitted to the Bankruptcy Court for
                           determination. Subject to the terms of the Plan, the
                           Debtors and the Liquidation Trustee are duly and
                           validly authorized to issue, execute, deliver, file
                           or record any and all documents necessary to
                           implement the Liquidation Trust. In the event of any
                           inconsistencies between the Plan and the Liquidation
                           Trust, the provisions of the Plan shall govern.

                  L.       In accordance with the provisions of the Plan, except
                           as modified herein, the Court shall retain
                           jurisdiction of the Debtors' cases until the Plan has
                           been substantially consummated, the Debtors' cases
                           are closed, and all assets of the Liquidation Trust
                           are distributed. Such jurisdiction shall extend,
                           without limitation, to the Debtors, the Liquidation
                           Trust, all assets of the Estate, and the matters and
                           purposes described in Section IX of the Plan.

                  M.       The failure to reference or discuss any particular
                           provision of the Plan in this Confirmation Order
                           shall have no effect on the validity, binding effect
                           and enforceability of such provision and such
                           provision shall have the same validity, binding
                           effect and enforceability as every other provision in
                           the Plan. To the extent that any inconsistency exists
                           between the Plan and this


                                       23


                           Confirmation Order, the terms and conditions of this
                           Confirmation Order shall govern.

                  N.       This Confirmation Order shall be vacated and shall be
                           of no further force or effect (1) if the Effective
                           Date has not occurred on or before the Outside
                           Termination Date (as defined in the Plan Support
                           Agreement), or (2) of the Asset Purchase Agreement is
                           terminated.

                  DONE this _____ day of September, 2002.



                                        ---------------------------------------
                                        Ronald S. Barliant
                                        United States Bankruptcy Judge



                                       24