AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1996
REGISTRATION NO. 333-12521
AMENDMENT NO. 1
TO
STEEL DYNAMICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 3312 35-1929476
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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Copies to:
ROBERT S. WALTERS, ESQ. JOHN MORRISON, ESQ.
BARRETT & MCNAGNY SHEARMAN & STERLING
215 EAST BERRY STREET 599 LEXINGTON AVENUE
FORT WAYNE, INDIANA 46802 NEW YORK, NEW YORK 10022
(219) 423-9551 (212) 848-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________
- --------------------------------------------------------------------------------
NUMBER OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- ---------------------------------------
Common Stock, $.01 par value........... 11,320,312 Shares $17.00 $192,445,304 $58,316.76
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
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(1) Includes 1,476,562 shares which the Underwriters have the option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a).
(3) $61,465.52 was previously paid.
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be used in connection with an offering of the registrant's Common Stock in the United States and Canada (the "U.S. Prospectus") and one to be used in a concurrent offering of the registrant's Common Stock outside the United States and Canada (the "International Prospectus" and, together with the U.S. Prospectus, the "Prospectuses"). The Prospectuses are identical except for the front cover page. The U.S. Prospectus is included herein and is followed by the alternate front cover page to be used in the International Prospectus. The alternate page for the International Prospectus included herein is labeled "Alternate Page for International Prospectus." Final forms of each Prospectus will be filed with the Securities and Exchange Commission under Rule 424(b) of the General Rules and Regulations under the Securities Act.
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
PROSPECTUS (Subject to Completion)
Issued October 31, 1996
9,843,750 Shares
OF THE 9,843,750 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 9,375,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 468,750 SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES OF COMMON STOCK
BY THE SELLING STOCKHOLDERS. OF THE 9,843,750 SHARES OF COMMON STOCK
BEING OFFERED, 7,875,000 SHARES ARE BEING OFFERED INITIALLY IN THE
UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 1,968,750
SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS."
PRIOR TO THE OFFERINGS, THERE HAS BEEN NO PUBLIC MARKET FOR
THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED
THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $15 AND $17. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- ----------------
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
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(2) Before deducting expenses payable by the Company estimated at $875,000.
(3) Certain stockholders have granted the U.S. Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 1,476,562 additional Shares of Common Stock at the price to public less underwriting discounts and commissions, for the purpose of covering over-allotments, if any. If the U.S. Underwriters exercise such option in full, the total price to public, underwriting discounts and commissions, and proceeds to Company will be $ , $ and $ , respectively. See "Underwriters."
MORGAN STANLEY & CO. PAINEWEBBER INCORPORATED Incorporated |
McDONALD & COMPANY SALOMON BROTHERS INC
Securities, Inc.
, 1996
[Various photographs of mini-mill equipment]
THE EXISTING MILL
JANUARY 1996
- - Twin Shell, 195t, AC, Electric Arc Furnace Battery
- - Ladle Metallurgy Facility, Desulphurization
- - SMS, Thin-Slab Caster
- - Tunnel Furnace for Direct Charge
- - Six Stand, SMS Hot Mill, Single Downcoiler
- - CAPACITY @ 1,400,000 TONS
THE COLD MILL PROJECT
MID 1997
- - Continuous Pickle Line
- - Hot-Rolled Products Galvanizing Line
- - Semi-Tandem 2-Stand Reversing Cold-Rolling Mill
- - Cold-Rolled Products Galvanizing Line
- - Batch Annealing Furnaces
- - Temper Mill
- - PLANNED CAPACITY @ 1,000,000 TONS
THE IRON DYNAMICS PROJECT
LATE 1998
- - Pelletizing Plant
- - Rotary Hearth Reduction Furnace
- - PLANNED DRI CAPACITY @ 520,000 TONNES
THE CASTER PROJECT
LATE 1998
- - Second Hybrid Electric Arc Furnace
- - Second Thin-Slab Caster
- - Second Tunnel Furnace
- - Second Downcoiler
- - PLANNED INCREMENTAL CAPACITY @ 1,000,000 TONS
[LOGO] SDI
STEEL DYNAMICS, INC.]
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 4
Risk Factors.......................... 10
Use of Proceeds....................... 18
Dividend Policy....................... 18
Dilution.............................. 19
Capitalization........................ 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 29
Management............................ 52
Certain Transactions.................. 61
PAGE
----
Principal and Selling Stockholders.... 64
Description of Certain Indebtedness... 66
Description of Capital Stock.......... 68
Shares Eligible for Future Sale....... 71
Certain United States Federal Tax
Consequences for Non-United States
Holders............................. 73
Underwriters.......................... 76
Legal Matters......................... 79
Experts............................... 79
Available Information................. 79
Index to Consolidated Financial
Statements.......................... F-1
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The Company intends to furnish its stockholders with annual reports containing consolidated financial statements audited by its independent accountants and quarterly reports for the first three quarters of each fiscal year containing unaudited consolidated financial information.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise indicates, "Steel Dynamics," "SDI" or the "Company" means Steel Dynamics, Inc. and its consolidated subsidiaries. "Common Stock" means the Company's Common Stock, par value $.01 per share. Unless otherwise indicated, the information contained in this Prospectus (i) assumes an estimated initial public offering price of $16.00 per share and that the U.S. Underwriters' over-allotment option is not exercised and (ii) gives effect to a 28.06 for 1.00 split of the Common Stock to be effected in November 1996. As used in this Prospectus, the term "tonne" means a metric tonne, equal to 2,204.6 pounds, and the term "ton" means a net ton, equal to 2,000 pounds. Certain information contained in this summary and elsewhere in this Prospectus, including information with respect to the Company's plans and strategy for its business, are forward-looking statements. For a discussion of important factors which could cause actual results to differ materially from the forward-looking statements contained herein, see "Risk Factors."
THE COMPANY
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel mini-mill, which commenced operations in January 1996. The Company was founded by executives and managers who pioneered the development of thin-slab/flat-rolled compact strip production ("CSP") technology and directed the construction and operation of the world's first thin-slab/flat-rolled mini-mill. Building upon their past experience with CSP technology, management founded SDI to produce steel more efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to become the low cost producer of a broad range of flat-rolled steel products, including hot-rolled, cold-rolled and galvanized sheet, and to serve more markets than any other flat-rolled mini-mill. In addition, the Company intends to participate in the development and use of new technologies to produce a broad range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D. Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the mini-mill in October 1994 and commissioned it in December 1995. The Company believes that this 14-month construction period is the fastest ever for this kind of facility. In addition, the Company believes that the approximately $275.7 million initial capital cost of its mini-mill is approximately $75.0 million, or approximately 20%, less than the cost of comparable mini-mills currently operating. Actual production at the mini-mill of primary grade steel commenced on January 2, 1996. The mill achieved an annualized production rate of 930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities to produce further value-added steel products, Steel Dynamics is currently constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton annual capacity (the "Cold Mill Project") which is scheduled for completion during the second half of 1997. Steel Dynamics also plans to add a second melting furnace, a second caster and tunnel furnace, and an additional coiler in 1998 to expand its annual production capacity of hot-rolled steel from 1.4 million tons to approximately 2.4 million tons (the "Caster Project"). In addition, through its wholly-owned subsidiary, Iron Dynamics, Inc. ("IDI"), the Company intends to construct a 520,000 tonne annual capacity plant for the manufacture of direct reduced iron ("DRI"), which the Company expects to be completed in 1998 (the "IDI Project"). The DRI, after further processing into 430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel scrap substitute.
Management strategically located the Company's mini-mill within close proximity to its natural customer base, steel service centers and other end users, abundant supplies of automotive and other steel scrap (SDI's principal raw material), competitive sources of power, and numerous rail and truck transportation routes. Steel Dynamics believes that its strategic location provides it with sales and marketing as well as production cost advantages. The Company has secured a stable baseload of sales through long-term "off-take" contracts with
two major steel consumers, a 30,000 ton per month sales contract with Heidtman Steel Products, Inc. ("Heidtman"), a major Midwest-based steel service center and distributor and an affiliate of one of the Company's stockholders, and a 12,000 ton per month sales contract with Preussag Stahl AG ("Preussag"), a major German steel manufacturer and a stockholder of the Company, with affiliate distributors and steel service centers throughout the United States. The Company has also sought to assure itself of a secure supply of steel scrap and scrap substitute. To accomplish this objective, SDI has entered into a long-term scrap purchasing services contract with OmniSource Corporation ("OmniSource"), one of the largest scrap dealers in the Midwest and an affiliate of one of the Company's stockholders. In addition, the Company has also sought to assure itself of a secure supply of scrap substitute material for use as a lower cost complement to steel scrap as part of the Company's melt mix. SDI has entered into a long-term 300,000 tonne per year "off-take" contract to purchase iron carbide from Qualitech Steel Corporation's ("Qualitech's") iron carbide facility currently under construction in Corpus Christi, Texas which is expected to be completed in 1998. Additional scrap substitute material will be provided through the Company's IDI Project.
Although the Company reported net income for July, August and September 1996, the Company had incurred aggregate net losses since commencing commercial operations in January 1996 through June 29, 1996 of approximately $14.1 million. In addition, from September 7, 1993 through December 31, 1995, the Company had incurred an aggregate of approximately $29.9 million of net losses, resulting principally from operating expenses during start-up.
STRATEGY
The Company's business strategy is to use advanced CSP hot-rolled steelmaking and cold-rolling technologies to produce high surface quality flat-rolled steel in a variety of value-added sizes, gauges and surface treatments, emphasizing low production costs, reliable product quality and excellent customer service. In addition, SDI intends to remain financially strong and competitive through the selective purchasing of scrap and scrap substitutes to offset the effects of cyclical cost/price imbalances. The principal elements of the Company's strategy include:
- Achieve Lowest Conversion Costs in Industry. Steel Dynamics' electric arc furnace ("EAF"), caster and rolling mill designs represent substantial improvements over earlier mini-mills using CSP technology. These improvements have been designed to speed the steelmaking process, to limit "power off time" and other non-productive time in the EAF, to reduce the per ton cost of consumables and to yield higher quality finished steel product. By designing and using equipment that is more efficient, requires less periodic maintenance or rebuilding, requires less consumables and improves the consistency and reliability of the steelmaking process, the Company believes that it will achieve lower unit costs for converting metallics and other raw materials into flat-rolled steel. The Company believes that its per ton manufacturing costs are already among the lowest in the industry.
- Emphasize Value-Added Products. Steel Dynamics believes that it will be able to produce thinner gauge (down to .040") steel in hot-rolled form with consistently better surface and edge characteristics than most other flat-rolled producers. The Company believes that its high quality, thinner hot-rolled products will compete favorably with certain more expensive cold-rolled (further processed) products, enabling it to obtain higher margins. In addition, with the completion of the Cold Mill Project, SDI expects to devote a substantial portion of its hot-rolled products to the production of higher value-added cold-rolled and galvanized products, as well as thinner gauges, down to .015". This increased product breadth should also allow the Company to broaden its customer base.
- Secure Reliable Sources of Low Cost Metallics. The principal raw material used in the Company's mini-mill is steel scrap which represents approximately 45% to 50% of the Company's total manufacturing costs. Steel Dynamics has pursued a three-part strategy to secure access to adequate low cost supplies of steel scrap and steel scrap substitute materials. First, the Company has entered into a long-term steel scrap contract with OmniSource. Second, SDI has sought to further this strategy through its iron carbide "off-take" contract with Qualitech. Third, Steel Dynamics is pursuing the IDI Project to produce DRI as a lower cost complement for use in the melt mix with steel scrap.
- Secure a Solid Baseload of Hot Band Sales. In order to help ensure consistent and efficient plant utilization, SDI has entered into six-year "off-take" sales and distribution agreements with Heidtman and Preussag, pursuant to which Heidtman has agreed to purchase at least 30,000 tons and Preussag has agreed to purchase at least an average of 12,000 tons of the Company's flat-rolled products per month, at the Company's market price, subject to certain volume and single run discounts.
- Increase Unit Growth at Low Capital Cost. SDI seeks to continue to grow its production of flat-rolled steel coil at low capital and unit costs. The Company plans to use approximately $75.0 million of the net proceeds of the offerings to finance its Caster Project. The Caster Project, which is expected to be completed in 1998, will increase the annual production capacity of the Company's mini-mill from 1.4 to approximately 2.4 million tons of hot-rolled steel. The Caster Project will enable the Company to better use the increased rolling and finishing capacity that its Cold Mill Project will provide when completed in 1997. The foundations and infrastructure necessary to house and support the second caster have been pre-planned into the existing plant and, therefore, the 1.0 million additional tons of annual hot-rolled steel capacity should be added at a relatively low capital cost. In addition, management intends to continue to explore new production technologies to further lower its unit costs of production.
- Incentivize Employees. In contrast to the high fixed labor costs of many of the Company's competitors, SDI has established certain incentive compensation programs specifically designed to reward employee teams for their efforts towards enhancing productivity, thereby encouraging a sense of ownership throughout Steel Dynamics. Production employees actively share in the Company's success through a production bonus and a conversion cost bonus. The production bonus is directly tied to the quantity and quality of products manufactured during a particular shift. The conversion cost bonus encourages employees to use materials and resources more efficiently. Steel Dynamics' employees' bonuses may equal or exceed their base hourly wage.
- Pursue Future Opportunities. Steel Dynamics believes that technology development and management's experience will provide significant opportunities for SDI in a broad range of markets, potentially including flat-rolled, non-flat-rolled, stainless and specialty steels. The Company plans to pursue opportunities through greenfield projects, strategic alliances or acquisitions to secure the long-term future growth and profitability of SDI. Steel Dynamics will seek to enter new steel markets and to produce new steel products using the latest technology, with the objective of being a low cost producer. In addition, the Company has a technology sharing agreement with Preussag which will provide SDI with Preussag's expertise and know-how in steel manufacturing, particularly steel finishing.
THE OFFERINGS
Common Stock offered:
By the Company............................. 9,375,000 shares
By the Selling Stockholders................ 468,750 shares
Total.............................. 9,843,750 shares
United States offering..................... 7,875,000 shares
International offering..................... 1,968,750 shares
Common Stock to be outstanding after the
offerings(1)............................... 47,803,341 shares
Use of proceeds.............................. The net proceeds to the Company will be used
to prepay approximately $65.5 million of
outstanding indebtedness (including
prepayment premiums and accrued interest
thereon) and to finance the Caster Project
(approximately $75.0 million). The Company
will not receive any proceeds from the sale
by the Selling Stockholders of Common Stock
in the offerings. See "Use of Proceeds."
Nasdaq National Market symbol................ "STLD"
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(1) Based on approximately 36,636,869 shares of Common Stock outstanding on September 28, 1996, as adjusted to reflect the exercise of warrants (the "Warrants") to purchase 1,791,472 shares of Common Stock at an aggregate purchase price of $400,585 which were exercised after such date. Excludes 634,159 shares of Common Stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $4.25 per share.
RISK FACTORS
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS." The risk factors include
(i) Start-up; Limited Operating History; Recent Losses, (ii) Variability of
Financial Results; Production Shutdowns, (iii) Significant Capital Requirements,
(iv) Cost of Steel Scrap and Other Raw Materials, (v) Cyclicality of Steel
Industry and End User Markets, (vi) Competition, (vii) Risks Related to Scrap
Substitutes, (viii) Reliance on Major Customers, (ix) Potential Costs of
Environmental Compliance, (x) Dependence upon Key Management, (xi) Restrictions
on Payment of Dividends on Common Stock, (xii) Restrictive Covenants, (xiii)
Absence of Prior Public Market and Possible Volatility of Stock Prices, (xiv)
Shares Eligible for Future Sale, (xv) Anti-Takeover Provisions and (xvi)
Dilution.
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth summary consolidated financial and operating data for the date and periods indicated. The monthly summary statement of operations data are derived from unaudited consolidated financial statements of the Company and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly such data. Operating results for interim periods are not necessarily indicative of a full year's operations. The consolidated financial data as of and for the nine months ended September 28, 1996 are derived from the Company's audited consolidated financial statements appearing elsewhere in this Prospectus. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
NINE MONTHS
MONTH ENDED(1) ENDED
--------------------------------------------------------------------------------------------------------------- SEPTEMBER
JANUARY 27, FEBRUARY 24, MARCH 30, APRIL 27, MAY 25, JUNE 29, JULY 27, AUGUST 24, SEPTEMBER 28, 28,
1996 1996 1996 1996 1996 1996 1996(2) 1996 1996 1996
----------- ------------ --------- --------- -------- -------- -------- ---------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER TON AMOUNTS)
STATEMENT
OF
OPERATIONS
DATA:
Net
sales... $ 3,558 $ 10,183 $ 18,546 $ 17,874 $ 20,941 $27,560 $18,286 $ 25,277 $32,394 $174,619
Cost
of
products
sold... 5,610 11,281 18,294 16,532 18,951 24,925 15,704 20,546 26,414 158,257
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Gross
profit
(loss)... (2,052) (1,098) 252 1,342 1,990 2,635 2,582 4,731 5,980 16,362
Selling,
general
and
administrative
expenses... 776 799 1,234 1,006 1,154 924 863 1,178 1,413 9,347
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Income
(loss)
from
operations... (2,828) (1,897) (982 ) 336 836 1,711 1,719 3,553 4,567 7,015
Foreign
currency
gain
(loss)... 235 (189) 108 127 20 (41 ) (94 ) (6) 100 260
Interest
expense(3)... 1,650 1,896 2,291 1,879 1,930 2,482 1,675 1,887 2,360 18,050
Interest
income... 33 28 32 101 176 209 117 92 169 957
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Net
income
(loss)(4)... $ (4,210) $ (3,954) $ (3,133 ) $ (1,315 ) $ (898) $ (603 ) $ 67 $ 1,752 $ 2,476 $ (9,818)
======== ========= ======== ======== ======== ======== ======== ======== ======== ========
Net
income
(loss)
per
share(4)... $ (.13) $ (.12) $ (.10 ) $ (.04 ) $ (.02) $ (.02 ) $ -- $ .04 $ .06 $ (.27)
Weighted
average
common
shares
outstanding(4)(5)... 32,537 32,537 32,871 34,123 37,798 37,798 39,729 39,758 41,162 35,940
OTHER
DATA:
Shipments
(net
tons)... 13,093 35,966 65,855 60,187 69,384 89,069 56,280 75,629 96,659 562,122
Hot
band
production
(net
tons)(6)... 22,282 38,777 66,871 62,226 66,407 84,758 58,411 76,033 92,984 568,749
Prime
tons
produced(6).. 15,495 28,690 50,220 54,215 58,242 78,577 53,996 73,096 85,470 498,001
Prime
ton
percentage... 69.5% 74.0% 75.1% 87.1% 87.7% 92.7% 92.4% 96.1% 91.9% 87.6%
Yield
percentage(7)... 78.3% 85.4% 84.9% 84.9% 89.2% 87.0% 88.3% 87.8% 89.2% 86.9%
Average
sales
price
per
prime
ton... $ 302 $ 313 $ 313 $ 319 $ 317 $ 322 $ 336 $ 346 $ 348 $ 330
Effective
capacity
utilization(8)... 19.9% 34.6% 47.8% 55.6% 59.3% 60.5% 69.5% 67.9% 66.4% 53.5%
Man-hours
per net
ton
produced... 1.77 .83 .66 .73 .69 .65 .61 .61 .61 .73
Number
of
employees
(end
of
period)... 224 230 238 248 252 255 256 259 263 263
Operating
profit
(loss)
per
net
ton
shipped... $ (215.99) $ (52.74) $ (14.91 ) $ 5.58 $ 12.05 $ 19.21 $ 30.54 $ 46.98 $ 47.25 $ 12.48
Depreciation
and
amortization... $ 466 $ 951 $ 1,453 $ 1,413 $ 1,532 $ 1,844 $ 1,219 $ 1,616 $ 2,224 $ 12,718
Net
cash
provided
by
(used
in):
Operating
activities... $ (13,293) $ (4,040) $(10,404 ) $(13,434 ) $ (9,784) $ 7,019 $(6,623 ) $ 12,108 $(7,174) $(45,625)
Investing
activities... $ 114 $ (247) $ (4,682 ) $ (1,268 ) $(32,153) $ 1,639 $ 757 $ 9,015 $(4,888) $(31,713)
Financing
activities... $ 12,953 $ 3,917 $ 19,486 $ 43,683 $ 484 $(4,048 ) $ (652 ) $ (32) $25,227 $101,018
EBITDA(9)... $ (2,362) $ (946) $ 471 $ 1,749 $ 2,368 $ 3,555 $ 2,938 $ 5,169 $ 6,791 $ 19,733
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SEPTEMBER 28, 1996
---------------------------
AS
ACTUAL ADJUSTED(10)
-------- --------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................... $ 30,564 $105,965
Working capital..................................................................................... 58,848 134,249
Property, plant, and equipment, net................................................................. 289,431 289,431
Total assets........................................................................................ 422,368 496,299
Long-term debt (including current portion).......................................................... 257,705 198,700
Stockholders' equity................................................................................ 123,636 256,746
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(footnotes on following page)
(1) The Company commenced actual production of primary grade steel in January 1996. Accordingly, management believes that the Company's results of operations prior to 1996 are not indicative of results to be expected in the future. See "Selected Consolidated Financial Data." Management believes that during the start-up phase, while the Company is in the process of ramping up steel production, monthly data provides a potential investor with meaningful information to evaluate an investment in the Company. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. The Company does not intend to continue to disclose its statement of operations and other data on a monthly basis.
(2) The Company's accounting year, which ends on December 31, consists of quarterly reporting periods of two four-week months, followed by a five-week month. For operational purposes July 1996, which would have been a four-week month, and December 1996, which would typically be a five-week month, are three week- and four week-months, respectively, to take into account scheduled semi-annual shutdowns for maintenance. Beginning in 1997, the Company intends to change to a quarterly maintenance shutdown schedule and, as a result, for operational purposes, each fiscal quarter will consist of two four-week months and a four and one half-week month.
(3) Interest expense for the nine months ended September 28, 1996 would have been approximately $12.3 million, giving pro forma effect to the offerings and the application of net proceeds therefrom to prepay (a) all $55.0 million principal amount of the Company's outstanding 11% Subordinated Notes due 2002 (the "Subordinated Notes") and (b) approximately $9.1 million of the Company's Senior Term Loan Notes (the "Term Loan Notes"). These adjustments (i) assume that the transactions occurred as of January 1, 1996 and (ii) assume that the average interest rate on the Term Loan Notes during the period was 7.6%. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(4) For the nine months ended September 28, 1996, on a pro forma basis, giving effect to the transactions described in footnote 3 above and the exercise of the Warrants as if they had occurred as of January 1, 1996, the Company's net loss and net loss per share would have been approximately $4.1 million and $.09, respectively. The pro forma net loss and net loss per share does not give effect to an extraordinary charge of approximately $8.3 million ($.9 million in cash) that the Company expects to incur as a result of the prepayment of the Subordinated Notes. Pro forma net loss per share is based on the weighted average number of common shares outstanding during the period plus the issuance of 9,375,000 shares of Common Stock offered by the Company hereby and 1,791,472 shares of Common Stock upon exercise of the Warrants.
(5) Weighted average common shares outstanding for each period presented give effect to the anti-dilutive effect of shares issued from September 23, 1995 through September 23, 1996 using the treasury stock method. Common Stock equivalents are included only when dilutive.
(6) Hot band production refers to the total production of finished coiled products. Prime tons refer to hot bands produced which meet or exceed metallurgical and quality standards for surface, shape, and metallurgical properties.
(7) Yield percentage refers to tons of finished products divided by tons of raw materials.
(8) Effective capacity utilization is the ratio of tons produced for the operational month to the operational month's capacity based on an annual capacity of 1.4 million tons.
(9) EBITDA represents operating income before depreciation and amortization. Based on its experience in the steel industry, the Company believes that EBITDA and related measures of cash flow serve as important financial analysis tools for measuring and comparing steel companies in several areas, such as liquidity, operating performance and leverage. However, EBITDA is not a measurement of financial performance under generally accepted accounting principles ("GAAP") and may not be comparable to other similarly titled measures of other companies. EBITDA should not be considered as an alternative to operating or net income (as determined in accordance with GAAP), as an indicator of the Company's performance or as an alternative to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. See the Company's Consolidated Statements of Operations and Consolidated Statements of Cash Flows, including the notes thereto, appearing elsewhere in this Prospectus.
(10) As adjusted to give effect to the transactions described in footnote 3 above and the exercise of the Warrants as if they had occurred as of September 28, 1996. See "Use of Proceeds." As adjusted stockholders' equity reflects an extraordinary charge of approximately $8.3 million ($.9 million in cash) that the Company expects to incur as a result of the prepayment of the Subordinated Notes.
RISK FACTORS
Prospective investors should consider carefully the following factors in addition to other information set forth in this Prospectus in evaluating an investment in the shares of the Common Stock offered hereby.
START-UP; LIMITED OPERATING HISTORY; RECENT LOSSES
The Company was formed in September 1993 and commenced commercial quality production at its thin-slab steel mini-mill in January 1996. The Company is in the process of ramping up steel production to full capacity. The Company has experienced normal start-up and operational difficulties in bringing its mini-mill into full scale production, and the mini-mill is not yet operating at full capacity. By the end of September 1996, the Company was operating at an annualized production rate of 930,000 tons, or 66% of full capacity. Because of the high fixed cost nature of operating a steel mill, failure to bring production to, or maintain production at, full capacity could have a material adverse effect on the Company's cost and pricing structure and on its resulting ability to compete and results of operations. Although the Company believes that the start-up difficulties it experienced are typical of those encountered when a new steel mill commences production, there is no assurance that the Company will not continue to experience operational difficulties beyond start-up difficulties, or that it will ultimately achieve or be able to sustain full production. In addition, the Company could experience construction, start-up or operational difficulties as it implements the Cold Mill, IDI and Caster Projects. There can be no assurance that the Company will be able to operate its mini-mill at full capacity or that the Cold Mill, IDI and Caster Projects will be successfully built, started-up, and integrated with the Company's existing operations. Management has no experience in building or operating scrap substitute manufacturing plants. The Company's continued rapid development and the implementation of the Cold Mill, IDI and Caster Projects may place a strain on its administrative, operational and financial resources. As the Company increases its production and expands its customer base, there will be additional demands on the Company's ability to coordinate sales and marketing efforts with production. The failure to produce at full capacity, coordinate its sales and marketing efforts with production or manage its future development and growth, or the emergence of unexpected production difficulties could adversely affect the Company's business, results of operations and financial condition.
Because the Company commenced commercial quality production in January 1996, the Company's results of operations for prior periods will not be comparable with future periods. As a result, there is only limited financial and operating information available for a potential investor to evaluate an investment in the Common Stock. Although the Company reported net income for July, August and September 1996, the Company has incurred aggregate net losses since start-up of production of prime grade flat-rolled steel on January 2, 1996 and through September 28, 1996 of approximately $9.8 million. As of September 28, 1996 the Company had an accumulated deficit of approximately $39.7 million. These losses have resulted principally from operating expenses during start-up. The Company will experience additional start-up losses in connection with the Cold Mill, IDI and Caster Projects. There can be no assurance that the Company's operations will continue to be profitable. If the Company cannot maintain profitability it may not be able to make required debt service payments and the value of the Common Stock could be adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
VARIABILITY OF FINANCIAL RESULTS; PRODUCTION SHUTDOWNS
The Company's results of operations are substantially affected by variations in the realized sales prices of its products, which in turn depend both on prevailing prices for steel and demand for particular products. In 1995, spot prices for hot bands dropped in the second and third quarters by approximately $40 and $20 per ton, respectively. Operating results have been, and in the future will be, affected by numerous factors, including the prices and availability of raw materials, particularly steel scrap and scrap substitutes, the demand for and prices of the Company's products, the level of competition, the level of unutilized production capacity in the steel industry, the mix of products sold by the Company, the timing and pricing of large orders, start-up difficulties with respect to the Cold Mill Project, IDI Project or Caster Project, the integration and modification of facilities and other factors. There can be no assurance that these events and circumstances or other events or circumstances, such as seasonal factors like weather, disruptions in the transportation, energy
or the Company's customers' industries or an economic downturn adversely affecting the steel industry, generally, or the Company, in particular, will not occur, any of which could have a material adverse effect on the Company.
The Company's manufacturing processes are dependent upon certain critical pieces of steelmaking equipment, such as its EAF and continuous caster, which on occasion may be out of service due to routine scheduled maintenance or as the result of equipment failures. This interruption in the Company's production capabilities could result in fluctuations in the Company's quarterly results of operations. The most significant scheduled maintenance outages are planned to occur quarterly, for three days at a time, and involve routine maintenance work. Other routine scheduled maintenance could limit the Company's production for a period of less than a day, while unanticipated equipment failures could limit the Company's production for a longer period.
Equipment failures at its plant could limit or shut down the Company's production. During the first ten months of its operations, the Company experienced some equipment failures, none of which lasted more than two days. In order to reduce the risk of equipment failure, the Company follows a comprehensive maintenance and loss prevention program, has on-site maintenance and repair facilities, and maintains an inventory of spare parts and machinery. For example, the Company maintains a spare EAF transformer as well as spare caster parts, mechanical parts and electrical controls for its cranes and other tools. No assurance can be given, however, that material shutdowns will not occur in the future or that a shutdown would not have a material adverse affect on the Company. In addition to equipment failures, the mill is also subject to the risk of catastrophic loss.
SIGNIFICANT CAPITAL REQUIREMENTS
The Company's business is capital intensive and will require substantial expenditures for, among other things, the purchase and maintenance of equipment used in its steelmaking and finishing operations and compliance with environmental laws. In addition, the construction and start-up of the Cold Mill, IDI and Caster Projects (collectively, the "Expansion Projects") will require substantial capital.
The Company currently estimates that the funds required for the
construction and start-up of (i) the Cold Mill Project, which is expected to be
completed in the second half of 1997, will total approximately $200.0 million,
(ii) the IDI Project, which is expected to be completed in 1998, will total
approximately $65.0 million and (iii) the Caster Project, which is expected to
be completed in the second quarter of 1998, will total approximately $75.0
million. There can be no assurance that the Expansion Projects will be completed
as planned or at the costs currently budgeted or that the Company will have
adequate sources of funds for any such future capital expenditures. The Company
may also require additional financing in the event it decides to enter into
strategic alliances or make acquisitions.
The Company intends to use cash on hand, funds from operations and borrowings under the Credit Agreement (as defined) to finance the construction and startup of the Cold Mill Project. The Company's Credit Agreement provides for a $150.0 million senior term loan facility for the construction of the Cold Mill Project. Borrowings under the Credit Agreement are conditioned upon the Company's compliance with various financial and other covenants and other conditions set forth therein and, as a result, there can be no assurance that such financing will be available to the Company as planned. See "Description of Certain Indebtedness." The Company intends to use $20.0 million of the $25.4 million of net proceeds it recently received from the private placement of its Common Stock to finance a portion of the IDI Project and intends to finance the remaining $45.0 million of expenditures required to construct and fund the start-up operating losses for the IDI Project with indebtedness (the "IDI Financing"). The IDI Financing will be raised by IDI, the Company's wholly owned subsidiary. Although IDI is negotiating to obtain such indebtedness, it has not yet secured a commitment. No assurances can be given that the IDI Financing will be obtained on terms acceptable to the Company or within the limitations contained in the Credit Agreement. The Company intends to use approximately $75.0 million of the net proceeds from the offerings to finance the Caster Project. The extent of additional financing will depend on the success of the Company's business. There can be no assurance that additional financing, if needed, will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company and within the limitations contained in the Credit Agreement or any future financing, including the IDI Financing. Failure to obtain the required funds could delay or prevent some portion of the Expansion Projects from being implemented or completed, which could have a material adverse effect on the Company. See "-- Restrictive Covenants."
COST OF STEEL SCRAP AND OTHER RAW MATERIALS
The Company's principal raw material is scrap metal derived from, among other sources, junked automobiles, industrial scrap, railroad cars and railroad track materials, agricultural machinery and demolition scrap from obsolete structures, containers and machines. The prices for scrap are subject to market forces largely beyond the control of the Company, including demand by U.S. and international steel producers, freight costs and speculation. The prices for scrap have varied significantly and may vary significantly in the future. In addition, the Company's operations require substantial amounts of other raw materials, including various types of pig iron, alloys, refractories, oxygen, natural gas and electricity, the price and availability of which are also subject to market conditions. The Company may not be able to adjust its product prices, especially in the short-term, to recover the costs of increases in scrap and other raw material prices. The Company's future profitability may be adversely affected to the extent it is unable to pass on higher raw material and energy costs to its customers. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business -- Steel Scrap and Scrap Substitute Resources" and "-- Energy Resources."
CYCLICALITY OF STEEL INDUSTRY AND END USER MARKETS
The steel industry is highly cyclical in nature and sensitive to general economic conditions. The financial condition and results of operations of companies in the steel industry are generally affected by macroeconomic fluctuations in the U.S. and global economies. The Company is particularly sensitive to trends in the automotive, oil and gas, gas transmission, construction, commercial equipment, rail transportation, agriculture and durable goods industries, because these industries are significant markets for the Company's products and are highly cyclical. In the early 1980s, U.S. integrated steel producers incurred significant restructuring charges associated with efforts to reduce excess capacity. Significant losses and bankruptcies in certain cases, occurred as a result of a number of factors, including worldwide production overcapacity, increased U.S. and global competition, low levels of steel demand, substitution of alternative materials for steel, high labor costs, inefficient plants and the strength of the U.S. dollar relative to other currencies. In the late 1980s, earnings of U.S. steel producers benefitted from improved industry conditions. During the 1990 to 1992 downturn, substantial excess worldwide manufacturing capacity for steel products, combined with a worldwide economic slowdown, resulted in a substantial decrease in the demand for steel products, increased competition and a decline in financial performance for the steel industry. Although demand for steel products recovered and the profitability of the industry has improved recently, there can be no assurance that economic conditions will remain favorable to the steel industry. Future economic downturns, a stagnant economy or currency fluctuations may adversely affect business, results of operations, and financial condition of the Company.
COMPETITION
Competition within the steel industry can be intense. The Company competes primarily on the basis of price, quality, and the ability to meet customers' product specifications and delivery schedules. Many of the Company's competitors are integrated steel producers which are larger, have substantially greater capital resources and experience, and, in some cases, have lower raw material costs than the Company. The Company also competes with other mini-mills which may have greater financial resources. The highly competitive nature of the industry, combined with excess production capacity in some products, may in the future exert downward pressure on prices for certain of the Company's products. In addition, in the case of certain product applications, steel competes with other materials, including plastics, aluminum, graphite composites, ceramics, glass, wood and concrete. There can be no assurance that the Company will be able to compete effectively in the future.
U.S. The Company's products compete with many integrated hot-rolled coil producers, such as Rouge Steel Co. and National Steel Corp.'s Great Lakes Steel Division in the Detroit area, LTV Steel Co., Inc., Inland Steel Co., Bethlehem Steel Corp., U.S. Steel, Acme Steel Co. and Beta Steel Corp. in the northwest Indiana and Chicago area, as well as a growing number of hot-rolled mini-mills, such as Nucor Corporation's ("Nucor's") Crawfordsville, Indiana and Hickman, Arkansas facilities and the Gallatin Steel Company's mini-mill in Ghent, Kentucky. New hot-rolled band producing mini-mills are scheduled to be opened by Delta Steel, the BHP/Northstar joint venture in Delta, Ohio, and TRICO Steel, the three-way, joint venture in Alabama among LTV Steel Co., Inc., Sumitomo Metal USA Corp. and British Steel, in 1997. Despite significant reductions in raw steel production capacity by major U.S. producers over the last decade, the U.S. industry continues to be adversely affected, from time to time, by excess world capacity. According to the American Iron and Steel Institute (the "AISI"), annual U.S. raw steel production capacity was reduced from approximately 154 million tons in 1982 to approximately 112 million tons in 1995. This reduction resulted in higher utilization rates. Average utilization of U.S. industry capacity improved from approximately 61% in the 1982 to 1986 period to approximately 83% in the 1987 to 1991 period, was approximately 89% in 1993, 93% in 1994 and 93% in 1995. Recent improved production efficiencies also have begun to increase overall production capacity in the United States. Excess production capacity exists in certain product lines in U.S. markets and, to a greater extent, worldwide. Increased industry overcapacity, coupled with economic recession, would intensify an already competitive environment.
Over the last decade, extensive downsizings have necessitated costly restructuring charges that, when combined with highly competitive market conditions, have resulted at times in substantial losses for some U.S. integrated steel producers. A number of U.S. integrated steel producers have gone through bankruptcy reorganization. These reorganizations have resulted in somewhat reduced capital costs for these producers and may permit them to price their steel products at levels below those that they could have otherwise maintained.
An increasing number of mini-mills have entered or are expected to enter the EAF-based thin-slab/flat-rolled steel market in the next several years. These mini-mills have cost structures and management cultures more closely akin to those of the Company than to the integrated producers. Flat-rolled mini-mill production capacity increased from 4.0 million tons in 1994 to approximately 5.0 million tons in 1995, and industry sources expect this cumulative flat-rolled mini-mill capacity to reach 12.0 million tons in 1997 and 14.0 million tons in 1998. The Company's penetration into the flat-rolled steel market is limited by geographic considerations, to some extent by gauge and width of product specifications and by metallurgical and physical quality requirements. Based on product type and geographic location, the Company believes it will most closely compete with the following mini-mills: Nucor's Crawfordsville, Indiana facility, Gallatin Steel's Ghent, Kentucky facility, Delta Steel's Delta, Ohio facility, and, to a more limited extent, Nucor's Hickman, Arkansas facility, Nucor's Berkeley County, South Carolina facility, and TRICO Steel's facility in northern Alabama. Each of these mills produces hot-rolled product, however, only an affiliate of the anticipated Delta Steel facility in Delta, Ohio is expected to produce hot-rolled galvanized product, and only Nucor's Crawfordsville, Indiana facility produces cold-rolled and cold-rolled galvanized products.
Non-U.S. U.S. steel producers face significant competition from certain non-U.S. steel producers who may have lower labor costs. In addition, U.S. steel producers may be adversely affected by fluctuations in the relationship between the U.S. dollar and non-U.S. currencies. Furthermore, some non-U.S. steel producers have been owned, controlled or subsidized by their governments, and their decisions with respect to production and sales may be, or may have been in the past, influenced more by political and economic policy considerations than by prevailing market conditions. Some non-U.S. producers of steel and steel products have continued to ship into the U.S. market despite decreasing profit margins or losses. If certain pending trade proceedings ultimately do not halt or otherwise provide relief from such trade practices, if other relevant U.S. trade laws are weakened, if world demand for steel eases or if the U.S. dollar strengthens, an increase in the market share of imports may occur, which could adversely affect the pricing of the Company's products. The costs for current and future environmental compliance may place U.S. steel producers, including the Company, at a competitive disadvantage with respect to non-U.S. steel producers, which are not subject to environmental requirements as stringent as those in the U.S.
RISKS RELATED TO SCRAP SUBSTITUTES
The process that the Company currently plans to use to produce DRI in the IDI Project (the "IDI Process") has not been previously used commercially for this purpose. There are many alternative technologies available to produce commercially viable scrap substitute material, but only a small number have been commercially operated. The technologies that the Company intends to use in its IDI Project have not been previously combined into a steel scrap substitute production facility. There is a risk, therefore, that the IDI Process will not produce DRI for a price that makes it commercially viable as a steel scrap substitute. If the IDI Process does not work as planned, the capital costs incurred in designing and building the facility may be largely unrecoverable, the planned 430,000 tonnes of low cost liquid pig iron that was intended to be available annually to help lower the Company's overall metallics costs might be unavailable or available at higher costs, and the impact could be materially adverse to the Company's profitability. In addition, the Company does not have any experience in the production of DRI and there can be no assurance that the Company will be able to successfully design, construct and operate the IDI Project or that the expected production capacity will be achieved. Although the technologies to be employed by Qualitech to produce iron carbide in its Corpus Christi, Texas plant currently under construction have been used commercially, Qualitech is a start-up company, and there is no assurance that it will be able to successfully complete that project, or that the project, when completed, will produce commercially viable iron carbide. If this material were not available to the Company, the Company could be unable to secure a comparable amount of similar material or the cost to the Company could be materially higher, causing the Company to rely more heavily on potentially higher-priced steel scrap for a greater proportion of its melt mix. See "Business -- The Company's Steelmaking Equipment and Technology -- The IDI Project" and "-- Steel Scrap and Scrap Substitute Resources."
RELIANCE ON MAJOR CUSTOMERS
The Company has entered into long-term "off-take" contracts with Heidtman and with Preussag pursuant to which the they have agreed to purchase an aggregate of at least 42,000, or 36%, of the Company's monthly output capacity. If the Company's actual output is less than its full capacity, as it has been to date, sales to these customers increase as a percentage of the Company's total net sales. For the nine months ended September 28, 1996, these customers accounted for 37% and 10%, respectively, of the Company's total net sales, and the Company's top five customers accounted for approximately 66% of its total net sales. Although the Company expects to continue to depend upon certain customers for a significant percentage of its net sales, there can be no assurance that any of the Company's customers will continue to purchase its steel from the Company. A loss of one or more of them, or of a group of its next largest customers could have a material adverse effect on the Company's results of operations and financial condition. Heidtman is an affiliate of a stockholder of the Company. The President and Chief Executive Officer of Heidtman serves as the designated director of such stockholder and another stockholder on the Company's Board of Directors. Preussag is a stockholder of the Company and a representative of Preussag serves on the Company's Board of Directors. If the terms of the "off-take" contracts are or become burdensome to these companies, or if a dispute arises over the contracts, either or both of the "off-take" providers could be viewed as having a conflict of interest between what they perceive to be best for their companies as "off-take" buyers and what is best for the Company as the product seller.
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
U.S. steel producers, including the Company, are subject to stringent federal, state and local laws and regulations relating to, among other things, wastewater, air emissions, toxic use reduction and hazardous material disposal. The Company believes that its facility is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its results of operations or financial condition. The Company has made, and will continue to make, expenditures to comply with such provisions. The Company generates certain waste products, such as EAF dust, that are classified as hazardous waste and must be properly disposed of under applicable environmental laws, which, despite the Company's due care, could result in the imposition of strict liability for the costs of clean-up of any landfills to which the waste may have been transported.
Environmental legislation and regulations and related administrative policies have changed rapidly in recent years. It is likely that the Company will be subject to increasingly stringent environmental standards in the future (including those under the Clean Air Act Amendments of 1990, the Clean Water Act Amendments of 1990, stormwater permit program and toxic use reduction programs) and will be required to make additional expenditures, which could be significant, relating to environmental matters on an ongoing basis. In addition, due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated.
DEPENDENCE UPON KEY MANAGEMENT
The Company's ability to maintain its competitive position is dependent to a large degree on the services of its senior management team, including Keith E. Busse, President and Chief Executive Officer, Mark D. Millett, Vice President of Melting and Casting, Richard P. Teets, Jr., Vice President of Rolling and Finishing, and Tracy L. Shellabarger, Vice President and Chief Financial Officer. Although these senior managers all have employment agreements with, and are substantial stockholders of, the Company, there can be no assurance that such individuals will remain with the Company. The loss of the services of any of these individuals or an inability to attract, retain and maintain additional senior management personnel could have a material adverse effect on the Company. There can be no assurance that the Company will be able to retain its existing senior management personnel or to attract additional qualified senior management personnel. See "Management." The Company maintains key man life insurance on Messrs. Busse, Millett, Teets and Shellabarger.
RESTRICTIONS ON PAYMENT OF DIVIDENDS ON COMMON STOCK
The Company has never paid any dividends on its Common Stock and does not anticipate paying dividends on its Common Stock in the foreseeable future. In addition, the Company is currently prohibited from declaring cash dividends on the Common Stock under its Credit Agreement. See "Dividend Policy" and "Description of Certain Indebtedness."
RESTRICTIVE COVENANTS
The Company's Credit Agreement restricts the Company's ability to incur
additional indebtedness, except (i) refinancings of indebtedness incurred under
the Credit Agreement and other existing indebtedness, (ii) licensing or royalty
fees payable to SMS Schloemann-Siemag AG and (iii) unsecured indebtedness in an
aggregate principal amount at any one time not greater than $5.0 million. In
addition, the Credit Agreement prohibits the Company from making capital
expenditures (other than specified permitted capital expenditures) in any fiscal
year in excess of the lesser of (i) $20.0 million and (ii) the sum of $12.0
million plus 25% of excess cash flow for the immediately preceding year plus 70%
of the amount of capital expenditures allowed but not made in the immediately
preceding fiscal year. The Company may make specified permitted capital
expenditures including up to $230.0 million for the Cold Mill Project, up to
$55.0 million for the Caster Project and an equity investment of up to $25.0
million for the IDI Project. The Company is also prohibited from creating liens
on its properties except (i) liens created in connection with its indebtedness
under the Credit Agreement and in connection with its existing indebtedness,
(ii) liens created and/or deposits made in the ordinary course of business for
taxes and assessments, workmen's compensation, unemployment insurance and other
social security obligations, bids, surety and appeal bonds and the like and
(iii) purchase money liens on assets acquired after completion of the Cold Mill
Project in an aggregate amount not to exceed $5.0 million. The Credit Agreement
contains additional restrictive covenants, including among others, covenants
restricting the Company and its subsidiaries with respect to: investments in
additional equipment and business opportunities, entering into certain
contracts, disposition of property or assets, the payment of dividends, entering
into sale-leaseback transactions, entering into transactions with affiliates,
mergers and consolidations, the making of payments on and modifications of
certain indebtedness and modification of certain agreements. In addition, the
Credit Agreement requires the Company to meet certain financial tests, including
maintaining (a) its current ratio at or above 1.3, (b) its leverage ratio at or
below 2.25 for 1996, 2.10 for 1997, 1.90 for 1998, 1.40 for 1999 and 1.00
thereafter, (c) its tangible net worth at or above the sum of (i) $45.0 million
and
(ii) 50% of cumulative net income at such time and (d) its fixed charge coverage ratio at or above 1.00 for 1996, 1.15 for 1997 and 1998, and 1.25 thereafter. See "Description of Certain Indebtedness." In addition, the Stockholders Agreement dated as of June 30, 1994 (the "Stockholders Agreement"), among the Company and the stockholders party thereto, contains a number of restrictive covenants. See "Description of Capital Stock -- The Stockholders Agreement." In addition to a voting agreement for the election of all ten of the Company's Directors, the Stockholders Agreement restricts the stockholders from selling, transferring, assigning, pledging, or otherwise disposing of their shares without first according all other parties "first offer" rights, and, even if declined, enables any stockholder who wishes to do so to particpate with the selling stockholder in any proposed sale (thereby reducing the amount of shares the selling stockholder would otherwise be entitled to sell). These restrictions do not apply to affiliate Transfers (as defined) within a stockholder group, to public sales, or to a sale of the Company, and the restriction will cease to apply entirely upon the realization of a "public float" (defined as the date upon which at least 25% of the Company's Common Stock has been sold pursuant to effective registration statements under the Securities Act). Except with the prior written consent of holders of 70% of the outstanding shares of Common Stock subject to the Stockholders Agreement, until a Public Float has been realized, the Company is not permitted to pay dividends or make distributions, redeem, purchase, or acquire its own equity securities, issue debt or equity securities (except for stock options), make investments (except for investments in limited financial instruments) in excess of $5.0 million, merge, sell or dispose of assets in excess of $5.0 million, acquire an interest in any business involving consideration of $2.0 million or more, or make capital expenditures in excess of $5.0 million. These restrictions may make it more difficult for the Company to operate in a manner that it deems necessary or appropriate to take advantage of opportunities, to adjust to operational difficulties or to respond to other difficulties.
ABSENCE OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICES
Prior to the offerings, there has been no public market for the Common Stock. The initial public offering price of the Common Stock will be determined by negotiations among the Company, the Selling Stockholders and the Underwriters and may not be indicative of the market price for shares of the Common Stock after the offerings. For a description of the factors to be considered in determining the initial public offering price, see "Underwriters -- Pricing of the Offerings." Although the Common Stock is expected to be approved for quotation on the Nasdaq National Market ("Nasdaq"), there can be no assurance that an active trading market for the Common Stock will develop or if developed, that such a market will be sustained. The market price for shares of the Common Stock may be significantly affected by such factors as the Company's net sales, earnings and cash flow, the difference between the Company's actual results and results expected by investors and analysts, news announcements including price reductions by the Company or its competitors or changes in general market conditions. In addition, broad market fluctuation and general economic conditions may adversely affect the market price of the Common Stock, regardless of the Company's actual performance.
SHARES ELIGIBLE FOR FUTURE SALE
The future sale of a substantial number of shares of Common Stock in the public market following the offerings, or the perception that such sales could occur, could adversely affect the market price for the Common Stock and could make it more difficult for the Company to raise funds through equity offerings in the future. Upon completion of the offerings, the Company expects to have 47,803,341 shares of Common Stock outstanding. Of these shares, the 9,843,750 shares of Common Stock sold in the offerings will be freely tradeable without restriction under the Securities Act of 1933, as amended (the "Securities Act"), except for any such shares which may be acquired by an "affiliate" of the Company. The remaining 37,959,591 shares of Common Stock outstanding will be "restricted securities" and may in the future be sold without registration under the Securities Act to the extent permitted by Rule 144 under the Securities Act or any applicable exemption under the Securities Act. See "Shares Eligible for Future Sale." In connection with the offerings, the Company, its executive officers and directors, the Selling Stockholders, and certain other stockholders of the Company, have agreed that, subject to certain exceptions, they will not sell, offer or contract to sell any shares of Common Stock without the prior written consent of Morgan Stanley & Co. Incorporated, for a period of 180 days after the date of this Prospectus. Certain of the Company's existing stockholders also have
registration rights with respect to their Common Stock. In addition, as soon as practicable after the offerings, the Company intends to file a registration statement under the Securities Act to register shares of Common Stock reserved for issuance under the Company's 1994 and 1996 Incentive Stock Option Plans, thus permitting the resale of such shares by non-affiliates upon issuance in the public market without restriction under the Securities Act. As of October 26, 1996, options to purchase 634,159 shares were outstanding under these Plans. See "Management -- Employee Plans," "Description of Capital Stock -- The Registration Agreement," "Shares Eligible for Future Sale" and "Underwriters."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Indiana Business Corporation Law (the "BCL"), and certain provisions of the Stockholders Agreement may have the effect of delaying or preventing transactions involving a change of control of the Company, including transactions in which stockholders might otherwise receive a substantial premium for their shares over then current market prices, may limit the ability of stockholders to approve transactions that they may deem to be in their best interests or may delay or frustrate the removal of incumbent directors. In addition, as long as the stockholders party to the Stockholders Agreement hold a majority of the Company's outstanding Common Stock, they will be able to elect all of the Company's directors. After giving effect to the offerings, the stockholders party to the Stockholders Agreement will hold 79.4 % of the outstanding shares of Common Stock. See "Description of Capital Stock -- Certain Provisions of Indiana Law Regarding Takeovers" and "-- The Stockholders Agreement."
DILUTION
Investors in the Common Stock offered hereby will experience an immediate dilution of $10.90 per share (assuming an initial public offering price of $16.00 per share) in the net tangible book value of their shares of Common Stock. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the offerings are estimated to be approximately $140.5 million (assuming an initial public offering price of $16.00 per share), after deducting estimated underwriting discounts and commissions and offering expenses. The Company will not receive any proceeds from the sale of Common Stock by the Selling Stockholders.
The Company will use the net proceeds of the offerings: (i) to prepay approximately $55.0 million principal amount of the Company's Subordinated Notes (which bear interest at 11% per annum and mature on September 30, 2002), together with accrued interest to the date of payment (estimated to be approximately $.5 million) and a prepayment premium of approximately $.9 million, (ii) to finance approximately $75.0 million of construction and start-up costs for the Caster Project and (iii) to prepay approximately $9.1 million of Term Loan Notes outstanding under the Credit Agreement, together with accrued interest to the date of prepayment. The Term Loan Notes outstanding under the Credit Agreement bear interest at variable rates (8.0% weighted average rate at September 28, 1996) and mature in 2002. See "Description of Certain Indebtedness." The Company intends on funding its Caster Project over the next 30 months. Pending such use, the Company will invest these funds in short-term, marketable, investment grade securities. See "Risk Factors -- Significant Capital Requirements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock. The Company currently anticipates that all of its future earnings will be retained to finance the expansion of its business and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. Any determination to pay cash dividends in the future will be at the discretion of the Company's Board of Directors after taking into account various factors, including the Company's financial condition, results of operations, outstanding indebtedness, current and anticipated cash needs and plans for expansion. The payment of dividends on the Company's Common Stock is subject, in any event, to limitations under the terms of the Company's Credit Agreement. See "Description of Certain Indebtedness."
DILUTION
The pro forma net tangible book value of the Company at September 28, 1996 after giving effect to the exercise of the Warrants would have been approximately $109.4 million or $2.85 per share of Common Stock. Pro forma net tangible book value per share is determined by dividing the net tangible book value (total assets less net intangibles and less total liabilities) by the number of outstanding shares of Common Stock. After giving effect to the sale by the Company of 9,375,000 shares of Common Stock offered hereby at an assumed initial public offering price of $16.00 per share and the application of the net proceeds as set forth under "Use of Proceeds," the net tangible book value of the Company as of September 28, 1996, would have been approximately $244.0 million or $5.10 per share, representing an immediate increase in net tangible book value of $2.25 per share to the existing stockholders and an immediate dilution to investors purchasing shares in the offerings of $10.90 per share. The following table illustrates this per share dilution:
Assumed initial public offering price.............................. $ 16.00
Pro forma net tangible book value per share at September 28,
1996.......................................................... $ 2.85
Increase per share attributable to sale of Common Stock in the
offerings..................................................... 2.25
------
Pro forma net tangible book value per share after the offerings.... 5.10
-------
---
Dilution per share to investors who purchase Common Stock in the
offerings........................................................ $ 10.90
==========
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The foregoing table does not give effect to the exercise of outstanding options granted to employees to purchase 634,159 shares of Common Stock at a weighted average exercise price of $4.25 per share. If all such outstanding options were exercised, the dilution to new investors would be $10.96 per share.
The following table sets forth on a pro forma basis as of September 28, 1996, the number of shares and percentage of total outstanding Common Stock purchased, the total consideration and percentage of total consideration paid and the weighted average price per share paid by existing stockholders (including the holders of the Warrants) and by investors purchasing the shares of Common Stock offered by the Company hereby (assuming an initial public offering price of $16.00 per share).
SHARES PURCHASED TOTAL CONSIDERATION WEIGHTED
---------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
Existing stockholders(1).......... 38,428,341 80.4% $158,559,705 51.4% $ 4.12
New investors..................... 9,375,000 19.6 150,000,000 48.6 16.00
--------- --- --------- ---
Total................... 47,803,341 100.0% $308,559,705 100.0%
========= === ========= ===
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(1) Sales by the Selling Stockholders in the offerings (assuming no exercise of the U.S. Underwriters' over-allotment option) will cause the number of shares held by existing stockholders to be reduced, and the number of shares held by new investors to be increased by 468,750. See "Principal and Selling Stockholders."
CAPITALIZATION
The following table sets forth the actual cash and cash equivalents, current maturities of long-term debt and capitalization of the Company as of September 28, 1996, and as adjusted to give effect to the offerings and the exercise of the Warrants and the application of the net proceeds therefrom (assuming an initial public offering price of $16.00 per share). This information should be read in conjunction with "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
SEPTEMBER 28, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE INFORMATION)
Cash and cash equivalents............................................. $ 30,564 $ 105,965
======== ========
Current maturities of long-term debt.................................. $ 5,840 $ 5,840
======== ========
Long-term debt, excluding current maturities:
Revolving credit facility........................................... $ -- $ --
Senior term loans................................................... 150,000 140,900
11% subordinated notes.............................................. 49,905(1) --
Other(2)............................................................ 51,960 51,960
-------- --------
Total long-term debt........................................ 251,865 192,860
Stockholders' equity:
Common Stock, $.01 par value per share, 100,000,000 shares
authorized, 36,636,869 shares issued and outstanding; 47,803,341
shares issued and outstanding, as adjusted....................... 366 478
Additional paid-in capital.......................................... 163,341 303,804
Amounts due from stockholders....................................... (325) --
Accumulated deficit................................................. (39,746) (47,536)
-------- --------
Total stockholders' equity.................................. 123,636 256,746
-------- --------
Total capitalization...................................... $375,501 $ 449,606
======== ========
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(1) The Subordinated Notes are recorded net of unamortized debt discount (approximately $5.1 million as of September 28, 1996). The Subordinated Notes were originally issued with warrants to purchase Common Stock. A portion of the net proceeds from the sale of the Subordinated Notes was allocated to additional paid-in capital to reflect the issuance of the warrants. The remaining debt discount will be expensed in connection with the prepayment of the Subordinated Notes with a portion of the net proceeds of the offerings.
(2) For a description of other long-term debt, see Note 3 to the Company's Consolidated Financial Statements appearing elsewhere in this Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the Company for the periods indicated. The selected consolidated financial data for the period from September 7, 1993 (date of inception) through December 31, 1993, as of December 31, 1993, 1994 and 1995 and September 28, 1996, for each of the two years in the period ended December 31, 1995 and for the nine months ended September 28, 1996 are derived from the Company's Consolidated Financial Statements appearing elsewhere in this Prospectus which have been audited by Deloitte & Touche LLP. The selected consolidated financial data for the nine months ended September 30, 1995 are derived from the unaudited consolidated financial statements of the Company and, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary to present fairly such data. Operating results for interim periods are not necessarily indicative of a full year's operations. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus.
SEPTEMBER 7, 1993 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31, NINE MONTHS ENDED
THROUGH ------------------- ---------------------------------------
DECEMBER 31, 1993 1994 1995 SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------- -------- -------- ------------------ ------------------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ -- $ -- $ 137 $ -- $ 174,619
Cost of products sold........... -- -- 3,169 -- 158,257
-------- -------- ---------- ---------- ----------
Gross profit (loss)......... -- -- (3,032) -- 16,362
Selling, general and
administrative expenses....... 1,159 4,192 13,580 8,640 9,347
-------- -------- ---------- ---------- ----------
Income (loss) from
operations................ (1,159) (4,192) (16,612) (8,640) 7,015
Foreign currency gain (loss).... (4,952) (3,272) (2,658) 260
Interest expense(1)............. 2 43 564 139 18,050
Interest income................. 1 307 560 463 957
-------- -------- ---------- ---------- ----------
Net loss(2)................. $(1,160) $ (8,880) $(19,888) $ (10,974) $ (9,818)
======== ======== ========== ========== ==========
Net loss per share(2)........... $ (.07) $ (.36) $ (.62) $ (.34) $ (.27)
Weighted average common shares
outstanding(2)(3)............. 15,931 24,679 31,975 31,952 35,940
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents....... $ 117 $ 28,108 $ 6,884 $ 3,202 $ 30,564
Working capital................. (29) 8,230 (14,488) (2,995) 58,848
Property, plant, and equipment,
net........................... 200 54,566 274,197 204,796 289,431
Total assets.................... 521 94,618 320,679 227,989 422,368
Long-term debt (including
current maturities)........... 800 11,949 223,054 151,012 257,705
Stockholders' equity
(deficiency).................. (429) 62,536 62,972 66,820 123,636
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(1) Interest expense for the nine months ended September 28, 1996 would have
been approximately $12.3 million, giving pro forma effect to the offerings
and the application of net proceeds therefrom to prepay (a) all $55.0
million principal amount of the Company's outstanding Subordinated Notes and
(b) approximately $9.1 million of the Company's Term Loan Notes. These
adjustments assume that (i) the transactions occurred as of January 1, 1996
and (ii) the average interest rate on the Term Loan Notes during the period
was 7.6%. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) For the nine months ended September 28, 1996, on a pro forma basis, giving effect to the transactions described in footnote 1 above and the exercise of the Warrants as if they had occurred as of January 1, 1996, the Company's net loss and net loss per share would have been approximately $4.1 million and $.09, respectively. The pro forma net loss and net loss per share does not give effect to an extraordinary charge of approximately $8.3 million ($.9 million in cash) that the Company expects to incur as a result of the prepayment of the Subordinated Notes. Pro forma net loss per share is based on the weighted average number of common shares outstanding during the period plus the issuance of 9,375,000 shares of Common Stock offered by the Company hereby and the 1,791,472 shares of Common Stock upon exercise of the Warrants.
(3) Weighted average common shares outstanding for each period presented give effect to the anti-dilutive effect of shares issued from September 23, 1995 through September 23, 1996 using the treasury stock method. Common Stock equivalents are included only when dilutive.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, the Company's Consolidated Financial Statements, including the notes thereto, appearing elsewhere in this Prospectus. Certain information contained below, including information with respect to the Company's plans with respect to the Cold Mill, IDI and Caster Projects, are forward-looking statements. See "Risk Factors" for a discussion of important factors which could cause actual results to differ materially from the forward- looking statements contained herein.
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel mini-mill, which commenced operations in January 1996. The Company was founded by executives and managers who pioneered the development of thin-slab/flat-rolled CSP technology and directed the construction and operation of the world's first thin-slab/flat-rolled mini-mill. Building upon their past experience with CSP technology, management founded SDI to produce steel more efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to become the low cost producer of a broad range of flat-rolled steel products, including hot-rolled, cold-rolled and galvanized sheet, and to serve more markets than any other flat-rolled mini-mill. In addition, the Company intends to participate in the development and use of new technologies to produce a broad range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D. Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the mini-mill in October 1994 and commissioned it in December 1995. The Company believes that this 14-month construction period is the fastest ever for this kind of facility. In addition, the Company believes that the approximately $275.7 million initial capital cost of its mini-mill is approximately $75.0 million, or approximately 20%, less than the cost of comparable mini-mills currently operating. Actual production at the mini-mill of primary grade steel commenced on January 2, 1996. The mill achieved an annualized production rate of 930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities to produce further value-added steel products, Steel Dynamics is currently constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton annual capacity which is scheduled for completion during the second half of 1997. Steel Dynamics also plans to add a second melting furnace, a second caster and tunnel furnace, and an additional coiler in 1998 to expand its annual production capacity of hot-rolled steel from 1.4 million tons to approximately 2.4 million tons. In addition, through IDI, the Company intends to construct a 520,000 tonne annual capacity plant for the manufacture of DRI, which the Company expects to be completed in 1998. The DRI, after further processing into 430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel scrap substitute.
Management strategically located the Company's mini-mill within close proximity to its natural customer base, steel service centers and other end users, abundant supplies of automotive and other steel scrap (SDI's principal raw material), competitive sources of power, and numerous rail and truck transportation routes. Steel Dynamics believes that its strategic location provides it with sales and marketing as well as production cost advantages. The Company has secured a stable baseload of sales through long-term "off-take" contracts with two major steel consumers, a 30,000 ton per month sales contract with Heidtman, a major Midwest-based steel service center and distributor and an affiliate of one of the Company's stockholders, and a 12,000 ton per month sales contract with Preussag, a major German steel manufacturer and a stockholder of the Company, with affiliate distributors and steel service centers throughout the United States. The Company has also sought to assure itself of a secure supply of steel scrap and scrap substitute. To accomplish this objective, SDI has entered into a long-term scrap purchasing services contract with OmniSource, one of the largest scrap dealers in the Midwest and an affiliate of one of the Company's stockholders. In addition, the Company has also sought to assure itself of a secure supply of scrap substitute material for use as a lower cost complement to steel scrap as part of the Company's melt mix. SDI has entered into a long-term 300,000 tonne per year
"off-take" contract to purchase iron carbide from Qualitech's iron carbide facility currently under construction in Corpus Christi, Texas which is expected to be completed in 1998. Additional scrap substitute material will be provided through the IDI Project.
The Company's business strategy is to use advanced CSP hot-rolled steel making and cold-rolling technologies to produce high surface quality flat-rolled steel in a variety of value-added sizes, gauges and surface treatments, emphasizing low production costs, reliable product quality and excellent customer service. In addition, SDI intends to remain financially strong and competitive through the selective purchasing of scrap and scrap substitutes to offset the effects of cyclical cost/price imbalances.
Since commencing commercial operations in January 1996, through June 29, 1996, the Company incurred net losses of approximately $14.1 million and had an accumulated deficit of approximately $44.0 million. However, in July, a three-week operating period, August 1996, a four-week operating period, and September 1996, a five-week operating period, SDI reported monthly net income of approximately $67,000, approximately $1.8 million and approximately $2.5 million as a result of shipments of approximately 56,000, 76,000 and 97,000 tons, respectively, representing approximately 67%, 68% and 69%, respectively, of capacity.
The Company's operations are subject to the cyclical nature of the steel industry and the U.S. economy as a whole. U.S. steel industry production was approximately 104.9 million tons in 1995, an increase of 8.0% from an average during the prior three-year period of approximately 97.1 million tons. This increase was due primarily to an improvement of general economic conditions and increased demand for durable goods. For instance, the production of U.S. cars and trucks in 1995 increased to approximately 12.0 million units from an annual average during the prior three-year period of approximately 11.0 million units. U.S. steel production in 1995 increased approximately 4.3% to approximately 104.9 million tons compared to approximately 100.6 million tons in 1994. Shipments increased over the same corresponding period from approximately 95.1 million tons to approximately 97.5 million tons, an increase of approximately 2.5%. Other factors which affect the performance of the Company include increasing competition from U.S. and international steel producers (both integrated mills and mini-mills), worldwide supply and demand for hot bands and the strength of the U.S. dollar relative to the currencies of other steel producing countries.
The following table summarizes the annual raw steel capacity, raw steel production, utilization rates and finished shipments information for the U.S. steel industry (as reported by the AISI) for the years 1993 through 1995:
U.S. RAW STEEL U.S. RAW STEEL TOTAL U.S.
YEAR CAPABILITY PRODUCTION UTILIZATION SHIPMENTS
- ---- -------------- -------------- ----------- ----------
(THOUSANDS OF TONS)
1993....................... 109,900 97,877 89.1% 89,022
1994....................... 108,200 100,579 93.0% 95,084
1995....................... 112,400 104,930 93.4% 97,494
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The Company believes that the current market for flat-rolled steel appears to be sufficiently strong to absorb the current capacity of integrated and mini-mill producers. In 1995, spot prices for hot band dropped significantly in the second and third quarters, approximately $40 and $20 per ton, respectively, before recovering by $10 per ton in the fourth quarter. Since December 1995, a series of spot price increases for hot band amounting to $30 to $40 per ton have been announced by leading U.S. producers, the most recent of which was announced effective for the third quarter of 1996. Although Steel Dynamics believes the immediate outlook for the U.S. economy remains positive, there can be no assurance that the level of net tons shipped in the industry and current price levels will continue or increase from present levels in view of the modest nature of the improvement in the U.S. economy to date, increasing worldwide competition within the steel industry and increasing steel production capacity.
Net Sales. The Company's net sales are a function of net tons shipped, prices and mix of products. SDI has experienced continued net sales growth since start-up and expects that trend to continue due to increasing production and shipments as well as improving pricing. In addition, the Company's products are sold out through the end of the fourth quarter of 1996 (the latest date for which Steel Dynamics has accepted orders).
SDI has not entered into any fixed-price, long-term (exceeding one calendar quarter) contracts for the sale of steel. Although fixed price contracts may reduce the risk of price declines, these contracts also limit the
ability of the Company to take advantage of price increases. All of the Company's orders are taken at its announced pricing levels with price discounts for high volume purchases when appropriate. SDI is also able to charge premium prices for certain grades of steel, dimensions of product, or certain smaller volumes, based upon the cost of production. When the Cold Mill Project is completed in the second half of 1997, the Company will be able to manufacture more value-added products requiring more exacting tolerances, thinner gauges, finer surface conditions, and galvanized coatings, thereby enabling it to charge premium prices.
Of the Company's shipments through September 28, 1996, approximately 37% have been purchased by Heidtman and 10% have been purchased by Preussag pursuant to long-term "off-take" contracts based upon market pricing. In addition to this stable baseload of demand, the Company is continually seeking to attract new customers for its products. The Company had 18 customers at the end of January 1996 and the number of the Company's customers has grown to 100 at the end of September. SDI is also continually seeking to enter new markets. Of the Company's shipments since start-up, the Company believes that approximately 23% has been used in the automotive industry, approximately 18% for tubing, approximately 13% for construction, approximately 12% for commercial equipment, with the balance for appliances and rail, machinery, agriculture and recreational equipment. Steel Dynamics believes that when the Cold Mill Project is completed, it will be able to broaden its customer base, diversify its product mix and access more profitable markets. See "Business -- The Flat-Rolled Market."
Cost of Products Sold. All direct and indirect manufacturing costs are included in costs of products sold. The principal elements comprising Steel Dynamics' current costs of products sold are steel scrap and scrap substitutes, electricity, natural gas, oxygen and argon, electrodes, alloys, depreciation and direct and indirect labor and benefits.
Steel scrap and scrap substitutes represent the most significant component of the Company's total cost of products sold. Although SDI believes that there will be an ample supply of high quality, low residual scrap in the future, the Company recognizes that the construction of additional mini-mills, increased efficiency of the steel making process and the continuing general recovery in steel prices have led to increased demand for, and higher prices of, steel scrap. The Company believes that, over the long-term, prices of steel scrap will continue to be volatile but its price ranges will likely increase. As a result, Steel Dynamics has pursued a three-part strategy to secure access to adequate supplies of steel scrap and lower cost steel scrap substitute materials. First, the Company has entered into a long-term steel scrap contract with OmniSource. Second, SDI has sought to assure itself of a secure supply of scrap substitute material as a lower cost complement for use in the melt mix with steel scrap through its iron carbide "off-take" contract with Qualitech. Third, the Company is pursuing the IDI Project to develop DRI.
The Company purchases its electricity from American Electric Power ("AEP"), pursuant to a contract which extends through 2005. The contract designates a portion of the Company's load as "firm" with the majority of the load designated as "interruptible." The blended rate under the contract is favorable and when the mill reaches full production is expected to be between $.024 and $.025 per kilowatt hour ("kWh"). The Company has a "primary firm" natural gas delivery contract on the Panhandle Eastern Pipeline that extends through May 2000 and an interruptible delivery contract with NIPSCO/NIFL/Crossroads that extends through December 2000. The Company believes the combined negotiated cost of natural gas and its transportation to be favorable. The Company has also contracted for all of its estimated requirements of natural gas at $1.91 per decatherm through July 1997. The Company maintains a liquid propane tank farm on site with sufficient reserves to sustain operations for approximately two weeks in the event of an interruption in the natural gas supply. SDI purchases all of its requirements for oxygen and argon from Air Products and Chemicals, Inc. ("Air Products"), which built a large plant adjacent to the mini-mill. Air Products uses its plant to supply other customers as well as the Company. As a result, the Company has been able to buy its oxygen and argon at what SDI believes to be favorable prices. Steel Dynamics generally purchases its other raw materials, such as electrodes and alloys, in the open market from various sources and their availability and price are subject to market conditions.
For manufacturing plant and equipment, the Company uses the units-of-production method of depreciation.
The current work force of Steel Dynamics consists of approximately 200 hourly and 60 salaried personnel. For September 1996, the Company's employment costs per ton shipped were approximately $14. The Company has established certain incentive compensation programs specifically designed to reward employee teams for their productivity efforts. Production employees actively share in SDI's success through a production bonus, a conversion cost bonus and a profit sharing plan. The Company's employees are not represented by any labor unions.
Selling, General & Administrative. Selling, general and administrative expenses are comprised of all costs associated with the sales, finance/accounting, materials and transportation, and administrative departments. These costs include labor and benefits, advertising, promotional materials, bad debt expenses and professional fees. These costs are not directly affected by sales volumes. SDI has established a Profit Sharing Plan for eligible employees under which a minimum of 5% of pretax profits are paid into a "profit sharing pool." The majority of the profit sharing pool is used to fund the Profit Sharing Plan, with the balance paid to employees as a cash bonus in March of each year. Selling, general and administrative expenses also include all non-capitalized start-up costs associated with the construction of the Cold Mill Project, including all labor and benefits, utilities and general supplies and services. The Company expects that these costs will increase through the construction and start-up of the Cold Mill Project. The Company may incur additional selling, general and administrative expenses as a result of becoming a publicly-held company.
Foreign Currency Gain (Loss). The foreign currency gains and losses represent transaction gains and losses incurred by the Company for purchases of equipment used within the Company's mini-mill. A portion of the purchase price, as stated within the contract to purchase the equipment, was denominated in German marks. The Company committed to purchase the equipment in December 1993 with settlement of the liability primarily occurring during the construction period of the mini-mill. No foreign currency financial instruments were entered into as a result of this equipment purchase to hedge the foreign currency risk. No commitments for equipment purchases denominated in a foreign currency exist at December 31, 1995 or September 28, 1996. The Company's strategy for managing foreign currency risk will depend on the facts and circumstances of the related transactions and the Company will consider risk management strategies, as appropriate.
Interest Expense. During the construction of the mini-mill, the costs related to construction expenditures are considered to be assets qualifying for interest capitalization under Statement of Financial Accounting Standards ("SFAS") No. 34, "Capitalization of Interest Cost." Capitalized interest for the year ended December 31, 1994 ("Fiscal 1994"), the year ended December 31, 1995 ("Fiscal 1995"), the nine months ended September 30, 1995 (the "1995 Nine-Month Period") and the nine months ended September 28, 1996 (the "1996 Nine-Month Period") was approximately $.3 million, $10.1 million, $6.0 million and $.1 million, respectively. There was no capitalized interest for the period from September 7, 1993 (date of inception) to December 31, 1993 ("Fiscal 1993"). Management expects that a majority of the interest on the indebtedness incurred to finance the construction of the Cold Mill and the IDI Projects will be capitalized.
Taxes. At December 1995, the Company had available net operating loss carryforwards ("NOLs") for federal income tax purposes of approximately $2.5 million of which $.2 million expire in 2009 and $2.3 million expire in 2010. Because of the Company's limited operating history, a valuation allowance for net deferred tax assets has been provided.
RESULTS OF OPERATIONS
Founded in September 1993, SDI commenced actual production of primary grade steel in January 1996. Accordingly, the Company's historical results of operations are not indicative of results to be expected in the future.
Net Sales. Net sales totaled approximately $174.6 million for the 1996 Nine-Month Period. SDI commenced commercial production of primary grade steel on January 2, 1996 and has continued to increase its net sales as its production of prime tons increased. By the end of September 1996, the Company was operating at an annualized rate of 930,000 tons, or at 66% of full capacity. In addition, the average sales price per prime ton increased from $302 for January 1996 to $348 for September 1996. For Fiscal 1993, Fiscal 1994
and Fiscal 1995, during which time the mini-mill was under construction, Steel Dynamics had no net sales other than $137,000 in December 1995 from the sale of approximately 600 tons of secondary grade steel.
Cost of Products Sold. Cost of products sold totaled approximately $158.3 million, or 91% of net sales, for the 1996 Nine-Month Period. As the Company continues to increase the number of prime tons sold, the Company expects that cost of products sold will continue to increase but, as a percentage of net sales, the cost of products sold will decrease. For Fiscal 1995 cost of products sold was $3.2 million.
Selling, General and Administrative. Selling, general and administrative was approximately $1.2 million, $4.2 million and $13.6 million for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively and approximately $8.6 million and $9.3 million for the 1995 Nine-Month Period and the 1996 Nine-Month Period, respectively. The increasing costs through 1995 were due to the increasing employee base as construction activity accelerated toward completion in December 1995. All costs normally classified as operating costs were classified as selling, general and administrative expenses until start-up of the mini-mill commenced in December 1995. Subsequently, once the Company began producing products for sale, such expenses were classified as cost of products sold.
Interest Expense. Interest expense totaled approximately $2,000, $43,000 and $564,000 for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and approximately $139,000 and $18.1 million for the 1995 Nine-Month Period and the 1996 Nine-Month Period, respectively. The low level of interest expense during Fiscal 1993, Fiscal 1994 and Fiscal 1995 reflects the effect of capitalizing interest relating to construction costs.
Foreign Currency Gain (Loss). Foreign currency loss totaled approximately $0, $5.0 million and $3.3 million for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and approximately $2.7 million for the 1995 Nine-Month Period. In the 1996 Nine-Month Period, foreign currency gain totaled $260,000.
Interest Income. Interest income totaled approximately $1,000, $307,000 and $560,000 for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and approximately $463,000 and $957,000 for the 1995 Nine-Month Period and the 1996 Nine-Month Period, respectively.
Taxes. At December 1995, the Company had available NOLs for federal income tax purposes of approximately $2.5 million of which $.2 million expire in 2009 and $2.3 million expire in 2010. Because of the Company's limited operating history, a valuation allowance for net deferred tax assets has been provided.
LIQUIDITY AND CAPITAL RESOURCES
Steel Dynamics' business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in its steelmaking and finishing operations and compliance with environmental laws. See "Risk Factors -- Significant Capital Requirements" and "-- Potential Costs of Environmental Compliance." The Company's liquidity needs arise primarily from capital investments, working capital requirements and principal and interest payments on its indebtedness. Since its inception, SDI has met these liquidity requirements with cash provided by equity and long-term borrowings.
Net cash used in operating activities totaled approximately $22.7 million for Fiscal 1993 through Fiscal 1995. During the 1996 Nine-Month Period, the Company used net cash of approximately $45.6 million in operating activities. Net cash used in investing activities totaled approximately $246.4 million for Fiscal 1993 through Fiscal 1995 and approximately $31.7 million for the 1996 Nine-Month Period. Investing activities primarily consisted of capital expenditures of approximately $268.4 million for the construction of the Company's existing facility and the beginning of the Cold Mill Project. Cash provided by financing activities totaled approximately $276.0 million for Fiscal 1993 through Fiscal 1995 and approximately $101.0 million for the 1996 Nine-Month Period.
In June 1994, the Company issued $55.0 million principal amount of the Subordinated Notes (together with warrants to purchase Common Stock) to finance a portion of the construction of the mini-mill. All of the Subordinated Notes will be repaid with a portion of the net proceeds from the offerings. See "Use of Proceeds."
The Credit Agreement provides for (i) up to an aggregate of $320.0 million of senior term loans and (ii) a $45.0 million revolving credit facility (the "Revolving Credit Facility") for working capital purposes, subject to borrowing base restrictions. Indebtedness outstanding under the Credit Agreement is secured by a first priority lien on substantially all of the assets of the Company. Of the $320.0 million in senior term loan commitments the Company borrowed $150.0 million for the construction of the mini-mill and $150.0 million
was designated and remains available for the construction of the Cold Mill Project. Commitments for $20.0 million were designated for mini-mill construction cost overruns (none of which is outstanding). See "Description of Certain Indebtedness." As of September 28, 1996, $150.0 million of senior term loans were outstanding and there were no outstanding borrowings under the Revolving Credit Facility. The Company will prepay $9.1 million of such indebtedness with a portion of the net proceeds from the offerings. See "Use of Proceeds."
As of September 28, 1996, after giving pro forma effect to the offerings and the application of the net proceeds therefrom, the Company's long-term debt (including current portion) would have been approximately $198.7 million and SDI would have had approximately $150.0 million available under the Credit Agreement to finance the Cold Mill Project. Most of the Company's indebtedness will bear interest at floating rates, causing the Company's results of operations to be affected by prevailing interest rates.
The Company currently estimates that the funds required for the construction and start-up (including capital expenditures) of the Expansion Projects will total approximately $340.0 million (approximately $200.0 million for the Cold Mill Project; approximately $65.0 million for the IDI Project and approximately $75.0 million for the Caster Project). The Company may also require additional financing in the event it decides to enter into strategic alliances or make acquisitions. See "Risk Factors -- Significant Capital Requirements."
The Company intends to use $20.0 million of the $25.4 million of net proceeds it recently received from the private placement of its Common Stock to finance a portion of the IDI Project and intends to finance the remaining $45.0 million with the IDI Financing. Although IDI is negotiating to obtain the IDI Financing, it has not yet secured a commitment. No assurance can be given that the IDI Financing will be obtained on terms acceptable to the Company or at all. See "Certain Transactions."
The Company intends to use approximately $75.0 million of the net proceeds from the offerings to finance the Caster Project. The Company intends to finance the Cold Mill Project with cash on hand and borrowings under the Credit Agreement. Borrowings under the Credit Agreement are conditioned upon the Company's compliance with various financial and other covenants and other conditions set forth therein and, as a result, there can be no assurance that such financing will be available to the Company as planned. See "Description of Certain Indebtedness." The extent of additional financing required, if any, by the Company will depend on the success of the Company's business. There can be no assurance that additional financing, if needed, will be available to the Company or, if available, that it can be obtained on terms acceptable to the Company and within the limitations contained in the Credit Agreement or the terms of any future financings, including the IDI Financing. Failure to obtain the required funds could delay or prevent some portion of the Expansion Projects from being implemented or completed, which could have a material adverse effect on the Company. See "Risk-Factors -- Significant Capital Requirements."
ENVIRONMENTAL EXPENDITURES AND OTHER CONTINGENCIES
SDI has incurred and, in the future, will continue to incur capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. Capital expenditures for environmental control for the Fiscal 1994, Fiscal 1995 and 1996 Nine-Month Period were approximately $595,000, $15.9 million, and $790,000, respectively, and operating expenses relating to environmental matters were approximately $0, $30,000, and $2.1 million, for the same periods. SDI has planned environmental capital expenditures for the years ending December 31, 1996, 1997, and 1998 of approximately $1.0 million, $3.0 million, and $6.1 million, respectively. In addition, the Company expects to incur expenses relating to environmental matters of approximately $2.7 million, $4.3 million, and $4.4 million, for the years ending December 31, 1996, 1997, and 1998, respectively. Steel Dynamics believes that compliance with current environmental laws and regulations is not likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and SDI may become subject to more stringent environmental laws and regulations in the future. See "Risk Factors -- Potential Costs of Environmental Compliance."
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets, and for Long-Lived Assets to be Disposed of " and SFAS No. 123, "Accounting for Stock-Based Compensation" were adopted effective January 1, 1996. Adopting these standards had no effect on the Company's financial position, results of operations or cash flows in 1996.
INFLATION
SDI does not believe that inflation has had a material effect on its results of operations over the periods presented.
BUSINESS
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel mini-mill, which commenced operations in January 1996. The Company was founded by executives and managers who pioneered the development of thin-slab/flat-rolled CSP technology and directed the construction and operation of the world's first thin-slab/flat-rolled mini-mill. Building upon their past experience with CSP technology, management founded SDI to produce steel more efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to become the low cost producer of a broad range of flat-rolled steel products, including hot-rolled, cold-rolled and galvanized sheet, and to serve more markets than any other flat-rolled mini-mill. In addition, the Company intends to participate in the development and use of new technologies to produce a broad range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D. Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the mini-mill in October 1994 and commissioned it in December 1995. The Company believes that this 14-month construction period is the fastest ever for this kind of facility. In addition, the Company believes that the approximately $275.7 million initial capital cost of its mini-mill is approximately $75.0 million, or approximately 20%, less than the cost of comparable mini-mills currently operating. Actual production at the mini-mill of primary grade steel commenced on January 2, 1996. The mill achieved an annualized production rate of 930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities to produce further value-added steel products, Steel Dynamics is currently constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton annual capacity which is scheduled for completion during the second half of 1997. Steel Dynamics also plans to add a second melting furnace, a second caster and tunnel furnace, and an additional coiler in 1998 to expand its annual production capacity of hot-rolled steel from 1.4 million tons to approximately 2.4 million tons. In addition, through IDI, the Company intends to construct a 520,000 tonne annual capacity plant for the manufacture of DRI, which the Company expects to be completed in 1998. The DRI, after further processing into 430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel scrap substitute.
Management strategically located the Company's mini-mill within close proximity to its natural customer base, steel service centers and other end users, abundant supplies of automotive and other steel scrap (SDI's principal raw material), competitive sources of power, and numerous rail and truck transportation routes. Steel Dynamics believes that its strategic location provides it with sales and marketing as well as production cost advantages. The Company has secured a stable baseload of sales through long-term "off-take" contracts with two major steel consumers, a 30,000 ton per month sales contract with Heidtman, a major Midwest-based steel service center and distributor and an affiliate of one of the Company's stockholders, and a 12,000 ton per month sales contract with Preussag, a major German steel manufacturer and a stockholder of the Company, with affiliate distributors and steel service centers throughout the United States. The Company has also sought to assure itself of a secure supply of steel scrap and scrap substitute. To accomplish this objective, SDI has entered into a long-term scrap purchasing services contract with OmniSource, one of the largest scrap dealers in the Midwest and an affiliate of one of the Company's stockholders. In addition, the Company has also sought to assure itself of a secure supply of scrap substitute material for use as a lower cost complement to steel scrap as part of the Company's melt mix. SDI has entered into a long-term 300,000 tonne per year "off-take" contract to purchase iron carbide from Qualitech's iron carbide facility currently under construction in Corpus Christi, Texas which is expected to be completed in 1998. Additional scrap substitute material will be provided through the Company's IDI Project.
STRATEGY
The Company's business strategy is to use advanced CSP hot-rolled steelmaking and cold-rolling technologies to produce high surface quality flat-rolled steel in a variety of value-added sizes, gauges and
surface treatments, emphasizing low production costs, reliable product quality and excellent customer service. In addition, SDI intends to remain financially strong and competitive through the selective purchasing of scrap and scrap substitutes to offset the effects of cyclical cost/price imbalances. The principal elements of the Company's strategy include:
- Achieve Lowest Conversion Costs in Industry. Steel Dynamics' EAF, caster and rolling mill designs represent substantial improvements over earlier mini-mills using CSP technology. These improvements have been designed to speed the steelmaking process, to limit "power off time" and other non- productive time in the EAF, to reduce the per ton cost of consumables and to yield high quality finished steel product. By designing and using equipment that is more efficient, requires less periodic maintenance or rebuilding, requires less consumables and improves the consistency and reliability of the steelmaking process, the Company believes that it will achieve lower unit costs for converting metallics and other raw materials into flat-rolled steel. The Company believes that its per ton manufacturing costs are already among the lowest in the industry.
- Emphasize Value-Added Products. Steel Dynamics believes that it will be able to produce thinner gauge (down to .040") steel in hot-rolled form with consistently better surface and edge characteristics than most other flat-rolled producers. The Company believes that its high quality, thinner hot-rolled products will compete favorably with certain more expensive cold-rolled (further processed) products, enabling it to obtain higher margins. In addition, with the completion of the Cold Mill Project, SDI expects to devote a substantial portion of its hot-rolled products to the production of higher value-added cold-rolled and galvanized products, as well as thinner gauges, down to .015". This increased product breadth should also allow the Company to broaden its customer base.
- Secure Reliable Sources of Low Cost Metallics. The principal raw material used in the Company's mini-mill is steel scrap which represents approximately 45% to 50% of the Company's total manufacturing costs. Steel Dynamics has pursued a three-part strategy to secure access to adequate low cost supplies of steel scrap and steel scrap substitute materials. First, the Company has entered into a long-term steel scrap contract with OmniSource. Second, SDI has sought to further this strategy through its iron carbide "off-take" contract with Qualitech. Third, Steel Dynamics is pursuing the IDI Project to produce DRI as a lower cost complement for use in the melt mix with steel scrap.
- Secure a Solid Baseload of Hot Band Sales. In order to help ensure consistent and efficient plant utilization, SDI has entered into six-year "off-take" sales and distribution agreements with Heidtman and Preussag, pursuant to which Heidtman has agreed to purchase at least 30,000 tons and Preussag has agreed to purchase at least an average of 12,000 tons of the Company's flat-rolled products per month, at the Company's market price, subject to certain volume and single run discounts.
- Increase Unit Growth at Low Capital Cost. SDI seeks to continue to grow its production of flat-rolled steel coil at low capital and unit costs. The Company plans to use approximately $75.0 million of the net proceeds of the offerings to finance its Caster Project. The Caster Project, which is expected to be completed in 1998, will increase the annual production capacity of the Company's mini-mill from 1.4 to approximately 2.4 million tons of hot-rolled steel. The Caster Project will enable the Company to better use the increased rolling and finishing capacity that its Cold Mill Project will provide when completed in 1997. The foundations and infrastructure necessary to house and support the second caster have been pre-planned into the existing plant and, therefore, the 1.0 million additional tons of annual hot-rolled steel capacity should be added at a relatively low capital cost. In addition, management intends to continue to explore new production technologies to further lower its unit costs of production.
- Incentivize Employees. In contrast to the high fixed labor costs of many of the Company's competitors, SDI has established certain incentive compensation programs specifically designed to reward employee teams for their efforts towards enhancing productivity, thereby encouraging a sense of ownership throughout Steel Dynamics. Production employees actively share in the Company's success through a production bonus and a conversion cost bonus. The production bonus is directly tied to the quantity and quality of products manufactured during a particular shift. The conversion cost bonus
encourages employees to use materials and resources more efficiently. Steel Dynamics' employees' bonuses may equal or exceed their base hourly wage.
- Pursue Future Opportunities. Steel Dynamics believes that technology development and management's experience will provide significant opportunities for SDI in a broad range of markets, potentially including flat-rolled, non-flat-rolled, stainless and specialty steels. See "-- The Flat-Rolled Market." The Company plans to pursue opportunities through greenfield projects, strategic alliances or acquisitions to secure the long-term future growth and profitability of SDI. Steel Dynamics will seek to enter new steel markets and to produce new steel products using the latest technology, with the objective of being a low cost producer. In addition, the Company has a technology sharing agreement with Preussag which will provide SDI with Preussag's expertise and know-how in steel manufacturing, particularly steel finishing.
INDUSTRY OVERVIEW
The steel industry has historically been and continues to be highly cyclical in nature, influenced by a combination of factors including periods of economic growth or recession, strength or weakness of the U.S. dollar, worldwide production capacity, levels of steel imports and tariffs. The industry has also been affected by other company-specific factors such as failure to adapt to technological change, plant inefficiency, and high labor costs. As an industry, most U.S. steel producers suffered losses between 1982 and 1986, earned profits between 1987 and 1989, weakened again through the end of 1992, strengthened during 1993 and 1994, weakened again in 1995 and appear to be strengthening at the present time. Steel, regardless of product type, is a commodity that responds to forces of supply and demand, and prices have been volatile and have fluctuated in reaction to general and industry specific economic conditions. Under such conditions, a steel company must be a low cost, efficient producer and a quality manufacturer.
There are generally two kinds of primary steel producers, "integrated" and "mini-mill." The following diagram illustrates the differences in production methodologies between the typical multi-step integrated mill production process and the typical continuous mini-mill melting-casting-rolling process.
[FLOW CHART]
Steel manufacturing by an "integrated" producer involves a series of distinct but related processes, often separated in time and in plant geography. This process generally involves ironmaking followed by steelmaking, followed by billet or slab making, followed by reheating and further rolling into steel plate or bar, or flat-rolling into sheet steel or coil. These processes may, in turn, be followed by various finishing processes (including cold-rolling) or various coating processes (including galvanizing). In integrated producer steelmaking, coal is converted to coke in a coke oven, then combined in a blast furnace with iron ore (or pellets) and limestone to produce pig iron, and then combined with scrap in a "basic oxygen" or other furnace to produce raw or liquid steel. Once produced, the liquid steel is metallurgically refined and then either poured as ingots for later reheating and processing or transported to a continuous caster for casting into a billet or slab, which is then further shaped or rolled into its final form. Typically, though not always, and whether by design or as a result of downsizing or re-configuration, many of these processes take place in separate and remote facilities.
In contrast, a mini-mill employs an electric arc furnace to directly melt scrap steel or steel scrap substitute, thus entirely eliminating the energy-intensive blast furnace. A mini-mill incorporates the melt shop, ladle metallurgical station, casting, and rolling into a unified continuous flow. The melting process begins
with the charging of a furnace vessel with scrap steel, carbon, and lime, following which the vessel's top is swung into place and electrodes lowered into the scrap through holes in the top of the furnace. Electricity is then applied to melt the scrap. The liquid steel is then checked for chemistry and the necessary metallurgical adjustments are made while the steel is still in the melting furnace or, if the plant has a separate staging area for that process (as SDI's does), the material is transported by a ladle to an area, commonly known as a ladle metallurgy station. From there, the liquid steel is transported by ladle to a turret at the continuous caster, wherein it is then transferred into a tundish, a kind of reservoir, which controls the flow of the liquid steel into a water-cooled copper-lined mold (collectively, the "caster") from which it exits as an externally solid billet or slab. After a billet is cast, it is then cut to length and either shipped as billets or stored until needed for further rolling or processing (which would involve reheating) or it may be sent directly into the rolling process, after which it may then be cut to length, straightened, or stacked and bundled. In the case of thin-slab casting, however, the slabs proceed directly into a tunnel furnace, which maintains and equalizes the slab's temperature, and then after descaling, into the first stand of the rolling mill operation. In this rolling process, the steel is progressively reduced in thickness. In the case of sheet steel, it is wound into coil and may be sold either directly to end users or to intermediate steel processors or service centers, where it may be pickled, cold-rolled, annealed, tempered, or galvanized.
As a group, mini-mills are generally characterized by lower costs of production and higher productivity than the integrated steelmakers. This is due, in part, to the mini-mills' lower capital costs and to their lower operating costs resulting from their streamlined melting process and smaller, more efficient plant layouts. Moreover, mini-mills have tended to employ a management culture that emphasizes worker empowerment and flexible, incentive-oriented non-union labor practices. The smaller plant size of the mini-mill operation also permits greater flexibility in locating the facility to optimize access to scrap supply, attractive energy costs, infrastructure and markets. Furthermore, the mini-mill's more efficient plant size and layout, which incorporates the melt shop, metallurgical station, casting and rolling in a unified continuous flow under the same roof (as contrasted with integrated mills, which have typically been downsized and re-configured over time and thus may perform each of these functions in separate facilities), have reduced or eliminated costly re-handling and re-heating of partially finished product. Mini-mills, moreover, have tended to be more willing to adapt to newer, more innovative and aggressive management styles, featuring decentralized decision-making. They have also adapted more quickly to the use of newer, more cost effective and efficient machinery and equipment, translating technological advances in the industry into more efficient production more quickly than the integrated mills.
EVOLUTION OF COMPACT STRIP PRODUCTION TECHNOLOGY
Mini-mills have been producing steel since the early 1960s when EAFs and continuous casting were initially commercialized. For many of those years, the mini-mills focused almost exclusively on lower-quality, lower-priced "long products," including merchant shapes such as rebar, wire, rod, angles, and structurals, due to the mini-mill's relatively smaller size, initial quality limitations and early power and capacity limitations. In 1989, however, a mini-mill, using the world's first CSP machine employing a revolutionary mold design, directly cast a 2" slab that was less than 25% of the thickness of the typical 8" to 10" slabs cast by the integrated producers.
The CSP technology was one of the most significant advances in steelmaking in the last forty years. The thinner slab greatly reduces costs, as less reduction is necessary in the hot-strip rolling mill to create hot-rolled bands or coils of steel, and there is substantially less re-heating required prior to rolling. Most important, the development of this thin-slab casting technology, with its lower capital cost requirement, allowed for the entry of the mini-mills into the flat-rolled segment of the steel market.
THE FLAT-ROLLED MARKET
The flat-rolled market represents the largest steel product group, accounting for approximately 62.4% of the total annual U.S. steel shipments. Flat-rolled products consist of hot-rolled, cold-rolled, and coated sheet and coil. Currently, the Company's products consist only of hot-rolled coil. This product group has been the fastest growing segment of the U.S. steel market over the last 40 years, amounting to approximately 60.8 million tons of shipments in 1995. The following table shows the U.S. flat-rolled shipments by hot-rolled, cold-rolled, and coated production (as reported by the AISI) for the last five years.
YEAR ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(MILLIONS OF TONS)
Hot-Rolled(1)........................................... 20.8 20.8 22.7 24.6 26.8
Cold-Rolled(2).......................................... 13.0 14.2 14.4 14.7 14.1
Coated(3)............................................... 13.9 15.6 18.3 20.2 19.9
---- ---- ---- ---- ----
Total......................................... 47.7 50.6 55.4 59.5 60.8
==== ==== ==== ==== ====
% Total Steel Shipments................................. 60.6% 61.6% 62.3% 62.6% 62.4%
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The following chart presents 1995 U.S. industry flat-rolled product shipments by market segment (as reported by the AISI):
[PIE CHART]
Hot-Rolled Products. All coiled flat-rolled steel is initially hot-rolled, a process that consists of passing an ingot or a cast slab through a multi-stand rolling mill to reduce its thickness to less than 1/2" and, in some mills, to less than 1/16". Hot-rolled steel is minimally processed steel coil that is used in the manufacture of various non-surface critical applications such as automobile suspension arms, frames, wheels, and other unexposed parts in auto and truck bodies, agricultural equipment, construction products, machinery, tubing, pipe, tools, lawn care products and guard rails. The U.S. market for hot-rolled steel in 1995 was approximately 26.8 million tons, excluding imports. This is a market segment that the Company's existing mini-mill currently serves. The following chart presents 1995 U.S. industry hot-rolled product shipments by market segment (as reported by the AISI):
[PIE CHART]
Cold-Rolled Products. Cold-rolled steel is hot-rolled steel that has been further processed through a pickler and then successively passed through a rolling mill without reheating until the desired gauge (or thickness) and other physical properties have been achieved. Cold-rolling reduces gauge and hardens the steel and, when further processed through an annealing furnace and a temper mill, improves uniformity, ductility and formability. Cold-rolling can also impart various surface finishes and textures. Cold-rolled steel is used in applications that demand higher quality or finish, such as exposed automobile and appliance panels. As a result, cold-rolled prices are typically higher than hot-rolled. The U.S. market for cold-rolled steel in 1995 was approximately 14.1 million tons, excluding imports. This is a market segment that the Company's cold mill will serve when completed in 1997. The following chart presents 1995 U.S. industry cold-rolled product shipments by market segment (as reported by the AISI):
[PIE CHART]
Coated Products. Coated steel is usually cold-rolled sheet that has been coated with a non-ferrous metal to render it corrosion-resistant and to improve its paintability. Hot-dipped galvanized, electrogalvanized and aluminized products are types of coated steels. These are also the highest value-added sheet products because they require the greatest degree of processing and tend to have the strictest quality requirements. Coated steel is used in high volume applications such as automotive, household appliances, roofing and siding, heating and air conditioning equipment, air ducts, switch boxes, chimney flues, awnings, garbage cans and food containers. The use of coated steels in the U.S. has increased dramatically over the last 40 years. The U.S. market for coated steels in 1995 was approximately 19.9 million tons, excluding imports. This market segment will be served by SDI's cold mill when completed in 1997. The following chart presents 1995 U.S. industry coated product shipments by market segment (as reported by the AISI):
[PIE CHART]
THE COMPANY'S PRODUCTS AND APPLICATIONS
The Company's current array of hot-rolled products includes a variety of high quality mild and medium carbon and high strength low alloy hot-rolled bands in 40" to 62" widths and in thicknesses from .500" down to .040" (1 mm). These products are suitable for mechanical and structural tubing, gas and fluid transmission piping, metal building systems, parts and components for automobiles, trucks, trailers, and recreational vehicles, rail cars, ships, barges, and other marine equipment, agricultural equipment and farm implements, lawn, garden, and recreational equipment, industrial machinery and shipping containers. SDI believes that, because of innovations made in its state-of-the-art caster, its basic production hot band has surface and edge quality characteristics that exceed those of the other thin-slab/flat-rolled mini-mills operating currently. The Company also believes that the surface and edge quality of its hot bands compares favorably with conventional mills. Steel Dynamics believes that it is able to access a substantial portion of the current U.S. shipped hot-rolled market of 26.8 million tons. Based on information from its customers, the following chart displays SDI's 1996 flat-rolled shipments, for the first nine months of its operations, by market classification of the ultimate end user, regardless of whether the Company's hot band was further processed by a steel service center or other intermediate processor before being shipped to the end user.
END USER INDUSTRY PERCENTAGE TYPICAL APPLICATIONS
---------------------- ---------- ----------------------------------------------------
Automotive............ 23% Safety restraints, suspension, frame
Tubing................ 18 Structural, tube, mechanical tube, conduit
Construction.......... 13 Metal buildings, piling, safety grating
Commercial equipment.. 12 Racks, shelving, hardware
Machinery............. 6 Construction equipment, machine tools
Rail.................. 4 Rail car sides, tops, end caps
Residential
equipment........... 4 Lawn equipment, garden implements, motion furniture
Appliances............ 3 Liners, backs, brackets
Agriculture........... 2 Farm equipment, feeders, bins
Other................. 15 Exercise and recreational equipment
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Total....... 100%
==========
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After completion of the Cold Mill Project (expected to occur during the second half of 1997), SDI expects to produce a full range of hot-rolled, hot-rolled coated, cold-rolled and cold-rolled coated products. At that time, the Company expects to devote a substantial portion of its hot bands to the production of higher value added products, including galvanized coatings, as well as thinner gauge cold-rolled, down to .015(). This increased product breadth should also allow SDI to broaden its direct customer base, so that many of the products required by end user consumers could be purchased directly from the Company, instead of through an intermediate processor or steel service center. The Company believes that upon completion of the Cold Mill Project it will be able to access a substantial portion of the current U.S. shipped flat-rolled market of 60.8 million tons.
THE COMPANY'S CUSTOMERS AND MARKETS
Intermediate Steel Processors and Steel Service Centers. The Company's customers currently are primarily intermediate steel processors and steel service centers. Of Steel Dynamics' total net sales since the Company commenced operations, 81% were to steel processors or service centers. These steel processors and service centers typically act as intermediaries between primary steel producers, such as SDI, and the various end user manufacturers that require further processing of hot bands. The additional processing performed by the intermediate steel processors and service centers include pickling, galvanizing, cutting to length, slitting to size, leveling, blanking, shape correcting, edge rolling, shearing and stamping. After the completion of the Cold Mill Project, the Company expects to provide additional value-added cold-rolling and coating services. The Company expects, however, that its intermediate steel processor and service center customers will remain an integral part of its future customer base and plans to continue to sell its hot bands and other products to these customers after the Cold Mill Project is complete.
The Company's largest customers, Heidtman and Preussag, accounted in the aggregate for approximately 47% of Steel Dynamics' total net sales through September 28, 1996. While the loss of either Heidtman or Preussag as a customer, or a significant reduction in the business generated by Heidtman or Preussag, might have a material adverse effect on SDI's results of operations, the Company believes its relationships with these two companies have enabled it to baseload the mill, thus helping to ensure consistent and sufficient plant utilization. Heidtman and Preussag are the only two customers of SDI that have accounted, individually, for more than 10% of the Company's total net sales through September 28, 1996. Heidtman is an affiliate of one of the Company's stockholders and Preussag is a stockholder. See "Principal and Selling Stockholders." The Company's five largest customers in the aggregate accounted for approximately 66% of total net sales through September 28, 1996. See "Risk Factors -- Reliance on Major Customers."
SDI has a six-year purchasing agreement with Heidtman for the purchase of at least 30,000 tons of the Company's hot band products per month, at market prices, determined by reference to the lowest prices charged by other thin-slab mini-mills or conventional mills for the same products. The price at which the Company is required to sell 30,000 tons of steel coil to Heidtman cannot be higher than the lowest price at which SDI offers its products to any other customer. Heidtman is entitled to single run as well as certain volume discounts. In addition, Heidtman has priority purchase rights to the Company's secondary material and field claim material. The Company's aggregate sales to Heidtman (including its affiliated companies) through September 28, 1996 has amounted to 201,500 tons.
SDI also has a six-year Purchasing, U.S. Sales and Export Distribution Agreement (the "Preussag Purchasing Agreement") with Preussag pursuant to which, and subject to the Company's obligations to fill Heidtman's orders, Preussag is obligated to purchase an average of at least 12,000 tons per month of the Company's available products, at a market price determined by reference to the Company's price sheet and by reference to prevailing competitive market prices charged to large customers by other mills within the Company's typical marketing area. Preussag is entitled to single run and certain volume discounts. Under the Preussag Purchasing Agreement, the Company has also appointed Preussag as its preferred distributor for all sales to customers outside the United States, Canada and Mexico. See "-- International Sales." Preussag's affiliated companies include: Delta Steel, Inc., located in Houston, Texas; Feralloy Corporation, located in Chicago, Illinois; Feralloy North American Steel Co., LP, located in Melvindale, Michigan; Preussag Handel, Canada, located in Vancouver, British Columbia, Canada; Preussag Handel, GmbH, located in Mexico City,
Mexico; and Preussag International Steel Corporation, located in Atlanta, Georgia. The Company's aggregate sales to Preussag (including its affiliated companies) through September 28, 1996 has amounted to 56,800 tons.
Direct Sales to End Users. The Company sells directly to end users, including manufacturers of cold-rolled strip, oil and gas transmission pipe, and mechanical and structural tubing. The Company employs a 12-person direct sales staff, consisting of a Manager of Sales and Marketing, three Field Sales Managers, a Manager of Secondary Sales, with the balance dedicated to inside sales and administration. Steel Dynamics plans on keeping its end user sales and support staff small and efficient, reflecting the Company's emphasis on cost-containment and productivity.
Geographic Proximity to Customers. The following map illustrates the geographic proximity of certain of the more significant U.S. markets for flat-rolled sheet to the Company's mini-mill in Butler, Indiana.
[MAP]
Of the Company's total net sales through September 28, 1996, more than 80% were to customers within 300 miles of SDI. In addition to its low production costs, the Company believes that it also enjoys a pricing advantage over most of its competitors due to freight savings to its customers to the north and east of SDI's mini-mill, where it sold 60% of its flat-rolled steel through September 28, 1996.
International Sales. Of the Company's total net sales through September 28, 1996, sales outside the continental United States accounted for less than 5%. Pursuant to the Preussag Purchasing Agreement, the Company has appointed Preussag its preferred distributor for all sales to customers outside the United States, Canada and Mexico (the "Export Territory"). Under the Preussag Purchasing Agreement, if the Company wishes to sell in the Export Territory, it must notify Preussag of the products available for sale and the price of these products. Preussag must then use its best efforts to solicit these sales and to present the Company with any purchase orders for the product, which the Company may then accept or reject. Sales within the Export Territory are for Preussag's own account, regardless of whether Preussag is purchasing for its use or for resale. If the Company receives an unsolicited offer to purchase any products from a prospective customer in the Export Territory, the Company must notify Preussag of the terms and Preussag has a right of first refusal to effect the purchase. For sales in the Export Territory, Preussag is entitled to a sales commission in addition to
any other applicable discounts or rebates. The Company has also entered into a "second look" export sales agreement for such international sales with Sumitomo Corporation of America ("Sumitomo"). Sumitomo is also a stockholder in the Company.
THE COMPANY'S STEELMAKING EQUIPMENT AND TECHNOLOGY
Steel Dynamics' thin-slab/flat-rolled steelmaking equipment represents the state-of-the-art in EAF melting and thin-slab casting and rolling technology and embodies advancements and improvements reflecting the combined design and operating experience with thin-slab steelmaking of the Company's three founders, Keith E. Busse, Mark D. Millett, and Richard P. Teets, Jr. The Company's existing equipment and technology, as well as the design criteria of the equipment and technology that will constitute the Cold Mill Project and the Caster Project, are intended to improve steelmaking speed, efficiency and output, result in less "power off" and down time, require less maintenance, prolong equipment life and produce steel of better consistency and of better surface and edge qualities.
The Existing Mill. The principal steelmaking equipment that comprises the existing thin-slab/flat-rolling plant that is currently producing the Company's hot bands consists of a melting furnace, a ladle metallurgy station, a turret, thin-slab caster and rolling mill.
[SCHEMATIC DRAWING OF THE COMPANY'S CURRENT STEELMAKING PROCESS]
The Electric Arc Furnace. The Company's EAF is a 165-ton capacity tap weight (195-ton gross weight with a 30-ton "hot heel") Fuchs AC-powered 120 MVA high reactance twin-shell EBT (eccentric bottom tap) furnace, consisting of two melting hearths working off of a single power source. Although such a large capacity furnace might have suggested the use of DC power, SDI purchased an AC-powered unit but with a reactor added to the electrical system on the primary side of the transformer. In addition to saving approximately 30% in the capital cost of the EAF (as compared to a DC-type unit), the AC-powered EAF is designed to use smaller electrodes, which are less expensive than those required by a DC-type EAF, and to consume a smaller amount of electrodes per pound of steel produced. With a large capacity EAF, such as Steel Dynamics' furnace, using a DC power source would require substantially larger (28() to 30() diameter) electrodes, which cost up to 30% more per pound than the smaller (24() diameter) electrodes required by the Company's AC-powered EAF. Furthermore, electrode consumption by the Company's EAF (a substantial operating cost component) is designed to be less than a DC-powered unit, approximately 3.2 pounds per ton vs. 3.8 to 4.0 pounds per ton, a function of lower amperage to the electrode brought about by the reactor, which allows it to mimic the power characteristics of the DC EAF.
SDI's twin-shell EAF design results in virtually continuous melting and reduces the tap-to-tap time (i.e. the length of time between successive melting cycles or "heats"). While melting is being done on one side, the other vessel can be tapped and then refilled with scrap and readied for the next melt. In a single EAF with a 60-minute tap-to-tap time, typically 10 to 15 minutes is taken to tap liquid metal, gun refractories onto the side walls of the furnace, re-sand and repair the tap hole, and recharge the vessel with scrap. Therefore, for a small incremental capital cost of a second vessel, there is an approximate 20% increase in productivity gained by reducing the tap-to-tap time. Preheating of the scrap will occur in the idle vessel with both oxygen and natural gas, at a fairly low cost, aided by the 30-ton "hot heel" of melted scrap remaining in the idle vessel after tapping. This design enables the Company to save the additional capital cost of competing technologies such as a shaft furnace with a scrap preheating feature. The Company believes that shaft furnaces do not work well with larger pieces of scrap, such as the industrial bundles which the Company purchases. An additional attractive feature of the twin-shell design is that if there is a maintenance problem requiring work on one
vessel, melting can proceed in the other vessel without interruption. Electricity consumption in the EAF is approximately 350 to 375 kWh per ton.
Ladle Metallurgy Station. The Company has a separate ladle metallurgy station, built by Fuchs, consisting of two small EAFs, each of which consumes approximately 25 kWh of electricity per ton of steel, and a desulfurization station. A separate ladle refining station, located apart from the primary melting furnace, allows metallurgical adjustments to be effected, while still maintaining the steel at a sufficiently high temperature during the refining stage. This maximizes the time that the primary furnace can be used for scrap melting, while enabling the molten steel to continue through metallurgical testing, stirring, alloying, desulfurization, reheating and other adjustments, on its way to the casting deck. There are two ladle stations, each of which receives molten steel from the primary furnaces after tapping. When the adjustment process has been completed the refined metal is then transported by overhead crane to the casting deck. The ladles are placed on a turret, which rotates an empty ladle away from the top of the casting machine while simultaneously replacing it with a full ladle, allowing for a continuous process. The molten steel flows from the ladle to a tundish (a holding reservoir) and then directly into the mold of the casting machine.
The Thin-Slab Caster. The state-of-the-art continuous thin-slab caster was built by SMS Schloemann-Siemag AG and SMS Concast and is equipped with Liquid Core Reduction ("LCR") which the Company has not yet activated. LCR enables the caster to perform as a typical thin slab caster producing 50 mm slabs for hot rolling, as well as allowing the flexibility to produce slabs from 40 mm to 80 mm thick by using a variable thickness mold and movable segments. This feature is designed to ensure greater quality and a more diversified product line for the Company by reducing turbulence in the mold; providing for "soft reduction" on segregation sensitive grades; improving hot rolling reduction ratios on thick gauge products and the reduction of hot rolling loads to produce light gauge products.
The caster is also equipped with a newly designed submerged entry nozzle ("SEN"), with an improved geometry. This permits the walls of the SEN to be thicker, resulting in longer SEN life and, in turn, enables the Company to run a "string" of 12 heats before the SEN requires replacement (in contrast with 10 or less with a smaller SEN). These advantages are directly reflected in increased productivity. Within the newly designed SEN, SDI has incorporated a new baffle design to modify the fluid flow of molten steel into the mold cavity which slows and more evenly distributes the molten steel into the mold as compared to previous designs. This results in a quieter top surface of the liquid steel in the mold (at the meniscus), a more uniform solidification of the shell, and effectively eliminates sub-surface inclusions. The tundish design has been upgraded to include state-of-the-art baffle and other flow modification dividers which allow for maximum flotation and subsequent removal of inclusions prior to the molten steel entering the SEN.
The Hot-Rolling Mill. The Company's rolling mill is a state-of-the-art, six-stand rolling mill built by SMS Schloemann-Siemag AG. The hot-rolling mill is equipped with a specially designed high pressure 6,000 psi water descaling system to remove the mill scale after the steel emerges from the Bricmont-supplied tunnel furnace just before entering the rolling mill. This system provides an exceptionally clean surface while minimizing the cooling of the 2,000(++)F slab. The tunnel furnace restores heat lost during the casting process. The rolling mill is equipped with the latest electronic and hydraulic controls. Each rolling stand is driven by a high-powered 10,000 horsepower mill drive motor. The normal exit speed of light gauge steel, prior to coiling as it exits the last stand of the rolling mill, is approximately 10.5 meters per second. The Company's smaller more closely-spaced rolls on the run-out table will help prevent the steel strip from cobbling when rolling lighter gauges. When rolling to a thickness of 1 mm (.040()), the exit speed will remain the same until the sheet is captured in the down-coiler, at which point it will "zoom" the strip to a faster speed of 13.3 meters per second; which increases productivity. The last two stands of the rolling mill use specially designed work rolls to facilitate the Company's ability to roll to the thinnest gauge of any hot mill in the industry. Steel Dynamics' coiler is approximately 210 feet from the last stand of the rolling mill, and all necessary foundations and infrastructure have been pre-engineered and constructed to accommodate the second coiler that will be added as part of the Caster Project.
Throughout the rolling process, laser optical measuring equipment and multiple x-ray devices measure all strip dimensions, allowing adjustments to occur continuously and providing feedback information to the mill
process controls and computers. All positioning and control equipment used to adjust the rolling mill is hydraulically operated and regulated electronically to achieve a high degree of accuracy. The entire production process is monitored and controlled by both business and process computers. Production schedules are created based on order input information and transmitted to the mill computers by the plant business system. Mathematical models then determine the optimum settings for the tunnel furnace, the hot rolling mill and the strip cooling sprays. This information is then directly transmitted to the equipment controlling the rolling operations. As the material is processed, operating and quality data are gathered and stored for analysis of operating performance and for documentation of product parameters to the customer. The system then coordinates and monitors the shipping process, and prints all relevant paper work for shipping when the coil leaves the plant.
The Cold Mill Project. The Cold Mill Project is under construction adjacent to and south of the existing hot mill. Design work and equipment specification for the Cold Mill Project began in November 1995. Site preparation work began in July 1996, and foundation work began in August 1996. The budgeted cost for the Cold Mill Project is approximately $200.0 million.
[SCHEMATIC DRAWING OF THE COLD MILL PROJECT]
The Cold Mill Project will consist of a continuous pickle line, two hot dipped galvanizing lines, a semi-tandem two-stand reversing cold-rolling mill, batch annealing furnaces and a temper mill. The pickle line will consist of a dual payoff system, scale breaker, shallow bath pickling section, rinsing section and recoiler built by Davy International; the hot dipped galvanizing lines will consist of dual payoff, cleaning, annealing, coating, rolling, tension leveling, post-coating treatment, and recoiling systems built by Davy International and others; the semi-tandem two-stand reversing cold-rolling mill will consist of a payoff system, two take-up reels, two four-high stands, full instrumentation and quality controls, to be built by SMS Schloemann-Siemag AG; the batch annealing furnaces will be built by Ebner Furnaces and will consist of 18 bases and nine hydrogen annealing bells; and the temper mill will consist of a single four-high stand built by SMS Schloemann-Siemag AG. All electric drives and controls will be supplied by the General Electric Corporation, a stockholder of SDI. One of the galvanizing lines will process primarily hot-rolled product, while the second galvanizing line will process primarily cold-rolled product.
The pickle line will begin at the existing hot strip mill building, and will deliver pickled product to a coil storage facility centrally located in the cold-rolling and processing facility. Configuring the facility in this manner eliminates the need for equipment to transfer coils to the cold-rolling facility. At the entry end of the pickle line, there are two reels to unwind coils and a welder to join the coils together. Coils will be unwound on alternate reels and attached end to end by the welder, creating a continuous strip through the pickle tanks. The center section of the 700-foot pickle line consists of the scale breaker/tension leveler, the pickling tanks, where the strip moves through a bath of hydrochloric acid that thoroughly cleans the strip in preparation for galvanizing and rolling operations, and the rinse tanks. At the delivery end of the line there is a reel for recoiling the pickled product, and shearing facilities to separate the strip back into discrete coils. After recoiling, each coil is stored in the central coil storage facility.
From the central coil storage area, coils can proceed in either of two directions. Some coils will be immediately galvanized on the hot-rolled galvanizing line. The ability of the hot-rolling mill to produce steel strip that is extremely thin by comparison will allow for immediate galvanizing without the need for further rolling in the cold-rolling mill. The hot-rolled galvanizing line is designed to efficiently handle this type of material.
Hot-rolled coils that are not intended for immediate galvanizing will be
processed on the cold-rolling mill. SDI's cold-rolling mill will be unique in
that it will be a semi-tandem two-stand reversing cold-rolling operation. This
configuration provides considerably higher throughput than a conventional
single-stand reversing mill, yet also takes advantage of considerably lower
equipment costs than the conventional four to six-stand tandem cold-rolling
mill. The rolling mill is configured with multiple x-ray gauges, hydraulic
bending systems, rolling solution controls, gauge controls and strip flatness
controls used to produce an extremely high level of product quality parameters.
The cold-rolling mill will also use a process control computer using
sophisticated mathematical models to optimize both quality and throughput.
Cold-rolled product that requires galvanizing will proceed to the cold-rolled galvanizing line. There it will be annealed and coated. The cold-rolled galvanizing line is quite similar to the hot-rolled galvanizing line, but will have a more elaborate and larger strip heating furnace. This larger furnace is required to anneal cold-rolled product, which is not necessary on hot-rolled product. Designing the pickle line and the two galvanizing lines concurrently and procuring the equipment from the same manufacturer has allowed a high degree of commonality of parts between the three lines. This provides a high degree of flexibility and cost savings with regard to management of spare parts.
Cold-rolled product that does not require galvanizing will then proceed to the batch annealing furnaces. The batch annealing furnaces heat and then cool the coils in a controlled manner to reduce the hardness of the steel that is created in the cold-rolling process. The batch annealing furnaces will heat the steel in a hydrogen environment that optimizes the efficiency of the heating process and produces a product that is superior to conventional batch annealing with regard to cleanliness and uniform metallurgical characteristics. The heating and cooling of the coils is regulated by means of computer models based on current knowledge of heat transfers and steel characteristics.
Product from the annealing furnaces will then be temper-rolled. The temper-rolling facility is a single stand four-high rolling mill designed for relatively light reduction of the product. The temper mill introduces a small amount of hardness into the product and further ensures the overall flatness and surface quality of the product. The temper mill will also have an x-ray gauge to monitor strip thickness. This mill was purchased concurrently with the two-stand cold-rolling mill from the same manufacturer. This provides a high degree of flexibility and cost savings with regard to management of spare parts.
Product from both galvanizing lines and the temper mill will be delivered directly from the processes to a common coil storage area, where they will then be shipped by either truck or rail.
As in its hot mill, all facilities in the cold mill will be linked by means of business and process computers. Business systems will be expanded to comprehend order entry of the additional cold mill products and all line scheduling will be accomplished in the business computer systems, with schedules transmitted to the appropriate process related computers. Operating and quality data will also be collected for analysis and quality control purposes, and for reporting product data to customers.
The Caster Project. The Caster Project, which the Company believes will enable it to increase its annual production capacity of hot-rolled steel from 1.4 million tons to approximately 2.4 million tons, primarily involves the design and construction of an additional hybrid EAF, a second thin-slab caster, a second tunnel furnace, a second coiler and minor modifications to the meltshop building. The total cost of the Caster Project is estimated to be approximately $75.0 million. The Company expects this project to be completed in 1998. The following diagram shows the components of SDI's hot-mill upon completion of the Caster Project.
[CASTER GRAPHIC]
The necessary foundations and infrastructure to house and support the second caster were pre-planned into the existing plant at the time of its design and construction. This should allow SDI to add additional annual capacity of 1.0 million tons of hot-rolled steel at an incrementally low capital cost. The Company believes that these additional tons will allow it to maximize its rolling and finishing capacity that its Cold Mill Project is expected to provide in the second half of 1997.
The equipment that is being considered as a part of the Caster Project is similar in design and use to the equipment that constitutes the existing mini-mill facility.
The IDI Project. The IDI Project consists of the design, construction, and operation of a facility for the manufacture of DRI for use by Steel Dynamics (or, when desired, for resale to others) as a steel scrap substitute. The Company has studied and considered many alternative methods of securing a low cost source of steel scrap substitute material. Some of these methods are in limited commercial use while others have not been tested commercially, either for their ability to successfully yield useable substitute iron units or, even if technologically successful, their ability to do so at a cost that makes its use as a scrap substitute commercially feasible. The existing commercial processes differ by the type of raw feedstock they employ and the type of reductant that is used to "reduce" the feedstock to useable or semi-finished iron units. The Company currently intends to use the IDI Process, which uses low cost iron ore fines that are ultimately reduced to DRI in a rotary hearth furnace using coal as the reductant. The resulting DRI will be converted by SDI into liquid pig iron in a hybrid EAF and desulphurization station, intended to yield a final iron content of 96% (with little sulphur and gangue).
[FLOW CHART OF IDI PROCESS]
Background of Alternative Scrap Substitute Methodologies. DRI is a metallic product produced from iron ore that is used as an alternative or complementary feedstock in EAF steelmaking, blast furnaces and other iron and steelmaking applications. Of the approximately 30.7 million tonnes of DRI produced in 1995, over 90% was produced by either the Midrex or HYL processes, both of which use lump form iron ore or pellets that are treated in a direct reduction shaft furnace with natural gases to reduce the iron oxide to metallic iron. Although these processes are proven to work commercially, iron ore pellets tend to command a premium over iron ore fines. There are a number of other processes that use iron ore fines with natural gas as a reductant. One of these has been selected by Qualitech in building its iron carbide production facility, with which the Company has a long-term 300,000 tonne per year "off-take" contract.
The IDI Process. While the IDI Process has not been commercially employed, the Company believes that it has the technical capability to develop and implement the IDI Process. Moreover, the Company believes that the IDI Process, when combined with further processing by SDI, will produce a liquid pig iron with a richer iron content, at a lower cost, using readily available raw material and energy resources, than any other available process considering the location of SDI's mill.
The IDI Project will use low cost standard iron ore fines, which will be combined with ground coal, mixed with a bentonite binder and other fluxes, and then pelletized. The resulting green pellets will be fed onto a rotary hearth furnace, where they will be heated to 1,300(++)C for approximately 12 to 15 minutes, after which they will be removed by water-cooled screws to a refractory-lined container. At this stage, the DRI will be expected to have an iron content of approximately 81% to 82%, which is less than optimum. Although this product would be commercially viable, IDI intends to transport the DRI to Steel Dynamics for melting in SDI's hybrid EAF where gangue will be reduced, and then to SDI's desulphurization station, where impurities, such as sulphur, will be reduced. This reduction process is expected to reduce the resulting DRI to 96% to 97% metallic iron (versus an average 91% to 94% for standard DRI or 94% to 96% for standard manufactured pig iron), and which would have characteristics similar to that produced in conventional blast furnaces. The hybrid EAF and desulphurization station will be located within the Company's existing melt shop in Butler, Indiana, as part of the Caster Project. An added benefit which the Company expects to realize
from the use of this process is that electricity consumption can be lowered by the chemical energy available from the carbon, as well as from the fact that the liquid pig iron is expected to contain no iron oxide (versus 6% iron oxide in most other available DRI), which would otherwise take additional energy to reduce. Furthermore, since the resulting liquid pig iron would already be molten at 2,400(++)F, the electrical energy required in the Company's regular EAF would be substantially reduced when the liquid pig iron is introduced into the melt mix, resulting in not only an electrical consumption savings but a reduction in electrode consumption as well. The Company believes that there would be an approximate 20% productivity gain if pig iron produced by the IDI Process constituted 25% of the melt mix, and more if iron carbide is also added into the melt mix.
Steel Dynamics believes that the anticipated advantages of the IDI Process are that it permits the use of high silica iron ore fines, which are the cheapest iron ore units available (approximately $20 per ton cheaper than DRI pellets), that the fines do not have to be sized or graded, that pricing of the fines appears to be stable, and that coal as the reductant is abundantly available and not affected by global shortages that sometimes affect gas availability and prices. Additionally, the IDI Process is expected to allow for the use, as additional raw materials, of EAF dust and mill scale, which the Company will generate and will be able to purchase from other area mills. At present, the Company generates 30,000 tons of EAF dust per year, which otherwise causes the Company to incur disposal costs in excess of $120 per ton.
Steel Dynamics also believes that the DRI which it expects IDI to begin producing in 1998, when combined into the melt mix with iron carbide to be manufactured by Qualitech, and which the Company expects to begin receiving in 1998, will enable the Company to use these steel scrap substitute materials for up to 40% of its metallics charge, thus reducing its dependency upon low residual scrap (the most expensive grade).
STEEL SCRAP AND SCRAP SUBSTITUTE RESOURCES
Steel scrap is the single most important raw material used in the Company's steelmaking process, representing approximately 45% to 50% of the direct cost of a ton of finished steel. All steel scrap, however, is not the same. As it relates to final product quality, EAF flat-rolled producers, such as the Company, can only tolerate a maximum .2% level of "residuals" (i.e. non-ferrous metallic contamination such as copper, nickel, tin, chromium, and molybdenum, which, once having been dissolved into steel cannot be refined out). In order for the scrap melt to provide this level of quality under present circumstances (without the anticipated availability of future scrap substitute products), the mill must use approximately 60% of "low residual" steel scrap or an equivalent material. There are many grades of scrap (for example, Steel Dynamics maintains 10 to 12 separate grades of scrap in its 20-acre scrap holding yard on premises adjacent to the mini-mill), but scrap can be broadly categorized as either "obsolete scrap" or "prompt industrial scrap." Obsolete scrap, which is derived from discarded agricultural and construction equipment, consumer goods such as automobiles and appliances, container drums and building demolition scrap, generally contains residuals that exceed the tolerable maximums for EAF use (the only exception being old structural steel and rails that were made from Bessemer and open-hearth steel production process with high iron content, the supply of which is limited). Prompt industrial scrap, on the other hand, is produced as a by-product of various metalworking operations, such as steel fabricators, machine shops, automobile production and stamping plants, and is the most desirable for EAF steelmaking due to the traceability of its origins and to the fact that it is generally "low residual" scrap. Such low residual scrap generally takes the form of No. 1 Dealer Bundles, No. 1 Factory Bundles, busheling, and clips. Many variables impact scrap prices, the most critical of which is U.S. steel production. Generally, as steel demand increases, so does scrap demand (and resulting prices).
Until 1989 when Nucor commenced flat-rolled production of steel in its Crawfordsville, Indiana mini-mill and the subsequent opening of additional thin-slab/flat-rolled mini-mills (including the Company's), the availability of low residual scrap kept pace with demand, indeed exceeded demand, enabling the United States to be a net exporter of low residual scrap. By 1994, however, the supply of low residual scrap became tighter, although the shortfall was made up by a combination of pig iron use, obsolete structural steel, and, to a limited extent, non-U.S. or imported DRI. This supply/demand pressure on the cost of low residual scrap is expected to continue, as more flat-rolled EAF production comes on-line, although this may be mitigated to some extent
by the anticipated production of more steel scrap substitute material (such as the IDI Project or Qualitech's iron carbide production facility).
The Company uses various grades of obsolete (and thus less expensive) scrap in its melt mix, which it blends with its low residual scrap to keep within final tolerances. To the extent that SDI will be able to introduce the relatively pure pig iron that it expects to obtain from IDI's DRI (commencing in 1998), or the Qualitech iron carbide which it expects to begin receiving in 1998, Steel Dynamics believes that it will be able to use greater amounts of lower-priced obsolete scrap in its melt and still remain within acceptable limits.
There are several regions in the United States where scrap generation exceeds consumption within the region. One of these regions is in the Midwest. The Company believes that it enjoys freight savings versus other current mini-mill competitors for scrap generated near the mini-mill and made available to Steel Dynamics for use in its mini-mill.
The Company believes that the demand for low residual steel scrap will rise more rapidly than the supply in the coming years. This belief has prompted SDI, as a means of maintaining a low metallics cost, to seek and secure both a strong and dependable source through which to purchase steel scrap of all grades, including low residual scrap, and a reliable source for lower cost steel scrap substitute resources. SDI has accomplished this through a long-term scrap purchase agreement with OmniSource, and, in addition to its own IDI Project, through a long-term purchase contract for iron carbide with Qualitech.
Steel Scrap. The Company has entered into a six-year Agreement To Provide Scrap Purchasing Services And Certain Priority Purchase Rights with OmniSource, an affiliate of Heavy Metal, L.C., a stockholder of the Company. See "Principal and Selling Stockholders." Pursuant to this agreement, OmniSource has agreed to act as the Company's exclusive scrap purchasing agent and to use its best efforts to locate and secure for the Company's mini-mill such scrap supplies as SDI may from time-to-time wish to purchase, at the lowest then available market prices for material of like grade, quantity and delivery dates. The cost to the Company of OmniSource-owned scrap is the price at which OmniSource, in bona fide market transactions, can actually sell material of like grade, quality and quantity. With respect to general market scrap, the cost to the Company is the price at which OmniSource can actually purchase that scrap in the market (without mark-up or any other additional cost). For its services, OmniSource receives a commission per gross ton of scrap received by Steel Dynamics at its mini-mill. All final decisions regarding scrap purchases belong to the Company, and SDI maintains the sole right to determine its periodic scrap needs, including the extent to which it may employ steel scrap substitutes in lieu of or in addition to steel scrap. No commission is payable to OmniSource for scrap substitutes purchased or manufactured by the Company.
During the first nine months of 1996, the Company purchased 661,000 tons of steel scrap from OmniSource, and expects to purchase an average of 100,000 to 120,000 tons of steel scrap per month once full production is reached in 1997. Thereafter, although SDI expects that its total output in tons of flat-rolled steel coil will increase from 1.4 million to approximately 2.4 million after the completion of the Cold Mill and Caster Projects, the Company expects that its receipt of substantial quantities of steel scrap substitute material, both iron carbide from Qualitech and DRI from the IDI Project, will mitigate its continued dependency on low residual steel scrap. Steel Dynamics believes that its scrap purchasing relationship with OmniSource, an affiliate of one of the Company's stockholders, provides the Company with excellent access to available steel scrap within its primary scrap generation area.
Steel Scrap Substitutes. In June 1996, the Company entered into an Iron Carbide Off-Take Agreement (the "Iron Carbide Agreement") with Qualitech, in whose parent SDI is a 4% stockholder. The Iron Carbide Agreement is for five years, running from the time that Qualitech begins commercial production of iron carbide, and is subject to renewal. Qualitech is building a 660,000 tonne annual capacity iron carbide facility in Corpus Christi, Texas, of which 300,000 tonnes annually is expected to be sold to Steel Dynamics at a formula purchase price based on various components of Qualitech's costs of production, which the Company believes is favorable, and with a ceiling price which SDI believes will be favorable relative to the price of steel scrap. The Company will also purchase iron carbide from Qualitech during Qualitech's ramp-up commencing as early as 1998, although the amount of iron carbide that SDI can anticipate receiving during that period is unknown. In addition to the Iron Carbide Agreement, the Company has formed IDI, which is designing and
will construct a 520,000 tonne capacity rotary hearth-based DRI production facility. See "Certain Transactions."
ENERGY RESOURCES
SDI believes that it has very favorable energy rates, both electricity and gas, as well as for oxygen. These rates are critical to the Company in maintaining its status as a low-cost provider of flat-rolled steel.
Electricity. The plant operates at an average electrical power consumption level of 100 million watts, under an electric service contract with AEP that extends through 2005. The contract designates a capacity reservation of 150,000 kVa with provisions allowing for a total capacity increase of 80,000 kVa for new load connected within five years of the commencement date with a one-year notice of intent requirement. The contract designates a portion of the Company's load as "firm," which is billed under the applicable AEP retail tariff. All of the rest of the Company's load is designated as "interruptible service," which allows customers the option of accepting varying levels of risk of power interruption as a trade-off for discounted energy prices. With interruptible service, the Company is subject to risk of interruption at any time in the operation of the AEP System, as a result of an AEP annual peak demand, or even when AEP can receive a higher market price from an alternate buyer. Under such circumstances, the Company has the option of matching the market price of the alternate buyer in order to avoid interruption.
The interruptible load is billed as either "base" energy or as "peak" energy. The base energy charge is derived monthly from a formula that includes a discounted demand component, an energy component, and a fuel component. A peak energy charge, or "real-time price," is calculated hourly for differing peak-period hours throughout the year. The real-time price is defined as AEP's incremental cost of supplying energy that otherwise would not have been incurred if such energy had not been supplied to the Company, plus a fixed cost increment. The Company's average price of electricity for the month of September 1996 was $.027 per kWh. The Company's negotiated rate with AEP, once it reaches full capacity, however, should be in the range of $.024 and $.025 per kWh, which SDI believes is relatively attractive.
Electrical power to the plant site is supplied by AEP over its 14-mile, 345,000 volt transmission line directly to the Company's own electrical substation. The Company entered into a Transmission Facilities Agreement with AEP to pay "contributions in aid of construction" for the electric transmission lines, and these payments to AEP from the Company, pursuant to a $7.8 million 20-year note, at 8% interest, which commenced January 1, 1996, amounts to $65,400 per month. According to the Transmission Facilities Agreement, if any other users use these transmission lines, the amount owed by SDI would decrease. Additionally, the Company entered into a Substation Facilities Agreement with AEP whereby AEP provided the financing for Steel Dynamics' on-site substation and related facilities. This financing totaled $13.0 million as of January 1, 1996, and requires repayment, at 8% interest, commencing January 1, 1996, over a 15-year period, amounting to monthly payments of $125,000.
Gas. The Company uses approximately 3,200 decatherms (equivalent to 1,000 BTUs or 1,000 cubic feet) of natural gas per day. The Company holds a "Primary Firm" delivery contract on the Panhandle Eastern Pipeline that extends through May 2000, costing the Company $.42 per decatherm, with a current fuel surcharge equal to 5.72% of the gas the Company flows. The Company also has an interruptible delivery contract with NIPSCO/NIFL/Crossroads ("LDC") that extends through December 2000, costing the Company $.20 per decatherm with a fuel surcharge of .2%. LDC takes the gas from the Panhandle Eastern Pipeline and delivers it to the mini-mill.
The actual purchase of the gas itself is currently contracted through July 1997 for $1.91 per decatherm. The Company maintains a liquid propane tank farm on site with sufficient reserves to sustain operations for approximately two weeks in the event of an interruption in the natural gas supply. During February 1996, when severe weather conditions disrupted the flow of natural gas, the Company operated on liquid propane for a period of eight days.
Oxygen. Steel Dynamics uses oxygen, as well as nitrogen and argon for production purposes, which it purchases from Air Products, which built a plant on land adjacent to the Butler, Indiana mill site. Air
Products uses its plant not only to supply the Company, but also to provide oxygen and other gasses to other industrial customers. As a result, SDI has been able to effect very favorable oxygen and other gas purchase prices on the basis of Air Products' volume production.
COMPETITION
Competition within the steel industry can be intense. The Company competes primarily on the basis of price, quality, and the ability to meet customers' product specifications and delivery schedules. Many of the Company's competitors are integrated steel producers which are larger, have substantially greater capital resources and experience, and, in some cases, have lower raw material costs than the Company. The Company also competes with other mini-mills which may have greater financial resources. The highly competitive nature of the industry, combined with excess production capacity in some products, may in the future exert downward pressure on prices for certain of the Company's products. In addition, in the case of certain product applications, steel competes with other materials, including plastics, aluminum, graphite composites, ceramics, glass, wood and concrete.
U.S. The Company's products compete with many integrated hot-rolled coil producers, such as Rouge Steel Co. and National Steel Corp.'s Great Lakes Steel Division in the Detroit area, LTV Steel Co., Inc., Inland Steel Co., Bethlehem Steel Corp., U.S. Steel, Acme Steel Co. and Beta Steel Corp. in the northwest Indiana and Chicago area, as well as a growing number of hot-rolled mini-mills, such as Nucor's Crawfordsville, Indiana and Hickman, Arkansas facilities and the Gallatin Steel Company's mini-mill in Ghent, Kentucky. New hot-rolled band producing mini-mills are scheduled to be opened by Delta Steel in Delta, Ohio and TRICO Steel in Alabama in 1997. Despite significant reductions in raw steel production capacity by major U.S. producers over the last decade, the U.S. industry continues to be adversely affected, from time to time, by excess world capacity. According to the AISI, annual U.S. raw steel production capacity was reduced from approximately 154 million tons in 1982 to approximately 112 million tons in 1995. This reduction resulted in higher utilization rates. Average utilization of U.S. industry capacity improved from approximately 61% in the 1982 to 1986 period to approximately 83% in the 1987 to 1991 period, was approximately 89% in 1993, 93% in 1994 and 93% in 1995. Recent improved production efficiencies also have begun to increase overall production capacity in the United States. Excess production capacity exists in certain product lines in U.S. markets and, to a greater extent, worldwide. Increased industry overcapacity, coupled with economic recession, would intensify an already competitive environment.
Over the last decade, extensive downsizings have necessitated costly restructuring charges that, when combined with highly competitive market conditions, have resulted at times in substantial losses for some U.S. integrated steel producers. A number of U.S. integrated steel producers have gone through bankruptcy reorganization. These reorganizations have resulted in somewhat reduced capital costs for these producers and may permit them to price their steel products at levels below those that they could have otherwise maintained.
An increasing number of mini-mills have entered or are expected to enter the EAF-based thin-slab/flat-rolled steel market in the next several years. These mini-mills have cost structures and management cultures more closely akin to those of the Company than to the integrated producers. Flat-rolled mini-mill production capacity increased from 4.0 million tons in 1994 to approximately 5.0 million tons in 1995, and industry sources expect this cumulative flat-rolled mini-mill capacity to reach 12.0 million tons in 1997 and 14.0 million tons in 1998. The Company's penetration into the total flat-rolled steel market is limited by geographic considerations, to some extent by gauge and width of product specifications, and by metallurgical and physical quality requirements. Based on product type and geographic location, the Company believes it will most closely compete with the following mini-mills: Nucor's Crawfordsville, Indiana facility, Gallatin Steel's Ghent, Kentucky facility, Delta Steel's Delta, Ohio facility, and, to a more limited extent, Nucor's Hickman, Arkansas facility, Nucor's Berkeley County, South Carolina facility, and TRICO Steel's facility in northern Alabama. Of the anticipated 12.0 million tons of 1997 flat-rolled mini-mill capacity, the Company believes that it will most closely compete for approximately 4.6 million of those flat-rolled tons. Each of these mills will produce hot-rolled product, however, only an affiliate of the anticipated Delta Steel facility in Delta, Ohio is expected to produce hot-rolled galvanized product, and only Nucor's Crawfordsville, Indiana facility is expected to produce cold-rolled and cold-rolled galvanized products.
Non-U.S. U.S. steel producers face significant competition from certain non-U.S. steel producers who may have lower labor costs. In addition, U.S. steel producers may be adversely affected by fluctuations in the relationship between the U.S. dollar and non-U.S. currencies. Furthermore, some non-U.S. steel producers have been owned, controlled or subsidized by their governments, and their decisions with respect to production and sales may be, or may have been in the past, influenced more by political and economic policy considerations than by prevailing market conditions. Some non-U.S. producers of steel and steel products have continued to ship into the U.S. market despite decreasing profit margins or losses. If certain pending trade proceedings ultimately do not halt or otherwise provide relief from such trade practices, if other relevant U.S. trade laws are weakened, if world demand for steel eases or if the U.S. dollar strengthens, an increase in the market share of imports may occur, which could adversely affect the pricing of the Company's products. The costs for current and future environmental compliance may place U.S. steel producers, including the Company, at a competitive disadvantage with respect to non-U.S. steel producers, which are not subject to environmental requirements as stringent as those in the United States.
BACKLOG
SDI's backlog was approximately 248,000 tons of flat-rolled product or $87.0 million as of September 28, 1996.
FACILITIES
The Company's plant is situated on a greenfield 806-acre site in DeKalb County, Indiana, strategically located within eight miles of Interstate 69 (north-south), twenty miles from the Indiana Toll Road System (east-west Interstate 80). In addition, a cross-country high pressure gas line is located three-quarters of a mile north of the plant, and a 14-mile, 345,000 volt transmission line brings electrical power to the Company's own electrical sub-station. In addition, two truck scales and one rail scale have been installed. The land was formerly farm land, and 67 acres are still being farmed. The site is served by the east-west rail lines of Conrail, the north-south lines of the Norfolk & Southern Railway, and the east-west lines of CSX. Railroad spurs and switching apparatus link the plant with all three railroads. Within the plant site, the Company has 10 1/2 miles of railroad track, serving both the plant and the on-site 20-acre scrap yard facility operated by the Company to receive, hold, and stage its scrap. Water is supplied by two 12" 2,500 gallon per minute wells which are located on site and which pump out of an aquifer, located between 160 and 190 feet down, into a 13.0 million gallon reservoir. Water from this reservoir is pumped to a service water piping system that links the reservoir to the various water treatment facilities that support the steelmaking processes.
There are three main buildings that comprise the mill. They are the melt shop building, containing four bays totaling 103,740 square feet, the tunnel furnace building, which is 675 feet long and which is, 54,511 square feet in area (connecting the melt shop to the hot mill), and the hot mill building, 283,558 square feet in size, consisting of two bays in width and is 1,146 feet in length. The tunnel furnace building is serviced by a 10-ton crane, and the hot mill building is serviced by three 80 ton cranes. Office buildings on site include a general administrative corporate headquarters building, consisting of 12,000 square feet, a building for the hot rolling, engineering and safety personnel, consisting of 6,000 square feet, a melt shop office, consisting of 2,000 square feet, and a shipping office of 1,000 square feet. There is an employee services building of 8,000 square feet that includes a shower and locker room facility, as well as the plant cafeteria. A 22,000 square foot warehouse has been constructed to receive, store, and manage necessary parts and materials to maintain the plant.
Other support facilities include a bag house and a water treatment system with buildings located at various places in the plant. The bag house captures the gasses from the melting operation and cleans them to comply with all federal emissions standards. The bag house is capable of cleaning 1.5 million cubic feet per minute of these gasses. The water treatment system cleans, cools, and recirculates the water used by the plant in various processes at the overall rate of 100,000 gallons per minute.
The Company considers its manufacturing and operating facilities adequate for its needs, including the Expansion Projects, and for the foreseeable future.
Equipment failures at its plant could limit or shut down the Company's production. During the first eight months of its operations, the Company experienced some equipment failures, none of which lasted more than a day. In order to reduce the risk of equipment failure, SDI follows a comprehensive maintenance and loss prevention program, has on-site maintenance and repair facilities, and maintains an inventory of spare parts and machinery. For example, the Company maintains a spare EAF transformer as well as spare caster parts, mechanical parts and electrical controls for its cranes and other tools. No assurance can be given, however, that material shutdowns will not occur in the future or that a shutdown would not have a material adverse affect on Steel Dynamics. In addition to equipment failures, the mill is also subject to the risk of catastrophic loss. The Company believes that it maintains adequate property damage insurance to provide for reconstruction of damaged equipment, as well as business interruption insurance to mitigate losses resulting from any production shutdown caused by an insured loss.
The Company's executive offices are located at 4500 County Road 59, Butler, Indiana 46721 and its telephone number is (219) 868-8000.
ENVIRONMENTAL MATTERS
The Company's operations are subject to substantial and evolving environmental laws and regulations concerning, among other things, emissions to the air, discharges to surface and ground water, noise control and the generation, handling, storage, transportation, treatment and disposal of toxic and hazardous substances. SDI believes that its facilities are in material compliance with all provisions of federal and state laws concerning the environment and does not believe that future compliance with such provisions will have a material adverse effect on its results of operations or financial conditions. Since environmental laws and regulations are becoming increasingly more stringent, the Company's environmental capital expenditures and costs for environmental compliance may increase in the future. In addition, due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated. The cost for current and future environmental compliance may also place U.S. steel producers at a competitive disadvantage with respect to foreign steel producers, which may not be required to undertake equivalent costs in their operations.
Under CERCLA, the Environmental Protection Agency ("EPA") has the authority to impose joint and several liability for the remediation of contaminated properties upon generators of waste, current and former site owners and operators, transporters and other potentially responsible parties, regardless of fault or the legality of the original disposal activity. Many other states, including Indiana, have statutes and regulatory authorities similar to CERCLA and to the EPA. Steel Dynamics has a hazardous waste hauling agreement with The Waste Management Company of Indiana, Inc. to properly dispose of its flue dust, ash, and other waste products of steelmaking, but there can be no assurance that, even through no fault of the Company, SDI may not still be cited as a waste generator by reason of an environmental clean up at a site to which its waste products were transported.
EMPLOYEES
SDI's work force consists of approximately 200 hourly and 60 salaried personnel as of September 28, 1996. The Company's employees are not represented by labor unions. The Company believes that its relationship with its employees is good.
Performance Based Incentive Compensation Program. SDI has established certain incentive compensation programs for its employees, designed to encourage them to be productive by paying bonuses to groups of employees, based on various measures of productivity. The programs are designed to reward employees for productivity efforts. It is not unusual for a significant amount of an employee's total compensation to consist of such bonuses.
The productivity of the employees is measured by focusing on groups of employees and not individual performance. Three groups of employees participate in the bonus program: production, administrative and clerical, and department managers and officers. Each group of employees has its own bonus program or
programs. See "Management -- Employee Plans" for a description of the department manager/officer incentive bonus.
Production employees, consisting of those directly involved in the melting, casting and rolling processes, are eligible to participate in two cash bonus programs: the production bonus and the conversion cost bonus programs. The production bonus, if any, is based upon the quantity of quality product produced that week. The amount of the production bonus is determined for and allocated to each shift of employees. Depending upon the amount of quality product produced, the bonus may be equal to or greater than the base hourly wage paid to an employee. The conversion cost bonus is determined and paid on a monthly basis based on the costs for converting raw material into finished product. The program is intended to encourage employees to be efficient in converting the raw materials into finished steel. Costs of raw materials, over which the production employees have no control, are not considered.
SDI has also established a cash bonus plan for non-production employees, including accountants, engineers, secretaries, accounting clerks and receptionists. Bonuses under the plan are based upon the Company's return on assets.
SDI has also established the 1994 Stock Option Plan, 1996 Stock Option Plan, the Profit Sharing Plan and the Retirement Savings Plan for certain of its employees. See "Management -- Employee Plans."
RESEARCH AND DEVELOPMENT
At the present time, the Company engages in no substantial third-party research and development activities. Steel Dynamics, however, is continually working to improve the quality, efficiency and cost-effectiveness of its EAF-based thin-slab/flat-rolled CSP technology. The Company is also engaged in development efforts in connection with the IDI Project.
PATENTS AND TRADEMARKS
The Company filed an application with the U.S. Patent and Trademark Office to register the mark "SDI" and an accompanying design of a steel coil. The mark was published on September 3, 1996, in the Official Gazette and not opposed within 30 days. A notice of allowance is expected to be issued.
LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal course of business. In management's opinion, the ultimate outcome of these lawsuits will not have a material effect on the results of operations or on the financial condition of the Company.
MANAGEMENT
The Company's Board of Directors consists of ten directors. Directors and executive officers of the Company are elected to serve until they resign or are removed or are otherwise disqualified to serve or until their successors are elected and qualified. Directors of the Company are elected at the annual meeting of stockholders. The directors and executive officers of the Company, their ages as of August 31, 1996 and positions are as follows:
NAME AGE POSITION WITH THE COMPANY
- ------------------------------ --- --------------------------------------------------------
Keith E. Busse................ 53 President, Chief Executive Officer and Director
Mark D. Millett............... 37 Vice President of Melting and Casting and Director
Richard P. Teets, Jr. ........ 41 Vice President of Rolling and Finishing and Director
Tracy L. Shellabarger......... 39 Vice President of Finance, Chief Financial Officer and
Director
John C. Bates................. 53 Director
Leonard Rifkin(a)............. 65 Director
Paul B. Edgerley(b),(c)....... 40 Director
William D. Strittmatter(d).... 40 Director
William Laverack,
Jr.(b),(e).................. 39 Director
Dr. Jurgen Kolb(f)............ 53 Director
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(a) Mr. Rifkin serves as the designated director of the "Heavy Metal Shares" pursuant to the Stockholders Agreement. Pursuant to the Bylaws and the Stockholders Agreement, Daniel M. Rifkin has been designated as the Heavy Metal Shares' alternate director to serve in place of the designated director in case of absence or unavailability. See "Description of Capital Stock -- The Stockholders Agreement."
(b) Member of the Audit Committee
(c) Mr. Edgerley serves as the designated director of the "Bain Shares" pursuant to the Stockholders Agreement. Pursuant to the Bylaws and the Stockholders Agreement, Robert C. Gay has been designated as the Bain Shares' alternate director to serve in place of the designated director in case of absence or unavailability. See "Description of Capital Stock -- The Stockholders Agreement."
(d) Mr. Strittmatter serves as the designated director of the "GECC Shares" pursuant to the Stockholders Agreement. Pursuant to the Bylaws and the Stockholders Agreement, Molly Ferguson has been designated as the GECC Shares' alternate director to serve in place of the designated director in case of absence or unavailability. See "Description of Capital Stock -- The Stockholders Agreement."
(e) Mr. Laverack serves as the designated director of the "Whitney Shares" pursuant to the Stockholders Agreement. Pursuant to the Bylaws and the Stockholders Agreement, Michael Stone has been designated as the Whitney Shares' alternate director to serve in place of the designated director in case of absence or unavailability. See "Description of Capital Stock -- The Stockholders Agreement."
(f) Mr. Kolb serves as the designated director of the "Preussag Shares" pursuant to the Stockholders Agreement. Pursuant to the Bylaws and the Stockholders Agreement, Dr. Jorg Fuhrmann has been designated as the Preussag Shares' alternate director to serve in place of the designated director in case of absence or unavailability. See "Description of Capital Stock -- The Stockholders Agreement."
Keith E. Busse co-founded the Company in September 1993 and has been its President and Chief Executive Officer and a director since its inception. Mr. Busse is also the President and Chief Executive Officer and a director of IDI. Previously, for a period of 21 years, he worked for Nucor in a variety of positions, first as Division Controller and then as Vice President and General Manager of Nucor's Vulcraft Division, and then, additionally as the Vice President and General Manager of Nucor's Fastener Division. In 1987, he was given the responsibility to coordinate and direct the building in Crawfordsville, Indiana of the world's first thin-slab/flat-rolled mini-mill (the "Crawfordsville Mini-Mill"). Mr. Busse remained with Nucor's Crawfordsville Division as its Vice President and General Manager until his resignation in August 1993. Mr. Busse is a director of Qualitech Steel Holdings, Inc.
Mark D. Millett co-founded the Company in September 1993 and has been its Vice President of Melting and Casting and a director since its inception. Previously, Mr. Millett worked for Nucor since 1982 as chief metallurgist at its Darlington, South Carolina facility and then as manager of its Hazelett thin-slab casting project in 1985. In 1987, Mr. Millett joined Mr. Busse's senior management team to help build the Crawfordsville Mini-Mill, and from 1987 until his resignation in August 1993, Mr. Millett served as the Melting and Casting Manager for the Crawfordsville Mini-Mill.
Richard P. Teets, Jr. co-founded the Company in September 1993 and has been its Vice President of Rolling and Finishing and a director since its inception. Previously, Mr. Teets worked for LTV Steel Co., Inc., in its engineering, maintenance, and production areas, and in 1987, was hired by Nucor to be one of the senior managers to assist Messrs. Busse and Millett in the construction of the Crawfordsville Mini-Mill, overseeing the actual engineering and construction process, including its electrical, mechanical, and environmental aspects. In 1991, Mr. Teets assumed the responsibilities for the Crawfordsville Mini-Mill's cold-rolling and finishing operations as its Manager.
Tracy L. Shellabarger joined the Company as its Vice President of Finance and Chief Financial Officer and a director in July 1994. Previously, from 1987, Mr. Shellabarger worked for Nucor, first as its Manager of Internal Audit in its Charlotte, North Carolina home office, and, eight months later, as its Controller at the Crawfordsville Mini-Mill, where he also served as a member of the senior management team that constructed and operated that facility for Nucor.
John C. Bates was elected a director of the Company in September 1994, as the designated director of the "Keylock/Mazelina Shares" under the Stockholders Agreement. Mr. Bates is the President and Chief Executive Officer of Heidtman, which he joined in 1963, and for which he has served as its President and Chief Executive Officer since 1969. Mr. Bates is also a director of Heidtman and of National City Bank, N.W.
Leonard Rifkin was elected a director of the Company in November 1994, as the designated director of the "Heavy Metal Shares" under the Stockholders Agreement. Mr. Rifkin has been the President and Chief Executive Officer of OmniSource since 1959 and since September 1996 has been Chairman of the Board. He is also a director of Qualitech Steel Holdings, Inc.
Paul B. Edgerley was elected a director of the Company in September 1996, as the designated director of the "Bain Shares" under the Stockholders Agreement, having previously served as an alternate director from September 1994. Mr. Edgerley has been a Managing Director of Bain Capital, Inc. since May 1993 and has been a general partner of Bain Venture Capital since 1990. Mr. Edgerley was a principal of Bain Capital Partners from 1988 through 1990. Mr. Edgerley is also a director of GS Industries, Inc. and AMF Group, Inc.
William D. Strittmatter was elected a director of the Company in September 1994, as the designated director of the "GECC Shares" under the Stockholders Agreement. Mr. Strittmatter is a Vice-President and Senior Credit Officer of General Electric Capital Corporation, which he joined in 1982. Mr. Strittmatter is also a director of Newsprint South, Inc. and is Vice Chairman of Shanghai Zhadian Gas Turbine Power Generation Co., Ltd.
William Laverack, Jr. was elected a director of the Company in September 1994, as the designated director of the "Whitney Shares" under the Stockholders Agreement. Mr. Laverack is a general partner of J.H. Whitney & Co., a private equity and mezzanine capital investment firm, which he joined in 1993. Prior to joining Whitney, he was with Gleacher & Co., a mergers and acquisitions advisory firm, from 1991 to 1993, and from 1985 to 1991 was employed by Morgan Stanley & Co. Incorporated in its Merchant Banking Group. Mr. Laverack is also a director of CRA Managed Care, Inc., The North Face, Inc. and Qualitech Steel Holdings, Inc.
Dr. Jurgen Kolb was elected a director of the Company in April 1996, as the designated director of the "Preussag Shares" under the Stockholders Agreement. Dr. Kolb is a member of the Executive Board of Preussag Stahl AG, which he joined in 1986. Dr. Kolb is also a member of the Supervisory Board of Preussag Handel Gmbh and of Ruhrkohle Bergbau A.G., is Chairman of the Supervisory Board of Universal GmbH and of Peiner Agrar and Huttenstoffe GmbH; and is a director of Feralloy Corporation.
Daniel M. Rifkin was elected as an alternate director of the Company in November 1994, having been designated as such by "Heavy Metal Shares" to serve as director of the Company in Leonard Rifkin's absence or unavailability. Daniel M. Rifkin is the son of Leonard Rifkin. Mr. Rifkin is the President and Chief Operating Officer of OmniSource, which he joined in 1979.
Robert C. Gay was elected as an alternate director of the Company in September 1996, having been designated as such by the "Bain Shares" to serve as director of the Company in Mr. Edgerley's absence or
unavailability. Mr. Gay has been a managing director of Bain Capital, Inc. since 1996 and has been a general partner of Bain Venture Capital since 1989. From 1988 through 1989, Mr. Gay was a principal of Bain Venture Capital. Mr. Gay is a Vice Chairman of the Board of Directors of IHF Capital, Inc., parent of ICON Health & Fitness, Inc. In addition, Mr. Gay is a director of Alliance Entertainment Corp., GT Bicycles, Inc., GS Industries, Inc. and its subsidiary, GS Technologies Operating Co., Inc. and Physio-Control International Corporation.
Molly Ferguson was elected as an alternate director of the Company in September 1994, having been designated as such by the "GECC Shares" to serve as director of the Company in Mr. Strittmatter's absence or unavailability. Ms. Ferguson is a Manager, Operations of General Electric Capital Corporation which she joined in 1987.
Michael L. Stone was elected as an alternate director of the Company in September, 1994, having been designated as such by the "Whitney Shares" to serve as a director of the Company in Mr. Laverack's absence or unavailability. Mr. Stone is a general partner of J.H. Whitney & Co., a private equity and mezzanine capital investment firm, which he joined in 1989. Mr. Stone was an associate of the firm from 1989 through January 1992, at which time he became a general partner.
Dr. Jorg Fuhrmann was elected as an alternate director of the Company in November 1994, having been designated as such by the "Preussag Shares" to serve as a director of the Company in Dr. Kolb's absence or unavailability. Dr. Fuhrmann is a member of the Executive Board of Preussag Stahl AG, which he joined in 1995.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the compensation paid by the Company for services rendered for 1995 for the Chief Executive Officer and the other three most highly compensated executive officers of the Company whose salary and bonus amounts exceeded $100,000 (collectively, the "Named Executive Officers"). The amounts shown include compensation for services rendered in all capacities.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)(1) COMPENSATION COMPENSATION(2)
- ---------------------------------------- --------- ----------- ------------ ---------------
Keith E. Busse.......................... $ 275,000 $ 180,000 $ -- $ 1,320
President and Chief Executive Officer
Mark D. Millett......................... 165,000 90,000 -- 469
Vice President
Richard P. Teets, Jr. .................. 165,000 90,000 -- 446
Vice President
Tracy L. Shellabarger................... 120,000 28,515 87,882(3) 366
Vice President and Chief Financial
Officer
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(2) Represents matching contributions made by the Company under its Retirement Savings Plan and optional life insurance.
(3) Amount reimbursed for the payment of interest and taxes to Mr. Shellabarger for interest payments on a $750,000 promissory note payable to the Company. The promissory note will be forgiven in connection with the offerings. See "-- Employment Agreements."
OPTIONS
None of the Named Executive Officers were granted options to purchase Common Stock in 1995, nor were any options to purchase Common Stock held by any Named Executive Officer as of December 31, 1995.
DIRECTOR COMPENSATION
At present, no separate compensation or fees are payable to directors of the Company for their services, other than reimbursement of expenses incurred with respect to such services. The Company expects, however, that new directors that are not employed by or otherwise affiliated with the Company or its stockholders will be paid in a manner and at a level consistent with industry practice.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the offerings, the Board of Directors of the Company had no formal committees. Immediately prior to the completion of the offerings, the Board of Directors will establish an Audit Committee. The Board of Directors may also establish other committees to assist in the discharge of its responsibilities.
The Audit Committee will make recommendations to the Board of Directors regarding the independent auditors to be nominated for election by the stockholders and will review the independence of such auditors, approve the scope of the annual audit activities of the independent auditors, approve the audit fee payable to the independent auditors and review such audit results. Deloitte & Touche LLP presently serves as the independent auditors of the Company.
The Board of Directors, acting as a compensation committee, will provide a general review of the Company's compensation and benefit plans to ensure that they meet corporate objectives. In addition, the Board of Directors will review the Chief Executive Officer's recommendations on (i) compensation of all officers of the Company and (ii) adopting and changing major Company compensation policies and practices.
EMPLOYMENT AGREEMENTS
Effective as of June 24, 1994, the Company entered into an Employment Agreement with Mr. Busse for a term of five years, to serve as President and Chief Executive Officer. Mr. Busse received a Base Salary of $275,000 for 1995 and will receive a Base Salary of $290,000 for 1996. The Employment Agreement provides for an annual bonus (an "Annual Bonus"). The bonus is determined by making an award among executive employees selected by the Board of Directors in proportion to their respective base salaries, out of an "Annual Bonus Pool" consisting of 4% of the Company's pre-tax earnings, less an amount equal to 10% of the "equity investment" in the Company, determined as of the beginning of the year. The Annual Bonus is subject to first, a maximum of 200% of Base Salary paid in cash, then, a maximum of 100% of Base Salary paid in restricted stock vesting ratably over four years. For the first five years of employment, the Annual Bonus is guaranteed at not less than 60% of Base Salary, regardless of the Company's profitability. In addition, Mr. Busse received an additional sum of $30,000 during 1995 and will receive $30,000 during 1996 and 1997.
In the event that Mr. Busse's employment is terminated by the Company for cause, Mr. Busse is entitled to compensation earned prior to the date of termination computed pro rata up to and including the date of termination and all further obligations of the Company will terminate. For purposes of Mr. Busse's Employment Agreement, "cause" is defined as Mr. Busse's willful and knowing commission of a criminal act under applicable state or federal law. In the event that Mr. Busse's employment is terminated by the Company without "cause" or if he terminates his employment for certain specified reasons, Mr. Busse is entitled to all compensation set forth in his Employment Agreement, subject to Mr. Busse's reasonable duty to mitigate his damages, and provided that compensation payable to Mr. Busse will be reduced on a dollar for dollar basis to the extent of pre-tax compensation received by Mr. Busse from any competitor of the Company. In the event that Mr. Busse terminates his employment for any other reason, he will receive no further compensation under his employment agreement. Upon termination of Mr. Busse's employment due to his disability or death, the Company will continue paying to Mr. Busse or his estate, as the case may be, a base salary during the remainder of the five-year term; provided that in the case of disability, such payments will be reduced to the extent of any benefits paid by workers' compensation, or under any state disability benefit program or under any disability policy maintained by the Company.
Effective June 24, 1994, the Company entered into five-year Employment Agreements with Mr. Millett and Mr. Teets, pursuant to which Mr. Millett, as Vice President of Melting and Casting, and Mr. Teets, as
Vice President of Rolling and Finishing, received a Base Salary of $165,000 for 1995 and will receive a Base Salary of $175,000 for 1996. Both Mr. Millett and Mr. Teets are entitled to an Annual Bonus, calculated in the same manner and subject to the same limitations discussed above for Mr. Busse. The termination provisions contained in the Employment Agreements with Messrs. Millett and Teets are identical to those contained in the Employment Agreement with Mr. Busse.
Effective July 7, 1994, the Company entered into a four-year Employment Agreement with Mr. Shellabarger, to serve as Chief Financial Officer, at a Base Salary for 1995 of $120,000 ($135,000 for 1996). Mr. Shellabarger is entitled to an Annual Bonus calculated in the same manner and subject to the same limitations discussed above for Mr. Busse. In addition, the Company sold to Mr. Shellabarger, at the commencement of his employment, 280,601 shares of its Common Stock, at an aggregate purchase price of $750,100, for which he executed a promissory note for $750,000, secured by a pledge of the stock, due and payable in July 1998. Installments of interest are payable in July 1995 through 1997. Mr. Shellabarger is to receive an additional $70,000 annual bonus so long as the promissory note is outstanding and Mr. Shellabarger is employed by the Company to offset the interest payments due on the note. Pursuant to the terms of his employment agreement the note will be forgiven in connection with the offerings. See "Certain Transactions."
The termination provisions contained in Mr. Shellabarger's Employment Agreement are substantially similar to those contained in the other Employment Agreements. For purposes of Mr. Shellabarger's Employment Agreement, "cause" is defined as (i) dishonesty with respect to the Company or any of its subsidiaries; (ii) the unexcused failure, neglect, or refusal to perform his duties and responsibilities, despite being apprised of such failure, neglect or refusal and given a reasonable period to correct such problem; (iii) willful misfeasance or nonfeasance of duty intended to injure or having the effects of injuring the business or business opportunities of the Company or any of its subsidiaries; or (iv) his conviction of a crime that materially adversely affects the business of the Company or any of its subsidiaries, or his ability to perform his duties and responsibilities as contemplated by the Employment Agreement.
After the initial employment term expires, and although each of the foregoing Employment Agreements continues only on a month-to-month basis thereafter (unless renewed), Messrs. Busse, Millett, Teets, and Shellabarger are entitled to six months of severance pay, at their Base Salary, if employment is in fact not continued.
All four Named Executive Officers receive major medical, long-term disability, and term life insurance equal to twice their Base Salaries.
EMPLOYEE PLANS
Officer and Manager Cash and Stock Bonus Plan. In October 1996, the board of directors adopted and the stockholders approved an Officer and Manager Cash and Stock Bonus Plan (the "Bonus Plan"), which prescribes cash and stock bonus awards based upon the Company's profitability and the Officer's and Manager's relative base salaries.
Under the Bonus Plan, 5% of an amount determined by subtracting from the
Company's "Adjusted Pre-Tax Net Income" an amount equal to 10% of "Stockholder's
Equity" as determined by the Company's audited Consolidated Balance Sheets, is
placed into a "Distribution Pool," from which the bonus awards are made.
Adjusted Pre-Tax Net Income for any of the Company's fiscal years, commencing
January 1, 1997, is defined as the Company's net income before taxes,
extraordinary items and bonuses payable to Participants under the Bonus Plan, as
determined by the Company's outside auditors, except that, to the extent
reasonably determinable, the effect upon Adjusted Pre-Tax Net Income of any
income and start-up expenses associated with significant capital expenditures,
for a period not to exceed twelve months following start-up, are to be excluded
from and not taken into account in determining Adjusted Pre-Tax Net Income.
"Participants" under the Bonus Plan include "Officers" and "Managers" selected
from time to time to participate in the Bonus Plan by a committee of the Board
which administers the Bonus Plan, consisting of at least two members of the
Board, each of whom should be both a "non-employee director" (as defined in Rule
16(b)-3 under Section 16 of the Exchange Act) and an "outside director" as
defined in Section 162 of the Code. The Board currently serves as the committee,
in the absence of the appointment of a separate committee. At the present time,
four
Officers (the President and three Vice-Presidents) and four Managers have been selected to participate in the Bonus Plan.
Once the Distribution Pool has been calculated, and if it is a positive number, the Participants are entitled to receive a bonus, payable in cash and, if the Distribution Pool is sufficient, in stock of the Company, up to the amount prescribed in the Bonus Plan's formula. Specifically, each Participant is entitled to receive a cash bonus in an amount determined by multiplying the amount in the Distribution Pool by the "Participant's Bonus Percentage," except that, with respect to an Officer, the cash bonus is not to exceed two times the Officer's base salary and, with respect to a Manager, the cash bonus is not to exceed the Manager's base salary. Inasmuch as Keith E. Busse, Mark D. Millett, Richard P. Teets, Jr. and Tracy L. Shellabarger, the four Officers currently covered by the Bonus Plan, have existing employment agreements which provide for the payment of a cash bonus, and in order to preclude duplication of bonus payments, the Bonus Plan provides that the amount of any cash bonus payable to those Officers under their existing employment agreements is to be deducted from the cash bonus, if any, payable to them under the Bonus Plan.
If there is any excess in the Distribution Pool over the sum of the aggregate cash bonuses payable under the Bonus Plan to all Participants and the amounts deducted from the cash bonuses otherwise payable to Messrs. Busse, Millett, Teets and Shellabarger because of bonuses already payable to them under their employment agreements (which sum is defined as the "Adjusted Distribution Pool"), the amount thereof is to be distributed to the Participants in the form of "Restricted Stock." Each Participant is to receive that number of shares of Restricted Stock having a fair market value, at the time of issuance, equal to the product of that Participant's Bonus Percentage and the Adjusted Distribution Pool, except that, with respect to an Officer, the aggregate fair market value of the Restricted Stock so issued is not to exceed the Officer's Base Salary, and, with respect to a Manager, the aggregate fair market value of the Restricted Stock so issued is not to exceed 50% of the Manager's Base Salary. The Bonus Plan provides that Restricted Stock will vest and become nonforfeitable over a four year period. Commencing on January 1 following the year with respect to which the Restricted Stock was issued, the stock will vest and become nonforfeitable at the rate of 25% thereof for each full year following the year with respect to which the Restricted Stock was issued. Upon termination of a Participant's employment for any reason other than retirement, all shares of Restricted Stock of that Participant which were not vested at the time of termination of employment are required to be forfeited and returned to the Company (although the committee, in its discretion, may waive the forfeiture provisions). Until vested, Restricted Stock is not permitted to be transferred, assigned, sold, pledged, or otherwise disposed of in any manner, nor subject to levy, attachment or other legal process, and, while restricted, the stock certificates evidencing those shares are required to be legended and held by the Company. Subject to these limitations, however, and as long as a forfeiture has not occurred, the Participant is treated as the owner of the Restricted Stock with full dividend and voting rights.
The total number of shares of Common Stock of the Company reserved for distribution pursuant to the Restricted Stock portion of the Bonus Plan is 450,000 shares, subject to adjustment in the event of any stock dividends, stock splits, combinations or exchanges of shares, recapitalizations or other changes in the capital structure of the Company, as well as any other corporate transaction or event having any effect similar to any of the foregoing. If any such event occurs, the aggregate number of shares reserved for issuance under the Bonus Plan would be adjusted to equitably reflect the effect of such changes. The Bonus Plan will commence with the Company's fiscal year beginning January 1, 1997, and no cash or stock bonuses under this Bonus Plan will accrue until after the conclusion of the Company's 1997 fiscal year.
Because the attainment of the performance goals is not certain, it is not possible to determine the benefits and amounts that will be received by any individual participant or group of participants in the future.
The Company has also established other bonus plans for its employees. See "Business -- Employees."
Stock Option Plans. The following general discussion of certain features of the Company's 1994 Incentive Stock Option Plan (the "1994 Plan") and the 1996 Incentive Stock Option Plan (the "1996 Plan") is subject to and qualified in its entirety by reference to the 1994 Plan and the 1996 Plan, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus forms a part.
1994 Incentive Stock Option Plan. In December 1994, the Company adopted the 1994 Plan, which was approved by stockholders in March 1995. Under the 1994 Plan, the Company's Board of Directors, or a committee designated by the Board of Directors, grants to managers, supervisors and professionals of the Company (48 employees) incentive stock options ("ISOs") intended to qualify as such under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The exercise price of an ISO granted to any participant is the fair market value at the time of the grant (110% of fair market value in the case of an ISO granted to a 10% stockholder). ISOs granted under the 1994 Plan become exercisable on the fifth anniversary of the date of grant or at such time and subject to such terms and conditions as determined by the Board of Directors or a committee designated by the Board of Directors. In no event will exercise be permitted after ten years from the date of grant (five years, in the case of an ISO granted to a 10% stockholder). If an option expires or terminates without having been exercised in full, the unpurchased shares will continue to be available for award under the 1994 Plan. An ISO may be exercised during the life of the participant solely by the participant or the participant's duly appointed guardian or personal representative. The total number of shares of Common Stock available for awards under the 1994 Plan is 1,102,764 shares, subject to adjustment for future stock splits, stock dividends and similar events. As of September 28, 1996, there were options for 634,159 shares outstanding under the 1994 Plan, none of which were exercisable.
Awards under the 1994 Plan are determined by the Board of Directors (or a committee designated by the Board of Directors) in its discretion. For this reason, it is not possible to determine the benefits and amounts that will be received by any individual participant or group of participants in the future.
1996 Incentive Stock Option Plan. In October 1996, the Company adopted and the stockholders approved the 1996 Plan. The 1996 Plan covers all full-time employees of SDI (approximately 260 employees as of October 28, 1996) and its subsidiaries, including officers, department managers, supervisors, professional staff, and hourly employees, and provides for automatic semi-annual grants of stock options to all such employees, by position category, in the following amounts, based upon the fair market value of the Company's Common Stock on each semi-annual grant date, with an exercise price equal to the same fair market value on such date (110% of fair market value in the case of 10% stockholders). The stock options are intended to qualify as ISOs under the Code, except that to the extent that the aggregate fair market value (determined as of the time of the option grant) of all shares of Common Stock with respect to which ISOs are first exercisable by an individual optionee in any calendar year (under all plans of the Company and any parent or subsidiary) exceeds $100,000, the excess of the options over $100,000 will be issued as nonstatutory stock options, not qualifying as ISOs. In any fiscal year of the Company, no employee may be granted options to purchase more than 300,000 shares of the Company's Common Stock.
The 1996 Plan is a five year plan, which terminates December 31, 2001. Options issued under the 1996 Plan become exercisable six months after the date of grant and must be exercised no later than five years thereafter. The employee must remain in the continuous employment of the Company or any of its subsidiaries from the date of grant to and including the date of exercise. Options are not transferable, except by will or pursuant to a qualified domestic relations order, or as permitted under Section 422 of the Code or under applicable Securities and Exchange Commission rules, and may be exercised, during the optionee's lifetime, only by the optionee. No shares of Common Stock may be issued until full payment has been made, and an optionee has no right to any dividends or other rights of a stockholder with respect to shares subject to an option until such time as the stock has actually been issued in the optionee's name in accordance with the 1996 Plan. If an option expires or terminates without having been exercised in full, the unpurchased shares will continue to be available for award under the 1996 Plan.
The 1996 Plan is to be administered by a committee of directors appointed
by the Board from time to time and consisting of at least two members of the
Board each of whom must be both a "non-employee director," as defined in Rule
16(b)-3 promulgated under Section 16 of the Securities Exchange Act of 1934, and
an "outside director" as that term is used in Section 162 of the Code and the
regulations thereunder. Currently, in the absence of the appointment of a
committee by the Board, the Board is serving as the committee. The committee is
required to administer the 1996 Plan so as to comply at all times with Rule
16(b)-3 of the Exchange Act and Sections 162, 421, 422, and 424 of the Code.
The Board may amend, alter, or discontinue the 1996 Plan at any time and from time to time. The total number of shares of Common Stock available for award under the 1996 Plan is 1,403,000, subject to adjustment for future stock splits, stock dividends and similar events. As of October 28, 1996, no options had been issued under the 1996 Plan.
Set forth below is a chart summarizing the grants that will be made under the 1996 Plan upon completion of the offerings:
1996 INCENTIVE STOCK OPTION PLAN
NAME NUMBER OF OPTIONS(1)
------------------------------------------------------------------ --------------------
Keith E. Busse.................................................... 5,000
President and Chief Executive Officer
Mark D. Millett................................................... 3,750
Vice President
Richard P. Teets, Jr.............................................. 3,750
Vice President
Tracy L. Shellabarger............................................. 3,750
Vice President and Chief Financial Officer
Executive Group................................................... 23,750
Non-Employee Director Group....................................... --
Non-Executive Officer Employee Group.............................. 64,531
|
(1) The number of options is calculated on an assumed per share price of $16.00.
Certain Federal Income Tax Consequences of ISOs. Certain federal income tax consequences to optionees and the Company of ISOs granted under the 1994 and 1996 Plans are set forth in the following summary.
An employee to whom an ISO is granted will not recognize income at the time of grant or exercise of such ISO. No federal income tax deduction will be allowable to the employee's employer upon the grant or exercise of such ISO. However, upon the exercise of an ISO, any excess in the fair market price of the Common Stock over the exercise price constitutes a tax preference item which may have alternative minimum tax consequences for the employee. When the employee sells such shares more than one year after the date of transfer of such shares and more than two years after the date of grant of such ISO, the employee will normally recognize a long-term capital gain or loss equal to the difference, if any, between the sale prices of such shares and the exercise price. If the employee does not hold such shares for the required period, when the employee sells such shares, the employee will recognize ordinary compensation income and possibly capital gain or loss in such amounts as are prescribed by the Code and the regulations thereunder and the Company will generally be entitled to a federal income deduction in the amount of such ordinary compensation issues.
Profit Sharing Plan. Steel Dynamics has also established a Profit Sharing Plan, for eligible employees. The plan is a "qualified plan" for federal income tax purposes. Under the Profit Sharing Plan, the Company allocates each year to a trust fund such sum, if any, as the Board of Directors determines, up to an amount equal to 15% of the wages paid to Profit Sharing Plan participants ("profit sharing pool"). The profit sharing pool is used to fund the Profit Sharing Plan as well as a separate cash profit sharing bonus which is paid to employees in March of the following year. The allocation between the Profit Sharing Plan contribution and the cash bonus amount is determined by the Board of Directors each year. Employees become eligible to participate in the Profit Sharing Plan after they have completed 30 days of employment with the Company. An employee is entitled to a Profit Sharing Plan allocation only if that employee has worked at least 1,000 hours during the year. An employee becomes fully vested over a period of seven years of service with the Company, subject to prior vesting in the event of retirement, death or disability. Contributions to the Profit Sharing Plan by Steel Dynamics are deductible by the Company and the contributions and the income earned thereon are not taxable to an employee until actually received by the employee at a later date.
Retirement Savings Plan. SDI has also established a Retirement Savings Plan for eligible employees, which is also a "qualified plan" for federal income tax purposes. Employees become eligible to participate in the Retirement Savings Plan on the first day of the month following the date of employment with the Company. Contributions to the Retirement Savings Plan by the employees may be made on a pre-tax basis and the income earned on such contributions is not taxable to an employee until actually received at a later date. Generally, employees may contribute on a pre-tax basis up to 8% of their eligible compensation. SDI matches employee contributions in an amount equal to a minimum of 5% of the employee's pre-tax contribution, subject to certain applicable tax law limitations and to profitability levels of the Company. Employees are immediately 100% vested with respect to their pre-tax contributions and the Company's matching contributions. Contributions by Steel Dynamics are deductible by the Company and contributions and the income earned thereon are not taxable to the employee until actually received.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors acts as a compensation committee. See "-- Committees of the Board of Directors."
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS.
The Company's Amended and Restated Articles of Incorporation (the "Articles") limit the liability of directors by providing that the Company shall indemnify an individual made a party to a proceeding, because the individual is or was a director, against liability incurred in the proceeding if the individual's conduct was in good faith, and if the individual reasonably believed, in the case of "official conduct" with the Company, that the individual's conduct was in its best interests (or at least that the individual's conduct was not opposed to the Company's best interests), and, in the case of any criminal proceeding, that the individual either had reasonable cause to believe that his conduct was lawful, or had no reasonable cause to believe that his conduct was unlawful. These subsections prohibit indemnity if a director is found liable in a proceeding by the Company against the director (or a stockholder derivative action), or in connection with a proceeding in which the director has been adjudged liable for having improperly received a personal benefit in his capacity as a director. Further, in a direct action by the Company (or in a derivative action), indemnification is permitted but only to the extent of reasonable expenses incurred by the director in connection with the proceeding.
The underlying statutory standard for director liability in Indiana, however, is broad, providing that a director is not liable for any action taken as a director, or any failure to take any action, unless the director has breached or failed to perform the duties of the director's office, and the breach or failure to perform constitutes willful misconduct or recklessness.
CERTAIN TRANSACTIONS
Since commencing commercial production of steel in January 1996, through September 28, 1996, the Company has sold 201,500 tons of its hot bands to Heidtman (and its affiliated companies) for $65.1 million, pursuant to a six-year "off-take" agreement. See "Business -- The Company's Customers and Markets." John Bates is the President and Chief Executive Officer of Heidtman and is a member of Steel Dynamics' Board of Directors, designated by the Keylock Investments Limited stockholder in which Heidtman and Mr. Bates own a controlling interest, and by the Mazelina Anstalt stockholder (collectively, the owners of 5,823,097 shares of the Company's Common Stock, or 15.2% of the total outstanding shares prior to the offerings). Keylock Investments Limited was one of the Company's initial investors, becoming a stockholder in September 1993. Pursuant to the Company's off-take agreement with Heidtman, Heidtman has a 6-year obligation to purchase from the Company, and the Company is obligated to sell to Heidtman, at least 30,000 tons of the Company's hot band products per month. Heidtman also has priority purchase rights to the Company's secondary and field claim material. The Company's pricing to Heidtman is determined by reference to the lowest prices charged by other thin-slab mini-mills or conventional mills for the same products, and the Company cannot charge Heidtman higher prices than the lowest prices at which it offers its products to any other customer. In addition, in 1995 the Company sold approximately 32 unimproved acres of its plant site to Heidtman for $96,000, for the construction by Heidtman of a steel center processing and storage facility. See "Principal and Selling Stockholders."
Pursuant to a six-year "off-take" agreement, the Company has sold 56,800 tons of its steel coil to Preussag for an aggregate of $18.5 million during the nine months ended September 28, 1996. Under this agreement, the Company is obligated to sell to Preussag, and Preussag is required to purchase, not less than 12,000 tons per month of the Company's available products, for either domestic or export use or resale, at market prices determined by reference to the Company's price sheet and by reference to prevailing competitive market prices charged to large customers by other mills within the Company's marketing area. In addition, Preussag has been appointed as the Company's preferred distributor for all export sales to customers outside the United States, Canada and Mexico. See "Business -- The Company's Customers and Markets." Dr. Jurgen Kolb, a director of the Company, is a member of the Executive Board of Preussag Stahl AG and Preussag owns 6,089,865 shares of Common Stock, or 15.8% of the total outstanding shares prior to the offerings. See "Principal and Selling Stockholders."
Pursuant to a six-year scrap purchasing agreement with OmniSource, the Company purchased an aggregate of 661,000 tons of steel scrap for $91.1 million during the nine months ended September 28, 1996, and paid OmniSource a total of $1.2 million in fees. See "Business -- Steel Scrap and Scrap Substitute Resources." Leonard Rifkin is the Chairman of the Board and Chief Executive Officer of OmniSource and is a member of Steel Dynamics' Board of Directors designated by the Heavy Metal, L.C. stockholder (the owner of 6,233,926 shares of the Company's Common Stock, or 16.2% of the total outstanding shares prior to the offerings). Leonard Rifkin, together with members of his family, and OmniSource collectively own a controlling interest in Heavy Metal, L.C. See "Principal and Selling Stockholders." Heavy Metal, L.C. was one of the Company's initial investors, becoming a stockholder in September 1993. Pursuant to the OmniSource scrap purchasing agreement, OmniSource acts as the exclusive scrap purchasing agent for the Company's steel scrap, which may involve sales of OmniSource's own scrap, at the prevailing market prices which OmniSource can get for the same product, or it may involve brokering of general market scrap, for which the Company pays whatever is the lowest market price for which OmniSource can purchase that product. OmniSource is paid a commission per gross ton of scrap received by the Company at its mini-mill. In addition, OmniSource maintains a scrap handling facility, with its own equipment and staff, on the Company's plant site. OmniSource does not pay rent for this facility.
The Company has entered into a five-year "off-take" agreement with Qualitech, pursuant to which the Company has agreed to purchase from Qualitech approximately 300,000 tonnes of iron carbide that Qualitech intends to produce commencing in 1998. See "Business -- Steel Scrap and Scrap Substitute Resources." Steel Dynamics owns approximately 4.3% of the common stock of Qualitech Steel Holdings, Inc. ("Holdings"), the parent company of Qualitech. In addition, Keith E. Busse, Leonard Rifkin, and William Laverack, directors of the Company, also serve on Holdings' 12-member board of directors. OmniSource and Leonard
Rifkin, affiliates of Heavy Metal, L.C., one of the Company's stockholders, own approximately 6% of Holdings' common stock, and Whitney Equity Partners, L.P., an affiliate of J.H. Whitney & Co., a stockholder of the Company (of which Mr. Laverack is a general partner) owns approximately 10% of Holdings' common stock. The Company's iron carbide supply contact with Qualitech represents approximately 45% of Qualitech's estimated plant capacity, and the contract was considered vital to Qualitech's successful financing of its iron carbide project, which is presently under construction. OmniSource also has an iron carbide off-take contract with Qualitech, for 120,000 tonnes of iron carbide annually.
The Company has entered into a six year "second look" export sales agreement with Sumitomo. See "Business -- The Company's Customers and Markets." Sumitomo and its parent Sumitomo Corporation (Japan) own in the aggregate 1,582,620 shares of Common Stock or 4.1% of the total outstanding shares prior to the offerings. The export sales agreement applies if Preussag declines to handle the particular export sale. In addition, Sumitomo and IDI have entered into a Sale of Excess Product Agreement, pursuant to which Sumitomo will represent IDI, once it is producing DRI, in selling up to half of any of IDI's excess DRI that is not needed by the company for its own use and consumption. No export sales have been made to date under this agreement.
The Company's wholly owned subsidiary, IDI, has also entered into an agreement with Sumitomo, pursuant to which IDI has agreed to sell to or through Sumitomo up to 50% of any DRI that IDI manufactures starting in 1998 which Steel Dynamics does not retain for its own consumption. Such sales would be at the then prevailing market prices, either for Sumitomo's own account or on a sales commission basis for sale to third parties. In addition, IDI has agreed to enter into a license agreement with Sumitomo pursuant to which Sumitomo would be authorized, on an exclusive worldwide basis, except for the United States and Canada, and except for additional plants that IDI may wish to construct for its own use or for SDI's use, to sublicense others or to use any proprietary know-how or other intellectual property that constitutes the IDI Process or is part of the IDI Project and which may be developed by IDI in connection with the manufacture of DRI, or by Steel Dynamics either in connection with the conversion of DRI into liquid pig iron or in connection with the use thereof in the steelmaking process. Such license rights contemplate that Sumitomo would build and construct plants using this technology for itself or for others within the licensed territory. IDI would be entitled to receive a one-time license fee from Sumitomo, based upon each plant's rated production capacity, plus a negotiated royalty fee for the use of any IDI or SDI patents that may be acquired by IDI or SDI in connection with the enterprise. Any underlying royalties or fees that might have to be paid to third parties would be passed through to Sumitomo or to its sub-licensees. IDI has also agreed to afford Sumitomo an opportunity to provide its proposed DRI plant with its raw material and equipment supplies, on a competitive basis that is intended to secure for IDI the lowest and best prices for the supplies and products.
In September 1996, the Company closed two interrelated private placements of Common Stock pursuant to agreements that were entered into during the first and second quarters of 1996. In February 1996, the Company accepted subscriptions from existing stockholders and others, all "accredited" purchasers, for the purchase, at approximately $8.20 per share, of approximately $11.9 million of Common Stock, as part of the Company's efforts to place an aggregate of $25.0 million of Common Stock to be used in whole or in part to finance its IDI Project. In the exercise or waiver of their limited preemptive rights under the Stockholders Agreement existing stockholders and others, owning collectively (prior to the purchase) an aggregate of 26,444,666 shares of the Company's Common Stock, or 78.0% of the total then outstanding, agreed to purchase that amount. The purchase price was determined by reference to the arm's length Stock Purchase Agreement of December 1995 with Preussag, relating to the purchase by Preussag of $50.0 million of Common Stock at approximately $8.55 per share, which contained a provision that contemplated the Company's sale to existing stockholders or to others of up to $10 million of its shares of Common Stock at a purchase price of approximately $8.20 per share. Because of the interrelatedness of the Company's placement of the balance of approximately $13.0 million before the IDI Project could be undertaken, the approximately $11.9 million private placement was not closed until September 1996, at which time the Company also closed a $13.5 million private placement of its Common Stock with Sumitomo and Sumitomo Corporation (Japan), which was agreed to by the parties in April 1996, at a per share purchase price of approximately $10.51. This
purchase price was determined at arm's length by the Company's Board of Directors, in negotiations with Sumitomo.
During August and September, 1996, in connection with its Cold Mill Project, the Company entered into two agreements with units of General Electric Corporation, of which General Electric Capital Corporation, the owner of 5,759,738 of the Company's shares of Common Stock, or 15.0% of the total outstanding shares prior to the offerings is a wholly-owned subsidiary, for the purchase of equipment for the Cold Mill Project in the aggregate amount of approximately $23.4 million. This contract was entered into as a result of a competitive bidding process conducted by the Company in the same manner that it has used in connection with the letting of other equipment and supply agreements for its existing mini mill and for its Cold Mill Project.
The Company is intending to use a portion of the proceeds of the offerings to prepay all $55.0 million principal amount of the Subordinated Notes, together with accrued interest thereon and a prepayment premium. General Electric Capital Corporation and Whitney Subordinated Debt Fund, L.P., which owned $15.0 million principal amount and $18.5 million principal amount of the Subordinated Notes, respectively, are also each stockholders of the Company, owning 15.0% and 1.4% respectively, of the Company's shares of Common Stock prior to the offerings.
In July 1994, the Company sold Mr. Shellabarger, the Chief Financial Officer and a director of the Company, 280,601 shares of Common Stock, and accepted a $750,000 promissory note in partial payment of the purchase price. Pursuant to the terms of his employment agreement, the note will be forgiven in connection with the offerings. See "Management -- Employment Agreements."
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of September 28, 1996, and as adjusted to reflect the sale of the Common Stock offered hereby, by (i) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each director of the Company, (iii) each Named Executive Officer, (iv) each Selling Stockholder and (v) all executive officers and directors as a group. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares of Common Stock beneficially owned by them.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERINGS NUMBER OF OFFERINGS
-------------------- SHARES BEING ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------ ---------- ------- ------------ ---------- -------
Heavy Metal, L.C.(1)...................... 6,233,926 16.2% -- 6,233,926 13.0%
Preussag Stahl AG(2)...................... 6,089,865 15.8 -- 6,089,865 12.7
Bain Capital Entities(3).................. 5,128,889 13.3 -- 5,128,889 10.7
General Electric Capital Corporation(4)... 5,759,738 15.0 -- 5,759,738 12.0
Keylock Investments Limited(5)............ 3,017,139 7.9 -- 3,017,139 6.3
Mazelina Anstalt(6)....................... 2,805,958 7.3 -- 2,805,958 5.9
J.H. Whitney & Co.(7)..................... 1,753,591 4.6 -- 1,753,591 3.7
Sumitomo Corporation of America(8)........ 812,173 2.1 135,561 676,612 1.4
Sumitomo Corporation (Japan)(9)........... 770,447 2.0 -- 770,447 1.6
Keith E. Busse(10)........................ 1,823,909 4.7 140,301 1,683,608 3.5
Richard P. Teets, Jr...................... 1,122,406 2.9 -- 1,122,406 2.3
Mark D. Millett........................... 1,063,957 2.8 -- 1,063,957 2.2
Tracy L. Shellabarger..................... 280,601 .7 -- 280,601 .6
Leonard Rifkin(11)........................ 6,233,926 16.2 -- 6,233,926 13.0
OmniSource Corporation(12)................ 6,233,926 16.2 -- 6,233,926 13.0
John C. Bates(13)......................... 3,017,139 7.9 -- 3,017,139 6.3
Heidtman Steel Products, Inc.(14)......... 3,017,139 7.9 -- 3,017,139 6.3
Paul B. Edgerley(15)...................... 5,128,889 13.3 -- 5,128,889 10.7
William D. Strittmatter(16)............... 5,759,738 15.0 -- 5,759,738 12.0
William Laverack, Jr.(17)................. 1,753,591 4.6 -- 1,753,591 3.7
Dr. Jurgen Kolb(18)....................... 6,089,865 15.8 -- 6,089,865 12.7
Steel Dynamics, L.P.(19).................. 164,180 .4 13,780 150,400 .3
Lincoln National Life Insurance Company... 119,396 .3 119,396 -- --
Lincoln National Income Fund, Inc......... 29,856 .1 29,856 -- --
LDI, Ltd. ................................ 29,856 .1 29,856 -- --
APT Holdings Corporation(20).............. 208,094 .5 -- 208,094 .4
Directors and Executive Officers
as a Group (10 persons)(13, 15-18)...... 32,274,021 83.9 140,301 32,133,720 67.0
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(1) The address of this stockholder is 1650 21st Street, Santa Monica, CA 90404.
(2) The address of this stockholder is Eisenhuttenstrasse 99 D-38223, 38239 Salzgitter, Germany.
(3) The address for these stockholders is Two Copley Place, Boston, MA 02116.
Consists of 2,140,456 held of record by Bain Capital Fund IV, L.P. ("Fund
IV"), 2,449,538 held by Bain Capital Fund IV-B, L.P. ("Fund IV-B"), 412,568
held by BCIP Associates, L.P., and 126,327 held by BCIP Trust Associates,
L.P. (collectively, the "Bain Capital Entities"). If the U.S. Underwriters
exercise their over-allotment option in full, the shares beneficially owned
after the offerings by Fund IV would be 1,679,365, Fund IV-B would be
1,921,865, BCIP Associates, L.P. would be 323,694 and BCIP Trust
Associates, L.P. would be 99,113.
(4) The address of this stockholder is 1600 Summer Street, Fifth Floor, Stamford, CT 06927.
(5) The address of this stockholder is 17 Dame Street, Dublin 2, Republic of Ireland.
(6) The address of this stockholder is c/o Lic. for Gertrud Beck, Stadtle 36, 9490 Vaduz, Liechtenstein.
(7) The address of this stockholder is 177 Broad Street, Stamford, CT 06901.
Consists of 961,060 held of record by Whitney 1990 Equity Fund, L.P. (the
"Whitney Equity Fund"), 240,279 held of record by J.H. Whitney & Co., and
552,252 shares held of record by the Whitney Subordinated Debt Fund.
(8) The address of this stockholder is 2750 USX Tower, 1600 Grant Street, Pittsburgh, PA 15219. In September 1996 Sumitomo Corporation entered into a "second look" export distribution agreement with the Company, and in October 1996 entered into a Sale of Excess Product Agreement with IDI. Two representatives designated by Sumitomo Corporation serve on IDI's five person Board of Directors. If the U.S. Underwriters exercise their over-allotment option in full, the shares beneficially owned by Sumitomo Corporation of America would be 513,751.
(9) The address of this stockholder is Josuika Building, 2-1-1 Hirotsubashi, Chiyodo-ku, Tokyo, 101, Japan. Sumitomo Corporation is an affiliate of Sumitomo Corporation of America. See footnote (8).
(10) Mr. Busse is the President and Chief Executive Officer and a director of the Company, and is one of the Company's founders.
(11) Consists of 6,233,926 shares of Common Stock held of record by Heavy Metal, L.C. that Mr. Rifkin may be deemed to beneficially own due to his relationship with other beneficial owners of that entity. Mr. Rifkin is a member of Heavy Metal, L.C., a member-managed limited liability company. Three of Mr. Rifkin's adult sons also hold membership units, as does OmniSource, of which Mr. Rifkin is Chairman of the Board and a director. See "Certain Transactions." Mr. Rifkin disclaims beneficial ownership of all but 587,018 of these shares.
(12) Consists of 6,233,926 shares of Common Stock held of record by Heavy Metal, L.C. that OmniSource may be deemed to beneficially own due to its relationship with Heavy Metal, L.C. OmniSource is a member of Heavy Metal, L.C., a member-managed limited liability company. Leonard Rifkin, OmniSource's Chairman of the Board and a director, is also a member of Heavy Metal, L.C. OmniSource disclaims beneficial ownership of all but 1,716,439 of these shares.
(13) Consists of all 3,017,139 shares of Common Stock held of record by Keylock Investments Limited that Mr. Bates may be deemed to beneficially own due to his relationship with Keylock Investments Limited. Mr. Bates and Heidtman own a controlling interest in Keylock Investments Limited.
(14) Consists of 3,017,139 shares of Common Stock held of record by Keylock Investments Limited that Heidtman may be deemed to beneficially own due to its relationship with Keylock Investments Limited. Heidtman and its President, John F. Bates, own a controlling interest in Keylock Investments Limited.
(15) Consists of all 5,128,889 shares of Common Stock held of record by the Bain Entities that Mr. Edgerley may be deemed to beneficially own due to his relationship with those entities. Mr. Edgerley is a Managing Director of Bain Capital, Inc., which manages the Bain Capital Entities. Mr. Edgerley disclaims beneficial ownership of these shares.
(16) Consists of all 5,759,738 shares of Common Stock held of record by General Electric Capital Corporation that Mr. Strittmatter may be deemed to beneficially own due to his relationship with that entity. Mr. Strittmatter is a Vice President and Senior Credit Officer of General Electric Capital Corporation. Mr. Strittmatter disclaims beneficial ownership of these shares.
(17) Consists of all 1,753,591 shares of Common Stock held of record by the Whitney Equity Fund, J.H. Whitney & Co., and Whitney Subordinated Debt Fund that Mr. Laverack may be deemed to beneficially own due to his relationship with those entities. Mr. Laverack is a general partner of J.H. Whitney & Co., an affiliate of Whitney Equity Fund and Whitney Subordinated Debt Fund. Mr. Laverack disclaims beneficial ownership of these shares.
(18) Consists of all 6,089,865 shares of Common Stock held of record by Preussag that Mr. Kolb may be deemed to beneficially own due to his relationship with that entity. Mr. Kolb is a member of the Executive Board of Preussag Stahl AG. Mr. Kolb disclaims beneficial ownership of these shares.
(19) If the U.S. Underwriters exercise their over-allotment option in full, Steel Dynamics, L.P. would sell its remaining shares of Common Stock.
(20) APT Holdings Corporation is an affiliate of Mellon Bank, N.A., one of the Company's lenders and the agent under its Credit Agreement. If the U.S. Underwriters exercise their over-allotment option in full, the shares beneficially owned after the offerings by APT Holdings Corporation would be 149,645.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a brief description of the basic terms of and instruments governing certain indebtedness of the Company. The following discussion does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the instruments governing the respective indebtedness, which instruments are filed as exhibits to the Registration Statement of which this Prospectus is a part.
The Company entered into a Credit Agreement, dated as of June 30, 1994, as amended (the "Credit Agreement"), with Mellon Bank, N.A. (the "Agent") and the lenders party thereto (the "Lenders"), which provides for (i) up to an aggregate of $320.0 million of senior term loans ("Senior Term Loans") and (ii) a $45.0 million revolving credit facility (the "Revolving Credit Facility") for working capital purposes. Indebtedness outstanding under the Credit Agreement is secured by a first priority lien on substantially all of the assets of the Company.
Of the $320.0 million in senior term loan commitments, $150.0 million was designated for the construction of the Company's mini-mill, $20.0 million was designated for mini-mill construction cost overruns (none of which is outstanding) and $150.0 million was designated and remains available for the construction of the Cold Mill Project. Borrowings under the Revolving Credit Facility are subject to a borrowing base consisting of specified percentages of eligible inventory and receivables.
The Revolving Credit Facility will mature on September 30, 2000. The Senior Term Loans will amortize semi-annually from September 30, 1997 to March 31, 2002. Borrowings under the Revolving Credit Facility must be repaid to the extent such borrowings exceed the borrowing base. In addition, the Company is required to make prepayments under certain circumstances from excess cash flow, asset sales, insurance proceeds, condemnation awards and issuances of debt or equity.
Borrowings under the Revolving Credit Facility bear interest at the option of the Company, at (i) the "Base Rate" plus an applicable margin, depending on the status of the construction of the mini-mill and Cold Mill Project or (ii) the "Euro-Rate" plus an applicable margin (the "Euro-Rate Option"). The Senior Term Loans bear interest on the basis of the Euro-Rate Option. The "Base Rate" for any day is defined as the greater of (A) the prime rate for such day or (B) .50% plus the federal funds effective rate for such day. The "Euro-Rate" for any day is defined as the rate for each funding segment determined by the Agent by dividing the rate of interest quoted on the Reuter's screen ISDA page to be the average of the rates per annum for deposits in dollars offered to major money center banks in the London interbank market two business days prior to the first day of the funding period in amounts comparable to the funding segment and with maturities comparable to such funding period by 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate Reserve Percentage is the percentage as determined by the Agent which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System representing the maximum reserve requirement with respect to eurocurrency funding of a member bank.
The Company's Credit Agreement restricts the Company's ability to incur
additional indebtedness, except (i) refinancings of indebtedness incurred under
the Credit Agreement and other existing indebtedness, (ii) licensing or royalty
fees payable to SMS Schloemann-Siemag AG and (iii) unsecured indebtedness in an
aggregate principal amount at any one time not greater than $5.0 million. In
addition, the Credit Agreement prohibits the Company from making capital
expenditures (other than specified permitted capital expenditures) in any fiscal
year in excess of the lesser of (i) $20.0 million and (ii) the sum of $12.0
million plus 25% of excess cash flow for the immediately preceding year plus 70%
of the amount of capital expenditures allowed but not made in the immediately
preceding fiscal year. The Company may make specified permitted capital
expenditures including up to $230.0 million for the Cold Mill Project, up to
$55.0 million for the Caster Project and an equity investment of up to $25.0
million for the IDI Project. The Company is also prohibited from creating liens
on its properties except (i) liens created in connection with its indebtedness
under the Credit Agreement and in connection with its existing indebtedness,
(ii) liens created and/or deposits made in the ordinary course of business for
taxes and assessments, workmen's compensation, unemployment insurance and other
social security obligations, bids, surety and appeal bonds and the like and
(iii) purchase money liens on assets acquired after completion of the Cold Mill
Project in an aggregate amounted not to exceed $5.0 million. The Credit
Agreement contains additional restrictive covenants, including among others,
covenants
restricting the Company and its subsidiaries with respect to: investments in additional equipment and business opportunities, entering into certain contracts, disposition of property or assets, the payment of dividends, entering into sale-leaseback transactions, entering into transactions with affiliates, mergers and consolidations, the making of payments on and modification of certain indebtedness and modification of certain agreements. In addition, the Credit Agreement requires the Company to meet certain financial tests, including maintaining (a) its current ratio at or above 1.3, (b) its leverage ratio at or below 2.25 for 1996, 2.10 for 1997, 1.90 for 1998, 1.40 for 1999 and 1.00 thereafter, (c) its tangible net worth at or above the sum of (i) $45.0 million and (ii) 50% of cumulative net income at such time and (d) its fixed charge coverage ratio at or above 1.00 for 1996, 1.15 for 1997 and 1998, and 1.25 thereafter.
The failure of the Company to satisfy any of the covenants will constitute an event of default under the Credit Agreement, notwithstanding the Company's ability to meet its debt service obligations. The Credit Agreement also contains customary events of default, including the nonpayment of principal, interest, fees and other amounts, change of control, change of management and cross-defaults to certain other obligations of the Company and certain events including bankruptcy, reorganization and insolvency of the Company, SMS Schloemann-Siemag AG, Heidtman or OmniSource.
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Common Stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Articles and Bylaws, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part, as well as by the provisions of Indiana's law. Upon consummation of the offerings, the Company's authorized capital stock will consist of 100,000,000 shares of Common Stock, par value $.01 per share. As of October 30, 1996 there were 38,428,341 shares of Common Stock issued and outstanding, validly issued and fully paid and non-assessable, that were held of record by 29 stockholders. As of September 28, 1996, 634,159 shares of Common Stock were reserved for issuance upon exercise of outstanding stock options.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders, including the election of directors. The Articles do not provide for cumulative voting in the election of directors and, thus, holders of a majority of the shares of Common Stock may elect all of the directors standing for election. However, under the Stockholders Agreement, stockholders of the Company having the power to vote in the aggregate 79.4% of the shares of the Company's Common Stock outstanding after the offerings, have agreed to vote their shares in the election of directors for representatives of stockholder parties designated by them. All 10 of the Company's directors have been elected in this manner and will continue to be so long as the Stockholders Agreement is in effect and the stockholders party to the Stockholders Agreement hold a majority of the Company's outstanding Common Stock. See "-- The Stockholders Agreement." Accordingly, these stockholder parties will retain the power to elect the entire Board of Directors of the Company.
All holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor. Upon the liquidation, dissolution or winding-up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company that are available after the payment of all debts and liabilities. Holders of Common Stock have no preemptive rights or rights to convert their Common Stock into any other securities, nor are there any redemption or sinking fund provisions applicable to the Common Stock.
All outstanding shares of Common Stock are, and the shares to be issued in the offerings will be, validly issued, fully paid, and non-assessable.
CERTAIN PROVISIONS OF INDIANA LAW REGARDING TAKEOVERS
As an Indiana corporation, the Company is subject to certain provisions of Indiana law which may discourage or render more difficult an unsolicited takeover of the Company. There are two principal statutes relating to this issue that constitute part of the BCL, the statute regulating "business combinations" and the statute regulating "control share acquisitions."
Under Chapter 43 of the BCL relating to "business combinations" a corporation (with 100 or more stockholders) may not engage in any "business combination" with any "interested" stockholder for a period of five years following the interested stockholder's "share acquisition date" unless the business combination or the purchase of shares made by the interested stockholder was approved by the corporation's board of directors prior to the interested stockholder's share acquisition date. The term "business combination" is broadly defined to apply to any merger or consolidation of the corporation and the interested stockholder, as well as any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in a single or a series of transactions) to or with the interested stockholder (or any affiliate or associate thereof) of any assets of the corporation if the transaction represents 10% or more of the corporation's assets, outstanding shares of stock, or consolidated net income of the corporation. Similarly, the issuance or transfer by the corporation of any of its (or its subsidiary's) stock that has an aggregate market value equal to 5% or more of all the outstanding shares of stock to the interested stockholder (or any affiliate or associate thereof) is a "business combination," except if it is in connection with the distribution of a dividend or the exercise of warrants paid or made pro rata to all stockholders. The term is applicable as well to the adoption of any plan of liquidation or dissolution
proposed by or under any understanding with an interested stockholder (or an affiliate or associate thereof), and to any reclassification of securities, recapitalization, merger or consolidation with any subsidiary, or any other transaction proposed by or under any arrangement with the interested stockholder (or any affiliate or associate thereof) that has the "effect" of increasing the proportionate interest of the interested stockholder in the corporation.
An "interested stockholder," as defined, is any person (other than the corporation or a subsidiary) that is the beneficial owner of 10% or more of the voting power, or an affiliate or associate of the corporation that at any time within the five prior years was the beneficial owner of 10% or more of the voting power. For purposes of the statute, the "share acquisition date" is the date upon which the person first becomes an interested stockholder of a corporation. So long as the board of directors does not approve of the business combination with the interested stockholder, the five year "blackout" period, in which the business combination is prohibited, applies, and the board of directors is required to render its decision within a 30-day period (or sooner if required by the Securities Exchange Act of 1934 (the "Exchange Act")).
In addition to the absolute five-year business combination prohibition, the statute also requires that, any business combination between the corporation and an interested stockholder must satisfy additional statutory conditions. The board of directors must have approved of the business combination before the interested stockholder's share acquisition date, or a majority of the outstanding voting stock not beneficially owned by the interested stockholder must have approved the business combination at a meeting held no earlier than five years after the interested stockholder's share acquisition date, or the business combination transaction must meet certain per share values to all stockholders (keyed to the highest per share price paid by the interested stockholder within the prior five-year period). All consideration must also be paid either in cash or in the same form as the interested stockholder has used to acquire the largest number of shares acquired by it. Furthermore, the statute requires an interested stockholder to purchase all remaining shares of stock, if any are purchased, not just one class or series.
Under Chapter 42 of the BCL, the "control share acquisition" statute, "control shares" (shares that, in the election of directors, could exercise or direct the exercise of voting power of one-fifth, one-third or a majority or more of all of the voting power) of any "issuing public corporation" (one hundred or more stockholders, principal office or place of business, or substantial assets within Indiana, or 10% of its stockholders resident in Indiana) that are acquired in a "control share acquisition" by an "acquiring person" will be accorded only such voting rights, after the acquisition, as are specifically conferred by the stockholders, voting as a group, excluding all "interested shares." If a person holding "interested shares" engages in a control share acquisition of control shares, and the stockholders have not acted to specifically grant those acquired shares the voting rights they had prior to the control share acquisition, the acquired shares lose their voting rights. A majority of the shares (excluding interested shares) must be voted to confer voting rights upon the acquiring person. The only exemption from this statute is if the corporation's articles of incorporation or its bylaws provide that this statute does not apply to control share acquisitions of the corporation's shares, and such provisions must exist prior to the occurrence of any "control share acquisition." However, the Company does not have such a provision in either its Articles or in its Bylaws. Furthermore, if the Articles or Bylaws so provide (and the Articles and Bylaws do not so provide at this time), control shares acquired in a control share acquisition with respect to which the shares have not been accorded full voting rights by the stockholders can be redeemed by the corporation at "fair value." But if in fact the stockholders of the corporation do vote to accord full voting rights to the acquiring person's control shares, and if the acquiring person has acquired control with a majority or more of the voting power, all stockholders of the issuing public corporation are allowed to invoke dissenters' rights, providing "fair value" to them (defined as not less than the highest price paid per share by the acquiring person in the control share acquisition. In order to secure stockholder approval, as required, the acquiring person must deliver an acquiring person "statement" to the corporation, setting forth pertinent information concerning the identity of the acquiring person, the number of shares already owned, the range of voting power that the control share acquisition seeks, and the terms of the proposed acquisition. Thereafter, the directors for the issuing public corporation, within ten days, are required to call a special meeting of the stockholders to consider the voting rights issue, and the stockholders meeting must be held within 50 days after receipt of the statement by the issuing public corporation. The acquiring person can
specifically request that the special stockholders meeting not be held sooner than thirty days after delivery of the acquiring person's statement to the issuing public corporation. The corporation's notice of the special stockholders meeting must be accompanied by the acquiring person's statement, as well as a statement by the Board of Directors of the corporation concerning its position or recommendation (or that it is taking no position or making no recommendation) with respect to the voting rights issue in the proposed control share acquisition.
THE STOCKHOLDERS AGREEMENT
Under the Stockholders Agreement between the Company and various stockholder groups identified therein as the "Bain Group," "GECC" (General Electric Capital Corporation), the "Whitney Group," "Heavy Metal" (Heavy Metal, L.C.), the "Keylock Group," "Low Cost" (Low Cost Limited Partnership), the "Management Group" (Messrs. Busse, Millett, Teets, and Shellabarger), "Preussag," "Sumitomo" and members of the "Subdebt Group," the sale, assignment, transfer, encumbrance, or other disposition of both shares owned by the stockholder signatories (the "Stockholder Shares") are subject to certain prior rights and obligations as between the parties, as are certain corporate actions proposed to be taken by the Company.
Election of Directors. For a period of 10 years or until a "public float" has been realized (defined as the date upon which 25% of the outstanding Common Stock of the Company has been sold pursuant to effective registration statements under the Securities Act), each holder of Stockholder Shares has agreed to vote all of its Stockholder Shares to maintain the authorized number of directors on the Company's Board of Directors at an agreed level (currently 10 persons) and, further, to elect to the Board one representative designated by the holders of a majority of the Bain Shares, one representative designated by the holders of a majority of the GECC Shares, one representative designated by the holders of a majority of the Heavy Metal Shares, one representative designated by the holders of a majority of the Keylock Shares, one representative designated by the holders of a majority of the Keith Busse Shares, one representative designated by the holders of a majority of the Mark Millett Shares, one representative designated by the holders of a majority of the Richard Teets Shares, one representative designated by the holders of a majority of the Busse, Millett, and Teets Shares, one representative designated by the holders of a majority of the Whitney Shares, and one representative designated by the holders of a majority of the Preussag Shares.
Transfers of Common Stock: Participation Rights. No holder of Stockholder Shares nor any holder of Warrants is entitled to sell, transfer, assign, pledge, or otherwise dispose of (a "Transfer") any interest in any Stockholder Shares, except in an "exempt transfer," unless 20 days prior to making any Transfer, the transferring holder delivers an "Offer Notice" to all other holders of Stockholder Shares, disclosing the applicable number of securities intended to be transferred, the price at which the Transfer is proposed to be made, and other relevant terms and conditions. All other holders of Stockholder Shares then have 20 days within which to purchase their respective pro rata shares of the offered securities. These transfer restrictions are not applicable to any Transfer to an affiliate, to any "Public Sale" (as defined), to a sale of the Company, or a transfer between members of the same group.
Tag-Along Rights. In the event of an approved Transfer, each holder of Stockholder Shares which did not elect to purchase its pro rata share pursuant to someone else's Offer Notice, may, instead, elect to sell its pro rata portion together with the holder that originated the Offer Notice, thereby cutting that person back in the number of shares.
Sale of the Company. In the event that the Company's board of directors approves a sale of the Company, not otherwise prohibited, each holder of Stockholder Shares is required to consent. This undertaking, however, ceases to apply upon the earlier to occur of a sale of the Company or the realization of a "public float."
Other Restrictions. Unless the holders of 70% of the outstanding Stockholder Shares consent the Company may not do such things as pay dividends, make distributions, buy back any of its stock, issue additional debt or equity securities, make loans or advances to anyone, make investments in excess of $5.0 million, merge or consolidate with another company, make any business acquisition exceeding $2.0 million, make any capital expenditures exceeding $5.0 million, adopt any stock option plan, permit a sale of the
company, or hire, terminate, or enter into or amend any compensation arrangement with any of the Company's senior management. These restrictions terminate when the Company has realized a "public float."
THE REGISTRATION AGREEMENT
Under a Registration Agreement dated as of June 30, 1994, as amended, between the Company and various stockholder groups identified therein as the "Bain Stockholders," "General Electrical Capital Corporation," "Heavy Metal, L.C.," the "Keylock Stockholders," the "Whitney Stockholders," the "Management Stockholders," "Preussag," and "Sumitomo" (collectively the "Stockholders"), the Stockholders were granted certain demand and piggyback registration rights.
Demand Registrations. The Bain Stockholders and General Electric Capital Corporation are each entitled to request two demand registrations, and the Heavy Metal Stockholders and Keylock Stockholders are entitled to request one demand registration each. A demand registration must be for at least 50% of the total Company shares held by the Stockholder making the demand.
Piggyback Registrations. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a demand registration), the Company is required to notify all holders of "Registrable Securities" and will include all Registrable Securities requested to be included that may be prudently sold in the offering.
All expenses incident to the Company's compliance with its obligations under the Registration Agreement will be paid by the Company, regardless of whether in connection with a demand registration or a piggyback registration, and the Company has agreed to reimburse the holders of Registrable Securities for the reasonable fees and disbursements of one legal counsel chosen by all of them in connection with a registration.
The obligations under the Registration Agreement terminate on the seventh anniversary of a sale of the Company's Common Stock pursuant to an effective registration statement under the Securities Act, subject to extension for an additional six-month period under certain circumstances.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Chicago Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings there has been no market for the Common Stock of the Company. The Company can make no predictions as to the effect, if any, that sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. Nevertheless, sales of significant amounts of the Common Stock in the public market, or the perception that such sales may occur, could adversely the market price of the Common Stock and could impair the Company's future ability to raise capital through an offering of its equity securities. See "Risk Factors -- Shares Eligible for Future Sale."
Upon completion of the offerings, the Company will have a total of 47,803,341 shares of Common Stock outstanding. Of these shares, the 9,843,750 shares of Common Stock sold in the offerings will be freely tradeable without restriction under the Securities Act, except for any such shares which may be acquired by an "affiliate" of the Company (an "Affiliate") as that term is defined in Rule 144 under the Securities Act, which shares will be subject to the resale limitations of Rule 144. The remaining 37,959,591 shares of Common Stock outstanding will be "restricted securities" as the term is defined by Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this Prospectus, if a period of at least two years has elapsed since the later of the date the "restricted securities" were acquired from the Company and the date they were acquired from an Affiliate, then the holder of such restricted securities (including an Affiliate) is entitled to sell a number of shares within any three-month period that does not exceed the greater of 1% of the then outstanding shares of the Common Stock (approximately 478,033 shares immediately after the offerings) or the average weekly reported volume of trading of the
Common Stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale with the Securities and Exchange Commission (the
"Commission"). The holder may only sell such shares through unsolicited brokers'
transactions. Sales under Rule 144 are also subject to certain requirements
pertaining to the manner of such sales, notices of such sales, and the
availability of current public information concerning the Company. Under Rule
144(k), if a period of at least three years has elapsed between the later of the
date restricted securities were acquired from the Company and the date they were
acquired from an Affiliate, as applicable, a holder of such restricted
securities who is not an Affiliate at the time of the sale and has not been an
Affiliate for at least three months prior to the sale would be entitled to sell
the shares immediately without regard to the limitations described above. The
Commission has proposed shortening the applicable holding periods under Rule
144(d) and Rule 144(k) to one and two years, respectively (from the current
periods of two and three years). The Company cannot predict whether such
amendments will be adopted or the effect thereof on the trading market for its
Common Stock.
The Company, its directors and executive officers, the Selling Stockholders, and certain other stockholders of the Company who in the aggregate own substantially all of the outstanding shares of Common Stock immediately prior to the offerings have entered into "lock-up" agreements with the Underwriters, providing that they will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (provided that such shares or securities are either currently owned by such person or are thereafter acquired from the Company) or (ii) enter into any swap or other agreement that transfers to another, in whole or in part, any of the economic consequences of ownership of such shares of Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, for a period of 180 days after the date of this Prospectus without the prior written consent of Morgan Stanley & Co. Incorporated, other than (i) the sale to the Underwriters of the shares of Common Stock offered hereby or (ii) the issuance by the Company of shares of Common Stock upon the exercise of an option sold or granted pursuant to existing benefit plans of the Company and outstanding on the date of this Prospectus.
The preceding description does not include shares of Common Stock issuable upon the exercise of options granted under the Company's 1994 Plan or the 1996 Plan. Rule 701 under the Securities Act provides that shares of Common Stock acquired on the exercise of outstanding options may be resold by nonaffiliates beginning 90 days after the date of this Prospectus, subject only to the manner-of-sale provisions of Rule 144, and by affiliates beginning 90 days after the date of this Prospectus, subject to all provisions of Rule 144 except the two-year minimum holding period. As of October 28, 1996, the Company had reserved an aggregate of 634,159 shares of Common Stock for issuance upon the exercise of options granted pursuant to the 1994 Plan and no options outstanding under the 1996 Plan. As soon as practicable after the offerings, the Company intends to register on Form S-8 under the Securities Act approximately 2,955,764 shares of Common Stock issuable under options subject to the Company's 1994 Plan and 1996 Plan thus permitting, subject to the lock-up agreements described above, the resale of such shares by nonaffiliates upon issuance in the public market without restriction under the Securities Act.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of Common Stock by a Non-U.S. Holder. For this purpose, the term "Non-U.S. Holder" is defined as any person who is, for United States federal income tax purposes, a foreign corporation, a non-resident alien individual, a foreign partnership or a foreign estate or trust, as such terms are defined in the Code. This discussion does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state and local consequences that may be relevant to such Non-U.S. Holders in light of their personal circumstances, or to certain types of Non-U.S. Holders which may be subject to special treatment under United States federal income tax laws (for example, insurance companies, tax-exempt organizations, financial institutions and broker-dealers). Furthermore, this discussion is based on provisions of the Code, existing and proposed regulations promulgated thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly with retroactive effect. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). U.S. resident aliens are subject to U.S. federal tax as if they were U.S. citizens.
DIVIDENDS
The Company does not anticipate paying cash dividends on its capital stock in the foreseeable future. See "Dividend Policy." In the event, however, that dividends are paid on shares of Common Stock, dividends paid to a Non-U.S. Holder of Common Stock will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be provided by an applicable income tax treaty between the United States and the country of which the Non-U.S. Holder is a tax resident, unless (i) the dividends are effectively connected with the conduct of a trade or business of the Non-U.S. Holder within the United States and the Non-U.S. Holder provides the payor with proper documentation or (ii) if a tax treaty applies, the dividends are attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder. In order to claim the benefit of an applicable tax treaty rate, a Non-U.S. Holder may have to file with the Company or its dividend paying agent an exemption or reduced treaty rate certificate or letter in accordance with the terms of such treaty. Dividends that are effectively connected with the conduct of a trade or business within the United States or, if a tax treaty applies, are attributable to such a United States permanent establishment, are subject to United States federal income tax on a net income basis (that is, after allowance for applicable deductions) at applicable graduated individual or corporate rates. Any such effectively connected dividends received by a foreign corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an address outside the United States are presumed to be paid to a resident of such country for purposes of the withholding discussed above (unless the payor has knowledge to the contrary) and, under the current interpretation of United States Treasury regulations, for purposes of determining the applicability of a tax treaty rate. However, under proposed United States Treasury regulations, in the case of dividends paid after December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts in existence on or before the date that is 60 days after the proposed United States Treasury regulations are published as final regulations), a Non-U.S. Holder generally would be subject to United States withholding tax at a 31% rate under the backup withholding rules described below, rather
than at a 30% rate or a reduced rate under an income tax treaty, unless certain certification procedures (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are complied with, directly or through an intermediary. Certain certification and disclosure requirements must be complied with in order to be exempt from withholding under the effectively connected income exemption.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service (the "IRS"), provided that the required information is furnished to the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal income tax with respect to gain recognized on a sale or other disposition of Common Stock unless (i) (a) the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder within the United States, or (b) if a tax treaty applies, the gain is attributable to a United States permanent establishment maintained by the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual and holds the Common Stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code applicable to United States expatriates, or (iv) the Company is or has been a "U.S. real property holding corporation" for United States federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or the period such Non-U.S. Holder held the Common Stock. If the Company were, or to become, a U.S. real property holding corporation, gains realized upon a disposition of Common Stock by a Non-U.S. Holder which did not directly or indirectly own more than 5% of the Common Stock during the shorter of the periods described above generally would not be subject to United States federal income tax so long as the Common Stock is "regularly traded" on an established securities market. The Company believes that it has not been, is not currently, and does not anticipate becoming, a "U.S. real property holding corporation" for United States federal income tax purposes.
If a Non-U.S. Holder who is an individual falls under clause (i) above, such individual generally will be taxed on the net gain derived from a sale under regular graduated United States federal income tax rates. If an individual Non-U.S. Holder falls under clause (ii) above, such individual generally will be subject to a flat 30% tax on the gain derived from a sale, which may be offset by certain United States capital losses (notwithstanding the fact that such individual is not considered a resident alien of the United States). Thus, individual Non-U.S. Holders who have spent (or expect to spend) more than a de minimis period of time in the United States in the taxable year in which they contemplate a sale of Common Stock are urged to consult their tax advisors prior to the sale as to the U.S. tax consequences of such sale.
If a Non-U.S. Holder that is a foreign corporation falls under clause (i) above, it generally will be taxed on its net gain under regular graduated United States federal income tax rates and, in addition, will be subject to the branch profits tax equal to 30% of its "effectively connected earnings and profits" within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual who is neither a United States citizen nor a United States resident (as defined for United States federal estate tax purposes) at the time of death will be included in the individual's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise and, therefore, may be subject to United States federal estate tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under United States Treasury regulations, the Company must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected with a trade or business in the United States of the Non-U.S. Holder or withholding was reduced or eliminated by an applicable income tax treaty. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement.
United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to (i) dividends paid to Non-U.S. Holders that are
subject to the 30% withholding discussed above (or that are not so subject
because a tax treaty applies that reduces or eliminates such 30% withholding) or
(ii) under current law, dividends paid to a Non-U.S. Holder at an address
outside of the United States. However, under proposed United States Treasury
regulations, in the case of dividends paid after December 31, 1997 (December 31,
1999 in the case of dividends paid to accounts in existence on or before the
date that is 60 days after the proposed United States Treasury regulations are
published as final regulations), a Non-U.S. Holder generally would be subject to
backup withholding at a 31% rate, unless certain certification procedures (or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures) are complied with,
directly or through an intermediary.
Backup withholding and information reporting generally will apply to dividends paid to addresses inside the United States on shares of Common Stock to beneficial owners that are not "exempt recipients" and that fail to provide in the manner required certain identifying information.
In general, backup withholding and information reporting will not apply to a payment of the gross proceeds of a sale of Common Stock effected at a foreign office of a broker. If, however, such broker is, for United States federal income tax purposes, a U.S. person, a controlled foreign corporation or a foreign person, 50% or more of whose gross income for certain periods is derived from activities that are effectively connected with the conduct of a trade or business in the United States, such payments will not be subject to backup withholding but will be subject to information reporting, unless (i) such broker has documentary evidence in its records that the beneficial owner is a Non-U.S. Holder and certain other conditions are met, or (ii) the beneficial owner otherwise establishes an exemption. Temporary United States Treasury regulations provide that the Treasury is considering whether backup withholding should be required in such circumstances. Under proposed United States Treasury regulations not currently in effect, backup withholding will not apply to such payments absent actual knowledge that the payee is a United States person. The IRS recently proposed regulations addressing certain withholding, certification and information reporting rules (some of which have been mentioned above) which could affect treatment of the payment of the proceeds discussed above. Non-U.S. Holders should consult their tax advisors regarding the application of these rules to their particular situations, the availability of an exemption therefrom, the procedure for obtaining such an exemption, if available, and the possible application of the proposed United States Treasury regulations addressing the withholding and the information reporting rules.
Payment by a United States office of a broker of the proceeds of a sale of Common Stock is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a Non-U.S. Holder, or otherwise establishes an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against such holder's U.S. federal income tax liability provided the required information is furnished to the IRS.
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the Company and Selling Stockholders have agreed to sell 9,375,000 and 468,750 shares, respectively, of the Company's Common Stock and the U.S. Underwriters named below, for whom Morgan Stanley & Co. Incorporated, PaineWebber Incorporated, McDonald & Company Securities, Inc. and Salomon Brothers Inc are serving as U.S. Representatives, have severally agreed to purchase, and the International Underwriters named below, for whom Morgan Stanley & Co. International Limited, PaineWebber International (U.K.) Ltd., McDonald & Company Securities, Inc. and Salomon Brothers International Limited are serving as International Representatives, have severally agreed to purchase, the respective number of shares of Common Stock set forth opposite their names below:
NUMBER
NAME OF SHARES
---------
U.S. Underwriters:
Morgan Stanley & Co. Incorporated....................................
PaineWebber Incorporated.............................................
McDonald & Company Securities, Inc. .................................
Salomon Brothers Inc.................................................
---------
Subtotal............................................................. 7,875,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited...........................
PaineWebber International (U.K.) Ltd. ...............................
McDonald & Company Securities, Inc. .................................
Salomon Brothers International Limited...............................
---------
Subtotal............................................................. 1,968,750
---------
Total................................................................ 9,843,750
========
|
The U.S. Underwriters and the International Underwriters are collectively referred to as the "Underwriters." The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Common Stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to take and pay for all of the shares of Common Stock offered hereby (other than those covered by the U.S. Underwriters' over-allotment option described below) if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each U.S. Underwriter has represented and agreed that, with certain exceptions, (a) it is not purchasing any U.S. Shares (as defined below) for the account of anyone other than a United States or Canadian Person (as defined below) and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside the United States or Canada or to anyone other than a United States or Canadian Person. Pursuant to the Agreement Between U.S. and International Underwriters, each International Underwriter has represented and agreed that, with certain exceptions, (a) it is not purchasing any International Shares (as defined below) for the account of any United States or Canadian Person and
(b) it has not offered or sold, and will not offer or sell, directly or indirectly, any International Shares or distribute any prospectus relating to the International Shares within the United States or Canada or to a United States or Canadian Person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Agreement Between U.S. and International Underwriters. As used herein, "United States or Canadian Person" means any national or resident of the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under the laws of the United States or Canada or of any political subdivision thereof (other than a branch located outside the United States and Canada of any United States or Canadian Person) and includes any United States or Canadian branch of a person who is otherwise not a United States or Canadian Person. All shares of Common Stock to be purchased by the U.S. Underwriters and the International Underwriters under the Underwriting Agreement are referred to herein as the U.S. Shares and the International Shares, respectively.
Pursuant to the Agreement Between U.S. and International Underwriters, sales may be made between the U.S. Underwriters and International Underwriters of any number of shares of Common Stock to be purchased pursuant to the Underwriting Agreement as may be mutually agreed. The per share price of any shares sold shall be the Price to Public set forth on the cover page hereof, in United States dollars, less an amount not greater than the per share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each U.S. Underwriter has represented that it has not offered or sold, and has agreed not to offer or sell, any shares of Common Stock, directly or indirectly, in Canada in contravention of the securities laws of Canada or any province or territory thereof and has represented that any offer of shares of Common Stock in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer is made. Each U.S. Underwriter has further agreed to send to any dealer who purchases from it any shares of Common Stock a notice stating in substance that, by purchasing such shares of Common Stock, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, directly or indirectly, any of such shares of Common Stock in Canada or to, or for the benefit of, any resident of Canada in contravention of the securities laws of Canada or any province or territory thereof and that any offer of shares of Common Stock in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province of Canada in which such offer is made, and that such dealer will deliver to any other dealer to whom it sells any of such shares of Common Stock a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each International Underwriter has represented and agreed that (a) it has not offered or sold and during the period of six months after the date hereof will not offer or sell any shares of Common Stock in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their business or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations (1995) (the "Regulations"); (b) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Regulations with respect to anything done by it in relation to the shares of Common Stock offered hereby in, from or otherwise involving the United Kingdom; and (c) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the shares of Common Stock, other than any document which consists of, or is a part of, listing particulars, supplementary listing particulars or any other document required or permitted to be published by listing rules under Article IV of the Financial Services Act 1986, if that person is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or is a person to whom such document may otherwise lawfully be issued or passed on.
The Underwriters initially propose to offer part of the shares of Common Stock directly to the public at the Price to Public set forth on the cover page hereof and part to certain dealers at a price which represents a concession not in excess of $ per share under the public offering price. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to other Underwriters or to certain dealers. After the initial offering of the shares of Common Stock, the offering price and other selling terms may from time to time be varied by the Underwriters.
The Underwriters have informed the Company and the Selling Stockholders that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Common Stock offered by them.
Application has been made to have the Common Stock approved for quotation on the Nasdaq National Market under the symbol STLD.
Pursuant to the Underwriting Agreement, Sumitomo Corporation of America, Steel Dynamics, L.P., APT Holdings Corporation and the Bain Capital Entities have granted to the U.S. Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to 1,476,562 additional shares of Common Stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The U.S. Underwriters may exercise such option to purchase solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of Common Stock offered hereby. To the extent such option is exercised, each U.S. Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Common Stock as the number set forth next to such U.S. Underwriter's name in the preceding table bears to the total number of shares of Common Stock offered by the U.S. Underwriters hereby.
At the request of the Company, the Underwriters have reserved for sale, at the initial public offering price, up to 492,187 shares offered hereby for directors, officers, employees and their relatives. The number of shares of Common Stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not so purchased will be offered by the Underwriters to the general public on the same basis as the other shares offered hereby. Reserved shares purchased by such individuals will, except as restricted by applicable securities laws, be available for resale following the offerings.
The Company, its executive officers and directors, the Selling Stockholders, and certain other stockholders of the Company who in the aggregate own substantially all of the outstanding shares of Common Stock immediately prior to the offerings, have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated, they will not, for a period of 180 days after the date of this Prospectus, (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (provided that such shares or securities are either currently owned by such person or are thereafter acquired from the Company) or (b) enter into any swap or other agreement that transfers to another, in whole or in part, any of the economic consequences of ownership of such shares of Common Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, other than (i) the sale to the Underwriters of the shares of Common Stock offered hereby or (ii) the issuance by the Company of shares of Common Stock upon the exercise of an option sold or granted pursuant to existing benefit plans of the Company and outstanding on the date of this Prospectus.
McDonald & Company Securities, Inc. ("McDonald & Company") has provided investment banking, financial advisory and other services to the Company for which it has received customary fees and reimbursement of its out-of-pocket expenses. McDonald & Company and its affiliates are stockholders of the Company.
The Company, the Selling Stockholders and the Underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
PRICING OF OFFERINGS
Prior to the offerings, there has been no public market for the shares of Common Stock. Consequently, the initial public offering price will be determined by negotiation among the Company, the Selling Stockholders and the Underwriters. Among the factors to be considered in determining the initial public offering price will be the Company's record of operations, the Company's current financial condition and future prospects, the experience of its management, the economics of the industry in general, the general condition of the equity securities market and the market prices of similar securities of companies considered comparable to the Company and such other factors as may be deemed relevant. There can be no assurance that a regular trading market for the shares of Common Stock will develop after the offerings or, if developed,
that a public trading market can be sustained. There can also be no assurance that the prices at which the Common Stock will sell in the public market after the offerings will not be lower than the price at which it is issued by the Underwriters in the offerings.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the Company by Barrett & McNagny, Fort Wayne, Indiana. Robert S. Walters, a partner at Barrett & McNagny, beneficially owns 2.9% of the equity units in Heavy Metal, L.C., a stockholder of the Company. Mr. Walters disclaims beneficial ownership of all but 1.6% of such units. Certain legal matters will be passed upon for the Underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994 and 1995 and September 28, 1996 and for the period from September 7, 1993 (date of inception) through December 31, 1993, for each of the two years in the period ended December 31, 1995 and for the nine-month period ended September 28, 1996, included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement (of which this Prospectus is a part and which term shall encompass all amendments, exhibits and schedules thereto) on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement certain parts of which are omitted from the Prospectus in accordance with the rules and regulations of the Commission, and to which reference is made. For further information about the Company and the securities offered hereby, reference is made to the Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract, agreement or other document filed as an exhibit to the Registration Statement, each such statement being qualified in its entirety by such reference.
Upon completion of the offerings, the Company will be subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, will be required to file reports, proxy statements and other information with the Commission. The Registration Statement, reports, proxy statements and other information filed by the Company with the Commission, may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such material also can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 28, 1996... F-3
Consolidated Statements of Operations for the Period from September 7, 1993 (date of
inception) through December 31, 1993, for each of the two years in the period ended
December 31, 1995, for the nine-month period ended September 28, 1996 and for the
unaudited nine-month period ended September 30, 1995................................ F-4
Consolidated Statements of Stockholders' Equity for the Period from September 7, 1993
(date of inception) through December 31, 1993, for each of the two years in the
period ended December 31, 1995, and for the nine-month period ended September 28,
1996................................................................................ F-5
Consolidated Statements of Cash Flows for the Period from September 7, 1993 (date of
inception) through December 31, 1993, for each of the two years in the period ended
December 31, 1995, for the nine-month period ended September 28, 1996 and for the
unaudited nine-month period ended September 30, 1995................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Steel Dynamics, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Steel Dynamics, Inc. and subsidiary (the "Company") as of December 31, 1994 and 1995 and September 28, 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for the period from September 7, 1993 (date of inception) through December 31, 1993, for each of the two years in the period ended December 31, 1995 and for the nine-month period ended September 28, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Steel Dynamics, Inc. and subsidiary as of December 31, 1994 and 1995 and September 28, 1996, and the results of their operations and their cash flows for the period from September 7, 1993 (date of inception) through December 31, 1993, for each of the two years in the period ended December 31, 1995 and for the nine-month period ended September 28, 1996 in conformity with generally accepted accounting principles.
Indianapolis, Indiana
October 28, 1996 (November ,1996 as to Note 11)
* * * * * *
The accompanying consolidated financial statements reflect a 28.06 for one stock split which is to be effected prior to the effective date of the registration statement. The above report is in the form which will be furnished by Deloitte & Touche LLP upon consummation of this event which is described in Note 11 to the consolidated financial statements, and assuming that, from October 28, 1996 to the date of such event, no events have occurred that would affect the accompanying consolidated financial statements and notes thereto.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
October 28, 1996
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31,
--------------------- SEPTEMBER 28,
1994 1995 1996
--------- --------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 28,108 $ 6,884 $ 30,564
Short-term investments.................................... 3,000
Accounts receivable, net of allowance for doubtful
accounts of $534 as of September 28, 1996.............. 125 20,225
Accounts receivable -- related parties.................... 14,842
Inventories............................................... 13,580 35,860
Other current assets...................................... 255 1,634 1,224
-------- -------- --------
Total current assets.............................. 28,363 22,223 105,715
PROPERTY, PLANT, AND EQUIPMENT, NET......................... 54,566 274,197 289,431
DEBT ISSUANCE COSTS, less accumulated amortization of $32
and $1,520 as of December 31, 1995 and September 28, 1996,
respectively.............................................. 11,140 12,211 14,265
RESTRICTED CASH............................................. 2,666 2,590
OTHER ASSETS................................................ 549 9,382 10,367
-------- -------- --------
TOTAL ASSETS...................................... $ 94,618 $ 320,679 $ 422,368
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 16,247 $ 24,478 $ 17,475
Accounts payable -- related parties....................... 3,424 14,389
Accrued interest.......................................... 29 2,660 1,929
Accrued foreign currency loss............................. 2,970 1,013 328
Other accrued expenses.................................... 887 3,078 6,906
Current maturities of long-term debt...................... 2,058 5,840
-------- -------- --------
Total current liabilities......................... 20,133 36,711 46,867
LONG-TERM DEBT, less current maturities..................... 11,949 220,996 251,865
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock voting, $.01 par value; 100,000,000
shares authorized; 28,060,145, 28,644,722 and
36,636,869 shares issued and outstanding as of December
31, 1994 and 1995 and September 28, 1996,
respectively........................................... 280 286 366
Class B common stock convertible non-voting, $.01 par
value; 500,000 shares authorized; no shares issued
Additional paid-in capital................................ 83,046 93,083 163,341
Amounts due from stockholders............................. (10,750) (469) (325)
Accumulated deficit....................................... (10,040) (29,928) (39,746)
-------- -------- --------
Total stockholders' equity........................ 62,536 62,972 123,636
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 94,618 $ 320,679 $ 422,368
======== ======== ========
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 7, 1993 ---------------------------------------
(DATE OF INCEPTION) YEAR ENDED SEPTEMBER 30, 1995
THROUGH DECEMBER 31, ------------------
DECEMBER 31, -------------------
1993 1994 1995 (UNAUDITED) SEPTEMBER 28, 1996
------------------- ------- --------- ------------------
Net sales:
Unrelated parties....... $ 137 $ 92,824
Related parties......... 81,795
--------- ---------
Total net sales...... 137 174,619
Cost of goods sold........ 3,169 158,257
------- ------- --------- --------- ---------
Gross profit (loss)....... (3,032) 16,362
Selling, general and
administrative
expenses................ $ 1,159 $ 4,192 13,580 $ 8,640 9,347
------- ------- --------- --------- ---------
Operating income (loss)... (1,159) (4,192) (16,612) (8,640) 7,015
Foreign currency gain
(loss).................. (4,952) (3,272) (2,658) 260
Interest expense.......... 2 43 564 139 18,050
Interest income........... 1 307 560 463 957
------- ------- --------- --------- ---------
Net loss.................. $(1,160) $(8,880) $ (19,888) $ (10,974) $ (9,818)
======= ======= ========= ========= =========
Net loss per share........ $ (.07) $ (.36) $ (.62) $ (.34) $ (.27)
======= ======= ========= ========= =========
Weighted average shares
outstanding............. 15,931 24,679 31,975 31,952 35,940
======= ======= ========= ========= =========
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
CLASS A COMMON
STOCK ADDITIONAL AMOUNTS TOTAL
---------------- PAID-IN DUE FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT EQUITY
------ ------ ---------- ------------ ----------- -------------
Issuance of shares........... 13,436 $134 $ 597 $ 731
Net loss..................... $ (1,160) (1,160)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1993....................... 13,436 134 597 (1,160) (429)
Issuance of shares........... 14,624 146 81,042 $(10,750) 70,438
Issuance of Class A common
stock warrants............. 1,407 1,407
Net loss..................... (8,880) (8,880)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1994....................... 28,060 280 83,046 (10,750) (10,040) 62,536
Issuance of shares........... 585 6 4,994 5,000
Issuance of Class A common
stock warrants............. 5,043 5,043
Collection of amounts due
from
Class A common
stockholders............... 10,000 10,000
Amortization of amount due
from officer............... 281 281
Net loss..................... (19,888) (19,888)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1995....................... 28,645 286 93,083 (469) (29,928) 62,972
Issuance of shares........... 7,992 80 70,258 70,338
Amortization of amount due
from officer............... 144 144
Net loss..................... (9,818) (9,818)
------ ------ ---------- ------------ ----------- -------------
Balances at September 28,
1996....................... 36,637 $366 $ 163,341 $ (325) $ (39,746) $ 123,636
====== ====== ======== ========= ========= ==========
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SEPTEMBER 7, 1993
(DATE OF INCEPTION) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER DECEMBER 31, ----------------------------
31, -------------------- SEPTEMBER 28,
1993 1994 1995 SEPTEMBER 30, 1996
------------------- -------- --------- 1995 -------------
-------------
(UNAUDITED)
OPERATING ACTIVITIES:
Net loss............................... $(1,160) $ (8,880) $ (19,888) $ (10,974) $ (9,818)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 13 876 450 14,208
Foreign currency loss (gain)........ 4,952 3,272 2,658 (260)
Changes in certain assets and
liabilities:
Accounts receivable............... (125) (34,942)
Inventories....................... (13,580) (1,659) (22,280)
Other assets...................... (5) (251) (788) (1,947) 410
Accounts payable.................. 29 691 6,441 (12,054) 3,962
Accrued expenses.................. 120 796 4,822 2,525 3,095
------- -------- --------- --------- ---------
Net cash used in operating
activities................... (1,016) (2,679) (18,970) (21,001) (45,625)
------- -------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment........................... (198) (43,709) (224,449) (168,054) (29,286)
Proceeds from government grants........ 2,878 21,188 14,688 1,558
Purchase of short-term investments..... (7,000)
Maturities of short-term investments... 4,000
Other.................................. (549) (1,602) (718) (985)
------- -------- --------- --------- ---------
Net cash used in investing
activities................... (198) (41,380) (204,863) (154,084) (31,713)
FINANCING ACTIVITIES:
Proceeds from vendor/customer
advances............................ 800
Repayment of vendor/customer
advances............................ (800)
Issuance of long-term debt............. 13,352 188,430 141,010 35,157
Repayments of long-term debt........... (1,079)
Issuance of common stock............... 681 70,488 15,281 10,287 70,482
Debt issuance costs.................... (150) (10,990) (1,102) (1,019) (3,542)
------- -------- --------- --------- ---------
Net cash provided by financing
activities................... 1,331 72,050 202,609 150,278 101,018
------- -------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................ 117 27,991 (21,224) (24,807) 23,680
Cash and cash equivalents at beginning of
period................................. 117 28,108 28,108 6,884
------- -------- --------- --------- ---------
Cash and cash equivalents at end of
period................................. $ 117 $ 28,108 $ 6,884 $ 3,301 $ 30,564
======= ======== ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest................. $ 2 $ 14 $ 8,000 $ 4,456 $ 18,900
======= ======== ========= ========= =========
Supplemental disclosure of noncash
information:
Electric utility transmission facility
loan and other equipment
obligation.......................... $ -- $ -- $ 24,349 $ -- $ --
======= ======== ========= ========= =========
|
See notes to consolidated financial statements.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Interim financial information for the nine-month period ended September 30, 1995 is unaudited. The unaudited interim financial statements reflect all adjustments, consisting of normal, recurring adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim period. Information for the interim period is not necessarily indicative of results to be achieved for the full year.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The accompanying consolidated financial statements include the accounts of the Company and Iron Dynamics, Inc., a wholly owned subsidiary. All significant intercompany transactions have been eliminated. The Company operates on a four week, four week, five week accounting cycle. Accordingly, the Company's interim periods end on the last day of the fourth or fifth week within the month.
Business -- The Company, formed on September 7, 1993, operates in one industry segment and operates a thin-slab cast steel mini-mill in the Midwest, with the capacity to produce 1.4 million tons annually of hot-rolled steel coils. The Company's products are sold primarily to the automotive, tubing, construction and commercial equipment industries.
Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Inventories -- Inventories consist of approximately 97% and 93% of raw materials and supplies, and 3% and 7% of finished products as of December 31, 1995 and September 28, 1996, respectively. Inventories are stated at the lower of cost (first-in, first-out method) or market.
Property, Plant, and Equipment -- Property, plant, and equipment are stated at cost of acquisition which includes capitalized interest on construction-in-progress of $.3 million, $10.1 million and $.1 million in 1994, 1995 and 1996, respectively. Depreciation is provided on the units-of-production method for manufacturing plant and equipment and the straight-line method over the estimated useful lives of the assets ranging from 12 years to 30 years for office equipment. Repairs and maintenance are expensed as incurred. The Company recorded the proceeds received from state government and other grants as a reduction of the related capital cost.
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, among other things, requires entities to review long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Adoption of this standard had no effect on the Company's financial position, results of operations or cash flows in 1996.
Stock Options -- Employee-based stock options are accounted for in accordance with Accounting Principles Board Opinion No. 25 and related Interpretations.
Debt Issuance Costs -- The costs related to the issuance of debt are deferred and amortized to interest expense using a method that approximates the effective interest method over the terms of the related debt.
Restricted Cash -- Restricted cash consists of cash held by a trustee in a debt service fund for the repayment of principal and interest on the Company's municipal bonds.
Revenue Recognition -- The Company records sales upon shipment and provides an allowance for estimated costs associated with returns.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes -- Deferred tax assets and liabilities are computed based on differences between the financial statement and income tax bases of assets and liabilities using enacted income tax rates. Deferred income tax expense or benefit is based on the change in deferred tax assets and liabilities from period to period, subject to an ongoing assessment of realization of deferred tax assets.
Concentrations of Credit Risk -- Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, short-term investments and accounts receivable. The Company places its cash with high quality financial institutions and limits the amount of credit exposure from any one institution. Generally, the Company does not require collateral or other security to support customer receivables.
Foreign Currency Transactions -- Transaction gains and losses incurred by the Company for equipment purchases denominated in a foreign currency are recorded in results of operations currently.
Net Loss Per Share -- Net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding including the anti-dilutive effect of shares issued from September 23, 1995 through September 23, 1996 using the treasury stock method. Common stock equivalents do not have a dilutive effect on net loss per share.
Reclassifications -- Certain amounts in the 1994 and 1995 consolidated financial statements have been reclassified to conform to the 1996 presentation.
2. PROPERTY, PLANT, AND EQUIPMENT (IN THOUSANDS)
DECEMBER 31, SEPTEMBER
-------------------- 28,
1994 1995 1996
------- -------- -----------
Land and improvements.............................. $ 2,497 $ 5,309 $ 4,752
Buildings and improvements......................... 24,849 26,939
Plant, machinery and equipment..................... 77 242,690 244,045
Construction-in-progress........................... 52,001 1,499 25,916
------- -------- --------
54,575 274,347 301,652
Less accumulated depreciation...................... 9 150 12,221
------- -------- --------
Property, plant, and equipment, net................ $54,566 $274,197 $ 289,431
======= ======== ========
|
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
Debt consists of the following (in thousands):
DECEMBER 31, SEPTEMBER 28,
-------------------- -------------
1994 1995 1996
------- -------- -------------
Senior secured notes payable, principal and
interest due semi-annually beginning in 1997
through 2002, interest is variable (weighted
average rate of 8.6% and 8.0% as of December 31,
1995 and September 28, 1996, respectively)...... $115,000 $ 150,000
8.01% municipal bond, principal and interest due
monthly through 2015............................ 21,400 21,100
Electric utility, transmission facility and other
equipment obligation at interest rates ranging
from 7% to 8%, collateralized by on-site
substation and related equipment, principal and
interest due monthly or quarterly through
2015............................................ $ 1,352 37,397 36,700
11% senior subordinated promissory notes payable,
principal and interest due quarterly through
2002............................................ 10,597 49,257 49,905
------- -------- --------
Total debt........................................ 11,949 223,054 257,705
Less current maturities........................... 2,058 5,840
------- -------- --------
Long-term debt.................................... $11,949 $220,996 $ 251,865
======= ======== ========
|
The Company entered into a credit agreement, as amended, with a syndicate bank group, on June 30, 1994 and subject to the terms and conditions of the credit agreement, borrowings of $150 million under senior secured notes were made available to fund the construction and operation of the steel mini-mill and $45 million of revolving credit is available for working capital purposes. At December 31, 1994 and 1995 and September 28, 1996 there were no amounts outstanding under the revolving credit facility. The senior secured notes and revolving credit facility are collateralized by substantially all assets of the Company other than certain property, plant, and equipment securing the electric utility loan. The Company is required to pay a commitment fee equal to a percentage ranging from 0.125% to 0.50% annually depending upon the principal amount of the unused borrowing capacity under the senior notes and the unused revolving credit facility.
The credit agreement requires the Company to maintain tangible net worth of at least $45 million plus 50% of cumulative net income, a minimum current ratio, a maximum leverage ratio and a minimum fixed charge coverage ratio. The credit agreement also limits indebtedness of the Company and the amount of capital expenditures and prohibits the payment of dividends.
In 1995 the Company borrowed $21.4 million through a state government municipal bond program, of which $2.7 million and $2.6 million as of December 31, 1995 and September 28, 1996, respectively, is held by a trustee in a debt service reserve fund, and is recorded as restricted cash. At September 28, 1996, a stand-by letter of credit amounting to $22.0 million relating to the municipal bonds was outstanding.
The electric utility transmission facility loan of $7.8 million and $7.5 million at December 31, 1995 and September 28, 1996, respectively, represents the Company's portion of the cost of the transmission facilities constructed by the utility to service the Company's site. The amount of the debt would be reduced if other customers of the utility access the transmission facilities. The corresponding cost is included in other assets and is being amortized over twenty years on the straight-line basis.
The electric utility loan of $13.0 million and $12.8 million at December 31, 1995 and September 28, 1996, respectively, represents the Company's portion of the cost of the Company's substation constructed on-site. Interest and principal payments are made equally on a monthly basis in an amount necessary to repay the loan fifteen years from the date of commencement of operations.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The other equipment obligation represents deferred payments for the purchase of certain equipment. The obligation is non-interest bearing and was discounted at 7% over a term of five years.
The Company in June 1994 entered into an agreement with respect to senior subordinated promissory notes ("Subordinated Notes") in the aggregate principal amount of $55 million and warrants to purchase up to 1,641,827 shares of Class A common stock (warrants for the purchase of 29,851 shares per $1 million of Subordinated Notes) at an exercise price of $0.01 per share. In the event of payment default on any senior secured notes or revolving credit facility, the Company may not make any direct or indirect payment of or on account of the principal of or interest on the Subordinated Notes until such payment default shall have been remedied or waived or shall have ceased to exist. Subordinated Notes in the principal amount of $55 million and warrants for the purchase of 1,641,827 shares of Class A common stock are outstanding at September 28, 1996. The proceeds received from the issuance of the Subordinated Notes and warrants are allocated to the Subordinated Notes and warrants based upon their estimated fair values. The Subordinated Notes are recorded net of unamortized debt discount of $1.4 million, $5.7 million and $5.0 million as of December 31, 1994 and 1995 and September 28, 1996, respectively. The debt discount is being amortized as interest expense over the life of the Subordinated Notes, resulting in an effective interest rate of 12.8%. A prepayment premium of up to 4% of the Subordinated Notes outstanding is required in the event the Subordinated Notes are redeemed prior to maturity. Stockholders of the Company held 71% of the Subordinated Notes outstanding at December 31, 1994 and 1995 and September 28, 1996.
Maturities of outstanding debt as of September 28, 1996 are as follows (in thousands):
YEAR ENDING AMOUNT
--------------------------------------------------- -------
1997............................................... $ 5,840
1998............................................... 47,228
1999............................................... 46,627
2000............................................... 57,863
2001............................................... 12,088
|
4. INCOME TAXES
The effective income tax rate differs from the statutory federal income tax rate for the period from September 7, 1993 (date of inception) through December 31, 1993, for the years ended December 31, 1994 and 1995 and for the nine months ended September 28, 1996 because of the valuation allowances recorded.
The components of deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 31, SEPTEMBER 28,
------------------- --------------
1994 1995 1996
------- ------- --------------
Deferred tax assets:
Net operating loss carryforwards.............. $ 69 $ 1,002 $ 16,802
Inventory, including tax over book
depreciation............................... 826 5,498
Other accrued expenses........................ 779 1,828 2,349
------- -------
Total deferred tax assets....................... 1,674 8,328 19,151
Less valuation allowance........................ (1,667) (8,009) (11,931)
------- -------
Net deferred tax assets......................... 7 319 7,220
Deferred tax liabilities:
Inventory, including tax over book
depreciation............................... (6,894)
Amortization of fees.......................... (102) (322)
Other......................................... (7) (217) (4)
------- -------
Total deferred tax liabilities.................. (7) (319) (7,220)
------- -------
Net deferred tax assets and liabilities......... $ -- $ -- $ --
======= =======
|
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 28, 1996, the Company has available net operating loss carryforwards for federal income tax purposes of approximately $42.0 million. The carryforwards expire $.2 million in 2009, $2.3 million in 2010 and $39.5 million in 2011. Because of the Company's limited operating history, a valuation allowance for net deferred tax assets has been provided.
5. COMMON STOCK
The Company's articles of incorporation provide preemptive rights in certain circumstances to holders of Class A common stock and warrants to purchase common stock. The Company is currently prohibited from declaring cash dividends on the Class A common stock under its senior credit agreement. Each share of Class B common stock is convertible into one share of Class A common stock at the holder's option or upon consummation of a public offering pursuant to the Company's articles of incorporation.
Warrants to purchase 149,645 shares of Class B common stock at an exercise price of $3 per share were issued to an affiliate of the agent bank to the credit agreement (see Note 3) pursuant to a warrant purchase agreement in 1994. These warrants expire on June 30, 2004. At December 31, 1994 and 1995 and September 28, 1996, there were 149,645 Class B common stock warrants outstanding.
An officer of the Company has an employment agreement through July 1998 which requires the officer to perform duties commensurate with his role as chief financial officer, and provides for a $750,000 note receivable from the officer to purchase 280,601 shares of Class A common stock. The note was recorded as a reduction of stockholders' equity at December 31, 1994, bears interest at 10% and will be forgiven on the earlier of the fourth anniversary of the employment agreement or the effective date of the Company's initial public offering. Compensation expense is being recorded ratably over the term of the note.
1994 Incentive Stock Option Plan. The Company has adopted the 1994 Incentive Stock Option Plan ("1994 Plan") for certain key employees who are responsible for management of the Company. A total of 611,711 and 1,102,764 shares of Class A common stock have been reserved for issuance under the 1994 Plan as of December 31, 1995 and September 28, 1996, respectively. Eligible individuals under the 1994 Plan may be granted options to purchase the Company's Class A common stock at an exercise price per share of at least 100% of fair market value at the date of grant. Options under the 1994 Plan vest 100% five years after the date of grant and have a maximum term of ten years. The following summarizes the transactions under the 1994 Plan:
OUTSTANDING OPTIONS
SHARES -------------------------------------
AVAILABLE NUMBER PRICE PER AGGREGATE
FOR GRANT OF SHARES SHARE PRICE
---------- --------- --------- ---------
(IN
THOUSANDS)
Authorized in December 1994....................... 611,711
Options granted................................... (241,317) 241,317 $ 3 $ 800
-------
---
------- ------
Balance, December 31, 1994........................ 370,394 241,317 800
Options granted................................... (272,183) 272,183 3 902
Options granted................................... (58,926) 58,927 5 290
-------
---
------- ------
Balance, December 31, 1995........................ 39,285 572,427 1,992
Options forfeited................................. 8,418 (8,418) 3 (28)
Additional shares authorized...................... 491,053
Options granted................................... (2,806) 2,806 8 24
Options granted................................... (67,344) 67,344 11 708
-------
---
------- ------
Balance, September 28, 1996....................... 468,606 634,159 $ 2,696
======= ====== ==========
|
At September 28, 1996, no options were exercisable under the plan.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Incentive Stock Option Plan. The Company on October 28, 1996 adopted the 1996 Incentive Stock Option Plan ("1996 Plan") for all employees of the Company. A total of 1,403,000 shares of common stock has been reserved for issuance under the 1996 Plan. Eligible employees under the 1996 Plan may be granted options to purchase the Company's common stock at an exercise price per share of at least 100% of fair market value at the grant of date. Options under the 1996 Plan vest 100% six months after the date of grant and have a maximum term of five years.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for the 1994 Plan. No compensation cost has been recognized for the 1994 Plan because the stock option price is equal to fair value at the grant date. Had compensation cost for the 1994 Plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net loss and net loss per share would have increased to the pro forma amounts indicated below (in thousands, except per share data):
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
Net loss
As reported............................. $(19,888) $(9,818)
Pro forma............................... (19,972) (9,872)
Net loss per share
As reported............................. $ (.62) $ (.27)
Pro forma............................... (.63) (.28)
|
The fair value of the option grants are estimated on the date of grant using an option pricing model with the following assumptions: no dividend yield, risk-free interest rates of 5.7% to 7.1%, and expected lives of five to eight years. The pro forma amounts are not representative of the effects on reported net income (loss) for future years.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS
The Company has executed a raw material supply contract with OmniSource
Corporation ("OmniSource") for the purchase of steel scrap resources (see Note
8). Under the terms of the contract, OmniSource will locate and secure at the
lowest then-available market price steel scrap for the Company in grades and
quantities sufficient for the Company to meet substantially all of its
production requirements. The initial term of the contract is through October
2001. The Company retains the right to acquire scrap from other sources if
certain business conditions are present.
The Company has executed finished goods off-take contracts with Heidtman Steel Products ("Heidtman") and Preussag Stahl, AG ("Preussag") (see Note 8). Under the terms of the contracts, the Company retains the right to sell its hot-rolled coils in the open market; however, the Company is required to sell and Heidtman and Preussag are required to purchase a minimum of 30,000 and 12,000 tons, respectively, each month at the then-current market price the Company is charging for similar products. The Company is required to provide Heidtman and Preussag with a volume discount for all tons purchased each month in which Heidtman and Preussag purchase the minimum tons from the Company. The initial term of the contracts for Heidtman and Preussag are through December 2001.
The Company purchases its electricity pursuant to a contract which extends through 2005. Under the contract the Company is subject to a monthly minimum charge. At September 28, 1996, the Company's fixed and determinable purchase obligations for electricity are $7.5 million annually from 1997 through 2001. Purchases under the electricity contract were $.5 million in 1995 and $12.2 million in 1996.
The Company began construction of its cold mill in August 1996 and had construction related commitments of $126.3 million as of September 28, 1996.
7. LEGAL PROCEEDINGS
The Company, from time to time, is subject to claims relating to the conduct of its business. In the opinion of management any such matters presently outstanding will not have a material adverse effect upon the Company's financial position or future results of operations.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
The Company sells hot-rolled coils to Heidtman and affiliates of Preussag and purchases steel scrap resources from OmniSource. Heidtman, Preussag and OmniSource are stockholders of the Company. The Company had sales of $65.1 million and $18.5 million during the nine-months ended September 28, 1996 to Heidtman and affiliates of Preussag, respectively. The Company as of September 28, 1996 had outstanding accounts receivable of $11.3 million and $3.5 million from Heidtman and affiliates of Preussag, respectively. The Company had purchases of $7.1 million and $91.1 million from OmniSource in 1995 and the nine-months ended September 28, 1996, respectively. The Company as of December 31, 1995 and September 28, 1996 had accounts payable to OmniSource of $3.4 million and $14.4 million, respectively. During 1996, sales to Heidtman and Preussag represented 37% and 10%, respectively, of the Company's total net sales.
In 1995, the Company sold approximately 32 unimproved acres of its plant site to Heidtman for $96,000, for the construction by Heidtman of a steel processing and storage facility. In addition, the Company permits OmniSource to maintain a scrap handling facility, with its own equipment and staff, on the Company's plant site. OmniSource does not pay rent for this facility.
The on-site substation was purchased by the Company for approximately $12.8 million in 1995 from General Electric Corporation, the parent of General Electric Capital Corporation, a stockholder of the Company, and has commitments to purchase additional equipment for approximately $23 million.
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximated fair value as of December 31, 1994 and 1995 and September 28, 1996, because of the relatively short maturity of these instruments. The carrying value of long-term debt, including the current portion, approximated fair value as of December 31, 1994 and 1995 and September 28, 1996, respectively. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates.
As required by the credit agreement, in August 1994 the Company entered into an interest rate cap agreement with the agent bank whereby the maximum base rate on fifty percent of the principal amount, up to $75 million, of the Company's projected outstanding senior term loans during the period from June 30, 1995 through December 31, 1996 is 7.0%. The Company is exposed to credit loss in the event of nonperformance by the counterparty to its interest rate cap agreement. The Company anticipates that the counterparty will be able to fully satisfy its obligation under the interest rate cap agreement. The fair value of the interest rate cap agreement was $1.1 million at December 31, 1994 and the interest rate cap agreement had nominal values at December 31, 1995 and September 28, 1996. The fair value of the interest rate cap agreement was estimated by obtaining a quote from a broker and represents the cash requirement if the existing contract had been settled at period end. The premium paid for the interest rate cap agreement is included in other current assets and is being amortized to interest expense over the term of the interest rate cap agreement.
10. RETIREMENT PLANS
The Company sponsors a tax-deferred retirement savings plan for all employees of the Company under which eligible employees may elect to contribute on a pre-tax basis up to 8% of their eligible compensation. The Company provides matching contributions equal to 5% of the participants' contributions to the savings plan. Employer contributions are not significant for any periods presented.
11. STOCK SPLIT
On October 28, 1996, the board of directors approved a 28.06 for one-stock split which will be effected in November 1996. Per share data has been restated to give effect to the stock split for all periods presented.
[GRAPHIC DEPICTING PICTURES OF STEEL
DYNAMICS' STEEL MILL
[LOGO] SDI
STEEL DYNAMICS, INC.]
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued October 31, 1996
9,843,750 Shares
OF THE 9,843,750 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 9,375,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 468,750 SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES OF COMMON STOCK
BY THE SELLING STOCKHOLDERS. OF THE 9,843,750 SHARES OF COMMON STOCK
BEING OFFERED, 1,968,750 SHARES ARE OFFERED INITIALLY OUTSIDE THE
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS AND
7,875,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES
AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." PRIOR
TO THE OFFERINGS, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT
THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $15 AND $17. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- ----------------
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
|
(2) Before deducting expenses payable by the Company estimated at $875,000.
(3) Certain stockholders have granted the U.S. Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 1,476,562 additional Shares of Common Stock at the price to public less underwriting discounts and commissions, for the purpose of covering over-allotments, if any. If the U.S. Underwriters exercise such option in full, the total price to public, underwriting discounts and commissions, and proceeds to Company will be $ , $ and $ , respectively. See "Underwriters."
MORGAN STANLEY & CO. PAINEWEBBER INTERNATIONAL International |
McDONALD & COMPANY SALOMON BROTHERS INTERNATIONAL LIMITED Inc. Securities, |
, 1996
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of Common Stock being registered. All amounts are estimates, except the SEC registration fee, the NASD filing fee and the Nasdaq National Market listing fee.
SEC registration fee...................................................... $ 61,466
NASD filing fee........................................................... 20,625
Nasdaq National Market listing fee........................................ 50,000
Printing and engraving expenses........................................... 254,000
Blue Sky qualification fees and expenses.................................. 22,500
Legal fees and expenses................................................... 275,000
Accounting fees and expenses.............................................. 160,000
Transfer Agent and Registrar fees......................................... 25,000
Miscellaneous expenses and administrative costs........................... 6,409
--------
Total........................................................... $875,000
========
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ITEM 14 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Chapter 37 of the Indiana Business Corporation Law ("BCL"), Article IX of the Registrant's Amended and Restated Articles of Incorporation provides that the Company shall indemnify a director or officer against liability (which includes expenses and costs of defense) incurred in any proceeding, if that individual was made a party to the proceeding because the individual is or was a director or officer of the Company (or, at the Company's request, was serving as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, whether or not for profit), so long as the individual's conduct was in good faith and with the reasonable belief (in connection with the individual's "official capacity") that the conduct was in the Company's best interests, or (in all other cases) that the conduct was at least not opposed to the Company's best interests. In the case of any criminal proceeding, the duty to indemnify applies so long as the individual either had reasonable cause to believe that the conduct was lawful, or had no reasonable cause to believe that the conduct was unlawful. Conduct with respect to an employee benefit plan in connection with a matter the individual believed to be in the best interests of the participants in and beneficiaries of the plan is deemed conduct that satisfies the indemnification standard that the individual reasonably believed that the conduct was at least not opposed to the Company's best interests. The Company may advance or reimburse for reasonable expenses incurred by a person entitled to indemnification, in advance of final disposition, if the individual furnishes the Company with a written affirmation of his or her good faith belief that the applicable standard of conduct was observed, accompanied by a written undertaking to repay the advance if it is ultimately determined that the applicable standards were not met.
In all cases, whether in connection with advancement of expenses during a proceeding, or afterward, the Company may not grant indemnification unless authorized in the specific case after a determination has been made that indemnification is permissible under the circumstances. The determination may be made either by the Company's Board of Directors, by majority vote of a quorum consisting of directors not at the time parties to the proceeding, or, if a quorum cannot be so obtained, then by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more directors not at the time parties to the proceeding. Alternatively, the determination can be made by special legal counsel selected by the Board of Directors or the committee, or by the stockholders (excluding shares owned by or voted under the control of persons who are
II-1
at the time parties to the proceeding). In the event that a person seeking indemnification believes that it has not been properly provided may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. In such a proceeding, a court is empowered to grant indemnification if it determines that the person is fairly and reasonably entitled to indemnification in view of all of the relevant circumstances, whether or not the person met the standard of conduct for indemnification.
The Company may purchase and maintain insurance on behalf of a director, officer, employee, or agent of the Company, insuring that individual against liability arising from his or her status as a director, officer, employee, or agent, whether or not the Company would have the power to indemnify the individual against the same liability under Article IX. Article IX does not preclude the Company to provide indemnification in any other manner.
Reference is hereby made to Section 9 of the Underwriting Agreement between the Company, the Selling Stockholders and the Underwriters, a form of which has been filed as Exhibit 1.1 to this Registration Statement, for a description of indemnification arrangements between the Company, the Selling Stockholders and the Underwriters.
The indemnification provisions set forth in Article IX of the Amended and Restated Articles of Incorporation, as well as the authority vested in the Board of Directors by Chapter 37 of the BCL to grant indemnification beyond that which is described in Article IX, may be sufficiently broad to provide indemnification of the Registrant's directors and officers for liabilities arising under the Securities Act.
ITEM 15 RECENT SALES OF UNREGISTERED SECURITIES
From the Registrant's inception in September 1993 through September 28, 1996, the Registrant has issued and sold the following securities (without giving effect to the 28.06:1 stock split of the Registrant's Common Stock):
1. At the time of incorporation in September 1993, more than three years ago, Registrant issued and sold an aggregate of 150,000 shares of Common Stock to its founding stockholders Keith E. Busse, Mark D. Millett, and Richard P. Teets, Jr., at a purchase price of $0.30 per share, for an aggregate purchase price of $45,000, pursuant to restricted stock purchase agreements.
2. In September 1993, more than three years ago, Registrant issued and sold an aggregate of 20,000 shares of Common Stock to Steelink Co., of which Peter Brickfield, Esq., a consultant and advisor to the Company, is a partner, at a purchase price of $0.30 per share, for an aggregate purchase price of $6,000, pursuant to a restricted stock purchase agreement.
3. In September 1993, more than three years ago, Registrant issued and sold an aggregate of 308,820 shares of Common Stock to "seed money" accredited investors, at a purchase price of $2.20 per share, for an aggregate purchase price of $680,000. Heavy Metal, L.C. purchased $340,000, Keylock Investments Limited purchased $170,850, and Mazelina Anstalt purchased $169,150 (the latter two aggregating $340,000, the same as Heavy Metal, L.C.). All three were sophisticated, accredited investors. There was no formal stock purchase agreement for this initial transaction.
4. On June 30, 1994, Registrant issued and sold an aggregate of 511,180 shares of Common Stock to accredited financial investors, for a total of $55,379,792. The purchasers consisted of Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates (Bain), and BCIP Trust Associates, L.P. (Bain), which together purchased 180,599 shares for $19,906,948, for a per share purchase price of $110.22; General Electric Capital Corporation, which purchased 180,610 shares for $19,906,948, for the same per share purchase price of $110.22 as Bain; J.H. Whitney & Co., which purchased 7,258 shares for $800,000 and Whitney 1990 Equity Fund, L.P., which purchased 29,033 shares for $3,200,000, for a per share purchase price of $110.22; Low Cost Limited Partnership, which purchased 5,000 shares for which it paid $551,104, a per share purchase price of the same $110.22; and Klans Associates, which purchased 907 shares for $100,000, for a per share purchase price of $110.25. In addition, Heavy Metal, L.C. purchased 61,170 shares for $6,742,157, for a per share purchase price of $90.61 and Keylock
II-2
Investments Limited and Mazelina Anstalt purchased 46,590 shares, for which it paid $4,172,135, for a per share purchase price of $89.55. In total, 511,180 shares were purchased for $55,379,792, for a per share average purchase price of $108.34.
5. On June 30, 1994, Registrant issued and sold $55,000,000 aggregate principal amount of senior subordinated promissory notes and warrants to purchase up to 58,511 shares of Common Stock at an exercise price of $.01 per share to Whitney Subordinated Debt Fund, General Electric Capital Corporation, Sumitomo Corporation of America, Steel Dynamics, L.P., Lincoln National Life Insurance Company, Lincoln National Income Fund, Inc. and LDI, Ltd. for an aggregate purchase price of $55,000,000.
6. In connection with the Credit Agreement, on June 30, 1994. Registrant issued warrants to purchase 5,333 shares of Common Stock at an exercise price of $75 per share to APT Holdings Corporation.
7. On July 26, 1994, pursuant to an Employment Agreement of even date entered into between the Company and Tracy L. Shellabarger, the Company sold 10,000 of its shares of Common Stock to Mr. Shellabarger for a purchase price of $75.01 per share, for an aggregate purchase price of $750,100. Mr. Shellabarger paid cash of $100 and executed a promissory note for $750,000, with interest only payable at 7% percent per annum. Pursuant to the terms of the Employment Agreement, the principal amount of the promissory note will be forgiven concurrently with the effectiveness of the Registration Statement in connection with the offerings.
8. On December 14, 1995 and March 11 and April 22, 1996, Registrant issued and sold an aggregate of 208,333 shares of Common Stock to Preussag Stahl, AG, a German steelmaker, and an accredited investor, at a purchase price of $240.00 per share, for an aggregate purchase price of $50 million, pursuant to a restricted stock purchase agreement.
9. On September 10, 1996, pursuant to subscriptions made in December 1995 (and accepted by the Company in February 1996), the Company issued and sold an aggregate of 51,558 shares of Common Stock to existing stockholders or their affiliates, pursuant to exercise of their limited pre-emptive rights under the Stockholders Agreement, at a purchase price of $230.00 per share, for an aggregate purchase price of $11,858,400; and, as part of the same equity financing, issued and sold to Sumitomo Corporation (Japan) and Sumitomo Corporation of America, an accredited investor, pursuant to a commitment entered into in April 1996, an aggregate of 45,763 shares of Common Stock, at a purchase price of $295.00 per share, for an aggregate purchase price of $13,500,085, pursuant to a stock purchase agreement.
10. On October 1996, all of the outstanding warrants were converted into 63,844 shares of Common Stock for an aggregate price of $400,585.
The issuances described in this Item 15 were deemed exempt from registration under the Securities Act of 1933, as amended (the "Act"), in reliance upon Section 4(2) of the Act as transactions by an issuer not involving any public offering. In addition, the recipients of securities in each such transaction were accredited investors, mostly institutional investors, and each represented its intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the stock certificates issued in each such transaction. All recipients had adequate access, through their relationships with the Registrant, to information about the Registrant.
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ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits: The following exhibits are filed as a part of this Registration Statement:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Steel Dynamics, Inc.
3.2 Bylaws of Steel Dynamics, Inc.
5.1 Legal Opinion of Barrett & McNagny.
10.1a Amended and Restated Credit Agreement between Steel Dynamics, Inc. and Mellon
Bank, N.A., et al. (including Amendments Nos. 1 through 5 thereto).
10.1b* Amendment No. 5 to Credit Agreement.
10.1c* Amendment No. 6 to Credit Agreement.
10.1d* Amendment No. 7 to Credit Agreement.
10.2* Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc. re Taxable Economic Development Revenue Bonds. Trust Indenture
between Indiana Development Finance Authority and NBD Bank, N.A., as Trustee
re Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc.
10.3 Contract for Electric Service between Steel Dynamics, Inc. and Indiana
Michigan Power Company.
+10.4* Industrial Gases Supply Agreement between Steel Dynamics, Inc. and Air
Products and Chemicals, Inc. dated August 5, 1994.
10.5 Interruptible Gas Supply Contract between Steel Dynamics, Inc. and Northern
Indiana Trading Co. dated February 27, 1995.
10.6* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana Fuel
& Light Company, Inc. dated April 3, 1995.
10.7* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Trading Co. dated April 3, 1995.
10.8* Gas Services Agreement between Steel Dynamics, Inc. and Crossroads Pipeline
Company dated April 3, 1995.
10.9 Panhandle Eastern Pipeline Agreement dated July 22, 1996.
10.10 Natural Gas Purchase Agreement between Steel Dynamics, Inc. and PanEnergy
Trading and Market Services, Inc. dated August 8, 1996.
10.11 Agreement for Wastewater Services between the City of Butler, Indiana and
Steel Dynamics, Inc. dated September 5, 1995.
10.12 Slag Processing Agreement between Steel Dynamics, Inc. and Butler Mill Service
Company dated February 3, 1995.
+10.13* Agreement to Provide Scrap Purchasing Services between Steel Dynamics, Inc.
and OmniSource Corporation dated October 29, 1993.
10.14 Purchasing Agreement between Steel Dynamics, Inc. and Heidtman Steel Products,
Inc. dated October 29, 1993.
+10.15* Iron Carbide Off Take Agreement between Steel Dynamics, Inc. and Qualitech
Steel Corporation dated June 29, 1996.
10.16 Purchasing, Domestic Sales and Export Distribution Agreement between Steel
Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.
10.17 Reciprocal Patent and Technical Information Transfer and License Agreement
between Steel Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.
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II-4
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
10.18* 1994 Incentive Stock Option Agreement, as amended.
10.19** 1996 Incentive Stock Option Agreement.
10.20* Employment Agreement between Steel Dynamics, Inc. and Keith Busse.
10.21* Employment Agreement between Steel Dynamics, Inc. and Mark D. Millett.
10.22* Employment Agreement between Steel Dynamics, Inc. and Richard P. Teets, Jr.
10.23** 1996 Officer and Manager Cash and Stock Bonus Plan
10.24 Employment Agreement between Steel Dynamics, Inc. and Tracy L. Shellabarger.
Tracy L. Shellabarger Promissory Note and Stock Pledge Agreement.
10.25* "Second Look" Export Distribution Agreement between Steel Dynamics, Inc. and
Sumitomo Corporation of America.
10.26* Sale of Excess Product Agreement between Iron Dynamics, Inc. and Sumitomo
Corporation of America.
10.27 Stockholders Agreement dated June 30, 1994.
10.28 Amendment No. 1 to Stockholders Agreement.
10.29 Amendment No. 2 to Stockholders Agreement.
10.30 Amendment No. 3 to Stockholders Agreement.
10.31 Registration Agreement dated June 30, 1994.
10.32 Amendment No. 1 to Registration Agreement.
10.33 Amendment No. 2 to Registration Agreement.
10.34 Amendment No. 3 to Registration Agreement.
10.35* Stock Purchase Agreement with Preussag Stahl AG dated December 14, 1995.
10.36* Stock Purchase Agreement with Sumitomo Corporation of America and Sumitomo
Corporation dated September 10, 1995.
10.37* Stock Purchase Agreement with Bain Capital, General Electric Capital
Corporation, Heavy Metal, L.C., Keylock Investments Limited, Mesalina Anstalt,
et. al, dated June 30, 1994.
11.1* Computation of Net Loss Per Share.
21.1* List of the Registrant's Subsidiaries.
23.1 Consent of Barrett & McNagny (included in Exhibit 5.1).
23.2* Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included in signature pages).
27.1* Financial Data Schedule.
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+ Confidential treatment has been requested for certain portions of these documents, which have been blacked out in the copy of the exhibit filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to the application for confidential treatment.
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules:
All schedules are omitted because they are either not applicable or the required information is included in the consolidated financial statements or notes thereto.
II-5
ITEM 17 UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the Underwriters, at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the BCL, the Registrant's Amended and Restated Articles of Incorporation, or any other provision, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(b) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Butler, Indiana, on this 31st day of October, 1996.
STEEL DYNAMICS, INC.
By: /s/ KEITH E. BUSSE
------------------------------------
KEITH E. BUSSE
President and Chief Executive
Officer
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Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ----------------------------------- ------------------------------------- -------------------
* President & Chief Executive Officer October 31, 1996
- ----------------------------------- and Director
Keith E. Busse (Principal Executive Officer)
* Vice President & Chief Financial October 31, 1996
- ----------------------------------- Officer and Director
Tracy L. Shellabarger (Principal Financial and Accounting
Officer)
* Vice President of Melting and Casting October 31, 1996
- ----------------------------------- and Director
Mark D. Millett
* Vice President of Rolling and October 31, 1996
- ----------------------------------- Finishing and Director
Richard P. Teets, Jr.
* Director October 31, 1996
- -----------------------------------
Paul B. Edgerley
* Director October 31, 1996
- -----------------------------------
William D. Strittmatter
* Director October 31, 1996
- -----------------------------------
Leonard Rifkin
* Director October 31, 1996
- -----------------------------------
John C. Bates
* Director October 31, 1996
- -----------------------------------
William Laverack, Jr.
* Director October 31, 1996
- -----------------------------------
Jurgen Kolb
*By /s/ Tracy L. Shellabarger
- -----------------------------------
Tracy L. Shellabarger
Attorney-In-Fact
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II-7
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------ ------------------------------------------------------------------------- ----
1.1* Form of Underwriting Agreement...........................................
3.1 Amended and Restated Articles of Incorporation of Steel Dynamics, Inc....
3.2 Bylaws of Steel Dynamics, Inc............................................
5.1 Legal Opinion of Barrett & McNagny.......................................
10.1a Amended and Restated Credit Agreement between Steel Dynamics, Inc. and
Mellon Bank, N.A., et al. (including Amendments Nos. 1 through 5
thereto).................................................................
10.1b* Amendment No. 5 to Credit Agreement......................................
10.1c* Amendment No. 6 to Credit Agreement......................................
10.1d* Amendment No. 7 to Credit Agreement......................................
10.2* Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc. re Taxable Economic Development Revenue Bonds. Trust
Indenture between Indiana Development Finance Authority and NBD Bank,
N.A., as Trustee re Loan Agreement between Indiana Development Finance
Authority and Steel Dynamics, Inc........................................
10.3 Contract for Electric Service between Steel Dynamics, Inc. and Indiana
Michigan Power Company...................................................
+10.4* Industrial Gases Supply Agreement between Steel Dynamics, Inc. and Air
Products and Chemicals, Inc. dated August 5, 1994........................
10.5 Interruptible Gas Supply Contract between Steel Dynamics, Inc. and
Northern Indiana Trading Co. dated February 27, 1995
10.6* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Fuel & Light Company, Inc. dated April 3, 1995...........................
10.7* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Trading Co. dated April 3, 1995..........................................
10.8* Gas Services Agreement between Steel Dynamics, Inc. and Crossroads
Pipeline Company dated April 3, 1995.....................................
10.9 Panhandle Eastern Pipeline Agreement dated July 22, 1996.................
10.10 Natural Gas Purchase Agreement between Steel Dynamics, Inc. and PanEnergy
Trading and Market Services, Inc. dated August 8, 1996...................
10.11 Agreement for Wastewater Services between the City of Butler, Indiana and
Steel Dynamics, Inc. dated September 5, 1995.............................
10.12 Slag Processing Agreement between Steel Dynamics, Inc. and Butler Mill
Service Company dated February 3, 1995...................................
+10.13* Agreement to Provide Scrap Purchasing Services between Steel Dynamics,
Inc. and OmniSource Corporation dated October 29, 1993...................
10.14 Purchasing Agreement between Steel Dynamics, Inc. and Heidtman Steel
Products, Inc. dated October 29, 1993....................................
+10.15* Iron Carbide Off Take Agreement between Steel Dynamics, Inc. and
Qualitech Steel Corporation dated June 29, 1996..........................
10.16 Purchasing, Domestic Sales and Export Distribution Agreement between
Steel Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.......
10.17 Reciprocal Patent and Technical Information Transfer and License
Agreement between Steel Dynamics, Inc. and Preussag Stahl AG dated
December 14, 1995........................................................
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EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------ ------------------------------------------------------------------------- ----
10.18* 1994 Incentive Stock Option Agreement, as amended........................
10.19** 1996 Incentive Stock Option Agreement....................................
10.20* Employment Agreement between Steel Dynamics, Inc. and Keith Busse........
10.21* Employment Agreement between Steel Dynamics, Inc. and Mark D. Millett....
10.22* Employment Agreement between Steel Dynamics, Inc. and Richard P. Teets,
Jr.......................................................................
10.23** 1996 Officer and Manager Cash and Stock Bonus Plan.......................
10.24 Employment Agreement between Steel Dynamics, Inc. and Tracy L.
Shellabarger. Tracy L. Shellabarger Promissory Note and Stock Pledge
Agreement................................................................
10.25* "Second Look" Export Distribution Agreement between Steel Dynamics, Inc.
and Sumitomo Corporation of America......................................
10.26* Sale of Excess Product Agreement between Iron Dynamics, Inc. and Sumitomo
Corporation of America...................................................
10.27 Stockholders Agreement dated June 30, 1994...............................
10.28 Amendment No. 1 to Stockholders Agreement................................
10.29 Amendment No. 2 to Stockholders Agreement................................
10.30 Amendment No. 3 to Stockholders Agreement................................
10.31 Registration Agreement dated June 30, 1994...............................
10.32 Amendment No. 1 to Registration Agreement................................
10.33 Amendment No. 2 to Registration Agreement................................
10.34 Amendment No. 3 to Registration Agreement................................
10.35* Stock Purchase Agreement with Preussag Stahl AG dated December 14,
1995.....................................................................
10.36* Stock Purchase Agreement with Sumitomo Corporation of America and
Sumitomo Corporation dated September 10, 1995............................
10.37* Stock Purchase Agreement with Bain Capital, General Electric Capital
Corporation, Heavy Metal, L.C., Keylock Investments Limited, Mesalina
Anstalt, et.al. dated June 30, 1994......................................
11.1* Computation of Net Loss Per Share........................................
21.1* List of the Registrant's Subsidiaries....................................
23.1 Consent of Barrett & McNagny (included in Exhibit 5.1)...................
23.2* Consent of Deloitte & Touche LLP.........................................
24.1 Power of Attorney (included in signature pages)..........................
27.1* Financial Data Schedule..................................................
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+ Confidential treatment has been requested for certain portions of these documents, which have been blacked out in the copy of the exhibit filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to the application for confidential treatment.
* Filed herewith.
** To be filed by amendment.
Exhibit 1.1
S&S DRAFT; 10/28/96
[______________] Shares
STEEL DYNAMICS, INC.
Common Stock (par value $.01 per share)
UNDERWRITING AGREEMENT
___________, 1996
_____________, 1996
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs:
Steel Dynamics, Inc., an Indiana corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedules I and
II hereto (the "Underwriters"), and certain shareholders of the Company (the
"Selling Shareholders") named in Schedule III hereto severally propose to sell
to the several Underwriters, an aggregate of [________] shares of the Common
Stock (par value $.01 per share) of the Company (the "Firm Shares") of which
[_________] shares are to be issued and sold by the Company (the "Company
Shares") and [_________] shares are to be sold by the Selling Shareholders, each
Selling Shareholder selling the amount set forth opposite such Selling
Shareholder's name in Schedule III hereto. The Company and the Selling
Shareholders are hereinafter collectively referred to as the "Sellers".
It is understood that, subject to the conditions hereinafter stated, [___________] Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection with the offering and sale of such U.S. Firm Shares in the United States and Canada to United States and Canadian Persons (as such terms are defined in the Agreement Between U.S. and International Underwriters of even date herewith), and [_________] Firm Shares (the
"International Shares") will be sold to the several International Underwriters named in Schedule II hereto (the "International Underwriters") in connection with the offering and sale of such International Shares outside the United States and Canada to persons other than United States and Canadian Persons. Morgan Stanley & Co. Incorporated, PaineWebber Incorporated, McDonald & Company Securities, Inc. and Salomon Brothers Inc shall act as representatives (the "U.S. Representatives") of the several U.S. Underwriters, and Morgan Stanley & Co. International Limited, PaineWebber International (U.K.) Ltd., McDonald & Company Securities, Inc. and Salomon Brothers International Limited shall act as representatives (the "International Representatives") of the several International Underwriters. The U.S. Underwriters and the International Underwriters are hereinafter collectively referred to as the "Underwriters".
The Company and the Selling Shareholders also severally propose to issue and sell to the several U.S. Underwriters not more than an additional aggregate of [_________] shares of its Common Stock (par value $.01 per share) (the "Additional Shares") if and to the extent that the U.S. Representatives shall have determined to exercise, on behalf of the U.S. Underwriters, the right to purchase such shares of Common Stock granted to the U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares". The shares of Common Stock (par value $.01 per share) of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "Common Stock".
The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement relating to the Shares. The registration statement contains two prospectuses to be used in connection with the offering and sale of the Shares: the U.S. prospectus, to be used in connection with the offering and sale of Shares in the United States and Canada to United States and Canadian Persons, and the international prospectus, to be used in connection with the offering and sale of Shares outside the United States and Canada to persons other than United States and Canadian Persons. The international prospectus is identical to the U.S. prospectus except for the outside front cover page. The registration statement as amended at the time it becomes effective, including the exhibits thereto and the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter referred to as the "Original Registration Statement"; any registration statement filed pursuant to Rule 462(b) under the Securities Act is hereinafter referred to as the "Rule 462(b) Registration Statement"; the Original Registration Statement and any Rule 462(b) Registration Statement are hereinafter referred to collectively as the "Registration Statement"; the U.S. prospectus and the international prospectus in the respective forms first used to confirm sales of Shares are hereinafter collectively referred to as the "Prospectus".
The Underwriters agree to reserve a maximum of [________] Firm Shares for the offering and sale to certain employees of the Company (and to certain other persons designated by the Company) at the Purchase Price (as defined below). Any such shares not purchased by such persons by the end of the first business day after the date of this Agreement will be offered to the public by the Underwriters as set forth in the Prospectus
1. Representations and Warranties of the Company. The Company represents and warrants to each of the Underwriters that:
(a) The Original Registration Statement has become effective, and if the Company has elected to rely upon Rule 462(b) under the Securities Act, the Rule 462(b) Registration Statement shall have become effective not later than the earlier of (i) 10:00 p.m. Eastern time on the date hereof and (ii) the time confirmations are sent or given, as specified by Rule 462(b) under the Securities Act; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (ii) each part of the Registration Statement, when such part became effective, did not contain and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 1(b) do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(e) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus.
(f) The shares of Common Stock (including the Shares to be sold by the Selling Shareholders) outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable.
(g) The Company Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights.
(h) This Agreement and each of the Irrevocable Power of Attorney and Custody Agreements (collectively, the "Power of Attorney and Custody Agreements"), each dated the date hereof, by each Selling Shareholder and the Company as Custodian (the "Custodian"), appointing certain individuals as the Selling Shareholders' attorneys-in-fact to the extent set forth therein relating to the transactions contemplated hereby and by the Registration Statement have been duly authorized, executed and delivered by the Company.
(i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the Power of Attorney and Custody Agreements, and the issuance and delivery of the Company Shares will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of or qualification with any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.
(l) Each of the Company and its subsidiaries has all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent that the failure to obtain such consents, authorizations, approvals, orders, certificates and permits or make such declarations and filings would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such consent, authorization, approval, order, certificate or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Prospectus.
(m) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act or incorporated by reference into or filed as part of the Rule 462(b) Registration Statement, complied when so filed in all material respects with the Securities Act and the rules and regulations of the Commission thereunder.
(n) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended.
(o) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(p) In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(q) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (1) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (2) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock; and (3) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its consolidated subsidiaries, except in each case as described in or contemplated by the Prospectus.
(r) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in any material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
(t) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in or contemplated by the Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could result in any material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole.
(u) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in or contemplated by the Prospectus.
(v) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (1) transactions are executed in accordance with management's general or specific authorizations; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (3) access to assets is permitted only in accordance with management's
general or specific authorization; and (4) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(w) There are no holders of securities (debt or equity) of the Company or any of its subsidiaries, or holders of rights, options, or warrants to obtain securities of the Company or any of its subsidiaries, who have the right, during the 180 day period after the date of this Agreement to require the Company to register securities held by them under the Securities Act, other than holders who have waived such right for the 180 day period after the date of the initial public offering of the Shares and have waived their rights with respect to the inclusion of their securities in the Registration Statement.
(x) The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida), relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba.
(y) The Company has obtained the necessary waivers from (i) the holders of the Company's 11% Senior Subordinated Promissory Notes due September 30, 2002 (the "Subordinated Notes") to prepay such Subordinated Notes as described in the "Use of Proceeds" section of the Prospectus and (ii) the lenders under the Company's Credit Agreement dated as of June 30, 1994 and as amended as of March 4, 1996.
2. Representations and Warranties of the Selling Shareholders. Each of the Selling Shareholders severally and not jointly represents and warrants to and agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under, this Agreement and its Power of Attorney and Custody Agreement will not contravene any provision of applicable law, or the certificate of incorporation or by-laws of such Selling Shareholder (if such Selling Shareholder is a corporation), or the trust agreement (if such Selling Shareholder is a trust) or any agreement or other instrument binding upon such Selling Shareholder or any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such Selling Shareholder of its obligations under this Agreement or the Power of Attorney and Custody Agreement of
such Selling Shareholder, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares.
(c) Such Selling Shareholder has, and on the Closing Date (as defined below) will have, valid and marketable title to the Shares to be sold by such Selling Shareholder and the legal right and power, and all required authorizations and approvals to enter into this Agreement and its Power of Attorney and Custody Agreement and to sell, transfer and deliver the Shares to be sold by such Selling Shareholder.
(d) The Shares to be sold by such Selling Shareholder pursuant to this Agreement have been duly authorized and are validly issued, fully paid and non-assessable.
(e) The Power of Attorney and Custody Agreement of such Selling Shareholder has been duly authorized, executed and delivered by such Selling Shareholder and is a valid and binding agreement of such Selling Shareholder, enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and the availability of equitable remedies may be limited by equitable principles of general applicability.
(f) Delivery of the Shares to be sold by such Selling Shareholder pursuant to this Agreement will pass valid and marketable title to such Shares free and clear of any security interests, claims, liens, equities and other encumbrances.
(g) All information furnished to the Company by or on behalf of such Selling Shareholder expressly for use in the Registration Statement and Prospectus is, and on the Closing Date (as defined below) will be, true, correct and complete, and does not, and on the Closing Date will not, contain any untrue statement of material fact or omit to state any material fact necessary to make such information not misleading.
(h) (i) The Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (ii) each part of the Registration Statement, when such part became effective, did not contain and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 2(h) do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(i) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Common Stock (provided that such Selling Shareholder does not make any representation as to any actions that may be taken by any Underwriter); and such Selling Shareholder has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Shares other than any preliminary prospectus filed with the Commission or the Prospectus or other material permitted by the Securities Act.
(j) Such Selling Shareholder has no direct or indirect association or affiliation with any National Association of Securities Dealers, Inc. ("NASD") members and has had no arrangements, dealings or affiliation with, and is not aware of any information relating to underwriting compensation payable to or for the benefit of, any NASD member, person associated with a member or any Underwriter, relating to the offering of Shares that has not been disclosed in the Registration Statement.
3. Agreements to Sell and Purchase. Each Seller, severally and not jointly, hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from such Seller at U.S.$[______] a share (the "Purchase Price") the number of Firm Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the number of Firm Shares to be sold by such Seller as the number of Firm Shares set forth in Schedules I and II hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Sellers, severally and not jointly, agree to sell to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall have a one-time right to purchase, severally and not jointly, up to [_________] Additional Shares at the Purchase Price. If you, on behalf of the U.S. Underwriters, elect to exercise such option, you shall so notify the Sellers in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the U.S. Underwriters and the date on which such shares are to be purchased. Such date
may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 5 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each U.S. Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the U.S. Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I hereto opposite the name of such U.S. Underwriter bears to the total number of U.S. Firm Shares.
Each Seller hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated ("Morgan Stanley"), it will not, for a period of 180 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (provided that such shares or securities are either now owned by such Seller or are hereafter acquired from the Company), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such shares of Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, other than (a) the sale of the Shares to the Underwriters pursuant to this Agreement or (b) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing.
In addition, each Selling Shareholder agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, for a period of 180 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock.
4. Terms of Public Offering. The Sellers are advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Original Registration Statement and this Agreement have become effective as in your judgment is advisable. The Sellers are further advised by you that the Shares are to be offered to the public initially at U.S.$[____] a share (the "Public Offering Price") and to certain dealers selected by you at a price that represents a concession not in excess of U.S.$[____] a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of U.S.$[____] a share, to any Underwriter or to certain other dealers.
Each U.S. Underwriter hereby makes to and with the Company and each Selling Shareholder the representations and agreements of such U.S. Underwriter contained in the fifth and sixth paragraphs of Article III of the Agreement Between U.S. and International Underwriters of even date herewith. Each International Underwriter hereby makes to and with the Company and each Selling Shareholder the representations and agreements of such International Underwriter contained in the seventh, eighth, ninth and tenth paragraphs of Article III of such Agreement.
5. Payment and Delivery. Payment for the Firm Shares to be
sold by each Seller shall be made by wire transfers to the Company's and the
Custodian's accounts in federal funds or other funds immediately available in
New York City against delivery of such Firm Shares for the respective accounts
of the several Underwriters at the office of Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022 at 10:00 a.m., New York City time, on
[_________], 1996, or at such other time on the same or such other date, not
later than [_________], 1996, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made by wire
transfer payable to the Company's and the Custodian's accounts in federal funds
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several U.S. Underwriters
at the office of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022 at 10:00 a.m., New York City time, on the date specified in the notice
described in Section 3 or on such other date, in any event not later than
[_______], 1996, as shall be designated in writing by you. The time and date of
such payment are hereinafter referred to as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The obligations of the Sellers and the several obligations of the Underwriters hereunder are subject to the condition that the Registration Statement shall have become effective not later than the date hereof.
The several obligations of the Underwriters hereunder are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act, and
(ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, from that set forth in the Registration Statement, that, in your judgment, is material and adverse and makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement).
(b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in clause (a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened.
(c) No stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or, to the knowledge of the Company or the Underwriters, threatened by the Commission.
(d) You shall have received on the Closing Date an opinion of Barrett & McNagny, counsel for the Company, dated the Closing Date, in the form attached hereto as Exhibit A.
The opinion of Barrett & McNagny shall be rendered to you at the request of the Company and shall so state therein.
(e) You shall have received on the Closing Date an opinion of each of _______________________, [___________________ and _________________,] counsel for the Selling Shareholders, dated the Closing Date, in the form attached hereto as Exhibit[s] B[-1 through B-__, respectively,].
The opinion[s] of _____________[, _____________ and ___________] shall be rendered to the Underwriters at the request of the Selling Shareholders and shall so state therein.
(f) You shall have received on the Closing Date an opinion of Shearman & Sterling, counsel for the Underwriters, dated the Closing Date, with respect to the Registration Statement and the Prospectus and such other related matters as you may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.
(g) You shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof and the Closing Date, as the case may be, in form and substance satisfactory to you, from Deloitte & Touche LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof.
(h) The "lock-up" agreements, each substantially in the form of Exhibit C hereto between you, certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or any securities convertible into or exercisable or exchangeable for such Common Stock, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date.
[(i) True and complete copies of the waivers by (a) the holders of the Subordinated Notes and (b) the lenders under the Company's Credit Agreement dated as of June 30, 1994 and as amended as of March 4, 1996, shall be delivered to you on or before the date hereof and shall be in full force and effect on the Closing Date.]
(j) You shall have received on the Closing Date certificates dated the Closing Date and signed by the Selling Shareholders or by attorneys-in-fact of the Selling Shareholders, to the effect that the representations and warranties of each such Selling Shareholder contained in this Agreement are true and correct as of the Closing Date and that each such Selling Shareholder has complied with all of the agreements
and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.
(k) The Company shall have complied with the provisions of
Section 7(a) hereof with respect to the furnishing of Prospectuses on
the business day next succeeding the date of this Agreement, in such
quantities as you shall have reasonably requested.
(l) The Shares shall have been approved for quotation on the Nasdaq National Market System by the NASD.
(m) You shall have received such other documents and certificates as are reasonably requested by you or your counsel.
The several obligations of the U.S. Underwriters to purchase Additional Shares hereunder are subject to the delivery to the U.S. Representatives on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares.
7. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and, during the period mentioned in Section 7(c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. In the case of the Prospectus, to furnish copies of the Prospectus in New York City, prior to 10:00 a.m., New York City time, on the business day following the date of this Agreement, in such quantities as you reasonably request.
(b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object; and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering of the Shares as in the opinion of your counsel the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of your counsel, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request and to pay all expenses (including fees and disbursements of counsel) in connection with such qualification and in connection with any review of the offering of the Shares by the NASD.
(e) If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Securities Act no later than the earlier of (i) 10:00 p.m. Eastern time on the date hereof and (ii) the time confirmations are sent or given, as specified by Rule 462(b)(2) under the Securities Act, and shall pay the applicable fees in accordance with Rule 111 under the Securities Act.
(f) To make generally available to the Company's security holders and to you as soon as practicable, but no later than 60 days after the end of the twelve-month period beginning at the end of the Company's fiscal quarter during which the effective date of the Original Registration Statement occurs, an earnings statement of the Company covering such twelve-month period that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.
(g) To use the net proceeds received by the Company from the sale of the Shares hereunder in the manner specified in the Prospectus under the caption "Use of Proceeds".
(h) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any preliminary or supplementary Blue Sky memorandum in connection with
the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 7(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with any preliminary or supplementary Blue Sky
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Shares by the NASD, (v) all fees and expenses in
connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and
expenses incident to quoting the Shares on the Nasdaq National Market
System, (vi) the cost of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with
the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (ix) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 9 and the last paragraph of Section 11 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.
8. Covenants of the Selling Shareholders. In further consideration of the agreements of the Underwriters herein contained, each of the Selling Shareholders severally and not jointly covenants as follows:
(a) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, to pay or cause to be paid
(i) all taxes, if any, on the transfer and sale of the Shares being
sold by such Selling Shareholder and (ii) such Selling Shareholder's
pro rata share (determined by dividing the number of Shares sold by
such Selling Shareholder by the total number of Shares sold by all
Sellers) of all costs and expenses incident to the performance of the
obligations of such Selling Shareholder under this Agreement,
including, but not limited to, all expenses enumerated in Section 7(h)
above, all expenses incident to the delivery of the Shares and the fees
and expenses of counsel and accountants for such Selling Shareholder.
(b) Such Selling Shareholder has carefully reviewed the Registration Statement and will carefully review, promptly upon receipt, each amendment thereto provided to such Selling Shareholder. At any time during the period from the date hereof through the Closing Date, if there is any change in the information in the Registration Statement, including the tables and notes thereto that specifically relate to such Selling Shareholder, such Selling Shareholder will immediately notify the Company of such change.
(c) Such Selling Shareholder shall cooperate fully with the Company in supplying such information relating to such Selling Shareholder and the Shares as the Company may reasonably request for use in preparation of the Registration Statement and all other documents reasonably necessary or desirable in connection with the offering of Shares. In addition, such Selling Shareholder shall furnish to the Company (or, at the Company's request, to the Underwriters or other parties) such further certificates and documents confirming the representations and warranties contained herein, or with respect to related matters, as the Company may reasonably request.
9. Indemnity and Contribution. (a) The Sellers, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by any Underwriter or any such controlling
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(b) Each Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Selling Shareholder furnished in writing by or on behalf of such Selling Shareholder expressly for use therein.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, the Selling Shareholders and each person, if any,
who controls the Company or any Selling Shareholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Sellers to such Underwriter, but only
with reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to subsection (a), (b) or (c) of this Section 9, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for (i) all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, (ii) the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (iii) all Selling Shareholders and all persons, if any, who control any Selling Shareholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters and such control persons of Underwriters, such firm shall be designated in writing by Morgan Stanley. In the case of any such separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Shareholders and such controlling persons of Selling Shareholders, such firm shall be designated in writing by the persons named as attorneys-in-fact for the Selling Shareholders under the Power of Attorney and Custody Agreements. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this subsection, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid, request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
(e) To the extent the indemnification provided for in subsection (a), (b) or (c) of this Section 9 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such subsection, in lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Sellers on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by each Seller and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Sellers on the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Sellers or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 9 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (e) of this Section 9. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in subsection (e) of this Section 9 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this Section 9 and the representations and warranties of the Company and the Selling Shareholders contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, any Selling Shareholder or any person controlling any Selling Shareholder, or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
(h) The liability of each Selling Shareholder under the provisions of this Section 9 shall be limited to an amount equal to the Purchase Price of the Shares to be sold by such Selling Shareholder to the Underwriters hereunder.
10. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the NASD, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event singly or together with any other such event makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the later of (x) execution and delivery hereof by the parties hereto and (y) release of notification of the effectiveness of the Original Registration Statement by the Commission.
If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I or Schedule II bears to the aggregate number of Firm Shares set forth opposite the names of all such nondefaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Shares that any Underwriter
has agreed to purchase pursuant to this Agreement be increased pursuant to this
Section 11 by an amount in excess of one-ninth of such number of Shares without
the written consent of such Underwriter. If, on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter or Underwriters shall fail or
refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to you and
the Company for the purchase of such Shares are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date or the Option
Closing Date, as the case may be, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of any Seller to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any Seller shall be unable to perform its obligations under this Agreement, the Sellers will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.
12. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by the laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
Very truly yours,
STEEL DYNAMICS, INC.
Title:
The Selling Shareholders named in
Schedule III hereto, acting severally
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
MCDONALD & COMPANY SECURITIES, INC.
SALOMON BROTHERS INC
Acting severally on behalf of themselves and the several U.S. Underwriters named in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
MCDONALD & COMPANY SECURITIES, INC.
SALOMON BROTHERS INTERNATIONAL LIMITED
Acting severally on behalf of themselves and the several International Underwriters named in Schedule II hereto.
By Morgan Stanley & Co.
International Limited
SCHEDULE I
U.S. Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
Total U.S. Firm Shares.......................... ==============
SCHEDULE II
International Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
SCHEDULE III
Selling Shareholders
Number of
Firm Shares
Selling Shareholder To Be Sold
----------------
Total .......................................................
================
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EXHIBIT A
Pursuant to Section 6(d) of the Underwriting Agreement, Barrett & McNagny, counsel for the Company, shall furnish an opinion to the effect that:
(i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole;
(iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock (including the Shares to be sold by the Selling Shareholders) outstanding prior to the issuance of the Company Shares have been duly authorized and are validly issued, fully paid and non-assessable;
(v) the Company Shares have been duly authorized and, when issued and delivered in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights;
(vi) the Underwriting Agreement and each of the Irrevocable Power of Attorney and Custody Agreements (collectively, the "Power of Attorney and Custody Agreements"), each dated the date hereof, by each Selling Shareholder and the Company as Custodian, appointing certain individuals as the Selling Shareholders' attorneys-in-fact to the extent set forth therein relating to the transactions contemplated hereby and by the Registration Statement have been duly authorized, executed and delivered by the Company;
(vii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement, the Power of Attorney and Custody Agreements, and the issuance and delivery of the Company Shares will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of or qualification with any governmental body or agency is required for the performance by the Company of its obligations under the Underwriting Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares;
(viii) the statements (1) in the Prospectus under the captions "________", "Certain Transactions", "Description of Certain Indebtedness", "Description of Capital Stock," "Certain United States Federal Tax Consequences For Non-United States Holders" and "Underwriters" and (2) in the Registration Statement in Items 14 and 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein;
(ix) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required;
(x) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended;
(xi) such counsel (1) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the rules and regulations of the Commission thereunder,
(2) has no reason to believe that (except for financial statements and schedules as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (3) has no reason to believe that (except for financial statements and schedules as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and
(xii) each of the Company and its subsidiaries has all necessary certificates, orders, permits, licenses, authorizations, consents and approvals of and from, and has made all declarations and filings with, all federal, state and local governmental authorities, all self-regulatory organizations and all courts and tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to revocation or modification of any such certificates, orders, permits, licenses, authorizations, consents or approvals, nor is the Company or any of its subsidiaries in violation of, or in default under, any federal, state and local law, regulation, rule, decree, order or judgment applicable to the Company or any of its subsidiaries the effect of which, singly or in the aggregate, would have a material adverse effect on the prospects, condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, except as described in the Prospectus.
With respect to subsection (xi) above, such counsel may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.
EXHIBIT B
Pursuant to Section 6(e) of the Underwriting Agreement, counsel for the Selling Shareholders shall furnish an opinion to the effect that:
(i) the Underwriting Agreement has been duly authorized, executed and delivered by or on behalf of each of the Selling Shareholder[s];
(ii) the execution and delivery by [the] [each] Selling Shareholder[s] of, and the performance by such Selling Shareholder of its obligations under, the Underwriting Agreement and the Power of Attorney and Custody Agreement of such Selling Shareholder will not contravene any applicable law, or the certificate of incorporation or by-laws of such Selling Shareholder (if such Selling Shareholder is a corporation), or the trust agreement (if such Selling Shareholder is a trust) or, to the best of such counsel's knowledge, any agreement or other instrument binding upon such Selling Shareholder, or to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder, and no consent, approval, authorization or order of or qualification with any governmental body or agency is required for the performance by such Selling Shareholder of its obligations under this Agreement or Power of Attorney and Custody Agreement of such Selling Shareholder, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares;
(iii) [each of] the Selling Shareholder[s] has valid and marketable title to the Shares to be sold by such Selling Shareholder and the legal right and power, and all authorization and approval required by law, to enter into the Underwriting Agreement and Power of Attorney and Custody Agreement of such Selling Shareholder and to sell, transfer and deliver the Shares to be sold by such Selling Shareholder;
(iv) the Power of Attorney and Custody Agreement of [each of] the Selling Shareholder[s] has been duly authorized, executed and delivered by the Selling Shareholder[s] and is a valid and binding agreement of [each of] of the Selling Shareholder[s], enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability;
(v) delivery of the Shares to be sold by each Selling Shareholder pursuant to the Underwriting Agreement will pass marketable title to such Shares free and clear of any security interests, claims, liens, equities and other encumbrances; and
(vi) such counsel has no reason to believe that as to information relating to the Selling Shareholder (except for financial statements and schedules as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and has no reason to believe that as to information relating to the Selling Shareholder (except for financial statements and schedules as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Such counsel may rely upon an opinion or opinions of counsel for any Selling Shareholders and, with respect to factual matters and to the extent such counsel deems appropriate, upon the representations of each Selling Shareholder contained herein and in the Power of Attorney and Custody Agreement of such Selling Shareholder and in other documents and instruments; provided that (A) each such counsel for the Selling Shareholder is satisfactory to counsel for the Underwriters, (B) a copy of each opinion so relied upon is delivered to you and is in form and substance satisfactory to counsel for the Underwriters, (C) copies of such Power of Attorney and Custody Agreement and of any such other documents and instruments shall be delivered to you and shall be in form and substance satisfactory to counsel for the Underwriters and (D) such counsel shall state in their opinion that they are justified in relying on each such other opinion.
EXHIBIT C
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
The undersigned understands that Steel Dynamics, Inc., an Indiana corporation (the "Company"), and the shareholders (the "Selling Shareholders") of the Company named in Schedule III of the Underwriting Agreement (as defined below) propose to enter into an underwriting agreement (the "Underwriting Agreement") with (a) Morgan Stanley & Co. Incorporated ("Morgan Stanley"), PaineWebber Incorporated, McDonald & Company Securities, Inc. and Salomon Brothers Inc, as representatives of the several U.S. underwriters (the "U.S. Underwriters") named in Schedule I thereto, and (b) Morgan Stanley & Co. International Limited, PaineWebber International (U.K.) Ltd., McDonald & Company Securities, Inc. and Salomon Brothers International Limited, as representatives of the several international underwriters (the several international underwriters and the U.S. Underwriters being hereinafter collectively called the "Underwriters") named in Schedule II thereto, providing for the public offering (the "Public Offering") of shares of the Company's Common Stock (par value $.01 per share) (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley, it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (provided that such shares or securities are either now owned by the undersigned or are hereafter acquired prior to or in connection with the Public Offering), or (2) enter into any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to the sale of any shares of Common Stock to the Underwriters pursuant to the Underwriting Agreement. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to agreement between the Company, the Selling Shareholders and the Underwriters.
Very truly yours,
Accepted as of the date
first set forth above:
MORGAN STANLEY & CO. INCORPORATED
By:
Exhibit 10.1b
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of March 4, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation (the "Borrower"), the lenders listed on the signature pages hereof and MELLON BANK, N.A., a national banking association, as agent for the Lenders under the Credit Agreement referred to below (the "Agent") .
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders") , the Agent, Mellon Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank One, Indianapolis, National Association and NBD Bank, N.A., as Co-Agents, entered into a Credit Agreement, dated as of June 30, 1994, as amended as of January 6, 1995, May 22, 1995, June 15, 1995 and November 20, 1995 (as so amended, the "Original Agreement"), pursuant to which the Lenders have extended credit to the Borrower to fund the construction and operation of a 1.2 million ton thin slab cast mini-mill in Butler, Indiana;
WHEREAS, the Borrower wishes to borrow, as term loans, an additional $150,000,000 to be used to fund the construction and operation of a cold rolling and coating steel processing facility to be constructed adjacent to the existing project facilities of the Borrower;
WHEREAS, the Borrower and the Required Lenders (as defined in the Original Agreement) desire to amend the Original Agreement to affect the changes described above and to make certain other changes therein;
WHEREAS, Banque Nationale de Paris is to become a party to the Original Agreement, as amended hereby, as a Senior Co-Agent and a Lender;
WHEREAS, upon the effectiveness of this Amendment, Kreditanstalt fur Wiederaufbau, Banque Nationale de Paris and Comerica Bank shall be designated Senior Co-Agents, and Bank One Indianapolis, National Association, NBD Bank, N.A., The Industrial Bank of Japan, Limited, and Bank Austria Aktiengesellschaft shall be designated Co-Agents (for purposes of the Original Agreement, as amended hereby, the term "Co-Agents" shall refer to both the Senior Co-Agents and the Co-Agents);
WHEREAS, immediately prior to the signing by the Lenders of this Amendment, Dai-Ichi Kangyo Bank, Ltd., shall have assigned all its rights and interests as a Lender to one or more other Lenders, and shall no longer be a Lender party to the Original Agreement, as amended hereby;
WHEREAS, in connection with the changes to be made pursuant to this Amendment, the Borrower proposes to amend the Subordinated Debt Purchase Agreement to make conforming changes in such document;
WHEREAS, the Borrower has advised the Agent and the Lenders, with
respect to the Stockholders Agreement among the stockholders of the Borrower's
parent, Steel Dynamics Holdings, Inc. ("Holdings") (which Stockholders Agreement
is referred to in Section 6.14 of the Original Agreement and is herein referred
to as the "Stockholders Agreement"), in connection with the sale by Holdings of
shares of its Class A Common Stock to Preussag Stahl AG ("Preussag"), the
Stockholders Agreement is proposed to be amended by a Stockholders Joinder
Agreement and Amendment No. 2 to Stockholders Agreement (the "Preussag
Amendment"), which will provide in substance that (i) Preussag will become a
party to the Stockholders Agreement and will be bound by and have the benefit of
all the terms thereof, (ii) the shares of Class A Common Stock of Holdings
issued to Preussag and any shares of equity securities issued with respect to
such shares of Class A Common Stock by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization (collectively the "Preussag Shares") shall
be "Stockholders Shares" under and as defined in the Stockholders Agreement, and
(iii) one representative designated by the holders of a majority of the Preussag
Shares shall be elected to the Board of Directors of Holdings and may be removed
only by such holders;
WHEREAS, the Borrower proposes to grant to its customer, Affiliated Metals Company, a surface drainage easement over a portion of the Project Site (the "Easement"), and has asked that the Lenders subordinate the lien of the Mortgage to the Easement; and
WHEREAS, capitalized terms not otherwise defined herein shall have the meanings assigned thereto in the Original Agreement .
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby agree as follows:
Section 1. Amendments to Original Agreement. The Original Agreement is hereby amended as follows:
(a) Articles I, II, III, IV, V, VI, VII and IX of the Original Agreement are hereby amended in their entirety to read as set forth on Annex 1 hereto.
(b) The Original Agreement is hereby amended by adding the following Schedules, which shall read as set forth on Annex 2 hereto:
Schedule Subject Matter
-------- --------------
1.01B-1996 Phase II Project Agreements
1.01C-1996 Phase II Project Budget
1.01D-1996 List of Specifications (Phase II)
3.15-1996 Ownership and Control as of Fifth
Amendment
3.31-1996 Phase II Project Compliance With Laws;
Permits
4.05(d)-1996 Certain Phase II Project Agreements
|
(c) The Original Agreement is hereby amended by adding the following Exhibit, which shall read as set forth on Annex 3 hereto:
Exhibit Title ------- ----- B-4-1996 Form of Tranche D Note |
Section 2. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original Agreement are true and correct on and as of the date hereof as if made on and as of the date hereof (except for any representation or warranty which was expressly limited to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date), and that no Event of Default or Potential Default has occurred and is continuing or exists on and as of the date hereof.
(b) The execution, delivery and performance of this Amendment has been duly authorized by all necessary action on the part of the Borrower, has been duly authorized by all necessary governmental approvals, if any, and does not and will not contravene or conflict with any provision of law or of the organizational instruments of the Borrower or of any agreement or instrument binding on it.
(c) This Amendment is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
Section 3. Inclusion of Banque National de Paris. By executing and delivering this Amendment, Banque National de Paris agrees to become a Senior Co-Agent and a Lender under, and to be bound by the terms and provisions of, the Original Agreement, as amended by this Amendment.
Section 4. Consent to Amendment of Subordinated Debt Purchase Agreement. Notwithstanding the restrictions of Section 6.14 of the Original Agreement, by executing and delivering this Amendment, the Required Lenders hereby consent to the Borrower's entering into Consent and Amendment No. 1 to the Subordinated Debt Purchase Agreement in substantially the form provided by the Borrower to the Lenders prior to the execution of this Amendment, with such changes therein as shall be satisfactory to the Agent.
Section 5. Preussag Amendment. By executing and delivering this Amendment, the Required Lenders hereby waive the application to the Preussag Amendment of the covenant set forth in Section 6.14 of the Original Agreement (which covenant limits certain modifications of the Stockholders Agreement) . This waiver is being made solely for the purpose of permitting the Preussag Amendment to be consummated. The waiver set forth herein shall be limited precisely as provided for herein and shall not be deemed to be a waiver of, amendment to, consent to or modification of any other term or provision of the Original Agreement or any other Loan Document or instrument referred to therein. Neither the fact that Borrower has requested this waiver nor the fact that the Required Lenders and the Agent have agreed to this waiver shall entitle the Borrower to expect the Required Lenders and/or the Agent to agree in the future to enter into any similar waivers of any provision of the Original Agreement.
Section 6. Consent to Easement. By executing and delivering this Amendment, the Required Lenders hereby consent to the granting of the Easement, as the same is more fully described on Annex 4 hereto, and further direct the Agent to execute and deliver a mortgage subordination instrument to effect subordination of the Mortgage to the Easement.
Section 7. Miscellaneous. (a) This Amendment shall become effective upon (i) execution and delivery hereof by all of the Lenders, the Borrower and the Agent and (ii) the payment by the Borrower to the Agent for the respective accounts of the Lenders of the amendment fees previously agreed to, provided that Sections 5 and 6 hereof shall become effective upon execution and delivery hereof by the Required Lenders, the Borrower and the Agent. The execution below by the Lenders shall constitute a direction to the Agent to execute this Amendment. The fees described in the first sentence of this Section 7(a) shall be due and payable on the day after this Amendment is signed by the Lenders.
(b) The Original Agreement, as amended by this Amendment, is in all respects ratified, approved and confirmed and shall, as so amended, remain in full force and effect. From and after the date hereof, all references to the "Agreement" in the Original Agreement and in the other Loan Documents shall be deemed to be references to the Original Agreement as amended by this Amendment .
(c) This Amendment shall be deemed to be a contract under the laws of the State of New York and for all purposes shall be governed by and construed and enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
STEEL DYNAMICS INC.
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
MELLON BANK, N.A., as Lender and as Agent
By /s/ ROGER N. STANIER ------------------------------------- Title: Vice President |
Tranche D Committed Amount: $10,000,000
Tranche D Commitment Percentage: 6.6666666666666666%
KREDITANSTALT FUR WIEDERAUFBAU
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
Tranche D Committed Amount: $50,000,000
Tranche D Commitment Percentage: 33.3333333333333333%
BANQUE NATIONALE DE PARIS
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
Tranche D Committed Amount: $20,000,000
Tranche D Commitment Percentage: 13.3333333333333333%
COMERICA BANK
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
Tranche D Committed Amount: $20,000,000
Tranche D Commitment Percentage: 13.3333333333333333%
BANK ONE INDIANAPOLIS, NATIONAL
ASSOCIATION
as Co-Agent
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
Tranche D Committed Amount: $10,000,000
Tranche D Commitment Percentage: 6.6666666666666666%
NBD BANK
as Co-Agent
By /s/ [SIG ILLEGIBLE] ------------------------------------- Title: Vice President |
Tranche D Committed Amount: -0-
Tranche D Commitment Percentage: -0-
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Co-Agent
By /s/ Yutaka Endo ------------------------------------- Title: Senior Vice President |
Tranche D Committed Amount: $5,000,000
Tranche D Commitment Percentage: 3.3333333333333333%
BANK AUSTRIA AKTIENGESELLSCHAFT
as Co-Agent
By /s/ J. Anthony Seay ------------------------------------ Title: Vice President By /s/ Jeanine Ball ------------------------------------ Title: Assistant Vice President |
Tranche D Committed Amount: $15,000,000
Tranche D Commitment Percentage: 10%
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ S. Wallat ----------------------------------- Title: Assistant Treasurer By /s/ K. H. Schroter ----------------------------------- Title: Vice President |
Tranche D Committed Amount: -0-
Tranche D Commitment Percentage: -0-
FORT WAYNE NATIONAL BANK
By /s/ Signature Illegible ------------------------------------ Title: Senior Vice President |
Tranche D Committed Amount: $5,000,000
Tranche D Commitment Percentage: 3.3333333333333333%
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ Signature Illegible ------------------------------------ Title: Vice President By /s/ Signature Illegible ------------------------------------ Title: |
Tranche D Committed Amount: $10,000,000
Tranche D Commitment Percentage: 6.6666666666666666%
DEUTSCHE BANK AG, CHIGAGO AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Haroon Imtiaz ------------------------------------ Title: Associate By /s/ David Berger ------------------------------------ Title: Assistant Vice President |
Tranche D Committed Amount: -0-
Tranche D Commitment Percentage: -0-
NATIONAL CITY BANK, INDIANA
By /s/ Reagan K. Rick --------------------------------- Title: Vice President |
Tranche D Committed Amount: $5,000,000
Tranche D Commitment Percentage: 3.3333333333333333%
SUMITOMO CORPORATION
By /s/ S. Ozawa --------------------------------------- Title: S. Ozawa, Deputy General Manager Energy, Chemical & Metal Project Dept. |
Tranche D Committed Amount: -0-
Tranche D Commitment Percentage: -0-
Exhibit 10.1c
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of May 20, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation (the "Borrower"), the lenders listed on the signature pages hereof and MELLON BANK, N.A., a national banking association, as agent for the Lenders under the Credit Agreement referred to below (the "Agent").
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders"), the Agent, Mellon Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank One, Indianapolis, National Association and NBD Bank, N.A., as Co-Agents, entered into a Credit Agreement, dated as of June 30, 1994, as amended as of January 6, 1995, May 22, 1995, June 15, 1995, November 20, 1995 and March 4, 1996 (as so amended, the "Original Agreement"), pursuant to which the Lenders have extended credit to the Borrower to fund the construction and operation of a 1.2 million ton thin slab cast mini-mill in Butler, Indiana;
WHEREAS, the Borrower and the Required Lenders (as defined in the Original Agreement) desire to amend the Original Agreement to effect certain changes therein; and
WHEREAS, capitalized terms not otherwise defined herein shall have the meanings assigned thereto in the Original Agreement .
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby agree as follows:
Section 1. Amendment to Section 1.01. The definition of "Cash Equivalent
Investments" is hereby amended (i) by inserting after the word "America" in
clause (a) thereof the following phrase: ", or issued by an agency or
instrumentality thereof, in each case"; (ii) by deleting the word "and" before
clause (c) thereof; and (iii) by adding at the end thereof, as a new clause
(d), the following: "and, (d) investments in mutual funds which do not make any
material investments other than those described in clauses (a), (b) or (c) of
this definition. As a result of these amendments, the definition of "Cash
Equivalent Investments" will read as follows:
"Cash Equivalent Investments" shall mean any of the following, to the extent acquired for investment and not with a view to achieving trading profits: (a) obligations fully backed by the full faith and credit of the United States of America, or issued by an agency or instrumentality thereof, maturing not in excess of nine
months from the date of acquisition, (b) commercial paper maturing not in
excess of nine months from the date of acquisition and rated "P-1" by
Moody's Investors Service or "A-1" by Standard & Poor's Corporation on the
date of acquisition, (c) the following obligations of any domestic
commercial bank having capital and surplus in excess of $500,000,000,
which has, or the holding company of which has, a commercial paper rating
meeting the requirements specified in clause (b) above: (i) time deposits,
certificates of deposit and acceptances maturing not in excess of nine
months from the date of acquisition, or (ii) repurchase obligations with a
term of not more than seven days for underlying securities of the type
referred to in clause (a) above, and (d) investments in mutual funds which
do not make any material investments other than those described in clauses
(a), (b) or (c) of this definition.
Section 2. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original Agreement are true and correct on and as of the date hereof as if made on and as of the date hereof (except for any representation or warranty which was expressly limited to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date), and that no Event of Default or Potential Default has occurred and is continuing or exists on and as of the date hereof.
(b) The execution, delivery and performance of this Amendment has been duly authorized by all necessary action on the part of the Borrower, has been duly authorized by all necessary governmental approvals, if any, and does not and will not contravene or conflict with any provision of law or of the organizational instruments of the Borrower or of any agreement or instrument binding on it.
(c) This Amendment is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
Section 3. Authorization of Agent. To further the intent and purpose of
Section 9.03(e) of the Original Agreement, the Required Lenders hereby authorize
the Agent now and at any time during the term of the Original Agreement (as the
same may be
amended) to release any Collateral, the disposition of which is expressly permitted under Section 6.10 of the Original Agreement, upon such disposition.
Section 4. Miscellaneous. (a) This Amendment shall become effective upon execution and delivery hereof by all of the Lenders, the Borrower and the Agent. The execution below by the Lenders shall constitute a direction to the Agent to execute this Amendment.
(b) The Original Agreement, as amended by this Amendment, is in all respects ratified, approved and confirmed and shall, as so amended, remain in full force and effect. From and after the date hereof, all references to the "Agreement" in the Original Agreement and in the other Loan Documents shall be deemed to be references to the Original Agreement as amended by this Amendment.
(c) This Amendment shall be deemed to be a contract under the laws of the State of New York and for all purposes shall be governed by and construed and enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
STEEL DYNAMICS, INC.
By /s/ SIG ILLEGIBLE ______________________________________ Title: Vice President |
MELLON BANK, N.A., as Lender and as Agent
By /s/ ROGER N. STANIER ______________________________________ Title: Vice President |
KREDITANSTALT FUR WIEDERAUFBAU
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE
______________________________________
Title: Vice President Senior Project
Manager
By______________________________________
Title:
|
BANQUE NATIONALE DE PARIS
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE ______________________________________ Title: Vice President |
COMERICA BANK
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE ______________________________________ Title: Vice President |
BANK ONE INDIANAPOLIS, NATIONAL ASSOCIATION
as Lender and Co-Agent
By /s/ SIG ILLEGIBLE ________________________________________ Title: Vice President |
NBD BANK, N.A.
as Lender and Co-Agent
By /s/ SIG ILLEGIBLE _______________________________________ Title: Vice President |
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Lender and Co-Agent
By__________________________________________
Title:
BANK AUSTRIA AKTIENGESELLSCHAFT
as Lender and Co-Agent
By /s/ J. Anthony Seay __________________________________________ Title: Vice President By /s/ Jeanine Ball __________________________________________ Title: Assistant Vice president |
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ SIG ILLEGIBLE
_________________________________________
Title: Schroter
(Vice President)
By /s/ L. Christmann
_________________________________________
Title: Christmann
(Assistant Vice President)
|
FORT WAYNE NATIONAL BANK
By /s/ SIG ILLEGIBLE __________________________________________ Title: Senior Vice President |
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH
By /s/ SIG ILLEGIBLE ---------------------------------------- Title: Vice President By /s/ Cordula Kraska-Hornemann ---------------------------------------- Title: Vice President |
DEUTSCHE BANK AG, CHIGAGO AND/OR
CAYMAN ISLANDS BRANCHES
NATIONAL CITY BANK, INDIANA
By /s/ SIG ILLEGIBLE ----------------------------------------- Title: Vice President |
SUMITOMO CORPORATION
Exhibit 10.1d
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of September 18, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation (the "Borrower"), the lenders listed on the signature pages hereof and MELLON BANK, N.A., a national banking association, as agent for the Lenders under the Credit Agreement referred to below (the "Agent").
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders"), the Agent, Mellon Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank One, Indianapolis, National Association and NBD Bank, N.A., as Co-Agents, entered into a Credit Agreement, dated as of June 30, 1994, as amended as of January 6, 1995, May 22, 1995, June 15, 1995, November 20, 1995, March 4, 1996 and May 20, 1996 (as so amended, the "Original Agreement"), pursuant to which the Lenders have extended credit to the Borrower to fund the construction and operation of a 1.2 million ton thin slab cast mini-mill and a cold rolling and coating steel processing facility in Butler, Indiana;
WHEREAS, Steel Dynamics Holdings, Inc. ("Holdings"), an Indiana corporation and the indirect parent of the Borrower, and the Borrower currently contemplate an initial public offering of equity securities of either Holdings or the Borrower (in either case, the "IPO") , and desire to use a portion of the Net Cash Proceeds from the IPO to prepay the Indebtedness incurred pursuant to the Subordinated Notes;
WHEREAS, Holdings and the Borrower desire to merge Steel Dynamics Sales Corp., Inc., an Indiana corporation and the direct parent of the Borrower, with and into the Borrower (the "Salesco Merger");
WHEREAS, Holdings and the Borrower desire to merge Holdings with and into the Borrower (the "Holdings Merger");
WHEREAS, as contemplated by Section 6.05(i) of the Original Agreement, the Borrower intends to enter the business of manufacturing scrap substitute and to construct one or more facilities for such purpose, such business to be conducted by formation of Iron Dynamics, Inc., an Indiana corporation ("IDI"), as a wholly-owned Subsidiary of the Borrower;
WHEREAS, the Borrower intends that the construction and start-up of such scrap substitute business will be funded in part by proceeds of the private placement sale (unrelated to the IPO)
of up to $25,000,000 of its equity securities to one or more investors as permitted under Section 6.05(i) of the Original Agreement as amended hereby;
WHEREAS, the Borrower and the Required Lenders (as defined in the Original Agreement) desire to amend the Original Agreement to affect the changes described above and to make certain other changes therein;
WHEREAS, capitalized terms not otherwise defined herein shall have the meanings assigned thereto in the Original Agreement.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby agree as follows:
Section 1. Initial Amendments to Original Agreement. Upon the effectiveness of the Salesco Merger, the following amendments (the "Initial Amendments") to the Original Agreement shall be made:
(1) The Original Agreement is hereby amended by replacing each of the phrases "the Borrower and Salesco", "Salesco, the Borrower", "the Borrower or Salesco", "Salesco and the Borrower" and "the Borrower, Salesco", wherever any of such phrases appears in the Original Agreement, with the words "the Borrower".
(2) The Original Agreement is hereby amended by replacing the words "Salesco and Holdings", "Holdings and Salesco", "Salesco/Holdings", "each of Holdings and Salesco" and "either Holdings or Salesco" with the word "Holdings" throughout the Original Agreement.
(3) The Original Agreement is hereby amended by replacing the phrase "Borrower's and Salesco's", wherever it appears in the Original Agreement, with the word "Borrower's".
(4) The Original Agreement is hereby amended by replacing the phrase "Salesco's and Holdings'", wherever it appears in the Original Agreement, with the word "Holdings'".
(5) Section 1.01 of the Original is hereby amended by adding, in the appropriate alphabetical order, the following defined terms:
"IDI" shall mean Iron Dynamics, Inc., an Indiana corporation, all of the capital stock of which will be owned by the Borrower if it is organized.
"IDI Guaranty" shall mean that certain Guaranty and Suretyship Agreement, substantially in the form of Exhibit R
hereto, to be dated on or about the date of organization of IDI, to be executed and delivered by IDI in favor of the Agent if IDI is organized.
"IDI Security Agreement" shall mean that certain Security Agreement, substantially in form and substance satisfactory to the Agent and its counsel, to be dated on or about the date of organization of IDI, to be executed and delivered by IDI in favor of the Agent if IDI is organized.
"IPO" shall mean the underwritten initial public offering of Holdings' equity securities.
"Salesco Merger" shall mean the merger of Salesco with and into the Borrower.
"Seventh Amendment" shall mean the Seventh Amendment to Credit Agreement, dated as of September 18, 1996, among the Borrower, the Lenders, the Issuing Bank, the Agent and the Co-Agents.
(6) Section 1.01 of the Original Agreement is hereby amended by amending and restating the defined terms "Change of Control", "Holdings", "Phase I Project Acceptance", "Phase I Project Acceptance Date", "Salesco", "Security Documents" and "Subordinated Guarantee" to read, respectively, as follows:
"Change of Control" shall mean that at any time (A) either Bain or General Electric Capital Corporation, a New York corporation ("GECC"), shall fail to retain voting securities which provide a minimum of 50% of the voting power Bain or GECC, as the case may be, held pursuant to its original equity investment in Holdings as described on Schedule 3.15 hereto, (B) the Control Group shall fail to satisfy the Control Tests for any reason (voluntarily or involuntarily), (C) any Person or group of Persons (as defined in the Securities Exchange Act of 1934, as amended) not a member of the Control Group shall own more than 20% of the voting capital stock of Holdings or more than 20% of the equity securities of Holdings, or (D) Holdings shall fail to own all of the equity securities of the Borrower.
As used herein, the term "Control Group" at any time shall mean the following Persons: (a) Bain, (b) GECC, (c) Keith Busse and the Designated Managers, (d) Heavy Metal, L.C., a Virginia limited liability company, (e) Keylock Investments Limited, an Irish non-resident corporation, and Mazelina Anstalt, a Liechenstein business trust and (f) Preussag. As used herein, the "Control Tests" are deemed satisfied at a given time if and only if at such time:
(x) The members of the Control Group in the aggregate own (beneficially and of record) and have the
right to vote at least 51% of the shares of voting capital stock of Holdings; and
(y) The members of the Control Group in the aggregate own (beneficially and of record) at least 51% of the equity securities of all classes of Holdings.
"Holdings" shall mean Steel Dynamics Holdings, Inc., an Indiana corporation which owns all of the capital stock of the Borrower.
"Phase I Project Acceptance" shall mean the issuance by Borrower to the Agent of a certificate, in the form of Schedule I to the Seventh Amendment, following the completion, in accordance with the SMS Documents, of the Final Acceptance Test referred to in Section 14.3 of the SMS Documents (assuming (contrary to fact) that the modifications set forth on Schedule II to such Seventh Amendment had been made to the SMS Documents) for all portions of the Phase I Project supplied by SMS, in which Test such portion of the Phase I Project met the guaranteed performance specified in the SMS Documents (assuming (contrary to fact) that the modifications set forth on Schedule II to such Seventh Amendment had been made to the SMS Documents).
"Phase I Project Acceptance Date" shall mean the earliest date which
(i) is not less than five days after the date on which the Borrower has
issued to the Agent, with a copy to the Phase I Project Monitor, the
certificate referred to in the definition of the phrase "Phase I Project
Acceptance" and (ii) is a date on which the Phase I Project Monitor shall
not have provided to the Agent written notice that it has received such
certificate and that it disagrees with one or more of the statements in
such certificate.
"Salesco" shall mean Steel Dynamics Sales Corp., Inc., an Indiana corporation, which prior to the Salesco Merger owned all the capital stock of Borrower, and was in turn a wholly-owned subsidiary of Holdings.
"Security Documents" shall mean the Security Agreement, the Holdings Security Agreement, the IDI Guaranty, the IDI Security Agreement, the Mortgage, the Holdings Guaranty, the Assignment of Contracts (and each assignment of contract entered into pursuant to Section 5.15 hereof), together with the Consents to Assignment of Contracts (and each consent to assignment of contract delivered pursuant to Section 5.15 hereof) and any other agreements or instruments from time to time to time granting or purporting to grant the Agent a Lien in any property for the benefit of the Lenders to secure the Obligations, or constituting a Guaranty Equivalent for the Obligations.
"Subordinated Guarantee" shall mean the Subordinated Guarantee, dated as of June 30, 1994, as amended, issued by Holdings for the benefit of the holders of the Subordinated Notes, it being understood that references herein to the agreements governing the Subordinated Notes shall include, without limitation, the Subordinated Guarantee.
(7) Section 1.01 of the Original Agreement is hereby amended by deleting, in the definition of the term "Designated Initial Phase II Equity Proceeds", the figure "$15,000,000" and inserting in lieu thereof the figure "$25,000,000".
(8) Section 1.01 of the Original Agreement is hereby amended by deleting the following defined term: "Salesco Security Agreement".
(9) Section 2.03(c)(i) of the Original Agreement is hereby amended by attending at the end thereof the following sentence:
If Tranche C Loans have not been made prior to consummation of the IPO, upon receipt by the Borrower or Holdings of Net Cash Proceeds of the IPO in excess of $100,000,000, the Tranche C Loan Commitments shall terminate automatically.
(10) Section 2.10(e) of the Original Agreement is hereby amended by replacing the phrase in parentheses with the following:
(other than the Designated Initial Phase II Equity Securities, the equity securities described in Schedule 3.15 hereto, any equity securities issued pursuant to the IPO and any equity securities issued in accordance with all of the terms and conditions of Section 6.05(i) hereof)
(11) Section 3.13 of the Original Agreement is hereby amended in its entirety to read as follows:
3.13. Subsidiaries. Except as otherwise specifically permitted by this Agreement, the Borrower has no Subsidiaries other than, if IDI is organized, IDI, and Holdings has no Subsidiaries except for the Borrower and, if IDI is organized, IDI.
(12) Section 3.15 of the Original Agreement is hereby amended in its entirety to read as follows:
3.15. Ownership and Control. Schedule 3.15 hereof states as of the date hereof, Schedule 3.15-1996 hereto states as of the date of the Fifth Amendment, and Schedule 3.15A-1996 hereto states as of the date of the Seventh Amendment, the authorized capitalization of each Loan Party, the number of shares of each class of capital stock issued and outstanding of each Loan Party and the number and
percentage of outstanding shares of each such class of capital stock and the names of the record owners of such shares and, to the Borrower's knowledge, the beneficial owners of such shares. The outstanding shares of capital stock of each Loan Party have been duly authorized and validly issued and are, except as designated on such Schedule 3.15, Schedule 3.15-1996, or Schedule 3.15A-1996, fully paid and nonassessable. There are no options, warrants, calls, subscriptions, conversion rights, exchange rights, preemptive rights or other rights, agreements or arrangements (contingent or otherwise) which may in any circumstances now or hereafter obligate any Loan Party to issue any shares of its capital stock or any other securities, except for matters set forth in such Schedule 3.15, Schedule 3.15-1996, or Schedule 3.15A-1996, and except for matters which are permitted by the terms hereof and notice of which is provided by the Borrower to the Agent. Schedule 3.15 hereof describes as of the date hereof, Schedule 3.15-1996 hereto describes as of the date of the Fifth Amendment, and Schedule 3.15A-1996 hereto states as of the date of the Seventh Amendment, all options, rights, purchase agreements, buy-sell agreements, restrictions on transfer, pledges, proxies, voting trusts, powers of attorney, voting agreements and other agreements, instruments or arrangements to which any Loan Party is a party or is subject or bound, or to which any record or beneficial owner of capital stock of any Loan Party is a party or is subject or bound, which pertain to any shares of capital stock (now or hereafter outstanding) of any Loan Party, including any matter which may affect beneficial or record ownership thereof or transferability thereof or voting rights with respect thereto.
(13) Section 6.03(c) of the Original Agreement is hereby amended by deleting the words "to Salesco as contemplated by Exhibit CC or to".
(14) Section 6.03(i) of the Original Agreement is hereby amended by deleting "; and" from the end thereof and inserting in ".".
(15) Section 6.03(j) of the Original Agreement is hereby deleted.
(16) Section 6.05(f) of the Original Agreement is hereby amended in its entirety to read as follows:
(f) Holdings' investment in the Borrower, as described on Schedule 6.05;
(17) Section 6.05(h) of the Original Agreement is hereby amended in its entirety to read as follows:
(h) Loans and advances of the Borrower to Holdings permitted by
Section 6.03(i); and
(18) Section 6.05(i) of the Original Agreement is hereby amended in its entirety to read as follows:
(i) An investment in IDI and/or in equipment to be owned by the Borrower which is related to processing product that is intended to be manufactured by IDI in an aggregate amount not exceeding $25,000,000 and funded solely with the Net Cash Proceeds of the issuance by Holdings after September 1, 1996 (other than in the IPO) of equity securities, but only upon execution and delivery by IDI to the Agent of the IDI Guaranty and the IDI Security Agreement.
(19) Section 6.06(a) of the Original Agreement is hereby amended by deleting the words "Salesco the full amount of which is (and may be) used by Salesco to pay a dividend in cash to" from the fourth and fifth lines thereof.
(20) Section 6.10(d) of the Original Agreement is hereby amended in its entirety to read as follows: "[Intentionally omitted]".
(21) Section 6.12(c) of the Original Agreement is hereby amended in its entirety to read as follows:
(c) The transactions between the Borrower and IDI described on Exhibit CC hereto;
(22) Section 6.13 of the Original Agreement is hereby amended by adding thereto, immediate before the period at the end thereof, the following:
, and (z) the costs, not to exceed the Net Cash Proceeds of the issuance of equity securities of Holdings after September 1, 1996 (other than in the IPO) remaining after the prepayment, if any, required by Section 2.10(e) hereof, of the construction of one or more scrap substitute manufacturing facilities owned by the Borrower or IDI (but not by both)
(23) Section 6.15 of the Original Agreement is hereby amended by
replacing the period at the end of subparagraph (b) thereof with the following:
"; and", and by adding the following subparagraph (c) thereto:
(c) The Borrower may, out of the Net Cash Proceeds of the IPO, (i) prepay in full the principal amount of the Indebtedness of the Borrower incurred pursuant to the
Subordinated Notes, together with accrued interest thereon and premium required to be paid thereon or (ii) prepay in part such Indebtedness incurred pursuant to the Subordinated Notes, so long as an amount of such Net Cash Proceeds equal to the principal amount of the Subordinated Notes outstanding after such prepayment is used to prepay principal of Term Loans.
(24) Section 6.18 of the Original Agreement is hereby amended in its entirety to read as follows:
6.18. Maintenance of Business. The Borrower shall not change its primary line of business from that of either constructing, owning and operating a steel mini-mill or constructing, owning and operating a steel mini-mill and one or more scrap substitute manufacturing facilities, shall not permit Holdings to change it sole line of business from owning all the capital stock of the Borrower and shall not permit IDI, if it is organized, to change its primary line of business from that of constructing, owning and operating one or more scrap substitute manufacturing facilities.
(25) Section 6.19 of the Original Agreement is hereby amended in its entirety to read as follows:
6.19. Subsidiaries. The Borrower shall not organize, incorporate, acquire or otherwise suffer to exist any Subsidiaries, except IDI (if IDI is organized), and Holdings shall not organize, incorporate, acquire or otherwise suffer to exist any Subsidiaries except the Borrower and Subsidiaries of the Borrower.
(26) Exhibit CC to the Original Agreement is hereby amended and restated in its entirety to read as set forth on Annex 1 hereto.
(26) Exhibit DD to the Original Agreement is hereby deleted.
Section 2. Additional Amendments to the Original Agreement. Upon the effectiveness of the Holdings Merger, the following amendments (the "Additional Amendments") to the Original Agreement shall be made:
(1) The Original Agreement is hereby amended by replacing each of the phrases "Holdings", "the Borrower, Holdings", "Holdings, the Borrower", "Holdings and the Borrower", "the Borrower and Holdings", "Holdings or the Borrower" and "the Borrower or Holdings", wherever any of such phrases appears in the Original Agreement, with the words "the Borrower".
(2) The Original Agreement is hereby amended by replacing the word "Holdings'", wherever such word appears in the Original Agreement, with the words "the Borrower's".
(3) Section 1.01 of the Original Agreement is hereby amended by adding, in the appropriate alphabetical order, the following defined term:
"Holdings Merger" shall mean the merger of Holdings with and into the Borrower.
(4) Section 1.01 of the Original Agreement is hereby amended by amending and restating the defined terms "Additional Common Equity", "Borrower Group", "Change of Control", "IPO", "Loan Documents" and "Security Documents" to read, respectively, as follows:
"Additional Common Equity" shall mean common stock of Holdings (or of the Borrower if the Holdings Merger is completed) issued for cash after December 1, 1995.
"Borrower Group" shall mean the group consisting of the Borrower and any of its consolidated Subsidiaries permitted hereunder.
"Change of Control" shall mean that at any time (A) either Bain or General Electric Capital Corporation, a New York corporation ("GECC"), shall fail to retain voting securities which provide a minimum of 50% of the voting power Bain or GECC, as the case may be, held pursuant to its original equity investment in the Borrower as described on Schedule 3.15A-1996 hereto, (B) the Control Group shall fail to satisfy the Control Tests for any reason (voluntarily or involuntarily), or (C) any Person or group of Persons (as defined in the Securities Exchange Act of 1934, as amended) not a member of the Control Group shall own more than 20% of the voting capital stock of the Borrower or more than 20% of the equity securities of the Borrower.
As used herein, the term "Control Group" at any time shall mean the following Persons: (a) Bain, (b) GECC, (c) Keith Busse and the Designated Managers, (d) Heavy Metal, L.C., a Virginia limited liability company, (e) Keylock Investments Limited, an Irish non-resident corporation, and Mazelina Anstalt, a Liechenstein business trust and (f) Preussag. As used herein, the "Control Tests" are deemed satisfied at a given time if and only if at such time:
(x) The members of the Control Group in the aggregate own (beneficially and of record) and have the right to vote at least 51% of the shares of voting capital stock of the Borrower; and
(y) The members of the Control Group in the aggregate own (beneficially and of record) at least 51% of the equity securities of all classes of the Borrower.
"Holdings" shall mean Steel Dynamics Holdings, Inc., an Indiana corporation which prior to the Salesco Merger owned all the capital stock of Salesco and prior to the Holdings Merger owned all the capital stock of the Borrower.
"IPO" shall mean the underwritten initial public offering of the Borrower's equity securities.
"Loan Documents" shall mean this Agreement, the Notes, the Agreement Among Secured Lenders, the Transfer Supplements, the Interest Rate Protection Agreements, the Letters of Credit, the Continuing Letter of Credit Agreement, the Letter of Credit Applications (and any other agreements or documents pursuant to which any Letter of Credit may be issued or amended), each Subsidiary Guaranty, the Security Documents, the Currency Hedge Agreements, the Fifth Amendment Documents and all other agreements and instruments extending, renewing, refinancing or refunding any indebtedness, obligation or liability arising under any of the foregoing, in each case as the same may be amended, modified or supplemented from time to time hereafter.
"Security Documents" shall mean the Security Agreement, the IDI
Security Agreement, the IDI Guaranty, the Mortgage, the Assignment of
Contracts (and each assignment of contract entered into pursuant to
Section 5.15 hereof), together with the Consents to Assignment of
Contracts (and each consent to assignment of contract delivered pursuant
to Section 5.15 hereof) and any other agreements or instruments from time
to time to time granting or purporting to grant the Agent a Lien in any
property for the benefit of the Lenders to secure the Obligations, or
constituting a Guaranty Equivalent for the Obligations.
(5) Section 1.01 of the Original Agreement is hereby amended by deleting the following defined term: "Holdings Security Agreement".
(6) Section 3.13 of the Original Agreement is hereby amended in its entirety to read as follows:
3.13. Subsidiaries. Except as otherwise specifically permitted by this Agreement, the Borrower has no Subsidiaries other than, if IDI is organized, IDI.
(7) Section 4.05(s) of the Original Agreement is hereby amended in its entirety to read as follows: " [Intentionally omitted] ".
(8) Section 5.01(i)(ii) of the Original Agreement is hereby amended by deleting the phrase "their respective stockholders" and replacing it with the phrase "its stockholders".
(9) Section 6.03(i) of the Original Agreement is hereby amended in its entirety to read as follows: "[Intentionally omitted]".
(10) Section 6.04(e) of the Original Agreement is hereby amended in its entirety to read as follows: "Any Subsidiary Guaranty".
(11) Section 6.04(f) of the Original Agreement is hereby amended in its entirety to read as follows: "[Intentionally omitted]".
(12) Section 6.05(f) of the Original Agreement is hereby amended in its entirety to read as follows: "[Intentionally omitted]".
(13) Section 6.05(h) of the Original Agreement is hereby amended in its entirety to read as follows: "[Intentionally omitted]".
(14) Section 6.06(a) of the Original Agreement is hereby amended in its entirety to read as follows:
(a) The Borrower may, if no Event of Default or Potential Default exists or is continuing or would result from the making of the purchase described hereinafter, pay up to $5,500,000 in cash to repurchase stock of the Borrower from any of the individuals employed by the Borrower listed on Schedule 6.06 hereof, provided that a minimum aggregate equity interest in the Borrower of 7.5% shall be owned by the remaining members of the Borrower's management;
(15) Section 6.14 of the Original Agreement is hereby amended in its entirety to read as follows:
6.14. Limitations on Modification of Certain Agreements and Instruments. The Borrower shall not amend, modify or supplement, or suffer any amendment, modification or supplement to, the Subordinated Debt Purchase Agreement or any of the agreements governing the Subordinated Notes (except as specifically permitted by Section 6.15(b)), the Stockholders' Agreement among the stockholders of Steel Dynamics Holdings, Inc. or its certificate of incorporation or by-laws (or similar constituent documents) except that the Borrower may, without the consent of the Required Lenders, amend or modify the sections of its certificate of incorporation or bylaws or Stockholders' Agreement listed on Schedule 6.14 hereto and may amend or modify the Stockholders' Agreement to permit the addition of new
stockholders whose rights thereunder are not greater than the rights of the original stockholders, and except that the Borrower may amend or modify Section 10.5 of the Subordinated Debt Purchase Agreement in order to permit the investment in Qualitech Steel Corporation which is permitted by Section 6.05(a) of this Agreement and in order to make amendments to the Subordinated Debt Purchase Agreement which correspond to the amendments hereto made by the Fifth Amendment, and except that the Stockholders Agreement may be amended to reflect the Holdings Merger and the fact that following the Holdings Merger the parties to such Stockholders Agreement shall no longer own equity securities of Steel Dynamics Holdings, Inc., but rather shall own equity securities of the Borrower.
(16) Section 6.18 of the Original Agreement is hereby amended in its entirety to read as follows:
6.18. Maintenance of Business. The Borrower shall not change its primary line of business from that of either constructing, owning and operating a steel mini-mill or constructing, owning and operating a steel mini-mill and one or more scrap substitute manufacturing facilities, shall not permit IDI, if it is organized, to change its primary line of business from that of constructing, owning and operating one or more scrap substitute manufacturing facilities.
(17) Section 6.19 of the Original Agreement is hereby amended in its entirety to read as follows:
6.19. Subsidiaries. The Borrower shall not organize, incorporate, acquire or otherwise suffer to exist any Subsidiaries, except IDI (if IDI is organized).
(18) The Original Agreement is hereby amended by adding a new Schedule 3.15A-1996 thereto, in the form attached as Annex 2 hereto.
Section 3. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original Agreement are true and correct on and as of the date hereof as if made on and as of the date hereof (except for any representation or warranty which was expressly limited to an earlier date, in which case such representations and warranties shall be true and correct on and as of such earlier date), and that no Event of Default or Potential Default has occurred and is continuing or exists on and as of the date hereof.
(b) The execution, delivery and performance of this Amendment has been duly authorized by all necessary action on the part of the Borrower, has been duly authorized by all necessary
governmental approvals, if any, and does not and will not contravene or conflict with any provision of law or of the organizational instruments of the Borrower or of any agreement or instrument binding on it.
(c) This Amendment is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
Section 4. Instructions to Agent. If the Salesco Merger and the Holdings Merger are completed simultaneously, the Required Lenders hereby instruct the Agent to release, upon such completion, the shares of Salesco and of Borrower (the "Pledged Shares") held as collateral pursuant to the Pledge and Security Agreements of each of Holdings and Salesco, each dated as of June 30, 1994. If the Holdings Merger is not completed, the Required Lenders hereby instruct the Agent to release, upon completion of the Salesco Merger, the Pledged Shares in return for replacement certificates representing the shares of the Borrower held by Holdings.
Section 5. Consent to Amendment of Subordinated Debt Purchase Agreement. Notwithstanding the restrictions of Section 6.14 of the Original Agreement, by executing and delivering this Amendment, the Required Lenders hereby consent to the Borrower's entering into a Consent and Amendment to the Subordinated Debt Purchase Agreement, in form satisfactory to the Agent, the only substance of which is to amend provisions of such Purchase Agreement which correspond to provisions of the Original Agreement amended hereby in a manner corresponding to the amendments made herein.
Section 6. Miscellaneous. (a) The Initial Amendments shall become effective upon (i) execution and delivery hereof by the Required Lenders, the Borrower and the Agent and (ii) the consummation of the Salesco Merger. The Additional Amendments shall become effective upon (i) execution and delivery hereof by all of the Lenders, the Borrower and the Agent and (ii) the consummation of the Holdings Merger. The execution below by the Required Lenders shall constitute a direction to the Agent to execute this Amendment and shall constitute consent of the Required Lenders to the Salesco Merger. The execution below by all of the Lenders shall constitute consent of the Lenders to the Holdings Merger.
(b) The Original Agreement, as amended by this Amendment, is in all respects ratified, approved and confirmed and shall, as so amended, remain in full force and effect. From and
after the date hereof, all references to the "Agreement" in the Original Agreement and in the other Loan Documents shall be deemed to be references to the Original Agreement as amended by this Amendment.
(c) This Amendment shall be deemed to be a contract under the laws of the State of New York and for all purposes shall be governed by and construed and enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
STEEL DYNAMICS, INC.
By /s/ [Signature Illegible] ------------------------------------- Title: Vice President |
MELLON BANK, N.A., as Lender and as Agent
By /s/ Roger N. Stanier ------------------------------------- Title: Vice President |
KREDITANSTALT FUR WIEDERAUFBAU
as Senior Co-Agent
By /s/ [Signature Illegible] ------------------------------------- Title: Vice President By /s/ [Signature Illegible] ------------------------------------- Title: Senior Project Manager |
BANQUE NATIONALE DE PARIS
as Senior Co-Agent
By /s/ Richard Cushing ------------------------------------- Title: Vice President |
COMERICA BANK
as Senior Co-Agent
By /s/ Phillip A. Coosaia
---------------------------------------
Title: Vice President
Name: Phillip A. Coosaia
|
BANK ONE INDIANAPOLIS, NATIONAL ASSOCIATION
as Co-Agent
By /s/ Dale C. Arfman
---------------------------------------
Title: Vice President
|
NBD BANK, N.A.
as Co-Agent
By /s/ [Signature Illegible]
---------------------------------------
Title: Vice President
|
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Co-Agent
By /s/ Jun Wantanabe
---------------------------------------
Title : Senior Vice President
|
BANK AUSTRIA AKTIENGESELLSCHAFT
as Co-Agent
By /s/ J. Anthony Seay
-------------------------------------------
Title: Vice President, BANK AUSTRIA
By /s/ George M. Williams, III
-------------------------------------------
Title: Asst. Vice President, BANK AUSTRIA
|
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ Karl-Heinz Schroter
-------------------------------------------
Title : Vice President
By /s/ Hermann J. Schutterle
-------------------------------------------
Title: Assistant Vice President
|
FORT WAYNE NATIONAL BANK
By /s/ Gerald Witte
-------------------------------------------
Title: Senior Vice President
|
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH
By /s/ [Siganture Illegible]
-------------------------------------------
Title: Vice President
By /s/ [Signature Illegible]
-------------------------------------------
Title: Vice President
|
DEUTSCHE BANK AG, CHICAGO AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ David S. Berger
-------------------------------------------
Title: Vice President
By /s/ Hans Roderich
-------------------------------------------
Title: Associate
|
NATIONAL CITY BANK, INDIANA
By /s/ [Signature Illegible]
-------------------------------------------
Title: Vice President
|
ANNEX 1
EXHIBIT CC
Holdings Line of Business
The business of Steel Dynamics Holdings, Inc. is to be the ownership of all of the issued and outstanding capital stock of the Borrower.
IDI Line of Business
The business of Iron Dynamics, Inc., if it is organized, is to construct, own and operate one or more scrap substitute manufacturing facilities.
Transactions between IDI and the Borrower
Until such time as IDI incurs Indebtedness (as to which incurrence the Credit Agreement requires the approval of the Required Lenders), the Borrower may provide overhead, accounting services and management services to IDI without cash compensation therefor.
ANNEX 2
SCHEDULE 3.15A-1996
[information regarding equity security ownership of the Borrower by Control Group to be provided]
SCHEDULE I
STEEL DYNAMICS, INC.
Final Acceptance Certificate
The undersigned, who is __________ of Steel Dynamics, Inc. (the "Borrower"), hereby certifies as follows:
1. The Final Acceptance Test referred to in Section 14.3 of the SMS Documents (assuming (contrary to fact) that the modifications set forth on Schedule II to such Seventh Amendment had been made to the SMS Documents) has been completed for all portions of the Phase I Project supplied by SMS, in which Test such portion of the Phase I Project met the guaranteed performance specified in the SMS Documents (assuming (contrary to fact) that the modifications set forth on Schedule II to such Seventh Amendment had been made to the SMS Documents).
2. Capitalized undefined terms used herein shall have the meanings assigned them in that certain Credit Agreement dated as of June 30,1994, between the Borrower, Mellon Bank, N.A., as Agent and the lenders parties thereto from time to time, as the same may be amended or modified.
WITNESS THE DUE execution hereof as of the _____ day of ____________, 1996.
Title:
SCHEDULE II
The modifications referred to in the definition of the term "Phase I Project Acceptance" are the modifications set forth under the heading "SDI Request" in each of items 1 through 7 of the Memo, dated September 10, 1996, from W. P. Burns of R. T. Patterson Co., Inc. to A. R. Pilz of The Lathrop Company, a copy
of which Memo is attached to and forms a part of this Schedule II.
Exhibit 10.2
LOAN AGREEMENT
between
INDIANA DEVELOPMENT FINANCE AUTHORITY
and
STEEL DYNAMICS, INC.
$21,400,000
Indiana Development Finance Authority
Taxable Economic Development Revenue Bonds, Series 1995
(Steel Dynamics, Inc. Project)
Dated
as of
May 1, 1995
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only)
Preambles Page
ARTICLE I DEFINITIONS............................................ 2
Section 1.1. Use of Defined Terms................................... 2
Section 1.2. Definitions............................................ 2
Section 1.3. Interpretation......................................... 4
Section 1.4. Captions and Headings.................................. 5
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 6
Section 2.1. Representations, Warranties and Covenants of the Issuer 6
Section 2.2. Representations, Warranties and Covenants of the
Borrower............................................... 7
ARTICLE III ACQUISITION AND EQUIPPING OF THE PROJECT;
ISSUANCE OF THE BONDS.................................. 10
Section 3.1. Acquisition and Equipping of the Manufacturing
Facility; Title........................................ 10
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. 10
Section 3.3. Disbursements from the Project Fund.................... 10
Section 3.4. Establishment of Completion Date; Obligation of
Borrower to Complete................................... 11
Section 3.5. Investment of Fund Moneys.............................. 12
ARTICLE IV LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS.................. 14
Section 4.1. Loan Repayment; Delivery of Note and Letter of Credit.. 14
Section 4.2. Additional Payments.................................... 15
Section 4.3. Place of Payments...................................... 15
Section 4.4. Obligations Unconditional.............................. 15
Section 4.5. Assignment of Agreement and Revenues................... 16
Section 4.6. Letter of Credit....................................... 16
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS.................... 17
Section 5.1. Right of Inspection.................................... 17
Section 5.2. Sale, Lease or Grant of Use by Borrower................ 17
-i-
|
Section 5.3. Indemnification........................................ 17
Section 5.4. Assignment by Issuer................................... 18
Section 5.5. Borrower's Performance Under Indenture................. 18
Section 5.6. Maintenance of Project................................. 19
Section 5.7. Balance in the Debt Service Reserve Fund............... 19
Section 5.8. Reimbursement of Issuer for Deposits to
Debt Service Reserve Fund.............................. 19
Section 5.9 Acknowledgement of Prior Lien.......................... 19
ARTICLE VI REDEMPTION OF BONDS.................................... 20
Section 6.1. Optional Redemption.................................... 20
Section 6.2. Extraordinary Optional Redemption...................... 20
Section 6.3. Actions by Issuer...................................... 22
Section 6.4. Required Deposits for Optional Redemption.............. 22
Section 6.5. Mandatory Redemption of Bonds.......................... 22
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES......................... 23
Section 7.1. Events of Default...................................... 23
Section 7.2. Remedies on Default.................................... 24
Section 7.3. No Remedy Exclusive.................................... 25
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses.......... 25
Section 7.5. No Waiver.............................................. 26
Section 7.6. Remedies Subject to Bank's Direction................... 26
Section 7.7. Retained Rights of Issuer.............................. 26
ARTICLE VIII MISCELLANEOUS.......................................... 27
Section 8.1. Term of Agreement...................................... 27
Section 8.2. Notices................................................ 27
Section 8.3. Extent of Covenants of the Issuer; No Personal
Liability.............................................. 27
Section 8.4. Binding Effect......................................... 27
Section 8.5. Amendments and Supplements............................. 27
Section 8.6. Execution Counterparts................................. 28
Section 8.7. Severability........................................... 28
Section 8.8. Governing Law.......................................... 28
Exhibit A - NOTE.................................................... A-1
|
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of May 1, 1995 between the INDIANA DEVELOPMENT FINANCE AUTHORITY, a body corporate and politic, duly organized and validly existing under the laws of the State of Indiana (the "Issuer"), and STEEL DYNAMICS, INC., an Indiana corporation (the "Borrower"), under the circumstances summarized in the following recitals (the capitalized terms not defined above or in the recitals being used therein as defined in or pursuant to Article I hereof):
A. Pursuant to the provisions of the laws of the State, including the Act, the Issuer plans to undertake the financing of certain economic development facilities as more fully described in the Indenture (the "Project"), by issuing its $21,400,000 Taxable Economic Development Revenue Bonds. Series 1995 (Steel Dynamics, Inc. Project) (the "Bonds").
B. The Issuer intends to lend the proceeds of the sale of the Bonds to the Borrower to reimburse the Borrower for qualifying costs it incurred to acquire, construct and equip the Project.
C. The Bonds will be issued under the terms of a Trust Indenture (the "Indenture") of even date herewith between the Issuer and NBD Bank, N.A., Indianapolis, Indiana, as trustee (the "Trustee"); and
D. The Borrower's obligations to repay the loan are evidenced by this Agreement and the Borrower's execution and delivery to the Issuer of its promissory note (the "Note") concurrently herewith and are secured by certain Revenues described in the Indenture.
E. The Borrower and the Issuer have full right and lawful authority to enter into this Agreement and to perform and observe the provisions hereof on their respective parts to be performed and observed.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto covenant, agree and bind themselves as follows (provided that any obligation of the Issuer created by or arising out of this Agreement shall not be a general debt on its part but shall be payable solely out of the Revenues):
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. Words and terms defined in the Indenture shall have the same meanings when used herein, unless the context or use clearly indicates another meaning or intent. In addition, the words and terms set forth in Section 1.2 hereof shall have the meanings set forth therein unless the context or use clearly indicates another meaning or intent.
Section 1.2. Definitions. As used herein:
"Additional Payments" means the amounts required to be paid by the Borrower pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Loan Agreement, as amended or supplemented from time to time.
"Bonds" means the Indiana Development Finance Authority Taxable Economic Development Revenue Bonds, Series 1995 (Steel Dynamics, Inc. Project) authorized in the Indenture, in the original principal amount of $21,400,000.
"Completion Date" means the date of completion of the Project as certified pursuant to Section 3.4 hereof.
"Cost of the Project" means the sum of the items authorized to be paid from the Project Fund pursuant to the provisions of (a) through (h) of Section 3.3 hereof.
"Engineer" means an individual or firm selected by the Borrower and qualified to practice the profession of engineering or architecture under the laws of the State.
"Event of Default" means any of the events described as an Event of Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events described as constituting Force Majeure in Section 7.1 hereof.
"Indenture" means the Trust Indenture, dated as of even date herewith, between the Issuer and the Trustee, as amended or supplemented from time to time.
"Loan" means the loan by the Issuer to the Borrower of the proceeds received from the sale of the Bonds.
"Loan Payment Date" means any date on which any of the Loan Payments are due and payable, whether at maturity, upon acceleration, call for redemption or prepayment, or otherwise.
"Loan Payments" means the amounts required to be paid by the Borrower in repayment of the Loan pursuant to the provisions of the Note and of Section 4.1 hereof and any additional amounts necessary to keep the Debt Service Reserve Fund Fully Funded or to reimburse the Issuer for any deposits made to keep the Debt Service Reserve Fund Fully Funded.
"Manufacturing Facility" means the Borrower's scrap steel recycling mill and related facilities, including the Project, located near the City of Butler, in DeKalb County, Indiana.
"Note" means the promissory note of the Borrower, dated as of even date with the Bonds, in the form attached hereto as Exhibit A and in the principal amount of $21,400,000 evidencing the obligation of the Borrower to make Loan Payments.
"Notice Address" means:
(a) As to the Issuer: Indiana Development Finance Authority One North Capitol, Suite 320 Indianapolis, Indiana 46204
Attention: Executive Director
(b) As to the Borrower: Steel Dynamics, Inc. 4500 County Road 59 Butler, Indiana 46721
Attention: Tracy Shellabarger Chief Financial Officer
(c) As to the Trustee: NBD Bank, N.A.
One Indiana Square, Suite 836
Indianapolis, Indiana 46266
Attention: Corporate Trust Department
(d) As to the Bank: National City Bank, Indiana 101 West Washington, Suite 200 E Indianapolis, Indiana 46255
Attention: Reagan Rick
(e) As to the Underwriter: McDonald & Company Securities, Inc. 800 Superior Avenue, Suite 2100 Cleveland, Ohio 44114-2603
Attention: David Stickler
or such additional or different address, notice of which is given under Section 8.2 hereof.
"Trustee" means the Trustee at the time acting as such under the Indenture, originally NBD Bank, N.A. as Trustee, and any successor Trustee as determined or designated under or pursuant to the Indenture.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to be held harmless and
indemnified under Section 5.3 hereof, to be reimbursed for attorney's fees and
expenses under Section 7.4 hereof, to sue for and collect payments due the
Issuer under the Note or the Loan Agreement under Section 5.8 in the manner
provided under Section 7.2(a) and to give or withhold consent to amendments,
changes, modifications, alterations and termination of this Agreement under
Section 8.5 hereof.
"Underwriter" means McDonald & Company Securities, Inc., as the original purchaser of the Bonds.
Section 1.3. Interpretation. Any reference herein to the Issuer or to any member or officer of the Issuer includes entities or officials succeeding to their respective functions, duties or responsibilities pursuant to or by operation of law or lawfully performing their respective functions.
Any reference to a section or provision of the Constitution of the State or the Act, or to a section, provision or chapter of the Indiana Code or to any statute of the United States of America, includes that section, provision, chapter or statute as amended, modified, revised, supplemented or superseded from time to time; provided, that no amendment, modification, revision, supplement or superseding section, provision, chapter or statute shall be applicable solely by reason of this provision if it constitutes in any way an impairment of the rights or obligations of the Issuer, the Holders, the Trustee, the Bank or the Borrower under this Agreement.
Unless the context indicates otherwise, words importing the singular number include the plural number, and vice versa; the terms "hereof", "hereby", "herein", "hereto", "hereunder"
and similar terms refer to this Agreement; and the term "hereafter" means after, and the term "heretofore" means before, the date of delivery of the Bonds. Words of any gender include the correlative words of the other genders, unless the sense indicates otherwise.
Section 1.4. Captions and Headings. The captions and headings in this Agreement are solely for convenience of reference and in no way define, limit or describe the scope or intent of any Articles, Sections, subsections, paragraphs, subparagraphs or clauses hereof.
(End of Article I)
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Representations, Warranties and Covenants of the Issuer. The Issuer represents and warrants that:
(a) It is a duly organized and validly existing body corporate and politic under the laws of the State:
(b) It has full legal right, power and authority pursuant to the Act to finance the Project through the issuance of the Bonds; has made the necessary findings of public purpose, has given any necessary notices and has taken all other steps and followed all procedures required by the Constitution and laws of the State (including the Act) in connection therewith; and has full legal right, power and authority to (i) enter into this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations and the Indenture, (ii) execute the Official Statement, (iii) issue, sell and deliver the Bonds, and (iv) carry out and consummate all other transactions contemplated by this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations and the Indenture.
(c) It has duly authorized (i) the execution, delivery and performance of its obligations under this Agreement, the Bonds, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations and the Indenture, and (ii) the execution of the Official Statement, and (iii) the taking of any and all such actions as may be required on the part of the Issuer to carry out, give effect to and consummate the transactions contemplated by such instruments.
(d) This Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations and the Indenture constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms: this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations, the Official Statement and the Indenture have been duly authorized and executed by the Issuer; and. when authenticated by the Trustee in accordance with the provisions of the Indenture, the Bonds will have been duly authorized, executed, issued and delivered and will constitute legal, valid and binding special obligations of the Issuer in conformity with the provisions of the Act and the Constitution of the State.
(e) There is no action, suit, proceeding, inquiry, or investigation at law or in equity or before or by any court, public board or body, pending or, to the best of the knowledge of the Issuer, threatened against the Issuer, nor to the best of the knowledge of the Issuer is there any basis therefor, which in any manner questions the validity of the Act, the powers of the Issuer referred to in paragraph (b) above or the validity of any proceedings taken by the Issuer in connection with the issuance of the Bonds or wherein
any unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by this Agreement or which, in any way, would adversely affect the validity or enforceability of the Bonds, this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Letter of Representations or the Indenture (or of any other instrument required or contemplated for use in consummating the transactions contemplated thereby and hereby).
(f) The execution and delivery by the Issuer of this Agreement, the Reimbursement Agreement, the Bonds, the Bond Purchase Agreement, the Letter of Representations, the Official Statement and the Indenture in compliance with the provisions of each of such instruments will not conflict with or constitute a breach of, or default under, any material commitment, agreement or other instrument to which the Issuer is a party or by which it is bound, or under any provision of the Act, the Constitution of the State or any existing law, rule, regulation, ordinance, judgment, order or decree to which the Issuer is subject.
(g) The Issuer will do or cause to be done all things necessary, so far as lawful, to preserve and keep in full force and effect its existence or to assure the assumption of its obligations under this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement, the Indenture, the Letter of Representations and the Bonds by any successor public body.
Section 2.2. Representations, Warranties and Covenants of the Borrower. The Borrower represents, warrants and covenants that:
(a) The Borrower is a corporation duly organized and validly existing under the laws of the State of Indiana, is duly qualified to conduct business in the State and has full corporate power and authority to execute, deliver and perform this Agreement, the Bond Purchase Agreement, the Reimbursement Agreement, the Letter of Representations and the Note and to enter into and carry out the transactions contemplated by those documents: that execution, delivery and performance do not, and will not, violate any provision of law applicable to the Borrower or its Articles of Incorporation or By-laws and do not, and will not, conflict with or result in a default under any agreement or instrument to which the Borrower is a party or by which the Borrower is bound. This Agreement, the Bond Purchase Agreement, the Reimbursement Agreement, the Letter of Representations and the Note, by proper corporate action, have been duly authorized, executed and delivered by the Borrower and are valid and binding obligations of the Borrower.
(b) The financing of the Project by the Issuer for the Borrower has constituted an inducement to the Borrower to locate the Manufacturing Facility in the State. The Manufacturing Facility will increase employment opportunities within the State of Indiana. The Manufacturing Facility will be operated and maintained in such manner as to conform in all material respects with all applicable zoning, planning, building, health,
environmental and other applicable governmental rules and regulations and as to be consistent with the Act.
(c) Except as previously disclosed in the Official Statement, no litigation at law or in equity nor any proceeding before any governmental agency or other tribunal involving the Borrower is pending or, to the knowledge of the Borrower, threatened, in which any liability of the Borrower is not adequately covered by insurance or in which any judgment or order would have a material and adverse effect upon the business or assets of the Borrower or would materially and adversely affect the operation of the Project, the validity of this Agreement, the Bond Purchase Agreement, the Reimbursement Agreement, the Letter of Representations and the Note or the performance of the Borrower's obligations thereunder or the transactions contemplated hereby.
(d) The Borrower has not made and will not make any changes to the Project or to the operation thereof which would affect the qualification of the Project under the Act.
(e) The Borrower has obtained or will obtain at the proper times all consents, approvals, authorizations and orders, of any governmental or regulatory authority that are required to be obtained by the Borrower as a condition precedent to the issuance of the Bonds, the execution and delivery of the Reimbursement Agreement, this Agreement or the Note and the performance by the Borrower of its obligations thereunder, and that are required for the operation of the Project.
(f) The Borrower has taken all necessary action required to make the Reimbursement Agreement, this Agreement and the Note the valid obligations of the Borrower which they purport to be; when executed and delivered by the parties thereto, the Reimbursement Agreement, this Agreement and the Note will constitute valid and binding agreements of the Borrower and will be enforceable against the Borrower in accordance with their respective terms subject to the provisions of bankruptcy and similar laws and to equitable principles.
(g) The Borrower is not in default in the payment of principal of, or interest on, any of the Borrower's indebtedness for borrowed money, or in default under any instrument under which, or subject to which, any indebtedness has been incurred, and no event has occurred and is continuing under the provisions of any agreement involving the Borrower that, with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder, which default would individually or in the aggregate have a material and adverse effect upon the business or assets of the Borrower or would materially and adversely affect the operation of the Project, the validity of this Agreement, the Bond Purchase Agreement, the Reimbursement Agreement, the Letter
of Representations and the Note or the performance of the Borrower's obligations thereunder or the transactions contemplated hereby.
(End of Article II)
ARTICLE III
ACQUISITION AND EQUIPPING OF THE PROJECT:
ISSUANCE OF THE BONDS
Section 3.1. Acquisition and Equipping of the Manufacturing Facility; Title. The Borrower agrees that it will acquire, construct and equip the Manufacturing Facility. To the extent applicable and available, any plans and specifications for any construction of the Project, including any and all supplements, amendments and additions (or deletions) thereto (or therefrom), shall be made available to the Issuer, the Trustee and the Bank on written request.
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. In order to provide funds to finance a portion of the cost of the Project, as provided in Section 4.1 hereof, the Issuer agrees that it will simultaneously with the execution hereof issue, sell and cause to be delivered to the purchasers thereof, the Bonds in the aggregate principal amount of $21,400,000 bearing interest, maturing and subject to prior redemption as set forth in the Indenture. The Issuer will thereupon lend the proceeds of the Bonds to the Borrower by causing the deposit of the proceeds of the Bonds as provided by the Indenture.
Section 3.3. Disbursements from the Project Fund. The Issuer authorizes and directs the Trustee, upon compliance with the Indenture, to disburse the moneys in the Project Fund to or on behalf of the Borrower for all advances and payments made with respect to any preliminary expenditures, subject to the provisions of Section 3.4 hereof, for the purposes set forth below, and for no other purposes:
(a) Payment or reimbursement to the Borrower of such amounts, if any, as shall be necessary to reimburse the Borrower in full for expenditures in connection with the preparation of plans and specifications for the Project (including any preliminary study or planning of the Project or any aspect thereof) and the acquisition, construction and equipping of the Project.
(b) Payment or reimbursement of any legal, financial and accounting fees and expenses, the established administrative fees and expenses of the Issuer, costs of the execution and filing of any instruments and the preparation of all other documents in connection therewith, and payment or reimbursement of all fees, costs and expenses for the preparation of this Agreement, the Reimbursement Agreement, the Letter of Credit, the Indenture, the Bond Purchase Agreement, the Official Statement and the Bonds, including, without limitation, any costs of issuing the Bonds.
(c) Payment or reimbursement for labor, services, materials and supplies used or furnished in the acquisition, construction and equipping of the Project, all as provided in the plans, specifications and work orders therefor, payment or reimbursement for the cost of the acquisition, construction and equipping of utility services or other facilities and the acquisition
and installation of all real and personal property deemed necessary in connection with the Project and payment or reimbursement for the miscellaneous capitalized expenditures incidental to any of the foregoing items.
(d) Payment or reimbursement of the fees, if any, for architectural, engineering, legal, investment banking and supervisory services with respect to the Project.
(e) To the extent not paid by a contractor for construction or installation with respect to any part of the Project, payment or reimbursement of the premiums on all insurance required to be taken out and maintained prior to the Completion Date, if any.
(f) Payment of interest on the Bonds, the taxes, assessments, and other charges, if any, that may become payable prior to the Completion Date with respect to the Project, or reimbursement thereof if paid by the Borrower.
(g) Payment or reimbursement of expenses incurred in seeking to enforce any remedy against any supplier, conveyor, grantor, contractor or subcontractor in respect of any default under a contract relating to the Project.
(h) Payment or reimbursement of any other costs permitted by the Act.
All moneys remaining in the Project Fund after the Completion Date and after payment or provision for payment of all other items provided for in the preceding subsections (a) to (h), inclusive, of this Section 3.3, shall at the direction of the Borrower be used in accordance with Section 3.4 hereof.
Each of the payments referred to in this Section 3.3 shall be made upon receipt by the Trustee of a written requisition (substantially in the form set forth in Exhibit B to the Indenture) signed by the Authorized Borrower Representative stating with respect to each payment to be made: (i) the requisition number, (ii) the name, address and taxpayer identification number of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Project Fund and has not been the basis of any previous withdrawal, (v) that the amount remaining in the Project Fund after the withdrawal in question is made, the reasonable estimate of investment income thereon, plus funds of the Borrower available for such purpose will, after payment of the amounts then requested, be sufficient to pay the cost of completing the Project, and (vi) in the case of subsection (h), stating that such costs are costs permitted to be paid under the Act.
Section 3.4. Establishment of Completion Date; Obligation of Borrower to Complete. The Completion Date shall be evidenced to the Trustee, the Issuer and the Bank by a certificate signed by the Authorized Borrower Representative, stating the Cost of the Project and stating that the acquisition and equipping of the Project has been completed substantially in accordance with the plans, specifications and work orders therefor and all labor, services, materials and
supplies used in such acquisition, renovation, expansion and equipping have been paid for, and all costs and expenses incurred in connection therewith (other than costs and expenses for which the Borrower has withheld payment) have been paid. If the Borrower withholds the payment of any such cost or expense of the Project, the certificate shall state the amount of such withholding and the reason therefor. Notwithstanding the foregoing, such certificate may state that it is given without prejudice to any rights against third parties which exist at the date of such certificate or which may subsequently come into being.
Within ten (10) days after the delivery by the Authorized Borrower
Representative of the certificate evidencing the Completion Date, the Trustee
shall retain in the Project Fund a sum equal to the amounts necessary for
payment of Costs of the Project not then due and payable or the liability for
which the Borrower is contesting as set forth in said certificate. Any amount
not so retained in the Project Fund for such costs, and all amounts so retained
but not subsequently used and for which notice of such failure of use has been
given by the Borrower to the Trustee, shall be segregated by the Trustee and
used by the Trustee, at the direction of the Authorized Borrower Representative,
(a) to redeem Bonds on the earliest redemption date permitted by the Indenture
for which no prepayment premium or penalty pertains, or, at the option of the
Borrower, at an earlier redemption date (provided that, in neither event shall
such amounts be used to pay interest or premium on the Bonds in connection with
such redemption), (b) to purchase Bonds on the open market prior to such
redemption date (provided that, if Bonds are purchased at an amount in excess of
the principal amount thereof, the Borrower shall pay such excess out of other
funds) for the purpose of cancellation, or (c) for any other purpose, provided
that the Trustee is furnished with an opinion of Bond Counsel to the effect that
such use is lawful under the Act. The Issuer agrees to cooperate with the
Trustee and take all required action necessary to redeem the Bonds or to
accomplish any other purpose contemplated by this Section 3.4.
In the event the moneys in the Project Fund available for payment of the
Cost of the Project should not be sufficient to pay the costs thereof in full,
the Borrower agrees to pay directly the costs of completing the Project as may
be in excess of the moneys available therefor in the Project Fund. The Issuer
does not make any warranty, either express or implied, that the moneys which
will be paid into the Project Fund and which, under the provisions of this
Agreement, will be available for payment of a portion of the Cost of the
Project, will be sufficient to pay all the costs which will be incurred in that
connection. The Borrower agrees that if after exhaustion of the moneys in the
Project Fund the Borrower should pay any portion of the Cost of the Project
pursuant to the provisions of this Section 3.4, they shall not be entitled to
any reimbursement therefor from the Issuer, from the Trustee or from the Bank,
nor shall they be entitled to any diminution of the amounts payable under
Section 4.2 hereof or under the Note.
Section 3.5. Investment of Fund Moneys. At the written or oral direction (promptly confirmed in writing) of the Authorized Borrower Representative and subject to Section 5.08 of the Indenture, any moneys held as part of the Bond Fund (except moneys held for purposes of
defeasing the Bonds pursuant to Article IX of the Indenture), the Project Fund and the Debt Service Reserve Fund shall be invested or reinvested by the Trustee in Eligible Investments.
(End of Article III)
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. Loan Repayment; Delivery of Note and Letter of Credit. Upon the terms and conditions of this Agreement, the Issuer will make the Loan to the Borrower. In consideration of and in repayment of the Loan, the Borrower shall make, as Loan Payments, payments sufficient in time and amount to pay when due all Bond Service Charges and any other payments described in the Note, all as more particularly provided in the Note. The Note shall be executed and delivered by the Borrower concurrently with the execution and delivery of this Agreement. All Loan Payments shall be paid to the Trustee in accordance with the terms of the Note for the account of the Issuer and shall be held and applied in accordance with the provisions of the Indenture and this Agreement. To the extent payments have been made with respect to Bond Service Charges pursuant to draws upon the Letter of Credit and the Borrower has reimbursed the Bank for such draws or has reimbursed the Issuer for payments made by the Issuer to the Bank under the Reimbursement Agreement, the Borrower shall receive a credit against its obligation to make Loan Payments under this Agreement and the Note.
On June 15, 1995, the Borrower shall deposit with the Trustee for deposit into the Bond Fund an amount equal to one-ninth (1/9) of the interest on the Bonds due on the first Interest Payment Date (February 15, 1996), and an amount equal to one-fifteenth (1/15) of the principal amount due on August 15, 1996. From July 15, 1995 to February 15, 1996, the Borrower shall deposit with the Trustee for deposit into the Bond Fund on the fifteenth day of each month an amount equal to one-ninth (1/9) of the interest due on the Bonds on February 15, 1996, and from July 15, 1995 to August 15, 1996, the Borrower shall deposit with the Trustee for deposit into the Bond Fund on the fifteenth day of each month an amount equal to one-fifteenth (1/15) of the principal due on the Bonds on August 15, 1996. After February 15, 1996, the Borrower shall deposit with the Trustee for deposit into the Bond Fund on the fifteenth day of each month an amount equal to one-sixth (1/6) of the interest on all Outstanding Bonds on the next succeeding Interest Payment Date. After August 15, 1996, the Borrower shall deposit with the Trustee for deposit into the Bond Fund on the fifteenth day of each month an amount equal to one-twelfth (1/12) of the principal amount due on the Bonds, whether at maturity or due to mandatory sinking fund redemption, on the next succeeding August 15. All such payments are subject to the credits against such payments as hereinafter described. In calculating the amount of the deposit to be made by the Borrower immediately preceding an Interest Payment Date, the Trustee shall take into account the then existing balance in the Bond Fund and any investment earnings anticipated to be released from the Debt Service Reserve Fund for deposit into the Bond Fund before or on such Interest Payment Date. The Borrower shall notify the Issuer and the Bank in writing prior to the date such deposits are due if the Borrower believes for any reason that it will not be able to make the monthly deposits when due.
Upon payment in full, in accordance with the Indenture, of the Bond Service Charges on the Bonds, whether at maturity or by redemption or otherwise, or upon provision for the
payment thereof having been made in accordance with the provisions of the Indenture, and upon payment in full of amounts owed by the Borrower to the Issuer or the Trustee under the Loan Agreement and the Note, (i) the Note shall be deemed fully paid, the obligations of the Borrower thereunder shall be terminated and the Note shall be surrendered by the Trustee to the Borrower, and shall be canceled by the Borrower, or (ii) an appropriate notation shall be endorsed thereon evidencing the date and amount of the principal payment or prepayment equal to the Bonds so paid, or with respect to which provision for payment has been made, and the Note shall be surrendered by the Trustee to the Borrower for cancellation if all Bonds shall have been paid (or provision made therefor) and canceled as aforesaid. Unless the Borrower is entitled to a credit under express terms of this Agreement or the Note, all payments on the Note shall be in the full amount required thereunder.
Except for such interest of the Borrower and the Bank as may hereafter arise pursuant to Section 5.10 or 5.11 of the Indenture, the Borrower and the Issuer each acknowledge that neither the Borrower nor the Issuer has any interest in the Bond Fund and any moneys deposited therein shall be in the custody of and held by the Trustee in trust for the benefit of the Holders and, to the extent of amounts due under the Reimbursement Agreement, the Bank.
Section 4.2. Additional Payments. The Borrower shall pay to the Issuer, as Additional Payments hereunder, any and all reasonable costs and expenses incurred or to be paid by the Issuer in connection with the issuance and delivery of the Bonds or otherwise related to actions taken by the Issuer under this Agreement, the Bond Purchase Agreement or the Indenture.
The Borrower shall pay to the Trustee its Ordinary and Extraordinary Fees and Expenses, reasonable fees, charges and expenses (including payment of reasonable fees, charges and expenses of its counsel or agents) for acting as such under the Indenture.
Any payments under this Section not paid to reimburse the Issuer when due shall bear interest at the Prime Rate plus two and one-half percent (2.5%) per annum commencing 15 days after the Trustee or the Issuer has notified the Borrower that such amount is due.
Section 4.3. Place of Payments. The Borrower shall make all Loan Payments directly to the Trustee at its principal corporate trust office. Additional Payments shall be made directly to the person or entity to whom or to which they are due.
Section 4.4. Obligations Unconditional. The obligations of the Borrower to make Loan Payments, Additional Payments and any payments required of the Borrower under Section 6.03 of the Indenture shall be absolute and unconditional, and the Borrower shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, set-off, recoupment or counterclaim which the Borrower may have or assert against the Issuer, the Trustee, any Paying Agent or Authenticating Agent, the Bank or any other Person; provided that the Borrower may contest or dispute the amount of any such obligation (other than Loan Payments) so long as such contest or dispute does not result in an Event of Default under the Indenture.
Section 4.5. Assignment of Agreement and Revenues. To secure the payment of Bond Service Charges, the Issuer shall assign to the Trustee, by the Indenture, all its right, title and interest in and to the Revenues, the Agreement and the Note (except for Unassigned Issuer's Rights). The Borrower hereby agrees and consents to that assignment.
Section 4.6. Letter of Credit. Simultaneously with the initial delivery of the Bonds pursuant to the Indenture and the Bond Purchase Agreement, the Borrower shall cause the Bank to issue and deliver the Letter of Credit to the Trustee. The Letter of Credit may be replaced by an Alternate Letter of Credit complying with the provisions of Section 5.12 of the Indenture. The Borrower shall take whatever action may be necessary to maintain the Letter of Credit or an Alternate Letter of Credit in full force and effect during the period required by the Indenture, including the payment to the Bank of all amounts due and payable under the Reimbursement Agreement.
(End of Article IV)
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. Right of Inspection. Subject to reasonable security and safety regulations and upon seven days' written notice, the Issuer, the Bank and the Trustee, and their respective agents, shall have the right during normal business hours to inspect the Project.
Section 5.2. Sale, Lease or Grant of Use by Borrower. Subject to the provisions of the Reimbursement Agreement, the other Loan Instruments, as defined therein, and any lease or other agreement to which the Borrower is a party or by which it is bound and with the written consent of the Issuer, which consent shall not be unreasonably withheld, the Borrower may sell, lease or grant the right to occupy and use the Project, in whole or in part, to others, provided that;
(a) No such sale, lease or grant shall impair materially the purposes of the Act to be accomplished by operation of the Project as herein provided.
(b) There shall be delivered to the Trustee and the Bank an opinion of Bond Counsel addressed to the Trustee and the Bank, in form and substance reasonably acceptable to the Trustee, to the effect that such sale, assignment or leasing shall not adversely affect the validity of the Bonds under the Act;
(c) The purchaser, assignee, lessee or transferee shall assume in writing all obligations of the Borrower under this Agreement, the Note and the Reimbursement Agreement or the Borrower maintains its ability to satisfy its obligations under this Agreement, the Note and the Reimbursement Agreement to the satisfaction of the Issuer; and
(d) There shall be delivered to the Trustee a copy of such document containing the prior written approval of the Bank.
Section 5.3. Indemnification. The Borrower releases the Issuer from, agrees that the Issuer shall not be liable for, and shall indemnify the Issuer against, all liabilities, claims, costs and expenses, including attorneys fees and expenses, imposed upon, incurred or asserted against the Issuer on account of; (a) any loss or damage to property or injury to or death of or loss by any person that may be occasioned by any cause whatsoever pertaining to the construction, maintenance, operation and use of the Project; (b) any breach or default on the part of the Borrower in the performance of any covenant or agreement of the Borrower under this Agreement, the Reimbursement Agreement, the Note or any related document, or arising from any act or failure to act by the Borrower, or any of the Borrower's agents, contractors, servants, employees or licensees; (c) the authorization, issuance, sale, trading, redemption or servicing of the Bonds, and the provision of any information or certification furnished in connection therewith concerning the Bonds, the Project or the Borrower including, without limitation, the
Official Statement (other than information excluded in Section 11 (c)(i) of the Bond Purchase Agreement) and information furnished by the Borrower for, and included in, or used as a basis for preparation of, any certifications, information statements or reports furnished by the Issuer; and (d) any claim, action or proceeding brought with respect to the matters set forth in (a), (b), or (c) above.
The Borrower agrees to indemnify the Trustee for, and to hold it harmless against, all liabilities, claims, costs and expenses incurred without negligence or willful misconduct on the part of the Trustee on account of any action taken or omitted to be taken by the Trustee in accordance with the terms of this Agreement, the Bonds, the Letter of Credit, the Note or the Indenture, or any action taken at the request of or with the consent of the Borrower, including the costs and expenses of the Trustee in defending itself against any such claim, action or proceeding brought in connection with the exercise or performance of any of its powers or duties under this Agreement, the Bonds, the Indenture, the Reimbursement Agreement, the Letter of Credit or the Note.
In case any action or proceeding is brought against the Issuer or the Trustee in respect of which indemnity may be sought hereunder, the party seeking indemnity promptly shall give notice of that action or proceeding to the Borrower, and the Borrower upon receipt of that notice shall have the obligation and the right to assume the defense of the action or proceeding; provided, that failure of a party to give that notice shall not relieve the Borrower from any of the Borrower's obligations under this Section unless that failure materially prejudices the defense of the action or proceeding by the Borrower. At the Borrower's expense, an indemnified party may employ separate counsel and participate in the defense. The Borrower shall not be liable for any settlement made without the Borrower's consent.
The indemnification set forth above is intended to and shall include the indemnification of all affected officials, directors, officers, agents and employees of the Issuer and the Trustee, respectively. That indemnification is intended to and shall be enforceable by the Issuer and the Trustee, respectively, to the full extent permitted by law.
Section 5.4. Assignment by Issuer. Except for the assignment of this Agreement to the Trustee, the Issuer shall not attempt to further assign, transfer or convey its interest in the Revenues, the Note or this Agreement or create any pledge or lien of any form or nature with respect to the Revenues or the payments hereunder.
Section 5.5. Borrower's Performance Under Indenture. The Borrower has examined the Indenture and approves the form and substance of, and agrees to be bound by, its terms. The Borrower, for the benefit of the Issuer and each Bondholder, shall do and perform all acts and things required or contemplated in the Indenture to be done or performed by the Borrower. The Borrower is a third party beneficiary of certain provisions of the Indenture, and Section 8.05 of the Indenture is hereby incorporated herein by reference.
Section 5.6. Maintenance of Project. The Borrower shall keep and maintain or make arrangements with others to maintain the Project in good order and condition and in rentable and tenantable state of repair, and will make or make arrangements with others to make, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen.
Section 5.7. Balance in the Debt Service Reserve Fund. At any time that the Debt Service Reserve Fund is less than Fully Funded and the Borrower has received notice of such deficiency from the Trustee pursuant to Section 5.06 of the Indenture, the Borrower shall deposit moneys into the Debt Service Reserve Fund as required under the Indenture so that it is Fully Funded.
Section 5.8. Reimbursement of Issuer for Deposits to Debt Service Reserve Fund or Payments Made Under the Reimbursement Agreement. The Borrower shall promptly reimburse the Issuer for any deposits made to the Debt Service Reserve Fund by the Issuer or the State in order to maintain the Debt Service Reserve Fund as Fully Funded or for any payments made by the Issuer or the State to the Bank under the Reimbursement Agreement. In addition, the Borrower shall pay the Issuer, interest on such deposit or payment from the date of the deposit or payment to the date of reimbursement at a rate equal to the highest interest rate on the Note plus two percent (2%).
Section 5.9. Acknowledgement of Prior Lien. The Issuer, and, by its acceptance of the assignment by the Issuer of this Agreement, the Trustee acknowledge that the Project and substantially all of the Manufacturing Facility are and will be subject to a prior lien in favor of certain lenders of the Borrower and that such lien, and the rights of such lenders with respect to the Project and the Manufacturing Facility in connection with such lien (both before and after any foreclosure or deed in lieu of foreclosure), shall not be subject to or affected by the terms and provisions of this Loan Agreement, the Indenture or any of the other documents delivered in connection herewith or therewith.
Section 5.10. Extension of Letter of Credit. Prior to the time that the Bonds are subject to optional redemption at 100% of the principal amount thereof pursuant to Section 4.01(c) of the Indenture, the Borrower agrees to request an extension of the Letter of Credit pursuant to Paragraph 8 thereof.
(End of Article V)
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Optional Redemption. Provided no Event of Default shall have occurred and be continuing, at any time and from time to time, the Borrower may deliver moneys to the Trustee in addition to Loan Payments or Additional Payments required to be made and direct the Trustee to use the moneys so delivered for the purpose of purchasing Bonds or of reimbursing the Bank for drawings on the Letter of Credit used to redeem Bonds called for optional redemption in accordance with and subject to the limitations set forth in the applicable provisions of the Indenture.
Section 6.2. Extraordinary Optional Redemption. (a) The Borrower shall have, subject to the conditions hereinafter imposed, the option to direct the redemption of the entire unpaid principal balance of the Bonds in accordance with the applicable provisions of the Indenture upon the occurrence of any of the following events:
(i) The Manufacturing Facility shall have been damaged or destroyed to such an extent that (A) it cannot reasonably be expected to be restored, within a period of six months, to the condition thereof immediately preceding such damage or destruction or (B) its normal use and operation is reasonably expected to be prevented for a period of six consecutive months;
(ii) Title to, or the temporary use of, all or a significant part of the Manufacturing Facility shall have been taken under the exercise of the power of eminent domain (A) to such extent that the Manufacturing Facility cannot reasonably be expected to be restored within a period of six months to a condition of usefulness comparable to that existing prior to the taking or (B) as a result of the taking, normal use and operation of the Manufacturing Facility is reasonably expected to be prevented for a period of six consecutive months;
(iii) As a result of any changes in the Constitution of the State, the constitution of the United States of America, or state or federal laws, or as a result of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Issuer, the Trustee or the Borrower in good faith, this Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed in this Agreement, or if unreasonable burdens or excessive liabilities shall have been imposed with respect to the Manufacturing Facility or the operation thereof, including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of this Agreement other than ad valorem taxes presently levied upon privately owned property used for the same general purpose as the Manufacturing Facility; or
(iv) Changes in the economic availability of raw materials, operating supplies, energy sources or supplies, or facilities (including, but not limited to, facilities in connection with the disposal of industrial wastes) necessary for the operation of the Manufacturing Facility shall have occurred or technological or other changes shall have occurred which the Borrower cannot reasonably overcome or control and which in the Borrower's reasonable judgment render the operation of the Project uneconomic.
The Borrower also shall have the option, in the event that title to or the temporary use of a portion of the Manufacturing Facility shall be taken under the exercise of the power of eminent domain, even if the taking is not of such nature as to permit the exercise of the redemption option upon an event specified in clause (ii) above, to direct the redemption, at a redemption price of 100% of the principal amount thereof prepaid, plus accrued interest to the redemption date, of that part of the principal balance of the Outstanding Bonds as may be payable from the proceeds received by the Borrower (after the payment of costs and expenses incurred in the collection thereof) in the eminent domain proceeding, provided that any such optional redemption shall be in a principal amount of $100,000 or any integral multiple thereof, and provided further that the Borrower shall furnish to the Issuer, the Bank and the Trustee a certificate of an Engineer stating that (A) the property comprising the part of the Manufacturing Facility taken is not essential to continued operations of the Project in the manner existing prior to that taking, (B) the Project has been restored to a condition substantially equivalent to that existing prior to the taking, or (C) other improvements have been acquired or made which are suitable for the continued operation of the Manufacturing Facility. Any proceeds remaining after redemption of the Bonds under this paragraph shall be deposited by the Trustee to the Bond Fund and applied to the then current mandatory staking fund requirement or to reimburse the Bank for draws on the Letter of Credit to satisfy such reimbursement.
To exercise any option under this Section, the Borrower within 90 days following the event authorizing the exercise of that option, or at any time during the continuation of the condition referred to in clause (iv) of the first paragraph of this Section, shall give notice to the Issuer and to the Trustee specifying the date of redemption, which date shall be not more than ninety days from the date that notice is mailed, and shall make arrangements satisfactory to the Trustee for the giving of the required notice of redemption.
The rights and options granted to the Borrower in this Section may be exercised whether or not the Borrower is in default hereunder; provided, that such default will not relieve the Borrower from performing those actions which are necessary to exercise any such right or option granted hereunder.
(b) At any time that the Borrower (i) is three months delinquent on payments under the Note, (ii) fails to maintain the Debt Service Reserve Fund under the Indenture as Fully Funded, after receipt of notice of such deficiency from the Trustee pursuant to Section 5.06 of the Indenture, (iii) is delinquent on payments under the Note on any Interest Payment Date; or (iv) fails to promptly reimburse the Issuer for any deposits to the Debt Service Reserve Fund,
the Issuer shall have the option, on or after August 15, 2005, to direct the redemption of the entire unpaid principal balance of the Bonds (in accordance with the applicable terms of the Indenture), after giving notice to the Borrower and to the Trustee specifying the date of redemption, which date shall be not more than ninety days from the date the notice is mailed and shall make arrangements with the Trustee for the giving of the required notice of redemption.
Section 6.3. Actions by Issuer. At the request of the Borrower or the Trustee, the Issuer shall take all steps required of it under the applicable provisions of the Indenture or the Bonds to effect the redemption of all or a portion of the Bonds pursuant to this Article VI.
Section 6.4. Required Deposits for Optional Redemption. Except with the prior written consent of the Bank, the Trustee shall not give notice of call to the Holders pursuant to the optional redemption provisions of Section 4.01 of the Indenture and Sections 6.1 and 6.2(a) hereof unless prior to the date by which the call notice is to be given there shall be on deposit with the Trustee Eligible Funds sufficient to redeem at the redemption price thereof, including interest accrued to the redemption date, all Bonds for which notice of redemption is to be given.
All amounts paid by the Borrower pursuant to this Article which are used to pay principal of, premium, if any, or interest on the Bonds, or to reimburse the Bank or the Issuer for payments made to the Bank as reimbursements for moneys drawn under the Letter of Credit and used for such purposes, shall constitute prepaid Loan Payments. No moneys drawn under the Letter of Credit shall be used to pay any portion of the premium on the Bonds.
Section 6.5. Mandatory Redemption of Bonds. If, as provided in the Bonds and the Indenture, the Bonds become subject to mandatory redemption for any reason the Borrower shall deliver or cause to be delivered to the Trustee, upon the date requested by the Trustee, moneys sufficient to pay in full the Bonds in accordance with the mandatory redemption provisions relating thereto set forth in the Indenture.
(End of Article VI)
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall be an Event of Default:
(a) The Borrower shall fail to observe and perform any agreement, term or condition contained in this Agreement other than as described in subparagraph (c) or (d) below, and the continuation of such failure for a period of 30 days after notice thereof shall have been given to the Borrower by the Issuer or the Trustee, or for such longer period as the Issuer and the Trustee may agree to in writing; provided, that if the failure is other than the payment of money and is of such nature that it can be corrected but not within the applicable period, that failure shall not constitute an Event of Default so long as the Borrower institutes curative action within the applicable period and diligently pursues that action to completion;
(b) The Borrower shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) have an order for relief entered in any case commenced by or against it under the federal bankruptcy laws, as now or hereafter in effect; (iii) commence a proceeding under any other federal or state bankruptcy, insolvency, reorganization or similar law, or have such a proceeding commenced against it and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for 90 days; (iv) make an assignment for the benefit of creditors; or (v) have a receiver or trustee appointed for it or for the whole or any substantial part of its property;
(c) The Borrower shall be three months delinquent in the required payment under the Note; and
(d) The Borrower shall be delinquent in payments under the Note on any Interest Payment Date.
Notwithstanding the foregoing, if, by reason of Force Majeure, the Borrower is unable to perform or observe any agreement, term or condition hereof which would give rise to an Event of Default under subsection (a) hereof, the Borrower shall not be deemed in default during the continuance of such inability. However, the Borrower shall promptly give notice to the Trustee and the Issuer of the existence of an event of Force Majeure and shall use its best efforts to remove the effects thereof; provided that the settlement of strikes or other industrial disturbances shall be entirely within the Borrower's discretion.
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes; lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the
United States of America or of the State or any of their departments, agencies, political subdivisions or officials, or any civil or military authority; insurrections; civil disturbances; riots; epidemics; landslides; lightning; earthquakes; fires; hurricanes; tornados; storms; droughts; floods; arrests; restraint of government and people; explosions; breakage, malfunction or accident to facilities, machinery, transmission pipes or canals; partial or entire failure of utilities; shortages of labor, materials, supplies or transportation; or
(ii) any cause, circumstance or event not reasonably within the control of the Borrower.
The declaration of an Event of Default under subsection (b) above, and the exercise of remedies upon any such declaration, shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding that declaration or exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings.
Section 7.2. Remedies on Default. (a) The Issuer may pursue the following remedies whenever there exists an Event of Default:
(i) The Issuer may declare all Loan Payments and the Note to be immediately due and payable;
(ii) The Issuer may have access to, inspect, examine and make copies of the books, records, accounts and financial data of the Borrower pertaining to the Project; and
(iii) The Issuer may pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Agreement or the Note or to enforce the performance and observance of any other obligation or agreement of the Borrower under those instruments.
Amounts collected by the Issuer pursuant to this paragraph shall be applied first to redeem the Bonds pursuant to Section 6.2(b) hereof or, if payment of the Bonds has been accelerated, pursuant to Section 7.03 of the Indenture. Any amounts collected in excess of the amount necessary to either redeem or accelerate the payment of the Bonds shall be retained by the Issuer.
(b) The Trustee may pursue the following remedies:
(i) If there is an Event of Default pursuant to Section 7.01(a) or
(b) of the Indenture, or an acceleration in the payment of the Bonds
pursuant to an Event of Default under Section 7.01(c) of the Indenture,
the Trustee shall declare all Loan Payments and the Note to be immediately
due and payable, and may pursue all remedies now or hereafter existing at
law or in equity to collect such amounts then due and payable under this
Agreement and the Note;
(ii) If the Borrower commits an Event of Default under Section 7.1(a) hereof, the Trustee may pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Agreement or the Note and to enforce the performance and observance of any other obligation or agreement of the Borrower under those instruments; or
(iii) If the Borrower commits an Event of Default under Section 7.1(a) hereof, the Trustee will be granted access to, inspect, examine and make copies of the books, records, accounts and financial data of the Borrower pertaining to the Project.
Subject to the rights of the Trustee to receive the payment of its costs and expenses incurred in connection with an acceleration in the payment of the Bonds, any amounts collected by the Trustee pursuant to this paragraph shall be applied first to the payment of the Bonds. Any amounts collected by the Trustee in excess of the amount necessary to pay the Bonds shall be paid to the Issuer.
(c) Notwithstanding the foregoing, the Issuer and the Trustee shall not be obligated to take any step which in their opinion will or might cause them to expend time or money or otherwise incur liability unless and until a satisfactory indemnity bond has been furnished to the Issuer and the Trustee at no cost or expense to the Issuer or the Trustee.
The provisions of this section are subject to the further limitation that the rescission by the Trustee of its declaration that all of the Bonds are immediately due and payable also shall constitute an annulment of any corresponding declaration made relating to the Loan Payments and the Note and a waiver and rescission of the consequences of that declaration and of the Event of Default with respect to which that declaration has been made, provided that no such waiver or rescission shall extend to or affect any subsequent or other default or impair any right consequent thereon.
Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer or the Trustee by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement, the Letter of Credit or the Note, or now or hereafter existing at law, in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair that right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than any notice required by law or for which express provision is made herein.
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. If an Event of Default should occur and the Issuer or the Trustee should incur Ordinary and Extraordinary Fees and Expenses, including attorneys' fees, in connection with the enforcement of this Agreement, the Letter of Credit or the Note or the collection of sums due thereunder, the Borrower shall
reimburse the Issuer and the Trustee, as applicable, for the Ordinary and Extraordinary Fees and Expenses so incurred upon demand.
Section 7.5. No Waiver. No failure by the Issuer or the Trustee to insist upon the strict performance by the Borrower of any provision hereof shall constitute a waiver of their right to strict performance and no express waiver shall be deemed to apply to any other existing or subsequent right to remedy the failure by the Borrower to observe or comply with any provision hereof.
Section 7.6. Remedies Subject to Bank's Direction. Except in the case of an Event of Default pursuant to Section 7.01(a), (b), (e) (f) or (g) of the Indenture, the Bank shall have the right to direct the remedies to be exercised by the Trustee, whether under Article VII of this Agreement or under Article VII of the Indenture. Whenever in the Indenture any action or omission to act by the Trustee or Holders is subject to the consent of the Bank or is to be directed by the Bank, the Bank agrees for the benefit of the Holders that it will act in good faith and will not unreasonably withhold its consent.
Section 7.7. Retained Rights of Issuer. Notwithstanding the provisions of the Indenture, this Agreement and the Note, the Issuer does hereby retain the non-exclusive right to enforce the payment of Loan Payments by the Borrower, which includes the right to enforce the obligation of the Borrower to maintain the Debt Service Reserve Fund as Fully Funded and the reimbursement obligations therefor, as set forth in the Indenture.
(End of Article VII)
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement. This Agreement shall be and remain in full force and effect from the date of initial delivery of the Bonds until such time as all of the Bonds shall have been fully paid (or provision made for such payment) pursuant to the Indenture and all other sums payable by the Borrower under this Agreement and the Note shall have been paid, except for obligations of the Borrower under Sections 3.4, 4.2 and 5.3 hereof, which shall survive any termination of this Agreement.
Section 8.2. Notices. All notices, certificates, requests or other communications hereunder shall be in writing and shall be deemed to be sufficiently given when mailed by first class mail, postage prepaid, and addressed to the appropriate Notice Address. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Issuer, the Borrower, the Bank, or the Trustee shall also he given to the others. The Borrower, the Issuer, the Bank and the Trustee, by notice given hereunder, may designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.
Section 8.3. Extent of Covenants of the Issuer: No Personal Liability. All covenants, obligations and agreements of the Issuer contained in this Agreement or the Indenture shall be effective to the extent authorized and permitted by applicable law. No such covenant, obligation or agreement shall be deemed to be a covenant, obligation or agreement of any present or future member, officer, agent or employee of the Issuer in other than his official capacity, and neither the members of the Board of Directors of the Issuer nor any official executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof or by reason of the covenants, obligations or agreements of the Issuer contained in this Agreement or in the Indenture.
Section 8.4. Binding Effect. This Agreement shall inure to the benefit of and shall be binding in accordance with its terms upon the Issuer, the Borrower and their respective successors and assigns; provided that this Agreement may not be assigned by the Borrower (except in connection with a sale, lease or grant of use pursuant to Section 5.2 hereof) and may not be assigned by the Issuer except to the Trustee pursuant to the Indenture or as otherwise may be necessary to enforce or secure payment of Bond Service Charges. This Agreement may be enforced only by the parties, their assignees and others who may, by law, stand in their respective places.
Section 8.5. Amendments and Supplements. Except as otherwise expressly provided in this Agreement, the Note or the Indenture, subsequent to the issuance of the Bonds and prior to all conditions provided for in the Indenture for release of the Indenture having been met, this Agreement or the Note may not be effectively amended, changed, modified, altered or terminated except in accordance with the applicable provisions of Article XI of the Indenture.
Section 8.6. Execution Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same instrument.
Section 8.7. Severability. If any provision of this Agreement, or any covenant, obligation or agreement contained herein, is determined by a court of competent jurisdiction to be invalid or unenforceable, that determination shall not affect any other provision, covenant, obligation or agreement, each of which shall be construed and enforced as if the invalid or unenforceable portion were not contained herein. That invalidity or unenforceability shall not affect any valid and enforceable application thereof, and each such provision, covenant, obligation or agreement shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.
Section 8.8. Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State and for all purposes shall be governed by and construed in accordance with the laws of the State.
(End of Article VIII)
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Agreement to be duly executed in their respective names, all as of the date first above written.
INDIANA DEVELOPMENT FINANCE
AUTHORITY
By: /s/ William H. King ----------------------------------- William H. King, Vice Chairman |
(SEAL)
Attest:
/s/ Thomas L. New - -------------------------------- Thomas L. New, Secretary-Manager |
STEEL DYNAMICS, INC.
By: /s/ Tracy Shellabarger -------------------------------- Vice President |
Exhibit 10.4
INDUSTRIAL GASES SUPPLY AGREEMENT
AGREEMENT, made as of 5 August 1994, between Air Products and Chemicals, Inc., a corporation organized and existing under the laws of the State of Delaware, ("Seller") and Steel Dynamics Incorporated, a corporation organized and existing under the laws of the State of Indiana, ("Buyer").
1. SALE AND PURCHASE
Seller hereby agrees to sell and Buyer hereby agrees to purchase Buyer's entire requirements (excluding cylinder gases) of oxygen, nitrogen, and argon ("Products"), for use at Buyer's facility in Butler, Indiana ("Designated Location").
2. TERM
(a) This Agreement shall be effective as of the date hereof. The Initial Term of this Agreement shall be thirteen (13) years from the first day of the month following the date the Equipment is installed and ready for operation ("Commencement Date"), not later than 1 December 1995, unless delayed by Force Majeure or failure of Buyer to fulfill its obligations listed in Paragraph 4, and this Agreement shall remain in force from year to year after the expiration of the Initial Term unless terminated as provided below. Said Initial Term together with any extension shall be referred to as the "Supply Period." Written notice of the Commencement Date shall be furnished to Buyer by Seller.
(b) Either party may terminate this Agreement as of the expiration of the Initial Term or the expiration of any anniversary date thereafter by giving not less than eighteen (16) months' prior written notice to the other party. Either party may terminate the portion of this Agreement dealing with the supply/purchase of argon five (5) years from the Commencement Date by giving not less than eighteen (16) months' prior written notice to the other party.
(c) If Buyer's oxygen volumes total less than 70,000,000 SCF in a month during years 2-13 of the Initial Term; then, at Seller's option, the Initial Term may be extended two (2) months for each occurrence. Seller shall provide Buyer with written notice of Seller's option to extend not later than sixty (60) days after the occurrence. In any event, the Initial Term plus any extensions thereof for reasons of low oxygen volumes shall not exceed fifteen (15) years in aggregate.
3. EQUIPMENT
(a) Seller will proceed with and perform, with reasonable promptness and diligence, all work necessary to fabricate and install production, backup storage, and vaporization equipment (the "Equipment") on a site ("Equipment Site") to be purchased by Seller from Buyer as provided in this Agreement. The Equipment Site shall be shown on a drawing to be prepared by Buyer promptly upon execution of this Agreement, and which shall be attached to and made a part of this Agreement as Exhibit A.
(b) Seller may, at Seller's expense, without affecting its obligations under this Agreement, remove any Equipment and replace it with other Equipment of a different size or type, or supply Products hereunder by pipeline from another producing source at a different location, and Buyer shall cooperate (said cooperation shall not be reasonably withheld) with Seller to effect any such change. Buyer's total cost pursuant to Paragraphs 4, 7, 8, 9, and 10 for the supply of Products after such a change shall in no event be greater than such costs would have been had the change not been made.
(c) It is understood and contemplated by the parties that the Equipment is designed to use air and water free of corrosive components and containing only normal contaminants, as more fully described in Exhibit B, and, therefore, if contaminants in the air (not beyond the reasonable control of Buyer) or water, or changes in the construction or operation of facilities in or about the Designated Location, justify the relocation, modification, or removal of any Equipment or the installation of additional Equipment. in the reasonable judgment of Seller. Seller shall at Buyer's expense (i) make such relocation, modification, or removal, and (ii) install such additional Equipment
* Material has been redacted pursuant to request for Confidential Treatment.
(d) Seller shall own, and shall operate, maintain and repair, the Equipment in accordance with Seller's standard practice at its expense except for damage to the Equipment directly caused by Buyer or third parties under the control of Buyer, which damage will be paid for by Buyer. The cost of any government-imposed modification in or addition to the Equipment, its operation, or maintenance shall be paid directly by Seller and a pro rata share of 8/27ths (0.296) of said costs shall be invoiced to Buyer as a separate item and paid by Buyer to Seller.
4 BUYER'S OBLIGATIONS
Buyer shall, without cost to Seller (except as noted below for the Equipment Site):
(a) As a condition precedent to Seller's obligations hereunder, sell to Seller the Equipment Site as shown on Exhibit A under terms and conditions, at a price (such price not to exceed $3,000/acre) to be agreed upon.
(b) Furnish the Equipment Site cleared, leveled, and well drained, and shall be free of subsurface and aboveground obstructions, with a soil bearing capacity of 3000 PSF minimum. Maximum settlement range at 2.5 feet below the finished grade shall be 1/2 inch for major foundations under full load conditions.
(c) Furnish the required, hydrant house, access road, lines and service for drainage, sewer, water, or gas including installation and connection to Equipment, in accordance with Exhibit A, and assistance in obtaining permits for the installation, protection, and operation of the Equipment.
(d) Install necessary facilities to transport Products from the Equipment to Buyer's points of use ("Distribution Lines").
5. SPECIFICATIONS
All Products delivered by Seller shall conform to the following
specifications
Oxygen Nitrogen Argon
------ -------- -----
Nitrogen: (less than) 200 ppm 99.9% (less than) 0.1%
Oxygen (greater than) 99.5% (less than) 20 ppm (less than) 200 ppm
Argon: (less than) 0.5% (less than)0.1% (greater than)99.9%
Pressure (+/- 10 psi) 165 psig 25 psig 150 psig
|
6. DELIVERY
(a) Products shall be delivered by Seller at the point of connection between the Equipment and the Distribution Line, as such point is depicted in Exhibit A.
(b) Title and risk of loss of Products shall pass to Buyer upon delivery to the point of connection.
7. PRODUCING FACILITIES AND QUANTITY LIMITATIONS
(a) Seller's specification, price, and supply obligations are predicated on furnishing Buyer's requirements of Products from the generating portion of Seller's Equipment.
(b) Seller shall supply and Buyer shall purchase Buyer's instantaneous requirements for oxygen up to 200,000 SCF per hour ("Oxygen Contract Rate"), and nitrogen up to 20,000 SCF per hour ("Nitrogen Contract Rate"), and argon. If Buyer has intermittent additional requirements in excess of said Oxygen or Nitrogen Contract Rates (collectively "Contract Rates") or continues to have requirements during Force Majeure Equipment outages (said additional or continual requirements referred to as "Supplemental Product"), Buyer will purchase from Seller and Seller will sell to Buyer such Supplemental Product or part thereof. when and if available for sale, from the Equipment or other facilities of Seller, in accordance with all relevant terms and conditions of this Agreement at the Supplemental Product Charge of ? per hundred SCF.
(c) The backup portion of the Equipment will contain nominal liquid oxygen and nitrogen storage capacity of 60,000 and 6,000 gallons respectively, and instantaneous vaporization capacity of 350,000 and 20,000 SCF per hour respectively for use with Supplemental Product. during normal operation.
(d) In the event Buyer has a long-term requirement in excess of the Contract Rates. Buyer and Seller shall negotiate, in good faith, the prices, terms, and conditions for an increase in the Contract Rates. Should Buyer and Seller be unable to reach agreement. Buyer must purchase the full Contract Rates hereunder prior to receiving any Products from another supplier or from Buyer's own facilities.
8. PRICE
Buyer shall pay Seller, during the Supply Period, a charge of *
per hundred SCF of oxygen and nitrogen (Oxygen-Nitrogen Product
Charge). Buyer shall pay Seller. during the Supply Period, a charge of
* per hundred SCF of argon (Argon Product Charge).
9. PRICE ADJUSTMENT
70% of the Oxygen-Nitrogen Product Charge in Paragraph 8 and 85% of the Supplemental Product Charge in Paragraph 7 and the Argon Product Charge in Paragraph 8 will be adjusted on the Commencement Date and annually thereafter by Seller according to the formulae shown below:
Adjusted Oxygen-Nitrogen Product Charge = * Adjusted Supplemental Product Charge = * Adjusted Argon Product Charge = * |
Where:
L1 = 119.2 (April 1994)
L2 = Value for the Employment Cost Index - Total Compensation as published by the Bureau of Labor Statistics at the time of adjustment.
E1 = 2.449 +ct per Kwh (April 1994)
E2 = Average price of electric power paid by Seller for the facility serving Buyer at the time of adjustment as documented by Seller to Buyer.
The most current indices (whether preliminary or final) available at the time of adjustment will be used. If any of these indices ceases to be available as presently constituted, the parties agree to substitute a suitable and reasonably comparable index.
10. TAXES
(a) Seller shall bear and pay all federal, state, and local taxes based upon or measured by its net income, and all franchise taxes based upon its corporate existence or its general corporate right to transact business.
(b) The prices as stated in Paragraphs 7, 8 and 9 do not include any taxes. charges, or fees other than as stated in 10(a) above. If any other taxes, charges, or fees howsoever denominated and howsoever measured (including but not limited to sales and use taxes and ad valorem taxes), are imposed on the Equipment, the Equipment Site, the inventory, or upon the construction, installation, operation. or maintenance of the Equipment, said taxes, charges, or fees shall be paid directly by Seller and a pro rata share of 8/27ths (0.296) of said taxes, charges or fees shall be invoiced to Buyer as a separate item and paid by Buyer to Seller. If Seller adds additional Equipment at the Equipment Site after the Commencement Date, then Buyer's pro rata share shall be adjusted accordingly and written notice of such an adjustment will be provided by Seller to Buyer.
(c) The prices as stated in Paragraphs 7, 8 and 9 do not include any taxes, charges, or fees other than as stated in 10(a) above. If any other taxes, charges, or fees howsoever denominated and howsoever measured (including but not limited to sales and use taxes and ad valorem taxes), are imposed upon or measured by the production, manufacture, storage, sale, transportation, delivery, use, or consumption of Products, said taxes, charges, or fees shall be paid directly by Seller and shall be invoiced to Buyer as a separate item and paid by Buyer to Seller.
(d) Seller has entered into an Incentive Agreement (Exhibit C) with DeKalb County (the "County") in order to induce the County to grant certain tax incentives to Seller. The County has agreed to provide tax incentives to Seller contingent on certain representations made by Seller regarding minimum capital investment, new jobs, and payroll associated with the Equipment. Whereas Buyer and the County are parties to a Memorandum of Understanding and Buyer receives direct benefit from the incentives granted to Seller by the County, Buyer agrees to indemnify Seller for any breach by Seller of the incentive Agreement and pay to the County, or other designated parties, any amounts which may be due as a result of such a breach if the breach occurs in the period 1 January 2011 through 31 December 2015.
11. INVOICING AND PAYMENT
(a) Seller may invoice Buyer at the beginning of each month for Products delivered in the previous month. Seller may, without affecting the Supply Period or any other provisions hereunder, invoice Buyer on the Commencement Date for the period the Equipment operated in the prior month. Invoices for other sums due hereunder shall be submitted monthly. All payments due Seller hereunder shall be made to Seller at the location indicated on the invoice, payable within twenty (20) days from date of invoice. In case of failure by Buyer to pay any invoice within said time period. a late payment charge shall be assessed against the unpaid portion of such invoice amount, at a rate equal to two points plus the prime rate charged for commercial loans to most preferred customers by the Chase Manhattan Bank, N.A. which is in effect on the date of issuance of the invoice.
(b) It is agreed the timely payment by Buyer of all amounts due and owing to Seller hereunder is an express condition to the continued performance by Seller of its obligations hereunder.
12. MEASUREMENT
(a) The unit of measurement for all purposes hereunder shall be one cubic foot of gas measured at a temperature of 70 degrees F, at a pressure of 14.7 psia and dry, herein referred to as "SCF" (standard cubic foot).
(b) Seller shall make readings, calibrations, and adjustments of Seller's Product meters as it deems necessary. Buyer may challenge the accuracy of said meters. For inaccuracies greater than 2%, billings shall be corrected at the rate of such inaccuracy for the period of inaccuracy known or agreed upon, or if the period of inaccuracy is unknown or not agreed upon, then for the month preceding initial determination of the inaccuracy. For inaccuracies of 2% or less, Buyer will pay for tests caused by Buyer's challenges. For inaccuracies greater than 2%, Seller will pay for tests caused by Buyer's challenges.
13. SELLER'S WARRANTY
(a) Seller warrants that Products delivered to Buyer shall conform to the specifications set forth in Paragraph 5 and that at the time of delivery Seller shall have good title and right to transfer the same and that the same shall be delivered free of encumbrances.
(b) THE WARRANTIES SET FORTH IN PARAGRAPH 13(a) ARE IN LIEU OF ALL OTHER WARRANTIES. EXPRESS OR IMPLIED, IN FACT OR BY LAW, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
14. LIMITATION OF LIABILITY
(a) Determination of the suitability of Products furnished hereunder for the use contemplated by Buyer is the sole responsibility of Buyer, and Seller shall have no responsibility in connection therewith.
(b) Buyer acknowledges that there are hazards associated with the use of Products, that it understands such hazards, and that it is the responsibility of Buyer to warn and protect its employees and others exposed to such hazards through Buyer's use of Products. Seller shall provide Buyer with copies of Material Safety Data Sheets ("MSDS") relating to Products for Buyer to make such warnings, and Buyer shall hold harmless, indemnify, and defend Seller from and against any liability incurred by Seller because such warnings were not made. Buyer assumes all risk and liability for loss, damages, or injury to persons or to property of Buyer or others arising out of the presence or use of Products or from the failure to make such warnings. Buyer shall have no obligations for inaccuracies or omissions in the MSDS.
(c) Buyer acknowledges that it can obtain and install devices to sample Products delivered to determine its compliance with specifications prior to use.
(d) Seller's sole liability and Buyer's sole and exclusive remedy for the non-delivery of Products or for the delivery of Products not conforming to specifications shall be limited to the purchase price of the quantity of Products not delivered or the purchase price of the non-specification Products delivered.
(e) Except in the case of a willful and wrongful act or omissi ion of Seller, Seller shall not be liable in contract or tort for any direct, indirect, special, incidental, or consequential damages, including by way of illustration and not of limitation, loss of use, loss of work in process, down time or loss of profits.
(f) Claims for non-delivery of Products or delivery of non-specification Products shall be void unless notification is given to Seller's operating personnel promptly upon discovery and confirmed in writing by Buyer within two (2) business days thereafter
15. FORCE MAJEURE
(a) Neither party hereto shall be considered in default in the performance of its obligations hereunder or be liable in damages or otherwise for any failure or delay in performance which is due to strike, lockout, concerted act of workers or other industrial disturbance; fire, explosion, flood, or other natural catastrophe; civil disturbance, riot, or armed conflict whether declared or undeclared; impairment or outage of equipment; curtailment, shortage, rationing, allocation, or failure of normal sources of supply of labor, materials, transportation, energy, or utilities; accident or Act of God; delay of subcontractor or vendor; sufferance of or voluntary compliance with act of government and government regulation (whether or not valid); embargo; or due to any other cause, whether or not foreseeable and whether similar or dissimilar to any of the causes or categories of causes described above and which is beyond the reasonable control of the party affected.
(b) Neither party hereto shall be required to make any concession or grant any demand or request to bring to an end any strike or other concerted act of workers.
(c) The party affected by an event described in Paragraph 15(a) shall, promptly upon learning of such event and ascertaining that it has affected or will affect such party's performance hereunder, give notice to the other party, stating the nature of the event, its anticipated duration and any action being taken to avoid or minimize its effect.
(d) Nothing contained in Paragraph 15(a) above shall relieve Buyer of its obligation to pay the amounts due under this Agreement.
16. GENERAL PROVISIONS
(a) No modification or waiver of this Agreement shall bind Seller unless in writing and signed and accepted by an executive officer of Seller. This instrument constitutes the entire agreement between the parties concerning the subject matter hereof. No terms and conditions in any purchase order or other document of Buyer issued or purported to be issued with respect to the sale of Products shall supplement or vary the terms hereof and all of such provisions are hereby objected to be Seller.
(b) Upon notice to the other party, any or all of Seller's or
Buyer's rights, title, and interest under this Agreement
(including without limitation any payments by Buyer hereunder)
may be assigned to any bank, trust company, insurance company,
financial institution, or other entity or groups thereof under
the terms of financing arrangements (but any such assignment
shall not relieve the assigning party of any its obligations
hereunder). This Agreement shall not otherwise be assignable
or transferable by either Buyer or Seller without the prior
written consent of the other. which consent will not be
unreasonably withheld, any attempted assignment or transfer
without such consent shall be void. All covenants and
provisions of this Agreement by and for the benefit of the
parties hereto shall bind and inure to the benefit of their
respective successors and assigns as permitted by the
provisions of this paragraph.
(c) Any notice or request given under this Agreement shall. if given to Seller. be addressed to:
Air Products and Chemicals. Inc. 7201 Hamilton Boulevard Allentown, PA 18195
Attention: Corporate Secretary
and if given to Buyer, be addressed to:
Steel Dynamics, Inc. 4500 Block - County Rd 59 Butler, IN 46214
Attention: Chief Financial Officer
(d) This Agreement shall be governed and construed in accordance with laws of the State of Indiana.
STEEL DYNAMICS INCORPORATED AIR PRODUCTS AND CHEMICALS, INC.
By: /s/ By: /s/ J. F. Strecansky
----------------------- ------------------------
J. F. Strecansky
Title: Vice President Title: Vice President
----------------------- ------------------------
Date: 8 - 29 - 94 Date: 6 September 1994
----------------------- ------------------------
|
Exhibit A
[COUNTY RECORDER'S MAP]
Exhibit B
AIR AND WATER STANDARDS
ALLOWABLE AIR FEED IMPURITIES
Exhibit C
INCENTIVE AGREEMENT
(Oxygen Plant)
WHEREAS, SDI and the Governments have entered into a Memorandum of
Understanding dated as of June 20, 1994 (the "MOU"), pursuant to which SDI has
agreed to construct the Project and the Governments have agreed to offer certain
incentives to SDI;
WHEREAS, certain processes integral to SDI's operation of the Project
may be owned and operated by entities other than SDI;
WHEREAS, Air Products and Chemicals, Inc. or an affiliate thereof (the "Company") desires to construct the Oxygen Plant in connection with the Project within the Area created by the commission;
WHEREAS, in order to induce the County to provide the incentives set forth herein, the Company has made the representations and warranties regarding capital investment, employment, and payroll set forth herein;
NOW, THEREFORE, the County and the Company hereby agree and represent as follows:
1. Capitalized terms used herein, including those used in the recitals above, shall have the meaning ascribed to such terms in the MOU, unless otherwise defined herein.
2. At the earliest opportunity legally permissible and upon timely receipt of the appropriate documentation, the County will grant to the Company, to the extent properly requested by the Company on the proper forms and within the required times provided by Indiana law, the maximum depreciable personal and real property tax abatement permitted by law on the investment in new personal property and real property to be undertaken by the Company within the Area.
3. The Company agrees that the (a) Oxygen Plant will be completed and
operational with a minimum capital investment of $25,000,000 by the.earlier of
(i) January 1, 1997, or (ii) the date of completion of the mini-mill portion of
the Project by SDI, and (b) by December 31, 1997, the Oxygen Plant will create
15 to 25 new jobs with an annual payroll of at least $500,000.
4. Subject to unforeseen economic conditions, the Company agrees that it will operate the Oxygen Plant in accordance with the minimum requirements set forth in paragraph 3 above for so long as the TIF Bonds issued by the Local Governments pursuant to the MOU remain outstanding and unredeemed.
5. In any year the Company fails to pay property taxes when first due, the Company agrees, upon the request of the County, and, if such property taxes remain unpaid within 60 days after first due, to make a payment in lieu of taxes to the County in the amount equal to the total real and depreciable personal property taxes abated in such year.
6. The foregoing representations and agreements are subject to the negotiation and delivery of the industrial gases supply agreement to be executed by the Company and SDI.
IN WITNESS HEREOF, the parties hereto have caused this agreement to be executed by the duly authorized officers as of the date shown below.
AIR PRODUCTS AND CHEMICALS, INC. COUNTY OF DEKALB, INDIANA
By: /s/ James F. Strecansky By: Board of Commissioners
---------------------------- of DeKalb County, Indiana
Printed: James F. Strecansky
------------------------
Title: Vice President /s/
------------------------- --------------------------------
President
Date: 29 June 1994
-------------------------- --------------------------------
--------------------------------
|
By: County Council of DeKalb County, Indiana
Name: /s/
-------------------------
Title: President of County
Council
Date: June 28, 1994
-------------------------
|
Exhibit 10.6
GAS SERVICES AGREEMENT (NIFL)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and between Northern Indiana Fuel & Light Company, Inc. ("NIFL") and Steel Dynamics, Inc. ("SDI"), both Indiana corporations, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near Butler, Indiana ("SDI Facility") and needs natural gas service in connection with that facility, which NIFL is able to provide; and
WHEREAS, the parties desire to expand industry and create additional jobs in NIFL's service territory, and the SDI Facility represents an opportunity to do so;
NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter set forth, the parties agree that;
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month following the month in which the Indiana Utility Regulatory Commission ("IURC") approves the NIFL economic development interruptible gas transportation rate schedule attached hereto as Exhibit A ("NIFL Rate") and shall terminate on December 31, 2000 ("Term"). NIFL shall be ready to serve SDI's Facility by mid-March, 1995. At the end of the Term, it shall be extended unless a party hereto gives written notice to the other party that the Agreement will not be renewed, which notice must be provided at least six (6) months prior to the end of the Term
and any extension thereof. If such notice is not provided at least six (6) months prior to the end of the Term, the Term shall be extended until the last day of the month which is at least six (6) months after the provision of written notice by either party to the other party that this Agreement will be terminated.
NIFL shall promptly submit the NIFL Rate for approval by the IURC, which rate shall, by its terms, be coterminous with this Agreement. If the IURC does not approve the NIFL Rate, as submitted, this Agreement, shall be terminable by either SDI or NIFL, upon thirty (30) days written notice to the other party. A failure to timely terminate this Agreement by either party shall result in this Agreement remaining in full force and effect.
ARTICLE II
NATURAL GAS SERVICE
NIFL shall furnish, and SDI shall purchase, interruptible gas transportation service for the SDI Facility on the terms and conditions hereinafter described (all such services herein referred to collectively as "Natural Gas Service"). Such transportation service will be interruptible transportation of SDI's gas from NIFL's interconnection with Crossroads Pipeline Company near Butler, Indiana ("NIFL Connection") to SDI's on-site regulating station. On and after January 1, 1996, SDI's minimum average volume of Natural Gas Service at the SDI Facility shall be one thousand five hundred dekatherms per day (1,500 Dkt/d). Prior to that date SDI shall endeavor to meet such minimum, but
shall not be required to do so, because of start-up conditions. Except (i) in those instances when energy service other than natural gas is required during periods of curtailment," as provided in Article IV of this Agreement, or (ii) when gas supplies to SDI are interrupted due to any condition or occurrence beyond SDI's control, SDI shall not bypass the NIFL system by means of a direct or indirect connection with any other entity or supplier of natural gas service or supersede or diminish NIFL as the provider of gas transportation service to the SDI Facility through the use of an energy service or services other than natural gas.
ARTICLE III
RATES AND CHARGES FOR GAS SERVICE
1. For the Natural Gas Service rendered during the first five (5) years of the Term, SDI shall pay NIFL or its designated representative hereinafter ("NIFL") a service fee in accordance with NIFL Rate No. 9T for all quantities of SDI's gas delivered to the SDI Facility.
2. Penalties and Charges Relating to Interstate Pipeline and other Suppliers. To the extent that SDI actions or inaction cause NIFL to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, SDI shall reimburse NIFL for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges. To the extent that
actions or inaction of NIFL cause SDI to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, NIFL shall reimburse SDI for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges.
ARTICLE IV
CURTAILMENT
In the event of a gas supply or operational curtailment on the NIFL system which affects NIFL's ability to provide Natural Gas Service to the SDI Facility, its receipt of such service shall be subject to curtailment before the curtailment of NIFL customers receiving firm sales service.
ARTICLE V
BILLING
NIFL will cause to be provided to SDI, or its designated representative ("SDI"), on or before the seventh (7th) day of every calendar month, by facsimile transmission, followed by the mailing of a copy, a detailed invoice for all services rendered under this Agreement. Each month SDI shall issue and send to NIFL payment of these invoices on SDI's "25th of the month check run" for the prior month's service. In the absence of written notice otherwise, these invoices and payments shall be sent to:
INVOICES PAYMENTS -------- -------- SDI NIFL C/O Accounts Payable C/O H.P. Conrad 4500 County Road 59 P.O. Box 526 Butler, Indiana 46721 Auburn, Indiana 46706 |
Interest on delinquent and unpaid amounts shall accrue at the published prime commercial lending rate established from time to time by National City Bank, Indiana, or its successor ("Prime Rate"), and is payable from the date due until the date upon which payment is made. Interest on any overpaid amounts shall accrue at the Prime Rate and is payable from the date paid by SDI until the date repaid by NIFL.
In the event SDI fails to make timely and full payment of any invoice rendered by NIFL, and except as provided in the next paragraph, NIFL may terminate or suspend the provision of further Natural Gas Service to the SDI Facility. Such suspension or termination shall be without prejudice to any other rights any party may have with respect to its provision of Natural Gas Service to SDI. Such termination or suspension may be undertaken only if SDI has been given ten (10) days written notice, via telefax or hand delivery, of the intent by NIFL to terminate or suspend the provision of Natural Gas Service.
Notwithstanding the foregoing paragraph, in the event SDI wishes to contest a portion of a billed amount, SDI shall pay the portion not contested and interest shall accrue at the rate specified in this ARTICLE on the unpaid portion while resolution of contested amounts is pending. However, the provisions of the
preceding sentence shall not be applicable where SDI has failed to make timely payment of an invoice and has failed to provide adequate assurances, including advance payments if requested, of SDI's continued solvency.
Upon providing NIFL with reasonable prior notification, during regular business hours and on regular business days, SDI, or its agent, shall have the right to examine relevant books, records, contracts and charts of NIFL to the extent reasonably necessary to verify the accuracy of any invoice, statement, test, chart, billing or computation made under or pursuant to any of the provisions of this Agreement.
ARTICLE VI
NOTICES
Except for matters pertaining to billings provided for in ARTICLE V of this Agreement, all notices and other communications shall be provided to the following:
SDI NIFL --- ---- Tracy Shellabarger H.P. Conrad Vice President P.O. Box 526 4500 County Road 59 Auburn, IN 46706 Butler, Indiana 46721 |
A party may change the addresses stated above, as well as the recipient of notices, by providing written notification of that change to the other party.
ARTICLE VII
FORCE MAJEURE
No party hereto shall be liable to the other for any act, omission or circumstance resulting from events beyond their reasonable control. Each party will use reasonable efforts and diligence to remove the cause of a force majeure condition and resume delivery or utilization of Natural Gas Service previously suspended. Natural Gas Service withheld from SDI during a force majeure condition will recommence upon the availability of such service and the end of such circumstances. No force majeure condition will relieve SDI from paying any invoice relating to Natural Gas Service previously rendered.
The term force Majeure as used herein shall mean any act, omission or circumstance occasioned by or as a consequence of any acts of God, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, vandalism, arrests and restraints of rulers and peoples, any strike or work stoppage, civil disturbances, explosions, breakage or accident to machinery or lines of pipe, telecommunications failures or malfunctions, or computer failures or malfunctions, which frustrates the intent of the parties hereto and which has been resisted in good faith by all reasonable legal means, and any other cause, whether of the kind enumerated or otherwise, not reasonably within the control of the party claiming suspension
and which by the exercise of due diligence such party is unable to prevent or overcome. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any event of force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is deemed to be inadvisable or inappropriate in the discretion of the party having the difficulty.
ARTICLE VIII
ASSIGNMENT
The benefits and obligations of this Agreement shall inure to and be binding upon successors and assigns, as the cause may be, of the original parties hereto, respectively, for the full term thereof; provided that no assignment thereof shall be made by either party without first obtaining the other party's prior written consent, which consent will not be unreasonably withheld. Unless expressly agreed to, no partial assignment of the Agreement can be made.
ARTICLE IX
APPLICABLE LAW AND REGULATION
This Agreement shall be governed by the laws of the State of Indiana. Natural Gas Service under this Agreement shall be subject to the applicable rules, regulations, orders and
standards of service for gas public utilities of the IURC and the Federal Energy Regulatory Commission, as the same may be in effect from time to time, and all applicable state and federal laws, administrative orders, and regulations, including 170 IAC 5-1-22, as the same may be in effect from time.
ARTICLE X
LIMITATION OF REMEDIES AND ACTIONS
Any claim pertaining to this Agreement must be commenced and litigated or otherwise resolved in Indiana. An action for breach of this Agreement must be commenced within one (1) year after the cause of action has accrued. The exclusive remedy for wrongful nondelivery of gas by NIFL, in the absence of NIFL's wilful misconduct or gross negligence, is, at NIFL's election, (a) actual damages caused by the nondelivery which are economic and incidental and subject to establishment by clear and convincing evidence, or (b) the price value of the gas which was not delivered, or (c) the cost for NIFL to deliver a replacement quantity of such gas. No consequential damages arising from a breach of this Agreement shall be recoverable, in the absence of NIFL's wilful misconduct or gross negligence. The parties agree this exclusion of consequential damages is not unconscionable.
ARTICLE XI
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless NIFL from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of NIFL arising out of and in the course of their employment, for injuries to person or property or for injury to or death of any person or persons due to the sole negligence of NIFL in the event that such lose, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of SDI, or its employees or agents, occurring in the performance of this Agreement.
NIFL agrees to indemnify, defend and hold harmless SDI from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of SDI arising out of and in the course of their employment with SDI, for injuries to person or property occasioned by the provision of Natural Gas Service, except for any liability for loss or damage to property or for injury or death of any person or persons due to SDI's sole negligence, in the event that such loss, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of NIFL, or its employees or agents, occurring in the performance of this Agreement.
In the event any loss, damage, expense, or claim occurs for which SDI and NIFL are ultimately each found to have been at fault in proximately causing the loss, damage, expense, or claim, NIFL and SDI shall both bear their own separate costs of defense and the proportionate share of such liability.
This ARTICLE is severable from the other portions of this Agreement. A breach of this ARTICLE is not a breach of the entire Agreement. If this ARTICLE is found to be unenforceable, the remaining portions of this Agreement shall remain in force and effect.
ARTICLE XII
FAILURE TO PERFORM
Except as otherwise provided for herein, if any party fails to perform any of the covenants or obligations imposed upon it under this Agreement (except where such failure is excused under other provisions hereof), then in such event a party not in default may, at its option (without waiving any other remedy for breach thereof), notify in writing the party in default, stating specifically the nature of the default and declaring it to be the intention of the party giving such notice to cancel the Agreement if the default is not cured as hereinafter provided. Cancellation under this ARTICLE shall require a substantial and material default. The party in default will have thirty (30) days after receipt of the aforesaid notice is which to remedy such default as stated in the notice, and if within said
thirty (30) days the party in default does so remove said cause or causes and fully indemnifies the party not in default for any and all consequences resulting from that default, then this Agreement shall remain in force and effect.
ARTICLE XIII
WARRANTY OF TITLE
Each party warrants to the other party that it will, at the time and place of delivery of gas asserted to be owned by it under this Agreement, have good title or good right to all volumes delivered on its behalf and further warrants for itself, its successors and assigns that such gas shall be free and clear of all liens, encumbrances, and claims of those not parties hereto; and that it will indemnify and save the other party harmless for all suits, actions, debts, accounts, damages, costs, losses or expenses (including reasonable attorney's fees) arising from or out of the adverse claims arising from or out of the same. This paragraph shall not apply to gas redelivered by NIFL to SDI, where NIFL or an affiliate took title as agent for or otherwise on behalf of SDI.
ARTICLE XIV
DISCLAIMER OF WARRANTIES
Except as provided in ARTICLE XIII, NIFL disclaims and excludes all warranties implied and express, including all warranties of fitness for a particular purpose and all warranties
of merchantability. SDI agrees its attention has been drawn to this exclusion of warranties.
ARTICLE XV
SEVERABILITY
If any provision hereof shall be found to be inoperative or in violation of any law or regulation, only that provision shall be deleted from the Agreement, and the remainder of the Agreement shall not be affected.
ARTICLE XVI
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of NIFL and SDI with respect to the subject matter hereof and supersedes any and all prior oral and written agreements. No modification or amendment of this Agreement is binding on the parties unless in writing and executed by duly authorized representatives of the parties.
ARTICLE XVII
WAIVER
No provision of this Agreement is waived and no breach consented to, unless the waiver or consent is in writing and signed by the waiving or consenting party. A waiver of or consent to a provision of breach is not a waiver of, consent to or excuse for a different or subsequent breach. Failure to enforce an obligation hereunder is not a waiver.
ARTICLE XVIII
AUTHORITY
Each party has full power and authority to enter into and perform this Agreement, and the person signing this Agreement on behalf of each has been properly authorized and empowered to enter into this Agreement. Each party further acknowledges that it has read this Agreement, understands it and agrees to be bound by it.
This Agreement has been executed in duplicate by the duly authorized representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/
----------------------- ---------------------------
NORTHERN INDIANA FUEL AND LIGHT
COMPANY
Date: 4/5/95 By: /s/ H.P. Conrad
----------------------- ---------------------------
H.P. Conrad
President
|
Exhibit A
NORTHERN INDIANA FUEL & LIGHT CO., INC. Sheet No. __________
ECONOMIC DEVELOPMENT INTERRUPTIBLE GAS TRANSPORTATION RATE
AVAILABILITY Rate No._ 9T
Available to all customers who contract with the Company for gas transportation service for a minimum of five (5) years and, together with any other customers located on the site described below, for a minimum average aggregate volume of not less than 15,000 therm's per day. Customers on this rate must
1. have an alternate capability;
2. be located on the Company's transmission main connecting to, and running south from, the main east-west pipeline of Crossroads Pipeline Company ("Crossroads Pipeline") to a tract bordered on the north by County Road 42, on the east by County Road 59, on the west by County Road 55 and on the south by the Sol Shank Ditch;
3. have made arrangements by which volumes of gas owned by it can be delivered into the Company's transmission system or the Crossroads Pipeline; and
4. require no additional facilities from the Company for the Company to provide the transportation service to the customer.
CHARACTER OF SERVICE
Gas service purchased hereunder shall be interruptible and shall be subject to complete or partial curtailment, at the option of the Company and upon the giving of notice to the customer.
RATE
Facilities charge $200.00 per meter
Usage charge $0.0425 Dth
MINIMUM CHARGE
The minimum monthly charge shall be the facilities charge.
TERMS OF PAYMENT
All bills on this rate schedule shall be rendered and due monthly.
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service Supplied under this rate schedule shall be governed by the Rules and Regulations of the Company, as approved by the Indiana Utility Regulatory Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
Exhibit 10.7
GAS SERVICES AGREEMENT (NITCO)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and between Northern Indiana Trading Co. ("NITCO"), an Indiana corporation, and Steel Dynamics, Inc. ("SDI"), an Indiana corporation, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near Butler, Indiana ("SDI Facility") and needs natural gas service in connection with that facility, which Northern Indiana Fuel & Light Company, Inc. ("NIFL") , Crossroads Pipeline Company ("Crossroads") and NITCO, all affiliates of NIPSCO Industries, Inc., an Indiana corporation, collectively are able to provide; and
WHEREAS, the parties desire to expand industry and create additional jobs in NIFL's service territory, and the SDI Facility represents an opportunity to do so;
NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter set forth, the parties agree that:
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month following the month in which the Indiana Utility Regulatory Commission ("IURC") approves the NIFL economic development interruptible gas transportation rate schedule attached hereto as Exhibit A ("NIFL Rate") and shall terminate on December 31, 2000 ("Term"). At the end of the Term, it shall be extended unless a party hereto gives written notice to the other
party that the Agreement will not be renewed, which notice must be provided at least six (6) months prior to the end of the Term and any extension thereof. If such notice is not provided at least six (6) months prior to the end of the Term, the Term shall be extended until the last day of the month which is at least six (6) months after the provision of written notice by either party to the other parties that this Agreement will be terminated.
If the IURC does not approve the NIFL Rate, as submitted. this Agreement, shall be terminable by either SDI or NITCO, upon thirty (30) days written notice to the other party. A failure to timely terminate this Agreement by either party shall result in this Agreement remaining in full force and effect.
ARTICLE II
NATURAL GAS SERVICE
NITCO will provide services ancillary to interruptible gas transportation service to be provided by Crossroads and NIFL, under separate agreements with SDI ("Crossroads and NIFL Agreements") for the SDI Facility, on the terms and conditions hereinafter described (all such services herein referred to collectively as "Natural Gas Service"). Such transportation service provided by Crossroads will be interruptible transportation of SDI's gas from the point at which it is delivered to the Crossroads system to the Crossroads
interconnection with the NIFL system near Butler, Indiana ("NIFL Connection"). The transportation service provided by NIFL will be from the NIFL Connection to SDI's on-site regulating station. Such transportation service shall be in accordance with the nominating procedures described in Exhibit B hereto. NITCO shall also make arrangements for balancing service in connection with SDI gas, as described in Exhibit B. On and after January 1, 1996, SDI's minimum average volume of Natural Gas Service at the SDI Facility shall be one thousand five hundred dekatherms per day (1,500 Dkt/d). Prior to that date SDI shall endeavor to meet such minimum, but shall not be required to do so, because of start-up conditions. At SDI's request, NITCO will act as SDI's agent for the purchase of natural gas to be owned by SDI and transported to the SDI Facility.
ARTICLE III
RATES AND CHARGES FOR GAS SERVICE
1. For the Natural Gas Service rendered during the first five (5) years of the Term, SDI shall pay to NITCO a monthly service fee of twenty cents per dekatherm ($.20/Dth) less any amounts paid directly by SDI under the Crossroads and NIFL Agreements for the billing month, on a per dekatherm basis, for all quantities of SDI's gas delivered by NIFL to the SDI Facility. Such fee shall be in full payment for all service rendered by NITCO except for the charges set forth in Exhibit B hereto.
2. Penalties and Charges Relating to Interstate Pipeline and Other Suppliers. To the extent that SDI actions or inaction cause NITCO to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, SDI shall reimburse NITCO for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges. To the extent that actions or inaction of NITCO cause SDI to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, NITCO shall reimburse SDI for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges.
ARTICLE IV
BILLING
NITCO will provide to SDI, on or before the seventh (7th) day of every calendar month, by facsimile transmission, followed by the mailing of a copy, a detailed invoice for all services rendered under this Agreement. Each month SDI shall issue and send to NITCO payment of these invoices on SDI's "25th of the month check run" for the prior month's service. In the absence of written notice otherwise, these invoices and payments shall be sent to:
INVOICES PAYMENTS
SDI NITCO
C/O Accounts Payable C/O H.P. Conrad
4500 County Road 59 P.O. Box 526
Butler, Indiana 46721 Auburn, Indiana 46706
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Interest on delinquent and unpaid amounts shall accrue at the published prime commercial lending rate established from time to time by National City Bank, Indiana, or its successor ("Prime Rate"), and is payable from the date due until the date upon which payment is made. Interest on any overpaid amounts shall accrue at the Prime Rate and is payable from the date paid by SDI until the date repaid by NITCO.
In the event SDI fails to make timely and full payment of any invoice rendered by NITCO, and except as provided in the next paragraph, NITCO may terminate or suspend the provision of further Natural Gas Service. Such suspension or termination shall be without prejudice to any other rights any party may have with respect to its provision of Natural Gas Service to SDI. Such termination or suspension may be undertaken only if SDI has been given ten (10) days written notice, via telefax or hand delivery, of the intent by NITCO to terminate or suspend the provision of Natural Gas Service.
Notwithstanding the foregoing paragraph, in the event SDI wishes to contest a portion of a billed amount, SDI shall pay the portion not contested and interest shall accrue at the rate specified in this ARTICLE on the unpaid portion while resolution of contested amounts is pending. However, the provisions of the
preceding sentence shall not be applicable where SDI has failed to make timely payment of an invoice and has failed to provide adequate assurances, including advance payments if requested, of SDI's continued solvency.
Upon providing NITCO with reasonable prior notification, during regular business hours and on regular business days, SDI, or its agent, shall have the right to examine relevant books, records, contracts and charts of NITCO to the extent reasonably necessary to verify the accuracy of any invoice, statement, test, chart, billing or computation made under or pursuant to any of the provisions of this Agreement.
ARTICLE V
NOTICES
Except for matters pertaining to billings provided for in ARTICLE V of this Agreement, all notices and other communications shall be provided to the following:
SDI NITCO
Tracy Shellabarger H.P. Conrad
Vice President P.O. Box 526
4500 County Road 59 Auburn, IN 46706
Butler, Indiana 46721
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A party may change the addresses stated above, as well as the recipient of notices, by providing written notification of that change to the other party.
ARTICLE VI
FORCE MAJEURE
No party hereto shall be liable to the other for any act, omission or circumstance resulting from events beyond their reasonable control. Each party will use reasonable efforts and diligence to remove the cause of a force majeure condition and resume delivery or utilization of Natural Gas Service previously suspended. Natural Gas Service withheld from SDI during a force majeure condition will recommence upon the availability of such service and the end of such circumstances. No force majeure condition will relieve SDI from paying any invoice relating to Natural Gas Service previously rendered.
The term force majeure as used herein shall mean any act, omission or circumstance occasioned by or as a consequence of any acts of God, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, vandalism, arrests and restraints of rulers and peoples, any strike or work stoppage, civil disturbances, explosions, breakage or accident to machinery or lines of pipe, telecommunications failures or malfunctions, or computer failures or malfunctions, which frustrates the intent of the parties hereto and which has been resisted in good faith by all reasonable legal means, and any other cause, whether of the kind enumerated or otherwise, not reasonably within the control of the party claiming suspension
and which by the exercise of due diligence such party is unable to prevent or overcome. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any event of force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is deemed to be inadvisable or inappropriate in the discretion of the party having the difficulty.
ARTICLE VII
ASSIGNMENT
The benefits and obligations of this Agreement shall inure to and be binding upon successors and assigns, as the cause may be, of the original parties hereto, respectively, for the full term thereof; provided that no assignment thereof shall be made by either party without first obtaining the other party's prior written consent, which consent will not be unreasonably withheld. Unless expressly agreed to, no partial assignment of the Agreement can be made.
ARTICLE VIII
APPLICABLE LAW AND REGULATION
This Agreement shall be governed by the laws of the State of Indiana. Natural Gas Service under this Agreement shall be subject to the applicable rules, regulations, orders and
standards of service for gas public utilities of the IURC and the Federal Energy Regulatory Commission, as the same may be in effect from time to time, and all applicable state and federal laws, administrative orders, and regulations, including 170 IAC 5-1-22, as the same may be in effect from time.
ARTICLE IX
LIMITATION OF REMEDIES AND ACTIONS
Any claim pertaining to this Agreement must be commenced and litigated or otherwise resolved in Indiana. An action for breach of this Agreement must be commenced within one (1) year after the cause of action has accrued. The exclusive remedy for wrongful nondelivery of gas by NITCO, in the absence of NITCO's wilful misconduct or gross negligence, is, at NITCO's election, (a) actual damages caused by the nondelivery which are economic and incidental and subject to establishment by clear and convincing evidence, or (b) the price value of the gas which was not delivered, or (c) the cost for NITCO to deliver a replacement quantity of such gas. No consequential damages arising from a breach of this Agreement shall be recoverable, in the absence of NITCO's wilful misconduct or gross negligence. The parties agree this exclusion of consequential damages is not unconscionable.
ARTICLE X
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless NITCO from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of NITCO arising out of and in the course of their employment, for injuries to person or property or for injury to or death of any person or persons due to the sole negligence of NITCO, in the event that such loss, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of SDI, or its employees or agents, occurring in the performance of this Agreement.
NITCO agrees to indemnify, defend and hold harmless SDI from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of SDI arising out of and in the course of their employment with SDI, for injuries to person or property occasioned by the provision of Natural Gas Service, except for any liability for loss or damage to property or for injury or death of any person or persons due to SDI's sole negligence, in the event that such loss, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of NITCO, or its employees or agents, occurring in the performance of this Agreement.
In the event any loss, damage, expense, or claim occurs for which SDI and NITCO are ultimately each found to have been at fault in proximately causing the loss, damage, expense, or claim, NITCO and SDI shall both bear their own separate costs of defense and the proportionate share of such liability.
This ARTICLE is severable from the other portions of this Agreement. A breach of this ARTICLE is not a breach of the entire Agreement. If this ARTICLE is found to be unenforceable, the remaining portions of this Agreement shall remain in force and effect.
ARTICLE XI
FAILURE TO PERFORM
Except as otherwise provided for herein, if any party fails to perform any of the covenants or obligations imposed upon it under this Agreement (except where such failure is excused under other provisions hereof), then in such event a party not in default may, at its option (without waiving any other remedy for breach thereof), notify in writing the party in default, stating specifically the nature of the default and declaring it to be the intention of the party giving such notice to cancel the Agreement if the default is not cured as hereinafter provided. Cancellation under this ARTICLE shall require a substantial and material default. The party in default will have thirty (30) days after receipt of the aforesaid notice is which to remedy such default as stated in the notice, and if within said
thirty (30) days the party in default does so remove said cause or causes and fully indemnifies the party not in default for any and all consequences resulting from that default, then this Agreement shall remain in force and effect.
ARTICLE XII
WARRANTY OF TITLE
Each party warrants to the other party that it will, at the time and place of delivery of gas asserted to be owned by it under this Agreement, have good title or good right to all volumes delivered on its behalf and further warrants for itself, its successors and assigns that such gas shall be free and clear of all liens, encumbrances, and claims of those not parties hereto; and that it will indemnify and save the other party harmless for all suits, actions, debts, accounts, damages, costs, losses or expenses (including reasonable attorney's fees) arising from or out of the adverse claims arising from or out of the same. This paragraph shall not apply to gas redelivered by NIFL to SDI, where NITCO or an affiliate took title as agent for or otherwise on behalf of SDI.
ARTICLE XIII
DISCLAIMER OF WARRANTIES
Except as provided in ARTICLE XII, NIPL disclaims and excludes all warranties implied and express, including all warranties of fitness for a particular purpose and all warranties
of merchantability. SDI agrees its attention has been drawn to this exclusion of warranties.
ARTICLE XIV
SEVERABILITY
If any provision hereof shall be found to be inoperative or in violation of any law or regulation, only that provision shall be deleted from the Agreement, and the remainder of the Agreement shall not be affected.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of NIFL, Crossroads and NITCO and SDI with respect to the subject matter hereof and supersedes any and all prior oral and written agreements. No modification or amendment of this Agreement is binding on the parties unless in writing and executed by duly authorized representatives of the parties.
ARTICLE XVI
WAIVER
No provision of this Agreement is waived and no breach consented to, unless the waiver or consent is in writing and signed by the waiving or consenting party. A waiver of or consent to a provision of breach is not a waiver of, consent to or excuse for a different or subsequent breach. Failure to enforce an obligation hereunder is not a waiver.
ARTICLE XVII
AUTHORITY
Each party has full power and authority to enter into and perform this Agreement, and the person signing this Agreement on behalf of each has been properly authorized and empowered to enter into this Agreement. Each party further acknowledges that it has read this Agreement, understands it and agrees to be bound by it.
This Agreement has been executed in duplicate by the duly authorized representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/ Tracy Shellabarger
------------------------- ------------------------------------
NORTHERN INDIANA TRADING COMPANY, INC.
Date: 4/5/95 By: /s/ H.P. Conrad, Jr.
------------------------- ------------------------------------
H.P. Conrad
President
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Exhibit A
NORTHERN INDIANA FUEL & LIGHT CO., INC. Sheet No. ______
ECONOMIC DEVELOPMENT INTERRUPTIBLE GAS TRANSPORTATION RATE
Rate No. 9T
AVAILABILITY
Available to all customers who contract with the Company for gas transportation service for a minimum of five (5) years and, together with any other customers located on the site described below, for a minimum average aggregate volume of not less than 15,000 therm's per day. Customers on this rate must
1. have an alternate capability;
2. be located on the Company's transmission main connecting to, and running south from, the main east-west pipeline of Crossroads Pipeline Company ("Crossroads Pipeline") to a tract bordered on the north by County Road 42, on the east by County Road 59, on the west by County Road 55 and on the south by the Sol Shank Ditch;
3. have made arrangements by which volumes of gas owned by it can be delivered into the Company's transmission system or the Crossroads Pipeline; and
4. require no additional facilities from the Company for the Company to provide the transportation service to the customer .
CHARACTER OF SERVICE
Gas service purchased hereunder shall be interruptible and shall be subject to complete or partial curtailment, at the option of the Company and upon the giving of notice to the customer.
RATE
Facilities charge $200.00 per meter
Usage charge $0.0425 Dth
MINIMUM CHARGE
The minimum monthly charge shall be the facilities charge.
TERMS OF PAYMENT
All bills on this rate schedule shall be rendered and due monthly.
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service supplied under this rate schedule shall be governed by the Rules and Regulations of the Company, as approved by the Indiana Utility Regulatory Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
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Exhibit B
INTERRUPTIBLE GAS TRANSPORTATION NOMINATION
AND BALANCING PROCEDURES
The following nomination and balancing procedures shall apply to service under
the foregoing agreement for service between Northern Indiana Trading Co.
("NITCO") and Steel Dynamics, Inc.
("Customer") .
I. NOMINATION PROCEDURES
A. At least seven business days prior to the end of each month NITCO will quote SDI a price for any gas which it agrees to make available for sale to SDI in the next following month. The Customer shall nominate to NITCO for each month, at least six (6) business days prior to the end of the previous month, the daily quantity of
1. the Customer's nomination to Crossroads Pipeline Co. ("Crossroads") through NITCO of Customer-owned gas to be delivered on an interruptible basis that month to Crossroads and Northern Indiana Fuel & Light Company, Inc. ("NIFL") for delivery to the Customer ("Daily Pipeline Nomination"), and
2. any interruptible NITCO-supplied gas service requested by the Customer ("Daily Supply Deliveries").
B. The Customer shall thereafter notify NITCO, in writing, of any change in the Customer's Daily Pipeline Nomination or Daily Supply Deliveries by submitting to the Company a new nomination no later than noon of
1. the workday next preceding the starting day of the new Daily Pipeline Nomination, or
2. the second workday next preceding the starting day of the new Daily Supply Deliveries.
Nominations submitted after the deadlines specified above may, but are not required to, be accepted by NITCO
C. Each nomination to NITCO shall include the
1. start and end dates of nomination ("Nomination Period");
2. daily quantity, in dekatherms (Dkt), of the Customer's Daily Pipeline Nomination along with
a. the identity of the supplier(s) and the transporting pipeline(s) to Crossroads; and
b. any other information reasonably requested by NITCO; and
3. daily quantity, in Dkt, of any interruptible NITCO-supplied gas requested by the Customer.
D. NITCO reserves the right, in its reasonable discretion, to reject the Customer's nominations for Daily Supply Deliveries if (1) economical interruptible gas supplies are not available for sale to the Customer, (2) the Customer's nominations fail to include Carryover Gas, or (3) the Customer's nominations fail to equal the total of its Carryover Gas, Daily Pipeline Nominations and Daily Supply Deliveries.
E. Until the Customer submits the required nominations, the Customer's nominations of daily quantities shall be zero.
F. Because it is important that the quantities of gas to be transported for SDI's account and the notice given thereof to interstate pipelines and Crossroads be identical, the Customer shall cause its gas supplier on a transporting pipeline to Crossroads to provide NITCO a written statement of the Customer's daily nominations to that pipeline during each Nomination Period, within five (5) business days following the end of the billing month. The Customer shall pay the NITCO a NOMINATION CHARGE of $0.50 per Dkt on any quantity difference between Customer's Daily Pipeline Nomination and the daily amounts disclosed in the written statement from the transporting pipeline to Crossroads.
II. BALANCING PROCEDURES
A. The Customer shall balance its usage with actual deliveries of Customer-owned gas to Crossroads for delivery to NIFL (including Carryover Gas made available to Customer on an average daily basis) and NITCO-supplied gas requested by the Customer (collectively, "Total Deliveries").
B. An "Imbalance Quantity" will exist when the Customer's usage is greater or less than Customer's Total Deliveries on a daily basis or during the Nomination Period.
C. The Customer shall pay a DAILY IMBALANCE CHARGE of $0.50 per Dkt on the portion of the daily Imbalance Quantity that is greater than 1,000 Dkt or one hundred percent (100%) of the Customer's Total Deliveries on a daily basis, whichever is less.
D. If the quantity of Total Deliveries for the Customer's account at the end of the billing month exceeds the Customer's monthly usage, the unused gas shall be considered Carryover Gas to be carried over and consumed by the Customer, for billing purposes, as the first gas through the Customer's meter the next month.
E. The Customer shall pay a CARRYOVER CHARGE of $0.25 per Dkt on any quantity of Carryover Gas in excess of twenty-five percent (25%) of the Customer's usage during the billing month.
F. If the quantity of Total Deliveries for the Customer's account at the end of the billing month is less than the Customer's monthly usage, the difference shall be considered Interruptible Commodity Overrun Gas.
G. The Customer shall pay an INTERRUPTIBLE COMMODITY OVERRUN CHARGE of $0.25 per Dkt on any quantity of Interruptible Commodity Overrun Gas in excess of twenty-five percent of Total Deliveries for the Customer's account during the billing month.
Exhibit 10.8
GAS SERVICES AGREEMENT (Crossroads)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and between Crossroads Pipeline Company ("Crossroads"), an Indiana corporation, and Steel Dynamics, Inc. ("SDI"), an Indiana corporation, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near Butler, Indiana ("SDI Facility") and needs natural gas transportation service in connection with that facility; and
WHEREAS, Crossroads is able to provide such service;
NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter set forth, the parties agree that:
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month following the month in which the Indiana Utility Regulatory Commission ("IURC") approves the NIFL Economic Development Interruptible Gas Transportation Rate No. 9T, attached hereto as Exhibit A ("NIFL Rate") and shall terminate on December 31, 2000 ("Term"). At the end of the Term, it shall be extended unless a party hereto gives written notice to the other parties that the Agreement will not be renewed, which notice must be provided at least six (6) months prior to the end of the Term and any extension thereof. If such notice is not provided at least six (6) months prior to the end of the Term, the Term shall be extended until the last day of the month which is at least six (6) months after the provision of written notice by either
party to the other parties that this Agreement will be terminated.
If the IURC does not approve the NIFL Rate, as submitted, this Agreement, shall be terminable by either SDI or Crossroads, upon thirty (30) days written notice to the other party. A failure to timely terminate this Agreement by either party shall result in this Agreement remaining in full force and effect.
ARTICLE II
NATURAL GAS SERVICE
Crossroads shall furnish, and SDI shall purchase, interruptible gas transportation service through the NIFL transmission system for the SDI Facility on the terms and conditions hereinafter described (all such services herein referred to collectively as "Natural Gas Service") . Such transportation service provided by Crossroads will be interruptible transportation of SDI's gas from the point at which it is delivered to the Crossroads system to the Crossroads interconnection with the NIFL system near Butler, Indiana ("NIFL Connection"). On and after January 1, 1996, SDI's minimum average volume of Natural Gas Service at the SDI Facility shall be one thousand five hundred dekatherms per day (1,500 Dkt/d). Prior to that date SDI shall endeavor to meet such minimum, but shall not be required to do so, because of start-up conditions.
ARTICLE III
RATES AND CHARGES FOR GAS SERVICE
1. For the Natural Gas Service rendered during the first five (5) years of the Term, SDI shall pay to Crossroads or its designated representative (hereinafter "Crossroads") a monthly service fee equal to the maximum tariff rate for transportation service by Crossroads approved by the Federal Energy Regulatory Commission ("FERC"), not to exceed 11.57 cents per dekatherm ($.1157/Dth) for all quantities of SDI's gas delivered to the NIFL Connection.
2. Penalties and Charges Relating to Interstate Pipeline and Other Suppliers. To the extent that SDI actions or inaction cause Crossroads to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, SDI or its designated representatives ("SDI") shall reimburse Crossroads for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges. To the extent that actions or inaction of Crossroads cause SDI to be assessed any penalties and/or charges by or related to interstate pipeline suppliers or other suppliers of gas or services, Crossroads shall reimburse SDI for such penalties and charges upon being provided written documentation summarizing the actions causing the penalties or charges.
ARTICLE IV
CURTAILMENT
In the event of a gas supply or operational curtailment on the Crossroads system which affects Crossroad's ability to provide Natural Gas Service, SDI's receipt of such service shall be subject to curtailment at the same time and rate as the curtailment of other Crossroads interruptible gas transportation customers .
ARTICLE V
BILLING
Crossroads will cause to be provided to SDI, on or before the seventh
(7th) day of every calendar month, by facsimile transmission, followed by the
mailing of a copy, a detailed invoice for all services rendered under this
Agreement. Each month SDI shall issue and send to Crossroads payment of these
invoices on SDI's "25th of the month check run" for the prior month's service.
In the absence of written notice otherwise, these invoices and payments shall be
sent to:
INVOICES PAYMENTS
SDI Crossroads CIO Accounts Payable Richard S. Kalmas 4500 County Road 59 801 E. 86th Street Butler, Indiana 46721 Merrillville, Indiana 46410 |
Interest on delinquent and unpaid amounts shall accrue at the published prime commercial lending rate established from time to time by National City Bank, Indiana, or its successor ("Prime Rate"), and is payable from the date due until the date
upon which payment is made. Interest on any overpaid amounts shall accrue at the Prime Rate and is payable from the date paid by SDI until the date repaid by Crossroads.
In the event SDI fails to make timely and full payment of any invoice rendered by Crossroads, and except as provided in the next paragraph, Crossroads may terminate or suspend the provision of further Natural Gas Service. Such suspension or termination shall be without prejudice to any other rights any party may have with respect to its provision of Natural Gas Service to SDI. Such termination or suspension may be undertaken only if SDI has been given ten (10) days written notice, via telefax or hand delivery, of the intent by Crossroads to terminate or suspend the provision of Natural Gas Service.
Notwithstanding the foregoing paragraph, in the event SDI wishes to contest a portion of a billed amount, SDI shall pay the portion not contested and interest shall accrue at the rate specified in this ARTICLE on the unpaid portion while resolution of contested amounts is pending. However, the provisions of the preceding sentence shall not be applicable where SDI has failed to make timely payment of an invoice and has failed to provide adequate assurances, including advance payments if requested, of SDI's continued solvency.
Upon providing Crossroads with reasonable prior notification, during regular business hours and on regular business days, SDI, or its agent, shall have the right to examine
relevant books, records, contracts and charts of Crossroads to the extent reasonably necessary to verify the accuracy of any invoice, statement, test, chart, billing or computation made under or pursuant to any of the provisions of this Agreement.
ARTICLE VI
NOTICES
Except for matters pertaining to billings provided for in ARTICLE V of this Agreement, all notices and other communications shall be provided to the following:
SDI Crossroads
Tracy Shellabarger Richard S. Kalmas
Vice President 801 E. 86th St.
4500 County Road 59 Merrillville, Indiana 46410
Butler, Indiana 46721
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A party may change the addresses stated above, as well as the recipient of notices, by providing written notification of that change to the other party.
ARTICLE VII
FORCE MAJEURE
No party hereto shall be liable to the other for any act, omission or circumstance resulting from events beyond their reasonable control. Each party will use reasonable efforts and diligence to remove the cause of a force majeure condition and resume delivery or utilization of Natural Gas Service previously suspended. Natural Gas Service withheld from SDI during a force majeure condition will recommence upon the availability of such service and the end of such circumstances. No force majeure
condition will relieve SDI from paying any invoice relating to Natural Gas Service previously rendered.
The term force majeure as used herein shall mean any act, omission or circumstance occasioned by or as a consequence of any acts of God, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, vandalism, arrests and restraints of rulers and peoples, any strike or work stoppage, civil disturbances, explosions, breakage or accident to machinery or lines of pipe, telecommunications failures or malfunctions, or computer failures or malfunctions, which frustrates the intent of the parties hereto and which has been resisted in good faith by all reasonable legal means, and any other cause, whether of the kind enumerated or otherwise, not reasonably within the control of the party claiming suspension and which by the exercise of due diligence such party is unable to prevent or overcome. It is understood and agreed that the settlement of strikes or lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any event of force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is deemed to be inadvisable or inappropriate in the discretion of the party having the difficulty.
ARTICLE VIII
ASSIGNMENT
The benefits and obligations of this Agreement shall inure to and be binding upon successors and assigns, as the cause may be, of the original parties hereto, respectively, for the full term thereof; provided that no assignment thereof shall be made by either party without first obtaining the other party's prior written consent, which consent will not be unreasonably withheld. Unless expressly agreed to, no partial assignment of the Agreement can be made.
ARTICLE IX
APPLICABLE LAW AND REGULATION
This Agreement shall be governed by the laws of the State of Indiana. Natural Gas Service under this Agreement shall be subject to the applicable rules, regulations, orders and standards of service for gas public utilities of the IURC and FERC, as the same may be in effect from time to time, and all applicable state and federal laws, administrative orders, and regulations, including 170 IAC 5-1-22, as the same may be in effect from time.
ARTICLE X
LIMITATION OF REMEDIES AND ACTIONS
Any claim pertaining to this Agreement must be commenced and litigated or otherwise resolved in Indiana. An action for breach of this Agreement must be commenced within
one (1) year after the cause of action has accrued. The exclusive remedy for wrongful nondelivery of gas by Crossroads, in the absence of Crossroads' wilful misconduct or gross negligence, is, at Crossroads' election, (a) actual damages caused by the nondelivery which are economic and incidental and subject to establishment by clear and convincing evidence, or (b) the price value of the gas which was not delivered, or (c) the cost for Crossroads to deliver a replacement quantity of such gas. No consequential damages arising from a breach of this Agreement shall be recoverable, in the absence of Crossroads' wilful misconduct or gross negligence. The parties agree this exclusion of consequential damages is not unconscionable.
ARTICLE XI
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless Crossroads from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of Crossroads arising out of and in the course of their employment, for injuries to person or property or for injury to or death of any person or persons due to the sole negligence of Crossroads in the event that such loss, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of SDI, or its employees or agents, occurring in the performance of this Agreement .
Crossroads agrees to indemnify, defend and hold harmless SDI from all loss, damage or expense arising out of or in any way connected with the claims of any person, except claims for injuries and/or death of employees of SDI arising out of and in the course of their employment with SDI, for injuries to person or property occasioned by the provision of Natural Gas Service, except for any liability for loss or damage to property or for injury or death of any person or persons due to SDI's sole negligence, in the event that such loss, damage, injury or death shall be proximately caused by any act or omission, or any breach of any statutory duty of Crossroads, or its employees or agents, occurring in the performance of this Agreement.
In the event any loss, damage, expense, or claim occurs for which SDI and Crossroads are ultimately each found to have been at fault in proximately causing the loss, damage, expense, or claim, Crossroads and SDI shall both bear their own separate costs of defense and the proportionate share of such liability.
This ARTICLE is severable from the other portions of this Agreement. A breach of this ARTICLE is not a breach of the entire Agreement. If this ARTICLE is found to be unenforceable, the remaining portions of this Agreement shall remain in force and effect.
ARTICLE XII
FAILURE TO PERFORM
Except as otherwise provided for herein, if any party fails to perform any of the covenants or obligations imposed upon it under this Agreement (except where such failure is excused under other provisions hereof), then in such event a party not in default may, at its option (without waiving any other remedy for breach thereof), notify in writing the party in default, stating specifically the nature of the default and declaring it to be the intention of the party giving such notice to cancel the Agreement if the default is not cured as hereinafter provided. Cancellation under this ARTICLE shall require a substantial and material default. The party in default will have thirty (30) days after receipt of the aforesaid notice is which to remedy such default as stated in the notice, and if within said thirty (30) days the party in default does so remove said cause or causes and fully indemnifies the party not in default for any and all consequences resulting from that default, then this Agreement shall remain in force and effect.
ARTICLE XIII
WARRANTY OF TITLE
Each party warrants to the other party that it will, at the time and place of delivery of gas asserted to be owned by it under this Agreement, have good title or good right to all volumes delivered on its behalf and further warrants for itself,
its successors and assigns that such gas shall be free and clear of all liens, encumbrances, and claims of those not parties hereto; and that it will indemnify and save the other party harmless for all suits, actions, debts, accounts, damages, costs, losses or expenses (including reasonable attorney's fees) arising from or out of the adverse claims arising from or out of the same. This paragraph shall not apply to gas redelivered by Crossroads, where Crossroads or an affiliate took title as agent for or otherwise on behalf of SDI.
ARTICLE XIV
DISCLAIMER OF WARRANTIES
Except as provided in ARTICLE XIII, Crossroads disclaims and excludes all warranties implied and express, including all warranties of fitness for a particular purpose and all warranties of merchantability. SDI agrees its attention has been drawn to this exclusion of warranties.
ARTICLE XV
SEVERABILITY
If any provision hereof shall be found to be inoperative or in violation of any law or regulation, only that provision shall be deleted from the Agreement, and the remainder of the Agreement shall not be affected.
ARTICLE XVI
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of Crossroads and SDI with respect to the subject matter hereof and supersedes any and all prior oral and written agreements. No modification or amendment of this Agreement is binding on the parties unless in writing and executed by duly authorized representatives of the parties.
ARTICLE XVII
WAIVER
No provision of this Agreement is waived and no breach consented to, unless the waiver or consent is in writing and signed by the waiving or consenting party. A waiver of or consent to a provision of breach is not a waiver of, consent to or excuse for a different or subsequent breach. Failure to enforce an obligation hereunder is not a waiver.
ARTICLE XVIII
AUTHORITY
Each party has full power and authority to enter into and perform this Agreement, and the person signing this Agreement on behalf of each has been properly authorized and empowered to enter into this Agreement. Each party further acknowledges that it has read this Agreement, understands it and agrees to be bound by it.
This Agreement has been executed in duplicate by the duly authorized representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/ Tracy Shellabarger
------------------------- ------------------------------------
CROSSROADS PIPELINE COMPANY
Date: 4/18/95 By: /s/ Richard S. Kalmas
------------------------- ------------------------------------
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Exhibit A
NORTHERN INDIANA FUEL & LIGHT CO., INC. Sheet No. ______
ECONOMIC DEVELOPMENT INTERRUPTIBLE GAS TRANSPORTATION RATE
Rate No. 9T
AVAILABILITY
Available to all customers who contract with the Company for gas transportation service for a minimum of five (5) years and, together with any other customers located on the site described below, for a minimum average aggregate volume of not less than 15,000 therm's per day. Customers on this rate must
1. have an alternate capability;
2. be located on the Company's transmission main connecting to, and running south from, the main east-west pipeline of Crossroads Pipeline Company ("Crossroads Pipeline") to a tract bordered on the north by County Road 42, on the east by County Road 59, on the west by County Road 55 and on the south by the Sol Shank Ditch;
3. have made arrangements by which volumes of gas owned by it can be delivered into the Company's transmission system or the Crossroads Pipeline; and
4. require no additional facilities from the Company for the Company to provide the transportation service to the customer.
CHARACTER OF SERVICE
Gas service purchased hereunder shall be interruptible and shall be subject to complete or partial curtailment, at the option of the Company and upon the giving of notice to the customer.
RATE
Facilities charge $200.00 per meter
Usage charge $0.0425 Dth
MINIMUM CHARGE
The minimum monthly charge shall be the facilities charge.
TERMS OF PAYMENT
All bills on this rate schedule shall be rendered and due monthly.
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service supplied under this rate schedule shall be governed by the Rules and Regulations of the Company, as approved by the Indiana Utility Regulatory Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
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Exhibit 10.13
AGREEMENT TO PROVIDE
SCRAP PURCHASING SERVICES*
This Agreement to provide scrap purchasing services and certain priority purchase rights (the "Agreement") is entered into on this 29th day of October, 1993, by and between OmniSource Corporation, an Indiana corporation with its principal office and place of business in Fort Wayne, Indiana ("OmniSource") and Steel Dynamics, Inc., an Indiana corporation with its principal office and place of business in Indianapolis, Indiana ("SDI").
WHEREAS, SDI intends to design, construct and operate a new steel production facility in the Midwest, at a site yet to be selected, using thin slab casting technology to produce hot rolled sheet steel of varying sizes, grades, and specifications (hereinafter, from time to time, the "Mini- Mill");
WHEREAS, the Mini-Mill will require a continuous and dependable supply of steel scrap ("Scrap") as its primary raw material ingredient, and desires to secure the services of a major Scrap processor and broker with regional, national, and international access to substantial sources of Scrap supply, to act as SDI Scrap procurement agency for its periodic, regular, and ongoing needs; and
WHEREAS, OmniSource considers itself properly qualified to and provide the foregoing services to SDI, and desires to provide the Scrap purchasing services* described in this Agreement, all subject to the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the mutual covenants and undertakings of the parties set forth herein, the parties agree as follows:
I.
Appointment of OmniSource as Scrap Purchasing Agency
SDI hereby appoints and engages the services of OmniSource, and OmniSource hereby accepts the appointment and agrees to render services to SDI as SDI's exclusive Scrap purchasing agency, to carry out its functions hereunder either for and on behalf of SDI, as agent, or in direct seller/purchaser transactions with SDI, or both. OmniSource agrees to provide SDI with the following services and rights:
A. General Agreement. OmniSource agrees that, subject to the procedures and undertakings described in Paragraphs I.B., I.C., and I.D. herein, it will use its best
* Material has been redacted pursuant to request for Confidential Treatment.
efforts to locate and secure for SDI's Mini-Mill operations, such Scrap supplies as SDI may from time to time wish to purchase, at the lowest then available market prices for material of like grade, quantity, and delivery dates. OmniSource and SDI shall regularly consult with each other regarding the Mini-Mill's anticipated needs and requirements of Scrap, by grade, quantity, and approximate delivery date(s).
B. *. OmniSource represents and warrants to SDI that at the present time it regularly owns, controls, or otherwise has direct purchase rights with respect to approximately One Hundred Thousand (100,000) gross tons of mill grades of scrap of varying kinds and grades, on a monthly basis ("OmniSource's Scrap").
*
1. Communication. On a regular basis, OmniSource will notify SDI by means of voice, fax, or electronic communication, or in such other manner (i.e., as described in Paragraph I.D.) as the parties may mutually agree, of the grade, quantity, location and the prevailing OmniSource "Market Price" thereof (F.O.B. the Mini-Mill) of OmniSource Scrap that is available for immediate purchase for the Mini-Mill (an "OmniSource Available Lot").
2. Response. After its receipt of the foregoing notification, SDI shall have the * right, for a period of time as agreed to in connection with each offering, to secure such OmniSource Available Lot, by communicating its assent (using similar means) that it will take such OmniSource Available Lot upon the terms presented. If timely communicated to OmniSource, that will constitute a binding commitment by SDI to purchase and by OmniSource to sell (an "OmniSource Scrap Contract") the OmniSource Scrap constituting the particular OmniSource Available Lot. If a timely assent is not communicated, OmniSource shall thereafter b free to hold, use, or dispose of that OmniSource Available Lot in any manner, and upon such term (including price and other differences reflecting market conditions), as it deems appropriate.
3. Determination of Market Price. For purposes of determining "OmniSource's Market Price," with respect to any OmniSource Available Lot, the price at which OmniSource can actually sell material of like grade and quantity, F.O.B. the OmniSource Available Lot, shall constitute OmniSource's Market Price; and that, plus the actual cost of freight into SDI's Mini-Mill, shall be used to determine SDI's F.O.B. Mini-Mill price for that OmniSource Available Lot.
Subject to suitable safeguards to preserve confidentiality, OmniSource agrees to make available to SDI, for verification purposes,, OmniSource's Market Price information.
It is agreed, however, that in the event that OmniSource is able to purchase and bring into one or more of its operating plants additional tonnages of Scrap, over and above its normal flow, and the cost of such additional Scrap exceeds the "OmniSource Market Price," as defined herein, but is nonetheless lower than additional tonnages of Scrap that may be available F.O.B. the Mini-Mill pursuant to brokered General Market Scrap purchases pursuant to Paragraph I.C., such higher price shall be deemed the "OmniSource Market Price" for purposes of only of such additional tonnages.
4. Payment. Payment to OmniSource for all OmniSource Scrap purchased by SDI pursuant to this Paragraph I.B. shall be by SDI check and shall be due and made on net thirty (30) day terms after delivery of Scrap to the Mini-Mill, and OmniSource shall not be required hereunder to provide extended credit terms to SDI.
5. Other Terms and Conditions of Sale. In addition to grade, quantity, location, and price terms, as contemplated by OmniSource Scrap Contracts agreed to in the manner contemplated by Paragraph I.B.2., the OmniSource Scrap Contracts between OmniSource and SDI shall be governed by the Terms and Conditions of Sale for all OmniSource Scrap Contracts between the parties hereto, as identified to this Agreement from time to time.
C. * to General Market Scrap. OmniSource agrees to provide SDI, on a regular basis, with grade, quantity, location, availability, and General Market Price information, as defined in Paragraph I.C.3., F.O.B. the Mini-Mill, reflecting the lowest cost Scrap of like grade and quantity, other than OmniSource Scrap, that is available in the general marketplace ("General Market Scrap") to meet the Mini-Mill's monthly or other periodic requirements.
The * Rights to General Market Scrap that constitute the subject of this Paragraph I.C. will operate as follows:
1. Communication. On a regular basis, OmniSource will notify SDI, by means of voice, fax, or electronic communication, or in such other manner (i.e., as described in Paragraph I.D.) as the parties may mutually agree, of the grade, quantity, location and the "General Market Price" thereof (F.O.B. the Mini-Mill) of General Market Scrap that is available for immediate purchase for the Mini-Mill (a "General Market Available Lot").
2. Response. After its receipt of the foregoing notification, SDI shall have the * right, for a period of time, as agreed to in connection with each offering, to secure such General Market Available Lot by communicating its assent (using similar means), that it will take such General Market Available Lot upon the terms presented. If timely communicated to OmniSource, that will constitute a binding commitment by SDI to purchase the particular General Market Available Lot (a "General Market Scrap Contract"). If a timely assent is not communicated, OmniSource shall thereafter be free to forego, purchase, or otherwise dispose of that General Market Available Lot in any manner, and upon such terms (including price and other differences reflecting market conditions), as it deems appropriate.
3. Determination of General Market Price. For purposes of determining the "General Market Price" with respect to any General Market Available Lot, the price at which OmniSource can actually purchase that General Market Available Lot, F.O.B. the General Market Available Lot, shall constitute the General Market Price for such General Market Available Lot and that, plus the actual cost of freight into SDI's Mini-Mill, shall be used to determine SDI's F.O.B. Mini-Mill price for that particular General Market Available Lot.
Subject to suitable safeguards to preserve confidentiality, OmniSource agrees to make available to SDI, for verification purposes, all General Market Price data in connection with each and every transaction.
4. Payment. Payment to OmniSource for all General Market Scrap purchased by OmniSource and resold to SDI pursuant to this Paragraph I.C. shall be by SDI check and shall be due and made on net thirty (30) day terms after delivery of the Scrap to the Mini-Mill, and OmniSource shall not be required hereunder to provide extended credit terms to SDI.
5. Other Terms and Conditions of Sale. In addition to grade, quantity, location, and price terms, as contemplated by General Market Scrap Contracts agreed to in the manner contemplated by Paragraph I.C.2., the General Market Scrap Contracts between OmniSource and SDI shall be governed by the Terms and Conditions of Sale for all OmniSource General Market Scrap Contracts between the parties hereto, as identified to this Agreement from time to time.
D. Working Agreements Regarding Scrap Purchasing Procedures. The parties mutually agree that from time to time their representatives will develop daily, weekly, or other periodic procedures and forms pursuant to which OmniSource and SDI will carry out their respective obligations and rights hereunder. The parties further recognize that the specific rights granted to-SDI by OmniSource pursuant to Paragraphs I.B. and I.C. are primarily for SDI's protection during possible conditions of market undersupply, and for the further purpose of securing for SDI OmniSource's commitment to use its best efforts
in good faith to assist SDI in meeting its Scrap requirements on a-continuous basis at the lowest available market prices for goods of like quality and amount.
The parties agree, however, that in view of the foregoing, their respective representatives may from time to time devise operating procedures that may ignore the formalities contemplated by Paragraphs I.B. and I.C. hereunder; but such informal procedures shall not be deemed to constitute a modification or waiver of any of the rights and obligations described in Paragraphs I.B. and I.C.
E. Compensation to OmniSource. For OmniSource's services rendered to SDI as its exclusive Scrap purchasing agency and advisor, as well as for the purchase rights * granted to SDI by OmniSource pursuant to * and I.C. hereunder, SDI agrees to pay to OmniSource a fee ("OmniSource's Feel') equal to Two Dollars ($2.00) for every gross ton of Scrap received by SDI at its Mini-Mill, until such time as SDI's pre-tax earnings from operations reach the first Thirty Million Dollars ($30,000,000), without regard to prior accumulated losses, if any, at which time SDI agrees that OmniSource's Fee shall go to Three Dollars ($3.00) per gross ton thereafter. OmniSource's Fees shall be payable in any and all events based upon the Mini-Mill's receipt of Scrap and regardless of whether such Scrap derived from OmniSource Scrap Contracts pursuant to Paragraph I.B. or General Market Scrap Contracts pursuant to Paragraph I.C., but shall not be payable on SDI's direct purchase from other sources pursuant to its rights described in Paragraph I.F.
OmniSource's Fees will be billed to SDI periodically by OmniSource, with reference to specific OmniSource Scrap Contracts or General Market Scrap Contracts, either separately or accompanying OmniSource invoices for OmniSource Scrap or General Market Scrap, and shall be payable on net thirty (30) day terms the same as payments due pursuant to Paragraphs I.B. and I.C.
OmniSource agrees no other additional charge or mark-up, over and above the OmniSource Market Price (in the case of OmniSource Scrap Contracts) or the general Market Price (in the case of General Market Scrap Contracts) is to be levied by OmniSource, except as otherwise specifically contemplated by this Agreement.
F. SDI's Purchase Rights. All final decisions regarding purchases of Scrap hereunder shall belong to SDI, except insofar as the parties may otherwise agree pursuant to the procedures contemplated by Paragraph I.D.
SDI shall have the sole and unfettered discretion to determine its periodic Scrap needs hereunder, including the extent to which it may employ so-called Scrap substitutes, in lieu of metallic Scrap, in its manufacturing process.
SDI shall also retain the right, in the exercise of its own prudent discretion, if after reasonable notice to OmniSource, OmniSource is not able, for whatever reason, to supply sufficient Scrap of a particular quality and amount at a particular price and at a particular time, or if, by mutual agreement, there are independent business justifications for SDI to deal directly with a supplier, to purchase Scrap for its own account; and such action, unless in connection with a claim of breach, shall not be deemed to constitute a renunciation by SDI or a waiver by OmniSource of the exclusivity of OmniSource's Scrap agency rights hereunder; and OmniSource shall not be entitled to its Fees on such special transactions as otherwise determined under Paragraph I.E; provided, however, that such exception shall not be used as a device to evade OmniSource's compensation hereunder.
G. Additional OmniSource Services. In addition to the services previously described herein, OmniSource will regularly consult with and advise SDI with respect to such matters as the nature and extent of its purchasing services, scheduling of Scrap shipments, quality control, supplier supervision and control, and any other necessary services to enhance and facilitate the Mini-Mill's receipt of an orderly supply of quality, conforming Scrap.
SDI agrees to communicate regularly with OmniSource concerning any problems of supply, quality, or other operating concerns., so that SDI and OmniSource can work together to solve any supply issues before they become problems, and to enable OmniSource to take up any supplier-side quality or other problems with suppliers.
II.
Additional OmniSource Rights
A. Scrap Processing Facility. SDI represents to OmniSource that it has no present plans for the establishment of a Scrap processing facility on site at the Mini-Mill,,and that its current plans provide only for a Scrap Receiving and Holding Facility. SDI agrees, however, that if it decides to invite proposals for, install or construct a Scrap. processing facility in, on, adjacent to or to serve the Mini-Mill or on near premises OmniSource will be given a first right of refusal, for a period of not less than one hundred eighty (180) days, to construct and/or operate such a Scrap processing facility, on terms and conditions substantially similar to those proposed to or by SDI and set forth and described in reasonable detail in SDI's written notice to OmniSource.
B. Sale of Scrap by SDI. SDI agrees that OmniSource shall have a first right of refusal to purchase from SDI any scrap metal or comparable product that the Mini-Mill may sell from time to time.
C. Trash Removal or Waste Hauling Agreements. SDI agrees that OmniSource shall have a first right of refusal to provide any trash removal or waste hauling' services which SDI may require and not provide for its own account.
III.
Effective Date and Term of Agreement
The Effective Date of this Agreement shall be the date appearing at the outset hereof, but the initial term of OmniSource's exclusive Scrap agency relationship with SDI, as described in this Agreement, shall commence on the date upon which OmniSource enters into its first OmniSource Scrap Contract or General Market Scrap Contract pursuant to Paragraphs I.B. or I.C., and shall thereafter extend for a period of six (6) years, or, alternatively, shall extend for eight (8) years from the Effective Date, whichever is the greater period. At the expiration of the initial term, and unless the parties hereto have specifically extended this Agreement by a specific renewal term, by written instruction signed by both parties, or replaced this Agreement with a different agreement by a duly executed instrument signed by both parties, this Agreement shall be deemed to continue on a year to year basis, subject to termination by either party, with or without cause, upon one (1) year's advance written notice.
IV.
Default and Early Termination
A. Breach of Performance by OmniSource. In the event that SDI alleges OmniSource's failure to perform in accordance with the terms and conditions of this Agreement, and in the further event that such failure continues unabated for a period in excess of thirty (30) days after notification to OmniSource in writing with a particularized statement of the alleged failure to perform, then SDI, at its option, shall have the right to terminate this Agreement for cause, based upon OmniSource's default; provided, however, that in the event that prior to the lapse of the thirty (30) day "cure" period set forth herein OmniSource has taken reasonable steps to correct the default and failure of performance and, if diligent, can reasonably correct and cure the problem within an additional thirty (30) day period, OmniSource shall be entitled to the additional period of thirty (30) days before SDI shall be entitled to declare a default hereunder.
While the parties acknowledge and agree that this Agreement does not constitute a requirements contract, nor does it constitute an undertaking by OmniSource to provide SDI with its Mini-Mill's Scrap needs in accordance with any specific terms or conditions, or at all costs, or in any event, and while the parties further recognize that market conditions may be such that adequate Scrap supplies are from time to time not
available or, if available, may be unavailable at acceptable price
levels, .OmniSource agrees that SDI (i) has the right hereunder to
priority treatment of Scrap supply, and (ii) has entered into this
Agreement with the expectation that OmniSource, through its regular
acquisition and production of OmniSource Scrap and its access to General
Market Scrap, can provide SDI with adequate sources of Scrap for its
Mini-Mill operation. Subject to any periods of market aberration,
therefore, OmniSource agrees that if, for a continuous period of three
(3) months, it has failed to provide SDI with Scrap purchase contracts
sufficient to cover seventy percent (70%) of its operating needs during
such period, then such condition shall constitute grounds for a
declaration of default.
If OmniSource becomes insolvent, commits any act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceedings by or against OmniSource under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee or assignee for the benefit of creditors of OmniSource, then, at SDI's election, this Agreement may be immediately terminated.
B. Breach of Performance by SDI. In the event that OmniSource alleges SDI's failure to perform in accordance with the terms and conditions of this Agreement, and in the further event that such failure continues unabated for a period in excess of thirty (30) days after notification to SDI in writing with a particularized statement of the alleged failure to perform, and, in addition to any other remedies to which OmniSource may be entitled at law or in equity, OmniSource shall be entitled to terminate this Agreement; provided, however, that in the event that prior to the lapse of the thirty (30) day "cure" period set forth herein SDI has taken reasonable steps to correct the default and failure of performance and, if diligent, can reasonably correct and cure any non-payment problem within an additional thirty (30) day period, SDI shall be entitled to the additional period of thirty (30) days before OmniSource shall be entitled to declare a default hereunder. Any termination of this Agreement shall not relieve SDI from any liability which may have arisen hereunder prior to such termination, nor shall any such termination relieve SDI of any claim for damages or other liabilities arising as a consequence of its default hereunder.
If SDI becomes insolvent, commits any act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceedings by or against SDI under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee or assignee for the benefit of creditors of SDI, then, at OmniSource's election, this Agreement may be immediately terminated.
V.
Miscellaneous Provisions
A. Confidentiality. Each party hereto agrees to receive and hold any information acquired by it pursuant to this Agreement or through the relationships created hereunder and relating to the other party in confidence and to not use or disclose such information to any other person unless first authorized by the other party in writing, required by law, or unless such information is otherwise publicly available.
B. Force Majeure or Extraordinary Circumstances. In the event that OmniSource or SDI may be delayed or prevented from performing under this Agreement by reason of strikes, casualties, acts of God, labor troubles, power failures, inability to obtain replacement parts or other unanticipated breakdown of equipment, riots, insurrection, acts or events of local, regional, or national emergency, extraordinary market conditions beyond the control of a party to this Agreement, or the like, and which prevents such party from performing its obligations under this Agreement, such party shall not be deemed to be in default hereunder due to such non-performance during the pendency of such event or occurrence; provided, however, that if such condition continues to exist for a period in excess of three (3) months, the party suffering the non-performance shall be entitled to terminate this Agreement; and provided, further, that both parties agree to use their best efforts in good faith to work around and minimize the effect of any such act, condition, or circumstance, if it can be done without a materially adverse effect.
Should an event, act, or circumstance occur hereunder which justifies OmniSource's non-performance of its Scrap agency functions hereunder, then, during the course of any such interruption, SDI shall be entitled to obtain its Scrap from or through sources other than OmniSource without the obligation to pay OmniSource its Fees and without SDI being in default under this Agreement. During any such period of interruption, OmniSource agrees to take all reasonable measures to assist SDI in the procurement of such alternative sources of supply.
C. Notices. Any notice or other communication required to be given hereunder, or otherwise appropriate, shall be in writing and deemed given when delivered personally or sent by certified or-registered mail addressed to a party at the address set forth below, or at such other addresses as either party may from time to time designate:
If to OmniSource: OmniSource Corporation Attention: Leonard Rifkin, President 1610 N. Calhoun Street Fort Wayne, IN 46808
with a copy to: Robert S. Walters, Esq.
Barrett & McNagny
215 E. Berry Street
Fort Wayne, IN 46802
If to SDI: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
with a copy to: Mark C. Chambers, Esq.
Haller & Colvin
444 East Main Street
Fort Wayne, IN 46802
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D. Governing Law. This Agreement shall be governed in all respects in accordance with the provisions of the laws of the state of Indiana.
E. Independent Contractor Relationship. OmniSource shall act as an independent contractor to SDI hereunder, and the parties acknowledge and agree that there is no intention hereunder to act as joint venturers or partners, and nothing herein shall be so Construed.
F. Litigation Venue. In the event of any dispute hereunder, including (but not limited to) any dispute relating to a breach of this Agreement, such dispute shall be heard in any state or federal court, with jurisdiction, in or serving the county in which SDI's Mini- Mill is located.
G. Entire Agreement. This Agreement constitutes and contains the entire agreement of the parties and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting its subject matter. No changes or modifications to this Agreement shall be binding on either party unless in writing and executed by each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
OMNISOURCE CORPORATION
/s/ Leonard Rifkin
By: ____________________________________
Leonard Rifkin, President
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STEEL DYNAMICS, INC.
/s/ Keith Busse
By: ____________________________________
Keith Busse, President
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Exhibit 10.15
IRON CARBIDE OFF-TAKE AGREEMENT
THIS AGREEMENT dated June 29, 1996 (this "Agreement"), is made by and between QUALITECH STEEL CORPORATION, a Delaware corporation ("Qualitech"), and STEEL DYNAMICS, INC., an Indiana corporation ("Steel Dynamics").
PRELIMINARY STATEMENT:
Steel Dynamics and Qualitech entered into a certain Seed Money Commitment Agreement dated January 5, 1995 which, among other things, provides for Steel Dynamics and Qualitech to negotiate a more detailed agreement relating to the purchase by Steel Dynamics and the sale by Qualitech of iron carbide to be manufactured at a new production facility to be constructed by Qualitech in Corpus Christi, Texas (the "Iron Carbide Plant") planned to have an estimated aggregate annual production capacity of 660,000 metric tonnes (each such tonne consisting of 2,204.62 pounds and hereafter called a "Tonne"). As a result of negotiations pursuant to that provision, the parties are entering into this Agreement.
AGREEMENTS:
1. Purchase and Sale Commitments.
(a)Subject to the terms and conditions of this Agreement, during the
period (the "Ramp-up Period") commencing on the Commencement Date (as defined in
Section 4) and ending on the later to occur of the last day before the date of
Final Acceptance (as defined in the Contract for Supply of Iron Carbide
Production Equipment, Processes and Services, dated the date hereof, between
Qualitech and Mitsubishi International Corporation, a New York corporation
("Mitsubishi")), or the Sustained Production Date (as defined in Subsection
1(c)), but in no event later than 38 months from the date of this Agreement,
Qualitech shall sell to Steel Dynamics, and Steel Dynamics shall purchase from
Qualitech, under the terms and conditions set forth in Section 3, 60% of any and
all quantities of Product (as defined in Subsection 1(d)) produced by the Iron
Carbide Plant.
(b)Subject to the terms and conditions of this Agreement, during the Ramp-up Period, Steel Dynamics, together with Mitsubishi and OmniSource Corporation, an Indiana corporation ("OmniSource"), pursuant to the Iron Carbide Off-Take Agreements of even date herewith between Qualitech and Mitsubishi and OmniSource, respectively, shall have the option to purchase pro rata from Qualitech up to 45.5%, 12.1% and 18.2%, respectively (the "Option Quantities"), of any and all Product produced by the Iron Carbide Plant during any period of one calendar month or greater in the Ramp-up Period in which Product is produced during that particular period at an annualized rate of 330,000 Tonnes or more, up to 660,000 Tonnes. Qualitech shall be entitled to use the remaining 24.2% of such production for that particular period for its own consumption or other disposition. Qualitech shall notify Steel Dynamics at
* Material has been redacted pursuant to request for Confidential Treatment.
least 30 days in advance of each such applicable period during the Ramp-Up Period during which such production rate is reasonably estimated to occur. Steel Dynamic's Option Quantity option shall be exercisable by written notice to Qualitech within 30 days after Steel Dynamic's receipt of Qualitech's notice. If Steel Dynamics exercises such option, such purchase shall be made at the price and pursuant to the terms and conditions set forth in Sections 2 and 3. To the extent that any of Steel Dynamics, Mitsubishi and/or OmniSource does not elect to purchase its respective Option Quantity in its entirety, Qualitech and each of such other parties which has elected to purchase its respective Option Quantity in its entirety shall have the option (exercisable upon reasonable written notice) to purchase from Qualitech and/or use, as the case may be, and Qualitech shall sell to the foregoing parties who exercise such option (the "Electing Parties") quantities of such Product which Steel Dynamics, Mitsubishi and/or OmniSource do not elect to purchase, pro rata in accordance with the respective shares of the Electing Parties. If during the period described herein, production (on an annualized basis) drops below 330,000 Tonnes, the options described herein shall not apply, and Qualitech's disposition of its iron carbide shall revert to that which is otherwise required during the Ramp-Up Period.
(c)Subject to the terms and conditions of this Agreement, including but not limited to Subsections 1(e), 1(f) and 1(g), commencing on the later to occur of the date of Final Acceptance or the date, after Final Acceptance, on which Qualitech has successfully produced Product for a sustained period of 90 days at the average rate of 41,250 Tonnes per month (the "Sustained Production Date"), but in no event later than 38 months from the date of this Agreement, and continuing during the term of this Agreement, Qualitech shall annually sell to Steel Dynamics, and Steel Dynamics shall annually purchase from Qualitech, quantities of Product produced by the Iron Carbide Plant's initial module, under the terms and conditions contemplated by Section 3, in each Product Year (as defined in subsection 1(d)), determined as annualized rate as follows (prorated for any Product Year that is not a full calendar year) ("Steel Dynamics' Allocable Amount"):
(1) 55.6% of the first 270,000 Tonnes of Estimated Production (as defined in Subsection 1(e)) for such Product Year, pro rata with Mitsubishi and OmniSource each at the rate of 22.2% pursuant to their respective Iron Carbide Off-Take Agreements of even date herewith; and
(2) 48.4% of Estimated Production for such Product Year which is greater than 350,000 Tonnes but not in excess of 660,000 Tonnes, pro rata with Qualitech at its rate of 25.8% and with Mitsubishi and OmniSource at their rates of 6.4% and 19.4% pursuant to their respective Iron Carbide Off-Take Agreements of even date herewith.
Steel Dynamics acknowledges and agrees that Qualitech shall have sole rights to all annualized Estimated Production for each Product Year which is greater than 270,000 Tonnes but not exceeding 350,000 Tonnes.
(d)As used in this Agreement, the following terms shall have the following meanings:
(1) "Product" means iron carbide manufactured by Qualitech at the Iron Carbide Plant that (i) meets or exceeds the Product Specifications as defined in Exhibit A attached to and made part hereof, all as determined by testing methods prescribed for the Mossbauer analyzer (or any other commercially accepted substantially equivalent analyzer which may be available from time to time) and (ii) is capable of being used or consumed effectively in electric arc furnaces as a scrap substitute product;
(2) "Product Year" means, initially, the calendar year (or portion thereof) during which the Commencement Date occurs and, thereafter, each calendar year (or portion thereof) during the term of this Agreement;
(3) "Product Month" means each calendar month (or portion thereof) in any Product Year; and
(4) "Product Quarter" means a calendar quarter (or portion thereof) in any Product Year.
(e)Qualitech shall notify Steel Dynamics in writing no less than 90 days in advance of the Commencement Date and no less than .90 days in advance of the beginning of each Product Year of the amount of Product reasonably estimated to be manufactured by Qualitech for the applicable Product Year at the Iron Carbide Plant (including monthly estimates) (the "Estimated Production"). Upon written notice to Steel Dynamics, such estimates may be reasonably revised by Qualitech from time to time during the applicable Product Year, but in no event less than Steel Dynamic's Minimum Allocable Amount (as defined in Subsection 1(g)), as additional relevant production information becomes available, with notice of any such adjustment being given not less than 90 days in advance of the relevant Product Year and 45 days :in advance of any quarterly adjustments. Thereafter, if Qualitech in fact exceeds such revised Estimated Production, Steel Dynamics shall have an option, together with Mitsubishi, OmniSource and Qualitech, exercisable within 30 days after such written notice from Qualitech, to purchase its pro rata portion of such excess, up to Steel Dynamics' Allocable Amount, but shall not be required to do so. For purposes of satisfying Steel Dynamics' purchase obligation described in Subsection 1(c), but not Qualitech's sales obligation, Steel Dynamics shall be deemed to have purchased its full Allocable Amount during any Product Month in which less than the entire Steel Dynamics' Allocable Amount for that Product Month was offered to Steel Dynamics by Qualitech.
(f)If, after the fifth business day following the close of any Product Month, Steel Dynamics has failed to purchase at least Steel Dynamics' Allocable Amount for such Product Month (to the extent such amount was offered to Steel Dynamics for purchase in accordance with the terms and conditions of this Agreement), then, upon 21 days written notice of its intent to do so, and unless Steel Dynamics effects such purchases within such notice period or its performance is otherwise excused hereunder, Qualitech's sole remedy, exercisable by written notice delivered to Steel Dynamics within 15 days thereafter, shall be to terminate this
Agreement (it being understood that such failure by Steel Dynamics shall not be further subject to the cure provisions of Section 6). The failure by Qualitech to terminate this Agreement within such 15 day period shall not constitute a waiver of Qualitech's right to terminate for any such future failure by Steel Dynamics. Such notice shall specify the effective date of any such termination (not to be less than 60 days from the date of notice), and upon the effective date thereof this Agreement shall terminate and neither party shall have any further obligations hereunder, except for the performance of prior purchase orders and payment thereunder, and except to the extent any provisions of this Agreement expressly survive termination. Such termination right shall not extend or otherwise affect any other agreement or contract then existing between the parties, except as expressly provided in any such other agreement or contract. If Qualitech fails for any reason to give such termination notice within such 15-day period, this Agreement shall remain in full force and effect.
(g)Qualitech shall only be entitled to offer less than Steel Dynamics full Allocable Amount and to reduce Steel Dynamic's Product to not less than 37,500 Tonnes of Product per Product Quarter ("Steel Dynamics' Minimum Allocable Amount"), if and as long as such deficiency is not as a result of sales to third parties (other than quantities of Product offered to OmniSource and Mitsubishi) or taken by Qualitech for its own consumption, all as contemplated by this Agreement or as a result of any circumstance described in Section 7(a). If, in any Product Year, Qualitech has not offered to Steel Dynamics for purchase in accordance with the terms and conditions of this Agreement at least (i) 37,500 Tonnes of Product in any Product Quarter of such Product Year (or a prorated amount thereof for any Product Quarter that is not three full calendar months) (the "Quarterly Guarantee"), or (ii) 11,250 Tonnes of Product in any Product Month in such Product Year (or a pro rated part thereof that is not a full month) (the "Monthly Guarantee"), then, upon 21 days advance written notice of its intention to do so, and unless Qualitech provides such product to Steel Dynamics within the notice period or its performance is otherwise excused hereunder, Steel Dynamics' sole remedy, exercisable by written notice delivered to Qualitech within 15 days thereafter, shall be to terminate this Agreement (it being understood that such failure by Qualitech to offer Steel Dynamics the Quarterly Guarantee or the Monthly Guarantee shall not be further subject to the cure provisions of Section 6). The failure by Steel Dynamics to terminate this Agreement within such 15 day period as a result of a failure by Qualitech to offer the Quarterly Guarantee or the Monthly Guarantee shall not constitute a waiver of Steel Dynamics' right to terminate for a future failure by Qualitech to offer to Steel Dynamics the Quarterly Guarantee or the Monthly Guarantee. Such notice shall specify the effective date of any such termination (not to be less than 60 days from the date of notice), and upon the effective date thereof this Agreement shall terminate and neither party shall have any further obligations hereunder, except for the performance of prior purchase orders and payments thereunder, and except to the extent any provisions of this Agreement expressly survive termination. Such termination right shall not extend or otherwise affect any other agreement or contract then existing between the parties, except as expressly provided in any such other agreement or contract. If Steel Dynamics fails for any reason to give such termination notice within such 15-day period, this Agreement shall remain in full force and effect.
(h)In the event that Qualitech proposes to increase the Iron Carbide Plant's production capacity beyond 660,000 Tonnes of Product per Product Year by installing an additional module in addition to the first module, Qualitech shall notify Steel Dynamics at least twelve (12) months prior to the date on which Qualitech is scheduled to commence construction of any such additional module. Thereafter, Steel Dynamics shall have sixty (60) days after the applicable purchase price for such additional Product has been determined as set forth herein and, subject to Section 2, within which to provide Qualitech with written notice of exercise of its option to purchase its pro rata share of such additional Product, not to exceed an additional 300,000 Tonnes per Product Year for the additional module, pursuant to the terms and conditions set forth in this Agreement. If the parties, in good faith, do not agree on such purchase price for any reason on or before the 180th day immediately prior to the date that Qualitech is scheduled to commence construction of the additional module, the establishment of such purchase price shall be resolved by arbitration pursuant to Section 17. The fees and expenses of the arbitration shall be shared by both parties. In no event shall Qualitech be required to construct an additional module regardless of any decision or award by any arbitrator, and no arbitrator shall have any authority to obligate Qualitech to construct an additional module. So long as this Agreement is in effect, either during the initial term or any extension thereof, if Qualitech again at any time or from time to time proposes to increase the Iron Carbide Plant's production capacity by installing a module in addition to the first module as aforesaid, Qualitech and OmniSource shall again pursue the same notification, negotiation, and arbitration procedures set forth and as limited herein.
2. Purchase Price.
(a)The purchase price of Product shall be calculated on a per Tonne basis, f.o.b. the Iron Carbide Plant. Such purchase price shall be determined and fixed in advance for each Product Quarter in which such Product is to be manufactured, subject to adjustments as provided herein; provided that as of the date of this Agreement, and until the later to occur of Final Acceptance or Qualitech's Sustained Production Date, the purchase price shall be $*** per Tonne. After the later to occur of Final Acceptance or Qualitech's Sustained Production Date, such purchase price shall be adjusted and readjusted, upwards or downwards as the case may be, from time to time pursuant to the Adjusted Cost formula, as described in Exhibit B, with a "Floor Price" pursuant to this formula equal to the lesser of (i) $*** per Tonne or (ii) the greater of ***% of the published prior three month rolling average price of "No. 1 Bundles" f.o.b. point of origin or $*** per Tonne, and a "Ceiling Price" pursuant to this formula of $*** per Tonne (regardless of what this formula might otherwise require). If the price of No. 1 Bundles cannot be readily determined despite good faith efforts, the parties agree that Steel Dynamics' purchase prices (excluding freight) for No. 1 Bundles purchased from OmniSource for use at Steel Dynamics' Butler, Indiana mill site shall be used for purposes of determining the Floor Price. Steel Dynamics shall have reasonable rights to audit Qualitech's books and records for the purpose of verifying Qualitech's compliance with the provisions of Exhibit B and the calculations required thereby, and Qualitech shall have reasonable rights to audit Steel Dynamics' purchase records for the purpose of verifying such prices. The Adjusted Cost per
Tonne for any Product Quarter shall be effective commencing with the second Product Month within such Product Quarter and shall continue through the last day of the first month of the following Product Quarter and shall be based upon the Adjusted Cost per Tonne, determined in accordance with Exhibit B, for the prior Product Quarter. The effects of any year-end adjustments made for purposes of preparing Qualitech's annual audited financial statements shall be reflected in the second Product Quarter of each Product Year following the Product Year to which such adjustments apply.
(b)Notwithstanding any purchase price determination made pursuant to Subsection 2(a), and subject always to the Floor Price and Ceiling Price limitations described in Subsection 2(a), Steel Dynamics shall always receive a purchase price per Tonne of Product that is five percent (5%) lower than the lowest purchase price per Tonne of Product, FOB the Iron Carbide Plant, negotiated with any other similarly situated customer of Qualitech (excluding Qualitech and its affiliates, Mitsubishi and OmniSource) purchasing Product of similar quantity, quality and characteristics which is purchased in the same Product Quarter.
(c)If Steel Dynamics disagrees with any price determination made by Qualitech, Steel Dynamics shall notify Qualitech of such disagreement within 15 days after Qualitech's delivery of the applicable price determination to Steel Dynamics by delivering to Qualitech a written statement setting forth in reasonable detail the particulars of its disagreement. Qualitech and Steel Dynamics shall make reasonable, good faith efforts promptly to resolve any such disagreement(s). Any disagreement(s) with respect to such price determination which cannot be resolved between the parties within 120 days shall be finally resolved, if necessary, by arbitration pursuant to Section 17. The fees and out-of-pocket expenses of such arbitrator shall be shared by both parties.
3. Terms of Purchase.
(a)Steel Dynamics will place orders with Qualitech using Steel Dynamics' standard purchase order form, a copy of which is attached to and made part hereof an Exhibit C, as the same may be reasonably modified from time to time by mutual agreement of the parties, excluding such terms as are inconsistent with this Agreement. Unless otherwise agreed, such orders shall provide for delivery schedules in level amounts during each Product month, plus or minus twenty percent (20%) based upon Steel Dynamics' Allocable Amount. Each purchase and sale of Product shall be completed pursuant to the applicable price determined pursuant to Subsection 1(h) and Section 2, as the case may be, and payment terms shall be net 30 days. Risk of loss with respect to Product shall pass to Steel Dynamics upon delivery by Qualitech to Steel Dynamics or Steel Dynamics' designated carrier at the Iron Carbide Plant, with all necessary shipping and consignment documents properly prepared and delivered, subject, however, to final settlement adjustments based upon Steel Dynamics' delivered weights. If the parties are in dispute over the price determination, the most recently undisputed price shall apply for initial settlement, subject to adjustment after resolution of such dispute.
(b)Intentionally omitted.
(c)Intentionally omitted.
(d)Each delivery made pursuant to this Agreement shall be deemed a separate sale. Default in any such delivery shall not void or terminate this Agreement with respect to any other delivery made or to be made, nor shall any such default in any delivery entitle Steel Dynamics to reject other deliveries, whether made previously or subsequent thereto.
(e)In the event that any Product received by Steel Dynamics hereunder does not meet the standards set forth in Exhibit A, or as otherwise required hereunder, Steel Dynamics shall promptly notify Qualitech of such deficiency(ies) (in any event within 90 days after receipt of such Product). if Steel Dynamics does not give Qualitech notice of such deficiency as provided herein, the Product shall be deemed accepted by Steel Dynamics. Irrespective of any prior payment, any such defective Product may be rejected (within such 90-day notice period) and returned by Steel Dynamics, at Qualitech's reasonable expense and risk, which action will not, however, invalidate this Agreement. Any such rejected Product also may be held, at Qualitech's reasonable risk and expense, subject to resolution of such deficiency by any mutual agreement of the parties to an appropriate price reduction or to Qualitech's instruction as to disposition, but shall be subject to replacement only at the option of Steel Dynamics (exercisable in its reasonable discretion). If any such rejected Product has not been paid for and is not replaced, Steel Dynamics shall not pay for such Product. If any such defective Product is replaced, Steel Dynamics shall pay only for the replacement Product. It any such defective Product has been paid for, Qualitech shall refund to Steel Dynamics the purchase price paid therefor within 30 days of Steel Dynamics' notice of such defect(s), except that such payment shall be applied to the extent of the purchase price for any replacement Product. If Steel Dynamics rejects any Product pursuant to this Subsection 3(e) and does not elect replacement thereof, such quantity of Product so rejected without replacement shall be deemed, at Steel Dynamics' election, as having satisfied Steel Dynamics' obligation to place orders and purchase its Allocable Amount or Option Quantity, as the case may be, to the extent of such rejected quantity of Product.
4. Term of Purchase and Sale Obligations. The purchase and sale obligations
under this Agreement shall take effect upon the date on which the Iron Carbide
Plant commences production of Product and Steel Dynamics begins to receive
Product pursuant to Subsection 1(a) (the "Commencement Date") and shall
terminate on the fifth anniversary of the later to occur of the date of Final
Acceptance or the Sustained Production Date; provided that Steel Dynamics shall
have an option, exercisable by written notice on the later to occur of 120 days
prior to the expiration of the initial term or 30 days after the applicable
purchase price has been determined pursuant to this Section 4, and subject to
Section 2 (but in no event later than 60 days after the expiration of the
initial term), to extend the Agreement for five (5) additional years pursuant to
the terms and conditions set forth in this Agreement. If the parties, in good
faith, cannot within the period described in this Section 4 agree an such
purchase price the establishment of such price shall be resolved by arbitration
pursuant to Section 17. The applicable purchase price per
Tonne of Product in effect from time to time for each Product Quarter during the extended term shall equal the Adjusted Cost per Tonne of Product determined in accordance with Exhibit B as further modified in accordance with this Section 4. In determining the Adjusted Cost per Tonne of Product for each Product Quarter during such extended term, whether through good faith negotiations or by arbitration, the Price Adjustment factors set forth in Sections 1(A) through 1(E) of Exhibit B shall be binding upon the parties and upon any arbitrator, except that the costs per Tonne of Product shown on Annex 1 to Exhibit B regarding f actors 1(B) (depreciation), 1(D) (interest), and 1(E) (return on equity) shall remain constant and shall not be subject to further adjustment by the parties or by any arbitrator, absent mutual agreement by the parties to the contrary. The fees and out-of-pocket expenses of such arbitration shall be shared by both parties.
5. Notices. All notices required hereunder shall be personally delivered or sent by overnight courier for next business day delivery, certified or registered United States mail, return receipt requested, postage prepaid, or telecopier facsimile. If a notice is personally delivered, it will be conclusively deemed to have been received by a party when so delivered; if sent by overnight courier for next day delivery, on the next business day after deposit thereof with such courier; if sent by certified or registered mail, when delivered or refused for delivery; and if sent by telecopier facsimile, the first business day after receipt. Notices to Qualitech shall be addressed as follows:
Qualitech Steel Corporation Baker Building, Suite 700 1940 East 6th Street Cleveland, OK 44114 Attention:Gordon H. Geiger Facsimile:(216) 344-7506
or to such other person and place as Qualitech may hereafter designate in writing, and notices to Steel Dynamics shall be addressed to it as follows:
Steel Dynamics, Inc. 4500 County Road 59 Butler, Indiana 46721 Attention:Mr. Keith E. Busse Facsimile:(219) 868-8005
or to each other person or place as Steel Dynamics may hereafter designate in writing.
6. Events of Default and Remedies.
(a)Events of Default. Each of the following events shall constitute an "Event of Default" by a party hereunder:
(1) Except for a failure to purchase described in Subsection 1(f) (where the sole remedy by Qualitech is termination) the failure of Steel Dynamics to make the payment of any undisputed amount becoming due and payable to Qualitech under this Agreement an the date which such amount becomes due and payable hereunder (after giving effect to all applicable dispute resolution procedures provided under this Agreement with respect to disputed amounts, if any) if such payment is not made within 15 days after the date on which Qualitech gives written notice to Steel Dynamics of its intention to declare a default in respect thereof; or, except for the failure to offer Product for purchase by Steel Dynamics described in Subsection 1(g) (where the sole remedy by Steel Dynamics is termination), the failure by Qualitech to offer to Steel Dynamics any material quantity of Product on the date on which such performance becomes due under Section 3 of this Agreement, if such failure continues 15 days subsequent to written notice to Qualitech by Steel Dynamics of its intention to declare a default in respect thereof;
(2) The failure of a party to perform or comply in any material respect with any of the terms of this Agreement to be performed or complied with by such party (in addition and supplemental to those referred to in Subsection 6(a)(1) and except as excused pursuant to Section 7) if such failure is not remedied (A) within 30 days after the non-defaulting party shall have given to the other party written notice of such failure, or (B) in the case of any such default which cannot with due diligence be cured within 30 days, but is susceptible to cure without unreasonable effort, within such additional period as may be reasonably required to cure such default (not to exceed 90 days) if such curative action is diligently pursued;
(3) The making by a party of an assignment for the benefit of its creditors or an admission by a party of its insolvency;
(4) The filing by or against a party of any petition seeking relief under Title 11 of the United States Code, or the commencement by or against a party of any proceeding with respect to relief under the provisions of any other applicable bankruptcy, insolvency or other similar law of the United States or any State providing for reorganization, wind-up or liquidation or arrangement, composition, extension or adjustment with creditors; provided that no such event shall constitute an Event of Default if it is an involuntary proceeding and is discharged within 60 days of its filing or commencement;
(5) The appointment of a receiver or trustee for a party or for any substantial part of a party's assets if such receiver or trustee is not discharged within 60 days of appointment; or
(6) The institution of any proceedings for a dissolution and full or partial liquidation of the party if such proceedings are not dismissed or discharged within 60 days of their commencement.
(b)Performance Suspension. Upon the occurrence of an Event of Default by Steel Dynamics, Qualitech shall have the right, so long as such Event of Default remains uncured, at any time to suspend its performance under this Agreement by giving written notice of such
suspension to Steel Dynamics. Such notice shall specify the effective date of any such suspension. Such suspension right shall not extend or otherwise affect any other agreement or contract then existing between the parties, except as expressly provided in any such other agreement or contract.
Upon the occurrence of an Event of Default by Qualitech, Steel Dynamics shall have the right, so long as such Event of Default remains uncured. at any time to suspend its performance under this Agreement by giving written notice of such suspension to Qualitech. Such notice shall specify the effective date of any such suspension. Such suspension right shall not extend or otherwise affect any other agreement or contract then existing between the parties, except as expressly provided in any such other agreement or contract.
(c)Reimbursement. Upon the occurrence of an Event of Default, the nondefaulting party shall have, in addition to its other rights and remedies hereunder and under law and at equity (but subject to the limitations set forth in this Agreement), the right to recover from the party in default all reasonable costs and expenses incurred by the nondefaulting party in enforcing its rights and remedies hereunder, including reasonable attorneys' fees. The termination of this Agreement by either party by reason of default by the other party, as aforesaid, shall not relieve either party of any of its obligations accrued under this Agreement before the effective date of such termination.
7. Force Majeure.
(a)Any other provision of this Agreement to the contrary notwithstanding, neither party shall be liable to the other party for any loss or damage incurred by such other party, nor shall such other party have any right to terminate this Agreement, by reason of any default or delay at any time in such party's performance of this Agreement caused by reason of any occurrence or cause beyond the reasonable control of such party, including, but not limited to, any: (i) labor dispute, work stoppage, slowdown or strike, widespread material shortage, blockade or embargo; (ii) flood, fire, earthquake, explosion, casualty, act of God, accident, war, revolution, civil commotion, act of a public enemy; (iii) injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or subdivision, authority or representative of any such government; (iv) electricity, gas or other utilities outages; (v) unforeseen equipment failure; or (vi) unforeseen emergency shutdown. Such events shall be equally applicable to Steel Dynamics as purchaser hereunder, wherein its ability to consume the Product has been materially adversely affected by the force majeure, as to Qualitech as seller hereunder, wherein its ability to manufacture the Product has been materially adversely affected by the force majeure. If any such event shall occur, or if circumstances create a reasonable probability that such an event will occur, the party wishing to invoke this provision shall promptly notify the other party of the same, providing such information as is reasonably available relative to the event, and use all reasonable efforts to resume its performance hereunder as quickly as reasonably practicable if such performance is so delayed or interrupted.
(b)In the event that Qualitech is excused from performing pursuant to
Subsection 7(a), Steel Dynamics shall be entitled to make other arrangements to
satisfy its requirements for Product during the reasonably anticipated period of
Qualitech's inability to perform. In the event that Steel Dynamics is excused
from performing pursuant to Subsection 7(a), Qualitech shall be entitled to make
other arrangements to dispose of Product ordered by Steel Dynamics for
production and/or delivery during the reasonably anticipated period of Steel
Dynamics' inability to perform. Product purchased by Steel Dynamics from other
suppliers, and Product sold to other purchasers by Qualitech, pursuant to
reasonable arrangements made during, or in anticipation of, the other party's
inability to perform shall be counted in determining satisfaction of the
purchase and sale obligations of the parties pursuant to this Agreement. The
term of this Agreement shall be extended for a period equivalent to the
aggregate of all periods during which performance is excused by virtue of this
Section 7.
8. Construction of Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, and the parties consent to the jurisdiction of the State of Indiana, any and all objections to venue being waived. This Agreement (including the exhibits hereto) embodies the entire agreement and understanding between Qualitech and Steel Dynamics with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, oral or written, relative to the subject matter of this Agreement.
9. Waivers; Modifications, No waiver or modification of any provision of this Agreement shall be effective against either party hereto unless it is set forth in a writing signed by both parties. No waiver of any breach of any provision hereof shall be deemed a waiver of any other breach of the same provision or of any other provision hereof, unless expressly so stated in the writing setting forth such waiver.
10. Assignment. Except as specifically provided in this Section 10, neither party may assign any of its rights or delegate any of its duties under this Agreement without first obtaining the prior written consent of the other party, which consent will not be reasonably conditioned, delayed or withheld. Notwithstanding the foregoing and provided that the assigning or transferring party notifies the other party at least 60 days prior to the effective date of the assignment or transfer, (a) Steel Dynamics shall have the right, without Qualitech's consent, to assign or transfer this Agreement or all the benefits and obligations hereof to any entity directly or indirectly controlling, controlled by or under common control with Steel Dynamics (a "Steel Dynamics Affiliate"), provided that Steel Dynamics will remain fully liable hereunder unless there is no genuine question of the ability of such Steel Dynamics Affiliate to perform Steel Dynamics' obligations under this Agreement, and (b) Qualitech shall have the right, without Steel Dynamics' consent, to assign or transfer this Agreement or all of the benefits and obligations hereof (i) as collateral security for its obligations to its lenders (without, in the case of this clause (b)(i), notifying Steel Dynamics prior to the effective date of the assignment), (ii) to any entity directly or indirectly controlling, controlled by or under common control with Qualitech, provided that the net worth of such entity is not materially less than the net worth of
Qualitech on the date of this Agreement or there is no genuine question of the ability of such transferee to perform Qualitech's obligations under this Agreement, or (iii) to an entity that acquires all or substantially all of the stock or assets of Qualitech. regardless of the form or structure of the transaction (including but not limited to any merger), provided that the net worth of such transferee is not materially less than the net worth of Qualitech on the date of this Agreement or there is no genuine question of the ability of such transferee to perform its obligations under this Agreement; provided, that any transferee permitted pursuant to clauses b(ii) and b(iii) above shall execute a written instrument agreeing to be bound by all of the future obligations (and past obligations unless the transferor remains fully liable for such past obligations and is able to satisfy such obligations out of its remaining assets and or proceeds of the transfer.
11. Interpretation. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. Whenever the context requires, words used in the singular shall be construed to include the plural and vice versa, and pronouns of any gender shall be deemed to include and designate the masculine, feminine or neuter gender.
12. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
13. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
14. Assistance. Qualitech does hereby agree to render reasonable assistance to Steel Dynamics in connection with its training and/or use of the Product.
15. WAIVER OF JURY TRIAL. THE PARTIES HEREBY AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY EITHER PARTY OR ANY SUCCESSOR OR ASSIGN OF SUCH PARTY WITH RESPECT TO THIS AGREEMENT OR WHICH IN ANY WAY RELATES, DIRECTLY OR INDIRECTLY, TO THE OBLIGATIONS UNDER THIS AGREEMENT, OR THE DEALINGS OF THE PARTIES WITH RESPECT THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS PROVISION IS A SPECIFIC AND MATERIAL ASPECT OF THE AGREEMENT ]BETWEEN THE PARTIES AND THAT THEY WOULD NOT HAVE ENTERED INTO THIS TRANSACTION IF THIS PROVISION WERE NOT PART OF THEIR AGREEMENT.
16. Computing Time Periods. All time periods provided for in this Agreement shall be based on calendar days; provided that if any such time period ends on a day other than a business day, the time period shall be extended to the next business day, or if any payment becomes due on a day that in not a business day, such payment may be made on the next succeeding business day. For purposes of this Agreement, the term "business day" means any day excluding Saturday, Sunday and any other full day on which banks are required or authorized to close in the State of Texas.
17. Arbitration. Provided that there is no other legal or other proceeding then pending under or with respect to this Agreement in which the same could be resolved, all disputes with respect to the determination of any purchase price of Product pursuant to Section 1(h), 2 and 4 which cannot be resolved by the parties pursuant to the provisions of Subsection 2(c) shall be finally settled by arbitration as provided in this Section 17, subject to requirements and limitations set forth in such Section 1(h), 2 and 4, as the case may be. Either party may initiate arbitration hereunder upon written notice of the other party. If the parties are unable within 15 days of such notice to agree on a single, independent arbitrator experienced in arbitrating matters similar to those which may be at issue, the parties shall seek appointment of such arbitrator, or, if any party so prefers, a panel of three (3) arbitrators, one each to be selected by each of the parties, and the third, if not selected by agreement of the other two, to be appointed by the American Arbitration Association in accordance with its expedited rules. Such arbitration shall be held in alternating locations of Qualitech's home offices, and Steel Dynamics' home offices commencing with Qualitech's home office, unless another place shall be mutually agreed upon by the parties. The controlling rules shall be the Commercial Arbitration Rules of the American Arbitration Association. Neither party shall suspend performance of this Agreement solely by reason of reference of a dispute to arbitration. The award rendered by the arbitrator shall be final, subject to the limitations set forth in Sections 1(h) and 4, and judgment may be entered upon in accordance with applicable law in any court having jurisdiction thereof. The award shall also indicate how to distribute arbitrator's fees and arbitration expenses between the parties based on the provisions of Subsection 2(c).
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above given.
QUALITECH STEEL CORPORATION
/s/ Gordon H. Geiger
By: ____________________________________
Gordon H. Geiger, Chairman
and Chief Executive Officer
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STEEL DYNAMICS, INC.
/s/ Tracy Shellabarger
By: ____________________________________
Tracy Shellabarger
Vice President
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EXHIBIT A
PRODUCT STANDARDS
Product will be granular, free-flowing material with particle size under 2 mm and not more than 10% less than .10 mm and shall conform to the following chemical composition by weight:
Constituent % By Weight
-----------
Total Fe Min 88.7
Carbon (as Fe(3)C) min 5.7
Gangue max 3.3
Fe(3)C min 85.0
FeO max 8.0
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EXHIBIT B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Exhibit B, "Adjusted Costs" per Tonne for Product (all subject to audit by Steel Dynamics) manufactured during any Product Quarter shall be the sum of the following:
(A) Qualitech's inventoriable costs (including iron ore, iron ore transportation, iron ore agent feet, natural gas, hydrogen, electricity, maintenance, water, operating labor and benefits, supervision payroll and benefits, chemical and laboratory supplies, training, property taxes, insurance, iron carbide technology license royalty, materials handling, rent, operating lease expense, and general and administrative expense directly related to the Iron Carbide Plant) divided by the Iron Carbide Plant Tonneage (as defined below) to yield the applicable cost per Tonne of such Product for the Product Quarter in which such Product is manufactured at the Iron Carbide Plant, determined according to Qualitech GAAP (as defined below) in all respects, except that (i) the first-in, first-out method shall be used, (ii) depreciation of property, plant and equipment shall be excluded and (iii) amortization of capitalized financing costs and capitalized start-up costs shall be excluded;
(B) A depreciation charge for each Product Quarter equal to (i) the Iron Carbide Plant PP&E Costs (as defined below) depreciated over an average life of ** years on the straight line basis divided by (ii) the Iron Carbide Plant Tonneage (as defined below) for such Product Quarter;
(C) An amortization charge for each Product Quarter equal to (i) the Iron Carbide Plant Capitalization Start-Up and Financing Costs (as defined below) amortized over an average life of ** years on the straight line basis divided by (ii) the Iron Carbide Plant Tonneage for such Product Quarter;
(D) An interest charge for each Product Quarter equal to (i) the Iron Carbide Plant Interest Expense (as defined below) divided by (ii) the Iron Carbide Plant Tonneage for such Product Quarter;
(E) An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Exhibit B have the following meanings:
(A) "Iron Carbide Plant Tonneage" means, with respect to the applicable Product Quarter during which any Product is manufactured the greater of 165,000 Tonnes of Product of actual Tonnes of Product manufactured at the Iron Carbide Plant for such Product Quarter.
(B) "Iron Carbide Plant PP&E Costs" means the total of all costs of property, plant and equipment (before depreciation) determined in accordance with Qualitech GAAP attributable to the Iron Carbide Plant. The Iron Carbide Plant PP&E costs will be calculated as of the Commencement Date.
(C) "Qualitech GAAP" means generally accepted accounting principles applied on a basis consistent with prior periods without regard to materiality as used by Qualitech in preparing financial statements to its shareholders.
(D) "Iron Carbide Plant Capitalized Start-Up and Financing Costs" means the amount of $12,115.00.
(E) "Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement Date by
multiplying $8,110,055 by a fraction, the numerator of which is (x)
Qualitech's Iron Carbide Plant PP&E Costs and the denominator of which is
(y) $111,817,000.
EXHIBIT C
FORM OF PURCHASE ORDER
Annex 1 to Exhibit B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Annex 1 to Exhibit B, the following costs per Tonne of Product (all subject to audit by Steel Dynamics) manufactured during any Product Quarter shall remain constant during the initial and extended terms of this Agreement:
(A)Intentionally omitted.
(B)A depreciation charge of each Product Quarter equal to (i) the Iron Carbide Plant PP&E Costs (as defined below) depreciated over an average life of 25 years on the straight line basis divided by (ii) the Iron Carbide Plant Tonneage (as defined below (for such Product Quarter;
(C)Intentionally omitted.
(D)An interest charge for each Product Quarter equal to (i) the Iron Carbide Plant Interest Expense (as defined below) divided by (ii) the Iron Carbide Plant Tonneage for such Product Quarter;
(E)An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Annex 1 to Exhibit B have the following meanings:
(A)"Iron Carbide Plant Tonneage" means, with respect to the applicable Product Quarter during which any Product is manufactured, the greater of 165,000 Tonnes of Product or actual Tonnes of Product manufactured at the Iron Carbide Plant for such Product Quarter.
(B)"Iron Carbide Plant PP&E Costs" means the total of all costs of property, plant and equipment (before depreciation) determined in accordance with Qualitech GAAP attributable to the Iron Carbide Plant. The Iron Carbide Plant PP&E Costs will be calculated as of the Commencement Date.
(C)"Qualitech GAAP" means generally accepted accounting principles applied on a basis consistent with prior periods without regard to materiality as used by Qualitech in preparing financial statements to its shareholders.
Page 1 of Annex 1
(D)"Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement
Date by multiplying $8,110,055 by a fraction, the numerator of which is
(x) Qualitech's Iron Carbide Plant PP&E Costs and the denominator of
which is (y) $111,817,000.
Page 2 of Annex 1
Exhibit 10.18
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
Table of Contents
Article I. Purpose and Legal Status................... 1
1.1 Purpose.................................... 1
1.2 Legal Status............................... 1
Article II. Definitions and Construction............... 1
2.1 Definitions................................ 1
2.2 Construction............................... 1
Article III. Eligibility............................... 2
Article IV. Administration of the Plan................. 2
4.1 The Committee.............................. 2
4.2 Authority.................................. 3
Article V. Stock Subject to the Plan.................. 3
5.1 Stock Available............................ 3
5.2 Changes to Stock........................... 4
Article VI. Qualification of the Plan; Terms and
Conditions................................. 4
6.1 Qualification of the Plan.................. 4
6.2 Terms and Conditions....................... 4
Article VII. Amendments and Termination............... 6
7.1 Plan Amendment............................. 6
7.2 Incentive Stock Option Amendment........... 6
Article VIII. Unfunded Status of Plan................. 7
Article IX. General Provisions......................... 7
9.1 Stock Restrictions......................... 7
9.2 Additional Compensation Arrangements....... 7
9.3 Nonguarantee of Employment................. 8
9.4 Withholding of Taxes....................... 8
9.5 Compliance with Law........................ 8
9.6 Effective Date and Term of Plan............ 8
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STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
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ARTICLE I. PURPOSE AND LEGAL STATUS
1.1 Purpose. The purpose of the Steel Dynamics Holdings, Inc. 1994 Incentive Stock Option Plan (the "Plan") is to enable key employees of Steel Dynamics Holdings, Inc. or its subsidiaries (the "Company") to (i) own shares of stock in the Company, (ii) participate in the shareholder value which will be created, (iii) have a mutuality of interest with other shareholders and (iv) enable the Company to attract, retain and motivate key employees of particular merit.
1.2 Legal Status. The Plan is intended to be an Incentive Stock Option Plan pursuant to Section 422 of the Code.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. For the purposes of the Plan, the following terms shall be defined as set forth below:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
" COMMITTEE" means the Committee designated by the Board to administer the Plan. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Board.
"COMPANY" means Steel Dynamics Holdings, Inc., an Indiana corporation, and its subsidiaries or any successor organization.
"DISABILITY" means permanent and total disability within the meaning of
Section 22(e)(3) of the Code.
"DISINTERESTED PERSON" shall have the meaning set forth in the Rules.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means the fair market value of the Stock as determined by the Committee in good faith based on the best available facts and circumstances at the time;
provided, however, that where there is a public market for the Stock and the Stock is registered under the Exchange Act, Fair Market Value shall mean the per share or aggregate value of the Stock as of any given date, as determined by reference to the price of the last traded share of Stock on the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System for such date or the next preceding date that Stock was traded on such market, or, in the event the Stock is listed on a stock exchange, the closing price per share of Stock as reported on such exchange for such date.
"INCENTIVE STOCK OPTION" or "OPTION" means any stock option granted pursuant to the Plan.
"IPO" means an Initial Public Offering pursuant to the Securities Act.
"OPTIONEE" means a key employee to whom an Option is granted pursuant to the Plan.
"PLAN" means the Steel Dynamics Holdings, Inc. 1994 Incentive Stock Option
Plan.
"RULES" means the regulations promulgated by the Securities and Exchange
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Commission under Section 16 of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK" means the Class A Common Stock of the Company, par value $.01 per share.
2.2 Construction. The masculine gender includes the feminine and the singular may include the plural, unless the context clearly indicates otherwise.
ARTICLE III. ELIGIBILITY
Key employees who are responsible for or contribute to the management, growth and/or profitability of the business of the Company are eligible to be granted Options under the Plan.
ARTICLE IV. ADMINISTRATION OF THE PLAN
4.1 The Committee. The Plan shall be administered by the Board or by a
Committee designated by the Board; provided, however, that if the Company
registers the Stock or any class of equity securities of the Company pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of all such registrations, grants of
Options shall only be made by a Committee of not less than two Disinterested
Persons who shall be appointed by the Board and who shall serve at the pleasure
of the Board.
4.2 Authority. The Committee shall have the authority to grant Incentive Stock Options pursuant to the terms of the Plan. In particular, the Committee shall, subject to the limitations and terms of the Plan, have the authority:
(a) to select the key employees of the Company to whom Options may from time to time be granted hereunder;
(b) to determine whether and to what extent Options are to be granted hereunder;
(c) to determine the number of shares to be covered by each such Option granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder, including, but not limited to, the option or exercise price and any restriction or limitation, based upon such factors as the Committee shall determine, in its sole discretion;
(e) to determine whether and under what circumstances an Option may be exercised and settled in cash or Stock or without a payment of cash; and
(f) to amend the terms of any outstanding Option (with the consent of the Optionee) to reflect terms not otherwise inconsistent with the Plan, including amendments concerning vesting acceleration or forfeiture waiver regarding any Option or the extension of an Optionee's right with respect to Options granted under the Plan, as a result of termination of employment or service or otherwise, based on such factors as the Committee shall determine, in its sole discretion.
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any Option issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Optionees.
ARTICLE V: STOCK SUBJECT TO THE PLAN
5.1 Stock Available. The aggregate number of shares of Stock that may be issued or transferred under the Plan is 21,800, subject to adjustment pursuant to Section 5.2 below. Such shares may be authorized but unissued shares or reacquired shares. In the event the number of
shares of Stock issued under the Plan and the number of shares of Stock subject to outstanding Options equals the maximum number of shares of Stock authorized under the Plan, no further Options shall be made unless the Plan is properly amended or additional shares of Stock become available for further Options under the Plan. If and to the extent that Options granted under the Plan terminate, expire or are canceled without having been exercised, such shares shall again be available for subsequent Options under the Plan.
5.2 Changes to Stock. If any change is made to the Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all outstanding Options under the Plan, the Board or the Committee shall preserve the value of the outstanding Options by adjusting the maximum number and class of shares issuable under the Plan to reflect the effect of such event or change in the Company's capital structure, and by making appropriate adjustments to the number and class of shares subject to an outstanding Option and/or the option price of each outstanding Option, except that any fractional shares resulting from such adjustments shall be eliminated by rounding any portion of a share equal to .500 or greater up, and any portion of a share equal to less than .500 down, in each case to the nearest whole number.
ARTICLE VI. QUALIFICATION OF THE PLAN; TERMS AND CONDITIONS
6.1 Qualification of the Plan. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Optionee(s) affected, to disqualify any Incentive Stock Option under Section 422 of the Code.
6.2 Terms and Conditions. Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate:
(a) Option Price. The option price per share of Stock purchasable under an Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Stock at the time of grant.
Any Option granted to any Optionee who, at the time the Option is granted,
owns more than 10% of the voting power of all classes of stock of the
Company or of a Parent or Subsidiary corporation (within the meaning of
Section 424 of the Code), shall have an exercise price no less than 110%
of Fair Market Value per share on date of the grant.
(b) Option Term. The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten years after the date the Option is granted. However, any Option granted to any Optionee who, at the time the Option is granted, owns more than 10% of the voting power of all classes of stock of the Company or of a Parent or Subsidiary corporation may not have a term of more than five years. No Option may be exercised by any person after expiration of the term of the Option.
(c) Exercisability. Options shall be exercisable on the fifth anniversary of the date of grant or at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant; provided, however, that, except as provided in Sections 6.2(f) through 6.2(h), unless otherwise determined by the Committee at or after grant, no Option shall be exercisable during the six months following the date of the granting of such Option. If the Committee provides, in its discretion, that any Option is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after grant in whole or in part, based on such factors as the Committee shall determine, in its sole discretion.
The aggregate Fair Market Value (determined as of the time of grant) of the Stock with respect to which Options are exercisable for the first time by the Optionee during any calendar year under the Plan and/or any other stock option plan of the Company shall not exceed $100,000.
(d) Method of Exercise. Subject to whatever installment exercise provisions apply under Section 6.2(c), Options may be exercised in whole or in part at any time and from time to time during the Option period, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price, either by certified or bank check, or such other instrument as the Committee may accept.
No shares of Stock shall be issued until full payment therefor has been made. An Optionee shall not have any rights to dividends or other rights of a shareholder with respect to shares subject to the Option until such time as Stock is issued in the name of the Optionee following exercise of the Option in accordance with the Plan.
(e) Non-transferability of Options. No Option shall be transferable by the Optionee otherwise than by will, by the laws of descent and distribution, pursuant to a qualified domestic relations order or as permitted under the Rules, and all Options shall be exercisable, during the Optionee's lifetime, only by the Optionee.
(f) Termination by Reason of Death. Unless otherwise determined by the Committee at or after grant, if an Optionee's employment by the Company terminates by reason of death, any Option held by such Optionee may thereafter be exercised, to the extent then exercisable or on such accelerated basis as the Committee may determine at or after grant,
by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of one hundred eighty (180) days (or such shorter period as the Committee may specify at grant) from the date of such death or until the expiration of the stated term of such Option, whichever period is shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by the Committee at or after grant, if an Optionee's employment by the Company terminates by reason of Disability, any Option held by such Optionee may thereafter be exercised by the Optionee, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine at or after grant, for a period of ninety (90) days (or such shorter period as the Committee may specify at grant) from the date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter; provided, however, that, if the Optionee dies within such ninety-day period (or such shorter period as the Committee shall specify at grant), any unexercised Option held by such Optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one hundred eighty (180) days from the date of such death or until the expiration of the stated term of such Option, whichever period is shorter.
(h) Voluntary Termination. Unless otherwise determined by the Committee at or after grant, if an Optionee voluntary terminates his employment with the Company, any Option held by such Optionee may thereafter be exercised by the Optionee, to the extent it was exercisable at the time of such termination or on such accelerated basis as the Committee may determine at or after grant, for a period of three months (or such shorter period as Committee may specify at grant) from the date of such termination of employment or the expiration of the stated term of such Option, whichever period is shorter; provided, however, that, if the Optionee dies within such three-month period, any unexercised Option held by such Optionee shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one hundred eighty (180) days from the date of such death or until the expiration of the stated term of such Option, whichever period is shorter.
(i) Other Termination. Unless otherwise determined by the Committee at or after grant, if an Optionee's employment by the Company terminates for any reason other than death, Disability or voluntary termination, the Option shall thereupon terminate.
ARTICLE VII. AMENDMENTS AND TERMINATION
7.1 Plan Amendment. The Board may amend, alter or discontinue the Plan at any time and from time to time, but no amendment, alteration, or discontinuation shall be made (i) which would impair the rights of an Optionee under an Option award previously granted, without the
Optionee's consent, or (ii) which, if such approval is not obtained, would require shareholder approval under the Rules.
7.2 Incentive Stock Option Amendment. The Committee may amend the terms of any Option granted, prospectively or retroactively, but no such amendment shall impair the rights of any Optionee without the Optionee's consent. The Committee may also substitute new Options for previously granted Options, including previously granted Options having higher option prices. Subject to the above provisions, the Board shall have broad authority to amend the Plan to take into account changes in applicable tax laws, securities laws and accounting rules, as well as other developments.
ARTICLE VIII. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to an Optionee by the Company, nothing contained herein shall give any such Optionee any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock; provided, however, that, unless the Committee otherwise determines with the consent of the affected Optionee, the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
ARTICLE IX. GENERAL PROVISIONS
9.1 Stock Restrictions. The Committee may require each person purchasing shares pursuant to an Option to represent to and agree with the Company in writing that the Optionee is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer under the Securities Act or any state securities law.
All certificates for shares of Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities Act, the Exchange Act, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
At the time of exercise the Committee may require that an Optionee execute a shareholders' agreement, which may include such restrictions on shares of stock received as a result of such grant as the Committee deems advisable, including but not limited to, making such
Stock subject to a right of first refusal or call option on behalf of the Company and/or its shareholders, subject to such terms and conditions as the Committee may specify at the time of grant.
9.2 Additional Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
9.3 Nonguarantee of Employment. The adoption of the Plan shall not confer upon any Optionee any right to continued employment with the Company nor shall it interfere in any way with the right of the Company to terminate its relationship with any of its employees at any time.
9.4 Withholding of Taxes. No later than the date as of which an amount first becomes includible in the gross income of the Optionee for federal income tax purposes with respect to any Option under the Plan, the Optionee shall pay to the Company or make arrangements satisfactory to the Committee regarding the payment of any federal state or local taxes of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan shall be conditioned on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee.
9.5 Compliance with Law. The Plan shall be governed by and subject to all applicable laws and to the approvals by any governmental or regulatory agency as may be required.
9.6 Effective Date and Term of Plan. The Plan shall be effective as of December 23, 1994, or, if later, the date the Plan is adopted by the Board, subject to the consent or approval of the Company's shareholders. No Option shall be granted pursuant to the Plan on or after ten years from the date this Plan is adopted by the Board, but Options granted prior to such tenth anniversary may extend beyond that date.
STEEL DYNAMICS HOLDINGS, INC.
Attest By /s/ Signature Illegible
-------------------------------- -------------------------------
Vice President
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STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION
GRANT LETTER
Steel Dynamics Holdings, Inc. (the "Company") has adopted the Steel Dynamics Holdings, Inc. 1994 Incentive Stock Option Plan (the "Plan"), subject to the approval of the holders of a majority of the Company's outstanding common stock. This Incentive Stock Option is granted to Michael J. Cedoz (the "Optionee") on February 27, 1995 (the "Date of Grant") in accordance with the terms of the Plan. Capitalized terms used and not otherwise defined in this Grant Letter are used herein as defined in the Plan.
1. Option Grant and Acceptance.
(a) The Company hereby grants to the Optionee, effective as of the Date of Grant, the right and option (the "Option") to purchase 300 shares of Class A Common Stock (the "Stock").
(b) The Optionee shall signify his acceptance of the Option by executing this Grant Letter.
(c) The Option designated hereunder shall be an incentive stock option intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Board shall interpret and construe the Option in accordance with this designation and pursuant to the terms of the Plan, and its decisions shall be conclusive as to any question arising hereunder.
2. Option Price.
The price of each share covered by this Option shall be $93.00 (the "Option Price"), which is the fair market value of the Stock on the Date of Grant.
3. Option Expiration.
The Option, to the extent that it has not theretofore been exercised, shall automatically expire on the earliest to occur of the following events:
(a) the close of business on February 27, 2005
(b) in the event of the Optionee's voluntary termination, the Option may be thereafter exercised by the Optionee, to the extent then exercisable, for a period of three months from the date of such termination or until the occurrence of the date specified in Section
3(a), whichever period is shorter; provided, however, that if the Optionee dies within such three-month period, the Option shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one hundred eighty (180) days from the date of such death or until the occurrence of the date specified in Section 3(a), whichever period is shorter.
(c) in the event of the Optionee's death, the Option may be thereafter exercised, to the extent then exercisable, by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of one hundred eighty (180) days from the date of death or until the occurrence of the date specified in Section 3(a), whichever period is shorter.
(d) in the event of the Optionee's "Disability" (as defined in
Section 2.1 of the Plan), the Option may thereafter be exercised by the
Optionee, to the extent it was then exercisable at the time of such Disability,
for a period of ninety (90) days from the date of such Disability or until the
occurrence of the date specified in Section 3(a), whichever period is shorter;
provided, however, that if the Optionee dies within such ninety-day period, the
Option may thereafter be exercisable, to the extent to which it was exercisable
at the time of death, for a period of one hundred eighty from the date of such
death or until the occurrence of the date specified in Section 3(a), whichever
period is shorter.
(e) in the event the Optionee ceases to be an employee of Company for any reason other than his voluntary termination, death or Disability, the Option shall thereupon expire.
4. Vesting.
Subject to the terms, conditions and limitations expressed herein, the Option shall become exercisable upon the fifth anniversary of the Date of Grant, provided, however, that such Option may become exercisable earlier as determined by the Committee, in its sole discretion. Prior to an IPO, the Option shall only be exercisable on March 1 and September 1 of the calendar year. Upon or after an IPO, the Option may be exercised at any time during the calendar year.
5. Exercise Procedures.
The Optionee may exercise the Option with respect to all or any part
of the shares then subject to such exercise, in multiples of 100 shares, by
giving written notice of his intent to exercise in the manner provided in
Section 15 hereof. Such notice shall specify the number of shares desired at the
option price and the date of delivery thereof, which date shall be at least 15
days after the giving of such notice, unless an earlier date shall have been
mutually agreed upon. On such delivery date, the Company shall deliver to the
Optionee at the executive office of the Company, 4500 County Road 59, Butler,
Indiana 46721, or such other place as may be mutually acceptable to the Company
and the Optionee, a certificate or certificates for such shares out of
theretofore unissued shares or reacquired shares, as the Company may elect,
against
payment by the Optionee of the applicable exercise price in cash, or in any other manner approved by the Board. The obligation of the Company to deliver shares upon such exercise of the Option shall be subject to all applicable laws, rules, regulations and such approvals by governmental agencies as may be deemed appropriate by the Board, including, among other things, such steps as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. All obligations of the Company hereunder shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes. If the Optionee fails to accept delivery of, or to pay for, any of the shares specified in such notice upon tender of delivery thereof, the Optionee's rights to purchase such undelivered shares may be terminated, at the sole discretion of the Board.
6. Nonassignability of Option Rights:
The Option shall not be assigned or transferred by the Optionee, except, in the event of the death of the Optionee, by will or by the laws of descent or distribution. During the life of the Optionee, the Option shall be exercisable only by the Optionee. Upon a transfer by will or by the laws of descent or distribution, the person to whom the Option is transferred shall have the right to exercise the Option in accordance with the Plan and this Grant Letter. Any attempt to assign, transfer, pledge or dispose of the Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect.
7. Grant Subject to Plan Provisions.
This grant is made pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The granting and exercise of the Option and the payment of dividends or other distributions with respect to the shares are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established from time to time by the Board in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the shares, (iii) capital or other changes of the Company and (iv) other requirements of applicable law. A copy of the Plan will be furnished to the Optionee upon request.
8. Adjustments.
If any change is made to the Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or any other change in capital structure made without receipt of consideration), then unless such event or change results in the termination of all outstanding grants under the Plan, the Board shall preserve the value of the Option by making appropriate adjustments to the number and class of shares, the Option Price or otherwise, except that any fractional shares resulting from such adjustment shall be eliminated by rounding any portion of a
share equal to .500 or greater up, and any portion of a share equal to or less than .500 down, in each case to the nearest whole number.
9. Stock Restrictions.
If an Optionee exercises an Option prior to the IPO, the Optionee must execute a shareholders' agreement prior to receipt of such Stock. The Stock will be subject to such restrictions as indicated by the shareholders' agreement, including but not limited to the following:
(a) If, prior to the IPO, the Optionee (while still an employee of the Company) wishes to dispose of any shares acquired pursuant to the exercise of the Option, such shares shall be subject to a right of first refusal, at the then fair market value, in favor of the Company and its then existing shareholders.
(b) In the event of the Optionee's termination of employment with the Company prior to the IPO, the Company and its then existing shareholders shall have the option to purchase the shares held by the Optionee as a result of the exercise of the Option at the then fair market value. If the disposition of the shares would be characterized as a "disqualifying disposition" for purposes of the Code, then the Optionee may elect to delay such disposition until such time as the disposition would not constitute a disqualifying disposition of the shares.
10. Withholding.
The Company shall have the right to deduct from any payment hereunder any federal, state, local or employment taxes which it deems are required by law to be withheld.
11. Administration.
The Option has been granted pursuant to the terms, conditions and other provisions of the Plan, as in effect on the Date of Grant, and as the Plan may be amended from time to time. All questions of interpretation and application of the Plan and of any grant under the Plan (including this grant) shall be determined by the Committee in its sole discretion, and such determination shall be final and binding upon all persons. The validity, construction and effect of this Option shall be determined in accordance with the laws of the State of Indiana, without giving effect to the principles of conflicts of law thereof.
12. No Employment Rights.
Neither the granting of the Option nor any other action taken with respect to the Option or the Plan shall confer upon the Optionee any right to continue in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Optionee's employment at any time. Except as may be otherwise limited by another written
agreement, the right of the Company to terminate at will the Optionee's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved.
13. No Stockholder Rights.
Neither the Optionee, nor any person entitled to exercise the Optionee's rights in the event of the Optionee's death, shall have any of the rights and privileges of a stockholder with respect to the shares subject to the Option, except to the extent that certificates for such shares shall have been issued upon exercise of the Option as provided herein.
14. Cancellation or Amendment.
This Option may be cancelled or amended by the Board, in whole or in part, at any time that the Board determines, in its sole discretion, that the cancellation or amendment is necessary or advisable in light of any change after the Date of Grant in (a) the Code or the regulations issued thereunder or (b) any federal or state securities law or other law or regulation, which change by its terms effective retroactively to a date on or before the Date of Grant; provided, however, that no such cancellation or amendment shall, without the Optionee's consent, apply to or affect installments that matured on or before the date on which the Board makes such determination.
15. Notice.
Any notice to the Company provided for in this Grant Letter shall be addressed to it in care of the Secretary of the Company, 4500 County Road 59, Butler, Indiana 46721, and any notice to the Optionee shall be addressed to the Optionee at the current address shown on the payroll of the Company, or to such other address the Optionee may designate to the Company in writing. Any notice provided for hereunder shall be delivered by hand, sent by telecopy or telex or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage and registry being prepaid, in a post office or branch post office regularly maintained by the United States Postal Service.
16. Optionee's Securities Law Representations.
If the Committee shall deem it appropriate by reason of any securities law, it may require that the Optionee upon exercise in whole or in part of the Option, represent to the Company and agree in writing that the purchase of the shares is for investment only and not with a view to distribution. The Committee may require that the share certificates be inscribed with a legend restricting transfer in accordance with applicable securities law requirements.
17. Applicable Law.
The validity, construction, interpretation and effect of this instrument shall be governed by and determined in accordance with the laws of the State of Indiana.
STEEL DYNAMICS HOLDINGS, INC.
Attest: By: /s/ Signature Illegible
--------------------------- -----------------------------------
Accepted By:
Witness: /s/ Signature Illegible /s/ Signature Illegible
--------------------------- ---------------------------------------
Optionee
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Exhibit 10.20
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June, 1994, by and between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, and KEITH BUSSE ("Employee").
In consideration of the mutual covenants and agreements set forth below, the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts employment with the Employer for a period of five (5) years, commencing with the first date for which the Employee receives compensation hereunder, subject, however, to prior termination of this Agreement in the event of disability (Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original term, employment hereunder shall be on a month-to-month basis. In the event, however, that employment is thereafter terminated or not renewed by the Employer, without cause within the meaning of Section 8.1, the Employee shall be entitled to receive six (6) months of severance compensation at the base salary rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall not be limited to) assisting in the design and layout, specification and selection of machinery and equipment, contract negotiations, construction monitoring, and overall supervision of a thin slab casting steel mill, to be located in the Midwest (the "Mill"); shall include employee staffing, training, and supervision; shall include troubleshooting in connection with start-up operations; and shall include the performance of such duties as President and Chief Executive Officer of Steel Dynamics, Inc. as may be prescribed from time to time by the Employer's Board of Directors. The Employee shall devote his full business time, skill, energies, business judgment, knowledge and best efforts to the advancement of the best interests of the Employer and the performance of his executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the mutual consent of the Employer and Employee without affecting the other terms or conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term of this Agreement, the Employee shall perform his
duties at such place or places as the Employee and the Employer may agree, including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in addition to the additional Employee Benefits to which the Employee is entitled pursuant to Article IV, the Employer shall pay to the Employee the following amounts:
3.1 A one-time payment, paid previously, in the amount of One Hundred Ninety-Five Thousand Dollars ($195,000), together with four annual payments of Thirty Thousand Dollars ($30,000) each, commencing October 1, 1994.
3.2 A base salary of Two Hundred Fifty Thousand Dollars ($250,000) per year, payable in periodic installments as shall be mutually agreeable between the parties but not less than monthly payments of Twenty Thousand Eight Hundred Thirty-Three Dollars and 33/100 ($20,833.33).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash and the balance of one-third (1/3) of which shall be payable in cash or deferred compensation pursuant to such terms and conditions as the parties may mutually agree in advance (and which may include rights to apply all or a portion thereof toward the purchase of Employer stock on the occurrence of certain future events). The annual bonus shall not exceed in the aggregate two hundred percent (200%) of the base salary described in Section 3.2. In order to calculate the amount of such bonus, an annual bonus pool of funds equal to three percent (3%) of the Employer's pre-tax earnings, as determined under generally accepted accounting principles for financial accounting purposes, less an amount equal to ten percent (10%) of the amount determined to constitute the equity investment in the company, shall be placed into such bonus pool. Such bonus pool to be allocated among specifically designated key executive employees, which shall include the Employee in proportion to his respective base salaries. The designation of key executive employees for bonus pool purposes, in addition to the Employee, shall be made by the Management Committee of the Employer's Board of Directors, with input from the Employee. Any funds not allocated or otherwise in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee shall be entitled in any and all events to a bonus of the greater of sixty percent (60%) of his base salary or the amount determined as a result of the foregoing pre-tax earnings formula, regardless of the Employer's profitability.
For purposes of this Section 3.3, the amount of the "equity investment" in the company shall be determined in accordance with generally accepted accounting principles, for financial accounting purposes, and shall be calculated on the basis of the total common and preferred stockholders' equity as of the beginning of the company's fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month following the commencement of actual compensation to the Employee hereunder, the Employer has not received funding commitments to enable the proposed thin slab casting steel mill to be constructed in the manner envisioned in a business plan to be developed for presentation to prospective investors, or if the Employer should determine that the proposed venture will not proceed (for that or any other reason), then, in addition to and not in lieu of the remaining compensation to which he is entitled hereunder, the Employee shall additionally receive, in cash, an amount equal to two (2) years of his base salary, as described in Section 3.2. This payment shall be deemed to be in exchange for the common shares of the Employer owned by or through the Employee at such time, and shall be conditioned upon the Employer's entitlement to a reconveyance of such shares concurrently therewith. This payment shall likewise be in lieu of and not in addition to any payments that may become due by reason of the operation of Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major medical health insurance and with long term disability insurance, with terms and in amounts comparable to or better than Employee's coverages from his previous employer, and Employer agrees to provide the Employee with term life insurance in an amount equal to twice the Employee's base salary with double indemnity in the case of death by accident.
4.2 The Employee shall be entitled to four (4) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the reasonable relocation expenses of the Employee and his family, which reimbursement shall include (but not necessarily be limited to) payment for house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of sale of the Employee's home (including title insurance, survey, real estate Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
months interest, insurance and taxes on the Employee's existing home mortgage (or until such earlier time as the Employee shall have sold that home). In addition, the Employer will reimburse and make the Employee whole on any loss on the sale of the Employee's current residence, based on current value; and to determine "current value" the Employee, at the Employer's expense, shall promptly secure a current MAI appraisal of the fair market value of his present home, based upon a proposed sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable to perform substantially all of his duties for a continuous period of six (6) months, either the Employee or the Employer may by notice terminate the Employee's employment under this Agreement, effective as of sixty (60) days after the date such notice is given. In the event of termination, however, the Employer agrees to continue paying the Employee an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, less any amounts payable to the Employee under any benefits paid by Workmen's Compensation, or under any other state disability benefits program, or any other Employer provided disability benefits, including the Employer's long-term disability policy called for by Section 4.1, but only during the remaining period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under this Agreement shall be deemed automatically terminated, effective as of the date of death; provided, however, that the Employer shall thereafter continue paying the Employee's estate or designated beneficiary an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business expenses related to the business of the Employer, including expenditures for entertainment, business promotion, and travel, according to policies and guidelines to be prescribed from time to time by the Board of Directors. The Employee shall be required to furnish to the Employer documentary evidence, as required for tax purposes, containing sufficient information to establish the amount, date, place, and the essential character of the expenditure.
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but ending, if sooner, on the date the common shares of Steel Dynamics Holdings, Inc. ("Holdings") are sold in an initial public offering and Holdings' common shares are listed on any national securities exchange or quoted on the NASD automated quotation system, should the Employee's employment terminate hereunder, then:
(a) If termination shall have occurred prior to one year after the date of Mill Completion (the "First Anniversary"), for cause, as defined in Section 8.1, Holdings shall automatically become entitled to a reconveyance of the Employee's common shares, without the payment of any consideration by Holdings other than the price paid by the Employee for such shares (which shall be paid in cash); and Holdings shall be entitled to petition any court with jurisdiction herein for the appointment of a special master to effect such conveyance, such grant of authority herein being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer induced harassment or hostile work environment, because the Employee voluntarily resigns prior to the Mill Completion, Holdings shall automatically become entitled to the same reconveyance of the Employee's shares, for the same consideration, and with the same power to compel the reconveyance as set forth in Section 6.1(a). If termination shall have occurred because of the Employee's disability (Section 4.4) or death (Section 4.5) prior to the First Anniversary, or Employee's voluntary resignation, after the date of Mill Completion and prior to the First Anniversary, the Employee (or his estate) shall have the option, exercisable within one (1) year following termination, to sell or "put" his Common Shares to Holdings, for cash, for an amount, determined as of the date of termination, equal to two (2) years of his base salary, as described in Section 3.2, and with the same power to compel the reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's termination of Employee's employment, without cause, prior to the First Anniversary, or because of termination by the Employer or the Employee after the First Anniversary, or because of the Employee's disability or death after the First Anniversary, the Employee shall have the option, exercisable within one (1) year following termination, to sell or "put" his common shares to Holdings (if, as, and when permitted under applicable state corporate law), for cash, in quarterly installment over a period of two (2) years,
with interest at the Employer's prime of "reference" rate for short-term
commercial borrowing, for an amount, determined as of the date of
termination, equal to the greater of (i) two times Employee's annual base
salary or (ii) the fair market value of such shares. In the event,
however, that Holdings is precluded by applicable corporate law or
Holdings is in default or would be in default under a loan or other
covenant from making any payment hereunder, otherwise required by this
Section 6.1(c), or if any such payment is required to be deferred, then,
Holdings shall not be required to purchase the Shares until such
restrictions lapse and of such time interests will also be paid to
Employee on such amount for the period Holdings was restricted from making
the required payment. Holdings shall use reasonable efforts to effectuate
Employee's exercise of the "put" herein, including good faith efforts to
obtain the consent of any lender or other party if a covenant or agreement
prohibits same or requires such consent. Fair market value of the shares
shall be agreed upon by Holdings' board of directors and the Employee. If
such parties are unable to agree upon such fair market value within 30
days of notice of any put or call, fair market value shall be determined
by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the substantial completion of the steel mill and commencement of marketable steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the right to "put" to Holdings an amount of common shares with a fair market value of up to a cap of $2.45 million.
6.2 In the event that Employee is no longer employed by Employer and becomes employed by a competitor of Employer, Holdings shall have the right to "call" or purchase the Employee's shares, at the same valuation and subject to the same terms and limitations described in Section 6.1(c) and the same rights to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this Agreement and to perform his duties and obligations hereunder without breaching or in any manner being in conflict with or in violation of any other agreements, whether employment agreements or otherwise, to which he is a party or by which he is bound.
7.2 He is not now subject to any covenant against competition or similar covenant which would affect his right to perform the duties contemplated hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate any trade secrets, or confidential information belonging to his former or current employer, whether in the form of papers, plans, drawings, specifications, electronic media, magnetic tape, or other documents, or information contained therein.
7.4 During the period of his anticipated employment, he will develop and have access to information related to the business, operations, future plans, processes, specifications, procedures, and research and development that the Employer will want to maintain as proprietary and not disclose publicly. The Employee covenants that during the term of his employment and thereafter he will keep confidential all such information and documents produced by or under his direction, furnished or available to him through any other means in connection with his employment, or to which he may otherwise have access in connection with his employment, and which was not otherwise known to him, and that he will not use such information to the Employer's disadvantage or disclose it to any other person, except to the extent that such information or documents are or thereafter become lawfully obtainable from other sources, are in the public domain through no fault on his part, or are consented to in writing by the Employer. Upon termination of his employment, the Employee shall return to the Employer all documents, records, lists, plans, drawings, layouts, specifications, and other documents which are in his possession, which relate to the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under applicable state or federal law, Employer, at its option, may terminate this Agreement for cause by giving written notice of such termination to the Employee, without prejudice to any other remedy to which the Employer may be entitled at law or in equity including Section 6.1(a); and in such event, all further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
8.3 Should employment be terminated without cause by the Employer, or, even if the Employee voluntarily terminates but the reason therefor is related to the Employer's creation or maintenance of a work environment that is hostile to the Employee, the Employee shall be entitled to all of his compensation set forth herein, subject only to the Employee's reasonable duty to mitigate his damages, and provided that compensation payable to Employee by the Employer will be reduced on a dollar for dollar basis to the extent of pre-tax compensation received by Employee from any competitor of the Employer. If employment is terminated by the Employee for any other reason, the Employee shall not be entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the other shall be in writing and may be effected either by personal delivery or by mail, registered or certified, postage prepaid, with return receipt requested. All notices and communications required or permitted to be given hereunder shall be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
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or to such other address as either party shall have furnished to the other by like notice. Notices shall be effective as of the third business day subsequent to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements between the parties with regard to the Employer's employment of the Employee, including that certain Employment Agreement dated September 7, 1993 between Employer and Employee, and this Agreement contains all of the covenants and agreements between the parties with regard to employment hereunder. There are
no promises, representations, conditions, provisions, or terms relating thereto other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and warranties to the Employer as set forth in Section 7.3, the Employer hereby agrees that in the event of any claims made against the Employee by his prior employer, including any litigation that may occur as a result thereof, or against the Employer and the Employee, and in which the claim is made that the Employee and/or the Employer has violated or is violating any agreement, undertaking, or covenant to which the Employee is or was a party and by which the Employee is bound, the Employer will provide the Employee with a defense against any such claim or litigation, including attorney fees, expenses, and other costs of defense; and the Employer will indemnify and hold the Employee harmless from and against any damages, costs, and attorney fees, or amounts paid in settlement of any such claims; provided, however, that this indemnity and hold harmless agreement shall not apply to any award for punitive damages nor to the extent that the Employee is found to have willfully or intentionally misappropriated any trade secrets, willfully or intentionally violated any such agreement, or misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be deemed a waiver by such party of such provision in any other instance or a waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the party to be charged.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
------------------------------------
KEITH BUSSE, President
Date: June 24, 1994
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EMPLOYEE:
/s/ Keith E. Busse
----------------------------------------
KEITH BUSSE
Date: June 24, 1994
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HOLDINGS:
STEEL DYNAMICS HOLDINGS, INC.
BY: /s/ Keith E. Busse
------------------------------------
KEITH BUSSE, President
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Exhibit 10.21
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June, 1994, by and between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, and MARK MILLETT ("Employee").
In consideration of the mutual covenants and agreements set forth below, the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts employment with the Employer for a period of five (5) years, commencing with the first date for which the Employee receives compensation hereunder, subject, however, to prior termination of this Agreement in the event of disability (Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original term, employment hereunder shall be on a month-to-month basis. In the event, however, that employment is thereafter terminated or not renewed by the Employer, without cause within the meaning of Section 8.1, the Employee shall be entitled to receive six (6) months of severance compensation at the base salary rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall not be limited to) assisting in the design and layout, specification and selection of machinery and equipment, contract negotiations, construction monitoring, and overall supervision of a thin slab casting steel mill, to be located in the Midwest (the "Mill"); shall include employee staffing, training, and supervision; shall include troubleshooting in connection with start-up operations; and shall include the performance of such duties as Vice President of Melting and Casting of Steel Dynamics, Inc. as may be prescribed from time to time by the Employer's Board of Directors. The Employee shall devote his full business time, skill, energies, business judgment, knowledge and best efforts to the advancement of the best interests of the Employer and the performance of his executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the mutual consent of the Employer and Employee without affecting the other terms or conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term of this Agreement, the Employee shall perform his
duties at such place or places as the Employee and the Employer may agree, including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in addition to the additional Employee Benefits to which the Employee is entitled pursuant to Article IV, the Employer shall pay to the Employee the following amounts:
3.1 A one-time payment, paid previously, in the amount of Sixty-Five Thousand Dollars ($65,000).
3.2 A base salary of One Hundred Fifty Thousand Dollars ($150,000) per year, payable in periodic installments as shall be mutually agreeable between the parties but not less than monthly payments of Twelve Thousand Five Hundred Dollars ($12,500.00).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash and the balance of one-third (1/3) of which shall be payable in cash or deferred compensation pursuant to such terms and conditions as the parties may mutually agree in advance (and which may include rights to apply all or a portion thereof toward the purchase of Employer stock on the occurrence of certain future events). The annual bonus shall not exceed in the aggregate two hundred percent (200%) of the base salary described in Section 3.2. In order to calculate the amount of such bonus, an annual bonus pool of funds equal to three percent (3%) of the Employer's pre-tax earnings, as determined under generally accepted accounting principles for financial accounting purposes, less an amount equal to ten percent (10%) of the amount determined to constitute the equity investment in the company, shall be placed into such bonus pool. Such bonus pool to be allocated among specifically designated key executive employees, which shall include the Employee in proportion to his respective base salaries. The designation of key executive employees for bonus pool purposes, in addition to the Employee, shall be made by the Management Committee of the Employer's Board of Directors, with input from the Employee. Any funds not allocated or otherwise in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee shall be entitled in any and all events to a bonus of the greater of sixty percent (60%) of his base salary or the amount determined as a result of the foregoing pre-tax earnings formula, regardless of the Employer's profitability.
For purposes of this Section 3.3, the amount of the "equity investment" in the company shall be determined in accordance with generally accepted accounting principles, for
financial accounting purposes, and shall be calculated on the basis of the total common and preferred stockholders' equity as of the beginning of the company's fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month following the commencement of actual compensation to the Employee hereunder, the Employer has not received funding commitments to enable the proposed thin slab casting steel mill to be constructed in the manner envisioned in a business plan to be developed for presentation to prospective investors, or if the Employer should determine that the proposed venture will not proceed (for that or any other reason), then, in addition to and not in lieu of the remaining compensation to which he is entitled hereunder, the Employee shall additionally receive, in cash, an amount equal to two (2) years of his base salary, as described in Section 3.2. This payment shall be deemed to be in exchange for the common shares of the Employer owned by or through the Employee at such time, and shall be conditioned upon the Employer's entitlement to a reconveyance of such shares concurrently therewith. This payment shall likewise be in lieu of and not in addition to any payments that may become due by reason of the operation of Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major medical health insurance and with long term disability insurance, with terms and in amounts comparable to or better than Employee's coverages from his previous employer, and Employer agrees to provide the Employee with term life insurance in an amount equal to twice the Employee's base salary with double indemnity in the case of death by accident.
4.2 The Employee shall be entitled to three (3) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the
reasonable relocation expenses of the Employee and his family, which
reimbursement shall include (but not necessarily be limited to) payment for
house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of
sale of the Employee's home (including title insurance, survey, real estate
Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
(12) months interest, insurance and taxes on the Employee's existing home
mortgage (or until such earlier time as the Employee shall have sold that home).
In addition, the Employer will reimburse and
make the Employee whole on any loss on the sale of the Employee's current residence, based on current value; and to determine "current value" the Employee, at the Employer's expense, shall promptly secure a current MAI appraisal of the fair market value of his present home, based upon a proposed sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable to perform substantially all of his duties for a continuous period of six (6) months, either the Employee or the Employer may by notice terminate the Employee's employment under this Agreement, effective as of sixty (60) days after the date such notice is given. In the event of termination, however, the Employer agrees to continue paying the Employee an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, less any amounts payable to the Employee under any benefits paid by Workmen's Compensation, or under any other state disability benefits program, or any other Employer provided disability benefits, including the Employer's long-term disability policy called for by Section 4.1, but only during the remaining period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under this Agreement shall be deemed automatically terminated, effective as of the date of death; provided, however, that the Employer shall thereafter continue paying the Employee's estate or designated beneficiary an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business expenses related to the business of the Employer, including expenditures for entertainment, business promotion, and travel, according to policies and guidelines to be prescribed from time to time by the Board of Directors. The Employee shall be required to furnish to the Employer documentary evidence, as required for tax purposes, containing sufficient information to establish the amount, date, place, and the essential character of the expenditure.
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but ending, if sooner, on the date the Employer's common shares of Steel Dynamics Holdings, Inc. ("Holdings") are sold in an initial public offering and the Holdings' common shares are listed
on any national securities exchange or quoted on the NASD automated quotation system, should the Employee's employment terminate hereunder, then:
(a) If termination shall have occurred prior to one year after the date of Mill Completion (the "First Anniversary"), for cause, as defined in Section 8.1, Holdings shall automatically become entitled to a reconveyance of the Employee's common shares, without the payment of any consideration by Holdings other than the price paid by the Employee for such shares (which shall be paid in cash); and Holdings shall be entitled to petition any court with jurisdiction herein for the appointment of a special master to effect such conveyance, such grant of authority herein being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer induced harassment or hostile work environment, because the Employee voluntarily resigns prior to the Mill Completion, Holdings shall automatically become entitled to the same reconveyance of the Employee's shares, for the same consideration, and with the same power to compel the reconveyance as set forth in Section 6.1(a). If termination shall have occurred because of the Employee's disability (Section 4.4) or death (Section 4.5) prior to the First Anniversary, or Employee's voluntary resignation, after the date of Mill Completion and prior to the First Anniversary, the Employee (or his estate) shall have the option, exercisable within one (1) year following termination, to sell or "put" his Common Shares to Holdings, for cash, for an amount, determined as of the date of termination, equal to two (2) years of his base salary, as described in Section 3.2, and with the same power to compel the reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's termination of Employee's employment, without cause, prior to the First Anniversary, or because of termination by the Employer or the Employee after the First Anniversary, or because of the Employee's disability or death after the First Anniversary, the Employee shall have the option, exercisable within one (1) year following termination, to sell or "put" his common shares to Holdings (if, as, and when permitted under applicable state corporate law), for cash, in quarterly installment over a period of two (2) years, with interest at the Employer's prime of "reference" rate for short-term commercial borrowing, for an amount, determined as of the date of termination, equal to the greater of (i) two times Employee's annual base salary or (ii) the fair market value of such shares. In the event, however, that Holdings is precluded by applicable corporate law or Holdings is in default or would be in default under a loan or other covenant from making any payment hereunder, otherwise required by this
Section 6.1(c), or if any such payment is required to be deferred, then, Holdings shall not be required to purchase the Shares until such restrictions lapse and at such time interests will also be paid to Employee on such amount for the period Holdings was restricted from making the required payment. Holdings shall use reasonable efforts to effectuate Employee's exercise of the "put" herein, including good faith efforts to obtain the consent of any lender or other party if a covenant or agreement prohibits same or requires such consent. Fair market value of the shares shall be agreed upon by Holdings' board of directors and the Employee. If such parties are unable to agree upon such fair market value within 30 days of notice of any put or call, fair market value shall be determined by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the substantial completion of the steel mill and commencement of marketable steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the right to "put" to Employer an amount of common shares with a fair market value of up to a cap of $1.4 million.
6.2 In the event that Employee is no longer employed by Employer and becomes employed by a competitor of Employer, Holdings shall have the right to "call" or purchase the Employee's shares, at the same valuation and subject to the same terms and limitations described in Section 6.1(c) and the same rights to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this Agreement and to perform his duties and obligations hereunder without breaching or in any manner being in conflict with or in violation of any other agreements, whether employment agreements or otherwise, to which he is a party or by which he is bound.
7.2 He is not now subject to any covenant against competition or similar covenant which would affect his right to perform the duties contemplated hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate any trade secrets, or confidential information belonging to his former or current employer, whether in
the form of papers, plans, drawings, specifications, electronic media, magnetic tape, or other documents, or information contained therein.
7.4 During the period of his anticipated employment, he will develop and have access to information related to the business, operations, future plans, processes, specifications, procedures, and research and development that the Employer will want to maintain as proprietary and not disclose publicly. The Employee covenants that during the term of his employment and thereafter he will keep confidential all such information and documents produced by or under his direction, furnished or available to him through any other means in connection with his employment, or to which he may otherwise have access in connection with his employment, and which was not otherwise known to him, and that he will not use such information to the Employer's disadvantage or disclose it to any other person, except to the extent that such information or documents are or thereafter become lawfully obtainable from other sources, are in the public domain through no fault on his part, or are consented to in writing by the Employer. Upon termination of his employment, the Employee shall return to the Employer all documents, records, lists, plans, drawings, layouts, specifications, and other documents which are in his possession, which relate to the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under applicable state or federal law, Employer, at its option, may terminate this Agreement for cause by giving written notice of such termination to the Employee, without prejudice to any other remedy to which the Employer may be entitled at law or in equity including Section 6.1(a); and in such event, all further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
8.3 Should employment be terminated without cause by the Employer, or, even if the Employee voluntarily terminates but the reason therefor is related to the Employer's creation or maintenance of a work environment that is hostile to the Employee, the Employee shall be entitled to all of his compensation set forth herein, subject only to the Employee's reasonable duty to mitigate his damages, and provided that compensation payable to Employee by
the Employer will be reduced on a dollar for dollar basis to the extent of pre-tax compensation received by Employee from any competitor of the Employer. If employment is terminated by the Employee for any other reason, the Employee shall not be entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the other shall be in writing and may be effected either by personal delivery or by mail, registered or certified, postage prepaid, with return receipt requested. All notices and communications required or permitted to be given hereunder shall be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Mark Millett
Imperial Blvd.
Crawfordsville, IN 47933
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
|
or to such other address as either party shall have furnished to the other by like notice. Notices shall be effective as of the third business day subsequent to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements between the parties with regard to the Employer's employment of the Employee, including that certain Employment Agreement dated September 7, 1993 between Employer and Employee, and this Agreement contains all of the covenants and agreements between the parties with regard to employment hereunder. There are no promises, representations, conditions, provisions, or terms relating thereto other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and warranties to the Employer as set forth in Section 7.3, the Employer hereby agrees that in the event of any claims made against the Employee by his prior employer, including any litigation that may occur as a result thereof, or against the
Employer and the Employee, and in which the claim is made that the Employee and/or the Employer has violated or is violating any agreement, undertaking, or covenant to which the Employee is or was a party and by which the Employee is bound, the Employer will provide the Employee with a defense against any such claim or litigation, including attorney fees, expenses, and other costs of defense; and the Employer will indemnify and hold the Employee harmless from and against any damages, costs, and attorney fees, or amounts paid in settlement of any such claims; provided, however, that this indemnity and hold harmless agreement shall not apply to any award for punitive damages nor to the extent that the Employee is found to have willfully or intentionally misappropriated any trade secrets, willfully or intentionally violated any such agreement, or misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be deemed a waiver by such party of such provision in any other instance or a waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the party to be charged.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
----------------------------------
KEITH BUSSE, President
Date: June 24, 1994
|
EMPLOYEE:
/s/ Mark Millett -------------------------------------- MARK MILLETT Date: June 24, 1994 |
HOLDINGS:
STEEL DYNAMICS HOLDINGS, INC.
BY: /s/ Keith E. Busse
----------------------------------
KEITH BUSSE, President
|
Exhibit 10.22
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June, 1994, by and between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, and RICHARD P. TEETS, JR. ("Employee").
In consideration of the mutual covenants and agreements set forth below, the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts employment with the Employer for a period of five (5) years, commencing with the first date for which the Employee receives compensation hereunder, subject, however, to prior termination of this Agreement in the event of disability (Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original term, employment hereunder shall be on a month-to-month basis. In the event, however, that employment is thereafter terminated or not renewed by the Employer, without cause within the meaning of Section 8.1, the Employee shall be entitled to receive six (6) months of severance compensation at the base salary rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall not be limited to) assisting in the design and layout, specification and selection of machinery and equipment, contract negotiations, construction monitoring, and overall supervision of a thin slab casting steel mill, to be located in the Midwest (the "Mill"); shall include employee staffing, training, and supervision; shall include troubleshooting in connection with start-up operations; and shall include the performance of such duties as Vice President of Rolling and Finishing of Steel Dynamics, Inc. as may be prescribed from time to time by the Employer's Board of Directors. The Employee shall devote his full business time, skill, energies, business judgment, knowledge and best efforts to the advancement of the best interests of the Employer and the performance of his executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the mutual consent of the Employer and Employee without affecting the other terms or conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term of this Agreement, the Employee shall perform his
duties at such place or places as the Employee and the Employer may agree, including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in addition to the additional Employee Benefits to which the Employee is entitled pursuant to Article IV, the Employer shall pay to the Employee the following amounts:
3.1 A one-time payment, paid previously, in the amount of Sixty-Five Thousand Dollars ($65,000).
3.2 A base salary of One Hundred Fifty Thousand Dollars ($150,000) per year, payable in periodic installments as shall be mutually agreeable between the parties but not less than monthly payments of Twelve Thousand Five Hundred Dollars ($12,500.00).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash and the balance of one-third (1/3) of which shall be payable in cash or deferred compensation pursuant to such terms and conditions as the parties may mutually agree in advance (and which may include rights to apply all or a portion thereof toward the purchase of Employer stock on the occurrence of certain future events). The annual bonus shall not exceed in the aggregate two hundred percent (200%) of the base salary described in Section 3.2. In order to calculate the amount of such bonus, an annual bonus pool of funds equal to three percent (3%) of the Employer's pre-tax earnings, as determined under generally accepted accounting principles for financial accounting purposes, less an amount equal to ten percent (10%) of the amount determined to constitute the equity investment in the company, shall be placed into such bonus pool. Such bonus pool to be allocated among specifically designated key executive employees, which shall include the Employee in proportion to his respective base salaries. The designation of key executive employees for bonus pool purposes, in addition to the Employee, shall be made by the Management Committee of the Employer's Board of Directors, with input from the Employee. Any funds not allocated or otherwise in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee shall be entitled in any and all events to a bonus of the greater of sixty percent (60%) of his base salary or the amount determined as a result of the foregoing pre-tax earnings formula, regardless of the Employer's profitability.
For purposes of this Section 3.3, the amount of the "equity investment" in the company shall be determined in accordance with generally accepted accounting principles, for
financial accounting purposes, and shall be calculated on the basis of the total common and preferred stockholders' equity as of the beginning of the company's fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month following the commencement of actual compensation to the Employee hereunder, the Employer has not received funding commitments to enable the proposed thin slab casting steel mill to be constructed in the manner envisioned in a business plan to be developed for presentation to prospective investors, or if the Employer should determine that the proposed venture will not proceed (for that or any other reason), then, in addition to and not in lieu of the remaining compensation to which he is entitled hereunder, the Employee shall additionally receive, in cash, an amount equal to two (2) years of his base salary, as described in Section 3.2. This payment shall be deemed to be in exchange for the common shares of the Employer owned by or through the Employee at such time, and shall be conditioned upon the Employer's entitlement to a reconveyance of such shares concurrently therewith. This payment shall likewise be in lieu of and not in addition to any payments that may become due by reason of the operation of Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major medical health insurance and with long term disability insurance, with terms and in amounts comparable to or better than Employee's coverages from his previous employer, and Employer agrees to provide the Employee with term life insurance in an amount equal to twice the Employee's base salary with double indemnity in the case of death by accident.
4.2 The Employee shall be entitled to three (3) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the
reasonable relocation expenses of the Employee and his family, which
reimbursement shall include (but not necessarily be limited to) payment for
house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of
sale of the Employee's home (including title insurance, survey, real estate
Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
(12) months interest, insurance and taxes on the Employee's existing home
mortgage (or until such earlier time as the Employee shall have sold that home).
In addition, the Employer will reimburse and
make the Employee whole on any loss on the sale of the Employee's current residence, based on current value; and to determine "current value" the Employee, at the Employer's expense, shall promptly secure a current MAI appraisal of the fair market value of his present home, based upon a proposed sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable to perform substantially all of his duties for a continuous period of six (6) months, either the Employee or the Employer may by notice terminate the Employee's employment under this Agreement, effective as of sixty (60) days after the date such notice is given. In the event of termination, however, the Employer agrees to continue paying the Employee an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, less any amounts payable to the Employee under any benefits paid by Workmen's Compensation, or under any other state disability benefits program, or any other Employer provided disability benefits, including the Employer's long-term disability policy called for by Section 4.1, but only during the remaining period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under this Agreement shall be deemed automatically terminated, effective as of the date of death; provided, however, that the Employer shall thereafter continue paying the Employee's estate or designated beneficiary an amount equal to and in the same periodic installments as his base salary, as provided in Section 3.2, but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business expenses related to the business of the Employer, including expenditures for entertainment, business promotion, and travel, according to policies and guidelines to be prescribed from time to time by the Board of Directors. The Employee shall be required to furnish to the Employer documentary evidence, as required for tax purposes, containing sufficient information to establish the amount, date, place, and the essential character of the expenditure.
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but ending, if sooner, on the date the Employer's common shares of Steel Dynamics Holdings, Inc. ("Holdings") are sold in an initial public offering and Holdings' common shares are listed on
any national securities exchange or quoted on the NASD automated quotation system, should the Employee's employment terminate hereunder, then:
(a) If termination shall have occurred prior to one year after the date of Mill Completion (the "First Anniversary"), for cause, as defined in Section 8.1, Holdings shall automatically become entitled to a reconveyance of the Employee's common shares, without the payment of any consideration by Holdings other than the price paid by the Employee for such shares (which shall be paid in cash); and Holdings shall be entitled to petition any court with jurisdiction herein for the appointment of a special master to effect such conveyance, such grant of authority herein being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer induced harassment or hostile work environment, because the Employee voluntarily resigns prior to the Mill Completion, Holdings shall automatically become entitled to the same reconveyance of the Employee's shares, for the same consideration, and with the same power to compel the reconveyance as set forth in Section 6.1(a). If termination shall have occurred because of the Employee's disability (Section 4.4) or death (Section 4.5) prior to the First Anniversary, or Employee's voluntary resignation, after the date of Mill Completion and prior to the First Anniversary, the Employee (or his estate) shall have the option, exercisable within one (1) year following termination, to sell or "put" his Common Shares to Holdings, for cash, for an amount, determined as of the date of termination, equal to two (2) years of his base salary, as described in Section 3.2, and with the same power to compel the reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's termination of Employee's employment, without cause, prior to the First Anniversary, or because of termination by the Employer or the Employee after the First Anniversary, or because of the Employee's disability or death after the First Anniversary, the Employee shall have the option, exercisable within one (1) year following termination, to sell or "put" his common shares to Holdings (if, as, and when permitted under applicable state corporate law), for cash, in quarterly installment over a period of two (2) years, with interest at the Employer's prime of "reference" rate for short-term commercial borrowing, for an amount, determined as of the date of termination, equal to the greater of (i) two times Employee's annual base salary or (ii) the fair market value of such shares. In the event, however, that Holdings is precluded by applicable corporate law or Holdings is in default or would be in default under a loan or other covenant from making any payment hereunder, otherwise required by this
Section 6.1(c), or if any such payment is required to be deferred, then, Holdings shall not be required to purchase the Shares until such restrictions lapse and at such time interests will also be paid to Employee on such amount for the period Holdings was restricted from making the required payment. Holdings shall use reasonable efforts to effectuate Employee's exercise of the "put" herein, including good faith efforts to obtain the consent of any lender or other party if a covenant or agreement prohibits same or requires such consent. Fair market value of the shares shall be agreed upon by Holdings' board of directors and the Employee. If such parties are unable to agree upon such fair market value within 30 days of notice of any put or call, fair market value shall be determined by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the substantial completion of the steel mill and commencement of marketable steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the right to "put" to Employer an amount of common shares with a fair market value of up to a cap of $1.4 million.
6.2 In the event that Employee is no longer employed by Employer and becomes employed by a competitor of Employer, Holdings shall have the right to "call" or purchase the Employee's shares, at the same valuation and subject to the same terms and limitations described in Section 6.1(c) and the same rights to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this Agreement and to perform his duties and obligations hereunder without breaching or in any manner being in conflict with or in violation of any other agreements, whether employment agreements or otherwise, to which he is a party or by which he is bound.
7.2 He is not now subject to any covenant against competition or similar covenant which would affect his right to perform the duties contemplated hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate any trade secrets, or confidential information belonging to his former or current employer, whether in
the form of papers, plans, drawings, specifications, electronic media, magnetic tape, or other documents, or information contained therein.
7.4 During the period of his anticipated employment, he will develop and have access to information related to the business, operations, future plans, processes, specifications, procedures, and research and development that the Employer will want to maintain as proprietary and not disclose publicly. The Employee covenants that during the term of his employment and thereafter he will keep confidential all such information and documents produced by or under his direction, furnished or available to him through any other means in connection with his employment, or to which he may otherwise have access in connection with his employment, and which was not otherwise known to him, and that he will not use such information to the Employer's disadvantage or disclose it to any other person, except to the extent that such information or documents are or thereafter become lawfully obtainable from other sources, are in the public domain through no fault on his part, or are consented to in writing by the Employer. Upon termination of his employment, the Employee shall return to the Employer all documents, records, lists, plans, drawings, layouts, specifications, and other documents which are in his possession, which relate to the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under applicable state or federal law, Employer, at its option, may terminate this Agreement for cause by giving written notice of such termination to the Employee, without prejudice to any other remedy to which the Employer may be entitled at law or in equity including Section 6.1(a); and in such event, all further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
8.3 Should employment be terminated without cause by the Employer, or, even if the Employee voluntarily terminates but the reason therefor is related to the Employer's creation or maintenance of a work environment that is hostile to the Employee, the Employee shall be entitled to all of his compensation set forth herein, subject only to the Employee's reasonable duty to mitigate his damages, and provided that compensation payable to Employee by
the Employer will be reduced on a dollar for dollar basis to the extent of pre-tax compensation received by Employee from any competitor of the Employer. If employment is terminated by the Employee for any other reason, the Employee shall not be entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the other shall be in writing and may be effected either by personal delivery or by mail, registered or certified, postage prepaid, with return receipt requested. All notices and communications required or permitted to be given hereunder shall be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Richard P. Teets, Jr.
4933 Wellington Blvd.
Crawfordsville, IN 47933
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
|
or to such other address as either party shall have furnished to the other by like notice. Notices shall be effective as of the third business day subsequent to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements between the parties with regard to the Employer's employment of the Employee, including that certain Employment Agreement dated September 7, 1993 between Employer and Employee, and this Agreement contains all of the covenants and agreements between the parties with regard to employment hereunder. There are no promises, representations, conditions, provisions, or terms relating thereto other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and warranties to the Employer as set forth in Section 7.3, the Employer hereby agrees that in the event of any claims made against the Employee by his prior employer, including any litigation that may occur as a result thereof, or against the
Employer and the Employee, and in which the claim is made that the Employee and/or the Employer has violated or is violating any agreement, undertaking, or covenant to which the Employee is or was a party and by which the Employee is bound, the Employer will provide the Employee with a defense against any such claim or litigation, including attorney fees, expenses, and other costs of defense; and the Employer will indemnify and hold the Employee harmless from and against any damages, costs, and attorney fees, or amounts paid in settlement of any such claims; provided, however, that this indemnity and hold harmless agreement shall not apply to any award for punitive damages nor to the extent that the Employee is found to have willfully or intentionally misappropriated any trade secrets, willfully or intentionally violated any such agreement, or misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be deemed a waiver by such party of such provision in any other instance or a waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the party to be charged.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
--------------------------------
KEITH BUSSE, President
Date: June 24, 1994
|
EMPLOYEE:
/s/ Richard P. Teets, Jr.
-------------------------------------
RICHARD P. TEETS, JR.
Date: June 24, 1994
|
STEEL DYNAMICS HOLDINGS INC.
BY: /s/ Keith E. Busse
---------------------------------
KEITH BUSSE, President
|
Exhibit 10.25
"SECOND LOOK" EXPORT DISTRIBUTION AGREEMENT
This Agreement, dated this 10th day of September, 1996, (the "Agreement"), is entered into by and between STEEL DYNAMICS, INC., an Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a corporation incorporated under the laws of the State of New York ("Sumitomo").
WHEREAS, SDI has entered into a Purchasing, Domestic Sales and Export Distribution Agreement, dated December 12, 1995, with Preussag Stahl AG, a corporation organized under the laws of the Federal Republic of Germany, a true and correct copy of which has been made available to Sumitomo, pursuant to which SDI, inter alia, appointed Preussag as its preferred distributor for all sales of SDI's flat-rolled steel products to customers outside of North America and Mexico (the "Export Territory"), for a term extending through December 31, 2002;
WHEREAS, pursuant to the foregoing Preussag Agreement, SDI is not permitted to authorize any other distributor, agent, broker or sales representative, other than Preussag, to solicit sales within the Export Territory, nor is SDI permitted itself to solicit any such orders;
WHEREAS, pursuant to the Preussag Agreement, if SDI receives an unsolicited purchase order from or for export to the Export Territory, it is required to accord Preussag a right of first refusal for a period of five (5) business days after notice;
WHEREAS, Sumitomo has requested, and SDI has agreed, that in the event that Preussag declines or is unable to provide SDI with purchase orders for all or any portion of SDI's products that SDI wishes to provide for sale into the Export Territory, Sumitomo should have the opportunity to market and sell such product.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings of the parties as set forth herein, the parties agree as follows:
1. Notification To Sumitomo Of Available Product For Sale Into Export Territory. From time to time, as and when SDI determines that it has flat-rolled steel products ("Product") that it wishes to consider for sale into the Export Territory, with respect to which Preussag has either declined or has been unable to provide SDI with acceptable export purchase orders in accordance with Preussag's rights and SDI's obligations under the Preussag Agreement, SDI shall notify Sumitomo of such available Product, specifying the particular grade, quality, chemistry, gauge and width thereof, the available dates and quantities that may be available for shipment (which dates shall not be sooner than ninety (90) days from the date of such notice), together with SDI's price in United States dollars below which it would not be willing to consider purchase orders. All prices shall be deemed "FOB" SDI's mini-mill in Butler, Indiana.
2. Proposals For Purchase Orders. Within twenty (20) days after receiving SDI's notice of availability of specific Product for export sale into the Export Territory, Sumitomo shall submit purchase orders to SDI, in writing, specifying the Product ordered, the quantity thereof, delivery dates, and other proposed terms and conditions. Thereafter, SDI shall respond to Sumitomo within two (2) days that it either accepts or rejects each such purchase order. SDI shall not be required to accept any orders at prices or on terms that it does not consider beneficial. All purchase orders submitted by Sumitomo hereunder shall be subject to acceptance or rejection by SDI, and no such order or offer shall be binding upon SDI until so accepted. All SDI sales to Sumitomo to or through Sumitomo hereunder will be pursuant to SDI's sales order acknowledgments and its standard terms and conditions of sale, unless otherwise agreed.
3. Purchase And/Or Resale By Sumitomo. All sales to or through Sumitomo into the Export Territory shall be for Sumitomo's own account, regardless of whether it is purchasing Product for its own use in the Export Territory or for resale to customers therein. It is understood by SDI that the price and terms and conditions of resale by Sumitomo in the Export Territory shall be determined by Sumitomo in its sole discretion, and any and all payments made by Sumitomo's customers in the Export Territory for Products sold hereunder shall be retained by Sumitomo for its own account. All prices shall be stated in terms of and shall be payable in United States dollars, and Sumitomo shall be solely responsible for any bad debts or currency exchange losses arising from such sales.
4. Unsolicited Offers By Sumitomo. If from time to time, and not on any regular basis, Sumitomo has what it considers to be attractive export sales possibilities within the Export Territory that it wishes to bring to SDI's attention, notwithstanding the fact that SDI provided it with no offer of availability of Product for sale into such Export Territory, and if Sumitomo presents SDI with any such proposed purchase orders stating the type of Product, the quantities, delivery dates, FOB mini-mill price, and other pertinent terms and conditions, SDI shall first be required to present such unsolicited offer to Preussag, pursuant to Section III. B. 8 of the Preussag Agreement, and Preussag shall have five (5) business days thereafter to exercise its right of first refusal. If Preussag declines the offer or is unwilling or unable to provide SDI with the same or substantially similar price and terms, SDI shall be entitled to either accept or reject such Sumitomo offer. If SDI rejects such offer, any subsequent proposal from Sumitomo shall be deemed a new unsolicited offer with respect to which SDI is required to present such offer for Preussag's first refusal consideration.
5. Fulfillment Of Orders. All purchase orders accepted by SDI hereunder shall be subject to a variance, within the quantities ordered, of plus or minus ten percent (10%). Subject to such adjustment, as well as to raw materials supply availability or
interruption in production due to force majeure, as described herein, SDI shall produce sufficient quantities of its Product to complete all accepted Sumitomo orders for sale into the Export Market, as herein provided, and shall use its best efforts to meet the delivery dates proposed in each such accepted order. To the extent possible, Sumitomo will use its best efforts to accommodate any SDI request for modification of quantities or delivery dates for accepted orders, if deemed necessary by SDI. Unless otherwise specified in its acceptance, orders shall be "FOB" SDI's mini-mill in Butler, Indiana, and title shall pass to Sumitomo, as well as risk of loss in respect of the Product, at the FOB shipping point.
6. Compensation To Sumitomo. In addition to any single run discounts, volume rebates, or any other discounts that may be applicable to the particular sale, Sumitomo shall be entitled to a sales commission of $1.00 per ton of Product purchased from SDI for sale in the Export Territory. Payment of commissions to Sumitomo shall be made on or before the twenty-fifth (25th) day of the month following the month in which the particular Product was sold, invoiced, and paid. SDI shall pay commissions by check or wire transfer in accordance with instructions timely received from Sumitomo. All costs and expenses incurred by Sumitomo for its sales and marketing efforts for such "second look" sales into the Export Territory shall be born entirely by Sumitomo. Likewise, all taxes or other charges which may be due to any governmental agency of any country or subdivision thereof in respect of any such sales shall be the responsibility of Sumitomo.
7. Licenses And Permits. Sumitomo shall be responsible for obtaining all required governmental licensing permits and for satisfying whatever formalities may be required with respect to any sales into the Export Territory effected to or through Sumitomo.
8. General Obligations Of SDI. In addition to any sales commitments arising hereunder, SDI shall either confirm or reject all Sumitomo purchase orders, including any requests for modification or cancellation transmitted to it by Sumitomo, within seven (7) days, and shall cooperate with Sumitomo in dealing promptly and fairly with any complaints concerning the quality of the Product, including taking such action to resolve justified complaints as may be reasonably requested by Sumitomo.
9. Term Of Agreement. This Agreement shall commence on the date of its execution and shall continue until December 31, 2002. At the expiration of this term, the Agreement shall terminate, although it may continue on a month-to-month basis thereafter if the parties so desire; provided, however, that no such month-to-month extension shall be deemed to imply any obligation on the part of SDI or Sumitomo to extend this term for any period beyond thirty (30) days.
10. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that SDI notifies Sumitomo of its failure to properly perform its marketing and sales duties in accordance herewith, and in the further event that such failure continues unabated for a period in excess of thirty (30) days after such notification to Sumitomo, in writing, with a particularized statement of the failure to perform that is claimed by SDI, then SDI, at its sole option, shall have the right to terminate this Agreement, for cause, based upon Sumitomo's default. In the event, however, that prior to the lapse of the thirty (30) day cure period Sumitomo has taken reasonable steps to correct the default, and if Sumitomo can reasonably correct such default and cure the problem within an additional thirty (30) day period, Sumitomo shall be entitled to that additional period before SDI is entitled to terminate the Agreement. Any such termination shall not relieve Sumitomo from any liability which may have arisen hereunder prior to such termination, nor shall any such termination relieve Sumitomo of any claim for damages or other liabilities arising as a consequence of its default hereunder.
In the event that Sumitomo becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceeding by or against Sumitomo under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee, or assignee for the benefit of creditors of Sumitomo, then, at SDI's election, this Agreement may be immediately terminated.
B. Breach Of Performance By SDI. Apart from any particular
dispute that may from time to time involve individual
shipments by SDI of allegedly non-conforming Products that
are subject to the "Claims Handling" procedures described in
Section 11, in the event that Sumitomo believes that SDI has
failed to perform in its obligations in accordance with this
Agreement, and in the further event that such alleged failure
continues unabated for a period in excess of thirty (30) days
after notification to SDI in writing with a particularized
statement of the alleged failure to perform, then Sumitomo, at
its option, shall have the right to terminate this Agreement
based upon such SDI default. In the event, however, that prior
to the lapse of the thirty (30) day cure period, SDI has taken
reasonable steps to correct the default and if SDI can
reasonably correct and cure the problem within an additional
thirty (30) day period, SDI shall be entitled to the
additional period before Sumitomo shall be entitled to declare
a default. Any termination of this Agreement shall not relieve
SDI from any liability which may have arisen hereunder prior
to such termination, nor shall any such termination relieve
SDI of any claim for damages or other liabilities that may
arise as a
consequence of its default hereunder.
If SDI becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceedings by or against SDI under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee or assignee for the benefit of creditors of SDI, then, at Sumitomo's election, this Agreement may be immediately terminated.
11. Claims Handling. If any Product purchased by a customer of Sumitomo, or directly by Sumitomo, fails to meet the proper specifications represented by SDI, then, prior to any party's invoking any other remedy to which it might be entitled, at law or in equity, Sumitomo, if aware of the defect or of the non-conformity, shall notify SDI of the non-conformity, provide SDI an opportunity to inspect the allegedly non-conforming Product, and either propose a reduced price therefor or make some other gesture of accommodation. If the parties cannot successfully negotiate an appropriate resolution of the problem within thirty (30) days, then the party alleging the non-conformity may resort to any other remedy. It is understood that, although this informal claims handling procedure may not be formally binding upon a Sumitomo customer, which is not a party to this Agreement, Sumitomo will use its best efforts to encourage its customer, in the first instance, to resort to this informal claims handling procedure.
12. Force Majeure. In the event that performance of obligations hereunder by either party is legally excusable by reason of a force majeure, either party which believes that its performance is excused thereby shall give written notice to the other, as soon as possible and with sufficient detail to permit the other to minimize inconvenience and expense. A force majeure shall include (but shall not be limited to) natural disasters, wars, acts of government (including refusal to grant authorizations required to effectuate performance), power failures or interruptions, unanticipated breakdowns of equipment, extraordinary market or supply conditions beyond the party's control, labor strife, raw material shortages, transportation difficulties, legal restrictions on performance, and the like. If any force majeure continues for a period of greater than 360 days, either party shall have the right to terminate this Agreement.
13. Notices. All communications required by this Agreement to be given by one party to the other shall be in writing and delivered by hand, or by certified or registered mail, with postage pre-paid and return receipt requested, or by any other overnight express delivery or facsimile transmission which provide evidence of receipt, addressed or dispatched to the appropriate party at the address set forth below (unless a party has previously advised the other to use a different address or facsimile number):
If to Sumitomo:
Sumitomo Corporation of America
Attention: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to SDI:
Keith E. Busse, President
Steel Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when received.
14. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the matter of Sumitomo's export distribution rights for SDI's flat-rolled steel that forms the subject matter hereof, and it supersedes any concurrent or prior understandings or agreements between the parties. Except as noted herein, no changes to this Agreement shall be binding unless in writing and signed by each party.
15. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the state of Indiana.
16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first above written.
SUMITOMO CORPORATION OF AMERICA
By__________________________________________
Title_______________________________________
STEEL DYNAMICS, INC.
By__________________________________________
Title_______________________________________
Exhibit 10.26
SALE OF EXCESS PRODUCT AGREEMENT
This Agreement, dated this 28th day of October, 1996 (the "Agreement"), is entered into by and between IRON DYNAMICS, INC., an Indiana corporation ("IDI") and the wholly-owned subsidiary of STEEL DYNAMICS, INC., an Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a New York corporation ("Sumitomo").
WHEREAS, IDI intends to design, build, and operate a new manufacturing facility for the production of a direct reduced iron ("DRI") product, using iron ore fines with coal as a reductant;
WHEREAS, IDI intends to provide all or substantially all of the DRI that it produces to SDI for SDI's use as a feed stock by SDI either directly in its steel making melting furnace or for further processing through a submerged arch electric furnace;
WHEREAS, IDI may from time to time produce DRI in quantities not required by SDI, either for immediate use or for inventory, and may desire, instead, to sell such excess DRI into the marketplace; and
WHEREAS, if and to the extent that IDI produces Excess DRI, Sumitomo wishes to market and sell, on behalf of IDI, some of such Excess DRI, for a fee, and under terms and conditions satisfactory to IDI,
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties set forth herein, the parties agree as follows:
1. Designation of Excess DRI: In the exercise of IDI's sole discretion, after consulting with SDI to determine SDI's DRI needs for each calendar quarter (which needs shall in all events have priority over IDI's use or disposition of its DRI for the benefit of anyone other than SDI), IDI shall decide, not later than forty-five (45) days in advance of each such calendar quarter, whether it plans to produce DRI that is not required by SDI for SDI's own use and consumption in its Butler, Indiana mini-mill, or elsewhere, or for use and consumption by any of SDI's affiliates, ("Excess DRI"). If IDI determines that there will be Excess DRI for the following calendar quarter that it wishes to sell, it shall determine the amount thereof and, not later than thirty (30) days prior to the commencement of such calendar quarter, will provide Sumitomo with a "Notice Of Availability" not less than fifty percent (50%) of such Excess DRI. The Notice Of Availability shall set forth, for each calendar quarter to which it may apply, the amount of Excess DRI being offered to Sumitomo, the estimated weekly or monthly amounts thereof, the description, iron, gangue, and sulfur content thereof, and any other necessary product information, together with the minimum price per metric tonne, below which it will not consider a sale, "FOB" IDI's plant facility in Butler, Indiana. If IDI wishes and is entitled to make available
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
for sale through Sumitomo more than fifty percent (50%) of its Excess DRI, it may elect but shall not be required to do so.
2. Response By Sumitomo. From the time of its receipt of IDI's Notice Of Availability, Sumitomo shall have fifteen (15) days within which to provide IDI with proposed purchase orders for all or a part of the Excess DRI, specifying the amount of DRI including weekly or monthly quantities, delivery date, price, and other proposed terms and conditions. Sumitomo will use its best efforts to market the excess DRI on the best available terms for IDI, for the type and quantities of DRI that are made available. If Sumitomo has not provided purchase orders on a timely basis, as set forth herein, IDI shall be free to sell or otherwise dispose of its excess DRI in any other manner it deems appropriate, free of any further obligation, for that period, to Sumitomo.
3. Acceptance Of Orders. All purchase orders submitted by Sumitomo in connection herewith shall be subject to acceptance or rejection by IDI, and no purchase order submitted by Sumitomo to IDI shall be binding upon IDI absent IDI's express acceptance. All IDI sales through Sumitomo, to the extent accepted, shall be pursuant to IDI's sales order acknowledgments and its standard terms and conditions of sale, unless specifically otherwise agreed. All sales to third parties shall be further subject to IDI's credit determination, and nothing herein shall require IDI to extend credit to any purchaser that does not meet IDI's credit criteria for sale on open account.
4. Fulfillment Of Orders. All orders accepted by IDI hereunder shall be subject to a variance, within the quantities ordered, of plus or minus ten percent (10%). Subject to such adjustment, as well as to raw materials supply availability or interruption in DRI production due to force majeure, as described herein, IDI shall produce sufficient quantities of its DRI to complete all accepted Sumitomo orders, and shall use its best efforts to meet the delivery dates proposed in such accepted orders. To the extent possible, Sumitomo will use its best efforts to accommodate any IDI request for modification of quantities or delivery dates for accepted orders, if deemed necessary by IDI. Unless otherwise specified in its acceptance, orders shall be "FOB" IDI's plant facility in Butler, Indiana, and Sumitomo's customer (or Sumitomo, if it is the customer) shall accept title to, and risk of loss of the DRI at that point. The minimum price designated by IDI, and any purchase orders offered to IDI by Sumitomo, shall be stated in net dollars per tonne to IDI, and any taxes or charges that may be imposed by any governmental agency, whether foreign or domestic, upon the DRI or upon the sale transaction, other than regular federal and state income taxes that may be payable by SDI on its net taxable income derived from IDI's activities, shall be and remain the responsibility of the purchaser. In the event that IDI accepts a purchase order for DRI on an accumulation basis, the terms
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
thereof and any period of "free" storage pending shipment, shall be specified in IDI's acceptance.
5. Sumitomo's Compensation. For its sales and marketing efforts, in respect of DRI purchase orders that have been accepted, and in which DRI has been shipped and payment received therefor, Sumitomo shall be entitled to a sales commission of $2.00 per tonne. If Sumitomo is the purchaser, its sales commission set forth herein shall be treated as an additional discount and shall be deducted from the agreed sales price. Payment of commissions to Sumitomo shall be made on or before the twenty-fifth (25th) day of the month following the month in which the applicable sales invoices were invoiced and paid, and such commissions shall be paid either by check or wire transfer in accordance with instructions timely received from Sumitomo. All costs and expenses of Sumitomo in connection with its marketing and sales efforts shall be born by Sumitomo, without reimbursement from IDI. All payments made, both for DRI and for commissions shall be payable in United States dollars, unless the parties shall otherwise agree in writing.
6. General Obligations of IDI. In addition to any sales commitments arising hereunder, t IDI shall either confirm or reject all Sumitomo purchase orders, including any requests for modification or cancellation transmitted to it by Sumitomo, within two (2) days, and shall cooperate with Sumitomo in dealing promptly and fairly with any customer complaints concerning the quality of the DRI, including taking such action to resolve justified complaints as may be reasonably requested by Sumitomo. IDI agrees that, during normal business hours, within reason, it will accommodate Sumitomo's reasonable requests on behalf of its customers for product consultation concerning the proper use and applications of IDI's DRI.
7. General Obligations Of Sumitomo. Sumitomo shall be responsible for obtaining or insuring that its customers have obtained all necessary governmental permits and licenses that may be necessary in effecting IDI's sale of DRI pursuant to Sumitomo's accepted purchase orders, including any such permits and licenses, as well as any other formalities, in connection with any export sales beyond the territory of the United States.
8. Term Of Agreement. This Agreement shall commence on the date
of its execution and shall continue until the earlier of five
(5) years from the date upon which IDI makes its first Excess
DRI available to Sumitomo for sale hereunder, or December 31,
2004. At the expiration of this term, this Agreement shall
terminate, although it may continue on a month to month basis
thereafter if the parties desire that this be done; provided,
however, that no such month-to-month extension shall be deemed
to imply any obligation on the part of IDI or Sumitomo to
extend the term for any period beyond thirty (30) days.
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
9. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that
IDI notifies Sumitomo of its failure to properly
perform its marketing and sales duties in accordance
herewith, and in the further event that such failure
continues unabated for a period in excess of thirty
(30) days after such notification to Sumitomo, in
writing, with a particularized statement of the
failure to perform that is claimed by IDI, then IDI,
at its sole option, shall have the right to terminate
this Agreement, for cause, based upon Sumitomo's
default. In the event, however, that prior to the
lapse of the thirty (30) day cure period Sumitomo has
taken reasonable steps to correct the default, and if
Sumitomo can reasonably correct such default and cure
the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional
period before IDI is entitled to terminate the
Agreement. Any such termination shall not relieve
Sumitomo from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence
of its default hereunder.
In the event that Sumitomo becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceeding by or against Sumitomo under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee, or assignee for the benefit of creditors of Sumitomo, then, at IDI's election, this Agreement may be immediately terminated.
B. Breach Of Performance By IDI. Apart from any particular dispute that may from time to time involve individual shipments by IDI of allegedly non- conforming DRI that is subject to the "Claims Handling" procedures described in Section 10, in the event that Sumitomo believes that IDI has failed to perform in its obligations in accordance with this Agreement, and in the further event that such alleged failure continues unabated for a period in excess of thirty (30) days after notification to IDI in writing with a particularized statement of the alleged failure to perform, then Sumitomo, at its option, shall have the right to terminate this Agreement based upon such IDI default. In the event, however, that prior to the lapse of the thirty (30) day cure period, IDI has taken reasonable steps to correct the default and if IDI can reasonably correct and cure the problem within an additional thirty (30) day period, IDI shall be entitled to the additional period before Sumitomo shall be entitled to declare a default. Any termination of this Agreement shall not relieve IDI from any liability which may have arisen hereunder prior to such termination, nor shall any such termination relieve
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
IDI of any claim for damages or other liabilities that may arise as a consequence of its default hereunder.
If IDI becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceedings by or against IDI under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee or assignee for the benefit of creditors of IDI, then, at Sumitomo's election, this Agreement may be immediately terminated.
10. Claims Handling. If any DRI purchased by a customer of Sumitomo, or directly by Sumitomo, fails to meet the proper specifications represented by IDI, then, prior to any party's invoking any other remedy to which it might be entitled, at law or in equity, Sumitomo, if aware of the defect or of the non-conformity, shall notify IDI of the non-conformity, provide IDI an opportunity to inspect the allegedly non- conforming DRI, and either propose a reduced price therefor or make some other gesture of accommodation. If the parties cannot successfully negotiate an appropriate resolution of the problem within thirty (30) days, then the party alleging the non- conformity may resort to any other remedy. It is understood that, although this informal claims handling procedure may not be formally binding upon a Sumitomo customer, which is not a party to this Agreement, Sumitomo will use its best efforts to encourage its customer, in the first instance, to resort to this informal claims handling procedure.
11. Force Majeure. In the event that performance of obligations hereunder by either party is legally excusable by reason of a force majeure, either party which believes that its performance is excused thereby shall give written notice to the other, as soon as possible and with sufficient detail to permit the other to minimize inconvenience and expense. A force majeure shall include (but shall not be limited to) natural disasters, wars, acts of government (including refusal to grant authorizations required to effectuate performance), power failures or interruptions, unanticipated breakdowns of equipment, extraordinary market or supply conditions beyond the party's control, labor strife, raw material shortages, transportation difficulties, legal restrictions on performance, and the like. If any force majeure continues for a period of greater than 360 days, either party shall have the right to terminate this Agreement.
12. Notices. All communications required by this Agreement to be given by one party to the other shall be in writing and delivered by hand, or by certified or registered mail, with postage pre-paid and return receipt requested, or by any other overnight express delivery or facsimile transmission which provide evidence of receipt, addressed or dispatched to the appropriate party at the address set forth below (unless a party has previously advised the other to use a different address or facsimile number):
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
If to Sumitomo:
Sumitomo Corporation of America
ATTN: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to IDI:
Keith E. Busse
Iron Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when received.
13. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the sale of Excess DRI that forms the subject matter hereof, and it supersedes any concurrent or prior understandings or agreements between the parties. Except as noted herein, no changes to this Agreement shall be binding unless in writing and signed by each party.
14. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the state of Indiana.
15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first above written.
SUMITOMO CORPORATION OF AMERICA
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
IRON DYNAMICS, INC.
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
Exhibit 10.26
SALE OF EXCESS PRODUCT AGREEMENT
This Agreement, dated this 28th day of October, 1996 (the "Agreement"), is entered into by and between IRON DYNAMICS, INC., an Indiana corporation ("IDI") and the wholly-owned subsidiary of STEEL DYNAMICS, INC., an Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a New York corporation ("Sumitomo").
WHEREAS, IDI intends to design, build, and operate a new manufacturing facility for the production of a direct reduced iron ("DRI") product, using iron ore fines with coal as a reductant;
WHEREAS, IDI intends to provide all or substantially all of the DRI that it produces to SDI for SDI's use as a feed stock by SDI either directly in its steel making melting furnace or for further processing through a submerged arch electric furnace;
WHEREAS, IDI may from time to time produce DRI in quantities not required by SDI, either for immediate use or for inventory, and may desire, instead, to sell such excess DRI into the marketplace; and
WHEREAS, if and to the extent that IDI produces Excess DRI, Sumitomo wishes to market and sell, on behalf of IDI, some of such Excess DRI, for a fee, and under terms and conditions satisfactory to IDI,
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties set forth herein, the parties agree as follows:
1. Designation of Excess DRI: In the exercise of IDI's sole discretion, after consulting with SDI to determine SDI's DRI needs for each calendar quarter (which needs shall in all events have priority over IDI's use or disposition of its DRI for the benefit of anyone other than SDI), IDI shall decide, not later than forty-five (45) days in advance of each such calendar quarter, whether it plans to produce DRI that is not required by SDI for SDI's own use and consumption in its Butler, Indiana mini-mill, or elsewhere, or for use and consumption by any of SDI's affiliates, ("Excess DRI"). If IDI determines that there will be Excess DRI for the following calendar quarter that it wishes to sell, it shall determine the amount thereof and, not later than thirty (30) days prior to the commencement of such calendar quarter, will provide Sumitomo with a "Notice Of Availability" not less than fifty percent (50%) of such Excess DRI. The Notice Of Availability shall set forth, for each calendar quarter to which it may apply, the amount of Excess DRI being offered to Sumitomo, the estimated weekly or monthly amounts thereof, the description, iron, gangue, and sulfur content thereof, and any other necessary product information, together with the minimum price per metric tonne, below which it will not consider a sale, "FOB" IDI's plant facility in Butler, Indiana. If IDI wishes and is entitled to make available
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
for sale through Sumitomo more than fifty percent (50%) of its Excess DRI, it may elect but shall not be required to do so.
2. Response By Sumitomo. From the time of its receipt of IDI's Notice Of Availability, Sumitomo shall have fifteen (15) days within which to provide IDI with proposed purchase orders for all or a part of the Excess DRI, specifying the amount of DRI including weekly or monthly quantities, delivery date, price, and other proposed terms and conditions. Sumitomo will use its best efforts to market the excess DRI on the best available terms for IDI, for the type and quantities of DRI that are made available. If Sumitomo has not provided purchase orders on a timely basis, as set forth herein, IDI shall be free to sell or otherwise dispose of its excess DRI in any other manner it deems appropriate, free of any further obligation, for that period, to Sumitomo.
3. Acceptance Of Orders. All purchase orders submitted by Sumitomo in connection herewith shall be subject to acceptance or rejection by IDI, and no purchase order submitted by Sumitomo to IDI shall be binding upon IDI absent IDI's express acceptance. All IDI sales through Sumitomo, to the extent accepted, shall be pursuant to IDI's sales order acknowledgments and its standard terms and conditions of sale, unless specifically otherwise agreed. All sales to third parties shall be further subject to IDI's credit determination, and nothing herein shall require IDI to extend credit to any purchaser that does not meet IDI's credit criteria for sale on open account.
4. Fulfillment Of Orders. All orders accepted by IDI hereunder shall be subject to a variance, within the quantities ordered, of plus or minus ten percent (10%). Subject to such adjustment, as well as to raw materials supply availability or interruption in DRI production due to force majeure, as described herein, IDI shall produce sufficient quantities of its DRI to complete all accepted Sumitomo orders, and shall use its best efforts to meet the delivery dates proposed in such accepted orders. To the extent possible, Sumitomo will use its best efforts to accommodate any IDI request for modification of quantities or delivery dates for accepted orders, if deemed necessary by IDI. Unless otherwise specified in its acceptance, orders shall be "FOB" IDI's plant facility in Butler, Indiana, and Sumitomo's customer (or Sumitomo, if it is the customer) shall accept title to, and risk of loss of the DRI at that point. The minimum price designated by IDI, and any purchase orders offered to IDI by Sumitomo, shall be stated in net dollars per tonne to IDI, and any taxes or charges that may be imposed by any governmental agency, whether foreign or domestic, upon the DRI or upon the sale transaction, other than regular federal and state income taxes that may be payable by SDI on its net taxable income derived from IDI's activities, shall be and remain the responsibility of the purchaser. In the event that IDI accepts a purchase order for DRI on an accumulation basis, the terms
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
thereof and any period of "free" storage pending shipment, shall be specified in IDI's acceptance.
5. Sumitomo's Compensation. For its sales and marketing efforts, in respect of DRI purchase orders that have been accepted, and in which DRI has been shipped and payment received therefor, Sumitomo shall be entitled to a sales commission of $2.00 per tonne. If Sumitomo is the purchaser, its sales commission set forth herein shall be treated as an additional discount and shall be deducted from the agreed sales price. Payment of commissions to Sumitomo shall be made on or before the twenty-fifth (25th) day of the month following the month in which the applicable sales invoices were invoiced and paid, and such commissions shall be paid either by check or wire transfer in accordance with instructions timely received from Sumitomo. All costs and expenses of Sumitomo in connection with its marketing and sales efforts shall be born by Sumitomo, without reimbursement from IDI. All payments made, both for DRI and for commissions shall be payable in United States dollars, unless the parties shall otherwise agree in writing.
6. General Obligations of IDI. In addition to any sales commitments arising hereunder, t IDI shall either confirm or reject all Sumitomo purchase orders, including any requests for modification or cancellation transmitted to it by Sumitomo, within two (2) days, and shall cooperate with Sumitomo in dealing promptly and fairly with any customer complaints concerning the quality of the DRI, including taking such action to resolve justified complaints as may be reasonably requested by Sumitomo. IDI agrees that, during normal business hours, within reason, it will accommodate Sumitomo's reasonable requests on behalf of its customers for product consultation concerning the proper use and applications of IDI's DRI.
7. General Obligations Of Sumitomo. Sumitomo shall be responsible for obtaining or insuring that its customers have obtained all necessary governmental permits and licenses that may be necessary in effecting IDI's sale of DRI pursuant to Sumitomo's accepted purchase orders, including any such permits and licenses, as well as any other formalities, in connection with any export sales beyond the territory of the United States.
8. Term Of Agreement. This Agreement shall commence on the date
of its execution and shall continue until the earlier of five
(5) years from the date upon which IDI makes its first Excess
DRI available to Sumitomo for sale hereunder, or December 31,
2004. At the expiration of this term, this Agreement shall
terminate, although it may continue on a month to month basis
thereafter if the parties desire that this be done; provided,
however, that no such month-to-month extension shall be deemed
to imply any obligation on the part of IDI or Sumitomo to
extend the term for any period beyond thirty (30) days.
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
9. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that
IDI notifies Sumitomo of its failure to properly
perform its marketing and sales duties in accordance
herewith, and in the further event that such failure
continues unabated for a period in excess of thirty
(30) days after such notification to Sumitomo, in
writing, with a particularized statement of the
failure to perform that is claimed by IDI, then IDI,
at its sole option, shall have the right to terminate
this Agreement, for cause, based upon Sumitomo's
default. In the event, however, that prior to the
lapse of the thirty (30) day cure period Sumitomo has
taken reasonable steps to correct the default, and if
Sumitomo can reasonably correct such default and cure
the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional
period before IDI is entitled to terminate the
Agreement. Any such termination shall not relieve
Sumitomo from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence
of its default hereunder.
In the event that Sumitomo becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceeding by or against Sumitomo under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee, or assignee for the benefit of creditors of Sumitomo, then, at IDI's election, this Agreement may be immediately terminated.
B. Breach Of Performance By IDI. Apart from any particular dispute that may from time to time involve individual shipments by IDI of allegedly non- conforming DRI that is subject to the "Claims Handling" procedures described in Section 10, in the event that Sumitomo believes that IDI has failed to perform in its obligations in accordance with this Agreement, and in the further event that such alleged failure continues unabated for a period in excess of thirty (30) days after notification to IDI in writing with a particularized statement of the alleged failure to perform, then Sumitomo, at its option, shall have the right to terminate this Agreement based upon such IDI default. In the event, however, that prior to the lapse of the thirty (30) day cure period, IDI has taken reasonable steps to correct the default and if IDI can reasonably correct and cure the problem within an additional thirty (30) day period, IDI shall be entitled to the additional period before Sumitomo shall be entitled to declare a default. Any termination of this Agreement shall not relieve IDI from any liability which may have arisen hereunder prior to such termination, nor shall any such termination relieve
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
IDI of any claim for damages or other liabilities that may arise as a consequence of its default hereunder.
If IDI becomes insolvent, commits an act of bankruptcy, makes a general assignment for the benefit of creditors, or in the event of the institution of any voluntary or involuntary proceedings by or against IDI under bankruptcy, insolvency, or similar laws for the relief of debtors or the protection of creditors, or in the event of the appointment of a receiver, trustee or assignee for the benefit of creditors of IDI, then, at Sumitomo's election, this Agreement may be immediately terminated.
10. Claims Handling. If any DRI purchased by a customer of Sumitomo, or directly by Sumitomo, fails to meet the proper specifications represented by IDI, then, prior to any party's invoking any other remedy to which it might be entitled, at law or in equity, Sumitomo, if aware of the defect or of the non-conformity, shall notify IDI of the non-conformity, provide IDI an opportunity to inspect the allegedly non- conforming DRI, and either propose a reduced price therefor or make some other gesture of accommodation. If the parties cannot successfully negotiate an appropriate resolution of the problem within thirty (30) days, then the party alleging the non- conformity may resort to any other remedy. It is understood that, although this informal claims handling procedure may not be formally binding upon a Sumitomo customer, which is not a party to this Agreement, Sumitomo will use its best efforts to encourage its customer, in the first instance, to resort to this informal claims handling procedure.
11. Force Majeure. In the event that performance of obligations hereunder by either party is legally excusable by reason of a force majeure, either party which believes that its performance is excused thereby shall give written notice to the other, as soon as possible and with sufficient detail to permit the other to minimize inconvenience and expense. A force majeure shall include (but shall not be limited to) natural disasters, wars, acts of government (including refusal to grant authorizations required to effectuate performance), power failures or interruptions, unanticipated breakdowns of equipment, extraordinary market or supply conditions beyond the party's control, labor strife, raw material shortages, transportation difficulties, legal restrictions on performance, and the like. If any force majeure continues for a period of greater than 360 days, either party shall have the right to terminate this Agreement.
12. Notices. All communications required by this Agreement to be given by one party to the other shall be in writing and delivered by hand, or by certified or registered mail, with postage pre-paid and return receipt requested, or by any other overnight express delivery or facsimile transmission which provide evidence of receipt, addressed or dispatched to the appropriate party at the address set forth below (unless a party has previously advised the other to use a different address or facsimile number):
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If to Sumitomo:
Sumitomo Corporation of America
ATTN: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to IDI:
Keith E. Busse
Iron Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when received.
13. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the sale of Excess DRI that forms the subject matter hereof, and it supersedes any concurrent or prior understandings or agreements between the parties. Except as noted herein, no changes to this Agreement shall be binding unless in writing and signed by each party.
14. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the state of Indiana.
15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first above written.
SUMITOMO CORPORATION OF AMERICA
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IRON DYNAMICS, INC.
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
Exhibit 10.35
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 14, 1995 (this "Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana corporation (the "Company"), and Preussag Stahl AG, a company incorporated under the laws of the Federal Republic of Germany (the "Purchaser").
Except as otherwise indicated, capitalized terms used herein are defined in Section 11 hereof. All referenced or attached Schedules and Exhibits are deemed incorporated herein by reference.
The parties hereby agree as follows:
1. Purchase and Sale of Stock
1.1 First Sale and Issuance of Class A Common Stock: First Closing.
Subject to the terms of this Agreement and to the conditions set forth in
Section 2 hereof, the Company will sell and issue to Purchaser, and
Purchaser will purchase from the Company, for cash at the First Closing
(the "First Purchase"), Twenty Thousand Eight Hundred Thirty-three
(20,833) shares of the Company's authorized but unissued Class A Common
Stock, at a price of Two Hundred Forty U.S. Dollars (U.S. $240.00) per
share (the "Per Share Purchase Price"), for a total consideration of Five
Million U.S. Dollars (U.S. $5,000,000.00). For purposes of this Section
1.1 and elsewhere in the agreement, the Company's Class A Common Stock
shall be referred to as the "SDI Stock." This First Purchase of SDI Stock
will constitute a separate sale and purchase from those contemplated by
Sections 1.2 and 1.3.
1.2 Second Sale and Issuance of SDI Stock: Second Closing. Subject to the terms of this Agreement and to the conditions set forth in Section 3 hereof, including Purchaser's determination described in Section 3.2, the Company will sell and issue to Purchaser and Purchaser will purchase from the Company, for cash at the Second Closing (the "Second Purchase"), an additional Twenty Thousand Eight Hundred Thirty-three (20,833) shares of the Company's authorized but unissued SDI Stock, at the same Per Share Purchase Price, for a total additional consideration of Five Million U.S. Dollars (U.S. $5,000,000.00). This Second Purchase of SDI Stock will constitute a separate sale and purchase from those contemplated in Sections 1.1 and 1.3.
1.3 Third Sale and Issuance of SDI Stock: Third Closing. Subject to the terms of this Agreement and to the conditions set forth in Section 4 hereof, the Company, at its sole option and election exercisable by written notice to Purchaser no later than ten (10) days prior to the Third Closing, will sell and issue to Purchaser, and Purchaser will purchase from the Company, for cash at the Third Closing (the "Third Purchase), not less than an additional Sixty-Two Thousand Five Hundred (62,500) shares nor more than One Hundred Sixty-Six Thousand Six Hundred Sixty-seven (166,667) shares of the Company's authorized but unissued SDI Stock, in the event that the Second Closing was consummated as contemplated
by Section 1.2, or not less than an additional Eighty-three Thousand Three Hundred Thirty-three (83,333) shares nor more than One Hundred Eighty-seven Thousand Five Hundred (187,500) shares in the event that the Second Closing was not consummated, at the same Per Share Purchase Price, for a total additional consideration of not less than Fifteen Million U.S. Dollars (U.S. $15,000,000.00) nor more than Forty Million U.S. Dollars (U.S. $40,000,000.00) in the event that the Second Closing was consummated, or not less than Twenty Million U.S. Dollars (U.S. $20,000,000.00) nor more than Forty-five Million U.S. Dollars (U.S. $45,000,000.00) in the event that the Second Closing was not consummated. This Third Purchase of SDI Stock will constitute a separate sale and purchase from those contemplated in Sections 1.1 and 1.2, and if and when closed, and when aggregated with the purchase effected pursuant to Section 1.1 and with the purchase, if any, made pursuant to Section 1.2, will entitle Purchaser to acquire or maintain the benefits described in Sections 2.3, 2.4, 2.8, 2.15(a), 2.15(b), and 4.9.
1.4 Third Sale and Issuance of SDI Stock: Alternate Third Closing.
In the event that one or more of the conditions described in Sections 3 or
4 fail to materialize, such that Purchaser would not otherwise be required
to purchase additional stock under Sections 1.2 and/or 1.3, Purchaser,
pursuant to its rights under Sections 3.7 and/or 4.17, may elect to waive
such condition(s) and proceed, nonetheless, to effect the additional
purchase contemplated in this Section 1.4. Under such circumstances, and
notwithstanding anything to the contrary expressed or implied in Section
1.3 or elsewhere herein, Purchaser will purchase from the Company, and the
Company will sell to the Purchaser, for cash at the Alternate Third
Closing, if it occurs (the "Alternate Third Purchase") such number of
additional shares of the Company's authorized but unissued SDI Stock, at
the same Per Share Purchase Price, such that, when aggregated with the SDI
Stock sold to Purchaser pursuant to Section 1.1 and/or 1.2, will
constitute Purchaser the owner of a total of Twenty-five Million U.S.
Dollars (U.S. $25,000,000.00) of SDI Stock. If and when closed, in lieu of
the Third Purchase, and when aggregated with the purchase effected
pursuant to Section 1.1 and with the purchase, if any, made pursuant to
Section 1.2, such Alternate Third Purchase will entitle Purchaser to
acquire or maintain the benefits described in Sections 2.3, 2.4, 2.8, 4.5,
4.6, and 4.9.
1.5 Aggregate Shares to be Issued to Purchaser. In the event that
the Company elects to sell Purchaser only the minimum additional shares
required to be sold to Purchaser pursuant to Section 1.3, such that, in
addition thereto, Purchaser will have purchased the SDI Stock that was the
subject of the First Purchase (described in Section 1.1), and the Second
Purchase (described in Section 1.2), Purchaser would own, in the
aggregate, One Hundred Four Thousand One Hundred Sixty-seven (104,167)
shares of SDI Stock at and after the Third Closing. In the event that the
Company elects to sell Purchaser the maximum additional shares pursuant to
Section 1.3, Purchaser would own, in the aggregate, Two Hundred Eight
Thousand Three Hundred Thirty-three (208,333) shares of SDI Stock at and
after the Third Closing. In the event that the Company elects to sell more
than the minimum but less than the maximum additional shares pursuant to
Section 1.3, the aggregate number
of shares of SDI Stock that the Company will issue and deliver to Purchaser will be determined by dividing the actual U.S. dollar amount of Purchaser's actual aggregate purchases pursuant to Sections 1.1, 1.2, and 1.3 by Two Hundred Forty U.S. Dollars (U.S. $240.00) per share. For purposes of this Agreement, the number of shares of SDI Stock to be issued to Purchaser will be adjusted, as necessary, to reflect any stock splits or stock dividends.
1.6 Discretionary Additional Shares Issuable by the Company. Notwithstanding anything to the contrary set forth in this Agreement, and so long as the Company sells at least an aggregate of Twenty Five Million U.S. Dollars (U.S. $25,000,000.00) of SDI Stock to Purchaser pursuant to Sections 1.1, 1.2, and 1.3, the Company shall be entitled to sell SDI Stock to other persons ("Other Persons"), including existing Stockholders, Lenders or others who are qualified as Accredited Investors and whose participation as additional purchasers will not render unavailable to the Company any exemption from registration under the Securities Act of 1933 or comparable state Blue Sky Law otherwise available to the Company in connection with this transaction, in an amount equal to the difference between the amount of SDI Stock sold to Purchaser and at SDI's election (the "Final Equity Amount"), either (a) Fifty Million U.S. Dollars (U.S. $50,000,000.00), or (b) Sixty Million U.S. Dollars (U.S. $60,000,000.00). In the event that the Company elects to do so, it shall notify the Purchaser not less than ten (10) days prior to the Third Closing, including in such notice, the aggregate amount of SDI Stock to be sold by the Company, a list of the Other Persons, the number of shares intended to be sold and issued to each such Other Person, and subject to the provisions of Section 1.7, the per share purchase price with respect to each such proposed sale.
1.7 Purchase Price: Other Persons. The purchase price per share of
the SDI Stock that may be sold, at the Company's election, to Other
Persons pursuant to the provisions of Section 1.6, shall be (a), up to and
not exceeding a maximum of Ten Million U.S. Dollars (U.S. $10,000,000.00)
thereof, not less than Two Hundred Thirty U.S. Dollars (U.S. $230.00), and
(b) for all other shares sold to Other Persons, not less than Two Hundred
Forty U.S. Dollars (U.S. $240.00). The Company agrees that, except as
permitted by this Section 1.7, at least during the period of ninety (90)
days subsequent to the Third Closing or Alternate Third Closing, it will
not issue or sell any SDI Stock to any person at less than Two Hundred
Forty U.S. Dollars (U.S. $240.00) per share.
2. Conditions of Purchaser's Obligation at the First Closing.
Purchaser's obligations at the First Closing to deliver to the Company the $5,000,000.00 consideration for the SDI Stock to be purchased at such time shall be subject, as of the First Closing, to the satisfaction of the following conditions:
2.1 Stockholder Approvals and Consents. All requisite Stockholder votes, approvals, and consents prescribed by the Stockholders Agreement, including but not limited
to the approval of not less than Seventy percent (70%) of the Company's existing Stockholders, excluding Purchaser or any Other Person, and including necessary waivers by existing Stockholders and Warrant Holders of their limited preemptive rights thereunder, shall have been secured.
2.2 Lender Approvals. All requisite approvals, waivers, or consents, if any, from the Company's senior and/or subordinated Lenders, permitting the transactions contemplated by this Agreement shall have been secured.
2.3 Stockholders Agreement. Subject to Lender approval, with respect to its effectiveness, the Company, the Purchaser, the Bain Group, GECC, the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost, the Subdebt Group, and the Management Group, as those persons are identified and described in that certain Stockholders Agreement dated June 30, 1994 (the "Stockholders Agreement") attached hereto as Exhibit 2.3A, shall have entered into an agreement, in substantially the form and substance set forth in Exhibit 2.3B attached hereto (the "Stockholders Joinder Agreement"), with a delayed Effective Date, notwithstanding anything to the contrary set forth therein, that is the later to occur of Lender approval or of Purchaser's satisfaction of an aggregate of $25,000,000 minimum purchase amount of SDI Stock pursuant to Sections 1.1, 1.2, 1.3, and 1.4, and the Stockholders Joinder Agreement shall not have been rescinded or materially amended or modified. If Lender approval has not been secured prior to the First Closing, this condition shall become a condition of the Second and any Third or Alternate Third Closings.
In the interim between the First Closing and the date of the Third
Closing or Alternate Third Closing contemplated by Section 5, or until
such earlier or later time as it is determined that no Third Closing or
Alternate Third Closing will take place (the "Interim Period"), and from
and after any necessary Lender approval of the amendment of the
Stockholders Agreement, the provisions of Sections 2, 3, and 5-19,
inclusive, of the Stockholders Agreement shall be deemed effective as
between the parties hereto and thereto, and Purchaser, during such Interim
Period, shall be entitled to the benefits and shall be subject to the
burdens described in those sections, notwithstanding the delayed Effective
Date of the Stockholders Joinder Agreement. If a Third Closing or
Alternate Third Closing does not occur within the time set forth in
Section 5, then, unless extended by mutual agreement of the parties hereto
and thereto, the temporary rights conferred and burdens imposed hereby
during the Interim Period upon Purchaser shall automatically terminate.
2.4 Registration Agreement. The Company, the Purchaser, the Bain Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney Stockholders, the Management Stockholders, and the Warrant Holders, as those persons are identified and described in that certain Registration Agreement dated June 30, 1994 (the "Registration Agreement") attached hereto as Exhibit 2.4A, shall have entered into an agreement, in substantially the form and substance set forth in Exhibit 2.4B attached hereto (the "Registration Joinder Agreement"); provided, however, that the provisions of Section 1 of
the Registration Agreement ("Demand Registrations"), as amended by the Registration Joinder Agreement, together with the proviso of Section 11(a) thereof, and the provisions of Sections 3(b) and (c) of the Registration Joinder Agreement, shall not be deemed effective, notwithstanding anything to the contrary expressed herein or therein, unless and until Purchaser has completed the purchase of an aggregate of at least Twenty-five Million U.S. Dollars (U.S. $25,000,000.00) of SDI Stock pursuant to Sections 1.1, 1.2, 1.3, and 1.4.
2.5 [Section 2.5 is intentionally left blank.]
2.6 Representations and Warranties; Covenants. The representations and warranties of the Company contained in Section 7 hereof shall continue to be true and correct in all material respects at and as of the First Closing, as though then made again, except to the extent of changes caused by the transactions expressly contemplated herein.
2.7 The Company's Articles of Incorporation. The Company's current Articles of Incorporation shall continue to be in full force and effect, under the laws of Indiana, and shall not have been amended or modified in any material respect.
2.8 The Company's By-Laws. The Company's By-Laws shall continue to
be in full force and effect as they presently exist, and shall not have
been amended or modified in any material respect, except that Article III,
Section 3.2 of the By-Laws shall have been amended to provide that the
authorized number of directors is ten (10) rather than nine (9); provided,
however, that the vacancy so created shall not be filled by a Purchaser
representative, in the manner contemplated by Section 1(a)(ii)(J) of the
Stockholders Agreement, as it is contemplated to be amended by Exhibit
2.3B hereof, until the Stockholders Joinder Agreement shall have become
effective.
2.9 Securities Law Compliance. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance and sale of the SDI Stock at the First Closing and required to be made prior to or concurrently with such issuance and sale.
2.10 No Litigation, Proceedings. There shall be no action, suit, or proceeding threatened, instituted or pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction (other than those set forth on the Litigation Schedule attached hereto as Schedule 7.10) wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would (a) prevent or enjoin the consummation of any of the transactions contemplated by this Agreement (including, without limitation, the Government Financing Package, and the purchase of the SDI Stock by the Purchaser), (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (c) affect adversely the right of the Company to own, operate, or control its business or assets (and no such judgment, order, decree, stipulation, injunction, or charge shall be in effect).
2.11 Governmental Filings, Consents and Approvals. All federal, state and local governmental filings, consents and approvals necessary for the consummation of the First Closing (other than those required for the physical construction, permitting and operation of the Project) shall have been made or obtained.
2.12. Opinion of the Company's Counsel. The Purchaser shall have received from counsel for the Company an opinion substantially in the form set forth on Exhibit 2.12 attached hereto, which shall be addressed to the Purchaser and dated the date of the First Closing.
2.13 Closing Documents. The Company shall have delivered to the Purchaser all of the following documents:
(a) an Officer's Certificate, dated the date of the First Closing, stating that the conditions specified in Sections 2.1 through 2.11, inclusive (except to the extent of matters required to be satisfactory to the Purchaser), have been fully satisfied;
(b) certified copies of (i) the resolutions duly adopted by
the board of directors of the Company, authorizing the execution,
delivery and performance of this Agreement, the Registration Joinder
Agreement, and the Stockholders Joinder Agreement, and each of the
other agreements contemplated hereby at or prior to the First
Closing, and the issuance and sale of the SDI Stock contemplated by
Section 1.1;
(c) certified copies of the Articles of Incorporation and the By-Laws, each as in effect at the First Closing;
(d) certified copy of the Government Financing Package commitment, as issued or in effect at the First Closing;
(e) a certificate as to the incumbency of the officers of the Company executing this Agreement and the other agreements contemplated hereby on behalf of the Company;
(f) copies of all third party and governmental consents, approvals, waivers, and filings required in connection with the consummation of the transactions hereunder to the extent required to be obtained or filed prior to the First Closing (other than those required in connection with the physical construction, permitting and operation of the Project); and
(g) such other documents relating to the transactions contemplated by this Agreement as Purchaser may reasonably request.
2.14 Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the First Closing, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Purchaser.
2.15 Additional Agreements. Subject to the Company's right to terminate the following agreements and Purchaser's prospective rights thereunder in the event that Purchaser does not purchase an aggregate of $25,000,000 of SDI Stock pursuant to Sections 1.1, 1.2, 1.3, and 1.4:
(a) Reciprocal Patent and Technical Information Transfer and License Agreement. The Company shall have entered into the Reciprocal Patent and Technical Information Transfer and License Agreement (the "Technology Agreement"), in substantially the form and substance set forth in Exhibit 2.15(a) attached hereto, and the Technology Agreement shall be in full force and effect. In the event, however, that a Third Closing or Alternate Third Closing does not occur within the time set forth in Section 5, then, unless extended by mutual agreement of the parties hereto, the rights conferred and burdens imposed upon Purchaser and the Company, at the unilateral election of the Company, shall terminate; provided, however, that both Purchaser and the Company shall be entitled to retain and use in their own steel production operations in Europe, and in the United States, respectively, the proprietary information acquired during any period of effectiveness of the Technology Agreement.
(b) Purchasing, Domestic Sales and Export Distribution Agreement. The Company shall have entered into a Purchasing, Domestic Sales and Export Distribution Agreement (the "Commercial Agreement"), in substantially the form and substance set forth in Exhibit 2.15(b) attached hereto, and the Commercial Agreement shall be in full force and effect. In the event, however, that a Third Closing or Alternate Closing does not occur within the time set forth in Section 5, then, unless extended by mutual agreement of the parties hereto, the rights conferred and burdens imposed upon Purchaser and the Company, at the unilateral election of the Company, shall terminate, subject only to the completion of orders that were placed prior to termination.
2.16 State, County, and Municipal Financing. The Company and certain State of Indiana, DeKalb County and/or City of Butler governmental authorities ("Public Authorities") shall have agreed upon the principal terms and conditions pursuant to which such Public Authorities will provide certain state, county, and municipal grants and loans to the Company, in the aggregate amount of not less than $3,000,000.00, (collectively, the "Government Financing Package") and a commitment therefor shall have been issued and delivered to the Company, in form and substance reasonably satisfactory to Purchaser; and such Government Financing Package shall be in full force and effect and shall not have been rescinded or materially amended or modified.
2.17 Waiver. Any condition specified in this Section 2 may be waived if consented to in writing by Purchaser.
3. Conditions of Purchaser's Obligations at the Second Closing.
In addition to the conditions described in Section 2.1 through 2.11, relative to Purchaser's obligations at the First Closing, all of which shall be deemed continuing conditions and updated to the time and for purposes of the Second Closing, Purchaser's obligations at the Second Closing to deliver to the Company the $5,000,000.00 consideration for the SDI Stock to be purchased at such time shall be subject, as of the Second Closing, to the satisfaction of the following additional conditions:
3.1 Debt Financing Commitment. One or more lenders, or a syndicate of lenders (the "Lenders") shall have issued a firm commitment, (the "Debt-Financing Commitment"), on or before January 15, 1996, in form and substance reasonably satisfactory to Purchaser, for all necessary debt financing, including senior and subordinated components thereof, in the amount of One Hundred Forty Million U.S. Dollars (U.S. $140,000,000.00), without recourse, however, to Purchaser or to any other Company Stockholder.
3.2 Purchaser's Determination With Respect to Debt Financing Commitment. Purchaser shall have determined that the Debt Financing Commitment issued by the Lenders as contemplated by Section 3.1, is without material conditions to closing which, in the judgment of Purchaser, cannot reasonably be met or satisfied in connection therewith.
3.3 Lender Approvals. All remaining Lender approvals, waivers, or consents not previously obtained shall have been received, including (but not limited to) Lender approval of the Stockholders Joinder Agreement and Amendment No. 2 to Stockholders Agreement described in Section 2.3.
3.4 Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the Second Closing, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Purchaser.
3.5 Opinion of the Company's Counsel. The Purchaser shall have received from counsel for the Company an opinion substantially in the form set forth on Exhibit 3.4 attached hereto, which shall be addressed to the Purchaser and dated the date of the Second Closing.
3.6 Closing Documents. The Company shall have delivered to the Purchaser all of the following documents:
(a) an Officer's Certificate, dated the date of the Second Closing, stating that the conditions specified in Sections 2.1 through 2.11, inclusive, and Sections 3.1 through 3.3, inclusive (except to the extent of matters required to be satisfactory to the Purchaser), have been fully satisfied and that the representations and warranties set forth in Section 7 are true and correct as of the date of the Second Closing;
(b) certified copies of the Articles of Incorporation and the By-Laws, each as in effect at the Second Closing;
(c) certificate as to the incumbency of the officers of the Company executing this Agreement and the other agreements contemplated hereby on behalf of the Company;
(d) copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder to the extent required to be obtained or filed prior to the Second Closing (other than those required in connection with the physical construction, permitting and operation of the Project); and
(e) such other documents relating to the transactions contemplated by this Agreement as Purchaser or their special counsel may reasonably request.
3.6 Representations and Warranties; Covenants. The representations and warranties of the Company contained in Section 7 hereof shall continue to be true and correct in all material respects at and as of the Second Closing, as though then made again, except to the extent of changes caused by the transactions expressly contemplated herein.
3.7 Waiver. Any conditions specified in this Section 3 may be waived if consented to in writing by Purchaser.
4. Conditions of Purchaser's Obligations at the Third Closing.
In addition to the conditions described in Sections 2.1 through 2.9,
relative to Purchaser's Obligations at the First Closing, all of which shall be
deemed continuing conditions and updated to the time and for purposes of the
Third Closing, Purchaser's obligations at the Third Closing to deliver to the
Company (a) consideration of not less than $15,000,000.00 nor more than
$40,000,000.00 (in the event that Purchaser has already purchased the SDI Stock
contemplated by Section 1.2), or (b) consideration of not less than Twenty
Million U.S. Dollars (U.S. $20,000,000.00) nor more than Forty-five Million U.S.
Dollars (U.S. $45,000,000.00) (in the event that Purchaser did not purchase the
SDI Stock contemplated by Section 1.2), required to be delivered pursuant to
Section 1.3 for the SDI Stock to be purchased at such time, shall be subject, as
of the Third Closing, to the satisfaction of the following additional
conditions:
4.1 Status of Phase II Project. The Company's Board of Directors shall have reconfirmed that the planning, construction and operation of the hot dip galvanizing and cold rolling plant that constitutes "Phase II" of the Company's Development Plans (the "Phase II Project") will proceed forward, subject only to the availability of funds.
4.2 Debt Financing Commitment. The Debt Financing Commitment issued by the Lenders, referred to at Section 3.1, shall continue to be in full force and effect and shall not have been withdrawn, modified, or amended in any material respect.
4.3 Closing of Debt Financing. The Lenders in connection with the Debt Financing Commitment shall have entered into definitive agreements and related documentation (the "Bank Agreement") with the Company, providing for debt financing to the Company to finance the Phase II Project and the Company's working capital needs in connection therewith, in form and substance reasonably satisfactory to the Purchaser.
4.4 Construction and Equipment Contracts. The Company shall have entered into each of the preliminary contracts listed on Schedule 4.4 attached hereto (the "Construction Contracts") in connection with the construction of the Phase II Project and the acquisition of equipment to be used therein, each in form and substance reasonably satisfactory to the Purchaser, and each of the Construction Contracts shall be in full force and effect as of the Third Closing.
4.5 Technology Agreement. The Technology Agreement shall continue to be in full force and effect.
4.6 Commercial Agreement. The Commercial Agreement shall continue to be in full force and effect.
4.7 Other Equity Purchase Commitments; Closing. In the event that
the Company has determined to sell less than the aggregate of
$50,000,000.00 of SDI Stock to Purchaser within the limits described in
Section 1.3, and has so notified Purchaser in the manner contemplated by
Section 1.6, then, regardless of the Final Equity Amount selected by the
Company, the Company shall have obtained binding commitments from persons
other than Purchaser ("Other Purchasers"), who may but need not be
existing Stockholders and/or Lenders, for the full amount of the
difference between the Final Equity Amount and the aggregate amount of SDI
Stock to be sold to Purchaser pursuant to Section 1.1., 1.2, and either
1.3 or 1.4; and the Company shall have entered into definitive agreements
and related documentation with such Other Purchasers covering the
aggregate amount thereof.
4.8 Effectiveness of Stockholders Joinder Agreement and Registration Joinder Agreement; Amendment of By-Laws. All conditions to the effectiveness of the Stockholders Joinder Agreement, described in Section 2.3, and the Registration Joinder Agreement, described in Section 2.4, shall have been satisfied; the Company shall have delivered to
Purchaser an Officer's Certificate, dated as of the Third Closing, stating that all such conditions to the effectiveness of the Stockholders Joinder Agreement and the Registration Joinder Agreement have been satisfied, and that Purchaser shall thenceforth be entitled to all of the rights and benefits, and be subject to all of the burdens and obligations, set forth in the Stockholders Agreement (including, but not limited to, the amendment to Sections 1(a)(i) thereof, providing for a board of directors of ten (10) persons, and Section 1(a)(ii) thereof adding a new subparagraph (J) thereto providing for the election of one (1) Purchaser representative to the Company's Board of Directors) and set forth in the Registration Agreement; and the Company's By-Laws shall have been amended to increase the number of authorized members of the Board of Directors to ten (10), from the present number of nine (9).
4.9 Steel - Related Business Focus. Effective, if at all, at and after the Third Closing or the Alternate Third Closing, as the case may be, and until the Company effects an initial public offering (or its shares are otherwise required to be registered under the Securities Exchange Act of 1934, as amended), the Company agrees that it will concentrate its efforts upon steel-related businesses, broadly defined to include (but not be limited to) vertical integration, processing and distribution, and that Purchaser, absent its agreement to the contrary, will have the right to prohibit the Company's incursion into any prospective non-related businesses of a material nature, unless having a strategic fit with the Company's steel-related business.
4.10 Commencement of Actual Construction. Actual construction of the Phase II Project shall have commenced. For purposes of this Section 4.10, "actual construction" shall include (but shall not be limited to) engineering work, contracting for equipment and machinery, infrastructure work, and site preparation work, as well as actual plant building activities.
4.11 Hart-Scott-Rodino Clearance. All necessary notifications and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, by the Company and by Purchaser, shall have been made, all necessary submissions shall have been determined complete, and an actual clearance shall have been issued or a sufficient period shall have elapsed since the filing to signify that no action will be taken to block the SDI Stock purchases, contemplated hereunder.
4.12 No Litigation, Proceedings. There shall be no action, suit, or proceeding threatened, instituted or pending before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction, wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would prevent or enjoin the consummation of the purchase of the SDI Stock by Purchaser at or following the Third Closing, or the consummation of the debt financing contemplated by the Bank Agreement, or the subordinated debt financing contemplated by the Subordinated Loan Agreement.
4.13 Opinion of the Company's Counsel. The Purchaser shall have received from counsel for the company an opinion substantially in the form set forth on Exhibit 4.13 attached hereto, which shall be addressed to the Purchaser and dated the date of the Third Closing.
4.14 Closing Documents. In addition to the Closing Documents described in Section 2.13(a) - (g), all of which, including an officer certificate stating that the Company's representations and warranties set forth in Section 7 are true and correct as of the date of the Third Closing, shall be updated to the time and date of the Third Closing, the Company shall have delivered to the Purchaser all of the following additional documents:
(a) Certified copies of resolutions duly adopted by the Company's Board of Directors authorizing the execution, delivery and performance of the Bank Agreement, the Subordinated Loan Agreement, and the Construction Contracts, and the issuance and sale of the SDI Stock at and subsequent to the Third Closing;
(b) Certified copies of the Bank Agreement, the Subordinated Loan Agreement, and the Construction Contracts, as in effect at the Third Closing; and
(c) Such other documents relating to the transactions contemplated by the Third Closing as Purchaser may reasonably request.
4.15 Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the Third Closing, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Purchaser.
4.16 Representations and Warranties; Covenants. The representations and warranties of the Company contained in Section 7 hereof shall continue to be true and correct in all material respects at and as of the Third Closing, as though then made again, except to the extent of changes caused by the transactions expressly contemplated herein.
4.17 Lender Approvals. All remaining Lender approvals, waivers, or consents not previously obtained shall have been received, including (but not limited to) Lender approval of the Stockholders Joinder Agreement and Amendment No. 2 to Stockholders Agreement described in Section 2.3.
4.18 Waiver. Any condition specified in this Section 4 may be waived if consented to in writing by Purchaser.
5. The Closings and Payments. The First Closing, contemplated by Section 1.1, will occur, on not less than five (5) days notice, on or before December 15, 1995. The Second Closing contemplated by Section 1.2, will occur, if at all, on not less than five (5) days notice, on or before
January 15, 1996, and the Third Closing, contemplated by Section 1.3, or a closing in lieu of the Third Closing (the "Alternate Third Closing") will occur, on not less than five (5) days notice, on or before February 29, 1996. The First Closing, the Second Closing, The Third Closing, and the Alternate Third Closing, if it occurs, will take place at 10:00 A.M., E.S.T. on each date, at the offices of Barrett & McNagny, 215 East Berry Street, Fort Wayne, Indiana, or at such other place or time or on such other date as may be mutually agreeable to the Company and the Purchaser.
6. Restrictions on Transfers.
6.1 Restrictions. Purchaser agrees that Restricted Securities are only transferable pursuant to (a) public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rules then in force) if such rules are available, (c) Regulation S of the Securities and Exchange Commission (or any similar rules then in force), and (d) subject to the conditions specified in Section 6.2 below, any other legally available means of transfer pursuant to the Securities Act.
6.2 Procedure for Transfer. Subject to such other restrictions on
transfer set forth in the Stockholders Agreement, in connection with the
transfer of any Restricted Securities (other than a transfer referred to
in clauses (a), (b), or (c) of Section 6.1 above), Purchaser will deliver
written notice to the Company describing in reasonable detail the transfer
or proposed transfer, together with an opinion of counsel, which (to the
Company's reasonable satisfaction) is knowledgeable in securities law
matters, to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the
Securities Act. In addition, if Purchaser delivers to the Company an
opinion of such counsel reasonably satisfactory to the Company that no
subsequent transfer of such Restricted Securities by Purchaser will
require registration under the Securities Act, the Company will promptly
upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act Legend set
forth in Section 6(b) of the Stockholders Agreement. If the Company is not
required to deliver new certificates for such Restricted Securities not
bearing such legend, the Purchaser will not transfer the same until the
prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this Section 6 and
Section 8.4.
6.3 Transferees. Upon request of Purchaser, the Company shall promptly supply to Purchaser or its prospective transferees all information required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission.
6.4 Legend Removal. If any Restricted Securities become eligible for sale pursuant to Rule 144(k), the Company will promptly upon the request of Purchaser deliver new certificates for such Restricted Securities which do not bear the Securities Act Legend set forth in Section 5(b) of the Stockholders Agreement.
7. Representations, Warranties, and Covenants of the Company.
The Company hereby represents and warrants to the Purchaser that, as of the First Closing, and, except as otherwise stated herein, continuing to and as of the Second Closing and Third Closing as well:
7.1 Organization, etc. Each of the Company, Steel Dynamics Sales Corp. and Steel Dynamics, Inc. (the "Companies") is a corporation duly organized and validly existing under the laws of the State of Indiana and, at each of the First, Second, and Third Closing (collectively, the "Closings"), will be qualified to do business as a foreign corporation in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on the financial condition, operating results, assets, operations, business or prospects of the Companies, as applicable. At the Closings, each of the Companies will possess all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its respective businesses as now conducted and presently proposed to be conducted (other than licenses, permits and authorizations required for the physical construction, permitting and operation of the Project) and to carry out the transactions contemplated by this Agreement.
7.2 Capital Stock and Related Matters.
(a) As of the First Closing, but prior to the Sale to Purchaser contemplated by Section 1.1, (i) the authorized capital stock of the Company will consist of 10,000,000 shares of SDI Stock, par value $0.01 per share, and 500,000 shares of Class B Common, par value $0.01 per share, (ii) the Company will have issued, and there will be outstanding, 1,000,000 shares of SDI Stock and no shares of its Class B Common, (iii) purchasers of the Company's senior subordinated promissory notes will hold warrants for the purchase of up to Fifty-eight Thousand Five Hundred Eleven (58,511) shares of SDI's Stock, (iv) APT Holdings Corporation, an affiliate of Mellon Bank, N.A., will hold a warrant for the purchase of Five Thousand Three Hundred Thirty-three (5,333) shares of SDI's Class B Common Stock, convertible share for share into SDI Stock, and (v) a total of up to Twenty-one Thousand Eight Hundred (21,800) shares of SDI's Stock will be purchasable upon exercise of stock options granted to the Company's employees pursuant to its 1994 Incentive Stock Option Plan, aggregating, on a fully diluted basis (without regard to any purchase of SDI Stock by Purchaser or by any other Stockholders or Warrant Holders pursuant to the exercise of any of their limited preemptive rights under the existing Stockholders Agreement), One Million Eighty-five Thousand Six Hundred Forty-four (1,085,644) shares of SDI Stock.
(b) As of the Second Closing, unless Purchaser has determined not to proceed with the Second Closing, in accordance with Section 3.2, prior to the purchase by Purchaser of SDI Stock at the Second Closing, but including the 20,833
shares of SDI Stock that Purchaser will have purchased in connection with the First Closing, there will be outstanding 1,020,833 shares of SDI Stock, and the aggregate of all SDI Stock, on a fully diluted basis, as aforesaid, will total One Million One Hundred Six Thousand Four Hundred Sixty-three (1,106,463) shares of SDI Stock, all other share information remaining unchanged from that set forth in Section 7.2(a).
(c) As of the Third Closing, including the 20,833 shares of
SDI Stock that Purchaser will purchase in connection with the First
Closing and the Twenty Thousand Eight Hundred Thirty-three (20,833)
shares of SDI Stock that Purchaser will have purchased in connection
with the Second Closing, unless the Second Closing shall not have
taken place, there will be outstanding 1,041,666 shares of SDI
Stock, and the aggregate of all SDI Stock, on a fully diluted basis,
as aforesaid, will total One Million One Hundred Twenty-seven
Thousand Two Hundred Ninety-six (1,127,296) shares of SDI Stock, all
other share information remaining unchanged from that set forth in
Section 7.2(a).
(d) As of the Alternate Third Closing, if one occurs, and
including all of the shares of SDI Stock sold to Purchaser pursuant
to Sections 1.1 and 1.2, and under the Option Agreement described in
Section 2.4, there will be outstanding One Million One Hundred four
Thousand One Hundred Sixty-seven (1,104,167) shares of SDI Stock at
and after the Closing, and the aggregate of all SDI Stock, on a
fully diluted basis, as aforesaid, will total One Million One
Hundred Eighty-nine Thousand Seven Hundred Ninety-seven (1,189,797)
shares of SDI Stock, all other share information remaining unchanged
from that set forth in Section 7.2(a).
(e) As of the Closings, (i) the authorized capital stock of Steel Dynamics Sales Corp. will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (ii) Sales Dynamics Sales Corp. will have issued and there will be outstanding 100 such shares, owned entirely by the Company.
(f) As of the Closings, (i) the authorized capital stock of Steel Dynamics, Inc. will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (ii) Steel Dynamics, Inc. will have issued and there will be outstanding 100 such shares, all of which will be owned by Steel Dynamics Sales Corp.
(g) Except as set forth on the "Capitalization Schedule" attached hereto as Schedule 7.2(g), as of the Closings, none of the Companies will have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, or have outstanding any rights or options to subscribe for or to purchase any capital stock or any stock securities convertible into or exchangeable for any capital stock. The Capitalization Schedule accurately sets forth the following information as of each of the Closings with respect to all outstanding options and rights to acquire the capital stock of the Companies: the holder, the number of shares covered, the
exercise price and the expiration date. As of each of the Closings, except as contemplated by this Agreement, none of the Companies will be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock or to make any payment in respect of any of the foregoing, except pursuant hereto, pursuant to the Stockholders Agreement or as set forth on the Capitalization Schedule or in the Articles of Incorporation.
(h) As of the Closings, (i) the outstanding SDI Stock of the Company will be held exclusively by the persons and in the amounts set forth on the Capitalization Schedule, the outstanding common stock of Sales Dynamics Sales Corp. will be held exclusively by the Company and the outstanding common stock of Steel Dynamics, Inc. will be held exclusively by Steel Dynamics Sales Corp., and (ii) other than the matters disclosed on the Capitalization Schedule, none of the Companies will have any commitment to issue shares of its capital stock, or any rights or options to subscribe for or purchase any capital stock. As of each of the Closings, all of the outstanding shares of the Companies capital stock will have been duly authorized, validly issued, fully paid, and nonassessable.
(i) There are no statutory and no unwaived contractual shareholder preemptive rights or rights of refusal with respect to the issuance of the SDI Stock to Purchaser hereunder, except as described in Schedule 7.2 (i) attached hereto. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the SDI Stock hereunder do not require registration under the Securities Act or any applicable state securities laws. To the best of the Company's knowledge, there are no agreements between the Company's shareholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except as set forth in the Stockholders Agreement and the Registration Agreement, as amended by each of the joinder agreements.
7.3 Subsidiaries; Investments. The Company does not have any Subsidiaries other than Steel Dynamics Sales Corp. and Steel Dynamics, Inc., and the Company does not own or hold the right to acquire any shares of stock or any other security or interest in any other Person.
7.4 Authorization; No Breach. The execution, delivery and performance of this Agreement, the Option Agreement, the Registration Joinder Agreement, the Stockholders Joinder Agreement, the Commercial Agreement, the Technology Agreement, and all other agreements and transactions contemplated hereby and thereby to which the Company is a party, have been duly authorized by the Company. This Agreement, the Registration Joinder Agreement, the Stockholders Joinder Agreement, the Option Agreement, the Commercial
Agreement, the Technology Agreement, and all of the other agreements contemplated hereby and thereby to which the Company is a party each constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by the Company of this Agreement, the Registration Joinder Agreement, the Stockholders Joinder Agreement, and all other agreements and instruments contemplated hereby to be executed by the Company, the offering, sale and issuance of the SDI Stock, and the fulfillment of and compliance with the respective terms hereby and thereof by the Company, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of (b) constitute a default under, (c) result in the creation of any Lien upon the Company's capital stock or assets pursuant to, (d) give any third party the right to accelerate any obligation under, (e) result in a violation of, or other action by or notice to any court or administrative or governmental body (other than in connection with certain state and federal securities laws) pursuant to, the Articles of Incorporation or By-Laws, or any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company is subject or any agreement or instrument to which the Company is a party.
7.5 Conduct of Business; Liabilities. Attached hereto as Exhibit 7.5 is an unaudited consolidated balance sheet of the Companies as at September 30, 1995 (the "Balance Sheet). The Balance Sheet is accurate and complete in all material respects, is consistent with the books and records of the Companies, (which, in turn, are accurate and complete in all material respects) and has been prepared in accordance with generally accepted accounting principles ("GAAP"), consistently applied. Except as set forth on the "Liabilities Schedule attached hereto as Schedule 7.5, none of the Companies have any obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Companies, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to any of the Closings, or any action or inaction at or prior to any of the Closings other than: (a) liabilities set forth on the Balance Sheet (including any notes thereto), (b) liabilities and obligations which have arisen after the date of the Balance Sheet in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit), (c) other liabilities and obligations expressly disclosed in the other Schedules to this Agreement and (d) matters that, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the condition of the Companies taken as a whole.
7.6 No Material Adverse Change. Since September 30, 1995, there has been no material adverse change in the business or prospects of the Companies.
7.7 Absence of Certain Developments. Except as expressly contemplated or disclosed by this Agreement; by the Stock Purchase Agreement of June 30, 1994, and the Exhibits and Schedules thereto, by the Credit Agreement of June 30, 1994, and the Exhibits
and Schedules thereto; by the Subordinated Loan and Warrant Purchase Agreement of June 30, 1994, and the Exhibits and Schedules thereto; by the Company's 1994 Incentive Stock Option Plan; by the Memorandum of Understanding, dated June 10, 1994, by and among the State of Indiana, the County of DeKalb, Indiana, the DeKalb County Redevelopment Authority, the DeKalb County Redevelopment Commission, the City of Butler, Indiana, and Steel Dynamics, Inc., and various agreements contemplated thereby; by the Indiana Michigan Power Substation Facilities Agreement dated June 1, 1994; by the Seed Money Commitment Agreement, dated as of January 5, 1995, and related agreements in connection therewith, by and between SDHI and other seed money investors or loan providers and Qualitech Steel Corporation, a Delaware corporation; by SDHI's incorporation of Iron Dynamics, Inc., an Indiana corporation, and certain preliminary work done and costs associated with the capitalization and financing of this scrap substitute manufacturing facility; by the Facilities Agreement by and among Steel Dynamics, Inc., Consolidated Rail Corporation, Norfolk and Western Railway Company, and CSX Transportation, Inc.; by anything reflected in the Balance Sheet or notes thereto, or by anything set forth on the "Developments Schedule," attached hereto as Schedule 7.7, since their respective dates of formation, none of the companies have:
(a) issued any notes, bonds or other debt securities or any capital stock or other equity securities or any securities convertible, exchangeable or exercisable into any capital stock or other equity securities;
(b) borrowed any amount or incurred or become subject to any material liabilities;
(c) mortgaged or pledged any of its properties or assets or subjected them to any material Lien, except Liens for current property taxes not yet due and payable and Liens under the Bank Agreement;
(d) sold, assigned or transferred any of its tangible assets;
(e) sold, assigned or transferred any patents or patent applications, trademarks, service marks, trade names, corporate names, copyrights or copyright registrations, trade secrets or other intangible assets, or disclosed any material proprietary confidential information to any Person;
(f) made any loans or advances to, guarantees for the benefit of, or any investments in, any Person; or
(g) made any Investment in or taken steps to incorporate any Subsidiary.
7.8 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement, by the instruments disclosed in Section 7.7, or as set forth on the Phase II Project contracts schedule (the "Contracts Schedule") attached hereto as Schedule 7.8(A) -1, or the "Employee Benefits Schedule" attached hereto as Schedule 7.8(A)-2, none of the Companies are a party to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangement;
(ii) contract for the employment of any officer, individual employee or other Person on a full-time , part-time, consulting or the basis providing annual compensation in excess of $75,000 or contract relating to loans to officers, directors of Affiliates;
(iii) contract under which the Companies have advanced or loaned any other Person amounts in the aggregate exceeding $25,000;
(iv) agreement or indenture relating to borrowed money or other indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets of the Companies;
(v) guarantee of any obligation in excess of $25,000;
(vi) lease or agreement under which any of the Companies is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $50,000;
(vii) lease or agreement under which any of the Companies is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by the Companies;
(viii)contract or group of related contracts with the same party or group of affiliated parties the performance of which involves consideration in excess of $100,000;
(ix) assignment, license, indemnification or agreement with respect to any intangible property (including, without limitation, any Intellectual Property);
(x) agreement under which it has granted any Person any registration rights (including, without limitation, demand and piggyback registration rights) with respect to any securities of the Companies;
(xi) sales or distribution agreement;
(xii) agreement with a term of more than six months
which is not terminable by the Companies upon less than thirty
(30) days notice without material penalty;
(xiii)contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or
(xiv) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $200,000 annually.
(b) All of the contracts, agreements and instruments set forth on the Contracts Schedule are valid, binding and enforceable against the Companies, as the case may be, in accordance with their respective terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The Companies have performed all material obligations required to be performed by them heretofore under the contracts, agreements and instruments listed on the Contracts Schedule to which each is a party and are not in material default under or in material breach of nor in receipt of any claim of material default or material breach under any contract, agreement or instrument listed on the Contracts Schedule; no event has occurred which with the passage of time or the giving of notice or both would result in a material default, breach or event of noncompliance by the Companies, as the case may be, under any contract, agreement or instrument listed on the Contracts Schedule; none of the Companies, has nay present expectation or intention of not performing all such obligations; none of the Companies has any knowledge of any breach or anticipated material breach by the other parties to any contract, agreement, instrument or commitment to which it is a party listed on the Contracts Schedule.
7.9 Intellectual Property Rights.
(a) The "Intellectual Property Schedule" attached hereto as Schedule 7.9, contains a complete and accurate list of all (i) all patented or registered Intellectual property Rights owned or proposed to be used by the Companies, (ii) pending patent applications and applications for registrations of other Intellectual Property Rights filed by the Companies, (iii) unregistered trade names and corporate names owned or proposed to be used by the Companies, and (iv) unregistered trademarks, service marks, copyrights and computer software owned or proposed to be used by the Companies. The Intellectual Property Schedule also contains a complete and accurate list of all licenses and other rights granted by the Companies to any third party with respect to any Intellectual Property Rights and all licenses and other rights granted by any third party to the Companies with respect to any Intellectual property Rights, in each case identifying the subject Intellectual Property Rights. Except as set forth on the Intellectual Property Schedule, the Companies own all right, title and interest to, or has the right to use pursuant to a valid license, all Intellectual Property Rights necessary for the operation of the business of the Companies, as presently proposed to be conducted, free and clear of all Liens. Except as set forth on the Intellectual Property Schedule, the loss or expiration of any Intellectual Property Right or related group of Intellectual Property Rights owned or proposed to be used by the Companies would not reasonably be expected to have a material adverse effect on the conduct of the business of the Companies, and no such loss or expiration is, to the best of the Company's knowledge, threatened or pending.
(b) Except as set forth on the Intellectual Property Schedule, (i) the Companies own all right, title and interest in and to or has the legal, valid and enforceable right to use all of the Intellectual Property Rights listed on such schedule, free and clear of all Liens, (ii) the Companies have not received any claims or demands asserting the invalidity, misuse or unenforceability of any of such Intellectual Property Rights, and, to the best of the Company's knowledge, there are no valid grounds for the same (iii) none of the Companies have received any notices of, and neither is aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to such Intellectual Property Rights (including, without limitation, any demand or request that the Companies license any rights from a third party), (iv) to the best of the Company's knowledge, the conduct of the business of the Companies currently proposed to be conducted, will not infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons and (v) to the best of the Company's knowledge, the Intellectual Property Rights owned by or licensed to the Companies or currently proposed to be used by the Companies, have not been infringed, misappropriated or conflicted by other Persons.
7.10 Litigation. Except as set forth on the Litigation Schedule attached hereto as Schedule 7.10, there are no claims, actions or proceedings instituted, pending or, to the best of the Company's knowledge, threatened against or affecting the Companies (or to the best of the Company's knowledge, instituted, pending or threatened against or affecting any of
the officers, directors or employees of the Company with respect to their businesses or proposed business activities), at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any of the foregoing with respect to the transactions contemplated by this Agreement); to the best of the Company's knowledge, none of the Companies are subject to any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit); and, to the best of the Company's knowledge, there is no valid basis for any of the foregoing. None of the Companies is subject to any judgment, order or decree of any court or other governmental agency, and none of the Companies has received any opinion or memorandum or legal advise from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business.
7.11 Brokerage. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Companies.
7.12 Governmental Consent. Except as set forth on the "Consents Schedule" attached hereto as Schedule 7.12, no permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the Company of this Agreement or by the Companies of the other agreements contemplated hereby, or the consummation by the Companies of any other transactions contemplated hereby or thereby, except for any of the foregoing required for the physical construction, permitting or operation of the Projects and except as expressly contemplated herein or in the exhibits or schedules hereto.
7.13 Insurance. The "Insurance Schedule" attached hereto as Schedule 7.13, contains a description of each insurance policy maintained by the Companies with respect to its properties, assets and business, and each such policy is in full force and effect as of the Closing. None of the Companies are in material default with respect to its obligations under any insurance policy maintained by it. Except as set forth on the Insurance Schedule, none of the Companies has any self-insurance programs.
7.14 Employees. The Company is not aware that any executive or key employee of the Companies or any group of employees of the Companies has any plans to terminate employment with the Company. The Companies have complied in all material respects with all laws relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes). Except as set forth on the "Employees Schedule" attached hereto as Schedule 7.14, none of the Companies, or, to the best of the Companies' knowledge, any of their employees, is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the
present or proposed business activities of the Companies, except for agreements between the Companies and its present and former employees.
7.15 Compliance with Law. None of the Companies has violated any law or any governmental regulation or requirement which violation has had or would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, operations, business or prospects of the Companies, and the Company has not received notice of any such violation. None of the Companies is subject to any clean up liability, or has reason to believe it may become subject to any clean up liability, under any federal, state or local environmental law, rule or regulation.
7.16 Affiliated Transactions. Except for the Stockholders Agreement, the Registration Agreement, and the Employment Agreements, and except as set forth on the Affiliated Transactions Schedule" attached hereto as Schedule 7.16, no officer, director, employee, shareholder or Affiliate of the Companies, or (to the knowledge of the Companies) any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with the Companies or has any interest in any property used by the Companies.
7.17 Real Property Holding Corporation Status. Since their respective dates of incorporation, none of the Companies has been, and as of the dates of any of the Closings shall not be, a "United States real property holding corporation", as defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and in Section 1.897-2(b) of the Treasury Regulations issued thereunder. None of the Companies has any current plans or intentions which would cause the Companies, as the case may be, to become a "United States real property holding company," and the Companies have filed with the United States Internal Revenue Service all statements, if any, with its United States income tax returns which are required under Section 1.897-2(h) of the Treasury Regulations.
7.18 Disclosure. To the best of the Companies' knowledge, neither this Agreement nor any of the exhibits, schedules or attachments hereto, nor any written statements, documents, certificates or other items delivered at any of the Closings to the Purchaser by or on behalf of the Company with respect to the transactions contemplated hereby, contain any untrue statement of a material fact; provided that with respect to the financial projections furnished to the Purchaser by the Companies, the Companies represent and warrant only that such projections were prepared in good faith based upon assumptions reasonably believed by the Companies to be reasonable and fair as of the date the projections were prepared in the context of the Companies' history and current and reasonably foreseeable business conditions. There is no fact which the Companies have not disclosed to the Purchasers in writing and of which the Companies are aware (other than general economic conditions) and which has had or would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, customer or supplier relations, employee relations, business or prospects of the Companies.
7.19 Knowledge. As used in this Section 7, the terms "best of knowledge" or "aware" with reference to the Company shall mean and be limited to the actual knowledge or awareness of Keith E. Busse, Richard P. Teets, Jr., Mark D. Millett, and Tracy L. Shellabarger, or, in the case of an Officer's Certificate, the individual signing such Officer's Certificate.
7.20 No Registration. Assuming the truth and accuracy of the representations set forth in Section 8 hereof and in the investment letter to be delivered to the Company in connection herewith, the offers and sales of the SDI Stock pursuant to the terms hereof are not required to be registered under the Securities Act or any state securities laws.
8. Purchasers' Representations and Warranties. Purchaser hereby represents and warrants to the Companies that:
8.1 Organization, etc. Purchaser is a corporation, duly formed or organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation. Purchaser possesses all requisite power and authority to own such capital stock and to carry out the transactions contemplated by this Agreement.
8.2 Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Joinder Agreement, the Stockholders Joinder Agreement, the Commercial Agreement, the Technology Agreement, and all other agreements and transactions contemplated hereby and thereby to which purchaser is a party, have been duly authorized by Purchaser. This Agreement, the Registration Joinder Agreement, the Stockholders Joinder Agreement, the Commercial Agreement, the Technology Agreement, and all other agreements and transactions contemplated hereby and thereby, to which agreements Purchaser is a party, each constitute a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by Purchaser of the agreements to be performed hereunder, and the fulfillment of and compliance with the respective terms hereof and thereof by Purchaser, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, or (c) result in a violation of, Purchaser's organizational documents or any law, statute, rule, regulation, instrument, order, judgment or decree to which Purchaser is subject or any agreement or instrument to which Purchaser is a party.
8.3 Hart-Scott-Rodino. Either (a) no filing is or was required to be made by Purchaser with the Federal Trade Commission or the Antitrust Division of the United States Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended, with respect to the transactions contemplated hereby or (b) if such filing was required, the waiting period with respect thereto has expired or approval has been received.
8.4 Investment Letters. This Agreement is made in reliance upon Purchaser's representations to the Company, which by Purchaser's execution hereof Purchaser hereby confirms, that the SDI Stock issuable to Purchaser hereunder is being acquired solely for investment for Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person with respect to any of the SDI Stock that is the subject of this Agreement. Purchaser has executed and delivered to the Companies a separate letter containing additional representations, warranties and covenants, upon which the Companies are relying in entering into and performing its obligations under this Agreement. Purchaser, after conducting its due diligence investigation and analysis of the Company, believes that it has received all of the information it considers necessary or appropriate for deciding whether to purchase the SDI Stock described herein, and Purchaser acknowledges that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering in connection herewith and regarding the Companies; provided, however, that nothing herein shall limit, negate, or modify the Company's representations and warranties to Purchaser in connection with this Agreement or the Purchaser's right to rely thereon.
8.5 Compliance with the Laws of Germany. Purchaser is in compliance with all laws, rules, and regulations of the Federal Republic of Germany applicable to its purchase of the SDI Stock, to its status as a prospective Stockholder of the Company, and to the contemplated commercial relationships described throughout this Agreement; that the Company's offering to sell SDI Stock to Purchaser has been made entirely within the jurisdiction of the United States of America and does not constitute an offering requiring governmental approval, authorization, or consents by the Federal Republic of Germany; that it is and will be in compliance with any foreign exchange restrictions applicable to this transaction; and that it will obtain any other required governmental consents or approvals made necessary by its involvement in connection herewith either by the Federal Republic of Germany or in any other foreign jurisdiction where it plans to operate hereunder.
9. Use of Proceeds. The Company hereby agrees that the Companies will invest the additional equity from the sale of the SDI Stock to Purchaser primarily to finance the construction of the Phase II Project and for the working capital of the Companies relating to the operation of the Phase II Project itself. Notwithstanding anything herein to the contrary, however, expressed or implied, all final decisions concerning the design, configuration, equipment or technology to be employed in the cold rolling facility, or concerning Company investments and/or capital commitments in connection with other technologies, such as (but not limited to) the development
of scrap substitutes, shall remain the exclusive province of the Company Board of Directors; provided, however, that Company would seek and duly consider Purchaser's input concerning such matters, either through Purchasers Board of Directors representation (as contemplated by Section 4.7), or otherwise.
10. Conditions of the Company's Obligations at the Closings. The obligation of the Company to perform at any of the Closings its obligations to be then performed is subject to the satisfaction as of each of the Closings of the following conditions:
10.1 Representations and Warranties; Covenants. The representations and warranties of the Purchaser contained in Section 8 hereof shall be true and correct in all material respects at and as of the particular Closing as though then made.
10.2 Opinion of Counsel. The Company shall have received an opinion of counsel to Purchaser substantially in the form and substance set forth in Exhibit 10.2 attached hereto and reasonably satisfactory to the Company.
10.3 Investment Letters. The Company shall have received from Purchaser the investment letter referenced in Section 8.4 hereof.
10.4 Agreements. The parties thereto shall have entered into all of the Agreements to be Performed Hereunder.
11. Definitions.
"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.
"Common Stock" means the Class A Common.
"Companies" shall mean Steel Dynamics Holdings, Inc., Steel Dynamics Sales Corp., and Steel Dynamics, Inc.
"Intellectual Property Rights" means all (a) patents, patent applications, patent disclosures and inventions, (b) trademarks, service marks, trade names, logos and corporate names and registrations and applications for registration thereof, together with all of the goodwill associated therewith, (c) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (d) compute software, data, data bases and documentation thereof, (e) trade secrets and other confidential information (including, without limitations, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (f) other intellectual property rights and
(g) copies and tangible embodiments thereof (in whatever form or medium,
including, without limitation, negatives, plates and video and film masters).
"Liens" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against any of the Companies or any Affiliate thereof, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to any of the Companies under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).
"Officer's Certificate" means a certificate signed by the Company's president or its chief financial officer, stating that (a) the officer signing such certificate has made or has caused to be made such investigations as are reasonably necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (b) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading.
"Permitted Transferee" means any transferee of Class A Common in a transfer permitted by clause (i) and clauses (iv) through (xiii) of Section 2(f) of the Stockholders Agreement.
"Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government or any department or agency thereof.
"Phase II Project" means the Company's proposed hot dip galvanizing and cold rolling plant intended for construction at its Butler, Indiana site.
"Project" means the Company's thin slab cast mini-mill in Butler, Indiana.
"Restricted Securities" means the Class A Common issued hereunder and any
securities issued with respect to such Class A Common by way of any stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities will cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) become eligible for sale pursuant to Rule 144 or Rule 144A of the Securities
and Exchange Commission (or any similar rules then in force) or (c) been
otherwise transferred and new securities for them not bearing the securities Act
Legend set forth in Section 6 of the Stockholders Agreement have been delivered
by the Company in accordance with Section 4B or 4D. Whenever any particular
securities cease to be Restricted
Securities, the holder thereof will be entitled to receive from the company, without expense, new securities of like tenor not bearing a Securities Act Legend of the character set forth in Section 6 of the Stockholders Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange Commission under the Securities Act as such rule may be amended rom time to time, or any similar rule then in force.
"Securities Act " means the Securities Act of 1933, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes the United States government agency of that name and any governmental body or agency succeeding to the functions thereof.
"Warrant Holders" means the holders of warrants to purchase shares of Class A Common issued pursuant to the Subordinated Loan Agreement.
12. Miscellaneous.
12.1 Remedies. The holders of the SDI Stock acquired hereunder (directly or indirectly) will have all of the rights and remedies set forth in this Agreement and the Articles of Incorporation, and all of the rights and remedies which such holders have been granted at any time under any other agreement or contract, and all of the rights and remedies which such holders have under any law. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law.
12.2 Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provisions hereof shall be effective against the Company or the Purchaser unless such modification, amendment or waiver is approved in writing by the person against which such modification, amendment or waiver is intended to be enforced. The failure of any party to enforce any provision of this Agreement or under any agreement contemplated hereby or under the Articles of Incorporation or the By-Laws shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement, any agreement referred to herein, the Articles of Incorporation, or the By-Laws in accordance with their terms.
12.3 Confidentiality. Purchaser will treat and hold as such all of the Confidential Information, as that term was defined in the Confidentiality Agreement between Purchaser and the Company, dated May 25, 1995, and will refrain from using any of such Confidential Information except in connection with this Agreement; and Purchaser will deliver promptly to the Company or, at the request and option of the Company, will destroy all tangible embodiments and all copies of Confidential Information which are in its possession as a result of its examination of financial statements, reports, and other materials submitted or made available by the Company during the course of Purchaser's examinations, inspections, or due diligence work, unless such information loses its status as Confidential Information as provided in the Confidentiality Agreement. Purchaser may, however, disclose such Confidential Information to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with this transaction, all as set forth in the Confidentiality Agreement, as well as to any prospective Affiliate, shareholder, partner, or subsidiary of Purchaser, so long as that person agrees in writing to be bound by the provisions thereof. In the event that Purchaser is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, Purchaser will notify the Company promptly of the request or requirement, so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Section 12.3 and of the Confidentiality Agreement. If, in the absence of a protective order or the receipt of a waiver hereunder, Purchaser, on the advice of counsel, is compelled to disclose any Confidential Information to any tribunal or risk liability for contempt, Purchaser may disclose the Confidential Information to the tribunal, provided that it use its reasonable best efforts to obtain an order or other assurance, at the Company's request, that confidential treatment be accorded to such portion of the Confidential Information required to be disclosed as the Company shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public immediately prior to the time of disclosure.
12.4 Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any party in connection herewith will survive the execution and delivery of this Agreement, regardless of any investigation made by the Companies or by Purchaser or on their behalf.
12.5 Successors and Assigns.
(a) Except as otherwise expressly provided herein, all agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not, so long as such successors and assigns execute a counterpart hereof. In addition, the provisions of this Agreement which are for any Purchaser's benefit as the purchaser or holder of SDI Stock,
are also for the benefit of and enforceable by any subsequent Permitted Transferee of such Purchaser's SDI Stock.
(b) If a sale, transfer, assignment or other disposition of any shares of SDI Stock is made in accordance with the provisions of this Agreement to any Person and such shares remain Restricted Securities immediately after such disposition, such Person shall, at or prior to the time such shares are acquired, execute a counterpart of this Agreement with such modifications thereto as may be necessary to reflect such acquisition, and such other documents as are necessary to confirm such Person's agreement to become a party to, and to be bound by, all covenants, terms and conditions of this Agreement, the Stockholders Agreement, The Stockholders Joinder Agreement, the Registration Agreement, and the Registration joinder Agreement, as theretofore amended.
(c) PSAG may assign its rights under this Agreement to any PSAG Affiliate, and may delegate its obligations hereunder to any such Affiliate, so long as PSAG remains liable to SDI for the performance of all such obligations as a direct obligor and not as a guarantor or accommodation maker.
12.6 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction, without invalidating the remainder of this Agreement in such jurisdiction or any provision hereof in any other jurisdiction.
12.7 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
12.8 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
12.9 Governing Law. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Indiana, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Indiana or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Indiana.
12.10 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered or received by certified mail, postage prepaid and return receipt requested, or sent by guaranteed overnight courier service, charges prepaid. Notices, demand and communications will be sent to Purchaser at the address indicated below:
Notices to Purchaser:
Preussag Stahl AG
Eisenhuttenstrasse 99 D-38223
38239 Salzgitter, Germany
Attention: Jens Schneider
Telephone: 05341/213603 (4)
Fax: 05341/212045
With Copy To:
Mr. John D. Hushon
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Ave., NW
Washington, DC 20036-5339
Telephone: (202) 857-6290
Fax: (202) 857-6395
or to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
4500 County Road 59
Butler, IN 46721
Telephone: (219) 868-8000
Fax: (219) 868-8055
Attention: Keith E. Busse
With a Copy to:
Mr. Robert S. Walters
Barrett & McNagny
215 East Berry Street
P.O. Box 2263
Fort Wayne, IN 46801-2263
Telephone: (219) 423-9551
Fax: (219) 423-8924
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
12.11 Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement shall bear its own expenses in connection with the negotiation, execution, delivery and enforcement hereof.
12.12 Entire Agreement. Except as otherwise expressly set forth herein, and except for the provisions of the Confidentiality Agreement between the Company and Purchaser, dated May 25, 1995, which shall continue to apply in all events, this Agreement and any other agreement or instrument executed in connection herewith or expressly referred to herein embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: /s/ Keith E. Busse
----------------------------------------
Title: President
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PREUSSAG STAHL, AG
By: /s/ Jens Schneider & John Hushon
----------------------------------------
Title: _____________________________________
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Exhibit 10.36
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of September 10, 1996 (this "Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana corporation (the "Company"), Sumitomo Corporation of America, a corporation incorporated under the laws of the State of New York ("SCOA"), and Sumitomo Corporation, a corporation incorporated under the laws of Japan ("SC," and together with SCOA, the "Purchasers").
Except as otherwise indicated, capitalized terms used herein are defined in Section 10 hereof. All referenced or attached Schedules and Exhibits are deemed incorporated herein by reference.
The parties hereby agree as follows:
1. Purchase and Sale of Stock. Subject to the terms of this Agreement, and, to the conditions set forth in Section 2, the Company will sell and issue to (i) SC twenty-seven thousand four hundred and fifty-seven (27,457) shares of the Company's authorized but unissued voting Common Stock, at a price of Two Hundred Ninety-five and no/100 Dollars ($295.00) per share (the "Per Share Purchase Price"), for a total consideration of Eight Million One Hundred Thousand and no/100 Dollars ($8,100,000.00) and (ii) SCOA eighteen thousand three hundred and six (18,306) shares of the Company's authorized but unissued voting Common Stock, at the Per Share Purchase Price for a total consideration of Five Million Four Hundred Thousand and no/100 Dollars ($5,400,000.00). The voting Common Stock that Purchasers are to purchase hereunder is the same class currently described as "Class A Common Stock," but such designation may be eliminated in favor of a single class of voting Common Stock. For purposes of this Section 1 and elsewhere in the Agreement, the Company's Class A Common Stock to be purchased hereunder shall be referred to as the "SDI Stock."
2. Conditions of Purchasers' Obligations at Closing. Purchasers' obligations at the Closing to deliver to the Company the consideration for the SDI Stock to be sold to Purchasers at such time shall be subject, as of the Closing, to the satisfaction of the following conditions:
2.1 Stockholder Approvals and Consents. All requisite Stockholder votes, approvals, and consents prescribed by the Stockholders Agreement, including but not limited to the approval of not less than seventy percent (70%) of the Company's existing stockholders, excluding Purchasers, and including waivers by existing stockholders and Warrant Holders, with respect to such SDI Stock, of their limited preemptive rights thereunder, shall have been secured.
2.2 Lender Approvals. All requisite approvals, waivers, or consents with respect to Purchasers' purchase of the SDI Stock, including (but not limited to) waiver of any mandatory prepayment requirements, shall have been secured from the Company's senior and/or subordinated Lenders.
2.3 Stockholders Agreement. The Company, the Purchasers, the Bain Group, GECC, the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost, Preussag, the Subdebt Group, and the Management Group, as those persons are identified and described in that certain Stockholders Agreement dated June 30, 1994, as previously amended (the "Stockholders Agreement") and attached hereto as Exhibit 2.3A, Exhibit 2.3B and Exhibit 2.3C, shall have entered into an agreement, in substantially the form and substance set forth in Exhibit 2.3D attached hereto (the "S/H Amendment No. 3"), adding Purchasers as parties thereto, but without giving Purchasers the right to designate a representative to the Company's Board of Directors, and the
S/H Amendment No. 3 shall not have been rescinded or materially amended or
modified.
2.4 Registration Agreement. The Company, the Purchasers, the Bain
Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney
Stockholders, Preussag, the Management Stockholders, and the Warrant
Holders, as those persons are identified and described in that certain
Registration Agreement dated June 30, 1994, as previously amended (the
"Registration Agreement") and attached hereto as Exhibit 2.4A, Exhibit
2.4B, and Exhibit 2.4C, shall have entered into an agreement, in
substantially the form and substance set forth in Exhibit 2.4D attached
hereto (the "Registration Amendment No. 3"), adding Purchasers as parties
thereto, and, inter alia, with respect to the SDI Stock sold to Purchasers
hereunder, certain rights, as limited therein, which shall not become
effective until six (6) months after the Closing.
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2.5 Representations and Warranties; Covenants. The representations and warranties of the Company contained in Section 5 hereof shall continue to be true and correct in all material respects at and as of the Closing, as though then made again, except to the extent of changes caused by the transactions expressly contemplated herein.
2.6 Securities Law Compliance. The Company shall have made any necessary filings and/or given all necessary notices under applicable federal and state securities laws, if required in connection with the particular exemptions from the registration requirements upon which the Company is relying, in order to consummate the issuance and sale of the SDI Stock at the Closing as an exempt private placement.
2.7 No Litigation, Proceedings. There shall be no action, suit, or proceeding threatened, instituted or pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction (other than those set forth on the Litigation Schedule attached hereto as Schedule 5.8) wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would (a) prevent or enjoin the consummation of purchase of SDI Stock contemplated by this Agreement, (b) cause the purchase of the SDI Stock to be rescinded following consummation, or (c) affect adversely the right of the Company to own, operate, or control its business or assets (and no such judgment, order, decree, stipulation, injunction, or charge shall be in effect).
2.8 Governmental Filings, Consents and Approvals. All federal, state and local governmental filings, consents and approvals, if any, necessary for the consummation of the Closing shall have been made or obtained.
2.9 Opinion of the Company's Counsel. The Purchasers shall have received from counsel for the Company an opinion substantially in the form set forth on Exhibit 2.9 attached hereto, which shall be addressed to the Purchasers and dated the date of the Closing.
2.10 Closing Documents. The Company shall have delivered to the Purchasers all of the following documents:
(a) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in Sections 2.1 through 2.8, inclusive, have been fully satisfied;
(b) certified copies of (i) the resolutions duly adopted by the board of directors of the Company, authorizing the execution, delivery and performance of this Agreement, the Registration
Amendment No. 3, and the S/H Amendment No. 3, and each of the other agreements contemplated hereby at or prior to the Closing, and the issuance and sale of the SDI Stock contemplated by Section 1.1; |
(c) certified copies of the Articles of Incorporation and the By-Laws of the Company and a copy of the Articles of Incorporation of IDI;
(d) a certificate as to the incumbency of the officers of the Company executing this Agreement and the other agreements contemplated hereby on behalf of the Company;
(e) copies of all third party and/or governmental consents, approvals, waivers, and filings, if any, required in connection with the consummation of the transactions hereunder to the extent required to be obtained or filed prior to the Closing; and
(f) one or more stock certificates duly issued to Purchasers for the number of shares of SDI Stock.
2.11 Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the Closing, and all documents incident thereto, shall be reasonably satisfactory in form and substance to the Purchasers.
2.12 Additional Agreements.
(a) If and when legally constituted as a subsidiary of the Company (and if prior to Closing), subject to the understanding of the parties described in Section 7, IDI and SCOA shall have entered into the Sale of Excess Product Agreement, to be effective only if and when the project known as "Iron Dynamics" ("IDI") is fully funded, built, and commences operations, in substantially the form and substance set forth in Exhibit 2.12(a) attached hereto. If, on or prior to the Closing (unless extended by mutual agreement of the parties), IDI has not been legally constituted as a subsidiary of the Company, with all necessary Lender approvals as to the form, nature, and substance of the proposed IDI Project, the Sale of Excess Product Agreement shall no longer be deemed a condition of the Closing, nor the basis for any claim by Purchasers for recision of their purchase of stock hereunder, for specific performance, or for damages. The parties in their discretion, however, may still wish to enter into such Agreement after the closing.
(b) The Company and SCOA shall have entered into the "Second Look" Export Distribution Agreement, in substantially the form and substance set forth in Exhibit 2.12(b) attached hereto.
(c) If and when legally constituted as a subsidiary of the Company (and if prior to Closing), subject to the understanding of the parties described in Section 7, IDI, SDI and Purchasers shall have entered into separate License Agreements, to be effective only if and when IDI is fully funded, built, and commences operations, substantially covering the terms and conditions described in Paragraph 7(c) of the Letter of Intent dated July 19-22, 1996, between the Company and Purchasers, which terms, for reference purposes, are deemed incorporated herein and are binding and enforceable; provided, however, that with respect to the License Agreement described in Paragraph 7(c) of such Letter of Intent, the parties agree that (i) the definitions of Product and Process set forth in Section 10 of this Agreement shall control, (ii) IDI and Purchasers shall enter into a separate License Agreement with respect to that part of the Process involving the production of DRI, and (iii) SDI and Purchasers shall enter into a separate License Agreement with respect to that part of the Process involving the melting and processing of DRI into liquid pig iron. If, on or prior to the Closing (unless extended by mutual agreement of the parties), IDI has not been legally constituted as a subsidiary of the Company, with all necessary Lender approvals as to the form, nature, and substance of the proposed IDI Project, the License Agreements shall no longer be deemed a condition of the Closing, nor the basis for any claim by Purchasers for recission of their purchase of stock hereunder, for specific performance, or for damages. The parties in their sole discretion, however, may still wish to enter into such Agreement after the closing.
(d) If and when legally constituted as a subsidiary of the Company (and if prior to Closing), subject to the understanding of the parties described in Section 7, IDI and SCOA shall have executed a Stipulation and Agreement Regarding Raw Materials and Supplies and Equipment and Machinery, in substantially the form and substance set forth in Exhibit 2.12(d) attached hereto. If, on or prior to the Closing (unless extended by mutual agreement of the parties), IDI has not been legally constituted as a subsidiary of the Company, with all necessary Lender approvals as to the form, nature, and substance of the proposed IDI Project, the Stipulation and Agreement described herein shall no longer be deemed a condition of the Closing, nor the basis for any claim by Purchasers for recission of their purchase of stock hereunder, for specific performance, or for damages. The parties in their sole discretion, however, may still wish to enter into such Agreement after the closing.
2.13 Waiver. Any condition specified in this Section 2 may be waived if consented to in writing by Purchasers.
3. The Closing and Payment. The Closing, contemplated by Section 1.1, will
occur, on or before September 10, 1996. The Closing will take place at 10:00
A.M., E.S.T. on such date, at the offices of Barrett & McNagny, 215 East Berry
Street, Fort Wayne, Indiana, or at such other place or time or on such other
date as may be mutually agreeable to the Company and the Purchasers.
4. Restrictions on Transfers; Stockholders Agreement.
4.1 Restrictions. The SDI Stock constitutes Restricted Securities, and transfer thereof is restricted because of restrictions on transfer imposed by the securities laws. Purchasers agree that the SDI Stock, as Restricted Securities, is only transferable pursuant to (a) public offerings registered under the Securities Act, (b) Rule 144, or Rule 144A or any similar rules then in effect) if such rules are available, (c) Regulation S of the Securities Act or any similar regulations then in effect if Regulation S or such regulations are available, (d) subject to the conditions specified in Section 4.2 below, any other legally available means of transfer pursuant to the Securities Act and any applicable provisions of state securities laws that are consistent, and (e) in any and all events, subject to the transfer restrictions in the Stockholders Agreement, as well as the terms of any "Lock-Up Agreement" entered into between the Company, certain of its stockholders, and the Company's underwriters in connection with any forthcoming registered public offerings of the Company's securities. If requested by the Company, Purchasers agree to execute such a Lock-Up Agreement that will provide that Purchasers shall not sell any of their SDI Stock for one hundred eighty (180) days after the effective date of the Registration Statement for the initial public offering of the Common Stock of the Company and shall contain such other reasonable terms and conditions customarily requested by the underwriters on similar transactions.
4.2 Procedure for Transfer. Subject to such other restrictions on transfer as are set forth in the Stockholders Agreement or in any Lock-Up Agreement, in connection with any transfer of any Restricted Securities Purchasers will deliver written notice to the Company, describing in reasonable detail the proposed transfer, together with an opinion of counsel knowledgeable in securities law matters, and in form and content satisfactory to counsel for the Company, to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act or under applicable state securities laws. In addition, if Purchasers deliver to the Company an opinion of such counsel, in form and substance reasonably satisfactory to the Company, that subsequent transfer of such Restricted Securities by Purchasers may be freely made without restriction under the Securities Act, the Company will promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 4.3; provided, however, if any securities laws holding periods are applicable, such holding periods shall have passed.
4.3 Restrictive Transfer Legend. Purchasers agree that the certificates evidencing the SDI Stock will bear the following legend disclosing the transfer restrictions set forth herein:
NOTICE OF RESTRICTIONS ON TRANSFER
THESE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933 OR UNDER APPLICABLE STATE SECURITIES LAWS, HAVING BEEN OFFERED AND SOLD PURSUANT TO ONE OR MORE EXEMPTIONS THEREUNDER THAT LIMIT FURTHER TRANSFER OR DISPOSITION. ACCORDINGLY, THESE SHARES MAY NOT BE FURTHER TRANSFERRED WITHOUT REGISTRATION, UNLESS, IN THE OPINION OF THE COMPANY'S COUNSEL, SUCH TRANSFER MAY BE EFFECTED IN A TRANSACTION CONSISTENT WITH SUCH EXEMPTIONS.
TRANSFER OF THESE SHARES IS FURTHER RESTRICTED BY THE TERMS OF A STOCKHOLDERS AGREEMENT AND A REGISTRATION AGREEMENT, BOTH DATED AS OF JUNE 30, 1994, AND BOTH AS AMENDED, COPIES OF EACH OF WHICH ARE ON FILE AT THE OFFICES OF THE COMPANY IN BUTLER, INDIANA.
4.4 Transferee. Upon request of the Purchasers, the Company shall promptly supply to the Purchasers or their prospective transferee all information required to be delivered in connection with a transfer pursuant to Rule 144A.
4.5 Legend Removal. If any Restricted Securities become eligible for sale pursuant to Rule 144(k) promulgated under the Securities Act, the Company will promptly upon the request of the Purchasers deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 4.3 of this Agreement.
5. Representations, Warranties, and Covenants of the Company.
The Company hereby represents and warrants to the Purchasers that, as of the Closing, and, except as otherwise stated herein:
5.1 Organization, etc. Each of the Company, Steel Dynamics Sales Corp., Inc. ("SDSCI"), Steel Dynamics, Inc. ("SDI") (SDI, together with the Company and SDSCI are referred to collectively as the "Companies") is a corporation duly organized and validly existing under the laws of the State of Indiana and, at the Closing (the "Closing"), will be qualified to do business as a foreign corporation in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on the financial condition, operating results, assets, operations, business or prospects of the Companies, as applicable. At the Closing, the Companies will possess all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on their respective businesses as now conducted and presently proposed to be conducted (other than licenses, permits and authorizations required for the physical construction, permitting and operation of any of the Company's physical plant, facilities, project, or equipment) and to carry out the transactions contemplated by this Agreement.
5.2 Capital Stock and Related Matters.
(a) As of the date hereof, the authorized capital stock of the Company will consist of 10,000,000 shares of Class A or plain (without a class reference) voting Common Stock ("Common Stock"), par value $0.01 per share, and may still consist of 500,000 shares of Class B non-voting Common Stock, par value $0.01 per share.
(b) Except as set forth on the "Capitalization Schedule" attached hereto as Schedule 5.2(b), as of the Closing, the Company will have no outstanding stock or securities convertible or exchangeable for any shares of its capital stock, nor will it have outstanding any rights or options to subscribe for or to purchase any capital stock or any stock securities convertible into or exchangeable for any capital stock. The Capitalization Schedule accurately sets forth the following information as of the Closing with respect to all outstanding options and rights to acquire the capital stock of the Companies: the holder, the number of shares covered, the exercise price and the expiration date, if applicable. As of the Closing, except as contemplated by this Agreement, the Company will not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock or to
make any payment in respect of any of the foregoing, except pursuant hereto, pursuant to the Stockholders Agreement or as set forth on the Capitalization Schedule or in the Articles of Incorporation, as amended.
(c) As of the date of this Agreement (i) the authorized capital stock of SDSCI will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (ii) SDSCI will have issued and there will be outstanding 100 such shares, owned entirely by the Company.
(d) As of the date of this Agreement (i) the authorized capital stock of SDI will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (ii) SDI will have issued and there will be outstanding 100 such shares, all of which will be owned by SDSCI.
(e) As of the Closing, (i) the outstanding Common Stock of the Company, or rights to acquire the same, will be held exclusively by the persons and in the amounts set forth on the Capitalization Schedule, the outstanding common stock of Sales Dynamics Sales Corp., Inc., if it continues to exist, will be held exclusively by the Company, the outstanding common stock of Steel Dynamics, Inc. will be held exclusively by Steel Dynamics Sales Corp., if it continues to exist, or by the Company, and (ii) other than the matters disclosed on the Capitalization Schedule, none of the Companies will have any commitment to issue shares of its capital stock, or any rights or options to subscribe for or purchase any capital stock. As of the Closing, all of the outstanding shares of the Companies' capital stock will have been duly authorized, validly issued, fully paid, and nonassessable.
(f) As of the Closing, there will be no statutory and no unwaived contractual shareholder preemptive rights or rights of refusal with respect to the issuance of the SDI Stock to Purchasers hereunder, except as described in Schedule 5.2(f) attached hereto. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the SDI Stock hereunder do not require registration under the Securities Act or any applicable state securities laws. To the best of the Company's knowledge, there are no agreements between the Company's shareholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except as set forth in the Stockholders Agreement and the Registration Agreement, each as amended.
(g) As of the Closing, upon the issuance of the SDI Stock to the Purchasers, the receipt of the stock certificate(s) for the SDI Stock and the payment of the purchase price for the SDI Stock, the Purchasers shall receive good and marketable title to the SDI Stock, free and clear of all Liens.
5.3 Subsidiaries; Investments. Other than Steel Dynamics Sales Corp., Inc., which may or may not continue to exist at Closing, and other than Steel Dynamics, Inc.,
which may prior or subsequent to Closing merge with and into the Company or may be the survivor of a merger of the Company into it, the Company does not currently have any Subsidiaries. IDI may become a wholly-owned subsidiary of Steel Dynamics, Inc. or the Company after closing. Save for its $1,000,000 investment in Qualitech Steel Corporation, the Company does not own or hold the right to acquire any shares of stock or any other security or interest in any other Person.
5.4 Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Amendment No. 3, and the
S/H Amendment No. 3, and all other agreements and transactions contemplated hereby and thereby to which the Company is a party, have been duly authorized by the Company. This Agreement, the Registration Amendment No. 3, and the S/H Amendment No. 3, and all of the other agreements contemplated hereby and thereby to which the Company is a party, each constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by the Company of this Agreement, the Registration Amendment No. 3, and, subject to Lender approval, the S/H Amendment No. 3, and all other agreements and instruments contemplated hereby to be executed by the Company, the offering, sale and issuance of the SDI Stock, and the fulfillment of and compliance with the respective terms hereby and thereof by the Company, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of (b) constitute a default under, (c) result in the creation of any Lien upon the Company's capital stock or assets pursuant to, (d) give any third party the right to accelerate any obligation under, (e) result in a violation of, or other action by or notice to any court or administrative or governmental body (other than in connection with certain state and federal securities laws) pursuant to, the Articles of Incorporation, as amended, or By-Laws, as amended, or any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company is subject or any agreement or instrument to which the Company is a party. |
5.5 Conduct of Business; Liabilities. Attached hereto as Exhibit 5.5 is an audited consolidated balance sheet of the Companies as at December 31, 1995 (the "Balance Sheet") and an unaudited Balance Sheet as at July 27, 1996 (the "Unaudited Balance Sheet"). Both the Balance Sheet and Unaudited Balance Sheet are accurate and complete in all material respects, are consistent with the books and records of the Companies (which, in turn, are accurate and complete in all material respects), and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), consistently applied. Except as set forth on the "Liabilities Schedule" attached hereto as Schedule 5.5, none of the Companies, as of the date hereof, have any material obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Companies, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the date hereof, or any action or inaction at or prior to the date hereof, other than: (a) liabilities set forth on the Balance Sheet (including any
notes thereto), (b) liabilities and obligations which have arisen after the date of the Balance Sheet in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit), (c) other liabilities, obligations, or claims expressly disclosed in the other Schedules to this Agreement and (d) matters that, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the condition of the Companies taken as a whole.
5.6 Financial Statements and Absence of Material Adverse Changes. The Companies' consolidated financial statements dated as of December 31, 1995 attached hereto, fairly present the assets and liabilities of the Companies as of December 31, 1995, and the results of operations of the Companies for the period ending December 31, 1995, in accordance with U.S. generally accepted accounting principles applied on a basis consistent with prior periods. Since December 31, 1995, there has been no material adverse change in the business or prospects of the Companies.
5.7 Intellectual Property Rights.
(a) The Company neither owns nor has applied for any patents, and has applied for a trademark registration for the symbol "SDI." The Companies have the right to use pursuant to a valid license all Intellectual Property Rights necessary for the operation of the business of the Companies, as presently proposed to be conducted, free and clear of all Liens, and the loss or expiration of any such Intellectual Property Right or related group of Intellectual Property Rights used by the Company would not reasonably be expected to have a material adverse effect on the conduct of the business of the Company, and no such loss or expiration is, to the best of the Company's knowledge, threatened or pending.
(b) (i) The Companies own all right, title and interest in and to or have the legal, valid and enforceable right to use the Intellectual Property Rights they are using or plan to use, free and clear of all Liens, (ii) the Companies have not received any claims or demands asserting the invalidity, misuse or unenforceability of any of such Intellectual Property Rights, and, to the best of the Company's knowledge, there are no valid grounds for the same (iii) except noted in Section 5.8, none of the Companies have received any notices of, and neither is aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to such Intellectual Property Rights (including, without limitation, any demand or request that the Companies license any rights from a third party), (iv) to the best of the Company's knowledge, the conduct of the business of the Companies currently proposed to be conducted, will not infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons and (v) to the best of the Company's knowledge, the Intellectual Property Rights owned by or licensed to the Companies or currently proposed to be used by the Companies, have not been infringed, misappropriated or conflicted by other Persons.
5.8 Litigation. Except as set forth on the Litigation Schedule attached hereto as Schedule 5.8, there are no claims, actions or proceedings instituted, pending or, to the best of the Company's knowledge, threatened against or affecting the Companies (or to the best of the Company's knowledge, instituted, pending or threatened against or affecting any of the officers, directors or employees of the Company with respect to their businesses or proposed business activities), at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any of the foregoing with respect to the transactions contemplated by this Agreement); to the best of the Company's knowledge, none of the Companies are subject to any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit); and, to the best of the Company's knowledge, there is no valid basis for any of the foregoing. None of the Companies is subject to any judgment, order or decree of any court or other governmental agency, and none of the Companies has received any opinion or memorandum or legal advise from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business.
5.9 Brokerage. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Companies.
5.10 Governmental Consent. No permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the Company of this Agreement or by the Companies of the other agreements contemplated hereby, or the consummation by the Companies of any other transactions contemplated hereby or thereby.
5.11 Hart-Scott Rodino. Either (a) no filing is or was required to
be made by the Company with the Federal Trade Commission (the "FTC") or
the Antitrust Division of the United States Department of Justice (the
"DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, with respect to the transactions contemplated hereby or
(b) if such filing was required to be made by the Company, such filing has
been made and all required waiting periods with respect thereto have
expired or been terminated without comment or notice from the FTC or the
DOJ.
5.12 Insurance. The "Insurance Schedule" attached hereto as Schedule 5.12, contains a description of each insurance policy maintained by the Companies with respect to its properties, assets and business, and each such policy is in full force and effect as of the Closing. None of the Companies are in material default with respect to its obligations under any insurance policy maintained by it. Except as set forth on the Insurance Schedule, none of the Companies has any self-insurance programs.
5.13 Employees. The Company is not aware that any executive or key employee of the Companies or any group of employees of the Companies has any plans to terminate employment with the Company. The Companies have complied in all material respects with all laws relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes). Except as set forth on the "Employees Schedule" attached hereto as Schedule 5.13, none of the Companies, or, to the best of the Companies' knowledge, any of their employees, is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of the Companies, except for agreements between the Companies and its present and former employees.
5.14 Compliance with Law. None of the Companies has violated any law or any governmental regulation or requirement which violation has had or would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, operations, business or prospects of the Companies, and the Company has not received notice of any such violation. None of the Companies is subject to any clean up liability, or has reason to believe it may become subject to any clean up liability, under any federal, state or local environmental law, rule or regulation.
5.15 This section has intentionally been left blank.
5.16 This section has intentionally been left blank.
5.17 Disclosure. To the best of the Companies' knowledge, neither this Agreement nor any of the exhibits, schedules or attachments hereto, nor any written statements, documents, certificates or other items delivered at the Closing to the Purchasers by or on behalf of the Company with respect to the transaction contemplated hereby, contain any untrue statement of a material fact; provided that with respect to the financial projections furnished to the Purchasers by the Companies, the Companies represent and warrant only that such projections were prepared in good faith based upon assumptions reasonably believed by the Companies to be reasonable and fair as of the date the projections were prepared in the context of the Companies' history and current and reasonably foreseeable business conditions. There is no fact which the Companies have not disclosed to the Purchasers in writing and of which the Companies are aware (other than general economic conditions) and which has had or would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, customer or supplier relations, employee relations, business or prospects of the Companies.
5.18 No Registration. Assuming the truth and accuracy of the representations set forth in Section 6 and in the Investment Letter attached hereto as Exhibit 5.18, to be delivered to the Company in connection herewith, the offer and sale of the SDI Stock
pursuant to the terms hereof are not required to be registered under the Securities Act or any state securities laws.
6. Purchasers' Representations and Warranties. Purchasers hereby represent and warrant to the Companies that:
6.1 Organization, etc. Purchasers are corporations, duly formed or organized, validly existing and in good standing under the laws of the jurisdiction of their organization or formation, with full authority to engage in this transaction. Purchasers possess all requisite power and authority to own the SDI Stock and to carry out the transaction contemplated by this Agreement.
6.2 Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Amendment No. 3 and the
S/H Amendment No. 3, and all other agreements and transaction contemplated hereby and thereby to which Purchasers are a party, have been duly authorized by Purchasers. This Agreement, the Registration Amendment No. 3, and the S/H Amendment No. 3, and all other agreements and transactions contemplated hereby and thereby, to which agreements Purchasers are a party, each constitute a valid and binding obligation of Purchasers, enforceable against Purchasers in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by Purchasers of the agreements to be performed hereunder, and the fulfillment of and compliance with the respective terms hereof and thereof by Purchasers, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, or (c) result in a violation of, Purchasers' organizational documents or any law, statute, rule, regulation, instrument, order, judgment or decree to which Purchasers are subject or any agreement or instrument to which Purchasers are a party. |
6.3 Hart-Scott-Rodino. Either (a) no filing is or was required to be made by Purchasers with the FTC or the DOJ pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, with respect to the transactions contemplated hereby or (b) if such filing was required to be made by the Company, such filing has been made and all required waiting periods with respect thereto have expired or been terminated without comment or notice from the FTC or the DOJ.
6.4 Investment Letters. This Agreement is made in reliance upon Purchasers' representations to the Company, which by Purchasers' execution hereof Purchasers hereby confirms, that the SDI Stock issuable to Purchasers hereunder is being acquired solely for investment, for Purchasers' own accounts, not as nominees or agents, and not with a view to the resale or distribution of any part thereof, and that Purchasers have no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Purchasers further represent that Purchasers do not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person with respect to any of the SDI Stock that is the subject of this Agreement. Purchasers have executed and delivered to the Companies separate Investment Letters containing additional representations, warranties and covenants, in the form attached as Exhibit 5.18 attached hereto, upon which the Companies are relying in entering into and performing its obligations under this Agreement. Purchasers, after conducting its due diligence investigation and analysis of the Company, believe that it has received all of the information it considers necessary or appropriate for in arriving at its decision whether to purchase the SDI Stock described herein, and Purchasers acknowledge that they have had an opportunity to ask questions and receive answers from the Company regarding the Companies; provided, however, that nothing herein shall limit, negate, or modify the Company's representations and warranties to Purchasers referenced in this Agreement or the Purchasers' right to rely thereon.
7. Relationship of IDI and IDI Project to Sale of Stock; Use of Proceeds. While the Company presently intends to use all or part of the proceeds of this sale of SDI Stock to Purchasers in connection with an aggregate equity investment of approximately $20,000,000-$25,000,000 in the IDI Project, Purchasers acknowledge and agree that, if IDI is not legally constituted as a wholly-owned subsidiary of the Company, or if the IDI Project is not consummated, for whatever reason, including (but not limited to) a lack of adequate debt financing, or if there is a failure to consummate any of the proposed agreements described in Section 2.12(a), 2.12(c), or 2.12(d) or if the IDI Project does not require the amount of the proposed equity investments by the Purchasers set forth in Section 1, the Company has the complete right, power, and authority to use these proceeds, for any business purpose it deems necessary or appropriate, including working capital, and there are no restrictions placed upon the use of these proceeds by Purchasers. All decisions concerning the deployment of these resources, including the design, configuration, equipment or technology to be employed in its operations, or concerning Company investments and/or capital commitments in connection with other technologies, shall remain the exclusive province of the Company's and/or, if IDI becomes a wholly-owned subsidiary, the IDI's Board of Directors. Purchasers specifically acknowledge and agree that their purchase of SDI Stock hereunder is not conditioned or dependent upon the ultimate realization or successful operation of the IDI Project, the organization of an IDI subsidiary, the performance or realization of any of the agreements described in Sections 2.12(a), 2.12(c), 2.12(d), or any other aspect of the IDI Project, nor shall Purchasers have any claim for rescission or for damages in the event that the IDI Project does not go forward, is abandoned, or is not successful, or that any of the foregoing agreements are not consummated.
8. Conditions of the Company's Obligations at the Closing. The obligation of the Company to perform its obligations at the Closing is subject to the satisfaction as of the Closing of the following conditions:
8.1 Representations and Warranties; Covenants. The representations and warranties of the Purchasers contained in Section 6 hereof shall be true and correct in all material respects at and as of the Closing as though then made.
8.2 Opinion of Counsel. The Company shall have received an opinion of counsel to Purchasers substantially in the form and substance set forth in Exhibit 8.2 attached hereto and reasonably satisfactory to the Company.
8.3 Investment Letters. The Company shall have received from Purchasers the Investment Letters referenced in Section 6.4 hereof.
8.4 Stockholder Approvals and Consents. All requisite Stockholder votes, approvals, and consents prescribed by the Stockholders Agreement, including but not limited to the approval of not less than seventy percent (70%) of the Company's existing stockholders, excluding Purchasers, and including waivers by existing stockholders and Warrant Holders, with respect to the SDI Stock, of their limited preemptive rights thereunder, shall have been secured.
8.5 Stockholders Agreement. The Company, the Purchasers, the Bain Group, GECC, the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost, Preussag, the Subdebt Group, and the Management Group, as those persons are identified and described in the Stockholders Agreement; shall have
entered into the S/H Amendment No. 3, in substantially the form and
substance set forth in Exhibit 2.3D attached hereto, adding Purchasers as
a party thereto but without giving Purchasers the right to designate a
representative to the Company's Board of Directors, and the S/H Amendment
No. 3 shall not have been rescinded or materially amended or modified.
8.7 Registration Agreement. The Company, the Purchasers, the Bain
Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney
Stockholders, Preussag, the Management Stockholders, and the Warrant
Holders, as those persons are identified and described in the Registration
Agreement, shall have entered into the Registration Amendment No. 3, in
substantially the form and substance set forth in Exhibit 2.4D attached
hereto, adding Purchasers as a party thereto, and, inter alia, with
respect to the SDI Stock sold to Purchasers hereunder, granting Purchasers
certain limited rights which shall not become effective until six (6)
months after the Closing.
|
9. Covenants of the Company
(a) From and after the date hereof and until the provisions of this
Section 9 cease to be effective, if and when the Company constitutes IDI
as a wholly-owned subsidiary, and subject to the provisions of Section 7,
the Company shall vote its shares of stock in IDI and shall take all other
necessary action within its control so that:
(i) The authorized number of directors on the Board of Directors of IDI shall be established at five (5) directors;
(ii) Two (2) representatives designated by the Purchasers
shall be elected to IDI's Board of Directors and the remaining three
(3) members of the Board of Directors shall be designated by the
Company;
(iii) In the event any representative designated by the Purchasers for any reason ceases to serve as a member of the Board during his or her term office, the resulting vacancy on the Board shall be filled by a representative designated by the Purchasers; and
(iv) The Company and the Purchasers shall each be entitled to designate an alternate to serve and function as a director in place of a primary director with full voting and other rights of the primary director in the event the primary director is unavailable.
(b) The Board of Directors of IDI shall act in all matters by simple majority vote, including the hiring or retention or supervision of all senior management.
(c) IDI shall reimburse each director of IDI for travel, food and lodging expenses or other out-of-pocket costs incident to their attendance at meetings of the Board of Directors of IDI or otherwise in connection with their service as members of the Board.
(d) IDI's Board of Directors will appoint IDI's officers, who may include one or more persons who is (and may concurrently remain) an executive officer and/or employee of the Company or one of its affiliates.
(e) The provisions of this Section 9 shall terminate automatically and be of no further force and effect upon the earlier of (i) the fifth anniversary of the date of the start-up or the commencement of the operation of the facility contiguous to the Company's mini-mill in Butler, Indiana in connection with the IDI Project, or (ii) the liquidation or dissolution of IDI.
10. Definitions.
"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.
"Common Stock" means the Class A Common.
"Companies" shall mean Steel Dynamics Holdings, Inc., SDSCI, if it continues to exist, and SDI.
"IDI" means, if it is constituted as a subsidiary corporation, an Indiana corporation and a wholly-owned subsidiary of either the Company or SDI.
"IDI Project" means the design, and development, and construction of a facility, partly or entirely contiguous to the Company's mini-mill in Butler, Indiana, at which IDI will produce, use, and/or sell a coal-based direct reduced iron product suitable for subsequent conversion by the Company into liquid pig iron intended to be used as an alternative iron scrap substitute.
"Product" means the final or any of the intermediate products produced in the Process, including DRI and liquid pig iron produced from DRI.
"Process" means the technology involved in all or any portion of a process for producing the Product for use in steelmaking, with the raw materials of iron ore fines and the reductant of coal, including (1) milling and pelletizing the iron ore and coal with binder, (2) utilizing a rotary hearth furnace for production of DRI from the pellets, (3) utilizing a submerged arc furnace or electric arc furnace for producing liquid pig iron from the DRI, and (4) utilizing a desulfurizing facility and related equipment to charge the liquid iron into an electric arc furnace.
"DRI" means direct reduced iron.
"Intellectual Property Rights" means all (a) patents, patent applications,
patent disclosures and inventions, (b) trademarks, service marks, trade names,
logos and corporate names and registrations and applications for registration
thereof, together with all of the goodwill associated therewith, (c) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof, (d) computer software, data, data bases
and documentation thereof, (e) trade secrets and other confidential information
(including, without limitations, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (f) other intellectual property rights and
(g) copies and tangible embodiments thereof (in whatever form or medium,
including, without limitation, negatives, plates and video and film masters).
"Liens" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against any of the Companies or any Affiliate thereof, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to any of the Companies under a lease which is not in the nature of a conditional sale or title
retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).
"Officer's Certificate" means a certificate signed by the Company's president or its chief financial officer, stating that (a) the officer signing such certificate has made or has caused to be made such investigations as are reasonably necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (b) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government or any department or agency thereof.
"Restricted Securities" means the Common Stock issued hereunder and any securities issued with respect to such Common Stock by way of any stock dividend or stock split, or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Restricted Securities, such securities will cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144 or Rule 144A (or any similar rules then in effect), or (c) been otherwise transferred and new securities for them not bearing the Securities Act legend set forth in Section 4.3 of this Agreement have been delivered by the Company. Whenever any particular securities cease to be Restricted Securities, the holder thereof will be entitled to receive from the Company, without expense, new securities of like tenor not bearing the Securities Act legend of the character set forth in Section 4.3 of this Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, as such rule may be amended from time to time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange Commission under the Securities Act, as such rule may be amended from time to time, or any similar rule then in force.
"Securities Act " means the Securities Act of 1933, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes the United States government agency of that name and any governmental body or agency succeeding to the functions thereof.
"Warrant Holders" means the holders of warrants to purchase shares of Common Stock issued pursuant to the Subordinated Loan Agreement.
11. Miscellaneous.
11.1 Remedies. The holders of the SDI Stock acquired hereunder (directly or indirectly) will have all of the rights and remedies set forth in this Agreement and the Articles of Incorporation, as amended, and all of the rights and remedies which such holders have been granted at any time under any other agreement or contract, and all of the rights and remedies which such holders have under any law. A party to this Agreement will be entitled to enforce its rights under any provision of this Agreement, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law or equity.
11.2 Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provisions hereof shall be effective against the Company or the Purchasers unless such modification, amendment or waiver is approved in writing by the person against which such modification, amendment or waiver is intended to be enforced. The failure of any party to enforce any provision of this Agreement or under any agreement contemplated hereby or under the Articles of Incorporation, as amended, or the By-Laws, as amended, shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement, any agreement referred to herein, the Articles of Incorporation, or the By-Laws, in accordance with their terms.
11.3 Confidentiality. Purchasers will treat and hold as such all of
the Confidential Information, as that term is defined in Paragraph 10 of
the Letter of Intent between Purchasers and the Company, dated July 19-22,
1996, which terms are deemed incorporated herein by reference, and will
refrain from using any of such Confidential Information except in
connection with this Agreement. The term Confidential Information does not
include information that (i) at the time of disclosure to the Purchasers,
is generally available to the public, (ii) was available to the Purchasers
on a non-confidential basis prior to its disclosure to the Purchasers or
(iii) becomes available to the Purchasers on a non-confidential basis from
a third party, provided that such third party is not breaching an
obligation of confidentiality to the Company. If for any reason the
Closing does not take place on or before the date set forth in Section 3,
Purchasers will deliver promptly to the Company or, at the request and
option of the Company, will destroy all tangible embodiments and all
copies of Confidential Information which are in its possession as a result
of its examination of financial statements, reports, and other materials
submitted or made available by the Company during the course of
Purchasers' examinations, inspections, or due diligence work, unless such
information loses its status as Confidential Information as provided in
this Section 11.3. Purchasers may, however, disclose such Confidential
Information to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in
connection with this transaction, as well as to any prospective Affiliate,
shareholder, partner, or subsidiary of Purchasers, so long as that person
agrees in writing to be bound by the provisions thereof. In the event that
Purchasers are requested or required
(by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, Purchasers will notify the Company promptly of the request or requirement, so that the Company may seek an appropriate protective order or, waive compliance with the provisions of this Section 11.3. If, in the absence of a protective order or the receipt of a waiver hereunder, Purchasers, on the advice of counsel, are compelled to disclose any Confidential Information to any tribunal or risk liability for contempt, Purchasers may disclose the Confidential Information to the tribunal, provided that it use its reasonable best efforts to obtain an order or other assurance, at the Company's request, that confidential treatment be accorded to such portion of the Confidential Information required to be disclosed as the Company shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public immediately prior to the time of disclosure.
11.4 Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any party in connection herewith will survive the execution and delivery of this Agreement, regardless of any investigation made by the Companies or by Purchasers or on their behalf.
11.5 Successors and Assigns.
(a) Except as otherwise expressly provided herein, all agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not, so long as such successors and assigns execute a counterpart hereof. In addition, the provisions of this Agreement which are for Purchasers' benefit as the purchaser or holder of SDI Stock, are also for the benefit of and enforceable by any subsequent Permitted Transferee of such Purchasers' SDI Stock.
(b) If a sale, transfer, assignment or other disposition of any shares of SDI Stock is made in accordance with the provisions of this Agreement to any Person and such shares remain Restricted Securities immediately after such disposition, such Person shall, at or prior to the time such shares are acquired, execute a counterpart of this Agreement with such modifications thereto as may be necessary to reflect such acquisition, and such other documents as are necessary to confirm such Person's agreement to become a party to, and to be bound by, all
covenants, terms and conditions of this Agreement, the S/H Amendment No. 3
and the Registration Amendment No. 3.
11.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision will be ineffective only to the extent of
such invalidity, illegality or unenforceability in such jurisdiction,
without
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invalidating the remainder of this Agreement in such jurisdiction or any provision hereof in any other jurisdiction.
11.7 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
11.8 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
11.9 Governing Law. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Indiana, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Indiana or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Indiana.
11.10 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered or received by certified mail, postage prepaid and return receipt requested, or sent by guaranteed overnight courier service, charges prepaid. Notices, demand and communications will be sent to Purchasers at the address indicated below:
Notices to Purchasers:
Sumitomo Corporation of America
Attention: Kei Kato
2750 USX Tower
600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
Sumitomo Corporation
Attention: Tsunehiro Ichiki
Josuika Building
2-1-1 Hitotsubashi
Chiyodo-ku
Tokyo, 101, Japan
Telephone: 011-03-3237-3180
Fax: 011-03-3237-3179
With Copy To:
Paul K. Risko
Sidley & Austin
875 Third Avenue
New York, NY 10022
Telephone: (212) 906-2000
Fax: (212) 906-2021
or to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
4500 County Road 59
Butler, IN 46721
Telephone: (219) 868-8000
Fax: (219) 868-8055
Attention: Keith E. Busse
With a Copy to:
Mr. Robert S. Walters
Barrett & McNagny
215 East Berry Street
P.O. Box 2263
Fort Wayne, IN 46801-2263
Telephone: (219) 423-9551
Fax: (219) 423-8924
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
11.11 Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement shall bear its own expenses in connection with the negotiation, execution, delivery and enforcement hereof.
11.12 Entire Agreement. Except as otherwise expressly set forth herein, and except as provided for in Paragraphs 7(c) and 10 of the Letter of Intent between the Company and Purchasers, dated July 19-22, 1996, to the extent previously incorporated herein, which shall continue to apply in all events, this Agreement and any other agreement or instrument executed in connection herewith or expressly referred to herein embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: /s/ Keith E. Busse
--------------------------------------
Title:
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SUMITOMO CORPORATION OF AMERICA
PITTSBURGH OFFICE
By: /s/ Masahiko Nakagawa
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Title: Senior Vice President
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& General Manager
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SUMITOMO CORPORATION
By: /s/ Tsunehiro Ichiki
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Title: Director, Iron & Steel Raw Materials
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Iron & Steel Division No. 1
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Exhibit 10.37
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of June 30, 1994 (this "Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana corporation (the "Company"), and the Persons set forth on the "Schedule of Purchasers" attached hereto (hereinafter referred to collectively as the "Purchasers" and individually as a "Purchaser"). The Purchasers will purchase, severally and not jointly, the number of shares listed on the Schedule of Purchasers attached hereto. Except as otherwise indicated, capitalized terms used herein are defined in Section 9 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of Common Stock. The Company will authorize the issuance and sale to the Purchasers at the Closing of an aggregate of 820,000 shares of the Company's Class A Common Stock, par value $.01 per share (the "Class A Common").
1B. Purchase and Sale of Class A Common. At the Closing, the Company will sell to each Purchaser and, subject to the terms and conditions set forth herein, each Purchaser will purchase from the Company, the number of shares of Class A Common set forth opposite such Purchaser's name on the Schedule of Purchasers under the caption "Shares to be Purchased" at the purchase price per share set forth opposite such Purchaser's name on the Schedule of Purchasers under the caption "Share Purchase Price." Each Purchaser will pay the portion of the aggregate purchase price for the shares to be purchased by such Purchaser met forth opposite such Purchaser's name on the Schedule of Purchasers under the caption "Purchase Price to be Paid at Closing," and the remainder of the purchase price for such shares in the amounts set forth opposite such Purchaser's name on the Schedule of Purchasers under the caption "Remaining Purchase Price" shall be paid pursuant to Section 2 hereof. The sale to and purchase by each Purchaser of the Class A Common hereunder will constitute a separate sale and purchase.
1C. Capital Contributions of Certain Purchasers. At the Closing, certain of the Purchasers shall make contributions to the capital of the Company in the aggregate amounts set forth opposite such Purchasers' names on the Schedule of Purchasers under the caption "Capital Contributions to be Made at Closing," and shall make additional capital contributions in the aggregate amounts set forth opposite such Purchasers' names on the Schedule of Purchasers under the caption "Capital Contributions to be Made Following Closing" pursuant to Section 2 hereof.
1D. The Closing and Payments. The closing of the separate sales and purchases of the Class A Common and the payments therefor and the other contributions required to be made (the "Closing") pursuant to the foregoing provisions of this Section 1 will take place at the offices of Reed, Smith, Shaw &
McClay, Pittsburgh, Pennsylvania, at 10:00 a.m. on June 30, 1994, (or as soon thereafter as all conditions contained in Section 3 hereof have been satisfied) or at such other place or on such other date as may be mutually agreeable to the Company and the Purchasers. At the Closing, the Company will deliver to each Purchaser, subject to the provisions of the Escrow Agreement (as hereinafter defined), a certificate or certificates evidencing the number of shares of Class A Common to be purchased by such Purchaser, registered in the name of such Purchaser, against the payments and/or contributions to be made at Closing, by wire transfer of immediately available funds to a bank account designated by the Company.
1E. Failure To Make Payments at Closing. In the event that Heavy Metal, Keylock or Mazelina fails to make the payments or contributions to be made by such Purchaser at Closing (a "Forfeiting Purchaser"), (i) the Company shall redeem all of the then outstanding shares of common Stock of the Company owned immediately prior to the scheduled date of the Closing by such Forfeiting Purchaser and all Affiliates of such Forfeiting Purchaser for an aggregate price of $1.00, by the payment to such Forfeiting Purchaser and Affiliates, as applicable, of an aggregate of $1.00, (ii) all indebtedness owing as of such time by the Company to such Forfeiting Purchaser or any Affiliate thereof shall be automatically forgiven and cancelled, all promissory notes or other evidences thereof shall be delivered to the Company marked "Cancelled" and the holder thereof shall have no further claim with respect to such indebtedness and (iii) upon such redemption, (A) if the Forfeiting Purchaser is Keylock, any agreement with an Affiliate of Keylock shall be terminated, and (B) if the Forfeiting Purchaser is Heavy Metal, the OmniSource Agreement shall be terminated. Holders of shares of Class A Common to be redeemed pursuant to such redemption shall cease to be shareholders with respect to such shares upon tender of payment therefor, and shall have, from and after such time, no interest in or claim against the Company with respect to such shares, except only to receive payment, without interest, from the Company of the aggregate redemption price. Nothing in this paragraph shall be deemed to release Heavy Metal, Mazelina, Keylock or any of their respective Affiliates from any obligation or liability with respect to their guaranties of certain obligations under the Employment Agreements.
Section 2. Additional Payments and Contributions After Closing.
2A. Remaining Purchase Price; Additional Capital Contributions. Each Purchaser hereby severally, absolutely and unconditionally agrees to pay to the Company the remainder of the purchase price for the shares purchased by such Purchaser (in the amount set forth opposite such Purchaser's name on the Schedule of Purchasers under the caption "Remaining Purchase Price") and to make the additional capital contributions described in Section
1 hereof to be made after Closing (in the amount set forth opposite such Purchaser's name under the caption "Capital Contribution to be Made Following Closing") (such remaining purchase price and additional capital contributions, in the aggregate with respect to each Purchaser, such Purchaser's "Additional Commitment") pursuant to this Section 2A; provided, that with respect to any Purchaser the Additional Commitment of which includes additional capital contributions, all payments in respect of such Additional Commitment made by such Purchaser shall be deemed to be payments of such additional capital contributions until such Purchaser shall have made or be deemed to have made capital contributions to the Company in the aggregate amount required to be made pursuant to Sections 1 and 2 hereof. Each Purchaser shall make payments to the Company in respect of such Purchaser's Additional Commitment within twenty days of the delivery of written notice by the Company to such Purchaser specifying the portion of such Purchaser's Additional Commitment to be paid to the Company (each such notice, a "Capital Call Notice"), by wire transfer of immediately available funds to a bank account designated by the Company. The Company may deliver, from time to time, one or more Capital Call Notices to each Purchaser; provided, however, that (i) Capital Call Notices shall be issued by the Company pro rata to all Purchasers, and (ii) the initial Capital Call Notice shall not be delivered prior to July 1, 1994.
2B. Failure to Make Payments on Additional Commitment. In the event a Purchaser fails to make a payment in respect of such Purchaser's Additional Commitment pursuant to and in accordance with Section 2A (a "Defaulting Purchaser"), there shall be automatically cancelled the number of shares of Class A Common owned by such Defaulting Purchaser which is equal to such Defaulting Purchaser's then applicable Default Number (the "Default Shares"), upon delivery by the Company of written notice to such Defaulting Purchaser specifying the number of Default Shares, within five days following the expiration of the twenty-day period referred to in Section 2A (such notice, the "Cancellation Notice"). Upon delivery of the Cancellation Notice, the Default Shares shall no longer be deemed to be issued or outstanding, and holders of Default Shares cancelled pursuant to this Section 2B shall cease to be shareholders with respect to such Default Shares upon delivery of the Cancellation Notice and shall have, from and after such time, no interest in or claim against the Company with respect to such shares. Notwithstanding the foregoing provisions of this Section 2B, this Section 2B shall not apply (i) with respect to Keylock, to the extent that Keylock has made aggregate payments in respect of its Additional Commitment of at least $3,015,000 (the "Keylock Threshold Commitment") and (ii) with respect to Mazelina, to the extent that Mazelina has made aggregate payments in respect of its Additional Commitment of at least $2,985,000 (the "Mazelina Threshold Commitment").
Following the cancellation of Default Shares pursuant to this Section 2B, the
Company shall deliver written notice (the "Default Notice") to each Purchaser
who has not so failed to make the required payment pursuant to a Capital Call
Notice (each, a "Non-defaulting Purchaser") specifying the number of Default
Shares and the Default Share Purchase Price. Such Default Notice shall
constitute an offer by the Company to sell to such Non-defaulting Purchaser a
number of shares of Class A Common (the "New Shares") up to such Non-defaulting
Purchaser's Pro Rata Share (as defined below) of such New Shares for a purchase
price equal to the Default Share Purchase Price. If any Non-defaulting
Purchaser elects to accept such offer, such Non-defaulting Purchaser shall
deliver written notice of such acceptance to the Company as soon as practicable
but in any event within five days after delivery by the Company of the Default
Notice. Any New Shares not elected to be purchased by the Non-defaulting
Purchasers by the end of such five-day period shall be reoffered for an
additional ten-day period on a pro rata basis to the Non-defaulting Purchasers
who have elected to purchase their Pro Rata Share of the New Shares. Each
Non-defaulting Purchaser's "Pro Rata Share" shall be equal to the product of
(A) the number of New Shares remaining to be purchased and (B) a fraction, (1)
the numerator of which is the number of shares of Class A Common held by the
Non-defaulting Purchaser and (2) the denominator of which is the aggregate
number of shares of Class A Common held by all Non-defaulting Keylock
Purchasers.
2C. Cancellation of Certain Keylock Shares. In the event and to the extent that Keylock fails to make payments pursuant to Section 2A in respect of its Additional Commitment in excess of the Keylock Threshold Commitment, there shall be automatically cancelled the number of shares of Class A Common owned by Keylock which is equal to a fraction, (i) the numerator of which is the amount of such Additional Commitment which Keylock fails to pay, and (ii) the denominator of which is $89.55 (the "Keylock Default Shares"), by delivery by the Company of written notice to Keylock specifying the number of Keylock Default Shares, within five days following the expiration of the twenty-day period referred to in Section 2A (such notice, the "Keylock Cancellation Notice"). Upon delivery of the Keylock Cancellation Notice, the Keylock Default Shares shall no longer be deemed to be issued or outstanding, and Keylock shall cease to be a shareholder with respect to such Keylock Default Shares upon delivery of the Keylock Cancellation Notice and shall have, from and after such time, no interest in or claim against the Company with respect to such shares.
The Company shall deliver to Heavy Metal a copy of the Keylock Cancellation Notice. Heavy Metal shall purchase from the Company the number of Class A Common equal to the number of the Keylock Default Shares, for a purchase price of $89.55 per share, within 15 days following delivery to Heavy Metal of such notice. In the event Heavy Metal fails to purchase the Keylock Default Shares,
there shall be automatically cancelled the number of shares of Class A Common owned by Heavy Metal equal to the number of shares of Class A Common which Heavy Metal failed to purchase pursuant to the foregoing sentence (the "Heavy Metal Keylock Default Shares"), by delivery by the Company of written notice to Heavy Metal specifying the number of Heavy Metal Keylock Default Shares, within five days following the expiration of the seven-day period referred to in the preceding paragraph (such notice, the "Heavy Metal Keylock Cancellation Notice"). Heavy Metal shall cease to be a shareholder with respect to such Heavy Metal Keylock Default Shares upon delivery of the Heavy Metal Keylock Cancellation Notice and shall have, from and after such time, no interest in or claim against the Company with respect to such shares.
Following the cancellation of Heavy Metal Keylock Default Shares by the Company pursuant to this Section 2C, the Company shall deliver written notice (the "Keylock Default Notice") to all Purchasers other than Keylock and Heavy Metal (each, a "Non-defaulting Keylock Purchaser") specifying the number of Class A Common equal to the sum of the number of Keylock Default Shares and the number of Heavy Metal Keylock Default Shares (collectively, the "Aggregate Keylock Default Shares"). Such Keylock Default Notice shall constitute an offer by the Company to sell to such Non-Defaulting Keylock Purchaser a number of Aggregate Keylock Default Shares up to such Non-defaulting Keylock Purchaser's Proportionate Share (as defined below) of such Aggregate Keylock Default Shares for a purchase price of $44.78 per share. If any Non-defaulting Keylock Purchaser elects to accept such offer, such Non-defaulting Purchaser shall deliver written notice of such election to the Company as soon as practicable but in any event within five days after delivery by the Company of the Keylock Default Notice. Any Aggregate Keylock Default Shares not elected to be purchased by the Non-defaulting Keylock Purchasers by the end of such five-day period shall be reoffered for an additional ten-day period on a pro rata basis to the Non-defaulting Keylock Purchasers who have elected to purchase their Proportionate Share of the Aggregate Keylock Default Shares. Each Non-defaulting Keylock Purchaser's "Proportionate Share" shall be equal to the product of (A) the number of Aggregate Keylock Default Shares and (B) a fraction, (1) the numerator of which is the number of shares of Class A Common held by the Non-defaulting Keylock Purchaser and (2) the denominator of which is the aggregate number of shares of Class A Common held by all Non-defaulting Keylock Purchasers.
2D. Cancellation of Certain Mazelina Shares. In the event and to the extent that Mazelina fails to make payments pursuant to Section 2A in respect of its Additional Commitment in excess of the Mazelina Threshold Commitment, there shall be automatically cancelled the number of shares of Class A Common owned by Mazelina which is equal to a fraction, (i) the numerator of which is the amount of such Additional Commitment which
Mazelina fails to pay, and (ii) the denominator of which is $89.55 (the "Mazelina Default Shares"), by delivery by the Company of written notice to Mazelina specifying the number of Mazelina Default Shares, within five days following the expiration of the twenty-day period referred to in Section 2A (such notice, the "Mazelina Cancellation Notice"). Upon delivery of the Mazelina Cancellation Notice, the Mazelina Default Shares shall no longer be deemed to be issued or outstanding, and Mazelina shall cease to be a shareholder with respect to such Mazelina Default Shares upon delivery of the Mazelina Cancellation Notice and shall have, from and after such time, no interest in or claim against the Company with respect to such shares.
The Company shall deliver to Heavy Metal a copy of the Mazelina Cancellation Notice. Heavy Metal shall purchase from the Company the number of Class A Common equal to the number of the Mazelina Default Shares, for a purchase price of $89.55 per share, within 15 day. following delivery to Heavy Metal of such notice. In the event Heavy Metal fails to purchase the Mazelina Default Shares, there shall be automatically cancelled the number of shares of Class A Common owned by Heavy Metal equal to the number of shares of Class A Common which Heavy Metal failed to purchase pursuant to the foregoing sentence (the "Heavy Metal Mazelina Default "Shares"), by delivery by the Company of written notice to Heavy Metal specifying the number of Heavy Metal Mazelina Default Shares, within five days following the expiration of the seven-day period referred to in the preceding paragraph (such notice, the "Heavy Metal Mazelina Cancellation Notice"). Heavy Metal shall cease to be a shareholder with respect to such Heavy Metal Mazelina Default Shares upon delivery of the Heavy Metal Mazelina Cancellation Notice and shall have, from and after such time, no interest in or claim against the Company with respect to such shares.
Following the cancellation of Heavy Metal Mazelina Default Shares by the Company pursuant to this Section 2D, the Company shall deliver written notice (the "Mazelina Default Notice") to all Purchasers other than Mazelina and Heavy Metal (each, a "Non-defaulting Mazelina Purchaser") specifying the number of Class A Common equal to the sum of the number of Mazelina Default Shares and the number of Heavy Metal Mazelina Default Shares (collectively, the "Aggregate Mazelina Default Shares"). Such Mazelina Default Notice shall constitute an offer by the Company to sell to such Non-Defaulting Mazelina Purchaser a number of Aggregate Mazelina Default Shares up to such Non-defaulting Mazelina Purchaser's Proportionate Share (as defined below) of such Aggregate Mazelina Default Shares for a purchase price of $44.78 per share. If any Non-defaulting Mazelina Purchaser elects to accept such offer, such Non-defaulting Purchaser shall deliver written notice of such election to the Company as soon as practicable but in any event within five days after delivery by the Company of the Mazelina Default Notice. Any Aggregate
Mazelina Default Shares not elected to be purchased by the Non-defaulting Mazelina Purchasers by the end of such five-day period shall be reoffered for an additional ten-day period on a pro rata basis to the Non-defaulting Mazelina Purchasers who have elected to purchase their Proportionate Share of the Aggregate Mazelina Default Shares. Each Non-defaulting Mazelina Purchaser's "Proportionate Share" shall be equal to the product of (A) the number of Aggregate Mazelina Default Shares and (B) a fraction, (1) the numerator of which is the number of shares of Class A Common held by the Non-defaulting Mazelina Purchaser and (2) the denominator of which is the aggregate number of shares of Class A Common held by all Non-defaulting Mazelina Purchasers.
2E. Escrow Arrangements. Pursuant to the terms of the Escrow Agreement, the certificates representing all Class A Common purchased by the Purchasers pursuant hereto or otherwise owned by the parties hereto have been deposited with the escrow agent thereunder to be held pursuant to the terms thereof. Each such certificate shall be held in escrow by such escrow agent until such time as the shares represented by such certificate have been cancelled (at which time such certificates shall be delivered to the Company) or are no longer subject to being cancelled by the Company pursuant to Sections 2B or 2C hereof (at which time such certificates shall be delivered to the Purchaser which deposited such certificates into escrow). At such time as any party hereto determines that any such shares are no longer so subject, such party may deliver to the Company a certificate setting forth the justification for such party's position. If, and only if, the Company concurs with such party's position as outlined in such certificate, the Company shall instruct the escrow agent to release such certificates to the party entitled thereto.
Section 3. Conditions of Each Purchaser's Obligations at the Closing. The obligation of each Purchaser at the Closing (i) to deliver the consideration required to be delivered at the Closing for the Class A Common to be purchased by such Purchaser and/or (ii) to make capital contributions required to be made at the Closing is subject to the satisfaction as of the Closing of the following conditions:
3A. Representations and Warranties; Covenants. The representations and warranties contained in Section 5 hereof shall be true and correct in all material respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein, and the Company shall have performed in all material respects all of the covenants required to be performed by it hereunder prior to the Closing.
3B. Amendment of Certificate of Incorporation. The Company's Articles of Incorporation shall have been amended and restated so that they are in the form set forth in Exhibit C
hereto (as so amended, the "Articles of Incorporation"), shall be in full force and effect under the laws of Indiana as of the Closing as so amended and shall not have been further amended or modified.
3C. Amendment of the Company's By-Laws. The Company's By-Laws shall have been duly amended and restated in form and substance as set forth in Exhibit D hereto (as so amended, the "By-Laws"), the By-Laws shall be in full force and effect as of the Closing as so amended and shall not have been further amended or modified.
3D. Registration Agreement. The Company, the Purchasers, the Management Stockholders and the Warrant Holders shall have entered into a registration agreement in substantially the form and in substance as set forth in Exhibit E attached hereto (the "Registration Agreement"), and the Registration Agreement shall be in full force and effect as of the Closing.
3E. Stockholders Agreement. The Company, the Purchasers, the Management Stockholders and the Warrant Holders shall have entered into an agreement in substantially the form and in substance set forth in Exhibit F attached hereto (the "Stockholders Agreement"), and the Stockholders Agreement shall be in full force and effect as of the Closing.
3F. Bank Agreement. The Operating Company and a syndicate of lenders (the "Lenders") shall have entered into definitive agreements and related documentation (collectively, the "Bank Agreement") providing for loans to the Company of not less than $215 million in order to finance the Project and the Operating Company's working capital needs in form and substance reasonably satisfactory to such Purchaser, and the Bank Agreement shall be in full force and effect as of the Closing and shall not have been amended or modified.
3G. Subordinated Loan Agreement. The Company, the Operating Company, the Sales Subsidiary and certain investors (the "Subordinated Lenders") shall have entered into a definitive subordinated note and warrant purchase agreement and related documentation (collectively, the "Subordinated Loan Agreement") providing for subordinated loans to the Company or the Operating Company of not less than $50 million in form and substance reasonably satisfactory to such Purchaser, and the Subordinated Loan Agreement shall be in full force and effect as of the Closing and shall not have been amended or modified.
3H. Real Estate Closing. Except as described in Item 2 on Schedule 3.28 to the Bank Agreement, the purchase of the Butler, Indiana real estate will have closed and the Operating Company will own a fee simple interest in such real estate, subject to no claims, charges or encumbrances other than Permitted Liens (as defined in the Bank Agreement).
3I. State and Municipal Financing. The Operating Company and certain governmental authorities and public utilities shall have entered into one or more memoranda of understanding (collectively, the "Government Financing Package") providing for the provision of certain state and municipal utility grants and loans to the Company or the Operating Company in the aggregate amount of not less than $35 million in form and substance reasonably satisfactory to such Purchaser, and the Government Financing Package shall be in full force and effect as of the Closing and shall not have been amended or modified.
3J. Construction and Equipment Contracts. The Company or the Operating Company shall have entered into each of the contracts listed on Schedule 3J attached hereto (collectively, the "Construction Contracts"), providing for the construction of the Project and the acquisition of equipment to be used therein, each in form and substance reasonably satisfactory to such Purchaser, and each of the Construction Contracts shall be in full force and effect as of the Closing and shall not have been amended or modified.
3K. Purchase and Sale of Class A Common. On or prior to the date of this Agreement, the Company, the Operating Company or one of their respective predecessors shall have received at least $51,000 in cash or other proceeds from the issuance and sale to the Management Stockholders of common stock.
3L. Employment Agreements. The Company shall have entered into employment agreements with each of Keith E. Busse, Mark D. Millett and Richard P. Teets, Jr., in form and substance set forth in Exhibits H-1, H-2 and H-3 attached hereto (the "Employment Agreements"), and the Employment Agreements shall be in full force and effect as of the Closing.
3M. Steel Purchasing Agreement. The Company or the Operating Company and Heidtman Steel Products, Inc. ("Heidtman") shall have entered into a Purchasing Agreement in form and substance set forth in Exhibit I attached hereto (the "Heidtman Agreement"), the Heidtman Agreement shall be in full force and effect as of the Closing and shall not have been amended or modified.
3N. Scrap Supply Agreement. The Company or the Operating Company and OmniSource Corporation shall have entered into an Agreement to Provide Scrap Purchasing Services and Certain Priority Purchase Rights in form and substance set forth in Exhibit J attached hereto (the "OmniSource Agreement"), the OmniSource Agreement shall be in full force and effect as of the Closing and shall not have been amended or modified.
3O. Sale of Class A Common to Each Purchaser. The Company shall have sold to each other Purchaser the Class A Common to be purchased by such other Purchaser hereunder at Closing and shall have received therefor in full the amounts required to be paid at Closing as set forth in Section 1B and the capital contribution required to be made at Closing as set forth in Section 1C.
3P. Securities Law Compliance. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance and sale of the Class A Common at the Closing and required to be made prior to or concurrently with such issuance and sale, pursuant to this Agreement and otherwise, in each case in compliance with such laws.
3Q. No Litigation, Proceedings. There shall be no action, suit, or proceeding threatened, instituted or pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction (other than those set forth on the attached Litigation Schedule) wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would (A) prevent or enjoin the consummation of any or the transactions contemplated by this Agreement (including, without limitation, the purchase or Class A Common by the Purchasers and the consummation of the debt financing contemplated by the Bank Agreement, the Subordinated Loan Agreement, the SMS Contingency Facility and the Government Financing Package), (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Company to own, operate, or control the Project (and on such judgment, order, decree, stipulation, injunction, or charge shall be in effect).
3R. Governmental Filings, Consents and Approvals. All federal, state and local governmental filings, consents and approvals necessary for the consummation of the transactions contemplated by this Agreement (other than those required for the physical construction, permitting and operation of the Project) shall have been made or obtained.
3S. Opinion of the Company's Counsel. The Purchasers shall have received from counsel for the Company an opinion substantially in the form set forth on Exhibit K attached hereto, which shall be addressed to the Purchasers, dated the date of the Closing.
3T. Closing Documents. The Company shall have delivered to the Purchasers all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in Sections 3A through 3S, inclusive (except to the extent of
matters required to be satisfactory to the Purchasers), have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the board of directors of the Company or the Operating Company, as appropriate, authorizing the execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement, the Employment Agreements, the Bank Agreement, the Subordinated Loan Agreement, the Heidtman Agreement, the omnisource Agreement, the SMS Contingency Facility, the Government Financing Package, the Construction Contracts and each of the other agreements contemplated hereby to which each of the Company and the Operating Company is a party, the filing of the amendment to the Articles of Incorporation referred to in Section 3B, the amendment to the Company's By-Laws referred to in Section 3C, the issuance and sale of the Class A Common and the consummation of all other transactions contemplated by this Agreement, and (b) the resolutions duly adopted by the Company's shareholders adopting the amendment to the Articles of Incorporation referred to in Section 3B;
(iii) certified copies of the Certificate of Incorporation and the By-Laws, each as in effect at the Closing;
(iv) certified copies of the Bank Agreement, the Subordinated Loan Agreement, the Government Financing Package and the Construction Contracts, each as in effect at the Closing;
(v) a certificate as to the incumbency of the officers of the Company executing this Agreement and the other agreements contemplated hereby on behalf of the Company;
(vi) copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder to the extent required to be obtained or filed prior to Closing (other than those required in connection with the physical construction, permitting and operation of the Project); and
(vii) such other documents relating to the transactions contemplated by this Agreement as any Purchaser or their special counsel may reasonably request.
3U. Proceedings. All corporate and other proceedings taken or required to be taken by the Company in connection with the transactions contemplated hereby to be consummated at or prior to the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchasers.
3V. Guarantys. The Company shall have received the duly executed Keylock Guaranty, the duly executed Mazelina Guaranty and the duly executed Heavy Metal Guaranty in form and substance satisfactory to the Purchasers.
3W. Escrow Agreement. The Purchasers and the Company shall have entered into the Escrow Agreement in form and substance as set forth in Exhibit L hereto.
3X. Fee Letter. The Company and certain of the Purchasers shall have entered into a letter agreement, in form and substance satisfactory to such Purchasers, pursuant to which the Company shall agree to pay to such Purchasers a fee in connection with structuring the debt financing for the Company and the Operating Company.
3Y. Waiver. Any condition specified in this Section 3 may be waived if consented to in writing by each Purchaser.
Section 4. Restrictions on Transfers.
4A. Restrictions. Each of the Purchasers severally agrees that Restricted Securities are only transferable pursuant to (i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rules then in force) if such rules are available, and (iii) subject to the conditions specified in Section 4B below, any other legally available means of transfer pursuant to the Securities Act.
4B. Procedure for Transfer. In connection with the transfer of any
Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of Section 4A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of counsel which (to the Company's reasonable
satisfaction} is knowledgeable in securities law matters to the effect that
such transfer of Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act. In addition, if the
holder of such Restricted Securities delivers to the Company an opinion of such
counsel reasonably satisfactory to the Company that no subsequent transfer of
such Restricted Securities by such holder will require registration under the
Securities Act, the Company will promptly upon such contemplated transfer
deliver new certificates for such Restricted Securities which do not bear the
Securities Act Legend set forth in Section 6(b) of the Stockholders Agreement.
If the Company is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof will not transfer the
same until the prospective transferee has confirmed to the Company in writing
its agreement to be bound by the conditions contained in this Section 4 and
Section 6A.
4C. Transferees. Upon request of any Purchaser, the Company shall promptly supply to such Purchaser or its prospective transferees all information required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission.
4D. Legend Removal. If any Restricted Securities become eligible
for sale pursuant to Rule 144 (k), the Company will promptly upon the request
of the holder of such Restricted Securities deliver new certificates for such
Restricted Securities which do not bear the Securities Act Legend set forth in
Section 5(b) of the Stockholders Agreement.
Section 5. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers that as of the Closing:
5A. Organization, etc. Each of the Company, the Sales Subsidiary and the Operating Company is a corporation duly organized and validly existing under the laws of the State of Indiana and, at the Closing, will be qualified to do business as a foreign corporation in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on the financial condition, operating results, assets, operations, business or prospects of the Company, the Sales Subsidiary and the Operating Company, as applicable. At the Closing, each of the Company, the Sales Subsidiary and the Operating Company will possess all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its respective businesses as now conducted and presently proposed to be conducted (other than licenses, permits and authorizations required for the physical construction, permitting and operation of the Project) and to carry out the transactions contemplated by this Agreement required to be carried out by it.
5B. Capital Stock and Related Matters.
(i) As of the Closing, (a) the authorized capital stock of the Company will consist of 10,000,000 shares of Class A Common and 500,000 shares of Class B Common, and (b) the Company will have issued, and there will be outstanding, 990,000 shares of Class A Common. As of the Closing, (k) the authorized capital stock of the Sales Subsidiary will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (1) the Sales Subsidiary will have issued, and there will be outstanding, 100 such shares. As of the Closing, (x) the authorized capital stock of the Operating Company will consist of 10,000 shares of Class A Common Stock, par value $.01 per share, and (y) the Operating Company will have issued, and there will be outstanding, 100 such shares.
(ii) Except as set forth on the "Capitalization Schedule" attached hereto, as of the Closing, none of the Company, the Sales Subsidiary and the Operating Company will have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, or have outstanding any rights or options to subscribe for or to purchase any capital stock or any stock or securities convertible into or exchangeable for any capital stock. The Capitalization Schedule accurately sets forth the following information as of the Closing with respect to all outstanding options and rights to acquire the capital stock of the Company, the Sales Subsidiary and the Operating Company: the holder, the number of shares covered, the exercise price and the expiration date. As of the Closing, except as contemplated by this Agreement, none of the Company, the Sales Subsidiary and the Operating Company will be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock or to make any payment in respect of any of the foregoing, except pursuant hereto, pursuant to the Stockholders Agreement or as set forth on the Capitalization Schedule or in the Articles of Incorporation.
(iii) As of the Closing, (A) the outstanding Class A Common of the Company will be held exclusively by the Purchasers and by the Management Stockholders in the amounts set forth on the Capitalization Schedule, the outstanding common stock of the Sales Subsidiary will be held exclusively by the Company and the outstanding common stock of the Operating Company will be held exclusively by the Sales Subsidiary, and (B) other than the matters disclosed on the Capitalization Schedule, none of the Company, the Sales Subsidiary and the Operating Company will have any commitment to issue shares of its capital stock, or any rights or Options to subscribe for or purchase any capital stock. As of the Closing, all of the outstanding shares of the Company's, the Sales Subsidiary's and the Operating Company's capital stock will have been duly authorized, and upon payment of the purchase price therefor will be validly issued, fully paid and nonassessable.
(iv) There are no statutory or contractual shareholder preemptive rights or rights of refusal with respect to the issuance of the Class A Common hereunder. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the Class A Common hereunder do not require registration under the Securities Act or any applicable state securities laws. To the best of the Company's knowledge, there are no agreements between the Company's shareholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except for the Stockholders Agreement and the Registration Agreement.
5C. Subsidiaries; Investments. The Company does not have any Subsidiaries other than the Sales Subsidiary and the Operating Company and the Company does not Own or hold the right to acquire any shares of stock or any other security or interest in any other Person.
5D. Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow Agreement and all other agreements and transactions contemplated hereby and thereby to which the Company is a party, and the amendment to the Company's Articles of Incorporation and By-Laws have been duly authorized by the Company. This Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow Agreement and all of the other agreements contemplated hereby and thereby to which the Company is a party each constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by the Company of this Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow Agreement and all other agreements and instruments contemplated hereby to be executed by the Company, the filing of the Articles of Incorporation with the Secretary of State of Indiana, the amendment to the Company's By-Laws and the offering, sale and issuance of the Class A Common hereunder, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any Lien upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body (other than in connection with certain state and federal securities laws) pursuant to, the Articles of Incorporation or By-Laws, or any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company is subject or any agreement or instrument to which the Company is a party.
5E. Conduct of Business; Liabilities. Attached hereto as Exhibit M is an unaudited consolidated balance sheet of the Company, the Sales Subsidiary and the Operating Company as of May 31, 1994 (the "Balance Sheet"). The Balance Sheet is accurate and complete in all material respects, is consistent with the books and records of the Company, the Sales Subsidiary and the Operating Company (which, in turn, are accurate and complete in all material respects) and has been prepared in accordance with generally accepted accounting principles ("GAAP"), consistently applied. Except as set forth on the attached "Liabilities Schedule," none of the Company, the Sales
subsidiary and the Operating Company has any obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Company, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing other than: (i) liabilities set forth on the Balance Sheet (including any notes thereto), (ii) liabilities and obligations which have arisen after the date of the Balance Sheet in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit), (iii) other liabilities and obligations expressly disclosed in the other Schedules to this Agreement and (iv) matters that, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the condition of the Company, the Operating Company and the Sales Subsidiary taken as a whole.
5F. No Material Adverse Change. Since January 31, 1994, there has been no material adverse change in the business or prospects of the Company, the Sales Subsidiary or the Operating Company.
5G. Absence of Certain Developments. Except as expressly contemplated by this Agreement, reflected in the Balance Sheet or set forth on the attached "Developments Schedule," since their respective dates of formation, none of the Company, the Sales Subsidiary and the Operating Company has:
(i) issued any notes, bonds or other debt securities or any capital stock or other equity securities or any securities convertible, exchangeable or exercisable into any capital stock or other equity securities;
(ii) borrowed any amount or incurred or become subject to any material liabilities;
(iii) mortgaged or pledged any of its properties or assets or subjected them to any material Lien, except Liens for current property taxes not yet due and payable and Liens under the Bank Agreement;
(iv) sold, assigned or transferred any of its tangible assets;
(v) sold, assigned or transferred any patents or patent applications, trademarks, service marks, trade names, corporate names, copyrights or copyright registrations, trade secrets or other intangible assets, or disclosed any material proprietary confidential information to any Person;
(vi) made any loans or advances to, guarantees for the benefit of, or any Investments in, any Person; or
(vii) made any Investment in or taken steps to incorporate any Subsidiary.
5H. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as set forth on the attached "Contracts Schedule" or the attached "Employee Benefits Schedule," none of the Company, the Sales Subsidiary and the Operating Company is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock purchase or other plan or arrangement providing for deferred or other compensation to employees or any other employee benefit plan or arrangement, or any collective bargaining agreement or any other contract with any labor union, or severance agreements, programs, policies or arrangements;
(b) contract for the employment of any officer, individual employee or other Person on a full-time, part-time, consulting or other basis providing annual compensation in excess of $75,000 or contract relating to loans to officers, directors or Affiliates;
(c) contract under which the Company, theSales Subsidiary or the Operating Company has advanced or loaned any other Person amounts in the aggregate exceeding $25,000;
(d) agreement or indenture relating to borrowed money or other indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets of the Company, the Sales subsidiary or the Operating Company;
(e) guarantee of any obligation in excess of $25,000;
(f) lease or agreement under which the Company, the Sales Subsidiary or the Operating Company is lessee of or holds or operates any property, real or personal, owned by any other party, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $50,000;
(g) lease or agreement under which the Company, the Sales Subsidiary or the Operating Company is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company, the Sales Subsidiary or the Operating Company;
(h) contract or group of related contracts with the same party or group of affiliated parties the performance of which involves consideration in excess of $100,000;
(i) assignment, license, indemnification or agreement with respect to any intangible property (including, without limitation, any Intellectual Property);
(j) agreement under which it has granted any Person any registration rights (including, without limitation, demand and piggyback registration rights) with respect to any securities of the Company, the Sales Subsidiary or the Operating Company;
(k) sales or distribution agreement;
(l) agreement with a term of more than six months which is not terminable by the Company, the Sales Subsidiary or the Operating Company upon less than 30 days notice without material penalty;
(m) contract or agreement prohibiting it from freely engaging in any business or competing anywhere in the world; or
(n) any other agreement which is material to its operations and business prospects or involves a consideration in excess of $200,000 annually.
(ii) All of the contracts, agreements and instruments set forth on the Contracts Schedule are valid, binding and enforceable against the Company, the Sales Subsidiary or the Operating Company, as the case may be, in accordance with their respective terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The Company, the Sales Subsidiary and the Operating Company have performed all material obligations required to be performed by them heretofore under the contracts, agreements and instruments listed on the Contracts Schedule to which each is a party and are not in material default under or in material breach of nor in receipt of any claim of material default or material breach under any contract, agreement or instrument listed on the Contracts Schedule; no event has occurred which with the passage of time or the giving of notice or both would result in a material default, breach or event of noncompliance by the Company, the Sales Subsidiary or the Operating Company, as the case may be, under any contract, agreement or instrument listed on the Contracts Schedule; none of
the Company, the Sales Subsidiary and the Operating Company has any present expectation or intention of not performing all such obligations; none of the Company, the Sales Subsidiary and the Operating Company has any knowledge of any breach or anticipated material breach by the other parties to any contract, agreement, instrument or commitment to which it is a party listed on the Contracts Schedule.
5I. Intellectual Property Rights.
(i) The attached "Intellectual Property Schedule" contains a complete and accurate list of all (a) patented or registered Intellectual Property Rights owned or proposed to be used by the Company, the Sales Subsidiary or the Operating Company, (b) pending patent applications and applications for registrations of other Intellectual Property Rights filed by the Company, the Sales Subsidiary or the Operating Company, (c) unregistered trade names and corporate names owned or proposed to be used by the Company, the Sales Subsidiary or the Operating Company and (d) unregistered trademarks, service marks, copyrights and computer software owned or proposed to be used by the Company, the Sales Subsidiary or the Operating Company. The Intellectual Property Schedule also contains a complete and accurate list of all licenses and other rights granted by the Company, the Sales Subsidiary or the Operating Company to any third party with respect to any Intellectual Property Rights and all licenses and other rights granted by any third party to the Company, the Sales Subsidiary or the Operating Company with respect to any Intellectual Property Rights, in each case identifying the subject Intellectual Property Rights. Except as set forth on the Intellectual Property Schedule, the Company, the Sales Subsidiary or the Operating Company owns all right, title and interest to, or has the right to use pursuant to a valid license, all Intellectual Property Rights necessary for the operation of the business of the Company, the Sales Subsidiary and the Operating Company as presently proposed to be conducted, free and clear of all Liens. Except as set forth on the Intellectual Property Schedule, the loss or expiration of any Intellectual Property Right or related group of Intellectual Property Rights owned or proposed to be used by the Company, the Sales Subsidiary or the Operating Company would not reasonably be expected to have a material adverse effect on the conduct of the business of the Company, the Sales Subsidiary or the Operating Company, and no such loss or expiration is, to the best of the Company's knowledge, threatened or pending.
(ii) Except as set forth on the Intellectual Property Schedule, (a) the Company, the Sales Subsidiary or the Operating Company owns all right, title and interest in and to or has the legal, valid and enforceable right to use all of the Intellectual Property Rights listed on such schedule, free and clear of all Liens, (b) none of the Company, the Sales Subsidiary and the Operating Company has received any claims or demands asserting
the invalidity, misuse or unenforceability of any of such Intellectual Property Rights, and, to the best of the Company's knowledge, there are no valid grounds for the same, (c) none of the Company, the Sales Subsidiary and the Operating Company has received any notices of, and neither is aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to such Intellectual Property Rights (including, without limitation, any demand or request that the Company, the Sales Subsidiary or the Operating Company license any rights from a third party), (d) to the best of the Company's knowledge, the conduct of the business of the Company, the Sales Subsidiary and the Operating Company as currently proposed to be conducted will not infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons and (e) to the best of the Company's knowledge, the Intellectual Property Rights owned by or licensed to the Company, the Sales Subsidiary or the Operating Company or currently proposed to be used by the Company, the Sales Subsidiary or the Operating Company have not been infringed, misappropriated or conflicted by other Persons.
5J. Litigation, etc. Except as set forth on the attached Litigation Schedule, there are no claims, actions or proceedings instituted, pending or, to the best of the Company's knowledge, threatened against or affecting the Company, the Sales Subsidiary or the Operating Company (or to the best of the Company's knowledge, instituted pending or threatened against or affecting any of the officers, directors or employees of the Company with respect to their businesses or proposed business activities) at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any of the foregoing with respect to the transactions contemplated by this Agreement); to the best of the Company's knowledge, none of the Company, the Sales Subsidiary and the Operating Company is subject to any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit); and, to the best of the Company's knowledge, there is no valid basis for any of the foregoing. None of the Company, the Sales Subsidiary and the Operating Company is subject to any judgment, order or decree of any court or other governmental agency, and none of the Company, the Sales Subsidiary and the Operating Company has received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business.
5K. Brokerage. Except as set forth on the attached "Brokerage Schedule," there are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Company, the Sales Subsidiary or the Operating Company. The Company shall pay, and
hold each Purchaser harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim.
5L. Governmental Consent, etc. Except as set forth on the attached "Consents Schedule," no permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the Company of this Agreement or by the Company, the Sales Subsidiary or the Operating Company of the other agreements contemplated hereby, or the consummation by the Company, the Sales Subsidiary and the Operating Company of any other transactions contemplated hereby or thereby, except for any of the foregoing required for the physical construction, permitting or operation of the Project and except as expressly contemplated herein or in the exhibits or schedules hereto.
5M. Insurance. The attached "Insurance Schedule" contains a description of each insurance policy maintained by the Company, the Sales Subsidiary and the Operating Company with respect to its properties, assets and business, and each such policy is in full force and effect as of the Closing. None of the Company, the Sales Subsidiary and the Operating Company is in material default with respect to its obligations under any insurance policy maintained by it. Except as set forth on the Insurance Schedule, none the Company, the Sales Subsidiary and the Operating Company has any self-insurance programs,,
5N. Employees. The Company is not aware that any executive or key employee of the Company, the Sales Subsidiary or the Operating Company or any group of employees of the Company, the Sales Subsidiary and the Operating Company has any plans to terminate employment with the Company. The Company, the Sales Subsidiary and the Operating Company have complied in all material respects with all laws relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes). Except as set forth on the attached "Employees Schedule," none of the Company, the Sales Subsidiary and the Operating Company, or, to the best of the Company's knowledge, any of their employees is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of the Company, the Sales Subsidiary or the Operating Company, except for agreements between the Company, the Sales Subsidiary or the Operating Company and its present and former employees.
5O. Compliance with Law. None of the Company, the Sales Subsidiary and the Operating Company has violated any law or any governmental regulation or requirement which violation has had or would reasonably be expected to have a material adverse
effect upon the financial condition, operating results, assets, operations, business or prospects of the Company, the Sales Subsidiary or the Operating Company, and the Company has not received notice of any such violation. None of the Company, the Sales Subsidiary and the Operating Company is subject to any clean up liability, or has reason to believe it may become subject to any clean up liability, under any federal, state or local environmental law, rule or regulation.
5P. Affiliated Transactions. Except for the Stockholders Agreement, the Registration Agreement, the Escrow Agreement and the Employment Agreements and except as set forth on the attached "Affiliated Transactions Schedule," no officer, director, employee, shareholder or Affiliate of the Company, the Sales Subsidiary or the Operating Company, or (to the knowledge of the Company) any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with the Company, the Sales Subsidiary or the Operating Company or has any interest in any property used by the Company, the Sales Subsidiary or the Operating Company.
5Q. Real Property Holding Corporation Status. Since their
respective dates of incorporation, none of the Company, the Sales Subsidiary
and the Operating Company has been, and as of the date of the Closing shall not
be, a "United States real property holding corporation", as defined in Section
897(c) (2) of the Internal Revenue Code of 1986, as amended, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder. None of the Company,
the Sales Subsidiary and the Operating Company has any current plans or
intentions which would cause the Company, the Sales Subsidiary or the Operating
Company, as the case may be, to become a "United States real property holding
company," and the Company and the Operating Company have filed with the United
States Internal Revenue Service all statements, it any, with its United States
income tax returns which are required under Section 1.897-2(h) of the Treasury
Regulations.
5R. Disclosure. To the best of the Company's knowledge, neither this Agreement nor any of the exhibits, schedules or attachments hereto, nor any written statements, documents, certificates or other items delivered at the Closing to the Purchasers by or on behalf of the Company with respect to the transactions contemplated hereby, contain any untrue statement of a material fact; provided that with respect to the financial projections furnished to the Purchasers by the Company, the Company represents and warrants only that such projections were prepared in good faith based upon assumptions reasonably believed by the Company to be reasonable and fair as of the date the projections were prepared in the context of the Company's history and current and reasonably foreseeable business conditions. There is no fact which the Company has not disclosed
to the Purchasers in writing and of which the Company is aware (other than general economic conditions) and which has had or would reasonably be expected to have a material adverse effect upon the financial condition, operating results, assets, customer or supplier relations, employee relations, business or prospects of the Company, the Sales Subsidiary or the Operating Company.
5S. Knowledge. As used in this Section 5, the terms "best of knowledge" or "aware" with reference to the Company shall mean and be limited to the actual knowledge or awareness of Keith E. Busse, Richard P. Teets, Jr. and Mark D. Millett or, in the cage of an Officer's Certificate, the individual signing such Officer's certificate.
5T. No Registration. Assuming the truth and accuracy of the representations set forth in Section 6 hereof and in separate investment letters to be delivered to the Company in connection herewith, the offers and sales of the Class A Common pursuant to the terms hereof are not required to be registered under the Securities Act or any state securities laws.
Section 6. Purchasers' Representations and Warranties. Each Purchaser hereby represents and warrants, severally and not jointly, to the Company that:
6A. Organization, etc. Such Purchaser is a corporation, partnership, limited liability company or business trust, as the case may be, duly formed or organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation. Such Purchaser Possesses all requisite power and authority to own such capital stock and to carry out the transactions contemplated by this Agreement.
6B. Authorization; No Breach. The execution, delivery and performance of this Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow Agreement and all other agreements and transactions contemplated hereby and thereby to which such Purchaser is a party have been duly authorized by such Purchaser. This Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow Agreement, and all of the other agreements contemplated hereby and thereby to which such Purchaser is a party each constitutes a valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as any of them may be affected by laws relating generally to the enforcement of creditors' rights and general principles of equity. The execution and delivery by such Purchaser of this Agreement, the Registration Agreement, the Stockholders Agreement and all other agreements and instruments contemplated hereby to be executed by such Purchaser, and the fulfillment of and compliance with the respective terms hereof and thereof by such Purchaser, do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, or
(iii) result in a violation of, the organizational documents of such Purchaser or any law, statute, rule, regulation, instrument, order, judgment or decree to which such Purchaser is subject or any agreement or instrument to which such Purchaser is a party.
6C. Hart-Scott-Rodino. Either (i) no filing is or was required to be made by such Purchaser with the Federal Trade Commission or the Antitrust Division of the United States Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, with respect to the transactions contemplated hereby or, (ii) if such filing was required, the waiting period with respect thereto has expired or approval has been received.
6D. Investment Letters. Such Purchaser has executed and delivered to the Company a separate letter containing additional representations, warranties and covenants, upon which the Company is relying in entering into and performing its obligations under this Agreement.
Section 7. Covenants.
7A. Use of Proceeds. The Company hereby agrees that the Company, the Sales Subsidiary and the Operating Company will apply the proceeds of the sale of Class A Common hereunder to finance the construction of the Project and for the working capital and other corporate needs of the Company, the Sales Subsidiary and the Operating Company.
7B. Hostile Acquisition. The Company covenants to and in favor of GECC that, so long as GECC owns at least five percent of the then outstanding Class A Common, the Company shall not, nor shall it permit any of its Subsidiaries to, without GECC's prior written consent, engage in any hostile transaction for the control of another company, whether by open market purchases of the capital stock of such company, by offer for the capital stock of such company or by solicitation of proxies or consents of the shareholders of such company.
Section 8. Conditions of the Company's Obligations at the Closing. The obligation of the Company to perform at the Closing its obligations to be then performed is subject to the satisfaction as of the Closing of the following conditions:
8A. Representations and Warranties; Covenants. The representations and warranties of the Purchasers contained in Section 7 hereof shall be true and correct in all material respects at and as of the Closing as though then made.
8B. Opinion of Counsel. The Company shall have received Opinions of counsel to Keylock, Mazelina, and Heavy Metal, in form and substance reasonably satisfactory to the Company, as to (i) the status of Keylock, Mazelina and Heavy
Metal, respectively, as "accredited investors" as defined in Regulation D promulgated pursuant to the Securities Act, (ii) the due authorization, execution, delivery and performance by Keylock, Mazelina, and Heavy Metal of this Agreement, the Stockholders Agreement, the Escrow Agreement and the Registration Agreement and (iii) certain other matters.
8C. Investment Letters. The Company shall have received from each Purchaser the investment letter referenced in Section 6C hereof.
8D. Guarantys. The Company shall have received the duly executed Keylock Guaranty, the duly executed Mazelina Guaranty and the duly executed Heavy Metal Guaranty in form and substance acceptable to the Company.
8E. Agreements. The parties thereto shall have entered into the Escrow Agreement, the Stockholders Agreement and the Registration Agreement.
Section 9. Definitions.
"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the Ownership of voting securities, contract or otherwise.
"Aggregate Actual Investment" means, for a Purchaser, the aggregate amount paid by such Purchaser, whether as capital contribution or as a payment of purchase price, required to be paid by such Purchaser pursuant to Sections 1B, 1C and 2A hereof.
"Common Stock" means the Class A Common.
"Default Number" means, for a Purchaser, the number of Total Shares of such Purchaser less (i) with respect to Purchasers other than Keylock, Mazelina and Heavy Metal, the Penalty Shares Retained of such Purchaser, and (ii) with respect to Keylock, Mazelina and Heavy Metal, the sum of (A) the Penalty Shares Retained by Keylock, Heavy Metal or Mazelina, as the case may be, and (B) with respect to Heavy Metal, 30,000; with respect to Keylock, 15,075; and with respect to Mazelina, 14,925.
"Default Share Purchase Price" means, with respect to any transaction, a fraction (i) the numerator of which is the applicable Defaulted Contribution Amount and (ii) the denominator of which is the applicable Default Number.
"Defaulted Contribution Amount" means the amount of the Additional Commitment of a Defaulting Purchaser which the Defaulting Purchaser fails to pay pursuant to Section 2A hereof.
"Escrow Agreement" means the agreement by and among the Company and the Purchasers dated the date hereof with respect to the Class A Common purchased by the Purchasers or otherwise held by the other parties thereto.
"Heavy Metal" means Heavy Metal, L.C., a Virginia limited liability company.
"Heavy Metal Guaranty" means the guaranty or guarantys of the performance of Heavy Metal under Section 2 hereof.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade names, logos and corporate names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration
thereof, (iv) computer software, data, data bases and documentation thereof,
(v) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information), (vi) other intellectual property rights and (vii)
copies and tangible embodiments thereof (in whatever form or medium, including,
without limitation, negatives, plates and video and film masters).
"Investment" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) of any other Person and (ii) any capital contribution by such Person to any other Person.
"Keylock" means Keylock Investments Limited, an Irish non-resident corporation.
"Keylock Guaranty" means the guaranty or guarantys of the performance of Keylock under Section 2 hereof.
"Liens" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Company or any Affiliate, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other
than to reflect ownership by a third party of property leased to the Company under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).
"Management Stockholders" means Keith E. Busse, Richard P. Teets, Jr., Mark D. Millett and the Steel Ink Company and their respective Permitted Transferees.
"Mazelina" means Mazelina Anstalt c/o Lic. Iur. Gertrude Beck, Liechtenstein, a Liechtenstein business trust.
"Mazelina Guaranty" means the guaranty or guarantys of the performance of Mazelina under Section 2 hereof.
"Officer's Certificate" means a certificate signed by the Company's president or its chief financial officer, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are reasonably necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (ii) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading.
"Operating Company" means Steel Dynamics, Inc., an Indiana corporation.
"Penalty Shares" means, with respect to a Purchaser, the number set forth opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 75,374 Bain Capital Fund IV-B, L.P. 86,258 BCIP Associates 14,163 BCIP Trust Associates, L.P. 4,814 GECC 180,610 Heavy Metal 185,583 Keylock 85,930 Mazelina 85,070 J.H. Whitney & Co. 7,258 Whitney 1990 Equity Fund, L.P. 29,033 Low Cost Limited Partnership 5,000 KLANS Associates 907 |
"Penalty Shares Retained" means, for a Purchaser, the product of (i) the Penalty Shares Retained Percentage for such Purchaser and (ii) the number of Penalty Shares of such Purchaser.
"Penalty Shares Retained Percentage" means, for a Purchaser, the difference between (i) two times the Percentage Investment Made of such Purchaser and (ii) 100%.
"Percentage Investment Made" means, for a Purchaser, the percentage determined by multiplying 100 by a fraction (i) the numerator of which is the Aggregate Actual Investment of such Purchaser and (ii) the denominator of which is the Total Required Investment of such Purchaser.
"Permitted Transferee" means any transferee of Class A Common in a transfer permitted by clause (i) and clauses (iv) through (xiii) of Section 2(f) of the Stockholders Agreement.
"Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government or any department or agency thereof.
"Project" means the Company's 1.1 million ton thin slab cast mini-mill in Butler, Indiana.
"Restricted Securities" means the Class A Common issued hereunder and
any securities issued with respect to such Class A Common by way of any stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities will cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them, (b) become eligible for sale pursuant to Rule 144 or Rule 144A of the
Securities and Exchange Commission (or any similar rules then in force) or (c)
been otherwise transferred and new securities for them not bearing the
Securities Act Legend set forth in Section 6 of the Stockholders Agreement have
been delivered by the Company in accordance with Section 4B or 4D. Whenever
any particular securities cease to be Restricted Securities, the holder thereof
will be entitled to receive from the Company, without expense, new securities
of like tenor not bearing a Securities Act Legend of the character set forth in
Section 6 of the Stockholder. Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange Commission under the Securities Act as such rule may be amended from time to time, or any similar rule then in force.
"Sales Subsidiary" means Steel Dynamics Sales Corp., Inc., an Indiana corporation.
"Securities Act" means the Securities Act of 1933, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes the United States government agency of that name and any governmental body or agency succeeding to the functions thereof.
"Subsidiary" means the Sales Subsidiary, the Operating Company and any other corporation of which the securities having a majority of the ordinary voting power in electing the Board of Directors are, at the time as of which any determination is being made, owned by the Company either directly or through one or more Subsidiaries.
"Total Required Investment" means, with respect to a Purchaser, the amount set forth opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 8,307,784 Bain Capital Fund IV-B, L.P. 9,507,464 BCIP Associates 1,561,100 BCIP Trust Associates, L.P. 530,600 GECC 19,906,949 Heavy Metal 19,535,000 Keylock 9,045,000 Mazelina 8,955,000 J.H. Whitney & Co. 800,000 Whitney 1990 Equity Fund, L.P. 3,200,000 Low Cost Limited Partnership 551,104 KLANS Associates 100,000 |
"Total Shares" means, with respect to a Purchaser, the number set forth opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 75,374 Bain Capital Fund IV-B, L.P. 86,258 BCIP Associates 14,163 BCIP Trust Associates, L.P. 4,814 GECC 180,610 Heavy Metal 215,583 Keylock 101,002 Mazelina 99,998 J.H. Whitney & Co. 7,258 Whitney 1990 Equity Fund, L.P. 29,033 Low Coat Limited Partnership 5,000 KLANS Associates 907 |
"Warrant Holders" means the holders of warrants to purchase shares of Class A Common issued pursuant to the Subordinated Loan Agreement.
Section 10. Miscellaneous.
10A. Remedies. The holders of Class A Common acquired hereunder (directly or indirectly) will have all of the rights and remedies set forth in this Agreement and the Articles of Incorporation, and all of the rights and remedies which such holders have been granted at any time under any other agreement or contract, and all of the rights and remedies which such holders have under any law. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, and to exercise all other rights granted by law.
10B. Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provision hereof shall be effective against the Company or the Purchasers unless such modification, amendment or waiver is approved in writing by Bain Capital Partners IV, L.P., GECC, Heavy Metal, Keylock, J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P.; provided, however, that no such modification, amendment or waiver shall be effective against the Company without the approval of a majority of the Management Directors (as defined in the Stockholders Agreement). The failure of any party to enforce any provision of this Agreement or under any agreement contemplated hereby or under the Certificate of Incorporation or the By-Laws shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement, any agreement referred to herein, the Certificate of Incorporation, or the By-Law. in accordance with their terms.
10C. Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any party in connection herewith will survive the execution and delivery of this Agreement, regardless of any investigation made by the Company or any Purchaser or on its behalf.
10D. Successors and Assigns.
(i) Except as otherwise expressly provided herein, all agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not, so long as such successors and assigns execute a counterpart hereof. In addition, the provisions of this Agreement which are for any Purchaser's benefit as the purchaser or holder of Class A Common, are also for the benefit of and enforceable by any subsequent Permitted Transferee of such Purchaser's Class A Common.
(ii) If a sale, transfer, assignment or other disposition of any shares of Class A Common is made in accordance with the provisions of this Agreement to any Person and such shares remain Restricted Securities immediately after such disposition, such Person shall, at or prior to the time such shares are acquired, execute a counterpart of this Agreement with such modifications thereto as may be necessary to reflect such acquisition, and such other documents as are necessary to confirm such Person's agreement to become a party to, and to be bound by, all covenants, terms and conditions of this Agreement, the Stockholders Agreement and the Registration Agreement as theretofore amended.
10E. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction, without invalidating the remainder of this Agreement in such jurisdiction or any provision hereof in any other jurisdiction.
10F. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
10G. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
10H. Governing Law. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Indiana, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Indiana or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Indiana.
10I. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered or received by certified mail, postage prepaid and return receipt requested, or sent by guaranteed overnight courier Service, charges prepaid. Notices, demands and communications will be sent to each Purchaser at such Purchaser's address as indicated in the
Company's books and records of the Company's transfer agent and registrar and to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
c/o Steel Dynamics, Inc.
2780 Waterfront Parkway East Drive,
Suite 325
Indianapolis, IN 46214
Attention: Keith E. Busse
With a copy to:
Albert T. Adams, Esq.
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
10K. Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement shall bear its own expenses in connection with the negotiation, execution, delivery and enforcement hereof.
10L. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement and any other agreement or instrument executed in connection herewith or expressly referred to herein embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
*****
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
|
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
|
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
|
BCIP ASSOCIATES
BCIP TRUST ASSOCIATES, L.P.
GENERAL ELECTRIC CAPITAL
CORPORATION
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
|
KEYLOCK INVESTMENTS LIMITED
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
J.H. WHITNEY & CO.
WHITNEY 1990 EQUITY FUND, L.P.
HEAVY METAL, L.C.
By: /s/ ROBIN K. KANNER
---------------------------------
Name: ROBIN K. KANNER
----------------------------
Title: MEMBER
--------------------------
|
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., general
partner
KLANS ASSOCIATES
EXHIBIT 11.1
STEEL DYNAMICS, INC. AND SUBSIDIARY
COMPUTATION OF NET LOSS PER SHARE FOR THE
PERIOD FROM SEPTEMBER 7, 1993 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1993, FOR EACH OF THE TWO
YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 AND
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1993 1994 1995 1996
------- ------- -------- -------
Weighted average shares outstanding.......... 12,039 20,787 28,083 32,048
Adjustment for Staff Accounting Bulletin No.
83......................................... 3,892 3,892 3,892 3,892
Dilutive effect for options and warrants..... N/A(a) N/A(a) N/A(a) N/A(a)
------- -------- -------
Adjusted weighted average shares
outstanding................................ 15,931 24,679 31,975 35,940
======= ======== =======
Net loss..................................... $(1,160) $(8,880) $(19,888) $(9,818)
======= ======== =======
Net loss per share........................... $ (0.07)(b) $ (0.36)(b) $ (0.62)(b) $ (0.27)(b)
======= ======== =======
|
(a) The effect of options and warrants in the computation of primary earnings per share for the period from September 7, 1993 (date of inception) through December 31, 1993, for each of the two years in the period ended December 31, 1995 and for the nine-month period ended September 28, 1996 was anti- dilutive.
(b) Fully diluted earnings per share is the same as primary earnings per share.
EXHIBIT 21.1
LIST OF ALL SUBSIDIARIES OF THE REGISTRANT
IRON DYNAMICS, INC.
4500 County Road 59
Butler, IN 46721
State of Incorporation: Indiana
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to registration statement No. 333-12521 of Steel Dynamics, Inc. of our report dated October 28, 1996 (November , 1996 as to Note 11), appearing in the prospectus, which is a part of such registration statement, and to the reference to us under the headings "Selected Consolidated Financial Data" and "Experts" in such prospectus.
Indianapolis, Indiana
October 28, 1996
******
The consolidated financial statements included elsewhere in this registration statement of Steel Dynamics, Inc. reflect a 28.06 for one stock split which is to be effected prior to the effective date of the registration statement. The above consent is in the form which will be furnished by Deloitte & Touche LLP upon consummation of this event, which is described in Note 11 to the consolidated financial statements, and that from October 28, 1996 to the date of such event, no other events have occurred which would affect the accompanying consolidated financial statements and notes thereto.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
October 28, 1996
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Consolidated Balance Sheet of Steel Dynamics, Inc. and subsidiary at September 28, 1996 and the Consolidated Statement of Operations for the nine-month period ended September 28, 1996 and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | SEP 28 1996 |
| CASH | 30,564 |
| SECURITIES | 3,000 |
| RECEIVABLES | 35,067 |
| ALLOWANCES | 534 |
| INVENTORY | 35,860 |
| CURRENT ASSETS | 105,715 |
| PP&E | 289,431 |
| DEPRECIATION | 12,071 |
| TOTAL ASSETS | 422,368 |
| CURRENT LIABILITIES | 46,867 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 366 |
| OTHER SE | 123,270 |
| TOTAL LIABILITY AND EQUITY | 422,368 |
| SALES | 174,619 |
| TOTAL REVENUES | 174,619 |
| CGS | 158,257 |
| TOTAL COSTS | 167,604 |
| OTHER EXPENSES | (697) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 18,050 |
| INCOME PRETAX | (9,818) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (9,818) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (9,818) |
| EPS PRIMARY | (.27) |
| EPS DILUTED | 0 |