<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
STEEL DYNAMICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
INDIANA 3312 35-1929476
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
4500 COUNTY ROAD 59
BUTLER, INDIANA 46721
(219) 868-8000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KEITH E. BUSSE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
STEEL DYNAMICS, INC.
4500 COUNTY ROAD 59
BUTLER, INDIANA 46721
(219) 868-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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. / / ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------
Common Stock, $.01 par value........... $178,250,000 $61,465.52
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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.
<PAGE> 3
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 September 23, 1996
Shares
Steel Dynamics, Inc.
COMMON STOCK
------------------------
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY, SHARES
ARE BEING SOLD BY THE COMPANY AND 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 SHARES OF
COMMON STOCK BEING OFFERED, SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND 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 $ AND $ . SEE "UNDERWRITERS"
FOR A DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING
THE INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION WILL BE MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- ------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholders have granted the U.S.
Underwriters an option, exercisable within 30 days of the date hereof,
to purchase up to an aggregate of 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."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters. It is expected that delivery of the
Shares will be made on or about , 1996 at the office of Morgan
Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
------------------------
<TABLE>
<S> <C>
MORGAN STANLEY & CO. PAINEWEBBER INCORPORATED
Incorporated
</TABLE>
McDONALD & COMPANY
Securities, Inc.
, 1996
<PAGE> 4
[GRAPHICS]
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.
2
<PAGE> 5
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
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
For investors outside the United States: No action has been or will be
taken in any jurisdiction by the Company, any Selling Stockholder or any
Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company, the Selling
Stockholders and the Underwriters to inform themselves about, and to observe any
restrictions as to, the offering of the Common Stock and the distribution of
this Prospectus.
------------------------
In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
------------------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 10
Use of Proceeds....................... 17
Dividend Policy....................... 17
Dilution.............................. 18
Capitalization........................ 19
Selected Consolidated Financial
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 28
Management............................ 51
Certain Transactions.................. 58
<CAPTION>
PAGE
----
<S> <C>
Principal and Selling Stockholders.... 60
Description of Certain Indebtedness... 62
Description of Capital Stock.......... 63
Shares Eligible for Future Sale....... 66
Certain United States Federal Tax
Consequences for Non-United States
Holders............................. 67
Underwriters.......................... 71
Legal Matters......................... 74
Experts............................... 74
Available Information................. 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
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.
3
<PAGE> 6
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 $ per share and that the U.S. Underwriters'
over-allotment option is not exercised and (ii) gives effect to a for
split of the Common Stock to be effected in October 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
$275.6 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
1.1 million tons by the end of August 1996, or 79% 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
4
<PAGE> 7
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.
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.
5
<PAGE> 8
- 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.
6
<PAGE> 9
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered:
By the Company............................. shares
By the Selling Stockholders................ shares
Total.............................. shares
United States offering..................... shares
International offering..................... shares
Common Stock to be outstanding after the
offerings(1)............................... 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"
</TABLE>
- ---------------
(1) Based on approximately shares of Common Stock outstanding on ,
1996. Excludes shares of Common Stock issuable upon exercise of
outstanding stock options at a weighted average exercise price of $
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."
7
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth summary consolidated financial and operating
data for the date and periods indicated. The summary statement of operations
data and balance sheet 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 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.
<TABLE>
<CAPTION>
MONTH ENDED EIGHT MONTHS
----------------------------------------------------------------------------------------------- ENDED
JANUARY 27, FEBRUARY 24, MARCH 30, APRIL 27, MAY 25, JUNE 29, JULY 27, AUGUST 24, AUGUST 24,
1996 1996 1996 1996 1996 1996 1996(1) 1996 1996
----------- ------------ --------- --------- ------- -------- -------- ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER TON AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales......... $ 3,558 $ 10,183 $18,546 $17,874 $20,941 $ 27,560 $ 18,286 $ 25,277 $142,225
Cost of products
sold............ 5,610 11,281 18,294 16,532 18,951 24,925 15,704 20,546 131,843
-------- --------- -------- -------- -------- -------- -------- -------- --------
Gross profit
(loss)........ (2,052) (1,098) 252 1,342 1,990 2,635 2,582 4,731 10,382
Selling, general
and
administrative
expenses........ 776 799 1,234 1,006 1,154 924 863 1,178 7,934
-------- --------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
from
operations.... (2,828) (1,897) (982) 336 836 1,711 1,719 3,553 2,448
Foreign currency
gain
(loss).......... 235 (189) 108 127 20 (41) (94) (6) 160
Interest
expense(2)...... 1,650 1,896 2,291 1,879 1,930 2,482 1,675 1,887 15,690
Interest income... 33 28 32 101 176 209 117 92 788
-------- --------- -------- -------- -------- -------- -------- -------- --------
Net income
(loss)(3)..... $ (4,210) $ (3,954) $(3,133) $(1,315) $ (898) $ (603) $ 67 $ 1,752 $(12,294)
======== ========= ======== ======== ======== ======== ======== ======== ========
Net income (loss)
per common
share(3)........ $ $ $ $ $ $ $ $ $
Weighted average
common shares
outstanding(3)...
OTHER DATA:
Shipments (net
tons)........... 13,093 35,966 65,855 60,187 69,384 89,069 56,280 75,629 465,463
Hot band
production (net
tons)(4)........ 22,282 38,777 66,871 62,226 66,407 84,758 58,411 76,033 475,765
Prime tons
produced(4)..... 15,495 28,690 50,220 54,215 58,242 78,577 53,996 73,096 412,531
Prime ton
percentage...... 69.5% 74.0% 75.1% 87.1% 87.7% 92.7% 92.4% 96.1% 86.7%
Yield
percentage(5)... 78.3% 85.4% 84.9% 84.9% 89.2% 87.0% 88.3% 87.8% 86.4%
Average sales
price per prime
ton............. $ 302 $ 313 $ 313 $ 319 $ 317 $ 322 $ 336 $ 346 $ 325
Effective capacity
utilization(6)... 19.9% 34.6% 47.8% 55.6% 59.3% 60.5% 69.5% 67.9% 51.5%
Man-hours per net
ton produced.... 1.77 .83 .66 .73 .69 .65 .61 .61 .75
Number of
employees (end
of period)...... 224 230 238 248 252 255 256 259 259
Operating profit
(loss) per net
ton shipped..... $ (215.99) $ (52.74) $(14.91) $ 5.58 $ 12.05 $ 19.21 $ 30.54 $ 46.98 $ 5.26
Depreciation and
amortization.... $ 466 $ 951 $ 1,453 $ 1,413 $ 1,532 $ 1,844 $ 1,219 $ 1,616 $ 10,494
EBITDA(7)......... $ (2,362) $ (946) $ 471 $ 1,749 $ 2,368 $ 3,555 $ 2,938 $ 5,169 $ 12,942
</TABLE>
<TABLE>
<CAPTION>
AUGUST 24, 1996
---------------------------
ACTUAL AS ADJUSTED(8)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 17,396 $ 92,396
Working capital.......................................................................... 39,593 114,593
Property, plant, and equipment, net...................................................... 282,768 282,768
Total assets............................................................................. 402,053 477,053
Long-term debt (including current portion)............................................... 257,968 198,973
Stockholders' equity..................................................................... 95,802 228,797
</TABLE>
(footnotes on following page)
8
<PAGE> 11
(1) 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 the month of July, which would typically be
a four-week month, and the month of December, which would typically be a
five-week month, are three weeks and four weeks, respectively, to take into
account scheduled semi-annual shutdowns for maintenance.
(2) Interest expense for the eight months ended August 24, 1996 would have been
approximately $10.7 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 $9.2 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."
(3) For the eight months ended August 24, 1996, on a pro forma basis, giving
effect to the transactions described in footnote 2 above as if they had
occurred as of January 1, 1996, the Company's net loss and net loss per
common share would have been approximately $7.4 million and $ ,
respectively. The pro forma net loss and net loss per common share does not
give effect to an extraordinary charge of approximately $8.3 million ($.8
million in cash) that the Company expects to incur as a result of the
prepayment of the Subordinated Notes. Pro forma net loss per common share is
based on the weighted average number of common shares outstanding during the
period plus the issuance of shares of Common Stock offered by the
Company hereby.
(4) 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.
(5) Yield percentage refers to tons of finished products divided by tons of raw
materials.
(6) 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.
(7) 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. EBITDA should not be
considered as an alternative to operating or net income (as determined in
accordance with generally accepted accounting principles ("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.
(8) As adjusted to give effect to the transactions described in footnote 2 above
as if they had occurred as of August 24, 1996. See "Use of Proceeds." As
adjusted stockholders' equity reflects an extraordinary charge of
approximately $8.3 million ($.8 million in cash) that the Company expects to
incur as a result of the prepayment of the Subordinated Notes.
9
<PAGE> 12
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 August 1996, the Company was operating at an
annualized production rate of 1.1 million tons, or 79% of full capacity. Because
of the high fixed cost nature of operating a steel mill, failure to bring
production to 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 and August 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 August 24, 1996 of approximately $12.3 million. As of August 24, 1996
the Company had an accumulated deficit of approximately $42.2 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
10
<PAGE> 13
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 for a week at a time, semi-annually, 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 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, 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. 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
11
<PAGE> 14
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.
12
<PAGE> 15
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 60% 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.
13
<PAGE> 16
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 eight months ended August 24, 1996, these customers accounted
for 39% and 10%, respectively, of the Company's total net sales, and the
Company's top five customers accounted for approximately 68% 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.
14
<PAGE> 17
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, invest in additional equipment or business
opportunities, or enter into certain contracts. The Credit Agreement contains a
number of covenants, including among others, covenants restricting the Company
and its subsidiaries with respect to: dispositions of property or assets, the
incurrence of indebtedness, the creation of liens, making capital expenditures
and investments, 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 modifications of certain agreements. In addition, the Credit
Agreement requires the Company to meet certain financial tests, including
specified current ratio and minimum tangible net worth tests and ratios relating
to leverage and fixed charge coverage. 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." 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
15
<PAGE> 18
price for shares of the Common Stock may be significantly affected by such
factors as news announcements 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
shares of Common Stock outstanding. Of these shares, the 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 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 August 24, 1996, options to purchase 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 %
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 $ per share (assuming an initial public offering price of
$ per share) in the net tangible book value of their shares of Common
Stock. See "Dilution."
16
<PAGE> 19
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
$ 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 $.8
million, (ii) to finance approximately $75.0 million of construction and
start-up costs for the Caster Project and (iii) to prepay approximately $9.2
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 (7.6% weighted
average rate at August 24, 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."
17
<PAGE> 20
DILUTION
The net tangible book value of the Company at August 24, 1996 was
approximately $81.0 million or $ per share of Common Stock. 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 shares of Common Stock offered hereby at an assumed initial
public offering price of $ 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 August 24, 1996, would have been approximately $215.5 million or $ per
share, representing an immediate increase in net tangible book value of $
per share to the existing stockholders and an immediate dilution to investors
purchasing shares in the offerings of $ per share. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $
Net tangible book value per share at August 24, 1996......... $
Increase per share attributable to sale of Common Stock in
the offerings............................................. $
------
Pro forma net tangible book value per share after the
offerings.................................................... $
----------
Dilution per share to investors who purchase Common Stock in
the offerings................................................ $
==========
</TABLE>
The foregoing table does not give effect to the exercise of outstanding
options granted to employees to purchase shares of Common Stock at a
weighted average exercise price of $ per share. If all such outstanding
options were exercised, the dilution to new investors would be $ per
share.
The following table sets forth on a pro forma basis as of August 24, 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 and by investors
purchasing the shares of Common Stock offered hereby (assuming an initial public
offering price of $ per share).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION WEIGHTED
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. % $ % $
New investors.........................
--------- --- --------- ---
Total....................... 100% $ 100%
========= === ========= ===
</TABLE>
18
<PAGE> 21
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
August 24, 1996, and as adjusted to give effect to the offerings and the
application of the net proceeds therefrom, (assuming an initial public offering
price of $ 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.
<TABLE>
<CAPTION>
AUGUST 24, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE INFORMATION)
<S> <C> <C>
Cash and cash equivalents............................................. $ 17,396 $ 92,396
======== ========
Current maturities of long-term debt.................................. $ 4,015 $ 4,015
======== ========
Long-term debt, excluding current maturities:
Revolving credit facility........................................... $ -- $ --
Senior term loans................................................... 150,000 140,825
11% subordinated notes.............................................. 49,820(1) --
Other............................................................... 54,133 54,133
-------- --------
Total long-term debt........................................ 253,953 194,958
Stockholders' equity:
Common Stock, $.01 par value per share, shares authorized,
shares issued and outstanding; shares issued
and outstanding, as adjusted..................................... 12
Additional paid-in capital.......................................... 138,357
Amounts due from stockholders....................................... (345) --
Accumulated deficit................................................. (42,222) (50,072)
-------- --------
Total stockholders' equity.................................. 95,802 228,797
-------- --------
Total capitalization...................................... $349,755 $ 423,755
======== ========
</TABLE>
- ---------------
(1) The Subordinated Notes are recorded net of unamortized debt discount
(approximately $5.2 million as of August 24, 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.
19
<PAGE> 22
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
and as of December 31, 1994 and 1995 and for each of the two years in the period
ended December 31, 1995 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 as of December
31, 1993 and for and as of the end of the eight months ended August 26, 1995 and
August 24, 1996 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.
<TABLE>
<CAPTION>
SEPTEMBER 7, 1993 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31, EIGHT MONTHS ENDED
THROUGH ------------------- ---------------------------------
DECEMBER 31, 1993 1994 1995 AUGUST 26, 1995 AUGUST 24, 1996
------------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales............................ $ -- $ -- $ 137 $ -- $ 142,225
Cost of products sold................ -- -- 3,169 -- 131,843
-------- -------- ---------- ---------- ----------
Gross profit (loss).............. -- -- (3,032) -- 10,382
Selling, general and administrative
expenses........................... 1,159 4,192 13,580 6,821 7,934
-------- -------- ---------- ---------- ----------
Income (loss) from operations.... (1,159) (4,192) (16,612) (6,821) 2,448
Foreign currency gain (loss)......... (4,952) (3,272) (2,658) 160
Interest expense(1).................. 2 43 564 115 15,690
Interest income...................... 1 307 560 433 788
-------- -------- ---------- ---------- ----------
Net loss(2)...................... $(1,160) $ (8,880) $(19,888) $ (9,161) $ (12,294)
======== ======== ========== ========== ==========
Net loss per common share(2)......... $ $ $ $ $
Weighted average common shares
outstanding(2).....................
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............ $ 117 $ 28,108 $ 6,884 $ 12,236 $ 17,396
Working capital...................... (29) 8,230 (14,488) 6,432 39,593
Property, plant, and equipment,
net................................ 200 54,566 274,197 219,400 282,768
Total assets......................... 521 94,618 320,679 236,966 402,053
Long-term debt (including current
maturities)........................ 800 11,949 223,054 135,201 257,968
Stockholders' equity................. (429) 62,536 62,972 76,964 95,802
</TABLE>
- ---------------
(1) Interest expense for the eight months ended August 24, 1996 would have been
approximately $10.7 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 $9.2 million of the Company's 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."
(2) For the eight months ended August 24, 1996, on a pro forma basis, giving
effect to the transactions described in footnote 1 above as if they had
occurred as of January 1, 1996, the Company's net loss and net loss per
common share would have been approximately $7.4 million and $ ,
respectively. The pro forma net loss and net loss per common share does not
give effect to an extraordinary charge of approximately $8.3 million ($.8
million in cash) that the Company expects to incur as a result of the
prepayment of the Subordinated Notes. Pro forma net loss per common share is
based on the weighted average number of common shares outstanding during the
period plus the issuance of shares of Common Stock offered by the
Company hereby.
20
<PAGE> 23
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
$275.6 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
1.1 million tons by the end of August 1996, or 79% 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
21
<PAGE> 24
"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, and August 1996, SDI reported monthly net income of
approximately $67,000 and approximately $1.8 million as a result of shipments of
approximately 56,000 and 76,000 tons, respectively, representing approximately
70% and 68%, 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:
<TABLE>
<CAPTION>
U.S. RAW STEEL U.S. RAW STEEL TOTAL U.S.
YEAR CAPABILITY PRODUCTION UTILIZATION SHIPMENTS
- ---- -------------- -------------- ----------- ----------
(THOUSANDS OF TONS)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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
22
<PAGE> 25
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 August 24, 1996, approximately 39% 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 93 at the end of
August. SDI is also continually seeking to enter new markets. Of the Company's
shipments since start-up, the Company believes that approximately 30% has been
used in the automotive industry, approximately 15% for tubing, approximately 15%
for construction, approximately 10% 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.
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 equipment, the Company uses the units-of-production
method of depreciation during the start-up phase. Once the design capacity of
the equipment is achieved, SDI uses straight-line depreciation over the
estimated useful life of the property, plant, or equipment. As of August 24,
1996, all property other
23
<PAGE> 26
than construction in progress was deemed to be at capacity for purposes of the
depreciation policy. The average estimated useful life of all property as of
August 24, 1996 was 12 years.
The current work force of Steel Dynamics consists of approximately 200
hourly and 60 salaried personnel. For August 1996, the Company's employment
costs per ton shipped were approximately $15. 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 equipment
purchases denominated in a foreign currency.
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 eight months ended August 26, 1995 (the "1995 Eight-Month
Period") and the eight months ended August 24, 1996 (the "1996 Eight-Month
Period") was approximately $.3 million, $10.1 million, $4.5 million and $89,000,
respectively. There was no capitalized interest for the period from September 7,
1993 (the "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 which 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 necessarily indicative of results to be expected in the
future.
Net Sales. Net sales totaled approximately $142.2 million for the 1996
Eight-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 August 1996, the Company was operating at
an annualized rate of 1.1 million tons, or at 79% of full capacity. In addition,
the average sales price per prime ton increased from $302 for January 1996 to
$346 for August 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 $131.8
million, or 93% of net sales, for the 1996 Eight-Month Period. As the Company
continues to increase the number of prime tons sold, the
24
<PAGE> 27
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 $6.8 million and
$7.9 million for the 1995 Eight-Month Period and the 1996 Eight-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 $115,000 and $15.7 million for the 1995 Eight-Month Period and the
1996 Eight-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, $4.9 million and $3.3 million for Fiscal 1993, Fiscal 1994 and Fiscal 1995,
respectively, and approximately $2.7 million for the 1995 Eight-Month Period. In
the 1996 Eight-Month Period, foreign currency gain totaled $160,000.
Interest Income. Interest income totaled approximately $1,000, $307,000
and $560,000 for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and
approximately $433,000 and $788,000 for the 1995 Eight-Month Period and the 1996
Eight-Month Period, respectively.
Taxes. At December 1995, the Company had available NOLs for federal income
tax purposes of approximately $2.5 million which 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 Eight-Month Period, the
Company used net cash of approximately $38.4 million in operating activities.
Net cash used in investing activities totaled approximately $270.5 million for
Fiscal 1993 through Fiscal 1995 and approximately $28.4 million for the 1996
Eight-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 $300.1 million for Fiscal
1993 through Fiscal 1995 and approximately $77.3 million for the 1996
Eight-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
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<PAGE> 28
$20.0 million were designated for mini-mill construction cost overruns (none of
which is outstanding). See "Description of Certain Indebtedness." As of August
24, 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 $9.2 million of such indebtedness with a portion of the net proceeds from
the offerings. See "Use of Proceeds."
As of August 24, 1996, after giving pro forma effect to the offerings and
the application of the net proceeds therefrom, the Company's long-term debt
would have been approximately $199.0 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 Eight-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 $1.5 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."
26
<PAGE> 29
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" are effective for financial statements for fiscal
years beginning after December 15, 1995. SFAS No. 121, 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. Based on current facts and circumstances, adoption of SFAS No. 121
is not expected to have a material effect on the Company's financial position,
results of operations or cash flows.
SFAS No. 123 encourages, but does not require, entities to adopt the fair
value based method of accounting for stock-based compensation plans. Under the
fair value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period. Entities are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion No. 25, but will
be required to disclose on a pro forma basis, net income and, if presented,
earnings per share, if the fair value based method of accounting had been
applied. SFAS No. 123 also establishes fair value as the measurement basis for
transactions in which an entity acquires goods or services from non-employees in
exchange for equity instruments. The Company does not intend to adopt the fair
value based method of accounting for stock-based employee compensation plans.
INFLATION
SDI does not believe that inflation has had a material effect on its
results of operations over the periods presented.
27
<PAGE> 30
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
$275.6 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
1.1 million tons by the end of August 1996, or 79% 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
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<PAGE> 31
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
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<PAGE> 32
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.
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.
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<PAGE> 33
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
[FLOW CHART]
and the typical continuous mini-mill melting-casting-rolling process.
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
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<PAGE> 34
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.
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<PAGE> 35
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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
- ---------------
(1) Includes pipe/tube, sheet, strip and plate in coils.
(2) Includes blackplate, sheet, strip and electrical.
(3) Includes tin coated, hot dipped, galvanized, electrogalvanized and all other
metallic coated.
The following chart presents 1995 U.S. industry flat-rolled product
shipments by market segment (as reported by the AISI):
[PIE CHART]
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<PAGE> 36
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]
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<PAGE> 37
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 as much as 80% of the current U.S.
shipped hot-rolled market of 26.8 million tons. The following chart displays
SDI's 1996 flat-rolled shipments, for the first eight 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.
<TABLE>
<CAPTION>
END USER INDUSTRY PERCENTAGE TYPICAL APPLICATIONS
---------------------- ---------- ----------------------------------------------------
<S> <C> <C>
Automotive............ 30% Safety restraints, suspension, frame
Tubing................ 15 Structural, tube, mechanical tube, conduit
Construction.......... 15 Metal buildings, piling, safety grating
Commercial equipment.. 10 Racks, shelving, hardware
Rail.................. 5 Rail car sides, tops, end caps
Machinery............. 5 Construction equipment, machine tools
Agriculture........... 5 Farm equipment, feeders, bins
Appliances............ 5 Liners, backs, brackets
Residential
equipment........... 5 Lawn equipment, garden implements, motion furniture
Other................. 5 Exercise and recreational equipment
----------
Total....... 100%
==========
</TABLE>
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<PAGE> 38
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 as much as 85% 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, 75% 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 49% of Steel Dynamics' total net sales through
August 24, 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 since it
commenced operations. 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 68% of total net sales through August 24, 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 August 24, 1996 has
amounted to 176,000 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,
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<PAGE> 39
Mexico; and Preussag International Steel Corporation, located in Atlanta,
Georgia. The Company's aggregate sales to Preussag (including its affiliated
companies) through August 24, 1996 has amounted to 45,000 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 August 24, 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 August 24,
1996.
International Sales. Of the Company's total net sales through August 24,
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
37
<PAGE> 40
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
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<PAGE> 41
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
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<PAGE> 42
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.
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<PAGE> 43
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.
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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.
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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
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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
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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,
pursuant to which 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 eight months of 1996, the Company purchased 535,000 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
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<PAGE> 48
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 August
1996 was $.029 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
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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 60% 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.
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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 189,000 tons of flat-rolled product or
$65.0 million as of August 31, 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.
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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. 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
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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 if not opposed
within 30 days, a notice of allowance will 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.
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MANAGEMENT
The directors and executive officers of the Company, their ages as of
August 31, 1996 and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
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
</TABLE>
- ------------
(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
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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. 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.
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, 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 is a director of Peiner Agrar and Huttenstoffe GmbH.
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 Executive Vice
President 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.,
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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, 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 $100,000 (collectively,
the "Named Executive Officers"). The amounts shown include compensation for
services rendered in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)(1) COMPENSATION COMPENSATION(2)
- ---------------------------------------- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
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
</TABLE>
- ------------
(1) Represents guaranteed bonuses through construction of mill.
(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.
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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.
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<PAGE> 57
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, shares of its
Common Stock, at a purchase price of per share, 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
Department Manager/Officer Incentive Bonus. The Company has established
and the stockholders have approved a bonus plan for department managers and
officers of the Company. Department managers include Sales and Marketing,
Transportation and Engineering. The bonus is based upon the Company's return on
invested capital and is paid annually. Cash bonuses to managers are capped at
100% of their base salary while officer cash bonuses are capped at 200% of their
base salary. Whenever manager/officer cash bonuses are capped, any available
excess is to be paid in Common Stock, subject to a cap of 50% of base salary for
managers and 100% of base salary for officers. Such stock bonuses vest ratably
over four years.
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
(46 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
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<PAGE> 58
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 shares,
subject to adjustment for future stock splits, stock dividends and similar
events. As of August 24, 1996, there were shares outstanding under the
1994 Plan, none of which were exercisable.
1996 Incentive Stock Option Plan. In September 1996, the Company adopted
the 1996 Plan, which was approved by stockholders in September 1996. The 1996
Plan authorizes the Board of Directors, or a committee designated by the Board
of Directors, to grant to all employees of SDI (approximately 260 employees) and
its subsidiaries ISOs intended to qualify as such under 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). The Board of Directors will determine when the ISOs may be
exercised, but in no event will exercise be permitted after ten years (five
years, in the case of an ISO granted to a 10% stockholder) from the date of
grant. 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. 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 1996 Plan is shares, subject to adjustment for future stock
splits, stock dividends and similar events. As of August 24, 1996, there were no
shares outstanding under the 1996 Plan.
Awards under the 1994 Plan and 1996 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.
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
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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.
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CERTAIN TRANSACTIONS
Since commencing commercial production of steel in January 1996, through
August 24, 1996, the Company has sold 176,000 tons of its hot bands to Heidtman
for $56.3 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 and by
the Mazelina Anstalt stockholder (collectively, the owners of shares of the
Company's Common Stock, or % of the total outstanding shares prior to the
offerings). In addition, in 1995 the Company sold approximately 32 unimproved
acres of its plant site to Heidtman for an aggregate of $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 45,000
tons of its steel coil to Preussag for an aggregate of $14.4 million during the
eight months ended August 24, 1996. 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 and Preussag owns shares of Common Stock,
or % 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 535,000 tons of steel scrap for $74.4 million
during the eight months ended August 24, 1996, and paid OmniSource a total of
$951,491 in fees. See "Business -- Steel Scrap and Scrap Substitute Resources."
Leonard Rifkin is the President 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 shares of the Company's Common Stock, or
% 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." 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 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
shares of Common Stock or % of the total outstanding shares prior
to the offerings. 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 is
not needed by Steel Dynamics 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
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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 $ 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 shares of the Company's
Common Stock, or % 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 $ 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
$ 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 $ . 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
of the Company's shares of Common Stock, or % 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 pre-payment 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 % and
% 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, 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."
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of August 24, 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.
<TABLE>
<CAPTION>
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
- ------------------------------------------- ----------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Heavy Metal, L.C.(1)....................... % %
Preussag Stahl AG(2).......................
Bain Capital Entities(3)...................
General Electric Capital Corporation(4)....
Mazelina Anstalt(5)........................
Keylock Investments Limited(6).............
J.H. Whitney & Co.(7)......................
Sumitomo Corporation of America(8).........
Sumitomo Corporation (Japan)(9)............
Keith E. Busse.............................
Richard P. Teets, Jr.......................
Mark D. Millett............................
Tracy L. Shellabarger......................
Leonard Rifkin(10).........................
OmniSource Corporation(11).................
John C. Bates(12)..........................
Heidtman Steel Products, Inc.(13)..........
Paul B. Edgerley(14).......................
William D. Strittmatter(15)................
William Laverack, Jr.(16)..................
Dr. Jurgen Kolb(17)........................
Directors and Executive Officers
as a Group (10 persons)..................
</TABLE>
- ------------
(1) The address of this stockholder is 646 North Robertson, Los Angeles, CA
90069.
(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 held of record by Bain Capital Fund IV, L.P. ("Fund
IV"), held by Bain Capital Fund IV-B, L.P. ("Fund IV-B"),
held by BCIP Associates, L.P., and held by BCIP Trust Associates,
L.P. (collectively, the "Bain Capital Entities").
(4) The address of this stockholder is 1600 Summer Street, Fifth Floor,
Stamford, CT 06927.
(5) The address of this stockholder is c/o Lic. for Gertrud Beck, Stadtle 36,
9490 Vaduz, Liechtenstein.
(6) The address of this stockholder is 17 Dame Street, Dublin 2, Republic of
Ireland.
(7) The address of this stockholder is 177 Broad Street, Stamford, CT 06901.
Consists of held of record by Whitney 1990 Equity Fund, L.P. (the
"Whitney Equity Fund"), held of record by J.H. Whitney & Co., and
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.
(9) The address of this stockholder is Josuika Building, 2-1-1 Hirotsubashi,
Chiyodo-ku, Tokyo, 101, Japan.
(10) Consists of 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. See "Certain
Transactions." Mr. Rifkin disclaims beneficial ownership of all but
of these shares.
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(11) Consists of 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 disclaims beneficial
ownership of all but of these shares.
(12) Consists of all 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.
(13) Consists of 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.
(14) Consists of all 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 disclaims beneficial
ownership of these shares.
(15) Consists of all 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
disclaims beneficial ownership of these shares.
(16) Consists of all 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 disclaims beneficial ownership of these
shares.
(17) Consists of all 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 disclaims beneficial ownership of these shares.
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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 Credit Agreement contains a number of covenants, including among
others, covenants restricting the Company and its subsidiaries with respect to:
dispositions of property or assets, the incurrence of indebtedness, the creation
of liens, making capital expenditures and investments, 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 modifications of certain agreements.
In addition, the Credit Agreement requires the Company to meet certain financial
tests, including specified current ratio and minimum tangible net worth tests
and ratios relating to leverage and fixed charge coverage.
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.
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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 million shares of
Common Stock, par value $.01 per share. As of August 24, 1996 there were
shares of Common Stock issued and outstanding, validly issued and
fully paid and non-assessable, that were held of record by 22 stockholders. As
of August 24, 1996, 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 shares of the Company's Common Stock, 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),
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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
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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
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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 .
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
approximately shares of Common Stock outstanding. Of these shares, the
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 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 shares
immediately after the offerings) or the average weekly reported volume of
trading of the
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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's directors and executive officers, the Selling Stockholders,
and certain other stockholders have entered into "lock-up" agreements with the
Underwriters, providing that, subject to certain exceptions, 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.
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 August 24, 1996, the Company had reserved
an aggregate of shares of Common Stock for issuance upon the exercise
of options granted pursuant to the 1994 Plan, and 1996 Plan. As of ,
1996, options to purchase shares were outstanding under the 1994 Plan,
and 1996 Plan. As soon as practicable after the offerings, the Company intends
to register on Form S-8 under the Securities Act approximately 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
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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
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<PAGE> 71
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
69
<PAGE> 72
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.
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<PAGE> 73
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 and shares,
respectively, of the Company's Common Stock and the U.S. Underwriters named
below, for whom Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and
McDonald & Company Securities, 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. and McDonald & Company Securities, Inc. are serving as International
Representatives, have severally agreed to purchase, the respective number of
shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated....................................
PaineWebber Incorporated.............................................
McDonald & Company Securities, Inc. .................................
---------
Subtotal.............................................................
---------
International Underwriters:
Morgan Stanley & Co. International Limited...........................
PaineWebber International (U.K.) Ltd. ...............................
McDonald & Company Securities, Inc. .................................
---------
Subtotal.............................................................
---------
Total................................................................
========
</TABLE>
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
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<PAGE> 74
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 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 1995,
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
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<PAGE> 75
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.
The Company intends to apply to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol STLD.
Pursuant to the Underwriting Agreement, the Company and the Selling
Stockholders have granted to the U.S. Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 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 shares offered hereby for
directors, officers, employees, business associates and related persons of the
Company. 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, 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
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<PAGE> 76
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,
1995 and 1994 and for the period from September 7, 1993 (date of inception)
through December 31, 1993, and each of the two years in the period ended
December 31, 1995, included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are 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.
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<PAGE> 77
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and August 24, 1996
(unaudited)......................................................................... 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, and for the unaudited eight-month periods ended August 26, 1995
and August 24, 1996................................................................. 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 unaudited eight-month period ended
August 24, 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, and for the unaudited eight-month periods ended August 26, 1995
and August 24, 1996................................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 78
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Steel Dynamics Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Steel
Dynamics Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1995 and for the period from September 7, 1993 (date of inception) through
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Steel Dynamics Holdings, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1995 and for the period from September 7, 1993 (date of inception)
through December 31, 1993 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
September 12, 1996
F-2
<PAGE> 79
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- AUGUST 24,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 28,108 $ 6,884 $ 17,396
Short-term investments...................................... 7,000
Accounts receivable, net of allowance for doubtful accounts
of $495 as of August 24, 1996............................ 125 15,965
Accounts receivable -- related parties...................... 16,526
Inventories................................................. 13,580 33,409
Other current assets........................................ 255 1,634 1,595
-------- -------- --------
Total current assets................................ 28,363 22,223 91,891
PROPERTY, PLANT, AND EQUIPMENT, NET........................... 54,566 274,197 282,768
DEBT ISSUANCE COSTS, less accumulated amortization of $32 and
$1,324 as of December 31, 1995 and August 24, 1996,
respectively................................................ 11,140 12,211 14,461
RESTRICTED CASH............................................... 2,666 2,810
OTHER ASSETS.................................................. 549 9,382 10,123
-------- -------- --------
TOTAL ASSETS........................................ $ 94,618 $320,679 $ 402,053
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 16,247 $ 24,478 $ 28,328
Accounts payable -- related parties......................... 3,424 12,193
Accrued interest............................................ 29 2,660 1,696
Accrued foreign currency loss............................... 2,970 1,013 429
Other accrued expenses...................................... 887 3,078 5,637
Current maturities of long-term debt........................ 2,058 4,015
-------- -------- --------
Total current liabilities........................... 20,133 36,711 52,298
LONG-TERM DEBT, less current maturities....................... 11,949 220,996 253,953
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock voting, $.01 par value; 10,000,000
shares authorized; 1,000,000, 1,020,833 and 1,208,333
shares issued and outstanding as of December 31, 1994 and
1995 and August 24, 1996, respectively................... 10 10 12
Class B common stock convertible non-voting, $.01 par value;
500,000 shares authorized; no shares issued
Additional paid-in capital.................................. 83,316 93,359 138,357
Amounts due from stockholders............................... (10,750) (469) (345)
Accumulated deficit......................................... (10,040) (29,928) (42,222)
-------- -------- --------
Total stockholders' equity.......................... 62,536 62,972 95,802
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $ 94,618 $320,679 $ 402,053
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 80
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
SEPTEMBER 7, 1993 ---------------------------------
(DATE OF INCEPTION) YEAR ENDED AUGUST 26, 1995 AUGUST 24, 1996
THROUGH DECEMBER 31, --------------- ---------------
DECEMBER 31, -------------------
1993 1994 1995 (UNAUDITED) (UNAUDITED)
------------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net sales:
Unrelated parties............ $ 137 $ 71,445
Related parties.............. 70,780
--------- ---------
Total net sales........... 137 142,225
Cost of goods sold............. -- -- 3,169 -- 131,843
------- ------- --------- --------- ---------
Gross profit (loss)............ -- -- (3,032) -- 10,382
Selling, general and
administrative expenses...... $ 1,159 $ 4,192 13,580 $ 6,821 7,934
------- ------- --------- --------- ---------
Operating income (loss)........ (1,159) (4,192) (16,612) (6,821) 2,448
Foreign currency gain (loss)... (4,952) (3,272) (2,658) 160
Interest expense............... 2 43 564 115 15,690
Interest income................ 1 307 560 433 788
------- ------- --------- --------- ---------
Net loss....................... $(1,160) $(8,880) $ (19,888) $ (9,161) $ (12,294)
======= ======= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 81
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK ADDITIONAL AMOUNTS TOTAL
----------------- PAID-IN DUE FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT EQUITY
------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of shares....... 479 $ 5 $ 726 $ 731
Net loss................. $ (1,160) (1,160)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1993................... 479 5 726 (1,160) (429)
Issuance of shares....... 521 5 81,183 $(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................... 1,000 10 83,316 (10,750) (10,040) 62,536
Issuance of shares....... 21 5,000 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................... 1,021 10 93,359 (469) (29,928) 62,972
Issuance of shares
(unaudited)............ 187 2 44,998 45,000
Amortization of amount
due from officer
(unaudited)............ 124 124
Net loss (unaudited)..... (12,294) (12,294)
------ ------ ---------- ------------ ----------- -------------
Balances at August 24,
1996 (unaudited)....... 1,208 $ 12 $ 138,357 $ (345) $ (42,222) $ 95,802
===== ====== ======== ========= ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 82
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 7, 1993
(DATE OF INCEPTION) YEAR ENDED
THROUGH DECEMBER DECEMBER 31, EIGHT MONTHS ENDED
31, -------------------- -----------------------
1993 1994 1995 AUGUST 26, AUGUST 24,
------------------- -------- --------- 1995 1996
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................. $(1,160) $ (8,880) $ (19,888) $ (9,161) $ (12,294)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 13 876 408 11,947
Foreign currency loss (gain)....... 4,952 3,272 2,658 (160)
Changes in certain assets and
liabilities:
Accounts receivable.............. (125) (5) (32,366)
Inventories...................... (13,580) (802) (19,829)
Other assets..................... (5) (251) (788) (367) 39
Accounts payable................. 29 691 6,441 (11,782) 12,619
Accrued expenses................. 120 796 4,822 1,852 1,595
------- -------- --------- --------- ---------
Net cash used in operating
activities.................. (1,016) (2,679) (18,970) (17,199) (38,449)
------- -------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment.......................... (198) (43,709) (224,449) (147,320) (20,644)
Purchase of short-term investments.... (7,000)
Other................................. (549) (1,602) (506) (741)
------- -------- --------- --------- ---------
Net cash used in investing
activities.................. (198) (44,258) (226,051) (147,826) (28,385)
------- -------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from vendor/customer
advances........................... 800
Repayment of vendor/customer
advances........................... (800)
Issuance of long-term debt............ 13,352 188,430 125,291 35,285
Payments of long-term debt............ (1,079)
Proceeds from government grants....... 2,878 21,188 14,688 1,558
Issuance of common stock.............. 681 70,488 15,281 10,188 45,124
Debt issuance costs................... (150) (10,990) (1,102) (1,014) (3,542)
------- -------- --------- --------- ---------
Net cash provided by financing
activities.................. 1,331 74,928 223,797 149,153 77,346
------- -------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents........................... 117 27,991 (21,224) (15,872) 10,512
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 $ 12,236 $ 17,396
======= ======== ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest................ $ 2 $ 14 $ 8,000 $ 3,395 $ 16,902
======= ======== ========= ========= =========
Supplemental disclosure of noncash
information:
Electric utility transmission facility
loan and other equipment
obligation......................... $ -- $ -- $ 24,349 $ -- $ --
======= ======== ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 83
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INTERIM FINANCIAL INFORMATION AS OF AUGUST 24, 1996 AND FOR THE
EIGHT-MONTH PERIODS ENDED AUGUST 26, 1995 AND AUGUST 24, 1996 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 PERIODS. INFORMATION FOR THE
INTERIM PERIODS 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 its wholly-owned subsidiaries: Steel
Dynamics Sales Corp., Inc. and Steel Dynamics, Inc. 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% raw materials and
supplies, and 3% finished products as of December 31, 1995 (99% and 1%,
respectively, as of August 24, 1996). 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 and $10.1 million in 1994 and 1995,
respectively. Depreciation is provided on the straight-line basis over the
estimated useful lives of the assets ranging from 12 years to 30 years. 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, is effective for financial statements for fiscal years beginning after
December 31, 1995. This standard, 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. Based
upon current facts and circumstances, adoption of this standard is not expected
to have a material effect on the Company's financial position, results of
operations or cash flows.
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 lives 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.
F-7
<PAGE> 84
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
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.
Stock Options -- In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, Accounting for Stock-Based Compensation, which encourages,
but does not require, entities to adopt the fair value based method of
accounting for stock-based employee compensation plans. Under the fair value
based method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period. Entities are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, but would be
required to disclose on a pro forma basis, net income and earnings per share, as
if the fair value based method of accounting had been applied. SFAS No. 123 also
establishes fair value as the measurement basis for transactions in which an
entity acquires goods or services from non-employees in exchange for equity
instruments.
The accounting requirements of the new method are effective for financial
statements for fiscal years beginning after December 15, 1995. The Company does
not intend to adopt the fair value based method of accounting for stock-based
employee compensation plans.
Concentrations of Credit Risk -- Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash investments and accounts receivable. The Company places its
cash investments 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.
2. PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- AUGUST 24,
1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements.............................. $ 2,497 $ 5,309 $ 5,187
Buildings and improvements......................... 24,849 26,665
Plant, machinery and equipment..................... 77 242,690 243,783
Construction-in-progress........................... 52,001 1,499 17,373
------- -------- --------
54,575 274,347 293,008
Less accumulated depreciation...................... 9 150 10,240
------- -------- --------
Property, plant, and equipment, net................ $54,566 $274,197 $ 282,768
======= ======== ========
</TABLE>
F-8
<PAGE> 85
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- AUGUST 24,
1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Senior secured notes payable, principal and
interest due semi-annually beginning in 1997
through 2002, interest is variable (weighted
average rate of 8.39% and 7.6% as of December 31,
1995 and August 24, 1996, respectively).......... $115,000 $ 150,000
8.01% municipal bond, principal and interest due
monthly through 2015............................. 21,400 21,400
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 36,748
11% senior subordinated promissory notes payable,
principal and interest due quarterly through
2002............................................. 10,597 49,257 49,820
------- -------- --------
Total debt......................................... 11,949 223,054 257,968
Less current maturities............................ 2,058 4,015
------- -------- --------
Long-term debt..................................... $11,949 $220,996 $ 253,953
======= ======== ========
</TABLE>
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 at August 24, 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 as of December 31, 1995 is held by
a trustee in a debt service reserve fund, and is recorded as restricted cash. At
December 31, 1995, a stand-by letter of credit amounting to $22.6 million
relating to the municipal bonds was outstanding.
The electric utility transmission facility loan of $7.8 million at December
31, 1995 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 is reduced as 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 at December 31, 1995 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.
F-9
<PAGE> 86
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
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 58,511 shares of Class A
common stock (warrants for the purchase of 1,063.8 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
58,511 shares of Class A common stock are outstanding at December 31, 1995. 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 and $5.7 million as of December 31, 1994 and 1995, 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 both December
31, 1994 and 1995.
Maturities of outstanding debt as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
-------------------------------------------------- --------
<S> <C>
1996.............................................. $ 2,058
1997.............................................. 8,876
1998.............................................. 30,352
1999.............................................. 35,470
2000.............................................. 45,115
</TABLE>
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 and for the years ended December 31, 1994 and 1995 because of the
valuation allowances recorded.
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 69 $ 1,002
Inventory costs................................................ 1,916
Property, plant, and equipment................................. 1,981
Capitalized start-up costs..................................... 1,574 7,169
Other accrued expenses......................................... 1,213 776
------- -------
Total deferred tax assets........................................ 4,837 10,863
Less valuation allowance......................................... (4,830) (9,784)
------- -------
Net deferred tax assets.......................................... 7 1,079
Deferred tax liabilities:
Property, plant and equipment.................................. (717)
Capitalized interest........................................... (1) (217)
Other.......................................................... (6) (145)
------- -------
Total deferred tax liabilities................................... (7) (1,079)
------- -------
Net deferred tax assets and liabilities.......................... $ -- $ --
======= =======
</TABLE>
F-10
<PAGE> 87
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1995, the Company has available net operating loss
carryforwards for federal income tax purposes of approximately $2.5 million
which will expire in 2010. 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 5,333 shares of Class B common stock at an exercise
price of $75 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, there
were 5,333 Class B common stock warrants outstanding.
A $750 note receivable from an officer for 10,000 shares of Class A common
stock was recorded as a reduction of stockholders' equity at December 31, 1994.
The note bears interest at 10% and will be forgiven on the earlier of July 1,
1998 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 ("Plan") for
certain key employees who are responsible for management of the Company. A total
of 21,800 shares of Class A common stock have been reserved for issuance under
the Plan as of December 31, 1995. Eligible individuals under the 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 Plan vest 100% after five years of the date of grant and have
a maximum term of ten years. The following summarizes the transactions under the
Plan:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
SHARES ----------------------------------
AVAILABLE NUMBER PRICE PER AGGREGATE
FOR GRANT SHARES SHARE PRICE
---------- ------ --------- ---------
<S> <C> <C> <C> <C>
Authorized in December 1994......................... 21,800
Options granted..................................... (8,600) 8,600 $ 93 $ 800
-------
---
------- ------
Balance, December 31, 1994.......................... 13,200 8,600 800
Options granted..................................... (9,700) 9,700 93 902
Options granted..................................... (2,100) 2,100 138 290
-------
======= ---
------
Balance, December 31, 1995.......................... 1,400 20,400 $ 1,992
======= ====== ==========
</TABLE>
At December 31, 1995, no options were exercisable under the plan.
6. COMMITMENTS
The Company has executed a raw material supply contract with OmniSource
Corporation ("OmniSource") for the purchase of steel scrap resources. 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.
F-11
<PAGE> 88
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The Company began construction of its cold mill in August 1996 and had
construction related commitments of $122.0 million as of August 24, 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 $56.3
million (unaudited) and $14.4 million (unaudited) during the eight-months ended
August 24, 1996 to Heidtman and affiliates of Preussag, respectively. The
Company as of August 24, 1996 had outstanding accounts receivable of $14.6
million (unaudited) and $1.9 million (unaudited) from Heidtman and affiliates of
Preussag, respectively. The Company had purchases of $7.1 million and $74.4
million (unaudited) from OmniSource in 1995 and the eight-months ended August
24, 1996, respectively. The Company as of December 31, 1995 and August 24, 1996
had accounts payable of $3.4 million and $12.2 million (unaudited),
respectively, to OmniSource. During 1996, sales (unaudited) to Heidtman and
Preussag represented 39% and 10%, respectively, of the Company's total net
sales.
The on-site substation was purchased by the Company for approximately $12.8
million from General Electric, the parent of General Electric Capital
Corporation, a stockholder of the Company.
9. FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and short-term debt
approximated fair value as of December 31, 1994 and 1995, 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, 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
F-12
<PAGE> 89
STEEL DYNAMICS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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. SUBSEQUENT EVENTS
The Company issued Class A Common Stock as follows:
<TABLE>
<CAPTION>
DATE
INVESTOR ISSUED SHARES AMOUNT
-------------------------------------------- ------------------- ------- -------
<S> <C> <C> <C>
Sumitomo Corporation and
Sumitomo Corporation of America
(collectively, "Sumitomo")................ September 7, 1996 45,763 13,500
Certain existing stockholders............... September 10, 1996 51,558 11,858
------- -------
97,321 $25,358
======= =======
</TABLE>
The issuance of shares to Sumitomo was made pursuant to a letter of intent
between the Company and Sumitomo dated July 19, 1996. The issuance of shares to
certain existing stockholders was approved by the Board of Directors on February
29, 1996. The proceeds from the issuance of shares to Sumitomo and the certain
existing stockholders is expected to be used by the Company to fund the
construction of a steel scrap substitute plant.
F-13
<PAGE> 90
[GRAPHIC DEPICTING PICTURES OF STEEL
DYNAMICS' STEEL MILL
[LOGO] SDI
STEEL DYNAMICS, INC.]
<PAGE> 91
LOGO
<PAGE> 92
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued September 23, 1996
Shares
Steel Dynamics, Inc.
COMMON STOCK
------------------------
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY, SHARES
ARE BEING SOLD BY THE COMPANY AND 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 SHARES OF
COMMON STOCK BEING OFFERED, SHARES ARE OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND 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 $ AND $ . SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED
IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION WILL BE MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- ------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholders have granted the U.S.
Underwriters an option, exercisable within 30 days of the date hereof,
to purchase up to an aggregate of 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."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters. It is expected that delivery of the
Shares will be made on or about , 1996 at the office of Morgan Stanley
& Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
------------------------
<TABLE>
<S> <C>
MORGAN STANLEY & CO. PAINEWEBBER INTERNATIONAL
International
</TABLE>
McDONALD & COMPANY
Securities, Inc.
, 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.
<PAGE> 93
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.
<TABLE>
<S> <C>
SEC registration fee....................................................... $61,466
NASD filing fee............................................................ 20,625
Nasdaq National Market listing fee......................................... *
Printing and engraving expenses............................................ *
Blue Sky qualification fees and expenses................................... 22,500
Legal fees and expenses.................................................... *
Accounting fees and expenses............................................... *
Transfer Agent and Registrar fees.......................................... *
Miscellaneous expenses and administrative costs............................ *
-------
Total............................................................ $ *
=======
</TABLE>
- ---------------
* To be completed by amendment.
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
<PAGE> 94
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 August 31, 1996,
the Registrant has issued and sold the following securities (without giving
effect to the :1 stock split of the Registrant's Common Stock):
1. At the time of incorporation in September 1993, Registrant issued
and sold an aggregate of 150,000 shares of Common Stock to its founding
stockholders 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, Registrant issued and sold an aggregate of
20,000 shares of Common Stock to a consultant and advisor to the Company,
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 October 1993, 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,
pursuant to restricted stock purchase agreements.
4. On June 30, 1994, Registrant issued and sold an aggregate of
511,180 shares of Common Stock to accredited financial investors, at an
average purchase price of $159.08 per share, for an aggregate purchase
price of $81,320,000, pursuant to restricted stock purchase agreements.
5. 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
II-2
<PAGE> 95
promissory note will be forgiven concurrently with the effectiveness of the
Registration Statement in connection with the offerings.
6. 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 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.
7. In August 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 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.
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.
ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits: The following exhibits are filed as a part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
<C> <S>
1.1 **Form of Underwriting Agreement between Steel Dynamics, Inc. and Morgan
Stanley & Co. Incorporated, PaineWebber, Incorporated, McDonald & Company
Securities, Inc., and Donaldson, Lufkin & Jenrette Securities Corporation.
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. 6 to Credit Agreement.
10.1c **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.
</TABLE>
II-3
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
<C> <S>
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.
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/Manager Incentive 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.
21.1 **List of the Registrant's Subsidiaries.
23.1 Consent of Barrett & McNagny (included in Exhibit 5.1).
</TABLE>
II-4
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included in signature pages).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* 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.
** 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.
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-5
<PAGE> 98
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 23rd day of September, 1996.
STEEL DYNAMICS, INC.
By: /s/ KEITH E. BUSSE
------------------------------------
Keith E. Busse
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Keith E.
Busse and Tracy L. Shellabarger, either of whom may act without the joinder of
the other, as his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him, and in his name, place and stead,
in any and all capacities to sign any and all amendments (including
post-effective amendments) and supplements to this Registration Statement and
any related Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as full to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------- ------------------------------------- -------------------
<C> <S> <C>
/s/ KEITH E. President & Chief Executive Officer September 23, 1996
BUSSE and Director
- ----------------------------------- (Principal Executive Officer)
Keith E. Busse
/s/ TRACY L. SHELLABARGER Vice President & Chief Financial September 23, 1996
- ----------------------------------- Officer and Director
Tracy L. Shellabarger (Principal Financial and Accounting
Officer)
/s/ MARK D. MILLETT Vice President of Melting and Casting September 23, 1996
- ----------------------------------- and Director
Mark D. Millett
/s/ RICHARD P. TEETS, JR. Vice President of Rolling and September 23, 1996
- ----------------------------------- Finishing and Director
Richard P. Teets, Jr.
/s/ PAUL B. EDGERLEY Director September 23, 1996
- -----------------------------------
Paul B. Edgerley
/s/ WILLIAM D. STRITTMATTER Director September 23, 1996
- -----------------------------------
William D. Strittmatter
/s/ LEONARD RIFKIN Director September 23, 1996
- -----------------------------------
Leonard Rifkin
</TABLE>
II-6
<PAGE> 99
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------- ------------------------------------- -------------------
<C> <S> <C>
/s/ BATESJOHN C. Director September 23, 1996
- -----------------------------------
John C. Bates
/s/ WILLIAM LAVERACK, JR. Director September 23, 1996
- -----------------------------------
William Laverack, Jr.
/s/ JURGEN KOLB Director September 23, 1996
- -----------------------------------
Jurgen Kolb
</TABLE>
II-7
<PAGE> 100
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------ ------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 **Form of Underwriting Agreement between Steel Dynamics, Inc. and Morgan
Stanley & Co. Incorporated, PaineWebber, Incorporated, McDonald & Company
Securities, Inc., and Donaldson, Lufkin & Jenrette Securities
Corporation..............................................................
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. 6 to Credit Agreement....................................
10.1c **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........................................................
</TABLE>
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------ ------------------------------------------------------------------------- ----
<C> <S> <C>
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/Manager Incentive 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.
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..................................................
</TABLE>
- ---------------
* 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.
** To be filed by amendment.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
STEEL DYNAMICS, INC.
The Articles of Incorporation of Steel Dynamics, Inc., pursuant to the
provisions of the Indiana Business Corporation Law ("Act"), are hereby amended
and restated in their entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Steel Dynamics, Inc.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's Registered Office in the State of Indiana
is 4500 County Road 59, Butler, Indiana 46721. The name of its Registered
Agent at such address is Keith E. Busse.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Act.
ARTICLE IV
AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 100,000,000 shares of common stock, par value $0.01 per
share ("Common Stock"). The holders of the Common Stock shall be entitled to
one (1) vote per share on all matters to be voted on by the Corporation's
shareholders. As and when dividends are declared or paid, the holders of
Common Stock shall be entitled to participate in such dividends ratably on a
per share basis. The holders of the Common Stock shall be entitled to
participate ratably on a per share basis in
<PAGE> 2
all distributions to the holders of the Common Stock in any liquidation,
dissolution or winding up of the Corporation.
ARTICLE V
DIRECTORS
The number of Directors may from time to time be fixed by the Bylaws. If
the Bylaws do not fix the number of Directors, then the number of Directors
shall be ten (10). Vacancies occurring in the Board of Directors shall be
filled in the manner provided in the Bylaws, or if the Bylaws do not provide
for the filling of vacancies, then in the manner provided by Indiana law.
ARTICLE VI
STOCKHOLDER MEETINGS
Meetings of stockholders shall be held at such place, within or without
the State of Indiana, as may be designated by the Board of Directors.
ARTICLE VII
AMENDMENT OF ARTICLES
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute and these Articles of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE VIII
VALIDITY
In the event any provision (or portion thereof) of these Articles of
Incorporation shall be found to be invalid, prohibited, or unenforceable for
any reason, the remaining provisions (or portions thereof) of these Articles of
Incorporation shall be deemed to remain in full force and effect, and shall be
construed as if such invalid, prohibited, or unenforceable provision had been
stricken here from or otherwise rendered inapplicable, it being the intent of
the Corporation and its stockholders that each such remaining provision (or
potion thereof) of these Articles of Incorporation remain, to the fullest
extent permitted by applicable law, applicable and enforceable as to all
stockholders, notwithstanding any such finding.
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ARTICLE IX
INDEMNIFICATION
Section 1. DEFINITIONS. For purposes of this Article IX, the following
definitions shall apply:
(a) Corporation. The "Corporation" shall include the Corporation
and any domestic or foreign predecessor entity of the Corporation in a
merger or other transaction in which the predecessor's existence ceased
upon consummation of the transaction.
(b) Director. "Director" means an individual who is or was a
director of the Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise, whether for profit or not. A director is
considered to be serving an employee benefit plan at the Corporation's
request if the director's duties to the Corporation also impose duties on,
or otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. "Director" includes, unless
the context requires otherwise, the estate or personal representative of a
director.
(c) Officer. "Officer" means an individual who is or was an officer
of the Corporation or an individual who, while an officer of the
Corporation, is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise, whether for profit or not. An officer is
considered to be serving an employee benefit plan at the Corporation's
request if the officer's duties to the Corporation also impose duties on,
or otherwise involve services by, the officer to the plan or to
participants in or beneficiaries of the plan. "Officer" includes, unless
the context requires otherwise, the estate or personal representative of
an officer.
(d) Expenses. "Expenses" include counsel fees.
(e) Liability. "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect
to an employee benefit plan), or reasonable expenses incurred with respect
to a proceeding.
(f) Official Capacity. "Official capacity" means:
(1) when used with respect to a director, the office of
director in the Corporation; and
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(2) when used with respect to an officer, the office in the
Corporation held by the officer. "Official capacity" does not
include service for any other foreign or domestic corporation or any
partnership, joint venture, trust, employee benefit plan, or other
enterprise, whether for profit or not.
(g) Party. "Party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.
(h) Proceeding. "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
Section 2. MANDATORY INDEMNIFICATION. The Corporation shall indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the director was a party because the director is or
was a director of the Corporation against reasonable expenses incurred by the
director in connection with the proceeding.
Section 3. OTHER INDEMNIFICATION.
(a) Without limiting the provisions of Section 2, the Corporation
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:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official
capacity with the Corporation, that the individual's conduct was
in its best interests; and
(B) in all other cases, that the individual's conduct was
at least not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual
either:
(A) had reasonable cause to believe the individual's
conduct was lawful; or
(B) had no reasonable cause to believe the individual's
conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed to be in the interests of
the participants in and beneficiaries of the plan is conduct that
satisfies the requirement of subsection (a)(2)(B).
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(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this section.
Section 4. ADVANCEMENT OF EXPENSES.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(1) the director furnishes the Corporation a written
affirmation of the director's good faith belief that the director has
met the standard of conduct described in Section 3 of this Article;
(2) the director furnishes the Corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that the director
did not meet the standard of conduct; and
(3) a determination is made that the facts then known to those
making the determination would not preclude indemnification under
this Article.
(b) The undertaking required by Subsection (a)(2) must be an
unlimited general obligation of the director but need not be secured and
may be accepted without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this
Section shall be made in the manner specified in Section 6 of this
Article.
Section 5. APPLICATION TO COURT. A director of the Corporation who is a
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court after giving any notice the court considers necessary
may order indemnification if it determines:
(1) the director is entitled to mandatory indemnification under
Section 2 of this Article, in which case the court shall also order the
Corporation to pay the director's reasonable expenses incurred to obtain
court-ordered indemnification; or
(2) the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not
the director met the standard of conduct set forth in Section 3 of this
Article.
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Section 6. DETERMINATION AND AUTHORIZATION.
(a) The Corporation may not indemnify a director under Section 3 of
this Article unless authorized in the specific case after a determination
has been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set
forth in Section 3 of this Article.
(b) The determination shall be made by any one (1) of the following
procedures:
(1) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding.
(2) If a quorum cannot be obtained under subdivision (1), by
majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may
participate), consisting solely of two (2) or more directors not at
the time parties to the proceeding.
(3) By special legal counsel:
(A) selected by the board of directors or its committee in
the manner prescribed in subdivision (1) or (2); or
(B) if a quorum of the Board of Directors cannot be
obtained under subdivision (1) and a committee cannot be
designated under subdivision (2), selected by majority vote of
the full Board of Directors (in which selection directors who
are parties may participate).
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding
may not be voted on the determination.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be
made by those entitled under Subsection (b)(3) to select counsel.
Section 7. INDEMNIFICATION OF OFFICERS.
(1) An officer of the Corporation, whether or not a director, is
entitled to mandatory indemnification under Section 2 of this Article, and
to the indemnification under Section 3, and is entitled to apply for
court-ordered indemnification under Section 5 of this Article, in each
case to the same extent as a director; and
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(2) the Corporation may indemnify and advance expenses under this
Article to an officer, whether or not a director, to the same extent as to
a director.
Section 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the Corporation, or who, while a director, officer,
employee, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by the individual in that capacity or arising from the individual's
status as a director, officer, employee, or agent, whether or not the
Corporation would have power to indemnify the individual against the same
liability under Sections 2 or 3 of this Article.
Section 9. MISCELLANEOUS.
(a) The indemnification and advance for expenses provided for or
authorized by this Article does not exclude any other rights to
indemnification and advance for expenses that a person may have under:
(1) the Corporation's Bylaws;
(2) a resolution of the Board of Directors or of the
shareholders; or
(3) any other authorization, whenever adopted, after notice, by
a majority vote of all the voting shares then issued and outstanding.
(b) This Article does not limit the Corporation's power to pay or
reimburse expenses incurred by a director, officer, employee, or agent in
connection with the person's appearance as a witness in a proceeding at a
time when the person has not been made a named defendant or respondent to
the proceeding.
(c) The rights of indemnification herein provided shall be
severable, shall continue as to a person who has ceased to serve as a
director or officer and shall inure to the benefit of the heirs,
executors, administrators and other legal representatives of such person.
(d) Subject to the limitations above imposed in this Article, it is
intended by this Article to grant indemnification to the full extent
permissible under the law. It is not intended, however, that the
provisions of this indemnification shall be applicable to, and this
Article is not to be construed as granting indemnity with respect to,
matters as to which indemnification would be in contravention of the laws
of the State of Indiana or the United States of America whether as a
matter of public policy or pursuant to any statutory provision.
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The undersigned, being the President of the Corporation, executes these
Amended and Restated Articles of Incorporation and verifies that the facts
contained herein are true this _____ day of September, 1996.
/s/ Keith E. Busse
-----------------------------------
Keith E. Busse, President
This Instrument was Prepared by John P. Martin, Attorney at Law, Barrett &
McNagny, 215 East Berry Street, Fort Wayne, Indiana 46802.
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Exhibit 3.2
BYLAWS OF
STEEL DYNAMICS, INC.
ARTICLE I
OFFICES
Section 1.1. PRINCIPAL OFFICE. The principal office of the
Corporation shall be at a place as may be designated by the Board of Directors.
Section 1.2. OTHER OFFICES. The Corporation may also have other
offices at such places as the Board of Directors may designate or the business
of the Corporation may require from time to time.
Section 1.3. REGISTERED OFFICE AND AGENT. The Corporation shall
maintain a Registered Office and Registered Agent as required by the Indiana
Business Corporation Law.
ARTICLE II
SHAREHOLDERS
Section 2.1. ANNUAL MEETING. The annual meeting of the shareholders
of the Corporation shall be held at such place (either within or without the
State of Indiana but which is reasonably convenient for shareholders to attend)
and time (not later than the end of the sixth month following the close of the
fiscal year) as may be fixed by the Board of Directors and designated in the
notice or waiver of notice of the meeting. At the annual meeting, the
directors for the ensuing year shall be elected and all such other business as
may properly be brought before the meeting shall be transacted. The Secretary
of the Corporation shall cause notice of the annual meeting to be given to each
shareholder of record of the Corporation entitled to vote either by delivery to
the shareholder in person or by depositing in the United States mail, postage
<PAGE> 2
prepaid, in an envelope addressed to the shareholder's address shown in the
Corporation's current record of shareholders, a written or printed notice
stating the place, day and hour of the holding of the meeting. Notices shall
be delivered personally or mailed no fewer than ten (10) nor more than sixty
(60) days before the date of the meeting. If required by any provision of the
Indiana Business Corporation Law or by the Articles of Incorporation of the
Corporation or if required by the Board of Directors, the notice shall also
state the purpose or purposes for which the meeting is called.
Section 2.2. SPECIAL MEETINGS. Special meetings of the shareholders
may be held at the principal office of the Corporation or at any other place
which is reasonably convenient for shareholders to attend, as may be designated
in the notice or waiver of notice of the meeting. Special meetings may be
called in writing by the President, the Secretary or the Board of Directors.
In addition, special meetings may be called by the holders of at least
twenty-five percent (25%) of the outstanding shares of the Corporation entitled
to vote upon the business to be transacted at the meeting, if the holders sign,
date and deliver to the Corporation's Secretary one (1) or more written demands
for the meeting describing the purpose or purposes for which it is to be held.
The Secretary of the Corporation shall cause notice of the holding of a special
meeting to be given to each shareholder of record of the Corporation entitled
to vote upon the business to be transacted at the meeting either by delivery to
the shareholder personally or by depositing in the United States mail, postage
prepaid, in an envelope addressed to the shareholder's address shown in the
Corporation's current record of shareholders, a written or printed notice
stating the place, day, hour, and purpose or purposes for which such meeting is
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called. Notices shall be delivered personally or mailed no fewer than ten (10)
nor more than sixty (60) days before the date of such meeting.
Section 2.3. ADDRESS OF SHAREHOLDER. The address of a shareholder
appearing upon the Corporation's record of shareholders shall be deemed to be
the latest address of the shareholder that has been furnished in writing to the
Corporation by the shareholder.
Section 2.4. WAIVER OF NOTICE. A shareholder may waive notice of any
shareholder's meeting before or after the date and time specified in the
notice. The waiver must be in writing and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. A shareholder's
attendance at a meeting: (1) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting; and (2)
waives objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
Section 2.5. QUORUM. At any meeting of the shareholders the holders
of a majority of the outstanding shares of the Corporation entitled to vote who
are present in person or represented by proxy shall constitute a quorum for the
transaction of business. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is set
or is required to be set under the Indiana Business Corporation Law or
otherwise.
Section 2.6. VOTING. Except as the Articles of Incorporation may
otherwise state, at each meeting of the shareholders, every shareholder owning
shares entitled to vote shall have the right
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to one (1) vote for each such share standing in his name on the books of the
Corporation. The shareholder may vote either in person or by proxy appointed
in writing signed by the shareholder or by the shareholder's duly authorized
attorney-in-fact and delivered to the Secretary of the Corporation or other
officer or agent authorized to tabulate votes at or before the time of the
holding of the meeting. No proxy shall be valid after eleven (11) months from
the date of its execution unless a longer time is expressly provided therein.
Only shares which are fully paid and nonassessable may be voted. If
the name signed on a vote, consent, waiver, or proxy appointment does not
correspond to the name of its shareholder, the Corporation if acting in good
faith is nevertheless entitled to accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the shareholder if:
(1) the name signed purports to be that of an administrator,
executor, guardian, or conservator representing the shareholder and,
if the Corporation requests, evidence of fiduciary status acceptable
to the Corporation has been presented with respect to the vote,
consent, waiver, or proxy appointment;
(2) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation
requests, evidence of this status acceptable to the Corporation has
been presented with respect to the vote, consent, waiver, or proxy
appointment;
(3) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to the vote, consent, waiver, or proxy appointment; or
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(4) two (2) or more persons are the shareholder as co-tenants
or fiduciaries and the name signed purports to be the name of at least
one (1) of the co-owners and the person signing appears to be acting
on behalf of all the co-owners.
The Corporation is entitled to reject a vote, consent, waiver, or proxy
appointment if the Secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
Section 2.7. SHAREHOLDER LIST. After the record date for, and more
than five (5) business days before, each shareholders' meeting, the Secretary
of the Corporation shall make, or cause to be made, an alphabetical list of the
names of the shareholders entitled to notice of the meeting, arranged by voting
group (and within each voting group by class or series of shares) and showing
the address of and the number of shares held by each shareholder. The list
shall be available for inspection and copying to the extent provided in the
Indiana Business Corporation Law.
Section 2.8. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
to demand a special meeting, or to take any other action, the Board of
Directors may fix in advance a date, not more than seventy (70) days before the
date of such meeting or action, as the record date for the determination of
shareholders. In the absence of such a determination by the Board of
Directors, the date for the determination of shareholders shall be ten (10)
days before the date of the meeting or action.
Section 2.9. ORDER OF BUSINESS. The order of business at annual
meetings and, so far as practicable, at all other meetings of shareholders
shall be:
(a) Proof of due notice of meeting.
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(b) Ascertainment of quorum.
(c) Reading and disposal of any unapproved minutes.
(d) Reports of officers and committees.
(e) Unfinished business.
(f) New business.
(g) Election of Directors.
(h) Adjournment.
ARTICLE III
DIRECTORS
Section 3.1. POWERS OF DIRECTORS; ALTERNATES. All corporate powers
shall be exercised by or under the authority of, and the business and affairs
of the Corporation managed under the direction of, the Board of Directors,
subject to any limitation set forth in the Articles of Incorporation or these
bylaws. Any shareholder group that is signatory to that certain Stockholders
Agreement dated June 30, 1994, between the Corporation and the shareholder
signatories thereto ("Stockholders Agreement"), as amended from time to time,
and to the extent provided in the Stockholders Agreement, may designate an
alternate director to serve in any and all capacities for and in place of the
director for whom that person is an alternate, in case of the absence or
unavailability of the director. For purposes of these bylaws, any reference to
"director" shall be deemed to include "alternate director." Action taken, in
person or by consent, by any alternate director shall be conclusive of that
person's authority to act for and in place of the regular director, with no
distinction as to power or authority.
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Section 3.2. NUMBER. The present number of directors of the
Corporation is ten (10). The number of directors of the Corporation may be
increased or decreased by amendment of this Section 3.2, which amendment shall
state the new number of the directors, but no decrease shall shorten the term
of an incumbent director. Directors need not be shareholders. Directors shall
be elected at each annual meeting of the shareholders or at a special meeting
called for that purpose. To the extent applicable, directors shall be elected
pursuant to the provisions of the Stockholders Agreement, as it may be amended
from time to time.
Section 3.3. RESIGNATION. A director may resign at any time by
delivering written notice to the Board of Directors, its Chairman (if any), or
the Secretary of the Corporation, and the acceptance of the resignation, unless
required by the terms thereof, shall not be necessary to make it effective. It
shall be effective when the notice is delivered unless the notice specifies a
later effective date.
Section 3.4. REMOVAL OF DIRECTORS. To the extent applicable,
directors may be removed only pursuant to the terms and conditions of the
Stockholders Agreement, and otherwise may be removed as provided by the Indiana
Business Corporation Law.
Section 3.5. VACANCIES. If any vacancy occurs on the Board of
Directors, either of a director or an alternate director, and to the extent
applicable, the vacancy shall be filled pursuant to the terms and conditions of
the Stockholders Agreement. Otherwise, the vacancy shall be filled as provided
by the Indiana Business Corporation Law. The term of a director or alternate
director elected to fill a vacancy expires at the end of the term for which the
director's or alternate director's predecessor was elected.
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Section 3.6. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held at the place of (or reasonably near thereto) and
promptly following the annual meeting of the shareholders. Other regular
meetings may be held at the principal office of the Corporation or at any other
place reasonably convenient for directors to attend, at such times and places
as the Board of Directors may fix from time to time. No notice shall be
required for regular Board meetings.
Section 3.7. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held at the principal office of the Corporation or at any
other place reasonably convenient for directors to attend whenever called by
the President of the Corporation or by any member of the Board. At least 48
hours' notice of the meeting specifying the date, time, place, and purpose
thereof shall be given to each director. Notice may be given personally, by
written notice deposited in the United States mail, postage prepaid in an
envelope addressed to such director, or by telephone, telegraph, teletype, or
other form of wire or wireless communication. Notice of the date, time, place,
and purpose of the holding of any special meeting may be waived, before or
after the date and time stated in the notice, by written notice signed by any
director and filed with the minutes or corporate records. A director's
attendance at or participation in any meeting shall constitute a waiver of the
notice of the meeting, unless the director at the beginning of the meeting (or
promptly upon the director's arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
Section 3.8. CONDUCT OF MEETINGS. The President shall preside at all
meetings of the Board of Directors and the Secretary of the Corporation shall
act as secretary of the Board, but in their absence the directors may appoint
another person to serve.
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The order of business at all meetings shall be as follows:
(a) Proof of due notice of the meeting, if notice is
required.
(b) Ascertainment of quorum.
(c) Reading and disposal of any unapproved minutes.
(d) Reports of officers.
(e) Reports of committees.
(f) Unfinished business.
(g) New business.
(h) Adjournment.
Section 3.9. QUORUM AND VOTING. A majority of the actual number of
directors elected and qualified from time to time shall be necessary to
constitute a quorum for the transaction of any business. The act of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, unless the act of a greater number is expressly
required by the Indiana Business Corporation Law, the Articles of
Incorporation, or another provision of these bylaws.
Section 3.10. ASSENT BY DIRECTOR TO ACTION TAKEN AT A MEETING. A
director who is present at a meeting of the Board of Directors or a committee
of the Board at which action on any corporate matter is taken is deemed to have
assented to the action taken unless:
(1) the director objects at the beginning of the meeting (or
promptly upon the director's arrival) to holding it or transacting
business at the meeting;
(2) the director's dissent or abstention from the action
taken is entered in the minutes of the meeting; or
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(3) the director delivers written notice of the director's
dissent or abstention to the presiding officer of the meeting before
its adjournment or to the Secretary of the Corporation immediately
after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 3.11. DIRECTORS' OR COMMITTEE ACTION BY CONSENT IN LIEU OF
MEETING. Any action required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken without a meeting if
the action is taken by all members of the Board or committee. The action shall
be evidenced by one (1) or more written consents describing the action taken,
signed by each director, and included in the minutes or filed with the
Corporation's records reflecting the action taken. A written consent is
effective when the last director signs the consent, unless the consent
specifies a different prior or subsequent effective date.
Section 3.12. MEETINGS BY TELEPHONE OR OTHER COMMUNICATIONS. The
Board of Directors may permit any or all directors to participate in a regular
or special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
is deemed to be present in person at the meeting.
Section 3.13. COMPENSATION. Each member of the Board of Directors
shall be paid such compensation as shall be fixed by the Board of Directors.
This shall not preclude any director from serving in any other capacity and
receiving compensation therefor.
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Section 3.14. COMMITTEES. The Board by resolution may establish one
or more committees.
ARTICLE IV
OFFICERS
Section 4.1. OFFICERS. The officers of the Corporation shall consist
of a President, a Secretary, an Assistant Secretary, a Treasurer, an Assistant
Treasurer, and if desired by the Board of Directors one or more Vice
Presidents, all of whom shall be elected annually by the Board of Directors of
the Corporation at the first meeting thereof immediately following the annual
meeting of the shareholders; and they shall hold office, subject to removal,
until their successors are elected and qualified or the office is eliminated.
One person may hold more than one office.
Section 4.2. REMOVAL; RESIGNATIONS. Any officer of the Corporation
may be removed by the Board of Directors at any time with or without cause.
Removal does not affect the officer's contract rights, if any, with the
Corporation. An officer's resignation does not affect the Corporation's
contract rights, if any, with the officer. The election or appointment of an
officer does not itself create contract rights.
Section 4.3. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by, or as permitted by, the Board of Directors.
Section 4.4. DUTIES. The duties of the officers shall be determined
from time to time by the Board of Directors.
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ARTICLE V
CAPITAL STOCK
Section 5.1. CERTIFICATES FOR SHARES. Unless the Articles of
Incorporation provide otherwise, all shares of stock of the Corporation shall
be represented by a certificate. The certificates shall be in such form not
inconsistent with the Articles of Incorporation and the Indiana Business
Corporation Law as shall be approved by the Board of Directors. At a minimum,
each certificate must state on its face:
(1) The name of the Corporation and that it is organized
under the law of the State of Indiana;
(2) The name of the person to whom issued; and
(3) The number and class of shares and the designation of the
series, if any, the certificate represents.
Each certificate must be signed by the President and Secretary. Share
certificates which have been signed (whether manually or in facsimile) by
officers may be used and shall continue to be valid even though any individual
whose signature appears on a certificate shall no longer be an officer of the
Corporation at the time of the issue of such certificate.
Section 5.2. REGISTRATION OF TRANSFER. Registration of transfer of
shares and issuance of a new certificate or certificates therefor shall be made
only upon surrender to the Corporation and cancellation of a certificate or
certificates for a like number of shares, properly endorsed for transfer,
accompanied by (a) such assurance as the Corporation may require as to the
genuineness and effectiveness of each necessary endorsement, (b) satisfactory
evidence of compliance with
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all laws relating to collection of taxes, and (c) satisfactory evidence of
compliance with or removal of any restriction on transfer of which the
Corporation may have notice.
Section 5.3. REGISTERED SHAREHOLDERS. As respects the Corporation,
its stock record books shall be conclusive as to the ownership of its shares
for all purposes and the Corporation shall not be bound to recognize adverse
claims.
ARTICLE VI
SEAL
The use of a corporate seal is not required.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board.
ARTICLE VIII
FUNDS
Section 8.1. DEPOSITORY. The funds of the Corporation shall be
deposited at such Financial institutions or determined by the Board.
Section 8.2. WITHDRAWAL OF FUNDS. The funds of the Corporation may
be withdrawn and disbursed by such officers as may be designated by the Board
of Directors.
ARTICLE IX
RECORDS
Section 9.1. RECORDS.
13
<PAGE> 14
(a) The Corporation shall keep as permanent records minutes
of all meetings of the shareholders and Board of Directors, a record
of all actions taken by the shareholders or Board of Directors without
a meeting, and a record of all actions taken by a committee of the
Board of Directors in place of the Board of Directors on behalf of the
Corporation.
(b) The Corporation shall maintain appropriate accounting
records.
(c) The Corporation shall maintain a record of the
shareholders, in a form that permits preparation of a list of the
names and addresses of all shareholders, in alphabetical order by
class of shares showing the number and class of shares held by each.
(d) The Corporation shall maintain its records in written
form or in another form capable of conversion into written form within
a reasonable time.
(e) The Corporation shall keep a copy of the following
records at its principal office:
(1) The Articles of Incorporation and all amendments
to them currently in effect.
(2) The bylaws and all amendments to them currently
in effect.
(3) The minutes of all shareholders' meetings, and
records of all action taken by shareholders without a meeting,
for the past three (3) years.
(4) All written communications to shareholders
generally within the past three (3) years, including any
financial statements furnished for the past three (3) years as
required by the Indiana Business Corporation Law.
14
<PAGE> 15
(5) A list of the names and business addresses of
its current directors and officers.
(6) Its most recent annual report delivered to the
Secretary of State.
Section 9.2. SHAREHOLDER'S RIGHT TO INSPECT AND COPY; LIMITATIONS ON
USE. A shareholder may inspect and copy the Corporation's records only as
permitted by the Indiana Business Corporation Law. The shareholder, the
shareholder's agents and attorneys, and any other person who obtains the
information may use and distribute the records and the information only for the
purposes and to the extent permitted by the Indiana Business Corporation Law
and shall use reasonable care to ensure that the restrictions imposed by that
Law are observed.
ARTICLE X
REPORTS
Section 10.1. ANNUAL FINANCIAL REPORTS TO SHAREHOLDERS.
(a) On written request of any shareholder, The Corporation
shall furnish the shareholders annual financial statements, which may
be consolidated or combined statements of the Corporation and one (1)
or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that
year, and a statement of changes in shareholders' equity for the year
unless that information appears elsewhere in the financial statements.
If financial statements are prepared for the Corporation on the basis
of generally accepted accounting principles, the annual financial
statements must also be prepared on that basis.
(b) If the annual financial statements are reported upon by a
public accountant, the public accountant's report must accompany them.
If not, the statements must be
15
<PAGE> 16
accompanied by a statement of the President or the person responsible
for the Corporation's accounting records:
(1) stating the person's reasonable belief whether
the statements were prepared on the basis of generally
accepted accounting principles and, if not, describing the
basis of preparation; and
(2) describing any respects in which the statements
were not prepared on a basis of accounting consistent with the
statements prepared for the preceding year.
Section 10.2. REPORTS TO SHAREHOLDERS OF INDEMNIFICATION. If a
corporation indemnifies or advances expenses to a director under these bylaws
or otherwise, in connection with a proceeding by or in the right of the
Corporation, the Corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
Section 10.3. REPORTS TO SECRETARY OF STATE. The Secretary of the
Corporation shall cause such reports to the Secretary of State of Indiana to be
filed as required by the Indiana Business Corporation Law.
ARTICLE XI
AMENDMENT
These bylaws may be amended only by the Board of Directors, by the
affirmative votes of a majority of all members of the Board.
16
<PAGE> 1
Exhibit 5.1
BARRETT & McNAGNY
215 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
219-423-9551, Fax: 219-423-8924
ROBERT S. WALTERS
(219) 423-8905
September 23, 1996
Steel Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Dear Sirs:
In connection with the registration under the Securities Act of 1933, as
amended (the "Act") by Steel Dynamics, Inc. (the "Company") of its Common
Stock, in an Initial Public Offering registered with the United States
Securities and Exchange Commission on Form S-1, we have examined such corporate
records, certificates, and other documents, and have reviewed such questions of
law as we have considered necessary or appropriate for purposes of this
opinion.
On the basis of such examination and review, we advise you that, in our
opinion, when the Registration Statement on Form S-1 filed by the Company
herewith with respect to the Initial Public Offering of its Common Stock shall
have become effective under the Act, and when the certificates evidencing the
shares of Common Stock purchased in connection herewith shall have been issued,
executed, authenticated and delivered by the Company and by First Chicago Trust
Company of New York as its transfer agent, and when sold in accordance with
the terms set forth in the Underwriting Agreement between the Company and
Morgan Stanley & Co Incorporated, as the representative of the underwriters
identified therein, the shares of Common Stock will be validly and legally
issued and outstanding, will be fully paid and non-assessable, and will be
entitled to the benefits described for the Common Stock in the Company's
Amended and Restated Articles of Incorporation.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Opinions" in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
BARRETT & McNAGNY
/s/ Robert S. Walters
Robert S. Walters
RSW:klv:81625
<PAGE> 1
Exhibit 10.1a
THIS CONFORMED COPY REFLECTS THE FIRST AMENDMENT, DATED AS OF JANUARY 6, 1995;
THE SECOND AMENDMENT, DATED AS OF MAY 22, 1995; THE THIRD AMENDMENT, DATED AS
OF JUNE 15, 1995; THE FOURTH AMENDMENT, DATED AS OF NOVEMBER 20, 1995; AND THE
FIFTH AMENDMENT, DATED AS OF MARCH 4, 1996, RESPECTIVELY.
CREDIT AGREEMENT
THIS AGREEMENT, dated as of June 30, 1994, by and among STEEL
DYNAMICS, INC., an Indiana corporation (the "Borrower"), the lenders parties
hereto from time to time (the "Lenders", as defined further below), MELLON
BANK, N.A., a national banking association, as issuing bank (in such capacity,
the "Issuing Bank", as defined further below), MELLON BANK, N.A., a national
banking association, as agent for the Lenders hereunder (in such capacity,
together with its successors in such capacity, the "Agent"), and KREDITANSTALT
FUR WIEDERAUFBAU, BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION and NBD Bank, N.
A., as Co-Agents hereunder (in such capacities, the "Co-Agents").
Recitals:
WHEREAS, the Borrower wishes to borrow an aggregate amount of
$195,000,000, and this Agreement provides for (i) Term Loans in an aggregate
principal amount of up to $150,000,000 to be used to fund the construction and
operation of a 1.2 million ton thin slab cast mini-mill in Butler, Indiana
(the "Project"), and (ii) Revolving Credit Loans in an aggregate principal
amount of up to $45,000,000 to be used for working capital purposes.
[The following bracketed recitals were among the recitals set forth in
the preamble to the Fifth Amendment:
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, upon the effectiveness of this Amendment,
Kreditanstalt fur Wiederaufbau, Banque Nationale de Paris and Comerica
Bank shall be designated Senior Co-
<PAGE> 2
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).]
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION; ACCOUNTING PRINCIPLES
1.01. Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"Additional Common Equity" means common stock of Holdings
issued for cash after December 1, 1995.
"Affected Lender" shall have the meaning set forth in Section
2.06(e) hereof.
"Affiliate" of a Person (the "Specified Person") shall mean
(a) any Person which directly or indirectly controls, or is controlled
by, or is under common control with, the Specified Person, (b) any
director or officer (or, in the case of a Person which is not a
corporation, any individual having analogous powers) of the Specified
Person or of a Person who is an Affiliate of the Specified Person
within the meaning of the preceding clause (a), and (c) for each
individual who is an Affiliate of the Specified Person within the
meaning of the foregoing clauses (a) or (b), any other individual
related to such Affiliate by consanguinity within the third degree or
in a step or adoptive relationship within such third degree or related
by affinity with such Affiliate or any such individual. For purposes
of the preceding sentence, "control" of a Person means (a) the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether
through the ownership of voting securities, by contract or otherwise
and (b) in any case shall include direct or indirect ownership
(beneficially or of record) of, or direct or indirect power to vote,
5% or more of the
<PAGE> 3
outstanding shares of any class of capital stock of such Person (or in
the case of a Person that is not a corporation, 5% or more of any
class of equity interest). Bain Capital, Inc. shall be deemed to be
an Affiliate of the Borrower so long as Bain is an Affiliate of the
Borrower, whether or not Bain Capital meets the requirements of the
foregoing definition.
"Agreement Among Secured Lenders" shall mean the Agreement
Among Secured Lenders in the form of Exhibit K hereto entered into by
the Lenders and the Agent, as amended from time to time.
"Applicable Margin" shall have the meaning set forth in Section
2.06(b) hereof.
"Assignment of Contracts" shall have the meaning set forth in
Section 4.01(b)(i)(D) hereof.
"Bain" shall mean, collectively, Bain Capital Fund IV, L.P.,
Bain Capital Fund IV-B, L.P., BCIP Associates, BCIP Trust Associates,
L.P. and Klans Associates.
"Base Rate" shall have the meaning set forth in Section 2.06(a)
hereof.
"Base Rate Option" shall have the meaning set forth in Section
2.06(a) hereof.
"Base Rate Portion" of any Loan or Loans shall mean at any
time the portion, including the whole, of such Loan or Loans bearing
interest at such time (i) under the Base Rate Option or (ii) in
accordance with Section 2.12(c)(ii) hereof. If no Loan or Loans is
specified, "Base Rate Portion" shall refer to the Base Rate Portion of
all Loans outstanding at such time.
"Borrower Group" shall mean the group consisting of Holdings
and its consolidated Subsidiaries (including, without limitation,
Salesco and the Borrower).
"Borrowing Base" shall have the meaning set forth in Section
2.16 hereof.
"Borrowing Base Certificate" shall have the meaning set forth
in Section 2.16(e) hereof.
<PAGE> 4
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the laws of the Commonwealth of Pennsylvania or of the
State of New York or other day on which banking institutions generally are
authorized or obligated to close in Pittsburgh, Pennsylvania or in New York,
New York.
"Capital Expenditures" of any Person shall mean, for any period, all
expenditures (whether paid in cash or accrued as liabilities during such
period) of such Person during such period which would be classified as capital
expenditures for purposes of GAAP (including, without limitation, expenditures
for maintenance and repairs which are capitalized, and Capitalized Leases to
the extent an asset is recorded in connection therewith in accordance with
GAAP).
"Capitalized Lease" shall mean at any time any lease which is, or is
required under GAAP to be, capitalized on the balance sheet of the lessee at
such time, and "Capitalized Lease Obligation" of any Person at any time shall
mean the aggregate amount which is, or is required under GAAP to be, reported
as a liability on the balance sheet of such Person at such time as lessee under
a Capitalized Lease.
"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 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, and (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.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any successor statute of
similar import, and regulations thereunder, in each case as in effect from time
to time.
<PAGE> 5
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation and Liability Information System List, as the same may be amended
from time to time.
"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, (D) Holdings shall fail to own all of
the equity securities of Salesco, or (E) Salesco 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.
"Change of Management" shall be deemed to have occurred if, prior to
the later to occur of the date on which the Borrower has achieved six
consecutive months of positive monthly Net Income and the Phase II Project
Acceptance Date, (i) Keith Busse is no longer employed by Borrower in a senior
management position for any reason whatsoever, and (ii) fewer than two
Designated Managers are employed by the
<PAGE> 6
Borrower in senior management positions for any reason whatsoever.
"Closing Date" shall mean the date of execution and delivery of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall mean the property from time to time subject to or
purported to be subject to the Liens of the Security Documents.
"Commercial Grade Finished Goods" shall mean finished goods which are
of prime grade in accordance with A.I.S.I. standards.
"Commerzbank Lenders" shall mean the Tranche C Lenders at any time
prior to the earlier to occur of the making of $20,000,000 of Tranche C Loans
and the expiration of the Term Loan (A and B) Commitment Period.
"Commitments" of a Lender shall mean the Revolving Credit Commitment
and the Term Loan Commitment.
"Completion" "Complete" and "Completed" with respect to (i) the
construction of the Phase I Project shall mean that (A) construction of the
Phase I Project in accordance with the Design and Construction Standard shall
have been completed and the Phase I Project Commissioning Date and the Phase I
Project Acceptance Date shall have occurred, (B) the Phase I Project Monitor
shall have delivered to the Agent, with a copy for each Lender, a certificate
in the form of Exhibit W-2 hereto, with the blanks filled, and the Borrower
shall have delivered to the Agent, with a copy for each Lender, a certificate
in the form of Exhibit X-2 hereto, with the blanks appropriately filled, (C)
the Agent shall have received, with a copy for each Lender, a complete release
of liens signed by all contractors, subcontractors, materialmen and suppliers
providing goods and services to the Phase I Project who have contract prices in
excess of $500,000, except with respect to Liens contested in good faith which
are Permitted Liens under Section 6.02(c), and (D) the Agent shall have
theretofore received, with a copy for each Lender, copies of all Required Phase
I Project Permits and to the extent that the same continue to be needed, they
shall be in full force and effect and no longer
<PAGE> 7
subject to appeal and (ii) the construction of the Phase II Project shall mean
that (A) construction of the Phase II Project in accordance with the Design and
Construction Standard shall have been completed and the Phase II Project
Commissioning Date and the Phase II Project Acceptance Date shall have
occurred, (B) the Phase II Project Monitor shall have delivered to the Agent,
with a copy for each Lender, a certificate in form and substance reasonably
satisfactory to the Agent (and consistent with the form of Exhibit W-2 hereto),
with the blanks filled, and the Borrower shall have delivered to the Agent,
with a copy for each Lender, a certificate in form and substance reasonably
satisfactory to the Agent (and consistent with the form of Exhibit X-2 hereto),
with the blanks appropriately filled, (C) the Agent shall have received, with a
copy for each Lender, a complete release of liens signed by all contractors,
subcontractors, materialmen and suppliers providing goods and services to the
Phase II Project who have contract prices in excess of $500,000, except with
respect to Liens contested in good faith which are Permitted Liens under
Section 6.02(c), and (D) the Agent shall have theretofore received, with a copy
for each Lender, copies of all Required Phase II Project Permits and to the
extent that the same continue to be needed, they shall be in full force and
effect and no longer subject to appeal.
"Consents to Assignment of Contracts" shall mean the Consents to
Assignment of Contracts delivered pursuant to Section 4.01(b)(i)(E) or Section
4.05(b)(i)(C) hereof.
"Continuing Letter of Credit Agreement" shall mean the continuing
letter of credit agreement executed and delivered by the Borrower substantially
in the form of Exhibit L hereto.
"Contractual Obligations" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property (now owned or hereafter
acquired) is bound.
"Controlled Group Member" shall mean each trade or business (whether
or not incorporated) which together with the Borrower is treated as a single
employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b),
(c), (m) or (o) of the Code.
<PAGE> 8
"Corresponding Source of Funds" shall mean, in the case of any Funding
Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a
Notional Euro-Rate Funding Office or by a Lender through a Notional Euro-Rate
Funding Office of one or more Dollar deposits in the interbank eurodollar
market at the beginning of the Euro-Rate Funding Period corresponding to such
Funding Segment having maturities approximately equal to such Euro-Rate Funding
Period and in an aggregate amount approximately equal to such Lender's Pro Rata
share of such Funding Segment.
"Cost Overrun" shall mean incurrence by the Borrower of Phase I
Project Costs in excess of an aggregate of $316,120,000. Each increase in the
amount of such excess (consisting of one or more additionally incurred items of
Phase I Project Costs) shall constitute, for purposes of the definition of the
term "Cost Overrun Event", a separate Cost Overrun.
"Cost Overrun Event" shall mean the incurrence of a Cost Overrun with
respect to which the Required Overrun Decision Lenders have determined, in
their sole and absolute discretion, that the Tranche C Lenders will make
Tranche C Loans.
"Cumulative Net Income" shall mean for the period from January 1, 1994
until the end of the fiscal quarter completed most recently at the time of
measurement, the consolidated net earnings (without deduction for losses
incurred in any completed fiscal year or in any completed fiscal quarter in the
then current fiscal year) after taxes of the Borrower Group; provided, that
there shall be deducted therefrom (a) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made against income during such period, and (b) any gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of the Borrower Group.
"Cure Period" has the meaning ascribed thereto in Section 7.02(c).
"Currency Hedge Agreements" shall mean currency future, currency
option, currency swap or other currency hedge agreements entered into by the
Borrower in the ordinary course of business with one or more of the Lenders for
the purpose of providing the Borrower with currency protection with respect to
its obligations to make payments under Phase I Project Agreements or Phase II
Project Agreements in
<PAGE> 9
currencies other than Dollars.
"Current Assets" at any time shall mean the consolidated "current
assets" of the Borrower Group determined on a consolidated basis in accordance
with GAAP, excluding advanced payments on goods not yet delivered, and monies
held in environmental or reclamation escrow accounts to the extent included in
"current assets".
"Current Liabilities" at any time shall mean the consolidated "current
liabilities" of the Borrower Group determined on a consolidated basis in
accordance with GAAP (excluding current maturities of Indebtedness for borrowed
money).
"Current Ratio" at any time shall mean the ratio of the Current Assets
at such time to the Current Liabilities at such time.
"Design and Construction Standard" shall mean (i) with respect to the
Phase I Project, the design, construction, equipping and completion of the
Phase I Project (A) in a good and workmanlike manner, (B) in such manner as to
assure that the Phase I Project will meet all requirements for Phase I Project
Acceptance under the SMS Documents, (C) without infringing on the patent rights
and similar rights of others and (D) in accordance with the Specifications
(except for variations which are, individually and collectively, de minimis and
which, if they had been the subject of change orders, would have been permitted
by Section 6.20), all applicable Required Phase I Project Permits, all
applicable Laws and restrictive covenants, sound engineering and construction
practice and sound steel industry and electric industry practice and (ii) with
respect to the Phase II Project, the design, construction, equipping and
completion of the Phase II Project (A) in a good and workmanlike manner, (B) in
such manner as to assure that the Phase II Project will meet all requirements
for Phase II Project Acceptance, (C) without infringing on the patent rights
and similar rights of others and (D) in accordance with the Specifications
(except for variations which are, individually and collectively, de minimis and
which, if they had been the subject of change orders, would have been permitted
by Section 6.20), all applicable Required Phase II Project Permits, all
applicable Laws and restrictive covenants, sound engineering and construction
practice and sound steel industry practice.
<PAGE> 10
"Designated Initial Phase II Equity Proceeds" shall mean the Net Cash
Proceeds not exceeding $65,000,000 in the aggregate from the sale of equity
securities of any Loan Party to Preussag, to shareholders existing on the date
of the Fifth Amendment or to other entities satisfactory to the Agent (provided
that, in the event less than $50,000,000 of proceeds is derived from sales of
securities to Preussag or shareholders existing on the date of the Fifth
Amendment, such other entities must also be satisfactory to the Required
Lenders to the extent that proceeds of sales of securities to such other
entities account for the difference between $50,000,000 and the proceeds
derived from sales to Preussag and existing shareholders on the date of the
Fifth Amendment) which Net Cash Proceeds are used, forthwith upon any Loan
Party's receipt thereof, to pay Phase II Project Costs or, as to an aggregate
amount not exceeding $15,000,000, to make an investment permitted by Section
6.05(i).
"Designated Initial Phase II Equity Securities" shall mean equity
securities of a Loan Party all of the Net Cash Proceeds of which are Designated
Initial Phase II Equity Proceeds".
"Designated Lender" shall mean each Lender named on Exhibit EE hereto,
but any such Lender shall cease to be a Designated Lender if it transfers,
without recourse and without any other retained interest, to an entity which is
not related to or affiliated with such Lender, all of the Subordinated Notes in
which such Lender has any interest.
"Designated Managers" shall mean Mark Millett, Richard Teets and such
other senior management employee or employees of the Borrower, if any, as shall
have been approved by the Required Lenders as a Designated Manager.
"Development Package" shall mean the combination of grants and loans
extended to the Borrower as described on Schedule 1.01A hereto.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Early Period" shall mean the period of time commencing on the Closing
Date and ending on the earlier to occur of (i) the date of the first request by
the Borrower for Term Loans and (ii) July 31, 1995.
"EBITDA" for any period, with respect to the Borrower Group, shall
mean the sum of (a) Net Income for such period,
<PAGE> 11
(b) Interest Expense for such period, (c) charges against income for foreign,
federal, state and local income taxes for such period, (d) extraordinary losses
to the extent included in determining such Net Income, (e) depreciation expense
for such period, and (f) amortization expense for such period, minus (g)
extraordinary gains to the extent included in determining such Net Income, (h)
interest income, and (i) capitalized losses (exclusive of capitalized
interest), all as determined on a consolidated basis in accordance with GAAP;
provided, however, that for any period ending prior to the Phase II Project
Commissioning Date, the costs of and the expenses, losses, gains and income
attributable to the Phase II Project shall be excluded from the calculation of
EBITDA.
"Eligible Inventory" shall have the meaning set forth in Section
2.16(d) hereof.
"Eligible Receivables" shall have the meaning set forth in Section
2.16(b) hereof.
"Employment Agreements" shall mean the employment agreements between
each of Keith Busse and certain of the Designated Managers on the one hand and
the Borrower on the other.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability (contingent or otherwise) for any Environmental
Claim such Person has retained, assumed or otherwise is liable for (by Law,
agreement or otherwise).
"Environmental Approvals" shall mean any Governmental Action pursuant
to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or other communication (written or oral) by any other
Person (including but not limited to any Governmental Authority, citizens'
group or present or former employee of such Person) alleging, asserting or
claiming any actual or potential (a) violation of any Environmental Law, (b)
liability under any Environmental Law or (c) liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties arising out of, based on or
<PAGE> 12
resulting from the presence, or release into the environment, of any
Environmental Concern Materials at any location, whether or not owned by such
Person.
"Environmental Cleanup Site" shall mean any location which is listed
or proposed for listing on the National Priorities List, on CERCLIS or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding or investigation
related to or arising from any alleged violation of any Environmental Law.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous
waste, toxic substance, solid waste, pollutant, contaminant or any related
material, raw material, substance, product or by-product of any substance
specified in or regulated or otherwise affected by any Environmental Law
(including but not limited to any "hazardous substance" as defined in CERCLA or
any similar state Law), (b) any toxic chemical or other substance from or
related to industrial, commercial or institutional activities, and (c)
asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and
other petroleum products or compounds, polychlorinated biphenyls, radon and
urea formaldehyde.
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of the
environment, including natural resources, (b) exposure of Persons, including
but not limited to employees, to Environmental Concern Materials, (c)
protection of the public health or welfare from the effects of products,
by-products, wastes, emissions, discharges or releases of Environmental Concern
Materials or (d) regulation of the manufacture, use or introduction into
commerce of Environmental Concern Materials including their manufacture,
formulation, packaging, labeling, distribution, transportation, handling,
storage or disposal. Without limitation, "Environmental Law" shall also
include any Environmental Approval and the terms and conditions thereof.
"Equity Agreements" shall mean the Registration Agreement, dated June
30, 1994 among Holdings and the other parties thereto and the Stockholders
Agreement, dated June 30, 1994 among Holdings and the other parties thereto, as
amended from time to time in accordance with the terms hereof.
<PAGE> 13
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor sections.
"Euro-Rate" shall have the meaning set forth in Section 2.06(a)
hereof.
"Euro-Rate Funding Period" shall have the meaning set forth in Section
2.06(c) hereof.
"Euro-Rate Option" shall have the meaning set forth in Section 2.06(a)
hereof.
"Euro-Rate Portion" of any Loan or Loans shall mean at any time the
portion, including the whole, of such Loan or Loans bearing interest at any
time under the Euro-Rate Option or at a rate calculated by reference to the
Euro-Rate under Section 2.12(c)(i) hereof. If no Loan or Loans is specified,
"Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans
outstanding at such time.
"Euro-Rate Reserve Percentage" shall have the meaning set forth in
Section 2.06(a) hereof.
"Event of Default" shall mean any of the Events of Default described
in Section 7.01 hereof.
"Excess Cash Flow" for any period, with respect to any Person or group
of Persons shall mean the net increase, if any, in cash and cash equivalents
(including the net cash provided or used by the operating and investing
activities (but not, except as set forth below, financing activities) of such
Person or group, reflecting actual operating income, capital expenditures and
changes in working investment), during such period as presented in such
Person's or group's statement of cash flows for such period prepared in
conformity with GAAP (on a consolidated basis, if applicable) and set forth in
such Person's or group's audited year-end financial statements; except that
Excess Cash Flow for any period shall be reduced (but not to an amount less
than zero) by principal payments of Indebtedness (other than payments on
Revolving Credit Loans and other than payments on Term Loans pursuant to
Section 2.10(b) hereof) and Stock Payments made pursuant to Section 6.06(a)
<PAGE> 14
hereof and there shall be excluded from the calculation of Excess Cash Flow for
any period payments of Phase I Project Costs and payments of Phase II Project
Costs. For the purpose of the preparation of and presentation of said
statement of cash flows of any Person or group of Persons all investments
qualifying as a "cash equivalent" in accordance with GAAP shall be included in
the calculation and presentation of such Person's or group's statement of cash
flows without regard to such Person's or group's policy concerning which of
such investments are treated as cash equivalents on its statement of cash
flows.
"Federal Funds Effective Rate" for any day shall mean the rate per
annum (rounded upward to the nearest 1/100 of 1%) announced by the Federal
Reserve Bank of New York (or any successor) on such day as being the weighted
average of the rates on overnight Federal funds transactions arranged by
Federal funds brokers on the previous trading day, as computed and announced by
such Federal Reserve Bank (or any successor) in substantially the same manner
as such Federal Reserve Bank computes and announces the weighted average it
refers to as the "Federal Funds Effective Rate" as of the date of this
Agreement; provided, that if such Federal Reserve Bank (or its successor) does
not announce such rate on any day, the "Federal Funds Effective Rate" for such
day shall be the Federal Funds Effective Rate for the last day on which such
rate was announced.
"Fifth Amendment" shall mean the Fifth Amendment to this Credit
Agreement, dated as of February 27, 1996, among the Borrower, the Lenders, the
Issuing Bank, the Agent and the Co-Agents.
"Fifth Amendment Documents" shall mean the Fifth Amendment, the
amendments to the Loan Documents described in Section 4.05, the Tranche D
Notes, the amended Agreement Among Secured Lenders described in Section 4.05
and the amended Curency Hedge Agreements described in Section 4.05.
"Financial Acceptance Date" shall mean the earliest date which is the
last day of a month and on which all of the following shall have occurred and
on which no Event of Default or Potential Default shall have occurred and be
continuing or shall exist (but in no event earlier than April 30, 1997): (a)
the construction of the Phase I Project shall have been Completed, (b) the
three most recent monthly financial statements required to have been furnished
to the Agent pursuant to Section 5.01(c) hereof shall have been received by the
Agent and shall show over such three month period that the consolidated net
earnings after taxes of the
<PAGE> 15
Borrower Group (provided that there shall be deducted therefrom (i) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made against the income during such period, and
(ii) any gain arising from the acquisition from any securities or the
extinguishment, under GAAP, of any Indebtedness, of the Borrower Group) is at
least $5,000,000, and (c) the Borrower shall have furnished to the Agent the
financial statements (and related accountants' management letter) and other
items required to be furnished pursuant to Section 5.01(a) hereof with respect
to the most recently completed fiscal year of the Borrower. The Agreement
Among Secured Lenders provides for the change in allocation of proceeds of
Collateral among the Lenders to occur on the later of the Financial Acceptance
Date and the date on which the construction of the Phase II Project shall have
been Completed.
"Financial Covenant Date" shall mean the earlier of (a) the first day
of the first fiscal quarter after the Phase I Project Acceptance Date and (b)
January 1, 1997.
"Fixed Charges" for any period, with respect to the Borrower Group,
shall mean the sum of (a) Interest Expense for such period (other than original
issue discount on warrants to purchase common stock and other than interest on
the I&M Development Debt), (b) scheduled principal payments with respect to any
outstanding Indebtedness other than the I&M Development Debt for such period
and (c) the aggregate amount of dividends paid on, and redemptions of, capital
stock of Holdings for such period, all as determined on a consolidated basis in
accordance with GAAP.
"Fixed Charge Coverage Ratio" for any period shall mean the ratio of
(a) EBITDA for such period minus consolidated Capital Expenditures of the
Borrower Group for such period to (b) Fixed Charges for such period.
"Funded Indebtedness" of a person at any time shall mean all
Indebtedness (including the current portion thereof) of such person which would
at such time be classified in whole or part as a long-term liability of such
person in accordance with GAAP and shall also and in any event include (i) any
Indebtedness having a final maturity more than one year from the date of
creation of such Indebtedness and (ii) any Indebtedness, regardless of its
term, which is renewable or extendable by such person
<PAGE> 16
(pursuant to the terms thereof or pursuant to a revolving credit or similar
agreement or otherwise) to a date more than one year from such date or more
than one year from the date of creation of such Indebtedness.
"Funding Breakage Date" shall have the meaning set forth in Section
2.13(b) hereof.
"Funding Breakage Indemnity" shall have the meaning set forth in
Section 2.13(b) hereof.
"Funding Periods" shall have the meaning set forth in Section 2.06(c)
hereof.
"Funding Segment" of the Euro-Rate Portion of the Revolving Credit
Loans or the Term Loans at any time shall mean the entire principal amount of
such Portion to which at the time in question there is applicable a particular
Funding Period beginning on a particular day and ending on a particular day.
(By definition, each such Portion is at all times composed of an integral
number of discrete Funding Segments and the sum of the principal amounts of all
Funding Segments of any such Portion at any time equals the principal amount of
such Portion at such time.)
"Future Project Agreement" shall mean any contract or agreement
described on Schedule 1.01E hereto or on Schedule 1.01B-1996 hereto, and any
contract or agreement (or series of related contracts or agreements) entered
into by any Loan Party after the Closing Date for (a) the purchase of raw
materials of 100,000 tons or more annually for a term of one year or more, (b)
the sale of product for amounts of $10,000,000 or more annually for a term of
one year or more, (c) the disposal of Environmental Concern Material (and other
by-products of the Phase I Project or the Phase II Project) for a term of one
year or more, (d) the provision of materials or services for the construction
of the Phase I Project for a contract price of $500,000 or more or (e) the
provision of materials or services for the construction of the Phase II Project
for a contract price of $2,000,000 or more.
"GAAP" shall have the meaning set forth in Section 1.03 hereof.
"Governmental Action" shall have the meaning set forth in Section 3.04
hereof.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau,
<PAGE> 17
central bank, commission, department or instrumentality of either, or any
court, tribunal, grand jury or public or private mediator or arbitrator, in
each case whether foreign or domestic.
"Guaranty Equivalent": A Person (the "Deemed Guarantor") shall be
deemed to be subject to a Guaranty Equivalent in respect of any indebtedness,
obligation or liability (the "Assured Obligation") of another Person (the
"Deemed Obligor") if the Deemed Guarantor directly or indirectly guarantees,
becomes surety for, endorses, assumes, agrees to indemnify the Deemed Obligor
against, or otherwise agrees, becomes or remains liable (contingently or
otherwise) for, such Assured Obligation. Without limitation, a Guaranty
Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or
remains liable (contingently or otherwise), directly or indirectly: (a) to
purchase or assume, or to supply funds for the payment, purchase or
satisfaction of, an Assured Obligation, (b) to make any loan, advance, capital
contribution or other investment in, or to purchase or lease any property or
services from, a Deemed Obligor (i) to maintain the solvency of the Deemed
Obligor, (ii) to enable the Deemed Obligor to meet any other financial
condition, (iii) to enable the Deemed Obligor to satisfy any Assured Obligation
or to make any Stock Payment or any other payment, or (iv) to assure the holder
of such Assured Obligation against loss, (c) to purchase or lease property or
services from the Deemed Obligor regardless of the non-delivery of or failure
to furnish such property or services, (d) in a transaction having the
characteristics of a take-or-pay or throughput contract or as described in
paragraph 6 of FASB Statement of Financial Accounting Standards No. 47, or (e)
in respect of any other transaction the effect of which is to assure the
payment or performance (or payment of damages or other remedy in the event of
nonpayment or nonperformance) of any Assured Obligation.
"Heidtman" shall mean Heidtman Steel Products Inc., an Ohio
corporation.
"Heidtman Documents" shall mean the agreements and other documents
listed on Exhibit S hereto, in the respective forms referred to on or included
in such Exhibit.
"Holdings" shall mean Steel Dynamics Holdings, Inc., an Indiana
corporation which owns all of the capital stock of
<PAGE> 18
Salesco.
"Holdings Security Agreement" shall have the meaning set forth in
Section 4.01(b)(i)(G).
"I&M Development Debt" shall mean the indebtedness in the original
principal amount of $7,821,033 incurred by the Borrower as part of the
Development Package to finance the Borrower's share of the cost of the electric
transmission facilities constituting part of the Phase I Project.
"Indebtedness" of a Person shall mean:
(a) All obligations on account of money borrowed by, or credit
extended to or on behalf of, or for or on account of deposits with or
advances to, such Person;
(b) All obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(c) All obligations of such Person for the deferred purchase
price of property or services;
(d) All obligations secured by a Lien on property owned by
such Person (whether or not assumed); and all obligations of such
Person under Capitalized Leases (without regard to any limitation of
the rights and remedies of the holder of such Lien or the lessor under
such Capitalized Lease to repossession or sale of such property);
(e) The face amount of all letters of credit issued for the
account of such Person and, without duplication, the unreimbursed
amount of all drafts drawn thereunder, and all other obligations of
such Person associated with such letters of credit or draws thereon;
(f) All obligations of such Person in respect of acceptances
or similar obligations issued for the account of such Person;
(g) All obligations of such Person under a product financing
or similar arrangement described in paragraph 8 of FASB Statement of
Accounting Standards No. 49 or any similar requirement of GAAP; and
(h) All obligations of such Person under any interest rate or
currency protection agreement, interest rate or currency future,
interest rate or
<PAGE> 19
currency option, interest rate or currency swap or cap or other
interest rate or currency hedge agreement.
"Indemnified Parties" shall mean the Agent, the Lender Parties, the
Issuing Bank their respective affiliates, and the directors, officers,
employees, attorneys and agents of each of the foregoing.
"Initial Revolving Credit Committed Amount" shall have the meaning set
forth in Section 2.01(a) hereof.
"Initial Tranche D Funding Availability Date" shall mean the first
date, on or prior to December 31, 1997, on which all of the conditions
specified in Sections 4.03, 4.05 and 4.06 are complied with.
"Interest Expense" for any period shall mean the total interest
expense of the Borrower Group for such period determined on a consolidated
basis in accordance with GAAP.
"Interest Rate Protection Agreements" shall have the meaning set forth
in Section 5.13 hereof.
"Inventory" shall mean all goods now or hereafter owned by the
Borrower or Salesco, whenever acquired and wherever located, held for sale or
lease or furnished or to be furnished under contracts of service, and all raw
materials, spares and supplies, work in process and materials now or hereafter
owned by the Borrower or Salesco whenever acquired and wherever located, and
used or consumed in its business.
"Issuing Bank" shall mean Mellon Bank, N. A.
"Law" shall mean any law (including common law), constitution,
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.
"Lenders" shall mean lender parties listed on the signature pages
hereof, subject to the provisions of Section 9.14 hereof pertaining to Persons
becoming or ceasing to be Lenders, and "Lender" shall mean any of them.
"Lender Parties" shall mean the Lenders, the Issuing Bank, the
Co-Agents, and the Agent.
"Letter of Credit" shall mean each Standby Letter of
<PAGE> 20
Credit and each Trade Letter of Credit issued by the Issuing Bank for the
account of the Borrower pursuant to this Agreement, each as amended, modified or
supplemented from time to time.
"Letter of Credit Application" shall have the meaning given that term
in Section 2.18(a) hereof.
"Letter of Credit Collateral Account" shall have the meaning given
that term in Section 2.25(b) hereof.
"Letter of Credit Exposure" at any time shall mean the sum at such
time of (a) the aggregate Letter of Credit Unreimbursed Draws and (b) the
aggregate Letter of Credit Undrawn Availability.
"Letter of Credit Facing Fee" shall have the meaning set forth in
Section 2.17(e) hereof.
"Letter of Credit Fee" shall have the meaning given that term in
Section 2.17(d) hereof.
"Letter of Credit Participating Interest" shall have the meaning given
that term in Section 2.19(a) hereof.
"Letter of Credit Reimbursement Obligation" with respect to a Letter
of Credit means the obligation of the Borrower to reimburse the Issuing Bank
for Letter of Credit Unreimbursed Draws, together with interest thereon.
"Letter of Credit Undrawn Availability" with respect to a Letter of
Credit at any time shall mean the maximum amount available to be drawn under
such Letter of Credit at such time or thereafter, regardless of the existence
or satisfaction of any conditions or limitations on drawing.
"Letter of Credit Unreimbursed Draws" with respect to a Letter of
Credit at any time shall mean the aggregate amount at such time of all payments
made by the Issuing Bank under such Letter of Credit, to the extent not repaid
by the Borrower.
"Level 1 Day", "Level 2 Day", "Level 3 Day", "Level 4 Day" and "Level
5 Day" shall have the respective meanings set forth in Section 2.06(b).
"Leverage Ratio" at any time shall mean the ratio of (a) consolidated
Funded Indebtedness of the Borrower Group at such time minus the then
outstanding principal amount of the Subordinated Notes minus the then
outstanding amount of
<PAGE> 21
I&M Development Debt to (b) Tangible Net Worth at such time plus the then
outstanding principal amount of the Subordinated Notes.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" shall mean any loan by a Lender to the Borrower under this
Agreement, and "Loans" shall mean all Loans made by the Lenders under this
Agreement.
"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), the
Salesco/Holdings Guaranty, 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.
"Loan Parties" shall mean the Borrower, Salesco, Holdings and each
Subsidiary of the Borrower, and "Loan Party" shall mean any one of them.
"London Business Day" shall mean a day for dealing in deposits in
Dollars by and among banks in the London interbank market and which is a
Business Day.
"Material Adverse Effect" shall mean: (a) a material adverse effect on the
business, operations or condition (financial or otherwise) of the Borrower or of
the Borrower Group, (b) a material adverse effect on the ability of the Borrower
or any other Loan Party to perform or comply with any of the terms and
conditions of any Loan Document or an adverse effect on the ability of the
Borrower or any other Loan Party to perform or comply with any of the terms and
conditions of Project Agreement or of any Phase II Project Agreement if,
<PAGE> 22
in either such case, the effect thereof could excuse or preclude the other
party to such Phase I Project Agreement or Phase II Project Agreement from
performing any of its obligations or duties under the Phase Project or the Phase
II Project, as the case may be, or could increase the duties or obligations of
the Borrower or any other Loan Party thereunder to an extent material to the
Phase I Project or the Phase II Project, as the case may be, or (c) a material
adverse effect on (i) the legality, validity, binding effect, enforceability or
admissibility into evidence of any Loan Document, or (ii) the ability of the
Agent or any Lender Party to enforce any rights or remedies under or in
connection with any Loan Document which could, in the judgment of the Required
Lenders reasonably exercised, prevent the practical realization of the rights
and benefits of the Lenders under such Loan Document, or (iii) the ability of
any Loan Party to enforce any rights or remedies material to the Phase I
Project or to the Borrower under or in connection with any Phase I Project
Agreement or material to the Phase II Project or to the Borrower under or in
connection with any Phase II Project Agreement, or (iv) the ability of the
Borrower to achieve Completion of the Phase I Project or Completion of the Phase
II Project.
"Mellon" shall mean Mellon Bank, N.A., a national banking association.
"Mortgage" shall have the meaning set forth in Section 4.01(c).
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which any Loan Party or any Controlled Group Member has or had an obligation to
contribute.
"Net Cash Proceeds" with respect to any property or issuance of debt
or equity securities shall mean cash or cash equivalents received by any Loan
Party from, and payments of principal of any Capitalized Lease Obligations or
other obligation received by any Loan Party in connection with, the sale, lease
or other disposition of such property or securities, minus the sum of (a)
expenses reasonably incurred in respect of such sale, lease or other
disposition, (b) any sales or transfer taxes payable as a result of such sale,
lease or other disposition, (c) incremental income taxes reasonably estimated
by the Borrower to be payable by such Loan Party as a result of such sale,
lease or other disposition and (d) the amount required to discharge any
indebtedness or obligation secured by a Lien on such property and required to
be discharged in connection with such sale, lease or other disposition.
<PAGE> 23
"Net Income" for any period shall mean the net earnings (or loss)
after taxes of the Borrower Group for such period determined on a consolidated
basis in accordance with GAAP; provided, that there shall be deducted therefrom
(a) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made against income during such period, and
(b) any gain arising from the acquisition of any securities, or the
extinguishment, under GAAP, of any Indebtedness, of the Borrower Group.
"Non-PP&E Costs" shall mean Phase I Project Costs or Phase II Project
Costs, as the case may be, other than PP&E Costs.
"Notes" shall mean the Revolving Credit Notes and the Term Loan Notes
of the Borrower executed and delivered under this Agreement, together with all
extensions, renewals, refinancings or refundings of any thereof in whole or
part, and "Note" shall mean any one of the Notes.
"Notional Euro-Rate Funding Office" shall have the meaning given to
that term in Section 2.15(a) hereof.
"Obligations" shall mean all indebtedness, obligations and liabilities
of any Loan Party to any Lender Party or the Agent from time to time arising
under or in connection with or related to or evidenced by or secured by or
under color of this Agreement or any other Loan Document, and all extensions,
renewals or refinancings thereof, whether such indebtedness, obligations or
liabilities are direct or indirect, otherwise secured or unsecured, joint or
several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising. Without limitation of the
foregoing, such indebtedness, obligations and liabilities include the principal
amount of Loans, interest, Letter of Credit Reimbursement Obligations, guaranty
obligations, fees, indemnities or expenses under or in connection with this
Agreement or any other Loan Document, and all extensions, renewals and
refinancings thereof, whether or not such Loans were made or such Letters of
Credit were issued in compliance with the terms and conditions of this
Agreement or in excess of the obligation of the Lenders to lend or the
authority of the Issuing Bank to issue Letters of Credit. Obligations shall
remain Obligations notwithstanding any assignment or transfer or any subsequent
assignment or transfer of any of the Obligations or any interest therein.
<PAGE> 24
"Office," when used in connection with the Agent, shall mean its
office located at One Mellon Bank Center, Pittsburgh, Pennsylvania, or at such
other office or offices of the Agent or any branch, subsidiary or affiliate
thereof as may be designated in writing from time to time by the Agent to the
Borrower.
"OmniSource" shall mean OmniSource Corporation, an Indiana
corporation.
"OmniSource Documents" shall mean the agreements and other documents
listed on Exhibit T hereto, in the respective forms referred to on or included
in such Exhibit.
"Option" shall mean the Base Rate Option or the Euro-Rate Option, as
the case may be.
"Other Finished Goods" shall mean finished goods which are not
Commercial Grade Finished Goods.
"Other Raw Materials" shall mean raw materials other than Scrap.
"Participants" shall have the meaning set forth in Section 9.14(b)
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation established
under Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.
"Pension-Related Event" shall mean any of the following events or
conditions:
(a) Any action is taken by any Person (i) to terminate, or
which would result in the termination of, a Plan, either pursuant to
its terms or by operation of law (including, without limitation, any
amendment of a Plan which would result in a termination under Section
4041(e) of ERISA) other than compliance with Section 4041(b) of ERISA,
or (ii) to have a trustee appointed for a Plan pursuant to Section
4042 of ERISA;
(b) PBGC notifies any Person of its determination that an
event described in Section 4042 of ERISA has occurred with respect to
a Plan, that a Plan should be terminated, or that a trustee should be
appointed for a Plan;
(c) Any Reportable Event occurs with respect to a Plan;
<PAGE> 25
(d) Any action occurs or is taken which could result in any
Loan Party becoming subject to liability for a complete or partial
withdrawal by any Person from a Multiemployer Plan (including, without
limitation, seller liability incurred under Section 4204(a)(2) of
ERISA), or any Loan Party or any Controlled Group Member receives from
any Person a notice or demand for payment on account of any such
alleged or asserted liability; or
(e) (i) There occurs any failure to meet the minimum funding
standard under Section 302 of ERISA or Section 412 of the Code with
respect to a Plan, or any tax return is filed showing any tax payable
under Section 4971(a) of the Code with respect to any such failure, or
any Loan Party or any Controlled Group Member receives a notice of
deficiency from the Internal Revenue Service with respect to any
alleged or asserted such failure, or (ii) any request is made by any
Person for a variance from the minimum funding standard, or an
extension of the period for amortizing unfunded liabilities, with
respect to a Plan.
"Permitted Liens" shall have the meaning set forth in Section 6.02
hereof.
"Permitted Payments" shall mean payments made by Holdings to Persons
(other than Affiliates of Holdings and the Borrower) of regular and customary
legal, accounting and similar fees in connection with Holdings' capital stock,
maintenance of the corporate existence of Holdings, the compliance of Holdings
with Laws and other customary administrative expenses.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, Governmental
Authority or any other entity.
"Phase I Adequacy of Funds End Date" shall mean the earlier to occur
of (i) the last day of the Term Loan (A and B) Commitment Period and (ii) the
Phase I Project Acceptance Date.
"Phase I Project" shall mean the 1.2 million ton thin
<PAGE> 26
slab cast mini-mill and related improvements (including without limitation the
electric substation, the water-distribution system and mill railroad tracks) to
be constructed on the Project Site in accordance with the Design and
Construction Standard.
"Phase I Project Acceptance" shall mean the issuance by Borrower
(pursuant to Section 14.3.4 but not pursuant to Section 14.3.6 of the SMS
Documents) to SMS of a Final Acceptance Certificate, as contemplated by the SMS
Documents, following the completion, in accordance with the SMS Documents, of
the Final Acceptance Test referred to in Section 14.3 of the SMS Documents for
all portions of the Phase I Project supplied by SMS, in which Test such
portions of the Phase I Project met the guaranteed performance specified in the
SMS Documents.
"Phase I Project Acceptance Date" shall mean the earliest date on
which the Borrower has issued (pursuant to Section 14.3.4 but not pursuant to
Section 14.3.6 of the SMS Documents) to SMS a Final Acceptance Certificate, as
contemplated by the SMS Documents, following the completion, in accordance with
the SMS Documents, of the Final Acceptance Test referred to in Section 14.3 of
the SMS Documents for all portions of the Phase I Project supplied by SMS, in
which Test such portions of the Phase I Project met the guaranteed performance
specified in the SMS Documents.
"Phase I Project Agreements" shall mean the contracts and agreements
listed on Schedule 1.01B hereto and any Future Project Agreements (other than
those which relate solely to the Phase II Project) after execution and delivery
thereof by the Loan Party which is a party thereto.
"Phase I Project Budget" shall mean the schedule of Phase I Project
Costs attached hereto as Schedule 1.01C.
"Phase I Project Commissioning Date" shall mean the earliest date on
which all of the following shall have occurred: (a) the Borrower has issued
(other than pursuant to Section 14.2.6 of the SMS Documents) to SMS a
Preliminary Acceptance Certificate, as contemplated by the SMS Documents,
following the completion, in accordance with the SMS Documents, of the
Preliminary Acceptance Test referred to in Section 14.2 of the SMS Documents
for all portions of the Phase I Project supplied by SMS in which Test such
portions of the Phase I Project met the guaranteed performance specified in the
SMS Documents; (b) construction of the Phase I Project in accordance with the
Design and
<PAGE> 27
Construction Standard shall have been completed except for items which are not
part of the steel producing equipment and the noncompletion of which does not
adversely affect steel producing operations (including safety and disposal of
Environmental Concern Material and other by-products if any) (but the Phase I
Project need not be operating at projected efficiency and the Phase I Project
Acceptance Date need not have occurred), (c) the Phase I Project Monitor shall
have delivered to the Agent, with a copy to each Lender, a certificate in the
form of Exhibit W hereto, with the blanks filled, and the Borrower shall have
delivered to the Agent, with a copy for each Lender, a certificate in the form
of Exhibit X hereto, with the blanks appropriately filled, and (d) the Agent
shall have theretofore received, with a copy for each Lender, copies of all
Required Phase I Project Permits necessary to conduct steel producing
operations (including safety and disposal of Environmental Concern Material and
other by-products if any), on an uninterrupted basis and the same shall be in
full force and effect and no longer subject to appeal.
"Phase I Project Costs" shall mean the costs incurred or to be
incurred by the Borrower in connection with the design, construction,
equipping, acquisition, testing and start-up and financing of the Phase I
Project, and net operating losses (calculated without deduction for
depreciation, amortization and other non-cash charges) in connection with
operations through the Phase I Adequacy of Funds End Date, including costs
under any category listed on the Phase I Project Budget.
"Phase I Project Monitor" shall mean The Lathrop Company and R. T.
Patterson Company.
"Phase I Project Status Certificate" shall have the meaning set forth
in Section 4.02(d)(ii) hereof.
"Phase II Adequacy of Funds End Date" shall mean the earlier to occur
of (i) the last day of the Term Loan (D) Commitment Period and (ii) the Phase
II Project Acceptance Date.
"Phase II Project" shall mean the cold rolling and coating steel
processing facility to be constructed on the Project Site in accordance with
the Design and Construction Standard.
<PAGE> 28
"Phase II Project Acceptance" shall mean successful completion of, and
issuance by the Borrower of acceptance certificates with respect to, certain
tests, a listing and description of which tests shall have been proposed by the
Phase II Project Monitor with reference to the Phase II Project Agreements
after consultation with the Borrower and approved, prior to the Initial Tranche
D Funding Availability Date, by the Required Lenders.
"Phase II Project Acceptance Date" shall mean the date, after the
Phase II Project Commissioning Date, on which phase II Project Acceptance
occurs.
"Phase II Project Agreements" shall mean the contracts and agreements
listed or described on Schedule 1.01B-1996 hereto and any Future Project
Agreements relating to the Phase II Project after execution and delivery
thereof by the Loan Party which is a party thereto.
"Phase II Project Budget" shall mean the schedule of Phase II Project
Costs attached hereto as Schedule 1.01C-1996.
"Phase II Project Commissioning Date" shall mean the earliest date on which all
of the following shall have occurred: (a) successful completion of, and
issuance by the Borrower of acceptance certificates with respect to, certain
tests (which may be different from the tests referred to in the definition of
"Phase II Project Acceptance"), a listing and description of which tests shall
have been proposed by the Phase II Project Monitor with reference to the Phase
II Project Agreements after consultation with the Borrower and approved, prior
to the Initial Tranche D Funding Availability Date, by the Required Lenders, (b)
construction of the Phase II Project in accordance with the Design and
Construction Standard shall have been completed except for items which are
described on a listing which shall have been proposed by the Phase II Project
Monitor with reference to the Phase II Project Agreements after consultation
with the Borrower and approved, prior to the Initial Tranche D Funding
Availability Date, by the Required Lenders, (c) the Phase II Project Monitor
shall have delivered to the Agent, with a copy to each Lender, a certificate in
form satisfactory to the Agent and the Required Lenders, with respect to the
matters described in clauses (a) and (b) of this definition, and the Borrower
shall have delivered to the Agent, with a copy for each Lender, a certificate in
form satisfactory to the Agent, with respect to the matters described in clauses
(a) and (b) of this definition, and (d) the Agent shall have theretofore
received, with a copy
<PAGE> 29
for each Lender, copies of all Required Phase II Project Permits necessary to
conduct steel processing operations (including safety and disposal of
Environmental Concern Material and other by-products if any), on an
uninterrupted basis and the same shall be in full force and effect and no longer
subject to appeal.
"Phase II Project Costs" shall mean the costs incurred or to be
incurred by the Borrower in connection with the design, construction,
equipping, acquisition, testing and start-up and financing of the Phase II
Project, including costs under any category listed on the Phase II Project
Budget.
"Phase II Project Major Equipment Supply Contracts" shall mean
contracts identified on a list proposed by the Phase II Project Monitor after
consultation with the Borrower and approved by the Agent and the Required
Lenders prior to the Initial Tranche D Funding Availability Date.
"Phase II Project Monitor" shall mean The Lathrop Company and R. T.
Patterson Company (or their respective successors).
"Phase II Project Status Certificate" shall have the meaning set forth
in Section 4.06(d) hereof.
"Plan" means any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of
ERISA by reason of Section 4021 of ERISA, of which any Loan Party or any
Controlled Group Member is or has been within the preceding five years a
"contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or
which is or has been within the preceding five years maintained for employees
of any Loan Party or any Controlled Group Member.
"Portion" shall mean the Base Rate Portion or the Euro-Rate Portion,
as the case may be.
"Postretirement Benefits" shall mean any benefits, other than
retirement income, provided by any Loan Party to retired employees, or to their
spouses, dependents or beneficiaries, including, without limitation, group
medical insurance or benefits, or group life insurance or death benefits.
<PAGE> 30
"Postretirement Benefit Obligation" shall mean that portion of the
actuarial present value of all Postretirement Benefits expected to be provided
by any Loan Party which is attributable to employees' service rendered to the
date of determination (assuming that such liability accrues ratably over an
employee's working life to the earlier of his date of retirement or the date on
which the employee would first become eligible for full benefits), reduced by
the fair market value as of the date of determination of any assets which are
segregated from the assets of the applicable Loan Party and which have been
restricted so that they cannot be used for any purpose other than to provide
Postretirement Benefits or to defray related expenses.
"Potential Base Rate Lender" shall mean each Revolving Credit Lender
and each Term Loan Lender which has provided written notice to the Agent that
it is willing to have Term Loans bear interest under the Base Rate Option in
the circumstances set forth in Section 2.06(e).
"Potential Default" shall mean any event or condition which with
notice, passage of time, or both, would constitute an Event of Default.
"PP&E Costs" shall mean all costs incurred or to be incurred by the
Borrower for work, labor, materials and services furnished or to be furnished
in connection with the design, construction, equipping, acquisition and testing
of the Phase I Project or of the Phase II Project, as the case may be.
"Preussag" shall mean Preussag Stahl AG, a company incorporated under
the laws of the Federal Republic of Germany.
"Prime Rate" as used herein, shall mean the interest rate per annum
announced from time to time by the Agent as its prime rate, such rate to change
automatically effective as of the effectiveness of each announced change in
such prime rate. The Prime Rate may be greater or less than other interest
rates charged by the Agent to other borrowers and is not solely based or
dependent upon the interest rate which the Agent may charge any particular
borrower or class of borrower.
"Project Site" shall mean the property described in Exhibit A to the
Mortgage and which is located in Butler, Indiana.
"Pro Rata" shall mean from or to (i) each Revolving
<PAGE> 31
Credit Lender in proportion to its Revolving Credit Commitment Percentage, (ii)
each Tranche A Lender in proportion to its Tranche A Commitment Percentage,
(iii) each Tranche B Lender in proportion to its Tranche B Commitment
Percentage, (iv) each Tranche C Lender in proportion to its Tranche C
Commitment Percentage and (v) each Tranche D Lender in proportion to its
Tranche D Commitment Percentage, as the case may be.
"Purchasing Lender" shall have the meaning set forth in Section
9.14(c) hereof.
"Recording Date" shall mean the date which is 90 days after the
Closing Date or such earlier date as is designated as the Recording Date by not
less than five Business Days' prior written notice from the Borrower to the
Agent.
"Register" shall have the meaning set forth in Section 9.14(d) hereof.
"Regular Payment Date" shall mean the last day of each March, June,
September and December after the date hereof, commencing September 30, 1994.
"Remaining Phase I Project Costs" shall mean all PP&E Costs required
to Complete the construction of the Phase I Project and all Non-PP&E Costs in
connection with the Phase I Project through the Phase I Adequacy of Funds End
Date, excluding Phase I Project Costs theretofore paid.
"Remaining Phase II Project Costs" shall mean all PP&E Costs required
to Complete the construction of the Phase II Project and all Non-PP&E Costs in
connection with the Phase II Project through the Phase II Adequacy of Funds End
Date, excluding Phase II Project Costs theretofore paid.
"Reportable Event" means (i) a reportable event described in Section
4043 of ERISA and regulations thereunder, (ii) a withdrawal by a substantial
employer from a Plan to which more than one employer contributes, as referred
to in Section 4063(b) of ERISA, (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of Plan participants to be separated
from employment, as referred to in Section 4062(e) of ERISA, or (iv) a failure
to make a required installment or other payment with respect to a Plan when due
in accordance with Section 412 of the Code or Section 302 of ERISA which causes
the total
<PAGE> 32
unpaid balance of missed installments and payments (including unpaid interest)
to exceed $750,000.
"Required Phase I Contingency" shall mean $13,300,000 on the Closing
Date and $4,000,000 thereafter.
"Required Phase II Contingency" shall mean $12,000,000 on the Initial
Tranche D Funding Availability Date and $4,000,000 thereafter.
"Required Lenders" shall mean, as of any date, (i) if such date is
within the Term Loan Commitment Period (and the Term Loan Commitments have not
been terminated), Lenders (other than the Designated Lender) which have Term
Loan Committed Amounts (both borrowed and unborrowed) constituting, in the
aggregate, at least 51% of the total Term Loan Committed Amounts (both borrowed
and unborrowed) of all Lenders (other than the Designated Lender) on such date
or, if such date is after the end of the Term Loan Commitment Period or the
Term Loan Commitments have been terminated, Lenders which have made Term Loans
constituting, in the aggregate, at least 51% in principal amount of Term Loans
outstanding on such date (other than Term Loans made by the Designated Lender)
and (ii) Lenders which have Revolving Credit Commitments constituting, in the
aggregate, at least 51% of the total Revolving Credit Commitments of all the
Lenders on such date or, if the Revolving Credit Commitments have been
terminated, Lenders which have made Revolving Credit Loans constituting, in the
aggregate, at least 51% in principal amount of the Revolving Credit Loans
outstanding on such date; provided, however, that for purposes of the written
request referred to in Section 7.02(a) as it relates to clause (ii) thereof and
of the written request referred to in Section 7.02(c) as it relates to clause
(ii) thereof, "Required Lenders" shall mean Lenders (other than the Designated
Lender and, if no Tranche C Loans are then outstanding, other than the
Commerzbank Lenders) which have made outstanding Loans constituting, in the
aggregate, at least 51% in principal amount of all Loans (other than Loans made
by the Designated Lender) outstanding and Letter of Credit Reimbursement
Obligations outstanding on the date of such request.
"Required Overrun Decision Lenders" shall mean, as of any date, (i)
Lenders (other than the Designated Lender and other than the Commerzbank
Lenders) which have Term Loan Committed Amounts (both borrowed and unborrowed)
constituting, in the aggregate, at least 51% of the total Term Loan Committed
Amounts (both borrowed and unborrowed) of all Lenders (other than the
Designated Lender and other
<PAGE> 33
than the Commerzbank Lenders) on such date and (ii) Lenders which have
Revolving Credit Commitments constituting, in the aggregate, at least 51% of
the total Revolving Credit Commitments of all the Lenders on such date or, if
the Revolving Credit Commitments have been terminated, Lenders which have made
Revolving Credit Loans constituting, in the aggregate, at least 51% in
principal amount of the Revolving Credit Loans outstanding on such date.
"Required Phase I Project Permits" shall mean all Governmental Action
necessary for the design, construction, equipping, acquisition, testing,
start-up, ownership, occupancy or operation of the Phase I Project, including
in connection with the disposal of any Environmental Concern Materials and
other by-products from the Phase I Project.
"Required Phase II Project Permits" shall mean all Governmental Action
necessary for the design, construction, equipping, acquisition, testing,
start-up, ownership, occupancy or operation of the Phase II Project, including
in connection with the disposal of any Environmental Concern Materials and
other by-products from the Phase II Project.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any Law, right, privilege, qualification, license
or franchise or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property (now owned or hereafter acquired) or to which such Person or any of
its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Responsible Officer" shall mean the President, any Executive Vice
President, the Treasurer or the Chief Financial Officer of the Borrower.
"Restricted Indebtedness" shall mean the Indebtedness of the Borrower
allowed and described in Section 6.03(b) hereof and the Subordinated Guarantee.
"Revolving Credit Commitment" shall have the meaning set forth in
Section 2.01(a) hereof.
"Revolving Credit Commitment Fee" shall have the meaning set forth in
Section 2.02(a) hereof.
<PAGE> 34
"Revolving Credit Commitment Percentage" for any Lender shall mean the
Revolving Credit Commitment Percentage for such Lender set forth below its name
on the signature page hereof, subject to transfer to another Lender as provided
in Section 9.14 hereof.
"Revolving Credit Committed Amount" shall have the meaning set forth
in Section 2.01(a) hereof.
"Revolving Credit Lenders" shall mean the Lenders listed on the
signature pages hereof who have a Revolving Credit Committed Amount greater
than zero set forth thereon, subject to the provisions of Section 9.14 hereof
pertaining to Persons becoming or ceasing to be Lenders; "Revolving Credit
Lender" shall mean any one of them.
"Revolving Credit Loans" shall have the meaning set forth in Section
2.01(a) hereof.
"Revolving Credit Maturity Date" shall mean September 30, 2000.
"Revolving Credit Notes" shall mean the promissory notes of the
Borrower executed and delivered under Section 2.01(c) hereof, any promissory
notes issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c)
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part; "Revolving Credit Note" shall mean any one of them.
"Salesco" shall mean Steel Dynamics Sales Corp., Inc., an Indiana
corporation, which owns all of the capital stock of the Borrower.
"Salesco/Holdings Guaranty" shall have the meaning set forth in
Section 4.01(v).
"Salesco Security Agreement" shall have the meaning set forth in
Section 4.01(b)(i)(F).
"Scrap" shall mean ferrous material (excluding finished goods)
resident on Borrower's real property of suitable quality for melting in
Borrower's electric furnace.
"Second Caster Account" shall have the meaning set forth in Section
2.10(b).
"Second Caster Amount" shall have the meaning set forth in Section
2.10(b).
<PAGE> 35
"Second Caster Date" shall have the meaning set forth in Section
6.06(c).
"Security Agreement" shall have the meaning set forth in Section
4.01(b)(i)(A).
"Security Documents" shall mean the Security Agreement, the Holdings
Security Agreement, the Salesco Security Agreement, the Mortgage, the
Salesco/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.
"SMS" shall mean SMS Schloemann-Siemag AG, a German corporation.
"SMS Documents" shall mean the agreements and other documents listed
on Exhibit U hereto, in the respective forms referred to on and included in
such Exhibit.
"Solvent" means, with respect to any Person at any time, that at such
time (a) the sum of the debts and liabilities (including, without limitation,
contingent liabilities) of such Person is not greater than all of the assets of
such Person at a fair valuation, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become absolute and
matured, (c) such Person has not incurred, does not intend to incur, and does
not believe that it will incur, debts or liabilities (including, without
limitation, contingent liabilities) beyond such person's ability to pay as such
debts and liabilities mature, (d) such Person is not engaged in, and is not
about to engage in, a business or a transaction for which such person's
property constitutes or would constitute unreasonably small capital, and (e)
such Person is not otherwise insolvent as defined in, or otherwise in a
condition which could in any circumstances then or subsequently render any
transfer, conveyance, obligation or act then made, incurred or performed by it
avoidable or fraudulent pursuant to, any Law that may be
<PAGE> 36
applicable to such Person pertaining to bankruptcy, insolvency or creditors'
rights (including but not limited to the Bankruptcy Code of 1978, as amended,
and, to the extent applicable to such Person, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act, or any other applicable Law
pertaining to fraudulent conveyances or fraudulent transfers or preferences).
"Spares" shall mean spares and supplies of the Borrower which the
Agent in its reasonable discretion determines to be readily marketable.
"Special Specified Early Period Default" shall mean a Specified Early
Period Default which relates to a representation or warranty made in the second
sentence of Section 3.26.
"Specifications" shall mean at any time the detailed plans, drawings
and specifications for the construction and equipping of the Phase I Project or
the Phase II Project, as the case may be, in existence at such time, whether
preliminary or final, as the same may be modified from time to time in
accordance with Section 6.20 hereof. A list of the Specifications for the
Phase I Project, as developed on the date of this Agreement, is set forth in
Schedule 1.01D hereto. A list of the Specifications for the Phase II Project,
as developed on the date of the Fifth Amendment, is set forth in Schedule
1.01D-1996 hereto.
"Specified Early Period Default" shall mean any of the following
Events of Default which occurs or first exists during the Early Period: (i) an
Event of Default specified in Section 7.01(c) hereof which relates to a
representation or warranty made in Section 3.04, 3.05(b)(iii), 3.18(c), 3.21,
3.24, 3.26, 3.27, 3.28, or 3.29 hereof; (ii) an Event of Default specified in
Section 7.01(e) hereof which relates to a covenant made in Section 5.03, 5.05,
5.07(c), 5.14(b) or 5.15; (iii) an Event of Default specified in Section
7.01(f), 7.01(g), 7.01(h), 7.01(i), 7.01(n), 7.01(o), 7.01(t) or 7.01(z)
hereof; or (iv) an Event of Default specified in Section 7.01(c) hereof which
relates to a representation or warranty made in Section 3.17 to the extent such
representation or warranty relates to a Specified Early Period Default (other
than pursuant to this clause (iv).
"Specified Permitted Capital Expenditures" shall have the meaning set
forth in Section 6.13.
"Standard Notice" shall mean an irrevocable notice
<PAGE> 37
provided to the Agent on a Business Day which is
(a) On or before the same Business Day in the case of
selection of, conversion to or renewal of the Base Rate Option or
prepayment of any Base Rate Portion;
(b) At least four London Business Days in advance in the case
of selection of the Euro-Rate Option or prepayment of any Euro-Rate
Portion.
Standard Notice must be provided no later than 10:00 a.m., Pittsburgh time, on
the last day permitted for such notice.
"Standby Letter of Credit" shall mean a Letter of Credit which is not
a Trade Letter of Credit.
"Stock Payment" by any Person shall mean any dividend, distribution or
payment of any nature (whether in cash, securities, or other property) on
account of or in respect of any shares of the capital stock (or warrants,
options or rights therefor) of such Person, including but not limited to any
payment on account of the purchase, redemption, retirement, defeasance or
acquisition of any shares of the capital stock (or warrants, options or rights
therefor) of such Person, in each case regardless of whether required by the
terms of such capital stock (or warrants, options or rights) or any other
agreement or instrument.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement, dated as of the date hereof, by and among Holdings and the other
parties thereto.
"Subordinated Debt Purchase Agreement" shall mean the Subordinated
Note and Warrant Purchase Agreement, dated as of June 30, 1994, among the
Borrower, Whitney Subordinated Debt Fund, L.P. and the several purchasers named
therein, as the same may be amended in accordance with the terms of Section
6.15 hereof.
"Subordinated Guarantee" shall mean the Subordinated Guarantee, dated
as of June 30, 1994, issued by Holdings and Salesco 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.
<PAGE> 38
"Subordinated Notes" shall mean the promissory notes made by the
Borrower evidencing the Indebtedness incurred pursuant to the Subordinated Debt
Purchase Agreement.
"Subordinated Subsidiary Guarantee" shall mean any subordinated
Guaranty Equivalent by a Subsidiary of the Borrower substantially in the form
of Exhibit G to the Subordinated Debt Purchase Agreement.
"Subsidiary" shall mean any corporation of which a majority (by number
of shares or number of votes) of any class of outstanding capital stock
normally entitled to vote for the election of one or more directors (regardless
of any contingency which does or may suspend or dilute the voting rights of
such class) is at such time owned directly or indirectly, beneficially or of
record, by Holdings, Salesco, the Borrower or one or more Subsidiaries of the
Borrower.
"Subsidiary Guaranty" shall mean a Guaranty and Suretyship Agreement,
substantially in the form of Exhibit R hereto, entered into by a Subsidiary in
compliance with Section 6.04(e) hereof.
"Tangible Net Worth" at any time shall mean the total amount of
stockholders' equity of the Borrower Group at such time determined on a
consolidated basis in accordance with GAAP, except that there shall be deducted
therefrom the book value of all intangible assets (other than the asset
denominated the I&M Transmission Facilities Agreement which corresponds to the
I&M Development Debt) and deferred charges of the Borrower Group at such time
(that were created after the Financial Covenant Date) determined in accordance
with GAAP.
"Tax Affected Lender" shall have the meaning assigned to that term in
Section 2.14(f) hereof.
"Taxes" shall have the meaning set forth in Section 2.14 hereof.
"Term Lenders" shall mean the Tranche A Lenders, the Tranche B
Lenders, the Tranche C Lenders and the Tranche D Lenders.
"Term Loans" shall mean the Tranche A Loans, the Tranche B Loans, the
Tranche C Loans and the Tranche D Loans, collectively.
"Term Loan Commitment" shall mean, for any Lender, its
<PAGE> 39
Tranche A Loan Commitment, Tranche B Loan Commitment, Tranche C Loan Commitment
and Tranche D Loan Commitment.
"Term Loan Commitment Fee" shall mean the Tranche A Commitment Fee
plus the Tranche B Commitment Fee plus the Tranche C Loan Commitment Fee plus
the Tranche D Commitment Fee.
"Term Loan (A and B) Commitment Period" shall mean the period from the
date hereof to and including the date which is 180 days after the Phase I
Project Acceptance Date, but in any event not later than April 30, 1997.
"Term Loan (D) Commitment Period shall mean the period from the date
of execution of the Fifth Amendment to and including the date which is 180 days
after the Phase II Project Acceptance Date, but in any event not later than
June 30, 1998.
"Term Loan Commitment Period" shall mean the period from the date
hereof to and including the later to occur of the last day of the Term Loan (A
and B) Commitment Period and the last day of the Term Loan (D) Commitment
Period.
"Term Loan Committed Amount" shall mean, for any Lender, the sum of
such Lender's Tranche A Committed Amount, Tranche B Committed Amount, Tranche C
Committed Amount and Tranche D Committed Amount.
"Term Loan Notes" shall mean the Tranche A Notes, the Tranche B Notes,
the Tranche C Notes and the Tranche D Notes, and "Term Loan Note" shall mean
any one of them.
"Total Revolving Credit Exposure" of any Lender at any time shall mean
the sum of the outstanding principal amount of such Lender's Revolving Credit
Loans plus such Lender's Pro Rata share of the aggregate Letter of Credit
Exposure at such time.
"Trade Letter of Credit" shall mean a Letter of Credit which is
designated as such by the Issuing Bank after determination by the Issuing Bank
that such Letter of Credit may, in accordance with the Issuing Bank's usual
operating practice, be treated as a documentary or trade letter of credit.
"Tranche A" and "Tranche A Loan" shall have the
<PAGE> 40
meanings set forth in Section 2.03 hereof.
"Tranche B" and "Tranche B Loan" shall have the meanings set forth in
Section 2.03 hereof.
"Tranche C" and "Tranche C Loan" shall have the meanings set forth in
Section 2.03(c) hereof.
"Tranche D" and "Tranche D Loan" shall have the meanings set forth in
Section 2.03(d) hereof.
"Tranche A Commitment Fee" shall have the meaning set forth in Section
2.04 hereof.
"Tranche B Commitment Fee" shall have the meaning set forth in Section
2.04 hereof.
"Tranche C Commitment Fee" shall have the meaning set forth in Section
2.04 hereof.
"Tranche D Commitment Fee" shall have the meaning set forth in Section
2.04 hereof.
"Tranche A Commitment Percentage" for any Lender shall mean the
Tranche A Commitment Percentage for such Lender set forth below its name on the
signature page hereof, subject to transfer to another Lender as provided in
Section 9.14 hereof.
"Tranche B Commitment Percentage" for any Lender shall mean the
Tranche B Commitment Percentage for such Lender set forth below its name on the
signature page hereof, subject to transfer to another Lender as provided in
Section 9.14 hereof.
"Tranche C Commitment Percentage" for any Lender shall mean the
Tranche C Commitment Percentage for such Lender set forth below its name on the
signature page hereof, subject to transfer to another Lender as provided in
Section 9.14 hereof.
"Tranche D Commitment Percentage" for any Lender shall mean the
Tranche D Commitment Percentage for such Lender set forth below its name on the
signature page of the Fifth Amendment, subject to transfer to another Lender as
provided in Section 9.14 hereof.
"Tranche A Committed Amount" for any Lender shall mean the amount set
forth as its "Tranche A Committed Amount" below its name on the signature pages
hereof, subject to
<PAGE> 41
transfer to another Lender as provided in Section 9.14 hereof.
"Tranche B Committed Amount" for any Lender shall mean the amount set
forth as its "Tranche B Committed Amount" below its name on the signature pages
hereof, subject to transfer to another Lender as provided in Section 9.14
hereof.
"Tranche C Committed Amount" for any Lender shall mean the amount set
forth as its "Tranche C Committed Amount" below its name on the signature pages
hereof, subject to transfer to another Lender as provided in Section 9.14
hereof.
"Tranche D Committed Amount" for any Lender shall mean the amount set
forth as its "Tranche D Committed Amount" below its name on the signature pages
to the Fifth Amendment, subject to transfer to another Lender as provided in
Section 9.14 hereof.
"Tranche A Lenders" shall mean the Lenders listed on the signature
pages hereof who have a Tranche A Committed Amount greater than zero set forth
thereon, subject to the provisions of Section 9.14 hereof pertaining to Persons
becoming or ceasing to be Lenders; "Tranche A Lender" shall mean any one of
them.
"Tranche B Lenders" shall mean the Lenders listed on the signature
pages hereof who have a Tranche B Committed Amount greater than zero set forth
thereon, subject to the provisions of Section 9.14 hereof pertaining to Persons
becoming or ceasing to be Lenders; "Tranche B Lender" shall mean any one of
them.
"Tranche C Lenders" shall mean the Lenders listed on the signature
pages hereof who have a Tranche C Committed Amount greater than zero set forth
thereon, subject to the provisions of Section 9.14 hereof pertaining to Persons
becoming or ceasing to be Lenders; "Tranche C Lender" shall mean any one of
them.
"Tranche D Lenders" shall mean the Lenders listed on the signature
pages to the Fifth Amendment who have a Tranche D Committed Amount greater than
zero set forth
<PAGE> 42
thereon, subject to the provisions of Section 9.14 hereof pertaining to Persons
becoming or ceasing to be Lenders; "Tranche D Lender" shall mean any one of
them.
"Tranche A Loan Commitment" shall have the meaning set forth in
Section 2.03(a) hereof.
"Tranche B Loan Commitment" shall have the meaning set forth in
Section 2.03(b) hereof.
"Tranche C Loan Commitment" shall have the meaning set forth in
Section 2.03(c) hereof.
"Tranche D Loan Commitment" shall have the meaning set forth in
Section 2.03(d) hereof.
"Tranche A Maturity Date" shall mean September 30, 2000.
"Tranche B Maturity Date" shall mean September 30, 2001 subject to
extension to March 31, 2002 pursuant to Section 2.03(f).
"Tranche C Maturity Date" shall mean September 30, 2000.
"Tranche D Maturity Date" shall mean March 31, 2002.
"Tranche A Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03(a)(iii) hereof, or any promissory
note issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c)
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, and "Tranche A Note" shall mean any one of them.
"Tranche B Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03(b)(iii) hereof, or any promissory
note issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c)
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, and "Tranche B Note" shall mean any one of them.
"Tranche C Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03(c)(iii) hereof, or any promissory
note issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c)
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, and
<PAGE> 43
"Tranche C Note" shall mean any one of them.
"Tranche D Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03(d)(iii) hereof, or any promissory
note issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c)
hereof, together with all extensions, renewals, refinancings or refundings
thereof in whole or part, and "Tranche D Note" shall mean any one of them.
"Transfer Effective Date" shall have the meaning set forth in the
applicable Transfer Supplement.
"Transfer Supplement" shall have the meaning set forth in Section
9.14(c) hereof.
"Treasury Rate" as of any Funding Breakage Date shall mean the rate
per annum determined by the applicable Lender (which determination shall be
conclusive absent manifest error) to be the semiannual equivalent yield to
maturity (expressed as a semiannual equivalent and decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) for United
States Treasury securities maturing on the last day of the corresponding
Funding Period and trading in the secondary market in reasonable volume (or if
no such securities mature on such date, the rate determined by standard
securities interpolation methods as applied to the series of securities
maturing as close as possible to, but earlier than, such date, and the series
of such securities maturing as close as possible to, but later than, such
date).
"Work in Process" shall mean steel awaiting processing.
"Working Capital" at any time shall mean Current Assets at such time
minus Current Liabilities at such time.
1.02. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole; "or" has the inclusive meaning
represented by the phrase "and/or"; and "property" includes all properties and
assets of any kind or nature, tangible or intangible, real, personal or mixed.
References in this Agreement to "determination" (and similar terms) by the
Agent or by any Lender include good faith estimates by the Agent or by any
Lender (in the case of
<PAGE> 44
quantitative determinations) and good faith beliefs by the Agent or by any
Lender (in the case of qualitative determinations). The words "hereof,"
"herein," "hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References herein to "out-of-pocket expenses" of a Person (and similar terms)
include, but are not limited to, the fees of in-house counsel and other
in-house professionals of such Person to the extent that such fees are
routinely identified and separately and specifically charged under such
Person's normal cost accounting system consistent with past practice. The
terms "include" and "including" mean "including without limitation". The
section and other headings contained in this Agreement and the Table of
Contents preceding this Agreement are for reference purposes only and shall not
control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection and exhibit references are to this
Agreement unless otherwise specified.
1.03. Accounting Principles.
(a) As used herein, "GAAP" shall mean generally accepted
accounting principles in the United States, applied on a basis consistent with
the principles used in preparing the Borrower's financial statements as of June
30, 1994 and for the fiscal quarter then ended.
(b) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters shall be
made, and all financial statements to be delivered pursuant to this Agreement
shall be prepared, in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
(c) If and to the extent that the financial statements
generally prepared by the Borrower apply accounting principles other than GAAP,
all financial statements referred to in this Agreement or any other Loan
Document shall be delivered in duplicate, one set based on the accounting
principles then generally applied by the Borrower and one set based on GAAP.
To the extent this Agreement or such other Loan Document requires financial
statements to be accompanied by an opinion of independent accountants, each set
of financial statements shall be accompanied by such an opinion.
ARTICLE II
THE CREDITS
<PAGE> 45
2.01. Revolving Credit Loans.
(a) Revolving Credit Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein set
forth, each Revolving Credit Lender, severally and not jointly, agrees (such
agreement being herein called such Revolving Credit Lender's "Revolving Credit
Commitment") to make loans (the "Revolving Credit Loans") to the Borrower at
any time or from time to time on or after the Phase I Project Commissioning
Date and to but not including the Revolving Credit Maturity Date. A Revolving
Credit Lender shall have no obligation to make any Revolving Credit Loan to the
extent that the aggregate principal amount of such Revolving Credit Lender's
Total Revolving Credit Exposure at any time would exceed the lesser of (x) such
Revolving Credit Lender's Revolving Credit Committed Amount at such time and
(y) such Revolving Credit Lender's Pro Rata share of the Borrowing Base at such
time. Each Revolving Credit Lender's "Revolving Credit Committed Amount" at
any time shall be equal to the amount set forth as its "Initial Revolving
Credit Committed Amount" below its name on the signature pages hereof, as such
amount may have been reduced under Section 2.02 hereof at such time, and
subject to transfer to another Lender as provided in Section 9.14 hereof.
(b) Nature of Credit. Within the limits of time and amount
set forth in this Section 2.01, and subject to the provisions of this
Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans
hereunder.
(c) Revolving Credit Notes. The obligation of the Borrower
to repay the unpaid principal amount of the Revolving Credit Loans made to it
by each Revolving Credit Lender and to pay interest thereon shall be evidenced
in part by promissory notes of the Borrower, one to each Revolving Credit
Lender, dated the Closing Date (the "Revolving Credit Notes") in substantially
the form attached hereto as Exhibit A, with the blanks appropriately filled,
payable to the order of such Revolving Credit Lender in a face amount equal to
such Revolving Credit Lender's Initial Revolving Credit Committed Amount.
(d) Maturity. To the extent not due and payable earlier, the
Revolving Credit Loans shall be due and payable on the Revolving Credit
Maturity Date.
(e) Letters of Credit. Letters of Credit may be issued in
accordance with the terms and provisions of Section 2.17 hereof.
<PAGE> 46
2.02. Revolving Credit Commitment Fee; Reduction of the
Revolving Credit Committed Amounts.
(a) Revolving Credit Commitment Fee. The Borrower shall pay
to the Agent for the account of each Revolving Credit Lender a commitment fee
(the "Revolving Credit Commitment Fee") equal to (A) until the Phase I Project
Commissioning Date (w) 0.25% per annum (based on a year of 365 days and actual
days elapsed) for each day from and including the date hereof to and including
the day on which the aggregate amount of outstanding Revolving Credit Loans and
the Letter of Credit Exposure first reaches $3,000,000, and (x) 0.50% per annum
(based on a year of 365 days and actual days elapsed), for each day thereafter
to but not including the Revolving Credit Maturity Date or (B) from and after
the Phase I Project Commissioning Date (y) 0.125% per annum (based on a year of
365 days and actual days elapsed) for each day from and including the date
hereof to and including the day on which the aggregate amount of outstanding
Revolving Credit Loans and the Letter of Credit Exposure first reaches
$3,000,000, and (z) 0.375% per annum or, for any Level 5 Day, 0.25% per annum
(based on a year of 365 days and actual days elapsed), for each day thereafter
to but not including the Revolving Credit Maturity Date, on the amount (not
less than zero) equal to (i) such Revolving Credit Lender's Revolving Credit
Committed Amount on such day, minus (ii) the aggregate principal amount of such
Revolving Credit Lender's Revolving Credit Loans outstanding on such day, minus
(iii) such Revolving Credit Lender's Pro Rata share of Letter of Credit
Exposure on such day. Such Revolving Credit Commitment Fee shall be due and
payable for the preceding period for which such fee has not been paid: (x) on
each Regular Payment Date, (y) on the date of each reduction of the Revolving
Credit Committed Amounts (whether optional or mandatory) on the amount so
reduced and (z) on the Revolving Credit Maturity Date.
(b) Reduction of the Revolving Credit Committed Amounts. The
Borrower may at any time or from time to time reduce Pro Rata the Revolving
Credit Committed Amounts of the Revolving Credit Lenders to an aggregate amount
(which may be zero) not less than the sum of the unpaid principal amount of the
Revolving Credit Loans then outstanding plus the principal amount of all
Revolving Credit Loans not yet made as to which notice has been given by the
Borrower under Section 2.05 hereof plus the Letter of Credit Exposure at such
time; provided, however, that at any time when there is outstanding any
borrowered or unborrowed Tranche C Committed Amount, any reduction of the
Revolving Credit Committed Amounts shall require the consent of Lenders (other
than the Designated
<PAGE> 47
Lender) which are not Revolving Credit Lenders and which have at least 51% of
the Committed Amounts of all Lenders (other than the Designated Lender) which
are not Revolving Credit Lenders. Any reduction of the Revolving Credit
Committed Amounts shall be in an aggregate amount which is an integral multiple
of $1,000,000. Reduction of the Revolving Credit Committed Amounts shall be
made by providing not less than three Business Days' notice (which notice shall
be irrevocable) to such effect to the Agent. After the date specified in such
notice the Revolving Credit Commitment Fee shall be calculated upon the
Revolving Credit Committed Amounts as so reduced.
2.03. Term Loans.
(a) Tranche A Loans.
(i) Tranche A Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein
set forth, each Tranche A Lender, severally and not jointly, agrees
(such agreement being herein called such Tranche A Lender's "Tranche A
Loan Commitment") to make loans (the "Tranche A Loans") to the
Borrower during the Term Loan (A and B) Commitment Period in such
principal amounts as may be requested by the Borrower but not
exceeding such Lender's Tranche A Committed Amount.
(ii) Nature of Credit. The Borrower may not reborrow amounts
repaid with respect to Tranche A Loans.
(iii) Tranche A Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Tranche A Loan made to it by
each Tranche A Lender and to pay interest thereon shall be evidenced
in part by promissory notes of the Borrower to each Tranche A Lender,
dated the Closing Date (the "Tranche A Notes") in substantially the
form attached hereto as Exhibit B-1, with the blanks appropriately
filled, payable to the order of such Lender in a face amount equal to
the principal amount of such Lender's Tranche A Committed Amount.
(b) Tranche B Loans.
(i) Tranche B Loan Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein
set forth, each Tranche B Lender, severally and not jointly, agrees
(such agreement being herein called such Tranche B Lender's "Tranche B
Loan Commitment") to make loans (the "Tranche B Loans") to the
Borrower during the Term Loan (A and B) Commitment Period in
<PAGE> 48
such principal amounts as may be requested by the Borrower but not
exceeding such Lender's Tranche B Committed Amount.
(ii) Nature of Credit. The Borrower may not reborrow amounts
repaid with respect to Tranche B Loans.
(iii) Tranche B Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Tranche B Loan made to it by
each Tranche B Lender and to pay interest thereon shall be evidenced
in part by promissory notes of the Borrower to each Tranche B Lender,
dated the Closing Date (the "Tranche B Notes") in substantially the
form attached hereto as Exhibit B-2, with the blanks appropriately
filled, payable to the order of such Lender in a face amount equal to
the principal amount of such Lender's Tranche B Committed Amount.
(c) Tranche C Loans.
(i) Tranche C Commitments. Subject to the terms and
conditions (which conditions shall, as set forth in Section 4.04,
include the occurrence of a Cost Overrun Event and the written consent
of the Required Overrun Decision Lenders, which consent may be given
or withheld in their sole and absolute discretion) and relying upon
the representations and warranties herein set forth, each Tranche C
Lender, severally and not jointly, agrees (such agreement being herein
called such Tranche C Lender's "Tranche C Loan Commitment") to make
loans (the "Tranche C Loans") to the Borrower during the Term Loan (A
and B) Commitment Period (but not after the making of the first
Tranche D Loan) in such principal amounts as may be requested or
deemed to be requested by the Borrower but not exceeding such Lender's
Tranche C Committed Amount. The Borrower confirms that,
notwithstanding the designation of the Tranche C Commitments as
"Commitments" and notwithstanding the requirement to pay the Tranche C
Commitment Fee, Tranche C Loans will not be made unless the Required
Overrun Decision Lenders, in their sole and absolute discretion, shall
have consented thereto in writing. If a Cost Overrun Event occurs the
Borrower shall request, and shall be deemed to have requested, the
Tranche C Lenders to make Tranche C Loans in an aggregate amount equal
to the amount of the related Cost Overrun.
(ii) Nature of Credit. The Borrower may not reborrow amounts
repaid with respect to Tranche C Loans.
(iii) Tranche C Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Tranche C Loan made to it by
each Tranche C Lender and to pay interest
<PAGE> 49
thereon shall be evidenced in part by promissory notes of the Borrower
to each Tranche C Lender, dated the Closing Date (the "Tranche C
Notes") in substantially the form attached hereto as Exhibit B-3, with
the blanks appropriately filled, payable to the order of such Lender
in a face amount equal to the principal amount of such Lender's
Tranche C Committed Amount.
(d) Tranche D Loans.
(i) Tranche D Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein
set forth, each Tranche D Lender, severally and not jointly, agrees
(such agreement being herein called such Tranche D Lender's "Tranche D
Loan Commitment") to make loans (the "Tranche D Loans") to the
Borrower during the Term Loan (D) Commitment Period in such principal
amounts as may be requested by the Borrower but not exceeding such
Lender's Tranche D Committed Amount.
(ii) Nature of Credit. The Borrower may not reborrow amounts
repaid with respect to Tranche D Loans.
(iii) Tranche D Notes. The obligation of the Borrower to
repay the unpaid principal amount of the Tranche D Loan made to it by
each Tranche D Lender and to pay interest thereon shall be evidenced
in part by promissory notes of the Borrower to each Tranche D Lender,
dated the Initial Tranche D Funding Availability Date (the "Tranche D
Notes") in substantially the form attached hereto as Exhibit B-4-1996,
with the blanks appropriately filled, payable to the order of such
Lender in a face amount equal to the principal amount of such Lender's
Tranche D Committed Amount.
(e) Advances. Subject to the conditions set forth herein, up
to 30 advances may be made (not more often than twice monthly) Pro Rata of the
Tranche A Loans and the Tranche B Loans during the Term Loan (A and B)
Commitment Period and up to 30 advances may be made (not more often than twice
monthly) Pro Rata of the Tranche D Loans. Each such advance shall be an
integral multiple of $500,000 which is not less than $1,000,000. No advances
of the Tranche A Loans, the Tranche B Loans or the Tranche C Loans shall be
made after the expiration of the Term Loan (A and B) Commitment Period, at
which time the Term Lenders' Tranche A Loan Commitments, Tranche B Loan
Commitments and Tranche C Loan Commitments shall expire. No advances of the
Tranche C Loans shall be made after the making of the first
<PAGE> 50
Tranche D Loans, at which time the Tranche C Loans Commitments shall expire.
No advances of the Tranche D Loans shall be made after the expiration of the
Term Loan (D) Commitment Period, at which time the Tranche D Lenders' Tranche D
Loan Commitments shall expire.
(f) Scheduled Amortization; Maturity. Subject to the last
sentence of this Section 2.03(f), the Term Loans shall be due and payable in
installments on the dates and in the amounts corresponding to the percentages
as set forth below:
Percentage of Initial Principal Amount
of Term Loans Due and Payable
<TABLE>
<CAPTION>
Date Tranche A Tranche B Tranche C Tranche D
---- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
September 30, 1997 5.0% - 5.0% -
March 31, 1998 12.5% 5.0% 12.5% -
September 30, 1998 12.5% 5.0% 12.5% 8.5%
March 31, 1999 15.0% 5.0% 15.0% 8.5%
September 30, 1999 15.0% 5.0% 15.0% 8.5%
March 31, 2000 20.0% 5.0% 20.0% 8.5%
September 30, 2000 20.0% 5.0% 20.0% 10.0%
March 31, 2001 - 35.0% - 10.0%
September 30, 2001 35.0% - 10.0%
March 31, 2002 - - - 36.0%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
</TABLE>
The "Initial Principal Amount of Term Loans" shall be the principal amount
outstanding on the date the Term Loan Commitments expire. To the extent not
due and payable earlier, the Tranche A Loans shall be due and payable on the
Tranche A Maturity Date, the Tranche B Loans shall be due and payable on the
Tranche B Maturity Date, the Tranche C Loans shall be due and payable on the
Tranche C Maturity Date and the Tranche D Loans shall be due and payable on the
Tranche D Maturity Date. Notwithstanding the foregoing, upon the making of the
initial Tranche D Loans, the dates and amounts for payment of installments of
principal of the Tranche B Loans shall be automatically changed to be as
follows:
<TABLE>
<CAPTION>
Date Tranche B
---- ---------
<S> <C>
September 30, 1997 -
March 31, 1998 8.3%
September 30, 1998 8.3%
</TABLE>
<PAGE> 51
<TABLE>
<S> <C>
March 31, 1999 8.3%
September 30, 1999 8.3%
March 31, 2000 8.3%
September 30, 2000 8.3%
March 31, 2001 16.7%
September 30, 2001 16.7%
March 31, 2002 16.8%
------
100.0%
------
</TABLE>
2.04. Term Loan Commitment Fees.
(a) Tranche A Commitment Fee. The Borrower shall pay to the
Agent for the account of each Tranche A Lender a commitment fee (the "Tranche A
Commitment Fee") equal to (a) 0.25% per annum (based on a year of 365 days and
actual days elapsed) on the unused portion of the Tranche A Lender's total
Tranche A Committed Amount, for each day from and including the date hereof to
and including the date the first advance is made under the Tranche A Loans, (b)
0.50% per annum (based on a year of 365 days and actual days elapsed) on the
unused portion of such Tranche A Lender's Tranche A Committed Amount, for each
day thereafter to but not including the Phase I Project Commissioning Date and
(c) 0.375% for each day from the Phase I Project Commissioning Date to and
including the last day of the Term Loan (A and B) Commitment Period.
(b) Tranche B Commitment Fee. The Borrower shall pay to the
Agent for the account of each Tranche B Lender a commitment fee (the "Tranche B
Commitment Fee") equal to (a) 0.25% per annum (based on a year of 365 days and
actual days elapsed) on the unused portion of the Tranche B Lender's total
Tranche B Committed Amount, for each day from and including the date hereof to
and including the date the first advance is made under the Tranche B Loans,
(b) 0.50% per annum (based on a year of 365 days and actual days elapsed) on
the unused portion of such Tranche B Lender's Tranche B Committed Amount, for
each day thereafter for each day thereafter to but not including the Phase I
Project Commissioning Date and (c) 0.375% for each day from the Phase I Project
Commissioning Date to and including the last day of the Term Loan (A and B)
Commitment Period.
(c) Tranche C Commitment Fee. The Borrower shall pay to the Agent for
the account of each Tranche C Lender a commitment fee (the "Tranche C
Commitment Fee") equal to
<PAGE> 52
(a) 0.25% per annum (based on a year of 365 days and actual days elapsed) on
the unused portion of the Tranche C Lender's total Tranche C Committed Amount,
for each day from and including the date hereof to and including the date the
first advance is made under the Tranche A Loans (as opposed to the Tranche C
Loans), and (b) 0.50% per annum (based on a year of 365 days and actual days
elapsed) on the unused portion of such Tranche C Lender's Tranche C Committed
Amount, for each day thereafter to and including the last day of the Term Loan
(A and B) Commitment Period (or, if earlier, the date of the expiration of the
Tranche C Loan Commitment upon the making of the initial Tranche D Loans).
(d) Tranche D Commitment Fee. The Borrower shall pay to the
Agent for the account of each Tranche D Lender a commitment fee (the "Tranche D
Commitment Fee") equal to (a) 0.125% per annum (based on a year of 365 days and
actual days elapsed) on the unused portion of the Tranche D Lender's total
Tranche D Committed Amount, for each day from and including the date hereof to
and including the date the first advance is made under the Tranche D Loans and
(b) 0.375% per annum (based on a year of 365 days and actual days elapsed) on
the unused portion of such Tranche D Lender's Tranche D Committed Amount, for
each day thereafter to and including the last day of the Term Loan (D)
Commitment Period.
(e) Each of the Tranche A Commitment Fee, the Tranche B
Commitment Fee, the Tranche C Commitment Fee and the Tranche D Commitment Fee
shall be due and payable for the preceding period for which such fee has not
been paid on each Regular Payment Date and on the last day of the Term Loan (A
and B) Commitment Period or Term Loan (D) Commitment Period, as the case may
be.
2.05. Making of Loans. Whenever the Borrower desires that
the Lenders make Revolving Credit Loans or Term Loans, the Borrower shall
provide Standard Notice to the Agent setting forth the following information (a
separate notice being required for each such type of Loans):
(a) Whether the proposed Loans are Revolving Credit Loans or
Term Loans;
(b) The date, which shall be a Business Day, on which such
proposed Loans are to be made;
(c) The aggregate principal amount of such proposed Loans,
which shall be the sum of the principal amounts selected pursuant to
clause (d) of this Section 2.05, and which (in the case of proposed
Revolving Credit Loans) shall be an integral multiple of $500,000 not
less than $1,000,000
<PAGE> 53
and which (in the case of proposed Term Loans) shall be in the amount
set forth in Section 2.03(e) hereof;
(d) The interest rate Option or Options selected in
accordance with Section 2.06(a) hereof and the principal amounts
selected in accordance with Section 2.06(d) hereof of the Base Rate
Portion and each Funding Segment of the Euro-Rate Portion, as the case
may be, of such proposed Loans; and
(e) With respect to each such Funding Segment of such
proposed Loans, the Funding Period to apply to such Funding Segment,
selected in accordance with Section 2.06(c) hereof.
Standard Notice having been so provided, the Agent shall promptly notify each
Lender no later than 12:00 o'clock Noon, Pittsburgh time, of the information
contained therein and of the amount of such Lender's Loan. Unless any
applicable condition specified in Article IV hereof has not been satisfied, on
the date specified in such Standard Notice each Lender shall make the proceeds
of its Loan available to the Agent at the Agent's Office, no later than 2:00
o'clock P.M., Pittsburgh time, in funds immediately available at such Office.
Promptly after its receipt thereof, the Agent will make the funds so received
available to the Borrower in funds immediately available at the Agent's Office.
If the Borrower is deemed to have requested Tranche C Loans pursuant to 2.03(c)
upon a Cost Overrun Event, unless the Borrower gives contrary notice as
aforesaid, the Funding Period applicable to such Loans shall initially be one
month and the date of the making of such Loans shall be the date specified in
notice by the Required Lenders to the Agent and the Borrower.
2.06. Interest Rates.
(a) Optional Bases of Borrowing. The unpaid principal amount
of the Revolving Credit Loans shall bear interest for each day until due on one
or more bases selected by the Borrower from among the interest rate Options set
forth below. The unpaid principal amount of the Term Loans shall bear interest
for each day on the basis of the Euro-Rate Option described below. Subject to
the provisions of this Agreement the Borrower may select different Options to
apply simultaneously to different Portions of the Revolving Credit Loans and
may select different Funding Segments to apply simultaneously to different
parts of the Euro-Rate Portion of the Loans. Each selection of a rate Option
shall apply separately and without overlap to the Revolving Credit Loans as a
class, the Tranche A Loans as a
<PAGE> 54
class, the Tranche B Loans as a class, the Tranche C Loans as a class and the
Tranche D Loans as a class. The aggregate number of Funding Segments
applicable to the Euro-Rate Portion of the Revolving Credit Loans at any time
from and after the Phase I Project Acceptance date shall not exceed eight, the
aggregate number of Funding Segments applicable to the Euro-Rate Portion of the
Tranche A Loans at any time shall not exceed eight, the aggregate number of
Funding Segments applicable to the Euro-Rate Portion of the Tranche B Loans at
any time shall not exceed eight, the aggregate number of Funding Segments
applicable to the Euro-Rate Portion of the Tranche C Loans at any time shall
not exceed eight and the aggregate number of Funding Segments applicable to the
Euro-Rate Portion of the Tranche D Loans at any time from and after the Phase
II Project Acceptance Date shall not exceed eight.
(i) "Base Rate Option": A rate per annum (computed on
the basis of a year of 365 days and actual days elapsed) for each day
equal to the Base Rate for such day plus the Applicable Margin for
such day. The "Base Rate" for any day shall mean the greater of (A)
the Prime Rate for such day or (B) 0.50% plus the Federal Funds
Effective Rate for such day, such interest rate to change
automatically from time to time effective as of the effective date of
each change in the Prime Rate or the Federal Funds Effective Rate.
(ii) "Euro-Rate Option": A rate per annum (based on a
year of 360 days and actual days elapsed) for each day equal to the
Euro-Rate for such day plus the Applicable Margin for such day.
"Euro-Rate" for any day, as used herein, shall mean for each Funding
Segment of the Euro-Rate Portion corresponding to a proposed or
existing Euro-Rate Funding Period the rate per annum determined by the
Agent by dividing (the resulting quotient to be rounded upward to the
nearest 1/100 of 1%) (A) the rate of interest (which shall be the same
for each day in such Euro-Rate Funding Period) quoted on the Reuter's
screen ISDA page to be (or, if such Reuter's quotation is not
available, determined in good faith by the Agent, after inquiry to
three reference banks selected by the Agent from among the Lenders, in
accordance with its usual procedures when reference banks are
consulted (which determination shall be conclusive) to be) the average
of the rates per annum for deposits in Dollars offered to major money
center banks in the London interbank market at approximately 11:00
a.m., London time, two London Business Days prior to the first day of
such Euro-Rate Funding Period for delivery on the first day of such
Euro-Rate Funding Period in amounts comparable to such Funding Segment
and having maturities comparable to such Funding Period by (B) a
number equal to 1.00 minus the Euro-Rate Reserve Percentage.
<PAGE> 55
"Euro-Rate Reserve Percentage" for any day shall mean the percentage
(expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Agent (which determination shall be conclusive
absent manifest error), which is in effect on such day as prescribed by the
Board of Governors of the Federal Reserve System (or any successor)
representing the maximum reserve requirement (including, without limitation,
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a
member bank in such System. The Euro-Rate shall be adjusted automatically as
of the effective date of each change in the Euro-Rate Reserve Percentage. The
Euro-Rate Option shall be calculated in accordance with the foregoing whether
or not any Lender is actually required to hold reserves in connection with its
eurocurrency funding or, if required to hold such reserves, is required to hold
reserves at the "Euro-Rate Reserve Percentage" as herein defined.
The Agent shall give prompt notice to the Borrower and to the Lenders
of the Euro-Rate determined or adjusted in accordance with the definition of
the Euro-Rate, which determination or adjustment shall be conclusive if made in
good faith.
(b) Applicable Margins.
(i) As used herein:
"Level 1 Day" means any day prior to the Phase I Project
Commissioning Date;
"Level 2 Day" means a day during the period from the Phase I
Project Commissioning Date to, but not including, the Initial Tranche D
Funding Availability Date and any day thereafter which is not a Level 3
Day, a Level 4 Day or a Level 5 Day;
"Level 3 Day" means a day during the period from the Initial
Tranche D Funding Availability Date to, but not including, the Phase II
Project Acceptance Date, provided, however, that a day may not be a
Level 3 Day unless either the Fixed Charge Coverage Ratio for the
quarter ending June 30, 1996 shall be 1.05 or higher, the Fixed Charge
Coverage Ratio for the quarter ending September 30, 1996 shall be
<PAGE> 56
1.15 or higher or the Fixed Charge Coverage Ratio for any one fiscal
quarter ending after October 1, 1996 shall be 1.25 or higher;
"Level 4 Day" means a day from and after the Phase II Project
Acceptance Date which is not a Level 5 Day; provided, however, that a
day may not be a Level 4 Day unless the Fixed Charge Coverage Ratio
for any one fiscal quarter ending on or after the Phase II Project
Acceptance Date shall be 1.5 or higher; and
"Level 5 Day" means a day from and after the Phase II Project
Acceptance Date as to which EBITDA for the then most recently
completed period of twelve consecutive calendar months (which period
shall have commenced after the Phase II Project Acceptance Date) shall
exceed $100,000,000, provided, however, that a day may not be a Level
5 Day unless the Fixed Charge Coverage Ratio for any one fiscal
quarter (which quarter shall have ended on or after a day on or before
which EBITDA for any period of twelve consecutive calendar months
shall have exceeded $100,000,000) shall be 1.5 or higher.
(ii) The "Applicable Margin" for each installment of each type
of Loan and interest rate Option for any day shall mean the applicable
percentage set forth in this clause (ii). The Applicable Margin for the Base
Rate Option with respect to all Loans will be 1.50% for each Level 1 Day, 0.50%
for each Level 2 Day, each Level 3 Day and each Level 4 Day and zero percent
for each Level 5 Day. The Applicable Margin for the Euro-Rate Option with
respect to the Tranche A Loans, the Tranche C Loans and the Revolving Credit
Loans will be 2.50% for each Level 1 Day, 2.0% for each Level 2 Day, 1.75% for
each Level 3 Day, 1.50% for each Level 4 Day and 1.25% for each Level 5 Day.
The Applicable Margin for the Euro-Rate Option with respect to the Tranche B
Loans (except for the installment thereof due March 31, 2002) will be 3.0% for
each Level 1 Day, 2.0% for each Level 2 Day, 1.75% for each Level 3 Day, 1.50%
for each Level 4 Day and 1.25% for each Level 5 Day. The Applicable Margin for
the Euro-Rate Option with respect to the Tranche D Loans (except for the
installment thereof due March 31, 2002) will be 2.0% for each Level 2 Day,
1.75% for each Level 3 Day, 1.50% for each Level 4 Day and 1.25% for each Level
5 Day. The Applicable Margin for the Euro-Rate Option with respect to the
installments of the Tranche B Loans and the Tranche D Loans due March 31, 2002
will be 3.0% for each Level 1 Day, 2.25% for each Level 2 Day, 2.0% for each
Level 3 Day, 1.75% for each Level 4 Day and 1.375% for each Level 5 Day.
(iii) Notwithstanding clause (ii) above, upon the
<PAGE> 57
occurrence of an Event of Default, the Applicable Margin for each type
of Loan and the interest rate option for any day shall mean the
percentage set forth with respect thereto in clause (ii) plus 2%.
Such Applicable Margin shall remain in effect from the date of the
occurrence of such Event of Default until the earlier to occur of (a)
the date on which such Event of Default is cured or waived or
otherwise ceases to exist (and no other Event of Default exists), in
which case the Applicable Margin shall be determined in accordance
with clause (ii) above, and (b) the date on which the unpaid principal
amount of the Loans, interest accrued thereon and all other
Obligations are declared to be immediately due and payable pursuant to
Section 7.02(a)(ii) hereof, in which case Section 2.12(c) shall apply.
(c) Funding Periods. At any time when the Borrower shall
select, convert to or renew the Euro-Rate Option to apply to any part of the
Loans, the Borrower shall specify one or more periods (the "Funding Periods")
during which each such Option shall apply, such Funding Periods being one, two,
three or six months ("Euro-Rate Funding Period"); provided, that:
(i) Each Euro-Rate Funding Period shall begin on a London
Business Day, and the term "month", when used in connection with a
Euro-Rate Funding Period, shall mean the interval between the
Euro-Convention Dates in consecutive calendar months as to such Euro-
Rate Funding Period (and the "Euro-Convention Date" in a calendar
month as to any Euro-Rate Funding Period shall mean the day in such
calendar month numerically corresponding to the first day of such
Euro-Rate Funding Period, except (x) if there is no such numerically
corresponding day in a calendar month, the "Euro-Convention Date" for
such calendar month shall mean the last London Business Day of such
calendar month, (y) if the first day of such Euro-Rate Period is the
last day of a calendar month, the "Euro-Convention Date" for any
calendar month shall mean the last London Business Day of such
calendar month and (z) otherwise, if a numerically corresponding day
in a given calendar month is not a London Business Day, the
"Euro-Convention Date" for such calendar month shall mean the next
following day that is a London Business Day, but not later than the
last Business Day of such calendar month);
(ii) In the case of (A) Revolving Credit Loans, the
Borrower may not select a Funding Period that would end after the
Revolving Credit Maturity Date and (B) Term Loans,
<PAGE> 58
the Borrower may not select a Funding Period that would end after the
Tranche A Maturity Date, the Tranche B Maturity Date, the Tranche C
Maturity Date or the Tranche D Maturity Date, as the case may be; and
(iii) The Borrower shall, in selecting any Funding Period,
allow for scheduled mandatory payments and foreseeable mandatory
prepayments of the Loans.
(d) Transactional Amounts. Every selection of, conversion
from, conversion to or renewal of an interest rate Option and every payment or
prepayment of any Loans shall be in a principal amount such that after giving
effect thereto the aggregate principal amount of the Base Rate Portion of the
Revolving Credit Loans, or the aggregate principal amount of each Funding
Segment of the Euro-Rate Portion of the Revolving Credit Loans and the Term
Loans, respectively, as the case may be, shall be as set forth below:
Portion or Funding Segment Allowable Aggregate Principal Amounts
Base Rate Portion Any; and
Each Funding Segment $1,000,000 or integral
of the Euro-Rate Portion multiples of $500,000.
(e) Euro-Rate Unascertainable; Impracticability. If
(i) on any date on which a Euro-Rate would otherwise be
set the Agent (in the case of clauses (A) or (B) below) or any Lender
(in the case of clause (C) below) shall have determined in good faith
(which determination shall be conclusive) that:
(A) adequate and reasonable means do not exist for
ascertaining such Euro-Rate,
(B) a contingency has occurred which materially and
adversely affects the interbank eurodollar market, as the case
may be, or
(C) the effective cost to such Lender of funding a
proposed Funding Segment of the Euro-Rate Portion from a
Corresponding Source of Funds shall exceed the Euro-Rate
applicable to such Funding Segment, or
(ii) at any time any Lender shall have determined in good
faith (which determination shall be conclusive) that the making,
commitment to make, maintenance or funding of any part of the
Euro-Rate Portion has been made
<PAGE> 59
impracticable or unlawful by compliance by such Lender or a Notional
Euro-Rate Funding Office in good faith with any Law or guideline or
interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof or with any
request or directive of any such Governmental Authority (whether or
not having the force of law);
then, and in any such event, the Agent or such Lender, as the case may be,
shall promptly notify the Borrower of such determination (and any Lender giving
such notice shall notify the Agent). Upon such date as shall be specified in
such notice (which shall not be earlier than the date such notice is given),
the obligation of each of the Potential Base Rate Lenders to allow the Borrower
to select, convert to or renew the Euro-Rate Option shall be suspended until
the Agent or such Lender, as the case may be, shall have later notified the
Borrower (and any Lender giving such notice shall notify the Agent) of the
Agent's or such Potential Base Rate Lender's determination in good faith (which
determination shall be conclusive) that the circumstance giving rise to such
previous determination no longer exist. The obligation of each of the Lenders
which are not Potential Base Rate Lenders to allow the Borrower to select,
convert to or renew the Euro-Rate Option shall not be suspended, provided that,
in the case of a determination under clause A of subsection (i) of this Section
2.06(e), the Euro-Rate shall be deemed to be the most recent ascertainable
Euro-Rate with a Euro-Rate Funding Period of one month (or, at the option of
the applicable Lender, such Lender's cost of funds as verified to the Borrower
and the Agent) until the Agent shall have later notified the Borrower of the
Agent's determination in good faith (which determination shall be conclusive)
that the circumstances giving rise to such previous determination no longer
exist.
If any Potential Base Rate Lender notifies the Borrower of a
determination under subsection (ii) of this Section 2.06(e), the Euro-Rate
Portion of the Loans of such Lender (the "Affected Lender") shall automatically
be converted to the Base Rate Option as of the date specified in such notice
(and accrued interest thereon shall be due and payable on such date). When
such Affected Lender later notifies the Borrower and the Agent of such Affected
Lender's determination in good faith (which determination shall be conclusive)
that the circumstances giving rise to such previous determination no longer
exist, any portion of the Term Loans of the Affected Lender bearing interest at
the Base Rate Option shall automatically be converted to the Euro-Rate Option
in accordance with paragraphs (c) and (d) of this
<PAGE> 60
Section 2.06 as of the date specified in such notice (which specified date of
conversion shall not be earlier than the fourth Business Day after the date of
such notice) and accrued interest thereon shall be due and payable on such
date.
If at the time the Agent or a Potential Base Rate Lender makes
a determination under subsection (i) or (ii) of this Section 2.06(e) the
Borrower previously has notified the Agent that it wishes to select, convert to
or renew the Euro-Rate Option with respect to any proposed Loans but such Loans
have not yet been made, such notification shall be deemed to provide for
selection of, conversion to or renewal of the Base Rate Option instead of the
Euro-Rate Option with respect to such Loans or, in the case of a determination
by a Lender, such Loans of such Lender.
2.07. Conversion or Renewal of Interest Rate Options.
(a) Conversion or Renewal. Subject to the provisions of
Section 2.13(b) hereof, and if no Event of Default or Potential Default shall
have occurred and be continuing or shall exist, the Borrower may convert any
part of its Revolving Credit Loans from any interest rate Option or Options to
one or more different interest rate Options and may renew the Euro-Rate Option
as to any Funding Segment of the Euro- Rate Portion of Revolving Credit Loans
and Term Loans:
(i) At any time with respect to conversion from the Base Rate
Option; or
(ii) At the expiration of any Funding Period with respect to
conversions from or renewals of the Euro-Rate Option as to the Funding
Segment corresponding to such expiring Funding Period.
Whenever the Borrower desires to convert or renew any interest rate Option or
Options, the Borrower shall provide to the Agent Standard Notice setting forth
the following information:
(v) Whether such renewal is to apply to Revolving Credit
Loans or Term Loans;
(w) The date, which shall be a Business Day, on which the
proposed conversion (in the case of Revolving Credit Loans only) or
renewal is to be made;
(x) The principal amounts selected in accordance with Section
2.06(d) hereof of the Base Rate Portion and each Funding Segment of
the Euro-Rate Portion to be converted from or renewed;
<PAGE> 61
(y) The interest rate Option or Options selected in
accordance with Section 2.06(a) hereof and the principal amounts
selected in accordance with Section 2.06(d) hereof of the Base Rate
Portion and each Funding Segment of the Euro-Rate Portion to be
converted to (in the case of Revolving Credit Loans only); and
(z) With respect to each Funding Segment to be converted to
(in the case of Revolving Credit Loans only) or renewed, the Funding
Period selected in accordance with Section 2.06(c) hereof to apply to
such Funding Segment.
Standard Notice having been so provided, after the date specified in such
Standard Notice, interest shall be calculated upon the principal amount of the
Loans as so converted or renewed. Interest on the principal amount of any part
of the Loans converted or renewed (automatically or otherwise) shall be due and
payable on the conversion or renewal date.
(b) Failure to Convert or Renew. Absent due notice from the
Borrower of conversion or renewal in the circumstances described in Section
2.07(a)(ii) hereof, (i) any part of the Euro-Rate Portion of the Revolving
Credit Loans for which such notice is not received shall be converted
automatically to the Base Rate Option on the last day of the expiring Funding
Period and (ii) any part of the Euro-Rate Portion of the Term Loans for which
such notice is not received shall be renewed with a Funding Period of one
month.
2.08. Prepayments Generally; Refinancing Fee.
(a) Prepayments Generally. Whenever the Borrower desires or
is required to prepay any part of its Loans, it shall provide Standard Notice
to the Agent setting forth the following information:
(i) Whether such prepayment is to be applied to the Revolving
Credit Loans or the Term Loans;
(ii) The date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(iii) The total principal amount of such prepayment, which
shall be the sum of the principal amounts selected pursuant to clause
(a)(iv) of this Section 2.08; and
<PAGE> 62
(iv) The principal amounts selected in accordance with
Section 2.06(d) hereof of the Base Rate Portion and each part of each
Funding Segment of the Euro-Rate Portion to be prepaid.
Standard Notice having been so provided, on the date specified in such Standard
Notice, the principal amounts of the Base Rate Portion and each part of the
Euro-Rate Portion specified in such notice, together with interest on each such
principal amount to such date, shall be due and payable.
(b) Refinancing Fee. In the event the Loans are prepaid in
full within 18 months of the Phase I Project Acceptance Date with the proceeds
of or in connection with the incurrence of debt or the issuance by any Loan
Party of debt or equity securities, or both, the Borrower shall pay to each
Lender a fee in the amount of one and one-half percent of the sum of (i) such
Lender's full Revolving Credit Committed Amount in effect on such date and (ii)
the previously outstanding amount of the Term Loans made by such Lender prepaid
on such date.
2.09. Optional Prepayments. (a) The Borrower shall have the
right at its option from time to time to prepay its Loans in whole or part
without premium or penalty (subject, however, to Section 2.13(b) hereof):
(i) At any time with respect to any part of the Base Rate
Portion; or
(ii) At the expiration of any Funding Period with respect to
prepayment of the Euro-Rate Portion with respect to any part of the
Funding Segment corresponding to such expiring Funding Period.
Any such prepayment shall be made in accordance with Section 2.08 hereof.
(b) Optional prepayment, if made, shall be in integral
multiples of $1,000,000.
(c) Unless the Borrower elects (which it may do) to apply an
optional prepayment to the Term Loans in the inverse order of their scheduled
maturities, optional prepayments of the Term Loans shall be applied as follows:
(i) First, to the next scheduled installment of principal
due under the Term Loans (it being understood that
if, on the date of such next scheduled installment,
there are installments due under the Tranche A Loans
and the Tranche C Loans
<PAGE> 63
(as a class), the Tranche B Loans (as a class) and
the Tranche D Loans (as a class), such optional
prepayments shall be applied on a pro rata basis
among the three).
(ii) Second, to the remaining installments due under the
Term Loans, on a pro rata basis among all the
installments.
2.10. Mandatory Prepayments.
(a) Borrowing Base. If on any date any Borrowing Base
Certificate is required to be furnished pursuant to Section 2.16(e) hereof the
aggregate principal amount of the Total Revolving Credit Exposures of the
Revolving Credit Lenders exceeds the Borrowing Base, the Borrower shall prepay
(on the prepayment date described in the last sentence of this paragraph) a
principal amount of the Revolving Credit Loans (and, to the extent of undrawn
Letters of Credit, provide cash collateral therefor in accordance with the
terms hereof) in an aggregate amount not less than the amount of such excess.
The provision of cash collateral in accordance with Section 2.25 hereof for
Letters of Credit issued under this Agreement shall be equivalent to the making
of a prepayment under this Section 2.10(a). Concurrently with the delivery of
any Borrowing Base Certificate which shows such an excess, the Borrower shall
give notice to the Agent of such prepayment in accordance with Section 2.08
hereof, which notice shall specify a prepayment date no later than three
Business Days after the date of delivery of such Borrowing Base Certificate.
(b) Excess Cash Flow. The Borrower shall prepay a principal
amount of the Loans from time to time in an amount equal to (i) 75% of up to
$20,000,000 of the Excess Cash Flow of the Borrower Group, and (ii) 50% of the
Excess Cash Flow of the Borrower Group in excess of $20,000,000, in each case
during each fiscal year of the Borrower, commencing with and including the
fiscal year ending December 31, 1996, provided, that the Borrower may elect
with respect to fiscal 1996 and fiscal 1997 , in lieu of such prepayment with
respect to an amount (the "Second Caster Amount") not more than $55,000,000 in
the aggregate, to deposit the Second Caster Amount in the Second Caster
Account. Not later than the earlier of (w) five Business Days after the
Borrower receives its audited financial statements for each such fiscal year or
(x) 95 days after the end of each such fiscal year, the Borrower shall give
notice to the Agent of such prepayment in accordance with Section 2.08 hereof,
which notice shall specify a
<PAGE> 64
prepayment date no later than the earlier of (y) 15 days after the Borrower
receives its audited financial statements for each fiscal year or (z) 105 days
after the end of each such fiscal year. Such notice of prepayment shall be
accompanied by a certificate signed by a Responsible Officer of the Borrower
setting forth in reasonable detail the calculation of Excess Cash Flow for such
fiscal year. "Second Caster Account" shall mean an interest-bearing cash
collateral account maintained at and in the name of the Agent under an
agreement satisfactory in form and substance to the Agent providing for
disbursement only (i) to pay costs of acquisition and construction of a second
continuous caster project (the general parameters of which shall have
theretofore been approved by the Required Lenders) which are consistent with
projections provided to the Agent and the Lenders, and found acceptable by the
Agent and the Required Lenders, prior to the Initial Tranche D Funding
Availability Date (if no Event of Default or Potential Default shall have
occurred and be continuing), (ii) to pay the principal amount of Loans in
accordance with Section 2.10(h)(i) hereof upon the direction of the Borrower
(if no Event of Default or Potential Default shall have occurred and be
continuing), or (iii) to pay Obligations in accordance with this Agreement and
the Loan Documents if an Event of Default occurs and is continuing.
(c) Asset Sales. The Borrower shall prepay a principal
amount of the Loans from time to time in an amount equal to the Net Cash
Proceeds upon the sale or other disposition, if any, of assets as to which sale
or disposition the consent of the Required Lenders is required to be, and has
been, obtained (it being understood that sales or other dispositions of assets
permitted by Section 6.10(a) and (c) shall not require such prepayment and that
sales or dispositions of assets referred to in 6.10(b) from which the Net Cash
Proceeds are used to purchase replacement assets shall not require such
prepayment).
(d) Debt Issuances. The Borrower shall prepay a principal
amount of the Loans in an amount equal to the Net Cash Proceeds upon the
issuance of any indebtedness which is not permitted by the terms of Section
6.03 but is issued pursuant to a waiver granted by the Required Lenders in
their sole discretion pursuant to the provisions of Section 9.03 hereof. Said
principal amount shall be paid on the date of receipt by any Loan Party of such
Net Cash Proceeds.
(e) Equity Issuances. The Borrower shall prepay a principal
amount of the Loans in an amount equal to 25% of the Net Cash Proceeds in
excess of $10,000,000 upon the issuance of equity securities of any Loan Party
(other than the Designated Initial Phase II Equity Securities and other than
the equity
<PAGE> 65
securities described in Schedule 3.15 hereto), payable on the date of receipt
by any Loan Party of such Net Cash Proceeds.
(f) Insurance Proceeds and Condemnation Awards. The Borrower
shall prepay a principal amount of the Loans from time to time in an amount not
less than the amount of Net Proceeds (as defined Section 2.06 of the Mortgage)
of casualty insurance or of any condemnation award not used for the payment of
costs of restoring improvements and equipment in accordance with such Section
2.06. Such prepayment shall be made on the earliest date on which it shall
have been determined that the Borrower will not, or is not entitled under such
Section 2.06 to, apply such proceeds to such restoration.
(g) Applicability of Certain Provisions. Prepayments
required by this Section 2.10 are subject to all of the terms and conditions
applicable to prepayments generally pursuant to Section 2.08 hereof and Section
2.13(b) hereof and to all of the terms and conditions applicable to optional
prepayments pursuant to Section 2.09 hereof, except that Sections 2.08(a)(iv)
and 2.09(b) hereof shall not apply to such prepayments to the extent necessary
to comply with this Section 2.10. If the Borrower is required to give notice
of a prepayment but for any reason fails to give a notice in accordance with
the provisions of this Agreement, the amount as to which the Borrower is
required to have given notice of prepayment shall nevertheless be deemed due
and payable as of the date required to have been prepaid (for purposes of
calculating interest on such amounts pursuant to Section 2.12(c) hereof and
otherwise).
(h) Application of Prepayments. Unless the Borrower elects
(which it may do) to apply a mandatory prepayment to the Term Loans in the
inverse order of their scheduled maturities, mandatory prepayments of the Term
Loans shall be applied as follows:
(i) Prepayments required by subsection (b)(i) of this Section 2.10
shall be applied as follows: first, one-third shall be
applied ratably among the Tranche A Loans and the Tranche C
Loans (as a class), the Tranche B Loans (as a class) and the
Tranche D Loans (as a class) to the remaining installments due
or to become due thereunder in the direct order of their
maturities; and second, the remaining two-thirds shall be
applied ratably among the Tranche A Loans and the Tranche C
Loans (as a class), the Tranche B Loans (as a class) and the
Tranche D Loans (as a class) on a pro
<PAGE> 66
rata basis among all remaining installments due or to become
due thereunder.
(ii) All other prepayments required by this Section 2.10 shall be
applied ratably among the Tranche A Loans and and the Tranche
C Loans (as a class), the Tranche B Loans (as a class) and the
Tranche D Loans (as a class), on a pro rata basis among all
remaining installments due or to become due thereunder.
2.11. Interest Payment Dates. Interest on the Base Rate
Portion shall be due and payable in arrears on each Regular Payment Date.
Interest on each Funding Segment of the Euro-Rate Portion shall be due and
payable on the last day of the corresponding Euro-Rate Funding Period and, if
such Euro-Rate Funding Period is longer than three months, also every third
month during such Funding Period. After maturity of any part of the Loans (by
acceleration or otherwise), interest on such part of the Loans shall be due and
payable on demand.
2.12. Pro Rata Treatment; Payments Generally; Interest on
Overdue Amounts.
(a) Pro Rata Treatment.
(i) Revolving Credit Loans. Each borrowing and conversion
and renewal of interest rate Options hereunder shall be made, and all
payments made in respect of principal, interest, Revolving Credit
Commitment Fees, and Letter of Credit Fees due from the Borrower
hereunder or under the Revolving Notes shall be applied, Pro Rata from
and to each Revolving Credit Lender, except for payments of interest
involving an Affected Lender as provided in Section 2.06(e) hereof and
payments to a Lender subject to a withholding deduction under Section
2.14(c) hereof. The failure of any Revolving Credit Lender to make a
Revolving Credit Loan (or the failure of any other Lender to make any
other Loan) shall not relieve any other Revolving Credit Lender of its
obligation to lend hereunder, but neither the Agent nor any other
Lender shall be responsible for the failure of any other Lender to
make a Revolving Credit Loan.
(ii) Tranche A Loans. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all
payments made in respect of principal, interest, Term Loan Commitment
Fees due from the Borrower hereunder or under the Notes in respect of
Tranche A Loans shall be applied, Pro Rata from and to each Tranche A
<PAGE> 67
Lender, except for payments of interest involving an Affected Lender
as provided in Section 2.06(e) hereof and payments to a Lender subject
to a withholding deduction under Section 2.14(c) hereof. The failure
of any Tranche A Lender to make a Tranche A Loan (or the failure of
any other Lender to make any other Loan) shall not relieve any other
Tranche A Lender of its obligation to lend hereunder, but neither the
Agent nor any other Lender shall be responsible for the failure of any
other Lender to make a Tranche A Loan.
(iii) Tranche B Loans. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all
payments made in respect of principal, interest, Term Loan Commitment
Fees due from the Borrower hereunder or under the Notes in respect of
Tranche B Loans shall be applied, Pro Rata from and to each Tranche B
Lender, except for payments of interest involving an Affected Lender
as provided in Section 2.06(e) hereof and payments to a Lender subject
to a withholding deduction under Section 2.14(c) hereof. The failure
of any Tranche B Lender to make a Tranche B Loan (or the failure of
any other Lender to make any other Loan) shall not relieve any other
Tranche B Lender of its obligation to lend hereunder, but neither the
Agent nor any other shall be responsible for the failure of any other
Lender to make a Tranche B Loan.
(iv) Tranche C Loans. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all
payments made in respect of principal, interest, Term Loan Commitment
Fees due from the Borrower hereunder or under the Notes in respect of
Tranche C Loans shall be applied, Pro Rata from and to each Tranche C
Lender, except for payments of interest involving an Affected Lender
as provided in Section 2.06(e) hereof and payments to a Lender subject
to a withholding deduction under Section 2.14(c) hereof. The failure
of any Tranche C Lender to make a Tranche C Loan (or the failure of
any other Lender to make any other Loan) shall not relieve any other
Tranche C Lender of its obligation to lend hereunder, but neither the
Agent nor any other Lender shall be responsible for the failure of any
other Lender to make a Tranche C Loan.
(v) Tranche D Loans. Each borrowing and conversion and
renewal of interest rate Options hereunder shall be made, and all
payments made in respect of principal, interest,
<PAGE> 68
Term Loan Commitment Fees due from the Borrower hereunder or under the
Notes in respect of Tranche D Loans shall be applied, Pro Rata from
and to each Tranche D Lender, except for payments of interest
involving an Affected Lender as provided in Section 2.06(e) hereof and
payments to a Lender subject to a withholding deduction under Section
2.14(c) hereof. The failure of any Tranche D Lender to make a Tranche
D Loan (or the failure of any other Lender to make any other Loan)
shall not relieve any other Tranche D Lender of its obligation to lend
hereunder, but neither the Agent nor any other Lender shall be
responsible for the failure of any other Lender to make a Tranche D
Loan.
(b) Payments Generally. All payments and prepayments to be
made by any Loan Party in respect of principal, interest, fees, indemnity,
expenses or other amounts due from any Loan Party hereunder or under any Loan
Document shall be payable in Dollars at 12:00 o'clock Noon, Pittsburgh time, on
the day when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue, without setoff, counterclaim, withholding or other
deduction of any kind or nature, except for payments to a Lender subject to a
withholding deduction under Section 2.14(c) hereof. Except for payments under
Sections 2.13, 2.22 and 9.06 hereof, such payments shall be made to the Agent
at its Office in Dollars in funds immediately available at such Office, and
payments under Sections 2.13, 2.22 and 9.06 hereof shall be made to the
applicable Lender or Issuing Bank at such domestic account as it shall specify
to the Borrower from time to time in funds immediately available at such
account. Any payment or prepayment received by the Agent or such Lender or
Issuing Bank after 12:00 o'clock Noon, Pittsburgh time, on any day shall be
deemed to have been received on the next succeeding Business Day. The Agent
shall distribute to the Lenders all such payments received by it from any Loan
Party as promptly as practicable after receipt by the Agent, but in any event
by 2:00 o'clock P.M., Pittsburgh time, if received by 12:00 o'clock Noon,
Pittsburgh time.
(c) Interest on Overdue Amounts. To the extent permitted by
law, after there shall have become due (by acceleration or otherwise)
principal, interest, fees, indemnity, expenses or any other amounts due from
any Loan Party hereunder or under any other Loan Document, such amounts shall
bear interest for each day until paid (before and after judgment), payable on
demand, at a rate per annum (in each case based on a year of 365 days and
actual days elapsed) which for each day shall be equal to the following:
(i) In the case of any part of the Euro-Rate Portion
<PAGE> 69
of any Loans, (A) until the end of the applicable then-current Funding
Period at a rate per annum 2% above the rate otherwise applicable to
such part, and (B) thereafter in accordance with the following clause
(ii); and
(ii) In the case of any other amount due from any Loan Party
hereunder or under any Loan Document, 2% above the then-current Base
Rate Option applicable to Revolving Loans.
To the extent permitted by law, interest accrued on any amount which has become
due hereunder or under any Loan Document shall compound on a day-by-day basis,
and hence shall be added daily to the overdue amount to which such interest
relates.
2.13. Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or
guideline or interpretation or application thereof by any Governmental
Authority charged with the interpretation or administration thereof or
compliance with any request or directive of any Governmental Authority (whether
or not having the force of law) now existing or hereafter adopted:
(i) subjects any Lender or any Notional Euro-Rate Funding
Office to any tax or changes the basis of taxation with respect to
this Agreement, the Notes, the Loans or payments by any Loan Party of
principal, interest, commitment fee or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall
net income or overall gross receipts of such Lender or such Notional
Euro-Rate Funding Office imposed by the jurisdictions (federal, state
and local) in which the Lender's principal office or Notional
Euro-Rate Funding Office is located),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments
to extend credit extended by, assets (funded or contingent) of,
deposits with or for the account of, other acquisitions of funds by,
such Lender or any Notional Euro-Rate Funding Office (other than
requirements expressly included herein in the determination of the
Euro-Rate hereunder),
(iii) imposes, modifies or deems applicable any capital
<PAGE> 70
adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended
by, any Lender or any Notional Euro-Rate Funding Office, or (B)
otherwise applicable to the obligations of any Lender or any Notional
Euro- Rate Funding Office under this Agreement, or
(iv) imposes upon any Lender or any Notional Euro-Rate
Funding Office any other condition or expense with respect to this
Agreement, the Notes or its making, maintenance or funding of any Loan
or any security therefor,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Lender, any Notional Euro-Rate Funding Office or, in the case of clause (iii)
hereof, any Person controlling a Lender, with respect to this Agreement, the
Notes or the making, maintenance or funding of any Loan (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the
rate of return on such Lender's or controlling Person's capital, taking into
consideration such Lender's or controlling Person's policies with respect to
capital adequacy) by an amount which such Lender deems to be material (such
Lender being deemed for this purpose to have made, maintained or funded each
Funding Segment of the Euro-Rate Portion from a Corresponding Source of Funds),
such Lender may from time to time notify the Borrower of the amount determined
in good faith (using any averaging and attribution methods) by such Lender
(which determination shall be conclusive absent manifest error) to be necessary
to compensate such Lender or such Notional Euro-Rate Funding Office for such
increase, reduction or imposition. Such amount shall be due and payable by the
Borrower to such Lender fifteen Business Days after such notice is given,
together with an amount equal to interest on such amount from the date two
Business Days after the date demanded until such due date at the Base Rate
Option applicable to Term Loans. A certificate by such Lender as to the amount
due and payable under this Section 2.13(a) from time to time and the method of
calculating such amount shall be conclusive absent manifest error. Each Lender
agrees that it will use good faith efforts to notify the Borrower of the
occurrence of any event that would give rise to a payment under this Section
2.13(a); provided, however, that any failure of such Lender to give any such
notice shall have no effect on any Loan Party's obligations hereunder.
(b) Funding Breakage. In addition to all other amounts
payable hereunder, if and to the extent for any reason any part of any Funding
Segment of any Euro-Rate Portion of the Loans becomes due (by acceleration or
otherwise), or is paid, prepaid or converted to another interest rate Option
(whether or
<PAGE> 71
not such payment, prepayment or conversion is mandatory or automatic and
whether or not such payment or prepayment is then due), on a day other than the
last day of the corresponding Funding Period (the date such amount so becomes
due, or is so paid, prepaid or converted, being referred to as the "Funding
Breakage Date"), the Borrower shall pay each Lender an amount ("Funding
Breakage Indemnity") determined by such Lender as follows:
(i) first, calculate the following amount: (A) the principal
amount of such Funding Segment of the Loans owing to such Lender which
so became due, or which was so paid, prepaid or converted, times (B)
the greater of (x) zero or (y) the rate of interest applicable to such
principal amount on the Funding Breakage Date minus the Treasury Rate
as of the Funding Breakage Date, times (C) the number of days from and
including the Funding Breakage Date to but not including the last day
of such Funding Period, times (D) 1/360;
(ii) the Funding Breakage Indemnity to be paid by the Borrower
to such Lender shall be the amount equal to the present value as of
the Funding Breakage Date (discounted at the Treasury Rate as of such
Funding Breakage Date, and calculated on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed) of the amount
described in the preceding clause (i) (which amount described in the
preceding clause (i) is assumed for purposes of such present value
calculation to be payable on the last day of the corresponding Funding
Period).
Such Funding Breakage Indemnity shall be due and payable on demand, and each
Lender shall, upon making such demand, notify the Agent of the amount so
demanded. In addition, the Borrower shall, on the due date for payment of any
Funding Breakage Indemnity, pay to such Lender an additional amount equal to
interest on such Funding Breakage Indemnity from the Funding Breakage Date to
but not including such due date at the Base Rate Option (calculated on the
basis of a year of 365 days and actual days elapsed). The amount payable to
each Lender under this Section 2.13(b) shall be determined in good faith by
such Lender, and such determination shall be conclusive.
2.14 Taxes.
(a) Payments Net of Taxes. All payments made by any Loan
Party under this Agreement or any other Loan Document shall be made free and
clear of and without deduction for any and all
<PAGE> 72
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding (x) in the case of each
Lender and the Agent, net income taxes (but not withholding taxes imposed on
gross interest income) imposed on such Lender or the Agent (as the case may be)
by the United States, and net income taxes and franchise taxes imposed on such
Lender or the Agent (as the case may be) by the jurisdiction under the laws of
which such Lender or the Agent (as the case may be) is organized or by any
political subdivision thereof, and (y) in the case of each Lender, net income
taxes and franchise taxes imposed on such Lender by the jurisdiction in which
is located the Lender's lending office which makes or books a particular
extension of credit hereunder or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deduction, charges, withholdings and
liabilities being referred to as "Taxes"). If any Loan Party shall be required
by law to deduct any Taxes from or in respect of any sum payable under this
Agreement or any other Loan Document to the Lender or the Agent, (i) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.14) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Loan Party shall make such deductions, and (iii) such Loan
Party shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(b) Other Taxes. In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made under this
Agreement or any other Loan Document or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Document (hereinafter referred to as "Other Taxes").
(c) Indemnity. The Borrower will indemnify each Lender and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Agent (as the case
may be) and any liability (including, without limitation, penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Lender or the Agent (as the
case may be) makes written demand therefor.
(d) Receipts, etc. Within 45 days after the date of any
payment of Taxes or Other Taxes, the Borrower will furnish to
<PAGE> 73
the Agent the original or a certified copy of a receipt evidencing payment
thereof.
(e) Other. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the obligations of the Borrower contained
in this Section 2.14 shall survive the payment in full of all other obligations
of the Borrower under this Agreement and the other Loan Documents, termination
of all commitments to extend credit under, and all letters of credit issued
under, the Loan Documents, and all other events and circumstances whatever.
Nothing in this Section 2.14 or otherwise in this Agreement shall require the
Agent or any Lender to disclose to the Borrower any of its tax returns (or any
other information that it deems to be confidential or proprietary).
(f) Withholding Tax Exemption.
(i) Each Lender organized under the laws of a jurisdiction
outside the United States shall, on the date such Lender becomes party to this
Agreement, and from time to time thereafter if requested in writing by the
Borrower or the Agent, provide the Agent and the Borrower with the forms
prescribed by the United States Internal Revenue Service certifying as to such
Lender's status for purposes of determining exemption from, or reduced rate
applicable to, United States withholding taxes with respect to payments to be
made to such Lender under this Agreement and the other Loan Documents;
provided, that a Lender shall not be obligated to provide any such form after
the date such Lender becomes party to this Agreement if such Lender is not
legally able to do so.
(ii) The Borrower shall not be required to indemnify any
Lender, or to pay any additional amounts to any Lender, in respect of United
States withholding taxes (or any withholding tax imposed by a state of the
United States that applies only when such United States withholding tax is
imposed), pursuant to Sections 2.14(a) or 2.14(c), to the extent that: (A) the
obligation to withhold amounts with respect to United States withholding tax
existed on the date such Lender became a party to this Agreement; provided,
that this clause (A) shall not apply to a Lender that became a Lender as a
result of an assignment made or other action taken at the request of the
Borrower, or (B) the obligation to make such indemnification or to pay such
additional amounts would not have arisen but for a failure of such Lender to
comply with the provisions of Section 2.14(f)(i).
(iii) If the Borrower is required under Section
<PAGE> 74
2.14(a) or 2.14(c) to indemnify any Lender organized under the laws of a
jurisdiction outside the United States, or to pay additional amounts to any
such Lender, in respect of United States withholding taxes (or any withholding
tax imposed by a state of the United States that applies only when such United
States withholding tax is imposed), and such Lender (herein the "Tax Affected
Lender") does not waive the requirement for such indemnification or payment
after request by the Borrower that it do so, then, if the Borrower finds a
financial institution which offers in writing to purchase all such Tax Affected
Lender's outstanding Notes and Commitments, in accordance with Section 9.14(c),
at a price equal to the full outstanding principal amount thereof together with
accrued and unpaid interest and fees to the date of purchase and all other
amounts accrued or payable to such Tax Affected Lender to the date of purchase
(including but not limited to funding breakage under Section 2.13(b) to the
extent such date of purchase falls within a Euro-Rate Funding Period), such Tax
Affected Lender will accept such offer. Nothing in this Section 2.14(f) shall
limit the rights of the Agent and the Issuing Bank under Section 9.14(c) or
shall require a Lender which is also the Agent or the Issuing Bank to accept
any such offer.
(iv) The Designated Lender makes the following
representations and covenants (A) it is not a bank as such term is used in
Section 881(c)(3)(A) of the Code, (B) it is not a 10-percent shareholder of the
Borrower as that term is used in Section 881(c)(3)(B) of the Code, (C) it is
not a controlled foreign corporation as that term is used in Section
881(c)(3)(C) of the Code, (D) it is the beneficial owner of the rights which it
holds under this Agreement, (E) it will provide the Borrower with a completed
Form W-8 or other appropriate statement to the effect that it is not a U.S.
person in such form and with such other information as will satisfy the
requirements of Section 881(c)(2)(B)(ii) of the Code, and (F) it will notify
the Borrower and the Agent of any change relevant to its ability to make the
representations and covenants provided in (A) through (E) above.
2.15. Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. Each Lender shall have the right from
time to time, prospectively or retrospectively, without notice to the Borrower,
to deem any branch, subsidiary or affiliate of such Lender to have made,
maintained or funded any part of the Euro-Rate Portion at any time. Any
branch, subsidiary or affiliate so deemed shall be known as a "Notional
Euro-Rate Funding Office." Such Lender shall deem any part of the Euro-Rate
Portion of the Loans or the funding therefor to have been transferred to a
different Notional Euro-Rate Funding Office if such transfer would avoid or
cure an event or condition
<PAGE> 75
described in Section 2.06(e)(ii) hereof or would lessen compensation payable by
the Borrower under Section 2.13(a) hereof, and if such Lender determines in its
sole discretion that such transfer would be practicable and would not have a
material adverse effect on such part of the Loans, such Lender or any Notional
Euro-Rate Funding Office (it being assumed for purposes of such determination
that each part of the Euro- Rate Portion is actually made or maintained by or
funded through the corresponding Notional Euro-Rate Funding Office). Notional
Euro-Rate Funding Offices may be selected by such Lender without regard to such
Lender's actual methods of making, maintaining or funding Loans or any sources
of funding actually used by or available to such Lender.
(b) Actual Funding. Each Lender shall have the right from
time to time to make or maintain any part of the Euro-Rate Portion by arranging
for a branch, subsidiary or affiliate of such Lender to make or maintain such
part of the Euro-Rate Portion. Such Lender shall have the right to (i) hold
any applicable Note payable to its order for the benefit and account of such
branch, subsidiary or affiliate or (ii) request the Borrower to issue one or
more promissory notes in the principal amount of such Euro-Rate Portion, in
substantially the form attached hereto as Exhibit A, Exhibit B-1 or Exhibit
B-2, as the case may be, with the blanks appropriately filled, payable to such
branch, subsidiary or affiliate and with appropriate changes reflecting that
the holder thereof is not obligated to make any additional Loans to the
Borrower. The Borrower agrees to comply promptly with any request under
subsection (ii) of this Section 2.15(b). If any Lender causes a branch,
subsidiary or affiliate to make or maintain any part of the Euro-Rate Portion
hereunder, all terms and conditions of this Agreement shall, except where the
context clearly requires otherwise, be applicable to such part of the Euro-Rate
Portion and to any note payable to the order of such branch, subsidiary or
affiliate to the same extent as if such part of the Euro-Rate Portion were made
or maintained and such note were a Revolving Credit Note or Term Loan Note, as
the case may be, payable to such Lender's order.
2.16. Borrowing Base.
(a) Borrowing Base. The "Borrowing Base" at any time shall
mean the sum, at the date of the most recent Borrowing Base Certificate
required to be furnished pursuant to Section 2.16(e) hereof, of
(i) 85% of the Net Value of Eligible Receivables; plus
<PAGE> 76
(ii) the sum of 65% of the Net Value of Commercial Grade
Finished Goods, plus 50% of the Net Value of Other Finished Goods,
plus65% of the Net Value of Work in Process, plus 65% of the Net Value
of Scrap, plus 50% of the Net Value of Other Raw Materials, plus30% of
the Net Value of Spares, in each case which are owned by the Borrower
and which meet each of the requirements for Eligible Inventory set
forth in Section 2.16(d) hereof and in the case of Commercial Grade
Finished Goods and Other Finished Goods are held for sale by the
Borrower in the ordinary course of its business; provided that, after
the Phase I Project Acceptance Date, the sum calculated under this
subsection (a)(ii) shall not constitute more than one-half of the
Borrowing Base;
provided, however, that the Borrowing Base shall not exceed (x) $25,000,000
prior to the 90th day after the Phase I Project Commissioning Date, and (y)
$30,000,000 during the period commencing on the 90th day after the Phase I
Project Commissioning Date and ending on the 180th day after the Phase I
Project Commissioning Date.
(b) Eligible Receivables. "Eligible Receivable" at any time
shall mean all rights to payments due and to become due to the Borrower or
Salesco (each such right, a "Receivable") which meet each of the following
requirements at such time:
(i) The Borrower or Salesco has good title to such
Receivable, free and clear of any Lien, except for the Liens in favor
of the Agent for the benefit of the Lenders and the Agent securing the
Obligations, and such Receivable is subject to such a valid and
perfected Lien in favor of the Agent;
(ii) Such Receivable constitutes an "account" as defined in
the Uniform Commercial Code as in effect in the State of Indiana (and,
accordingly, without limitation, is not evidenced by any promissory
note or other instrument);
(iii) Such Receivable arises from the sale of goods or
rendering of services performed by the Borrower or Salesco in the
ordinary course of its business. Such transaction was effected
pursuant to the Borrower's and Salesco's ordinary and customary
policies, practices and procedures, including but not limited to
credit policies;
(iv) Such Receivable is collectible, is not disputed, and
represents an unconditional payment obligation in favor of the
Borrower or Salesco. All services in connection with such Receivable
have been rendered and all merchandise sold in connection with such
Receivable has been shipped (other
<PAGE> 77
than merchandise with respect to Receivables not exceeding $5,000,000
in the aggregate at any time, which merchandise is being temporarily
held pending shipment) and has not been subject to return, rejection,
repossession, dispute, offset, defense or counterclaim (including but
not limited to any claim for credits, allowances or adjustments). No
contra account or other obligation, contingent or otherwise, exists
from the Borrower or Salesco to such obligor;
(v) Such Receivable has been fully invoiced by the Borrower
or Salesco, is payable by its terms in full in Dollars on ordinary
trade terms, and in any event is payable no later than 30 days (or,
after Phase I Project Acceptance, with respect to Receivables
aggregating no more than $10,000,000 and the obligor of which is not
Heidtman or Preussag, no later than 60 days) after its original
invoice date. The due date of such Receivable has not been extended.
Such Receivable is payable by the obligor to the lockbox account
referred to in the Security Documents and the obligor has been so
instructed;
(vi) The related invoice has not remained unpaid for more
than 90 days past its original invoice date;
(vii) The obligor on such Receivable (A) is a Person whose
principal office is located in the United States (unless the
obligations of such Person or such Receivable are backed up by a
Letter of Credit or export credit insurance in an amount and in a
manner reasonably satisfactory to, and issued by an issuer reasonably
satisfactory to, the Agent), (B) is not the Borrower or an Affiliate
of the Borrower, other than Heidtman, General Electric Corporation or
one of its Affiliates, J.H. Whitney and Company or one of its
Affiliates or Preussag or one of its Affiliates, (C) is not the United
States of America, any State, municipality or Governmental Authority
(unless the security interest of the Agent therein is effectively
perfected and assigned under the Federal Assignment of Claims Act or
other relevant statute in a manner satisfactory to the Agent) and (D)
is not insolvent, subject to any bankruptcy, insolvency or similar
proceeding or unable to pay its debts as they become due;
(viii) Such Receivable shall not have arisen out of a
contract or agreement which by its terms purports to forbid or make
void or unenforceable any assignment thereof or Lien thereon;
<PAGE> 78
(ix) In the event a single obligor (other than Heidtman or
Preussag) shall account for more than 10% of the aggregate dollar
amount of all rights to payment due and to become due to the Borrower
or Salesco, the Receivables owed by such obligor shall only include
the dollar amount equal to said 10%;
(x) On or prior to September 30, 1997, in the event the dollar
amount of all rights to payment due and to become due to the Borrower
or Salesco from Heidtman shall exceed $12,000,000, the Receivables
owed by Heidtman shall only include $12,000,000;
(xi) After September 30, 1997, in the event Heidtman shall
account for more than the Applicable Heidtman Percentage Limit of the
aggregate dollar amount of all rights to payment due and to become due
to the Borrower or Salesco, the Receivables owed by Heidtman shall
only include the dollar amount equal to said Applicable Heidtman
Percentage Limit ("Applicable Heidtman Percentage Limit" being defined
as (x) 40% from October 1, 1997 to September 30, 1998, inclusive, (y)
35% from October 1, 1998 to September 30, 1999, inclusive, and (z) 30%
thereafter);
(xii) In the event Preussag shall account for more than the
30% of the aggregate dollar amount of all rights to payment due and to
become due to the Borrower or Salesco, the Receivables owed by
Preussag shall only include the dollar amount equal to said 30%; and
(xiii) Not more than 20% of the aggregate number or aggregate
amount of all invoices (excluding amounts in dispute) of the Borrower
or Salesco to the obligor on such Receivable remain unpaid 90 days
past their respective invoice dates.
Notwithstanding the foregoing, "Eligible Receivable" shall not include (A) any
Receivable with respect to which the account debtor's obligation to pay is
conditional upon such account debtor's approval or is otherwise subject to any
repurchase obligation or return right, as with sales made on a bill-and-hold
(except as permitted by clause (iv) above), guaranteed sale, sale-and-return,
sale on approval or consignment basis; (B) any Receivable with respect to which
the account debtor is domiciled or has its principal place of business or chief
executive office in Indiana, Minnesota, New Jersey or any other state denying
creditors access to its courts in the absence of a Notice of Business
Activities Report (which in Indiana, Minnesota and New Jersey are currently
required by Burns In. Stat. Ann. Section 6-8.1-6-6, 1988 Minn. Sess. Law Serv.
Sec. 41 (West) and N.J. Stat. Ann.
<PAGE> 79
Section 14A.13-18, respectively) or other similar filing, unless a
current Notice of Business Activities Report or similar filing has been made
with the applicable state agency (and a copy thereof provided to the Agent) or
unless an exemption from such requirement exists; or (C) any Receivable
generated by the sale of merchandise which is being held pending shipment in
any public warehouse or premises leased by the Borrower or Salesco, or any
other premises not owned by the Borrower, if the bailee, landlord or owner
thereof has not consented in writing to the existence and first priority of the
Liens in favor of the Agent for the benefit of the Lenders and the Agent
securing the Obligations and the Agent's right to enter such warehouse or
premises and take possession of and remove such merchandise. Any Receivable
which is at any time an Eligible Receivable, but which subsequently fails to
meet any of the foregoing requirements, shall forthwith cease to be an Eligible
Receivable until such time as it once again meets all of the foregoing
requirements.
The "Net Value" of an Eligible Receivable shall be its face amount, net of any
discount for prompt payment (and net of any other amount representing payment
of finance charges, late charges, or interest (however denominated)), and net
of any portion thereof which constitutes payment of sales, use or other taxes.
(c) Certain Adjustments and Exclusions. The Agent, upon the
direction of the Required Lenders, from time to time may adjust the percentages
or dollar amounts set forth in Section 2.16(a) or exclude any otherwise
Eligible Receivables from the class of Eligible Receivables, in each case based
on reasonable determinations as to the creditworthiness of the obligor, as to
the aggregate amount of receivables owing by such obligor and its affiliates,
or as to such other and further eligibility standards as the Required Lenders
may reasonably elect to impose from time to time; provided, however, that
neither the percentages nor the dollar amounts set forth in Section 2.16(a) may
be increased without the written consent of all the Revolving Credit Lenders.
The Agent shall give notice to the Borrower of the terms of any such adjustment
or exclusion at least thirty days prior to the effective date thereof. Except
as otherwise expressly stated in such notice, all such exclusions shall be
continuing and cumulative, and an exclusion as to any obligor shall apply in
the aggregate to all receivables of such obligor and its affiliates. The
Borrower shall, not later than one Business Day after the Agent effects any
such exclusion, deliver to the Agent a revised Borrowing Base Certificate
reflecting the Borrowing Base as redetermined in accordance with such
exclusion. The making of a
<PAGE> 80
Revolving Credit Loan in reliance on a Borrowing Base Certificate shall not
affect the Lenders' right later to exclude any receivables in accordance with
this Section 2.16(c). No Eligible Receivable excluded under this Section
2.16(c) shall be included by the Borrower in any later Borrowing Base
Certificate without written permission by the Agent.
(d) Eligible Inventory. "Eligible Inventory" shall mean at
any time (i) Commercial Grade Finished Goods, (ii) Other Finished Goods, (iii)
Scrap, (iv) Other Raw Materials, (v) Spares and (vi) Work in Process, in each
case owned by the Borrower and held for sale by the Borrower in the ordinary
course of its business which meet each of the following requirements at such
time:
(i) The Borrower has good title to such Inventory, free and
clear of any Lien, except for the Liens in favor of the Agent for the
benefit of the Lenders and the Agent securing the Obligations, and
such Inventory and proceeds thereof is subject to such a valid and
perfected Lien in favor of the Agent;
(ii) Such Inventory is in good and merchantable condition, is
readily saleable by the Borrower in the ordinary course of its
business and has not been held by the Borrower for more than 180 days;
(iii) Such Inventory is located in the United States and is
in the possession of the Borrower; and
(iv) Such Inventory conforms to such other eligibility
standards as the Required Lenders reasonably may impose from time to
time by notice to the Borrower of such eligibility standards at least
thirty days prior to the effective date thereof.
Notwithstanding the foregoing, no Inventory shall constitute Eligible Inventory
(A) if, at the request of the Borrower, the Lenders release their security
interest therein, (B) if it is produced in violation of the Fair Labor
Standards Act and subject to the so-called "hot goods" provision contained in
Title 219, Section 215(a)(1) of the United States Code, (C) if it is finished
goods held for consumption by the Borrower and not for sale in the ordinary
course of business, or (D) if it is located in any public warehouse or premises
leased by the Borrower, or any other premises not owned by the Borrower, where
the bailee, landlord or owner thereof has not consented in writing to the
existence and first priority of the Liens in favor of the Agent for the benefit
of the Lenders and the Agent securing the Obligations and the Agent's right to
enter such warehouse or premises and take
<PAGE> 81
possession of and remove such Inventory. Any Inventory which is at any time
Eligible Inventory, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be Eligible Inventory until such time as
it once again meets all of the foregoing requirements.
The "Net Value" of Eligible Inventory shall be the Borrower's book value of
such Eligible Inventory at lower of cost or market, net of all reserves against
such Eligible Inventory required by GAAP, with "cost" calculated on a first-in,
first-out basis, all determined in accordance with GAAP.
(e) Borrowing Base Certificates. On the date of the initial
Revolving Credit Loan made hereunder and from time to time thereafter as
specified herein the Borrower shall furnish to the Agent a certificate
("Borrowing Base Certificate") substantially in the form of Exhibit D hereto,
appropriately completed, signed by a Responsible Officer of the Borrower and
setting forth the Borrowing Base and the other information required therein.
Borrowing Base Certificates shall be delivered to the Agent:
(i) on the first Business Day of each first and third week of
each month after the date of the initial Revolving Credit Loan made
hereunder;
(ii) as required by Section 2.16(c) hereof; and
(iii) not later than two Business Days after the reasonable
request therefor by the Agent or the Required Lenders from time to
time.
To the extent the Borrower is required to deliver a Borrowing Base Certificate
on a particular day (A) the Eligible Receivables reflected on such Borrowing
Base Certificate and the Net Value applicable thereto shall be determined as of
a day (which shall be specified in the Borrowing Base Certificate) not earlier
than the Business Day before the day the Borrower is required to deliver such
Borrowing Base Certificate, and (B) the Eligible Inventory reflected on such
Borrowing Base Certificate and the Net Value applicable thereto shall be
determined as of a day (which shall be specified in the Borrowing Base
Certificate) not earlier than the Business Day before the day the Borrower is
required to deliver such Borrowing Base Certificate, provided, however, that
such date of determination may be a day not earlier
<PAGE> 82
than 40 days before the day the Borrower is required to deliver such Borrowing
Base Certificate, if the Borrowing Base Certificate includes certification that
there has been no material decrease in the Net Value of Eligible Inventory
since such specified date. The Borrowing Base set forth in any such Borrowing
Base Certificate shall be effective until delivery of a subsequent Borrowing
Base Certificate.
(f) Any failure to comply with the requirements of Section
2.10 with respect to a principal amount of Loans not exceeding the lesser of
$5,000,000 and an amount equal to 15% of the Borrowing Base for a period not
longer than five Business Days shall be deemed to have been waived by the
Lenders if the Agent, in the exercise of its sole and absolute discretion,
determines such waiver to be appropriate.
2.17. The Letter of Credit Subfacility.
(a) General. Subject to the terms and conditions of this
Agreement, and relying upon the representations and warranties herein set forth
and upon the agreements of the Revolving Credit Lenders set forth in Sections
2.19 and 2.20 hereof, the Issuing Bank agrees to issue Letters of Credit for
the account of the Borrower at any time or from time to time on or after the
Closing Date; provided, however, that (i) the Issuing Bank shall have no
obligation to issue any Letter of Credit if the aggregate Letter of Credit
Exposure upon such issuance would exceed $10,000,000 (at any time after the
Phase I Project Commissioning Date) or would exceed $5,000,000 (at any time
prior to the Phase I Project Commission Date), (ii) the Issuing Bank shall have
no obligation to issue any Letter of Credit if the aggregate Total Revolving
Credit Exposure of all Revolving Credit Lenders upon such issuance would exceed
the lesser of (x) the aggregate Revolving Credit Committed Amounts of the
Revolving Credit Lenders at such time and (y) the Borrowing Base at such time
(or until the Phase I Project Commissioning Date but not thereafter
$5,000,000), and (iii) the Issuing Bank shall have no obligation to issue any
Letter of Credit before the $82,000,000 of equity described in Schedule 3.15
has been contributed in cash to the Borrower if the aggregate Letter of Credit
Exposure upon such issuance would exceed $1,000,000 unless the then outstanding
balance of the Letter of Credit Collateral Account is at least equal to such
excess. The issuance of a Letter of Credit shall be equivalent to the making
of a Revolving Credit Loan in accordance with Section 2.01 hereof.
(b) Terms of Letters of Credit. The Borrower shall not
request any Letter of Credit to be issued except within the following
limitations: (i) each Letter of Credit shall have an
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expiration date no later than the earlier of (A) 12 months after the date of
issuance thereof and (B) the date which is 60 days prior to the Revolving
Credit Maturity Date, (ii) shall be denominated in Dollars and (iii) shall be
payable only against sight drafts (and not time drafts).
(c) Letters of Credit Satisfactory to Issuing Bank. Each
Letter of Credit shall be satisfactory in form, substance and beneficiary to
the Issuing Bank in its discretion. Each Standby Letter of Credit shall be
used by the Borrower as a standby letter of credit to provide credit
enhancement for workers' compensation obligations, contract performance
guarantees, and like bonding requirements, all in the ordinary course of
business of the Borrower. The provisions of this Section 2.17(c) represent
only an obligation of the Borrower to the Issuing Bank and the Revolving Credit
Lenders; the Issuing Bank shall have no obligation to the Revolving Credit
Lenders to ascertain the purpose of any Letter of Credit, and the rights and
obligations of the Revolving Credit Lenders and the Issuing Bank among
themselves shall not be impaired or affected by a breach of this Section
2.17(c).
(d) Letter of Credit Fee. The Borrower shall pay to the
Agent for the account of each Revolving Credit Lender a fee (the "Letter of
Credit Fee") equal to 1.50% per annum for Trade Letters of Credit and 2.50% per
annum for Standby Letters of Credit (in each case based on a year of 365 or 366
days, as the case may be, and actual days elapsed), for each Letter of Credit
for each day from and including the date of issuance thereof to and including
the date of expiration or termination thereof, on the Letter of Credit Undrawn
Availability on such day. Such Letter of Credit Fee shall be due and payable
for the preceding period for which such fee has not been paid on each of the
following dates: (i) each Regular Payment Date, (ii) the date of each drawing
on such Letter of Credit, and (iii) the date of expiration or termination of
such Letter of Credit.
(e) Facing Fee; Administration Fees. The Borrower shall pay
to the Agent, for the sole account of the Issuing Bank, for each Letter of
Credit, on the date of issuance of such Letter of Credit, a fee (the "Letter of
Credit Facing Fee") equal to 0.25% of the stated amount of such Letter of
Credit. In addition, the Borrower shall pay to the Agent, for the sole account
of the Issuing Bank, such other administration, maintenance, amendment, drawing
and negotiation fees as may be customarily charged by the Issuing Bank from
time to time in connection with letters of credit.
<PAGE> 84
2.18. Procedure for Issuance and Amendment of Letters of
Credit.
(a) Request for Issuance. The Borrower may from time to time
request, upon at least three Business Days' notice, the Issuing Bank to issue a
Letter of Credit by:
(i) delivering to the Issuing Bank and the Agent a written
request to such effect, specifying the date on which such Letter of
Credit is to be issued, the expiration date thereof, and the stated
amount thereof, and
(ii) delivering to the Issuing Bank an application, in such
form as may from time to time be approved by the Issuing Bank (the
"Letter of Credit Application"), completed to the satisfaction of the
Issuing Bank, together with such other certificates, documents and
other papers and information as the Issuing Bank may request.
Upon issuing each such Letter of Credit, the Issuing Bank shall promptly notify
the Agent (by telephone or otherwise), and furnish the Agent with the proposed
form of Letter of Credit to be issued. The Agent shall, promptly upon
receiving such notice, notify the Revolving Credit Lenders of such proposed
Letter of Credit (which notice shall specify the stated amount and term of such
proposed Letter of Credit), and shall determine, as of the close of business on
the Business Day before such proposed issuance, whether such proposed Letter of
Credit complies with the limitations set forth in Sections 2.17(a) and 2.17(b)
hereof. Unless such limitations are not satisfied, or unless the Required
Lenders have given notice to the Agent to cease issuing Letters of Credit
pursuant to Section 2.18(c)(ii) hereof, the Agent shall notify the Issuing Bank
(in writing or by telephone promptly confirmed in writing) that the Issuing
Bank is authorized to issue such Letter of Credit. If the Issuing Bank issues
a Letter of Credit, it shall deliver the original of such Letter of Credit to
the beneficiary thereof or as the Borrower shall otherwise direct, and shall
promptly notify the Agent thereof and furnish a copy thereof to the Agent.
(b) Request for Extension or Increase. The Borrower may from
time to time request the Issuing Bank to extend the expiration date of an
outstanding Letter of Credit or increase the Letter of Credit Undrawn
Availability of such Letter of Credit. Such extension or increase shall for
all purposes hereunder be treated as though the Borrower had requested issuance
of a replacement Letter of Credit (except only that the Issuing Bank may, if it
elects, issue a notice of extension or increase in lieu of issuing a new Letter
of Credit in substitution for the outstanding Letter of Credit).
<PAGE> 85
(c) Limitations on Issuance, Extension and Amendment.
(i) As between the Issuing Bank, on the one hand, and the
Agent and the Lenders, on the other hand, the Issuing Bank shall be
justified and fully protected in issuing such Letter of Credit after
receiving authorization from the Agent as provided in Section 2.18(a)
hereof, notwithstanding any subsequent notices to the Issuing Bank,
any knowledge of an Event of Default (unless the Issuing Bank shall
have received a notice specifying that such Event of Default is an
"Event of Default" under this Agreement) or Potential Default, any
knowledge of failure of any condition specified in Section 4.03 hereof
to be satisfied, any other knowledge of the Issuing Bank, or any other
event, condition or circumstance whatever. The Issuing Bank may
amend, modify or supplement Letters of Credit or Letter of Credit
Applications, or waive compliance to any condition of issuance or
payment, without the consent of, and without liability to, the Agent
or any Lender, provided that any such amendment, modification or
supplement that extends the expiration date or increases the Letter of
Credit Undrawn Availability of an outstanding Letter of Credit shall
be subject to Sections 2.17(a) and (b) hereof.
(ii) As between the Agent, on the one hand, and the Lenders,
on the other hand, the Agent shall not authorize issuance of any
Letter of Credit if the Agent shall have received, at least two
Business Days before authorizing such issuance, from the Required
Lenders an unrevoked written notice that any condition precedent set
forth in Section 4.03 will not be satisfied and expressly requesting
that the Agent direct the Issuing Bank to cease to issue Letters of
Credit. Absent such notice, or unless the Agent determines that the
applicable limitations set forth in Sections 2.17(a) and 2.17(b)
hereof are not satisfied, the Agent shall be justified and fully
protected, as against the Lenders, in authorizing the Issuing Bank to
issue such Letter of Credit, notwithstanding any subsequent notices to
the Agent, any knowledge of an Event of Default or Potential Default,
any knowledge of failure of any condition specified in Section 4.03
hereof to be satisfied, any other knowledge of the Agent, or any other
event, condition or circumstance whatever.
2.19. Letter of Credit Participating Interests.
(a) Generally. Concurrently with the issuance of each
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Letter of Credit, the Issuing Bank automatically shall be deemed, irrevocably
and unconditionally, to have sold, assigned, transferred and conveyed to each
other Revolving Credit Lender, and each other Revolving Credit Lender
automatically shall be deemed, irrevocably and unconditionally, severally to
have purchased, acquired, accepted and assumed from the Issuing Bank, without
recourse to, or representation or warranty by, the Issuing Bank, an undivided
interest, in a proportion equal to such Revolving Credit Lender's Pro Rata
share, in all of the Issuing Bank's rights and obligations in, to or under such
Letter of Credit, the related Letter of Credit Application, the Letter of
Credit Reimbursement Obligations, and all collateral, guarantees and other
rights from time to time directly or indirectly securing the foregoing (such
interest of each Revolving Credit Lender being referred to herein as a "Letter
of Credit Participating Interest"). Amounts other than Letter of Credit
Reimbursement Obligations and Letter of Credit Fees payable from time to time
under or in connection with a Letter of Credit or Letter of Credit Application
shall be for the sole account of the Issuing Bank. On the date that any
Purchasing Lender becomes a party to this Agreement in accordance with Section
9.14 hereof, Letter of Credit Participating Interests in any outstanding
Letters of Credit held by the Revolving Credit Lender from which such
Purchasing Lender acquired its interest hereunder shall be proportionately
reallotted between such Purchasing Lender and such transferor Revolving Credit
Lender (and, to the extent such transferor Revolving Credit Lender is the
Issuing Bank, the Purchasing Lender shall be deemed to have acquired a Letter
of Credit Participating Interest from such transferor Revolving Credit Lender
to such extent).
(b) Obligations Absolute. Notwithstanding any other
provision hereof, each Revolving Credit Lender hereby agrees that its
obligation to participate in each Letter of Credit issued in accordance
herewith, its obligation to make the payments specified in Section 2.20 hereof,
and the right of the Issuing Bank to receive such payments in the manner
specified therein, are each absolute, irrevocable and unconditional and shall
not be affected by any event, condition or circumstance whatever. The failure
of any Revolving Credit Lender to make any such payment shall not relieve any
other Revolving Credit Lender of its funding obligation hereunder on the date
due, but no Revolving Credit Lender shall be responsible for the failure of any
other Revolving Credit Lender to meet its funding obligations hereunder.
2.20. Letter of Credit Drawings and Reimbursements.
(a) Borrower's Reimbursement Obligation. The Borrower hereby
agrees to reimburse the Issuing Bank, by making payment to
<PAGE> 87
the Agent for the account of the Issuing Bank in accordance with Section
2.12(b) hereof on the date of each payment made by the Issuing Bank under any
Letter of Credit, without notice, protest or demand, all of which are hereby
waived, and an action therefor shall immediately accrue. To the extent such
payment is not timely made, the Borrower hereby agrees to pay to the Agent, for
the account of the Issuing Bank, on demand, interest on any Letter of Credit
Unreimbursed Draws for each day from and including the date of such payment by
the Issuing Bank until paid (before and after judgment) in accordance with
Section 2.12(c) hereof, at the rate per annum set forth in Section 2.12(c)(ii)
hereof.
(b) Payment by Lenders on Account of Unreimbursed Draws. If
the Issuing Bank makes a payment under any Letter of Credit and is not
reimbursed in full therefor on such payment date in accordance with Section
2.20(a) hereof, the Issuing Bank will promptly notify the Agent thereof (which
notice may be by telephone), and the Agent shall forthwith notify each
Revolving Credit Lender (which notice may be by telephone promptly confirmed in
writing) thereof. No later than the Agent's close of business on the date such
notice is given, each such Revolving Credit Lender will pay to the Agent, for
the account of the Issuing Bank, in immediately available funds, an amount
equal to such Revolving Credit Lender's Pro Rata share of the unreimbursed
portion of such payment by the Issuing Bank, provided such notice is given no
later than 2:00 o'clock P.M., Pittsburgh time. If and to the extent that any
Revolving Credit Lender fails to make such payment to the Issuing Bank on such
date, such Revolving Credit Lender shall pay such amount on demand, together
with interest, for the Issuing Bank's own account, for each day from and
including the date of the Issuing Bank's payment to and including the date of
repayment to the Issuing Bank (before and after judgment) at the following
rates per annum: (i) for each day from and including the date of such payment
by the Issuing Bank to and including the second Business Day thereafter, at
rate set forth in Section 8.14.
(c) Distributions to Lenders. If, at any time, after there
occurs a Letter of Credit Unreimbursed Draw and the Issuing Bank has received
from any Revolving Credit Lender such Revolving Credit Lender's share of such
Letter of Credit Unreimbursed Draw, and the Issuing Bank receives any payment
or makes any application of funds on account of the Letter of Credit
Reimbursement Obligation arising from such Letter of Credit Unreimbursed Draw,
the Issuing Bank will pay to the Agent, for the account of such Revolving
Credit Lender, such Revolving
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Credit Lender's Pro Rata share of such payment.
(d) Rescission. If any amount received by the Issuing Bank
on account of any Letter of Credit Reimbursement Obligation shall be avoided,
rescinded or otherwise returned or paid over by the Issuing Bank for any reason
at any time, whether before or after the termination of this Agreement (or the
Issuing Bank believes in good faith that such avoidance, rescission, return or
payment is required, whether or not such matter has been adjudicated), each
such Revolving Credit Lender will, promptly upon notice from the Agent or the
Issuing Bank, pay over to the Agent for the account of the Issuing Bank its Pro
Rata share of such amount, together with its Pro Rata share of any interest or
penalties payable with respect thereto.
(e) Equalization. If any Revolving Credit Lender receives
any payment or makes any application on account of its Letter of Credit
Participating Interest, such Revolving Credit Lender shall forthwith pay over
to the Issuing Bank, in Dollars and in like kind of funds received or applied
by it the amount in excess of such Revolving Credit Lender's ratable share of
the amount so received or applied.
2.21. Obligations Absolute. The payment obligations of the
Borrower and of the Revolving Credit Lenders under Section 2.20 shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
(a) any lack of validity or enforceability of this Agreement,
any Letter of Credit or any other Loan Document;
(b) the existence of any claim, set-off, defense or other
right which the Borrower or any other Person may have at any time
against any beneficiary or transferee of any Letter of Credit (or any
Persons for whom any such beneficiary or transferee may be acting),
the Issuing Bank, any Lender, or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby
or any unrelated transaction;
(c) any draft, certificate, statement or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(d) payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which
<PAGE> 89
does not comply with the terms of such Letter of Credit, or payment by
the Issuing Bank under the Letter of Credit in any other circumstances
in which conditions to payment are not met, except any such wrongful
payment resulting solely from the gross negligence or willful
misconduct of the Issuing Bank; or
(e) any other event, condition or circumstance whatever,
whether or not similar to any of the foregoing.
The Borrower bears the risk of, and neither the Issuing Bank, any of its
directors, officers, employees or agents, nor any Lender, shall be liable or
responsible for any of, the foregoing matters, the use which may be made of any
Letter of Credit, or acts or omissions of the beneficiary or any transferee in
connection therewith, except for such person's gross negligence or willful
misconduct.
2.22. Additional Compensation in Certain Circumstances.
Without limitation of any provision of Section 2.13(a) hereof, the Issuing Bank
and each Revolving Credit Lender shall be entitled to the benefit of Section
2.13(a) hereof, and the Borrower shall pay additional compensation to the
Issuing Bank and each Revolving Credit Lender in accordance with such Section
2.13(a), in respect of this Agreement, the Letters of Credit and Letter of
Credit Participating Interests, to the same extent and in the same manner as if
the word "Lender," in each place in which it occurs in such Section 2.13(a),
were replaced with "Lender or Issuing Bank," and the word "Loan," in each place
in which it occurs in such Section 2.13(a), were replaced with "Loan, Letter of
Credit or Letter of Credit Participating Interest."
2.23. Further Assurances. The Borrower hereby agrees, from
time to time, to do and perform any and all acts and to execute any and all
further instruments reasonably requested by the Issuing Bank more fully to
effect the purposes of this Agreement and the issuance of the Letters of Credit
hereunder.
2.24. Letter of Credit Applications. The representations,
warranties and covenants by the Borrower under, and the rights and remedies of
the Issuing Bank under, the Continuing Letter of Credit Agreement and any
Letter of Credit Application relating to any Letter of Credit are in addition
to, and not in limitation or derogation of, representations, warranties and
covenants by the Borrower under, and rights and remedies of the Issuing Bank
and the Lenders under, this
<PAGE> 90
Agreement, the Loan Documents, and applicable Law. The Borrower acknowledges
and agrees that all rights of the Issuing Bank under any Letter of Credit
Application shall inure to the benefit of each Revolving Credit Lender to the
extent of its Revolving Credit Commitment Percentage as fully as if such Lender
was a party to such Letter of Credit Application. In the event of any
inconsistency between the terms of this Agreement and any Letter of Credit
Application, this Agreement shall prevail.
2.25. Cash Collateral for Letters of Credit.
(a) Cash Collateral for Letter of Credit Exposure in Certain
Circumstances. To the extent that this Agreement or any other Loan Document
requires a payment or prepayment to be made with respect to the Revolving
Credit Loans, such provision shall be construed as follows: after payment in
full of the outstanding Revolving Credit Loans, then, to the extent of the
excess, if any, of the aggregate Letter of Credit Exposure at such time over
the balance in the Letter of Credit Collateral Account, an amount equal to the
remainder of the amount so required to be paid by the Borrower shall
immediately be paid by the Borrower to the Agent for deposit in the Letter of
Credit Collateral Account. In addition, the Borrower agrees that, without
limitation of the foregoing or of any other provisions of this Agreement or the
Loan Documents requiring collateral for the Letters of Credit or other
Obligations in whole or in part, and without limitation of other rights and
remedies under this Agreement or any Loan Document or at law or in equity, if
all of the Loans become due and payable pursuant to Section 7.02 hereof, the
Borrower shall immediately pay to the Agent, for deposit in the Letter of
Credit Collateral Account, an amount equal to the excess, if any, of the
aggregate Letter of Credit Exposure at such time over the balance in the Letter
of Credit Collateral Account.
(b) Letter of Credit Collateral Account. The Agent shall
maintain in its own name at its Office a deposit account (the "Letter of Credit
Collateral Account"), which shall bear interest (added to the deposit balance)
in accordance with the Agent's ordinary practices for deposit accounts of like
size and nature, over which the Agent shall have sole dominion and control, and
the Borrower shall have no right to withdraw any funds deposited therein. The
Agent shall deposit into the Letter of Credit Collateral Account such funds as
are required to be paid therein by Section 2.25(a). As security for the
payment of all Obligations, the Borrower hereby grants, conveys, assigns,
pledges, transfers to the Agent, and creates in the Agent's favor a continuing
Lien on and security interest in, the Letter of Credit Collateral Account, all
amounts from time to time on deposit therein, all proceeds of the conversion,
voluntary or
<PAGE> 91
involuntary, thereof into cash, instruments, securities or other property, and
all other proceeds thereof. The Borrower hereby represents, warrants,
covenants and agrees that such Lien shall at all times be valid and perfected,
prior to all other Liens, and the Borrower shall take or cause to be taken such
actions and execute and deliver such instruments and documents as may be
necessary or, in the Agent's judgment, desirable to perfect or protect such
Lien. The Borrower shall not create or suffer to exist any Lien on any amounts
or investment held in the Letter of Credit Collateral Account other than the
Lien in favor of the Agent granted under this Section.
(c) Application of Funds. The Agent shall apply funds in the
Letter of Credit Collateral Account: (i) on account of Letter of Credit
Reimbursement Obligations as and when the same become due and payable if and to
the extent that the Borrower fails directly to pay the same, and (ii) if no
Letter of Credit Reimbursement Obligations are due and payable, no Letters of
Credit are outstanding and the balance of the Letter of Credit Collateral
Account exceeds the aggregate Letter of Credit Exposure, the excess shall be
applied on account of the other Obligations secured hereby (it being understood
that, if no Event of Default or Potential Default has occurred or is
continuing, the Borrower may direct that such application be delayed for such
time as is necessary to avoid the requirement of a payment under Section
2.13(b)). If all Obligations (other than Obligations constituting contingent
obligations under indemnification provisions which survive indefinitely, so
long as no unsatisfied claim has been made under any such indemnification
provision) have been indefeasibly paid in full in cash, all Commitments have
terminated and all Letters of Credit have expired, the Agent shall release to
the Borrower all remaining funds in the Letter of Credit Collateral Account.
2.26. Certain Provisions Relating to the Issuing Bank.
(a) General. The Issuing Bank shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Loan Documents, and no implied duties or responsibilities on the part of
the Issuing Bank shall be read into this Agreement or any Loan Document or
shall otherwise exist. The duties and responsibilities of the Issuing Bank to
the other Lender Parties under this Agreement and the other Loan Documents
shall be mechanical and administrative in nature, and the Issuing Bank shall
not have a fiduciary relationship in respect of any Lender Party or any other
Person. The Issuing Bank shall not be liable for any action taken or omitted
to be
<PAGE> 92
taken by it under or in connection with this Agreement or any other Loan
Document, unless caused by its own gross negligence or willful misconduct. The
Issuing Bank shall not be under any obligation to ascertain, inquire or give
any notice relating to (i) the performance or observance of any of the terms or
conditions of this Agreement or any other Loan Document on the part of the
Borrower, (ii) the business, operations, condition (financial or otherwise) or
prospects of the Borrower or any other Person, or (iii) the existence of any
Event of Default or Potential Default. The Issuing Bank shall not be under any
obligation, either initially or on a continuing basis, to provide the Agent or
any Lender with any notices, reports or information of any nature, whether in
its possession presently or hereafter, except for such notices, reports and
other information expressly required by this Agreement to be so furnished.
(b) Administration. The Issuing Bank may rely upon any
notice or other communication of any nature (written or oral, including but not
limited to telephone conversations, whether or not such notice or other
communication is made in a manner permitted or required by this Agreement or
any Loan Document) purportedly made by or on behalf of the proper party or
parties, and the Issuing Bank shall not have any duty to verify the identity or
authority of any Person giving such notice or other communication. The Issuing
Bank may consult with legal counsel (including, without limitation, in-house
counsel for the Issuing Bank or in-house or other counsel for the Borrower),
independent public accountants and any other experts selected by it from time
to time, and the Issuing Bank shall not be liable for any action taken or
omitted to be taken in good faith in accordance with the advice of such
counsel, accountants or experts. Whenever the Issuing Bank shall deem it
necessary or desirable that a matter be proved or established with respect to
the Borrower or Lender Party, such matter may be established by a certificate
of the Borrower or Lender Party, as the case may be, and the Issuing Bank may
conclusively rely upon such certificate.
(c) Indemnification of Issuing Bank by Lenders. Each
Revolving Credit Lender hereby agrees to reimburse and indemnify the Issuing
Bank and each of their respective directors, officers, employees and agents (to
the extent not reimbursed by the Borrower and without limitation of the
obligations of the Borrower to do so), Pro Rata, from and against any and all
amounts, losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements of any kind or
nature (including, without limitation, the fees and disbursements of counsel
(other than in-house counsel) for the Issuing Bank or such other Person in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not the Issuing
<PAGE> 93
Bank or such other Person shall be designated a party thereto) that may at any
time be imposed on, incurred by or asserted against the Issuing Bank, in its
capacity as such, or such other Person, as a result of, or arising out of, or
in any way related to or by reason of, this Agreement, any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Letter of Credit, provided, that no Revolving Credit Lender
shall be liable for any portion of such amounts, losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements resulting from the gross negligence or willful misconduct of the
Issuing Bank or such other Person, as finally determined by a court of
competent jurisdiction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to each Lender
Party as follows:
3.01. Corporate Status. Each Loan Party is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Loan Party has corporate power and
authority to own its property and to transact the business in which it is
engaged or presently proposes to engage. Each Loan Party is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership of its properties or the nature of its
activities or both makes such qualification necessary or advisable except where
the failure to so qualify could not have a Material Adverse Effect.
3.02. Corporate Power and Authorization. Each Loan Party has
corporate power and authority to execute, deliver, perform, and take all
actions contemplated by, each Loan Document to which it is a party, and all
such action has been duly and validly authorized by all necessary corporate
proceedings on its part. Without limitation of the foregoing, the Borrower has
the corporate power and authority to borrow and request Letters of Credit to be
issued pursuant to the Loan Documents to the fullest extent permitted hereby
and thereby from time to time, and has taken all necessary corporate action to
authorize such borrowings and requests.
3.03. Execution and Binding Effect. This Agreement
<PAGE> 94
and each other Loan Document to which any Loan Party is a party and which is
required to be delivered on or before the Closing Date pursuant to Section 4.01
hereof has been duly and validly executed and delivered by such Loan Party.
This Agreement constitutes, and each other Loan Document when executed and
delivered by each Loan Party which is a party thereto will constitute, the
legal, valid and binding obligation of the Borrower or such Loan Party, as the
case may be, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of
equitable remedies.
3.04. Governmental Approvals and Filings. No approval,
order, consent, authorization, certificate, license, permit or validation of,
or exemption or other action by, or filing, recording or registration with, or
notice to, any Governmental Authority (collectively, "Governmental Action") is
or will be necessary in connection with execution and delivery of any Loan
Document by any Loan Party, consummation by any Loan Party of the transactions
herein or therein contemplated, performance of or compliance with the terms and
conditions hereof or thereof by any Loan Party, except for (i) Required Phase I
Project Permits and Required Phase II Project Permits, (ii) recordings and
filings necessary to perfect the Liens granted by the Security Documents and
(iii) matters set forth in Schedule 3.04. Each Governmental Action referred to
in such Schedule 3.04 has been duly obtained or made, as the case may be, and
is in full force and effect, and there is no action, suit, proceeding or
investigation pending or, to the Borrower's knowledge, threatened which seeks
or has a reasonable possibility of resulting in the reversal, rescission,
termination, modification or suspension of any such Governmental Action. No
Governmental Action referred to in such Schedule 3.04 requires any further act
to be performed or condition to be satisfied by any Person as a condition to
continued effectiveness thereof, except as set forth in such Schedule 3.04.
With respect to each of the matters set forth in Schedule 3.04, no Loan Party
made any application to any Governmental Authority in connection therewith
which application, when taken together with all amendments, supplements and
modifications thereto, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
contained therein not misleading.
3.05. Absence of Conflicts. Neither the execution and
delivery of any Loan Document by any Loan Party, nor consummation by any Loan
Party of the transactions herein or therein contemplated, nor performance of or
compliance with the terms and conditions hereof or thereof by any Loan Party
does or will
<PAGE> 95
(a) violate or conflict with any Requirement of Law, or
(b) violate, conflict with or result in a breach of any term
or condition of, or constitute a default under, or result in (or give
rise to any right, contingent or otherwise, of any Person to cause)
any termination, cancellation, prepayment or acceleration of
performance of, or result in the creation or imposition of (or give
rise to any obligation, contingent or otherwise, to create or impose)
any Lien upon any of the property of any Loan Party (except for any
Lien in favor of the Agent for the benefit of the Lenders and the
Agent securing the Obligations) pursuant to, or otherwise result in
(or give rise to any right, contingent or otherwise, of any Person to
cause) any change in any right, power, privilege, duty or obligation
of any Loan Party under or in connection with,
(i) the certificate or articles of incorporation or
by-laws (or other constituent documents) of any Loan Party,
(ii) any Contractual Obligations creating, evidencing
or securing any Indebtedness or Guaranty Equivalent to which
any Loan Party is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or
bound, or
(iii) any other Contractual Obligations of any Loan
Party,
except (in the case of each of (a) and (b) above) for matters as to which a
consent, waiver, amendment or agreement which has been duly obtained and is
in full force and effect (all of which matters are set forth on Schedule 3.05
hereof), and the Agent and each Lender has received a true, correct and
complete copy of each such consent, waiver, amendment or agreement and of each
of the underlying agreements or instruments to which it relates and except for
matters which, individually or in the aggregate, could not have a Material
Adverse Effect.
3.06. Projections. The Borrower has furnished to the Agent
and each Lender projections prepared by the Borrower demonstrating the
projected financial condition and results of operations of the Borrower and
Salesco after giving effect to completion of construction of the Phase I
Project, for the period commencing on January 1, 1994 and ending on December
31, 2002,
<PAGE> 96
which projections are accompanied by a written statement of the assumptions and
estimates underlying such projections. The Borrower has furnished to the Agent
and each Lender projections prepared by the Borrower demonstrating the
projected financial condition and results of operations of the Borrower and
Salesco after giving effect to completion of construction of the Phase II
Project, for the period commencing on January 1, 1997 and ending on December
31, 2002, which projections are accompanied by a written statement of the
assumptions and estimates underlying such projections. Such projections were
prepared on the basis of such assumptions and estimates. Such projections,
assumptions and estimates, as of the date of preparation thereof and as of the
date hereof, are reasonable, are made in good faith, represent the Borrower's
best judgment as to such matters on the date thereof and do not contain
assumptions or methods of calculation which are inconsistent with the
requirements of the Loan Documents. Nothing contained in this Section shall
constitute a representation or warranty that such future financial performance
or results of operations will in fact be achieved.
3.07. Labor Matters. On the Closing Date and on the Initial
Tranche D Funding Availability Date, no Loan Party is a party to any collective
bargaining agreements with respect to any of its employees.
3.08. Absence of Undisclosed Liabilities. Except as
disclosed in writing to the Lenders, no Loan Party has any liability or
obligation of any nature whatever (whether absolute, accrued, contingent or
otherwise, whether or not due), forward or long-term commitments or unrealized
or anticipated losses from unfavorable commitments, except matters that,
individually or in the aggregate, could not have a Material Adverse Effect.
3.09. Accurate and Complete Disclosure. All information
provided (in writing) by or on behalf of any Loan Party to the Agent or any
Lender (or to the Persons listed on Schedule 3.09 hereto) pursuant to or in
connection with any Loan Document or any transaction contemplated hereby or
thereby (excluding, however, for purposes of this Section 3.09, the projections
described in Section 3.06 hereof, the Phase I Project Budget and the Phase II
Project Budget) is true and accurate in all material respects on the date as of
which such information is dated (or, if not dated, when received by the Agent
or such Lender, as the case may be) and such information, taken as a whole,
which was provided on or prior to the time this representation is made or
remade, does not omit to state any material fact necessary to make such
information not misleading at such time in light of the circumstances in which
it was provided.
<PAGE> 97
3.10. Commitments. Other than as set forth on Schedule 3.10
hereto or as permitted by Section 6.03 hereof, no Loan Party has received any
commitments for financing other than the Revolving Credit Commitments and the
Term Loan Commitments.
3.11. Solvency. On and as of the Closing Date and on and as
of the Initial Tranche D Funding Availability Date, after consummation of the
transactions contemplated herein and after giving effect to all Loans and other
obligations and liabilities being incurred on such respective dates in
connection therewith, and on the date of each subsequent Loan or other
extension of credit hereunder and after giving effect to application of the
proceeds thereof in accordance with the terms of the Loan Documents, the
Borrower and each other Loan Party is and will be Solvent.
3.12. Margin Regulations. No part of the proceeds of any
Loan hereunder will be used for the purpose of buying or carrying any "margin
stock," as such term is used in Regulations G and U of the Board of Governors
of the Federal Reserve System, as amended from time to time, or to extend
credit to others for the purpose of buying or carrying any "margin stock". No
Loan Party is engaged in the business of extending credit to others for the
purpose of buying or carrying "margin stock". No Loan Party owns any "margin
stock". Neither the making of any Loan nor any use of proceeds of any such
Loan will violate or conflict with the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, as amended from time to
time.
3.13. Subsidiaries. Except as otherwise specifically
permitted by this Agreement, the Borrower has no Subsidiaries, Salesco has no
Subsidiaries except for the Borrower and Holdings has no Subsidiaries except
for Salesco.
3.14. Partnerships, etc. Except as otherwise specifically
permitted by this Agreement, no Loan Party is a partner (general or limited) of
any partnership, is a party to any joint venture or is an owner (beneficially
or of record) of any equity or similar interest in any Person (including but
not limited to any interest pursuant to which the Borrower has or may in any
circumstance have an obligation to make capital contributions to, or be
generally liable for or on account of the liabilities, acts or omissions of
such other Person).
3.15. Ownership and Control. Schedule 3.15 hereof states as
of the date hereof, and Schedule 3.15-1996 hereto
<PAGE> 98
states as of the date of the Fifth 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 or Schedule 3.15-1996, 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 or Schedule 3.15-1996 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, and Schedule 3.15-1996 hereto describes as of the date of the
Fifth 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.
3.16. Litigation. Except as set forth in Schedule 3.16
hereof (in the case of the making of this representation and warranty on the
Closing Date and on any other date prior to the date of the request for the
initial Term Loans), there is no pending or, to the Borrower's knowledge,
threatened action, suit, claim, proceeding or investigation by or before any
Governmental Authority against or affecting any Loan Party which could, if
adversely determined, have a Material Adverse Effect.
3.17. Absence of Events of Default. No event has occurred
and is continuing and no condition exists which constitutes an Event of Default
or Potential Default.
3.18. Absence of Other Conflicts. None of the Loan Parties,
Keith Busse, Mark Millet or Richard Teets is in violation of or conflict with,
or is subject to any contingent liability on account of any violation of or
conflict with:
(a) any Requirement of Law,
<PAGE> 99
(b) its certificate or articles of incorporation or by-laws
(or other constituent documents), or
(c) any Contractual Obligations to which it is party,
which violation or conflict could have a Material Adverse Effect.
3.19. Insurance. Each Loan Party maintains with financially
sound and reputable insurers the insurance required by Section 5.02 hereof.
3.20. Title to Property. Each Loan Party has good and
marketable title in fee simple to all real property owned or purported to be
owned by it and good title to all other property of whatever nature owned or
purported to be owned by it, in each case free and clear of all Liens, other
than Permitted Liens.
3.21. Intellectual and Other Property. Each Loan Party owns,
or is licensed or otherwise has the right to use, all the patents, trademarks,
service marks, names (trade, service, fictitious or otherwise), copyrights,
technology (including but not limited to all equipment comprising part of the
Phase I Project or the Phase II Project and computer programs and software),
processes, data bases and other rights, free from burdensome restrictions,
necessary to own and operate its properties and to carry on its business as
presently conducted and presently planned to be conducted without conflict with
the rights of others in any material respect.
3.22. Taxes. All tax and information returns required to be
filed by or on behalf of each Loan Party have been properly prepared, executed
and filed, except when the failure to do so could not have a Material Adverse
Effect. All taxes, assessments, fees and other governmental charges upon any
Loan Party or upon any of its properties, incomes, sales or franchises which
are due and payable have been paid other than those not yet delinquent and
payable without premium or penalty, and except for those being diligently
contested in good faith by appropriate proceedings, and in each case adequate
reserves and provisions for taxes have been made on the books of such Loan
Party. The reserves and provisions for taxes on the books of each Loan Party
are adequate for all open years and for its current fiscal period. The
Borrower does not know of any proposed additional assessment or basis for any
material assessment for additional taxes against any Loan Party (whether or not
reserved against) except, with respect to times after the Phase II Project
Acceptance Date, assessments or basis therefor which could not
<PAGE> 100
have a Material Adverse Effect.
3.23. Employee Benefits. Schedule 3.23 hereof sets forth as
of the date hereof a list of all Plans and Multiemployer Plans, and all
information available to the Borrower with respect to the direct, indirect or
potential withdrawal liability to any Multiemployer Plan of any Loan Party or
any Controlled Group Member. On the Closing Date and on the Initial Tranche D
Funding Availability Date, except as set forth in Schedule 3.23 hereof, no Loan
Party has any liability (contingent or otherwise) for or in connection with,
and none of their respective properties is subject to a Lien in connection
with, any Pension-Related Event.
3.24. Environmental Matters.
(a) Each Loan Party, and to the Borrower's knowledge each of
its Environmental Affiliates, is and has been in compliance with all applicable
Environmental Laws, except where the failure to so comply, individually or in
the aggregate, could not have a Material Adverse Effect. There are no
circumstances that may prevent or interfere with such compliance by any Loan
Party in the future.
(b) All Environmental Approvals necessary for the ownership
and operation of any Loan Party's properties, facilities and businesses as
presently owned and operated and as presently proposed to be owned and operated
are Required Phase I Project Permits. All Environmental Approvals necessary
for the ownership and operations of any Loan Party's properties, facilities and
businesses as owned and operated on the date of the Fifth Amendment and as
proposed on such date to be owned and operated are Required Phase I Project
Permits or Required Phase II Project Permits.
(c) There is no Environmental Claim pending or, to the
Borrower's knowledge, threatened, and there are no past or present acts,
omissions, events or circumstances (including but not limited to any dumping,
leaching, deposition, removal, abandonment, escape, emission, discharge or
release of any Environmental Concern Material at, on or under any facility or
property now or previously owned, operated or leased by any Loan Party or, to
Borrower's knowledge, any of its Environmental Affiliates) that could form the
basis of any Environmental Claim, against any Loan Party or any of its
Environmental Affiliates, except matters which, individually or in the
aggregate, could not have a Material Adverse Effect.
(d) No facility or property now or previously owned, operated or
leased by any Loan Party is an Environmental Cleanup Site. Neither any Loan
Party nor, to Borrower's knowledge, any
<PAGE> 101
of its Environmental Affiliates has directly transported or directly arranged
for the transportation of any material quantities of Environmental Concern
Materials to any Environmental Cleanup Site, except matters which, individually
or in the aggregate, could not have a Material Adverse Effect. No Lien exists,
and no condition exists which could result in the filing of a Lien, against any
property of any Loan Party or any of its Environmental Affiliates, under any
Environmental Law.
3.25. Subordinated Notes. (a) The offering and sale of the
Subordinated Notes have been and will be made in accordance with the terms of
the Securities Act of 1933, applicable state securities laws and other
applicable Laws.
(b) All of the Obligations constitute and will constitute
"Senior Indebtedness" within the meaning ascribed to such term in the
Subordinated Debt Purchase Agreement and the Subordinated Notes. The
subordination provisions of the Subordinated Debt Purchase Agreement and the
Subordinated Notes are enforceable against the Borrower and the holders from
time to time of the Subordinated Notes.
3.26. Phase I Project Compliance With Laws; Permits. The
construction of the Phase I Project as contemplated by the Specifications and
the intended use of the Phase I Project comply with all applicable Laws
(including Environmental Laws and Laws relating to zoning), restrictive
covenants and applicable Required Phase I Project Permits. All Required Phase
I Project Permits are listed in Schedule 3.26 hereto. All Required Phase I
Project Permits (except those Required Phase I Project Permits which are
designated on Schedule 3.26 hereto as being receivable after the Closing Date,
which permits are not necessary until a later stage of, or completion of,
construction of the Phase I Project, as designated on such Schedule) have been
duly obtained, have not been modified and, to the extent still necessary, are
in full force and effect (with all appeal periods having expired except as set
forth on Schedule 3.26), and there is no action, suit, proceeding,
investigation, claim, complaint or demand pending or, to the Borrower's
knowledge, threatened with respect thereto or which seeks or may result in (a)
the reversal, rescission, termination or suspension of any Required Phase I
Project Permit or (b) any modification of any Required Phase I Project Permit.
In obtaining each Required Phase I Project Permit, no Loan Party made any
application to any Governmental Authority in connection therewith which
application, when taken together with all amendments, supplements and
modifications thereto, contained any untrue statement of a material fact or
<PAGE> 102
omitted to state a material fact necessary in order to make the statements
contained therein not misleading. As to any Required Phase I Project Permits
that have not yet been obtained, (a) such Required Phase I Project Permits are
not discretionary in nature and are expected to be obtainable prior to the time
they are needed to maintain without material delay the process of construction
of the Phase I Project in order to achieve the Phase I Project Commissioning
Date on or before September 30, 1996 and to maintain without material
disruption operation of the Phase I Project thereafter, (b) the Borrower is not
aware of any facts or circumstances which could reasonably be expected to
preclude the Borrower from obtaining such Required Phase I Project Permits on a
timely basis and (c) no unusual or materially burdensome conditions are
expected to be placed upon the issuance of, or required by, such Required Phase
I Project Permits.
3.27. Sufficiency of Phase I Project Agreements. To the best
knowledge of the Borrower after due inquiry, except as described on Schedule
3.27 hereof, the services to be performed for, and the materials and equipment
to be supplied to and the easements and other rights granted to, the Borrower
pursuant to Phase I Project Agreements in effect on the Closing Date (a)
comprise all of the property and property interests necessary to construct,
install, equip, own, operate and maintain the Phase I Project in accordance
with all applicable Laws, Required Phase I Project Permits and restrictive
covenants and as contemplated by the Phase I Project Agreements, (b) are
sufficient to enable the Phase I Project to be located, constructed and
operated on the Phase I Project Site, (c) provide adequate ingress and egress
from the Phase I Project Site for any reasonable purpose in connection with the
operation of the Phase I Project and (d) can reasonably be expected to enable
the Borrower to operate the Phase I Project at the capacity and efficiency
contemplated in the SMS Contract; all without reference to any proprietary
information not owned by the Borrower or which the Borrower does not have the
legal right to use.
3.28. Subdivision; Separate Assessment. Except as set forth
on Schedule 3.28, from and after the Recording Date, the Phase I Project Site
will be a single parcel under the applicable Laws regulating subdivision and
land development, will be separately assessed for ad valorem real property
taxes, and may be leased, transferred and/or developed by constructing the
Phase I Project and the Phase II Project thereon without the approval of any
Governmental Authority having the jurisdiction to regulate or control
subdivision or land development.
3.29. Utility Services. Except as set forth on Schedule
3.29, from and after the Recording Date, all utility services necessary for the
construction of the Phase I Project
<PAGE> 103
and of the Phase II Project and the operation and maintenance thereof will be
available at the boundaries of the Phase I Project Site, including water supply
(including process water) and sanitary and storm sewer facilities and gas,
electric and telephone facilities, and the costs of construction for installing
the same are included in the Phase I Project Budget or, in the case of the
Phase II Project, the Phase II Project Budget.
3.30 Potential Conflicts of Interest. As of the Closing
Date, except for the Equity Agreements, the Employment Agreements and as set
forth on Schedule 3.30, to the best knowledge of Holdings, the Borrower and
Salesco, without independent investigation, no Affiliate of Holdings, Salesco
or the Company: (a) owns, directly or indirectly, any interest in (excepting
less than 5% stock holdings for investment purposes in securities of publicly
held and traded companies), or is an officer, director, employee or consultant
of, any Person which is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of, or lender to or
borrower from, Holdings, Salesco, the Borrower or any of their Subsidiaries;
(b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property that Holdings, Salesco, the Borrower or any of their
Subsidiaries uses in the conduct of business; or (c) has any cause of action or
other claim whatsoever against, or owes any amount to, Holdings, Salesco, the
Borrower or any of their Subsidiaries, except for claims in the ordinary course
of business.
3.31. Phase II Project Compliance With Laws; Permits. The
construction of the Phase II Project as contemplated by the Specifications and
the intended use of the Phase II Project comply with all applicable Laws
(including Environmental Laws and Laws relating to zoning), restrictive
covenants and applicable Required Phase II Project Permits. All Required Phase
II Project Permits will be listed in a schedule, designated Schedule 3.31-1996
hereto, which will be delivered to the Lenders prior to the Initial Tranche D
Funding Availability Date and will be satisfactory to the Agent after
consultation with the Phase II Project Monitor. All Required Phase II Project
Permits (except those Required Phase II Project Permits which will be
designated on such Schedule 3.31-1996 as being receivable after the Initial
Tranche D Funding Availability Date, which permits are not necessary until a
later stage of, or completion of, construction of the Phase II Project, as
designated on such Schedule) have been duly obtained, have not been modified
and, to the extent still necessary, are in full force and effect (with all
appeal
<PAGE> 104
periods having expired except as set forth on such Schedule 3.31-1996), and
there is no action, suit, proceeding, investigation, claim, complaint or demand
pending or, to the Borrower's knowledge, threatened with respect thereto or
which seeks or may result in (a) the reversal, rescission, termination or
suspension of any Required Phase II Project Permit or (b) any modification of
any Required Phase II Project Permit. In obtaining each Required Phase II
Project Permit, no Loan Party made any application to any Governmental
Authority in connection therewith which application, when taken together with
all amendments, supplements and modifications thereto, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements contained therein not misleading. As to any
Required Phase II Project Permits that have not yet been obtained, (a) such
Required Phase II Project Permits are not discretionary in nature and are
expected to be obtainable prior to the time they are needed to maintain without
material delay the process of construction of the Phase II Project in order to
achieve the Phase II Project Commissioning Date on or before June 30, 1998, and
to maintain without material disruption operation of the Phase II Project
thereafter, (b) the Borrower is not aware of any facts or circumstances which
could reasonably be expected to preclude the Borrower from obtaining such
Required Phase II Project Permits on a timely basis and (c) no unusual or
materially burdensome conditions are expected to be placed upon the issuance
of, or required by, such Required Phase II Project Permits.
3.32. Sufficiency of Phase II Project Agreements. To the
best knowledge of the Borrower after due inquiry, the services to be performed
for, and the materials and equipment to be supplied to and the easements and
other rights granted to, the Borrower pursuant to Phase II Project Agreements
in effect on the Initial Tranche D Funding Availability Date (a) comprise all
of the property and property interests necessary to construct, install, equip,
own, operate and maintain the Phase II Project in accordance with all
applicable Laws, Required Phase II Project Permits and restrictive covenants
and as contemplated by the Phase II Project Agreements, (b) are sufficient
(when taken together with the Phase I Project Agreements remaining in effect)
to enable the Phase II Project to be located, constructed and operated on the
Project Site, (c) provide (when taken together with the Phase I Project
Agreements remaining in effect) adequate ingress and egress from the Project
Site for any reasonable purpose in connection with the operation of the Phase
II Project and (d) can reasonably be expected to enable the Borrower to operate
the Phase II Project at the capacity and efficiency contemplated by the
projections referred to in the second sentence of Section 3.06; all without
reference to any proprietary information not owned by the Borrower or which the
<PAGE> 105
Borrower does not have the legal right to use.
ARTICLE IV
CONDITIONS OF LENDING
4.01. Conditions to Initial Loans and Letters of Credit. The
obligation of each Lender Party to make Loans (other than Tranche C Loans and
other than Tranche D Loans) or issue Letters of Credit is subject to the
satisfaction, on or before the Closing Date (or in the case of Section 4.01(c),
on or before the Recording Date), of the following conditions precedent, in
addition to the conditions precedent set forth in Sections 4.02 and 4.03
hereof:
(a) Agreement; Notes; Fees. The Agent shall have
received an executed counterpart of this Agreement for each
Lender, duly executed by the Borrower, and executed Revolving
Credit Notes and Term Loan Notes conforming to the
requirements hereof, duly executed on behalf of the Borrower
and each Lender shall have received the fees set forth in a
letter from the Borrower to such Lender dated June 29, 1994.
(b) Certain Security Documents Pertaining to
Personal Property. The Agent shall have received the
following, with a copy for each Lender (except for instruments
pledged pursuant to the Security Documents):
(i) Executed copies of each of the
following:
(A) A Security Agreement, duly
executed on behalf of the Borrower, in
substantially the form of Exhibit G hereto
(as amended, modified or supplemented from
time to time, the "Security Agreement").
(B) [intentionally omitted]
(C) [intentionally omitted]
(D) Assignment of Contracts, in
substantially the form of Exhibit M hereto
("Assignment of Contracts"), with respect to
the contracts listed on Schedule 4.01(b)
hereto.
(E) Consents to Assignment of
Contracts, in
<PAGE> 106
substantially the form of Exhibit N
hereto, with respect to the contracts listed
on Schedule 4.01(b) hereto.
(F) A Pledge and Security Agreement,
duly executed on behalf of Salesco, in
substantially the form of Exhibit AA hereto
(as amended, modified or supplemented from
time to time, the "Salesco Security
Agreement"), together with the certificates
representing the capital stock of the
Borrower pledged to the Agent thereunder,
accompanied by undated signed stock powers
separate from certificate duly endorsed in
blank.
(G) A Pledge and Security Agreement,
duly executed on behalf of Holdings, in
substantially the form of Exhibit JJ hereto
(as amended, modified or supplemented from
time to time, the "Holdings Security
Agreement"), together with the certificates
representing the capital stock of Salesco
pledged to the Agent thereunder, accompanied
by undated signed stock powers separate from
certificate duly endorsed in blank.
(ii) Evidence of the completion of all
recordings and filings of or with respect to, and of
all other actions with respect to, the above Security
Documents as may be necessary or, in the opinion of
the Agent, desirable to create or perfect the Liens
created or purported to be created by such Security
Documents as valid, continuing and perfected Liens in
favor of the Agent for the benefit of the Agent and
the Lenders securing the Obligations, prior to all
other Liens; and evidence of the payment of any
necessary fee, tax or expense relating to such
recording or filing. Without limitation of the
foregoing, the Agent shall receive:
(A) Acknowledgment copies of proper
financing statements duly filed under the
Uniform Commercial Code in all jurisdictions
as may be necessary or, in the opinion of the
Agent, desirable to create or perfect such
Liens in favor of the Agent);
(B) [intentionally omitted]; and
(iii) Evidence of the insurance required by
the terms of this Agreement, containing the
endorsements required by this Agreement.
<PAGE> 107
(iv) Evidence that all other actions
necessary or, in the opinion of the Agent, desirable
to create, perfect or protect the Liens created or
purported to be created by the above Security
Documents have been taken.
(v) A search dated not more than twenty days
prior to the Closing Date of UCC, real property, tax,
judgment and litigation dockets and records and other
appropriate registers shall have revealed no filings
or recordings in effect with respect to the
Collateral purported to be covered by the above
Security Documents, except such as are acceptable to
the Agent and each Lender (it being understood that
such acceptance does not limit the obligations of any
Loan Party with respect to the priority of the Liens
in favor of the Agent), and the Agent shall have
received a copy of the search reports received as a
result of the search and of the acknowledgment copies
of the financing statements or other instruments
required to be filed or recorded pursuant to this
subsection bearing evidence of the recording of such
statements or instruments at each of such filing or
recording places.
(c) Certain Security Documents Pertaining to Real
Property. The Agent shall, on or before the Recording Date
(but with respect to the mortgage supplement referred to in
clause (i)(A) below and the other items described below to the
extent they relate to such mortgage supplement or the property
covered thereby, on or before November 30, 1994), have
received the following, each of which shall be in form and
substance satisfactory to the Agent, with a copy for each
Lender:
(i) Executed copies of each of the following:
(A) A Mortgage, duly executed on behalf of the
Borrower, in substantially the form of Exhibit J
hereto, and (B) a mortgage supplement thereto, duly
executed by the Borrower, in substantially the form
of Exhibit J-2 hereto (together, as amended, modified
or supplemented from time to time, the "Mortgage").
(ii) Evidence of the completion of all
recordings and filings of or with respect to, and of
all other actions with respect to, the above Security
Documents as may be necessary or, in the opinion of
the Agent or any Lender, desirable or required to
create or
<PAGE> 108
perfect the Liens created or purported to be created
by such Security Documents as valid, continuing and
perfected Liens in favor of the Agent for the benefit
of the Agent and the Lenders securing the
Obligations, prior to all other Liens; and evidence
of the payment of any necessary fee, tax or expense
relating to such recording or filing.
(iii) With respect to such Security
Documents, the Agent shall have received in respect
of each property or estate constituting Collateral
thereunder one or more mortgagee's title insurance
policies (or marked up unconditional binders for such
insurance) dated the Recording Date. Each such
policy shall: (A) be in an amount not unsatisfactory
to the Lenders; (B) be issued at ordinary rates; (C)
insure that each Security Document insured thereby
creates a valid first priority Lien on such property
or estate of the mortgagor, free and clear of all
Liens, defects and other exceptions to title, except
such as are listed on the title commitment attached
hereto as Exhibit II or as may be approved by the
Lenders; (D) name the Agent for the benefit of the
Lenders and the Agent as the insured thereunder; (E)
be in the form of ALTA Loan Policy -- 1970 (or other
form reasonably acceptable to the Agent); (F) contain
such endorsements and affirmative coverage as the
Lenders may reasonably request, including without
limitation a revolving credit endorsement; (G) be
issued by Lawyers Title Insurance Company; and (H) be
accompanied by such coinsurance and reinsurance and
direct access agreements as the Lenders may
reasonably require. The Agent shall have received a
copy of such of the recorded documents referred to,
or listed as exceptions to title in, such policy or
policies or binders as the Agent or any Lender has
requested and a copy of all other documents requested
by the Agent or any Lender affecting the property
covered by each such Security Document. The Agent
and such title insurers shall have received such
affidavits from the mortgagor as they may reasonably
require.
(iv) With respect to such Security
Documents, the Agent and the title insurance company
issuing any applicable title insurance policy or
binder referred to in clause (iii) above shall have
received a survey of the site of each property or
estate covered by each Security Document, certified
to the Agent and such title insurance company in a
manner satisfactory to the Agent, each Lender and
such title insurance company,
<PAGE> 109
dated a date satisfactory to each of them by an
independent professional licensed land surveyor
satisfactory to each of them. Such survey shall
include such matters as the Agent, any Lender or such
title insurance company may request.
(v) With respect to Collateral referred to
in such Security Documents, certified copies of all
leases (as lessor or as lessee), if any, pertaining
to any part of such Collateral.
(vi) Such Governmental Actions and other
agreements, estoppel letters, consents from such
Governmental Authorities and other Persons in respect
of the above Security Documents, and the property
subject thereto, as may be reasonably requested by
the Agent or any Lender.
(vii) Evidence of the insurance required by
the terms of the above Security Documents, containing
the endorsements required by such Security Documents
and this Agreement.
(viii) Evidence that all other action
necessary or, in the reasonable opinion of the Agent,
desirable to create, perfect and protect the Liens
created or purported to be created by the above
Security Documents have been taken.
(d) Cash Management. The Agent shall have received
acknowledgments, in form and substance satisfactory to the
Agent, duly executed by Mellon as lockbox bank, together with
such other documents, releases and agreements as may be
reasonably required by the Agent in connection with perfecting
the Agent's Lien in the accounts referred to in such
acknowledgments.
(e) Capitalization, etc. The corporate and capital
structure of each Loan Party, the certificate or articles of
incorporation and by-laws (or other constituent documents) of
each of them, and the terms, conditions, amounts and holders
of all equity, debt and other indebtedness, obligations and
liabilities of each of them, shall be not unsatisfactory to
the Lenders. Without limitation of the foregoing:
(i) The Agent shall have received, with copies
and
<PAGE> 110
executed counterparts for each Lender, true and
correct copies (in each case certified as to
authenticity on such date on behalf of the Borrower)
of the Subordinated Debt Purchase Agreement and the
same shall be not unsatisfactory in form and
substance to any Lender and shall be in full force
and effect.
(ii) The Agent shall have received, with
copies and executed counterparts for each Lender,
true and correct copies (in each case certified as to
authenticity on such date on behalf of Holdings) of
each of the Equity Documents and the Stock Purchase
Agreement, and such items shall be not unsatisfactory
in form and substance to any Lender and shall be in
full force and effect.
(iii) The Agent shall have received, with
copies and executed counterparts for each Lender,
true and correct copies (in each case certified as to
authenticity on such date on behalf of the Borrower)
of the memoranda of understanding or other
documentation between the Borrower and the Persons
identified on Schedule 1.01A hereto evidencing the
undertakings of such Persons other than the Borrower
to provide the proceeds and benefits of the
Development Package.
(f) Governmental Approvals and Filings. The Agent
shall have received, with copies and executed counterparts or
each Lender, true and correct copies (in each case certified
as to authenticity on such date on behalf of the Borrower) of
all items referred to in Schedule 3.04 and Schedule 3.26
hereof which are designated on such Schedule to be receivable
on or prior to the Closing Date and such items shall be
satisfactory in form and substance to the Agent and shall be
in full force and effect.
(g) Other Conflicts. The Agent shall have received,
with copies and executed counterparts for each Lender, true
and correct copies (in each case certified as to authenticity
on such date on behalf of the Borrower) of all items referred
to in Schedule 3.05 hereof (if any) and such items shall be
satisfactory in form and substance to the Agent and each
Lender and shall be in full force and effect.
(h) Corporate Proceedings. The Agent shall have
received, with a counterpart for each Lender, certificates by
the Secretary of each Loan Party dated as of the Closing Date
as to (i) true copies of the certificate or articles of
incorporation and by-laws (or other constituent documents) of
such Loan Party in effect on such date (which, in the
<PAGE> 111
case of the certificate or articles of incorporation or other
constituent documents filed or required to be filed with the
Secretary of State or other Governmental Authority in its
jurisdiction of incorporation, shall be certified to be true,
correct and complete by such Secretary of State or other
Governmental Authority not more than 30 days before the
Closing Date), (ii) true copies of all corporate action taken
by such Loan Party relative to this Agreement and the other
Loan Documents and (iii) the incumbency and signature of the
respective officers of such Loan Party executing this
Agreement and the other Loan Documents, together with
satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary. The Agent shall have received, with a
copy for each Lender, certificates from the appropriate
Secretaries of State or other applicable Governmental
Authorities dated not more than 30 days before the Closing
Date showing the good standing of each Loan Party in its state
of incorporation and each state in which it does business.
(i) Insurance. The Agent shall have received a
report from Marsh & McLennan, with a copy for each Lender,
addressed to the Agent and each Lender, satisfactory in form
and substance to the Agent, as to insurance matters pertaining
to the Loan Parties. The Agent shall have received evidence
satisfactory to it that the insurance policies required by
this Agreement and the other Loan Documents have been
obtained, containing the endorsements required hereby and
thereby.
(j) Environmental Matters. The Agent shall have a
report from Rust Environment Infrastructure Inc., with a copy
for each Lender, addressed to the Agent and each Lender, not
unsatisfactory in form or substance to the Agent and each
Lender, as to such environmental matters pertaining to the
Loan Parties as any Lender may request (including but not
limited to a Phase I environmental risk report for all real
property constituting Collateral). In addition, the Agent
shall have received, with a copy for each Lender, such
certifications by officers or employees of the Borrower as any
Lender may request with respect to (A) compliance by each Loan
Party with existing Environmental Laws, (B) potential
environmental liabilities arising from past or present
conditions, operations or practices, and (C) potential
environmental liabilities arising from off-site disposal of
materials generated by any Loan Party.
<PAGE> 112
(k) Projections. The Agent shall have received,
with a counterpart for each Lender, copies of the projections
referred to in Section 3.06 hereof.
(l) Legal Opinions. The Agent shall have received,
with an executed counterpart for each Lender, opinions
addressed to the Agent and each Lender, dated the Closing
Date, of Baker & Hostetler, counsel to the Borrower and
Salesco and Holdings, Barnes & Thornburg, Indiana counsel to
the Borrower and Salesco and Holdings, Kirkland & Ellis, New
York counsel to the Borrower and Salesco and Holdings, and the
individuals or firms listed on Schedule 4.01(l) hereto,
counsel for the respective parties listed on such Schedule, as
to such matters as may be requested by the Agent or any Lender
and in form and substance satisfactory to the Agent and each
Lender.
(m) Officers' Certificates. The Agent shall have
received, with an executed counterpart for each Lender,
certificates from such officers of each Loan Party as to such
matters as the Agent or any Lender may request.
(n) Fees, Expenses, etc. All fees and other
compensation required to be paid to the Agent or the Lenders
pursuant hereto or pursuant to any other written agreement on
or prior to the Closing Date shall have been paid or received.
(o) Third Party Contracts. All contracts (including
without limitation those regarding construction, engineering,
equipment, supply of raw materials, provision of electric and
other utilities, and sales) set forth on Schedule 4.01(o)
hereto, as well as the SMS Documents, the Heidtman Documents,
the OmniSource Documents and the other Phase I Project
Agreements, shall have been executed and delivered, copies
thereof shall have been delivered to the Agent and shall
contain terms not reasonably unsatisfactory to the Agent.
Contracts will be in place assuring that the vendor-supplied
letters of credit and the vendor refund bonds will be in
amounts (not less than $15 million in the aggregate) and on
terms satisfactory to the Agent.
(p) [Intentionally omitted]
(q) Employment Agreements. Each of Keith Busse,
Mark Millett and Richard Teets shall have executed and
delivered the Employment Agreements, each containing terms
satisfactory to the Agent, and conformed copies of the same
shall have been provided to the Agent.
<PAGE> 113
(r) Material Adverse Change. There shall have been
no material adverse change in the projections described in
Section 3.06 hereto.
(s) Phase I Project Monitor's Report. The Agent
shall have received the following, which shall be in form and
substance satisfactory to the Lenders, with a copy for each
Lender: A report from the Phase I Project Monitor as to all
aspects of the Phase I Project reviewed by it, including the
design of the Phase I Project, the projected capacity and
efficiency of the Phase I Project, construction schedules,
cost estimates for construction, operation and maintenance of
the Phase I Project, the adequacy of performance tests,
operating performance feasibility (including without
limitation capability of producing a specified volume of
Commercial Grade Finished Goods), environmental matters,
Required Phase I Project Permits, reasonableness of liquidated
damage amounts and other Phase I Project matters. Said report
shall state that the Specifications to the extent then
developed are satisfactory and have been sufficiently
developed in order to establish an adequate basis for the
Design and Construction Standard.
(t) Agreement Among Secured Lenders. The Agent and
the Lenders shall have executed and delivered an Agreement
Among Secured Lenders substantially in the form of Exhibit K
hereto.
(u) Warrant Agreement. The Warrant Agreement dated
on or about the Closing Date between the Borrower and Mellon
shall have been executed and delivered, and the transactions
contemplated therein shall have been completed.
(v) Salesco/Holdings Guaranty. The Agent shall have
received, with sufficient signed copies for each of the
Lenders, a Guaranty and Suretyship Agreement, duly executed on
behalf of each of Holdings and Salesco, in substantially the
form of Exhibit BB hereto (as amended, modified or
supplemented from time to time, the "Salesco/Holdings
Guaranty").
(w) Adequacy of Funds Certificate. The Agent shall
have received, with a copy for each Lender, an "Adequacy of
Funds Certificate" (in form and scope described in Section
4.02(d) hereof) as of May 31, 1994, together with the related
Phase I Project Monitor's Certificate described in Section
4.02(e) hereof.
<PAGE> 114
(x) Additional Matters. The Agent shall have
received such other certificates, opinions, documents and instruments
as may be requested by any Lender. All corporate and other
proceedings, and all documents, instruments and other matters in
connection with the transactions contemplated by this Agreement and
the other Loan Documents shall be satisfactory in form and substance
to the Agent and each Lender.
4.02. Conditions to Term Loan (A and B) Commitment Period
Loans. The obligation of each Lender Party to make any Revolving Credit Loan
or issue any Letter of Credit or make any Term Loan (other than any Tranche C
Loan and other than any Tranche D Loan) during the Term Loan (A and B)
Commitment Period is subject to the performance by each Loan Party of its
obligations to be performed hereunder or under the other Loan Documents on or
before the date of such Loan or of the issuance of such Letter of Credit,
satisfaction of the conditions precedent set forth herein (including Sections
4.01(b), 4.01(c) and 4.03 hereof) and in the other Loan Documents and to
satisfaction of the following further conditions precedent:
(a) Receipt of Certain Proceeds. (i) All proceeds of
issuances of equity and the borrowings under Subordinated Notes (in
principal amounts of $82,000,000 and of at least $50,000,000 and no
more than $60,000,000, respectively) shall have been received and
substantially expended for construction and other operating costs of
the Phase I Project, and Borrower shall have received such proceeds
and benefits of the Development Package as are designated on Schedule
4.02(a) as receivable on or prior to the date of such Loan or Letter
of Credit and such proceeds and benefits shall have been committed by
the Borrower for construction and other operating costs of the Phase I
Project; and (ii) for any portion of the Development Package which is
to be financed by the issuance of bonds and which is included in the
$35,000,000 of Development Package benefits required to be in full
force and effect, the issuance of such bonds shall have closed, or
bond purchasers not reasonably unacceptable to the Required Lenders
shall have executed and delivered commitments (which are in full force
and effect) to purchase such bonds which commitments shall not be
reasonably unsatisfactory to the Required Lenders provided, however,
that the condition set forth in this Section 4.02(a) shall not be
applicable to the issuance of Letters of Credit if the aggregate
Letter of Credit Exposure, upon such issuance, would not exceed
$1,000,000, plus the outstanding balance of the Letter of Credit
Collateral Account.
<PAGE> 115
(b) Certification as to Certain Governmental Approvals. The
Borrower shall have provided an officer's certificate in form and
substance satisfactory to the Agent with supporting documentation
reasonably requested by the Agent confirming proper zoning and the
availability of utility and municipal services.
(c) Title Insurance. With respect to each Term Loan, a title
insurance policy endorsement satisfactory to the Agent covering the
applicable Term Loan shall have been received by the Agent.
(d) Certain Additional Officer's Certificates. The Borrower
shall have provided (at least three Business Days prior to the date of
the applicable Loans) the following officer's certificates in form and
substance satisfactory to the Agent:
(i) if a Loan is requested, a "Use of Advance
Certificate", substantially in the form of Exhibit O hereto,
with the blanks appropriately filled in, stating that such
Loan will only be used to pay capital expenditures, working
capital and other operating costs which are necessary for the
construction and operation of the Phase I Project and which,
in the case of any Term Loan, are Phase I Project Costs (A)
which have been incurred and are payable or (B) which
constitute interest on the Loans which will become due and
payable within 30 days after the date such Loan is to be made
or (C) which constitute other costs which are due on a
particular schedule and are of a category of cost referenced
in Attachment 1 to the form of "Use of Advance Certificate"
attached hereto as Exhibit O and will become due and payable
within 30 days after the date such Loan is made or (D)
constitute other costs which the Borrower estimates will be
incurred and become due and payable within 30 days after the
date such Loan is to be made; and, if any of the Phase I
Project Costs to be paid by a Term Loan were not included as
actual Phase I Project Costs to date in the "Phase I Project
Status Certificate" and "Adequacy of Funds Certificate"
referred to below in this Section 4.02(d), such "Use of
Advance Certificate" shall include a statement that such Phase
I Project Costs and the payment thereof by the Borrower, if
the same had been included in such "Adequacy of Funds
Certificate", would not have caused the Net Excess
<PAGE> 116
amount (total financing (excluding the Tranche C Committed
Amounts) less the sum of total project costs and required
contingency) set forth in the Summary section of Schedule Q of
such "Adequacy of Funds Certificate" to be less than zero;
(ii) if a Term Loan is requested, a "Phase I Project
Status Certificate", substantially in the form of Exhibit P
hereto, with the blanks appropriately filled in, setting
forth, as of a date not more than thirty days prior to the
date such Loan is to be made, the Phase I Project Budget, the
Phase I Project Costs thereof to date and the Remaining Phase
I Project Costs (including costs associated with any damage or
other casualty), and the percentage of completion of
construction of the Phase I Project;
(iii) if a Term Loan is requested, an "Adequacy of
Funds Certificate", substantially in the form of Exhibit Q
hereto, with the blanks appropriately filled in, stating and
demonstrating that, as of a date which is not earlier than
forty-five days prior to the date such Loan is to be made and
which is not earlier than the date of the most recent Adequacy
of Funds Certificate furnished to the Agent under Section
5.01(q) or otherwise, the Net Excess amount (total financing
(excluding the Tranche C Committed Amounts) less the sum of
total project costs and required contingency) is zero or more.
Neither the Designated Initial Phase II Equity Proceeds nor
the proceeds of Additional Common Equity nor any commitment with
respect to either thereof nor the Tranche D Loan Commitments shall
constitute a source of funding for purposes of any Adequacy of Funds
Certificate or for purposes of Section 4.02(h) hereof.
(e) Phase I Project Monitor's and Accountant's Certificates.
If a Term Loan is requested, the conditions set forth in this Section
4.02(e) shall have been satisfied. The Phase I Project Monitor shall
have provided a certificate, substantially in the form of Exhibit Z
hereto, with the blanks appropriately filled in, stating (i) the
status of the Phase I Project with respect to the PP&E Costs (PP&E
Costs to date, PP&E Costs required to Complete the construction of the
Phase I Project and percentage of completion), (ii) any variances in
such PP&E Costs from the Phase I Project Status Certificate, and (iii)
the date by which the Phase I Project Commissioning Date can be
expected to occur. The independent certified public accountants of
<PAGE> 117
the Borrower shall have provided an "Agreed Upon Procedures Report"
substantially in the form of Exhibit GG hereto, with the blanks
appropriately filled in, on the Phase I Project Status Certificate
with respect to the Non-PP&E Costs (actual and forecasts) contained
therein. The "Agreed Upon Procedures Report" shall include a
statement that nothing came to the attention of the independent
accountants that would indicate that the actual Non-PP&E Costs to date
and the current forecast of Non-PP&E Costs did not agree with the
projections of the Borrower referred to in Section 3.06 hereof (except
as detailed in the report, substantially in the form of Exhibit GG and
its supporting schedules) and a statement that the Borrower's current
projections of Non-PP&E Costs was prepared using accounting policies
consistent with the accounting policies used to prepare such
projections (except as detailed in the report, substantially in the
form of Exhibit GG and its supporting schedules). The timing and
procedure for obtaining the aforesaid certificate and report is
described in Schedule 4.02(e) hereto. If, at any time, despite the
reasonable and diligent efforts of the Borrower, the independent
certified public accountants of the Borrower refuse, for internal
business policy reasons, to continue to provide the aforesaid report
in the form described above, such report may be modified (for purposes
of this Section 4.02(e) and Section 5.01(q) hereof) to the extent
necessary for such accountants to issue the report, or, if for such
reasons such accountants refuse to issue any report, such report shall
thereafter not be required under this Section 4.02(e) nor under
Section 5.01(q) hereof.
(f) Damage. On the date of such Loan or Letter of Credit,
the Phase I Project shall not have been materially injured or damaged
by fire or other casualty and have remained unrestored unless the
Borrower has complied with all the requirements of Section 2.06 of the
Mortgage.
(g) Required Phase I Project Permits. The Agent shall have
received, with a copy for each Lender, on or before the date of such
Loan or Letter of Credit, true and correct copies (in each case
certified as to the authenticity on such date on behalf of the
Borrower) of all Required Phase I Project Permits referred to in
Schedule 3.04 and Schedule 3.26 hereof which are designated on such
Schedule to be receivable on or prior to the date of such Loan or
Letter of Credit and such items shall be satisfactory in form and
substance to the Agent and shall be in full force and
<PAGE> 118
effect.
(h) Adequacy of Funds. The remaining availability under the
Term Loan Commitment, plus the other undrawn committed financing of
Borrower from the sources listed on Schedule Q hereto (excluding
Tranche C Committed Amounts) shall be greater than the Remaining Phase
I Project Costs plus the Required Phase I Contingency.
(i) Substation Purchase. Indiana Michigan Power Company
shall have obtained the SEC approval referred to in its Substation
Facilities Agreement with the Borrower or the Borrower shall have
purchased back from Indiana Michigan Power Company the electric
substation which is part of the Phase I Project, as contemplated by
Section 2.01 of such Substation Facilities Agreement.
(j) Certain Future Project Agreements. Each Future Project
Agreement described on Schedule 3.27 hereto as being expected prior to
the initial Term Loans shall have been executed and delivered by the
Borrower and each other party thereto, and the Borrower shall have
complied with all of the applicable requirements of Section 5.15
hereof with respect to each such Future Project Agreement.
(k) Railroad Rights of Way. All rights of way necessary to
connect the Phase I Project with the railroad track system of at least
one of the three railroad companies party to the Facilities Agreement
by and between Steel Dynamics, Inc. Consolidated Rail Corporation,
Norfolk and Western Railway Company, and CSX Transportation, Inc.
shall have been obtained.
(l) Road Vacation. County road 44 shall be vacated to the
extent it runs through the Project Site.
(m) Utility Regulatory Commission Approval. The Indiana
Utility Regulatory Commission shall have approved the Contract for
Electric Service between the Borrower and Indiana Michigan Power
Company and the rate structure therein, and shall have approved the
Transmission Facilities Agreement between Indiana Michigan Power
Company and the Borrower (it being understood that (i) approval does
not include final approval of such commission in the event that there
is reconsideration or appeal from such approval and (ii) if necessary
to obtain the above approval, the rates under the Contract for
Electric Service may be increased to a level which is less than or
equal to that used for the Borrower's projections described in Section
3.06 hereof).
<PAGE> 119
4.03. Conditions to All Loans or Letters of Credit. The
obligation of each Lender Party to make any Loan (other than any Tranche C
Loan) or issue any Letter of Credit is subject to the performance by each Loan
Party of its obligations to be performed hereunder or under the other Loan
Documents on or before the date of such Loan or of the issuance of such Letter
of Credit, satisfaction of the conditions precedent set forth herein and in the
other Loan Documents and to satisfaction of the following further conditions
precedent:
(a) Notice. Appropriate notice of such Loan or Letter of
Credit shall have been given by the Borrower as provided in Article II
hereof.
(b) Borrowing Base. In the case of Revolving Credit Loans
and, from and after the Phase I Project Commissioning Date, Letters of
Credit, the Agent shall have received a Borrowing Base Certificate,
signed by a Responsible Officer of the Borrower, complying with the
provisions of Section 2.16.
(c) Representations and Warranties. Each of the
representations and warranties made by the Borrower in Article III
hereof (excluding after the Phase I Project Acceptance Date or the
Phase II Project Acceptance Date, whichever is later, Section 3.06) or
made by any Loan Party in each other Loan Document (other than in the
Assignment of Contracts) shall be true and correct in all material
respects on and as of such date as if made on and as of such date,
both before and after giving effect to the Loans or Letters of Credit
requested to be made or issued on such date; provided, however, that,
with respect to Section 3.16, the condition precedent in this
paragraph (c) shall not be deemed to be unsatisfied solely as a result
of a pending or threatened action, suit, proceeding or investigation
(i) which is the subject of a currently dated certificate of the
Borrower delivered to the Agent stating that the Borrower believes
such action, suit, proceeding or investigation is without merit and
(ii) as to which the Required Lenders have reasonably determined that
an outcome adverse to each Loan Party affected thereby is remote.
(d) No Defaults. No Event of Default or Potential Default
shall have occurred and be continuing on such date or after giving
effect to the Loans or Letters of Credit requested to be made or
issued on such date.
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(e) No Violations of Law, etc. Neither the making, issuing
nor use of the Loans or Letters of Credit shall cause any Lender to
violate or conflict with any Requirement of Law.
(f) No Material Adverse Change. There shall not have
occurred a material adverse change in the business, operations, assets
or condition (financial or otherwise) of the Borrower or of the
Borrower Group since the more recent of (i) the Closing Date or (ii)
the most recently delivered audited financial statements provided to
the Agent in accordance with Section 5.01(a) hereof. There shall not
have occurred any other event, act or condition which could have a
Material Adverse Effect.
(g) Letter of Credit Dollar Limits. The dollar limits set
forth in Section 2.17 hereof with respect to the issuance of all
Letters of Credit have been and are being complied with.
Each request by the Borrower for any Loan or Letter of Credit shall constitute
a representation and warranty by the Borrower that the conditions set forth in
this Section 4.03 have been satisfied as of the date of such request (except
that no representation or warranty will be deemed to be made as to whether the
Required Lenders have made the determination referred to in the proviso to
paragraph (c) above). Failure of the Agent to receive notice from the Borrower
to the contrary before such Loan is made shall constitute a further
representation and warranty by the Borrower that the conditions referred to in
this Section 4.03 have been satisfied as of the date such Loan is made or
Letter of Credit is issued.
4.04. Conditions to Tranche C Loans. The obligation of each
Tranche C Lender to make any Tranche C Loan is subject to satisfaction of the
following conditions precedent:
(a) Notice. Notice of the amount and date of such Loan shall
have been given by the Borrower or the Agent or the Required Overrun Decision
Lenders shall have provided notice to such Tranche C Lender that a request for
such Loan has been deemed to have been made.
(b) Cost Overrun Event. A Cost Overrun Event shall have
occurred with respect to a Cost Overrun and the amount of such Cost Overrun
shall be not less than the aggregate amount of the Tranche C Loans to be made
on such date.
(c) Other Term Loans. Tranche A Loans and Tranche B Loans in
an aggregate principal amount of $150,000,000 shall have
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theretofore been made by Lenders.
4.05. Conditions to Initial Tranche D Loans. The obligation
of each Lender Party which has a Tranche D Loan Commitment to make Tranche D
Loans is subject to the satisfaction, on or before the Initial Tranche D
Funding Availability Date, of the following conditions precedent, in addition
to the conditions precedent set forth in Sections 4.03 and 4.06 hereof:
(a) Fifth Amendment; Notes; Fees. The Agent shall have
received an executed counterpart of the Fifth Amendment for each
Lender, duly executed by the Borrower, and executed Tranche D Notes
for the Tranche D Lenders conforming to the requirements hereof, duly
executed on behalf of the Borrower, and each Lender shall have
received the fees set forth in a letter from the Borrower to such
Lender dated February __, 1996.
(b) Security Documents. The Agent shall have received the
following, with a copy for each Lender:
(i) Executed counterparts of each of the following
documents:
(A) Amendments to each of the Security
Documents in form satisfactory to the Agent and the
Required Lenders to reflect the Tranche D Loans and
the Phase II Project.
(B) An Amendment to the Assignment of
Contracts, with respect to the Phase II Project
Agreements, in form satisfactory to the Agent and the
Required Lenders.
(C) Consents to Assignment of Contracts, in
substantially the form of Exhibit N, with respect to
the Phase II Project Agreements (other than such
contracts as are Future Project Agreements on the
Tranche D Funding Availability Date).
(ii) Evidence of the completion of all recordings
and filings of or with respect to, and of all other actions
with respect to, the above amendments to Security Documents as
may be necessary or, in the opinion of the Agent, desirable to
create or perfect the Liens created or purported to be created
by such
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Security Documents as valid, continuing and perfected Liens in
favor of the Agent for the benefit of the Agent and the
Lenders securing the Obligations, prior to all other Liens;
and evidence of the payment of any necessary fee, tax or
expense relating to such recording or filing.
(iii) Evidence of the insurance required by the
terms of this Agreement with respect to the Phase II Project,
containing the endorsements required by this Agreement.
(iv) Evidence that all other actions necessary or,
in the opinion of the Agent, desirable to create, perfect or
protect the Liens created or purported to be created by the
Security Documents with respect to the Phase II Project and
the Phase II Project Agreements have been taken.
(v) A search dated not more than twenty days prior
to the Initial Tranche D Funding Availability Date of UCC,
real property, tax, judgment and litigation dockets and
records and other appropriate registers shall have revealed no
filings or recordings in effect with respect to the Collateral
purported to be covered by the above Security Documents,
except such as are acceptable to the Agent and each Lender (it
being understood that such acceptance does not limit the
obligations of any Loan Party with respect to the priority of
the Liens in favor of the Agent), and the Agent shall have
received a copy of the search reports received as a result of
the search and of the acknowledgment copies of the financing
statements or other instruments required to be filed or
recorded pursuant to this subsection bearing evidence of the
recording of such statements or instruments at each of such
filing or recording places.
(vi) Such endorsements to the title insurance
policies previously delivered under this Agreement with
respect to the Phase II Project as the Agent may request.
(vii) A survey of the Project Site, certified to the
Agent and the title insurance company issuing the policies
referred to in clause (vi) above in a manner satisfactory to
the Agent, dated a date satisfactory to the Agent by an
independent professional licensed land surveyor satisfactory
to the Agent, which survey shall include such matters as the
Agent or such title
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insurance company may request.
(viii) Such Governmental Actions and other
agreements, estoppel letters, consents from such Governmental
Authorities and other Persons in respect of the above Security
Documents, and the property subject thereto, as may be
reasonably requested by the Agent or any Lender.
(c) Phase I Project Commissioning. The Phase I Project
Commissioning Date shall have occurred and the Agent shall have
received evidence satisfactory to it that the Phase I Project shall
have operated for sixty consecutive days of production at not less
than 60-65% of rated capacity for such period, and that not less than
80% of such production shall have been Commercial Grade Finished
Goods.
(d) Phase II Project Agreements. Borrower shall have entered
into the Phase II Project Agreements to be listed on a schedule,
designated Schedule 4.05(d)-1996, to be provided to the Lenders prior
to the Initial Tranche D Funding Availability Date and to be
satisfactory to the Required Lenders, and the Agent shall have
received a fully executed copy of each such Phase II Project
Agreement, with copies for each of the Lenders. The Required Lenders
shall have given the approval contemplated by the definition of "Phase
II Project Major Equipment Supply Contracts".
(e) Equity. At least $45,000,000 of cash proceeds of the
issuance of Additional Common Equity shall have been received and
expended for Phase II Project Costs.
(f) Governmental Approvals and Filings. The Agent shall have
received, with copies and executed counterparts for each Lender, true
and correct copies (in each case certified as to authenticity on such
date on behalf of the Borrower) of all items referred to in Schedule
3.04-1996 and Schedule 3.31-1996 hereto which are designated on such
Schedule to be receivable on or prior to the Initial Tranche D Funding
Availability Date and such items shall be satisfactory in form and
substance to the Agent and the Required Lenders and shall be in full
force and effect.
(g) Corporate Proceedings. The Agent shall have received,
with a counterpart for each Lender, certificates by the Secretary of
each Loan Party dated as of the Initial Tranche D Funding Availability
Date as to (i) true copies of
<PAGE> 124
the certificate or articles of incorporation and by-laws (or other
constituent documents) of such Loan Party in effect on such date
(which, in the case of the certificate or articles of incorporation or
other constituent documents filed or required to be filed with the
Secretary of State or other Governmental Authority in its jurisdiction
of incorporation, shall be certified to be true, correct and complete
by such Secretary of State or other Governmental Authority not more
than 30 days before the Initial Tranche D Funding Availability Date),
(ii) true copies of all corporate action taken by such Loan Party
relative to the Fifth Amendment and the other Loan Documents
contemplated by this Section 4.05 and (iii) the incumbency and
signature of the respective officers of such Loan Party executing the
Fifth Amendment and such Loan Documents, together with satisfactory
evidence of the incumbency of such Secretary or Assistant Secretary.
The Agent shall have received, with a copy for each Lender,
certificates from the appropriate Secretaries of State or other
applicable Governmental Authorities dated not more than 30 days before
the Initial Tranche D Funding Availability Date showing the good
standing of each Loan Party in its state of incorporation and each
state in which it does business.
(i) Insurance. The Agent shall have received a report from
Marsh & McLennan, with a copy for each Lender, addressed to the Agent
and each Lender, satisfactory in form and substance to the Agent, as
to insurance matters pertaining to the Phase II Project. The Agent
shall have received evidence satisfactory to it that the insurance
policies required with respect to the Phase II Project by this
Agreement and the other Loan Documents have been obtained, containing
the endorsements required hereby and thereby.
(j) Environmental Matters. The Agent shall have a report
from an environmental consultant acceptable to the Agent, with a copy
for each Lender, addressed to the Agent and each Lender, not
unsatisfactory in form or substance to the Agent and the Required
Lenders, as to such environmental matters pertaining to the Phase II
Project as the Required Lenders may request. In addition, the Agent
shall have received, with a copy for each Lender, such certifications
on behalf of the Borrower by officers or employees of the Borrower as
any Lender may request with respect to (A) compliance by each Loan
Party with existing Environmental Laws, (B) potential environmental
liabilities arising from past or present conditions, operations or
practices, and (C) potential environmental liabilities arising from
off-site disposal of materials generated with respect to the Phase II
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Project.
(l) Legal Opinions. The Agent shall have received, with an
executed counterpart for each Lender, opinions addressed to the Agent
and each Lender, dated the Initial Tranche D Funding Availability
Date, of Barrett & McNagny, counsel to the Borrower and Salesco and
Holdings, Kirkland & Ellis, New York counsel to the Borrower and
Salesco and Holdings, and counsel for such other parties as may be
reasonably requested by the Agent or the Required Lenders, as to such
matters as may be requested by the Agent or the Required Lenders and
in form and substance satisfactory to the Agent and the Required
Lenders.
(m) Officers' Certificates. The Agent shall have received,
with an executed counterpart for each Lender, certificates from such
officers of each Loan Party as to such matters as the Agent or the
Required Lenders may request.
(n) Fees, Expenses, etc. All fees and other compensation
required to be paid to the Agent or the Lenders pursuant hereto or
pursuant to any other written agreement on or prior to the Initial
Tranche D Funding Availability Date shall have been paid or received.
(o) Third Party Contracts. All contracts (including without
limitation those regarding construction, engineering, equipment,
supply of raw materials, provision of electric and other utilities,
and sales) set forth on the list referred to in the first sentence of
Section 4.05(d) hereto, as well as the Phase II Project Agreements,
shall have been executed and delivered, copies thereof shall have been
delivered to the Agent and shall contain terms not reasonably
unsatisfactory to the Agent and the Required Lenders.
(p) Material Adverse Change. There shall have been no
material adverse change in the projections described in the second
sentence of Section 3.06 hereof.
(q) Phase II Project Monitor's Report. The Agent shall have
received the following, which shall be in form and substance
satisfactory to the Lenders, with a copy for each Lender: A report
from the Phase II Project Monitor as to all aspects of the Phase II
Project reviewed by it, including the design of the Phase II Project,
the projected
<PAGE> 126
capacity and efficiency of the Phase II Project, construction
schedules, cost estimates for construction, operation and maintenance
of the Phase II Project, the adequacy of performance tests, operating
performance feasibility, environmental matters, Required Phase II
Project Permits, reasonableness of liquidated damage amounts and other
Phase II Project matters. Said report shall state that the
Specifications with respect to the Phase II Project to the extent then
developed are satisfactory and have been sufficiently developed in
order to establish an adequate basis for the Design and Construction
Standard with respect to the Phase II Project.
(r) Agreement Among Secured Lenders. The Agent and the
Lenders shall have executed and delivered an amendment to the
Agreement Among Secured Lenders in connection with the Fifth
Amendment.
(s) Salesco/Holdings Guaranty. The Agent shall have
received, with sufficient signed copies for each of the Lenders, an
amendment to the Salesco/Holdings Guaranty, duly executed on behalf of
each of Holdings and Salesco, in form satisfactory to the Agent and
the Required Lenders.
(t) Adequacy of Funds Certificate. The Agent shall have
received, with a copy for each Lender, an "Adequacy of Funds
Certificate" (in form and scope described in Section 4.06(d) hereof)
as of the date of the Fifth Amendment and as of the month's end
immediately preceding the Initial Tranche D Funding Availability Date,
together with the related Phase II Project Monitor's Certificate
described in Section 4.06(e) hereof.
(u) Currency Hedges. The Agent shall have received copies of
currency hedge agreements satisfactory to the Required Lenders with
respect to Phase II Project Agreements not payable in U.S. Dollars.
(v) Additional Matters. The Agent shall have received such
other certificates, opinions, documents and instruments as may be
requested by the Agent or the Required Lenders. All corporate and
other proceedings, and all documents, instruments and other matters in
connection with the transactions contemplated by this Agreement and
the other Loan Documents shall be satisfactory in form and substance
to the Agent and the Required Lenders.
4.06. Conditions to Term Loan (D) Commitment Period Loans.
The obligation of each Lender Party to make any Revolving Credit Loan or issue
any Letter of Credit (other than a Revolving
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Credit Loan to be made or Letter of Credit to be issued prior to the Initial
Tranche D Funding Availability Date) or make any Tranche D Loan during the Term
Loan (D) Commitment Period is subject to the performance by each Loan Party of
its obligations to be performed hereunder or under the other Loan Documents on
or before the date of such Loan or of the issuance of such Letter of Credit,
satisfaction of the applicable conditions precedent set forth herein and in the
other Loan Documents and to satisfaction of the following further conditions
precedent:
(a) Adequacy of Funds. The sum of the remaining availability
under the Tranche D Loan Commitment plus the remaining unspent
principal amount of the $20,000,000 portion of the Revolving Credit
Loans permitted to be used to pay Phase II Project Costs pursuant to
Section 5.09 hereof plus the remaining unspent Designated Initial
Phase II Equity Proceeds, shall be greater than the sum of the
Remaining Phase II Project Costs plus the Required Phase II
Contingency.
(b) Certification as to Certain Governmental Approvals. The
Borrower shall have provided an officer's certificate in form and
substance satisfactory to the Agent with supporting documentation
reasonably requested by the Agent confirming proper zoning with
respect to the Phase II Project and the availability of utility and
municipal services.
(c) Title Insurance. With respect to each Tranche D Loan, a
title insurance policy endorsement satisfactory to the Agent covering
the applicable Tranche D shall have been received by the Agent.
(d) Certain Additional Officer's Certificates. The Borrower
shall have provided (at least three Business Days prior to the date of
the applicable Loans) the following officer's certificates in form and
substance satisfactory to the Agent:
(i) if a Loan is requested, a "Use of Advance
Certificate", in form and substance satisfactory to the Agent
(and consistent with the form of Exhibit O hereto), with the
blanks appropriately filled in, stating that such Loan will
only be used to pay capital expenditures, working capital and
other operating costs which are necessary for the construction
and operation of the Phase II Project or, in the case of
Revolving
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Credit Loans, the Phase I Project and which, in the case of
any Tranche D Loan, are Phase II Project Costs (A) which have
been incurred and are payable or (B) which constitute interest
on the Loans which will become due and payable within 30 days
after the date such Loan is to be made or (C) which constitute
other costs which are due on a particular schedule and are of
a category of cost similar to that referenced in Attachment 1
to the form of "Use of Advance Certificate" attached hereto as
Exhibit O and will become due and payable within 30 days after
the date such Loan is made or (D) constitute other costs which
the Borrower estimates will be incurred and become due and
payable within 30 days after the date such Loan is to be made;
and, if any of the Phase II Project Costs to be paid by a
Tranche D Loan were not included as actual Phase II Project
Costs to date in the "Phase II Project Status Certificate" and
"Adequacy of Funds Certificate" referred to below in this
Section 4.06(d), such "Use of Advance Certificate" shall
include a statement that such Phase II Project Costs and the
payment thereof by the Borrower, if the same had been included
in such "Adequacy of Funds Certificate", would not have caused
the Net Excess amount (total Phase II financing less the sum
of total Phase II project costs and required contingency) set
forth in the Summary section of Schedule Q of such "Adequacy
of Funds Certificate" to be less than zero;
(ii) if a Tranche D Loan is requested, a "Phase II
Project Status Certificate", in form and substance
satisfactory to the Agent (and consistent with the form of
Exhibit P hereto), with the blanks appropriately filled in,
setting forth, as of a date not more than thirty days prior to
the date such Loan is to be made, the Phase II Project Budget,
the Phase II Project Costs thereof to date and the Remaining
Phase II Project Costs (including costs associated with any
damage or other casualty), and the percentage of completion of
construction of the Phase II Project;
(iii) if a Tranche D Loan is requested, an "Adequacy
of Funds Certificate", in form and substance satisfactory to
the Agent (and consistent with the form of Exhibit Q hereto),
with the blanks appropriately filled in, stating and
demonstrating that, as of a date which is not earlier than
forty-five days prior to the date such Loan is to be made and
which is not earlier than the date of the most recent Adequacy
of Funds Certificate for the Phase II Project furnished to the
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Agent under Section 5.01(r) or otherwise, the Net Excess
amount (total Phase II financing less the sum of total Phase
II project costs and required contingency) is zero or more.
(e) Phase II Project Monitor's and Accountant's Certificates.
If a Tranche D Loan is requested, the conditions set forth in this
Section 4.06(e) shall have been satisfied. The Phase II Project
Monitor shall have provided a certificate, in form and substance
satisfactory to the Agent (and consistent with the form of Exhibit Z
hereto), with the blanks appropriately filled in, stating (i) the
status of the Phase II Project with respect to the PP&E Costs (PP&E
Costs to date, PP&E Costs required to Complete the construction of the
Phase II Project and percentage of completion), (ii) any variances in
such PP&E Costs from the Phase II Project Status Certificate, and
(iii) the date by which the Phase II Project Commissioning Date can be
expected to occur. The independent certified public accountants of
the Borrower shall have provided an "Agreed Upon Procedures Report" in
form and substance satisfactory to the Agent (and consistent with the
form of Exhibit GG hereto), with the blanks appropriately filled in,
on the Phase II Project Status Certificate with respect to the
Non-PP&E Costs (actual and forecasts) contained therein. The "Agreed
Upon Procedures Report" shall include a statement that nothing came to
the attention of the independent accountants that would indicate that
the actual Non-PP&E Costs to date and the current forecast of Non-PP&E
Costs did not agree with the projections of the Borrower referred to
in Section 3.06 hereof (except as detailed in the report, in form and
substance satisfactory to the Agent (and consistent with the form of
Exhibit GG hereto and its supporting schedules) and a statement that
the Borrower's current projections of Non-PP&E Costs was prepared
using accounting policies consistent with the accounting policies used
to prepare such projections (except as detailed in the report, in form
and substance satisfactory to the Agent (and consistent with the form
of Exhibit GG hereto and its supporting schedules). The timing and
procedure for obtaining the aforesaid certificate and report will be
described in a writing in form and substance satisfactory to the Agent
consistent with the form of Schedule 4.06 hereto. If, at any time,
despite the reasonable and diligent efforts of the Borrower, the
independent certified public accountants of the Borrower refuse, for
internal business policy reasons, to continue to provide the aforesaid
report
<PAGE> 130
in the form described above, such report may be modified (for purposes
of this Section 4.06(e) and Section 5.01(r) hereof) to the extent
necessary for such accountants to issue the report, or, if for such
reasons such accountants refuse to issue any report, such report shall
thereafter not be required under this Section 4.06(e) nor under
Section 5.01(r) hereof.
(f) Damage. On the date of such Loan or Letter of Credit,
the Phase II Project shall not have been materially injured or damaged
by fire or other casualty and have remained unrestored unless the
Borrower has complied with all the requirements of Section 2.06 of the
Mortgage.
(g) Required Phase II Project Permits. The Agent shall have
received, on or before the date of such Loan or Letter of Credit, true
and correct copies (in each case certified as to the authenticity on
such date on behalf of the Borrower) of all Required Phase II Project
Permits referred to in Schedule 3.04-1996 and Schedule 3.31-1996
hereto which are designated on such Schedule to be receivable on or
prior to the date of such Loan or Letter of Credit and such items
shall be satisfactory in form and substance to the Agent and shall be
in full force and effect.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Agent and each Lender as
follows:
5.01. Basic Reporting Requirements.
(a) Annual Audit Reports. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of the Borrower, the
Borrower shall furnish to the Agent, with a copy for each Lender, consolidated
and consolidating statements of income, cash flows and changes in stockholders'
equity of the Borrower and the Borrower Group for such fiscal year and
consolidated and consolidating balance sheets of the Borrower and the Borrower
Group as of the close of such fiscal year, and notes to each, all in reasonable
detail, setting forth in comparative form the corresponding figures for the
preceding fiscal year. Such consolidated financial statements shall be
accompanied by an opinion of Ernst & Young or other independent certified
public accountants of recognized national standing selected by the Borrower.
Such opinion shall be free of exceptions or qualifications other than
exceptions for accounting changes.
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Such opinion in any event shall contain a written statement of such accountants
substantially to the effect that (i) such accountants examined such financial
statements in accordance with generally accepted auditing standards and
accordingly made such tests of accounting records and such other auditing
procedures as such accountants considered necessary in the circumstances and
(ii) in the opinion of such accountants such financial statements present
fairly in all material respects the financial position of the Borrower and the
Borrower Group as of the end of such fiscal year and the results of operations
and cash flows and changes in stockholders' equity for such fiscal year, in
conformity with GAAP. The Borrower shall deliver to the Agent, with a copy for
each Lender, an Annual Compliance Certificate in substantially the form set
forth as Exhibit E hereto, duly completed and signed by a Responsible Officer
of the Borrower concurrently with the delivery of the financial statements
referred to in this Section 5.01(a).
(b) Quarterly Reports. As soon as practicable, and in any
event within 60 days after the close of each of the first three fiscal quarters
of each fiscal year of the Borrower, the Borrower shall furnish to the Agent,
with a copy for each Lender, unaudited consolidated and (unless the Borrower
has no Subsidiaries) consolidating statements of income, cash flows and changes
in stockholders' equity of the Borrower and the Borrower Group for such fiscal
quarter and for the period from the beginning of such fiscal year to the end of
such fiscal quarter and unaudited consolidated and (unless the Borrower has no
Subsidiaries) consolidating balance sheets of the Borrower and the Borrower
Group as of the close of such fiscal quarter, and notes to each which would be
required to be included in a Form 10-Q quarterly report if the Borrower were
required to file such a report under the Securities Exchange Act of 1934, all
in reasonable detail, setting forth in comparative form the corresponding
figures for the same periods or as of the same date during the preceding fiscal
year (except for the balance sheet, which shall set forth in comparative form
the corresponding balance sheet as of the prior fiscal year end). Such
financial statements shall be certified by a Responsible Officer of the
Borrower as presenting fairly in all material respects the financial position
of the Borrower and of the Borrower Group as of the end of such fiscal quarter
and the results of operations and cash flows and changes in stockholders'
equity for such fiscal year, in conformity with GAAP, subject to normal and
recurring year-end audit adjustments. The Borrower shall deliver to the Agent,
with a copy for each Lender, a Quarterly Compliance Certificate in
substantially the form set forth as Exhibit F
<PAGE> 132
hereto, duly completed and signed by a Responsible Officer of the Borrower
concurrently with the delivery of the financial statements referred to in this
Section 5.01(b).
(c) Monthly Reports. As soon as practicable, and in any
event within 30 days after the close of each month of each fiscal year of the
Borrower, the Borrower shall furnish to the Agent, with a copy for each Lender,
unaudited consolidated statements of income, cash flows and changes in
stockholders' equity of the Borrower Group for such month and for the period
from the beginning of such fiscal year to the end of such month and an
unaudited consolidated balance sheet of the Borrower Group as of the close of
such month, all in reasonable detail, setting forth in comparative form the
corresponding figures for the same periods or as of the same date during the
preceding fiscal year (except for the balance sheet, which shall set forth in
comparative form the corresponding balance sheet as of the prior fiscal year
end). Such financial statements shall be certified by a Responsible Officer of
the Borrower as presenting fairly in all material respects the financial
position of the Borrower Group as of the end of such month and the results of
operations and cash flows and changes in stockholders' equity for such fiscal
year, in conformity with GAAP, subject to normal and recurring year-end audit
adjustments.
(d) Third Party Financial Statements. The Borrower shall use
all reasonable efforts to cause each of OmniSource, Heidtman and Preussag, so
long as such party's contract is in effect, to deliver to the Agent, with a
copy for each Lender, the following:
(i) As soon as practicable, and in any event within 120 days
after the close of each fiscal year of OmniSource, Heidtman or
Preussag, as the case may be, statements of income, cash flows and
changes in stockholders' equity of OmniSource, Heidtman or Preussag,
as the case may be, for such fiscal year and a balance sheet of
OmniSource, Heidtman or Preussag, as the case may be, as of the close
of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the
preceding fiscal year. Such financial statements shall be certified
by the chief financial officer, chief executive officer or controller
of OmniSource, Heidtman or Preussag, as the case may be, as presenting
fairly in all material respects the financial position of OmniSource,
Heidtman or Preussag, as the case may be, as of the end of such fiscal
year and the results of operations and cash flows and changes in
stockholders' equity for such fiscal year, in conformity with
generally accepted accounting principles.
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(ii) As soon as practicable, and in any event within 60 days
after the close of each of the first three fiscal quarters of each
fiscal year of OmniSource or Heidtman, as the case may be, unaudited
statements of income, cash flows and changes in stockholders' equity
of OmniSource or Heidtman, as the case may be, for such fiscal quarter
and for the period from the beginning of such fiscal year to the end
of such fiscal quarter and an unaudited balance sheet of OmniSource or
Heidtman, as the case may be, as of the close of such fiscal quarter,
and notes to each, all in reasonable detail, setting forth in
comparative form the corresponding figures for the same periods or as
of the same date during the preceding fiscal year (except for the
balance sheet, which shall set forth in comparative form the
corresponding balance sheet as of the prior fiscal year end). Such
financial statements shall be certified by the chief financial
officer, chief executive officer or controller of OmniSource or
Heidtman, as the case may be, as presenting fairly in all material
respects the financial position of OmniSource or Heidtman, as the case
may be, as of the end of such fiscal quarter and the results of
operations and cash flows and changes in stockholders' equity for such
fiscal quarter, in conformity with general accepted accounting
principles, subject to normal and recurring year-end audit
adjustments.
In addition, prior to the Phase I Project Acceptance Date the Borrower shall
use all reasonable efforts to cause SMS to deliver to the Agent, with a copy
for each Lender, as soon as practicable, and in any event within 120 days after
the close of each fiscal year of SMS, statements of income, cash flows and
changes in stockholders' equity of SMS for such fiscal year and a balance sheet
of SMS as of the close of such fiscal year, and notes to each, all in
reasonable detail, setting forth in comparative form the corresponding figures
for the preceding fiscal year, and all in English.
(e) Accountants' Certificate. Each set of financial
statements delivered pursuant to Section 5.01(a) hereof shall be accompanied by
(i) a certificate or report dated the date of such statements and balance sheet
by the independent certified public accountants who opined on such financial
statements stating in substance that they have reviewed this Agreement and that
in making the examination necessary for their certification of such statements
and balance sheet they did not become aware of any Event of Default or
Potential Default, or if they did become so aware, such certificate or report
shall state the nature and
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period of existence thereof, and (ii) a certificate or report dated as of the
date of such financial statements by such accountants stating in reasonable
detail the information and calculations necessary to establish compliance with
the financial covenants set forth in Section 6.01 hereof as of the end of such
fiscal year.
(f) Projections.
(i) On the Closing Date and on the Initial Tranche D Funding
Availability Date (with respect to the then-current current fiscal
year of the Borrower), and as soon as practicable and in any event
within 20 days after the close of each fiscal year of the Borrower
after the Closing Date, the Borrower shall furnish to the Agent, with
a copy for each Lender, a certificate signed by a Responsible Officer
on behalf of the Borrower containing a projection of the revenues,
expenditures (capital or otherwise) and results of operations and cash
position of the Borrower and of the Borrower Group as of the end of
each month in the forthcoming fiscal year, together with a statement
of the assumptions and estimates upon which such projections are
based. Such projections, estimates and assumptions, as of the date of
preparation thereof, shall be made in good faith, shall represent the
Borrower's best judgment as to such matters on the date thereof and
shall not contain assumptions or methods of calculation which are
inconsistent with the requirements of the Loan Documents.
(ii) As soon as practicable, and in any event within 30 days
after the end of each month after the Closing Date, the Borrower shall
furnish to the Agent, with a copy for each Lender, a certificate
signed by a Responsible Officer of the Borrower containing the
unaudited statements of revenues, expenditures (capital or otherwise)
and results of operations and cash position of the Borrower and of the
Borrower Group for such month and for the period from the beginning of
the Borrower's fiscal year to the end of such month, together with
management commentary thereon, all in reasonable detail, setting forth
in comparative form the corresponding figures projected for the same
period or as of the same date as set forth in the most recent
projections referred to in subsection (i) of this Section 5.01(f), and
shall contain an analysis of significant variances from such
projections. Such report shall be certified by a Responsible Officer
of the Borrower as presenting fairly the financial position of the
Borrower and the Borrower Group as of the end of such month and the
results of their operations and their cash flows for the periods
covered thereby, in conformity with GAAP, subject to normal and
recurring year-
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end audit adjustments.
(g) Business Plan. On the Closing Date (with respect to the
then-current current fiscal year of the Borrower), and as soon as practicable
and in any event within 20 days after the commencement of each subsequent
fiscal year of the Borrower, the Borrower shall furnish to the Agent, with a
copy for each Lender, a certificate signed by a Responsible Officer on behalf
of the Borrower containing the Borrower Group's business plan for the
forthcoming fiscal year.
(h) Commercial Finance Reports. At such times as the Agent
or the Required Lenders shall reasonably specify from time to time in writing,
which may be as frequently as every month, the Borrower shall furnish to the
Agent, with a copy for each Lender, a report of a Responsible Officer of the
Borrower setting forth such matters pertaining to the working capital of the
Borrower and of the Borrower Group and in such detail as the Agent may specify
from time to time, which may include, among other things, information as to
receivables (which may include, among other things, a breakout of aging and
collections, identification of each receivable, obligor, due date and original
invoice date, identification of write-offs and changes made in reserves for bad
debts, and identification of any extension of the maturity of, refinancing or
other material change in the terms of any receivables), inventory (which may
include, among other things, a breakdown of the amount of inventory by type
(raw materials, work-in-progress and finished goods), by location, and
identification of write-offs and write- downs), payables (which may include,
among other things, a breakout of aging and payments), sales, credits
collections, backlog, and forecasts.
(i) Certain Other Reports and Information. Promptly upon
their becoming available to the Borrower, the Borrower shall deliver to the
Agent, with a copy for each Lender, a copy of (i) all regular or special
reports, registration statements and amendments to the foregoing which the
Borrower or Salesco or Holdings shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) all
reports, proxy statements, financial statements and other information
distributed by the Borrower or Salesco or Holdings to their respective
stockholders, bondholders or the financial community generally, and (iii) all
accountants' management letters pertaining to, all other reports submitted by
accountants in connection with any audit of, and all other material reports
from outside accountants with respect to, any Loan Party.
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(j) Further Information. The Borrower will promptly furnish
to the Agent, with a copy for each Lender, such other information and in such
form as the Agent or any Lender may reasonably request from time to time.
(k) Notice of Certain Events. Promptly upon becoming aware
of any of the following, the Borrower shall give the Agent notice thereof,
together with a written statement of a Responsible Officer of the Borrower
setting forth the details thereof and any action with respect thereto taken or
proposed to be taken by the Borrower:
(i) Any Event of Default or Potential Default.
(ii) Any material adverse change in the business, operations
or condition (financial or otherwise) or prospects of any Loan Party
or of the Borrower Group.
(iii) Any pending or threatened action, suit, proceeding or
investigation by or before any Governmental Authority against or
affecting any Loan Party which seeks damages in excess of $100,000
(or, from and after the Phase I Project Acceptance Date, $300,000) or
which, if adversely determined, could have a Material Adverse Effect.
(iv) Any material violation, breach or default by any Loan
Party of or under any agreement or instrument to which such Loan Party
is a party material to the business, operations, condition (financial
or otherwise) or prospects of such Loan Party, the Borrower or the
Borrower Group.
(v) Any amendment or supplement to, or extension, renewal,
refinancing, or refunding of, or waiver by any other party thereto of
any right under or conditions of, any agreement or instrument
creating, evidencing or securing any Indebtedness or Guaranty
Equivalent of any Loan Party, or any agreement or instrument material
to the business, operations, condition (financial or otherwise) or
prospects of any Loan Party or the Borrower Group, and any
negotiations pertaining to any of the foregoing.
(vi) Any Pension-Related Event. Such notice shall be
accompanied by a copy of any notice, request, return, petition or
other document received by any Loan Party or any Controlled Group
Member from any Person, or which has been or is to be filed with or
provided to any Person (including without limitation the Internal
Revenue Service, PBGC or any Plan participant, beneficiary, alternate
payee or employer representative), in connection with such
Pension-Related Event.
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(vii) Any Environmental Claim pending or threatened against
any Loan Party or any of its Environmental Affiliates, or any past or
present acts, omissions, events or circumstances (including but not
limited to any dumping, leaching, deposition, removal, abandonment,
escape, emission, discharge or release of any Environmental Concern
Material at, on or under any facility or property now or previously
owned, operated or leased by any Loan Party or any of its
Environmental Affiliates) that could form the basis of such
Environmental Claim, which Environmental Claim, if adversely resolved,
individually or in the aggregate, could have a Material Adverse
Effect.
(viii) Any material difficulty in obtaining labor or
materials in a timely manner or any other matter which could
materially impair the Borrower's ability to achieve the Phase I
Project Commissioning Date by September 30, 1996 or to achieve the
Phase II Project Commissioning Date by June 30, 1998.
(ix) Any lapse or other termination of any Required Phase I
Project Permit or Required Phase II Project Permit or other
Governmental Action (unless such Permit or Action is no longer
necessary) in connection with the Loan Documents, the SMS Documents,
the Heidtman Documents, the OmniSource Documents, the other Phase I
Project Agreements or the Phase II Project Agreements or matters
contemplated therein, or any dispute between any Loan Party and any
Governmental Authority which may have a Material Adverse Effect.
(x) Any Loan Party becoming a party to a collective
bargaining agreement with respect to any of its employees.
(l) Notices Under Other Agreements. Concurrently with any
Loan Party's delivery or receipt thereof, the Borrower shall provide the Agent
with copies of any reports, certificates or notices furnished by any Loan Party
to any other party to any agreement or instrument creating, evidencing or
securing any Indebtedness or Guaranty Equivalent of any Loan Party, or any
agreement or instrument material to the business, operations, condition
(financial or otherwise) or prospects of any Loan Party or of the Borrower
Group, or received by any Loan Party from any other party to any of the
foregoing.
(m) Visitation; Verification. Upon reasonable prior notice,
the Borrower shall permit (and cause each Loan Party to
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permit) the Agent or any Lender or its accountants, attorneys or other agents
to visit and inspect any of the properties of any Loan Party, to examine its
books and records and take copies and extracts therefrom and to discuss its
affairs with its directors, officers, employees and independent accountants at
such times and as often as the Agent or any Lender may reasonably request;
provided, that a Loan Party shall have the right to have an officer present at
any discussion with its employees; and provided, further, that the Lenders (as
opposed to the Agent) shall not have any right under this Section to examine
any proprietary technical information of the Borrower; the foregoing shall not
preclude walk-through visits of the properties of a Loan Party by the Agent or
any Lender. The Borrower hereby authorizes (and directs each Loan Party to
authorize) such officers, employees and independent accountants to discuss with
the Agent or any Lender the affairs of any Loan Party. The Agent and the
Lenders shall have the right to examine and verify accounts, inventory and
other properties and liabilities of each Loan Party from time to time, and the
Borrower shall cooperate with the Agent and the Lenders in such verification.
Any such inspection of the Phase I Project or of the Phase II Project shall be
for the protection of the Agent and the Lenders and neither the Agent nor any
Lender shall have any responsibility to any Loan Party or any other Person for
any deficiency in construction or variance from the Specifications which may be
revealed by any inspection by the Phase I Project Monitor, the Phase II Project
Monitor, the Agent or any Lender, whether or not discovered by any of such
Persons.
(n) Borrowing Base. The Borrower shall provide Borrowing
Base Certificates from time to time in accordance with Section 2.16 hereof.
(o) Environmental Audit. The Agent or the Required Lenders
shall have the right from time to time upon reasonable notice to designate such
Persons ("Environmental Auditors") as the Agent may select to visit, inspect
and have access to any of the properties, products or wastes of each Loan Party
and, to the extent possible, its Environmental Affiliates, for the purpose of
investigating whether there may be a basis for any Environmental Claim or any
condition which could result in any liability, cost or expense to the Agent or
any Lender; provided that unless an Event of Default or Potential Default shall
have occurred and be continuing, or unless there is reasonable cause, such
visitation and investigation shall not occur more than once during any period
of two calendar years. Such investigation may include, among other things,
above and below ground testing for the presence of Environmental Concern
Materials and such other tests as may be necessary or advisable in the opinion
of the Agent,
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after consultation with the Borrower. The Borrower will supply to the
Environmental Auditors such historical and operational information, including
the results of all samples sent for analysis, correspondence with Governmental
Authorities and environmental audits or reviews regarding properties, products
and wastes of each Loan Party or its Environmental Affiliates as are within its
possession, custody or control, or which are available to it, and will make
available for meetings with the Environmental Auditors appropriate personnel
employed by or consultants retained by the Borrower having knowledge of such
matters.
(p) Construction Progress Reports. The Borrower shall
furnish to the Agent, with a copy for each Lender, monthly reports concerning
the progress of engineering, procurement, design and construction of the Phase
I Project, in substantially the form of Exhibit Y hereto and monthly reports
concerning the progress of engineering, procurement, design and construction of
the Phase II Project, substantially in form and substance reasonably
satisfactory to the Agent (and consistent with the form of Exhibit Y hereto).
(q) Phase I Adequacy of Funds Certificate. As soon as
practicable (but no later than thirty days) after the end of each calendar
month commencing April 30, 1995 and continuing until the Phase I Adequacy of
Funds End Date, the Borrower shall furnish to the Agent, with a copy for each
Lender, an Adequacy of Funds Certificate (in form and scope described in
Section 4.02(d) hereof) as of such date, together with the related Phase I
Project Monitor's certificate and independent accountants' certificate
described in Section 4.02(e) hereof. As soon as practicable (but no later than
thirty days) after each of September 30, 1994, December 31, 1994 and March 30,
1995, the Borrower shall furnish to the Agent, with a copy for each Lender,
information reports by the Borrower, the Phase I Project Monitor and the
independent accountants containing the same information as would be set forth
in the foregoing certificates, respectively, but without the necessity of
certifying that funds are adequate.
(r) Phase II Adequacy of Funds Certificate. As soon as
practicable (but no later than thirty days) after the end of each calendar
month commencing June 30, 1996 and continuing until the Phase II Adequacy of
Funds End Date, the Borrower shall furnish to the Agent, with a copy for each
Lender, an Adequacy of Funds Certificate (in form and scope described in
Section 4.06(d) hereof) as of such date, together with the related Phase II
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Project Monitor's certificate and independent accountants' certificate
described in Section 4.02(e) hereof.
5.02. Insurance. The Borrower shall, and shall cause each
other Loan Party to, (a) maintain with financially sound and reputable insurers
insurance with respect to the Phase I Project, the Phase II Project and its
business and against such liabilities, casualties and contingencies and of such
types and in such amounts as is satisfactory to the Required Lenders (including
without limitation product and other liability, casualty, workers' compensation
and umbrella coverage, $10,000,000 key man life insurance on the life of Keith
Busse, and $5,000,000 key man life insurance on the lives of each of Mark
Millett and Richard Teets, and such insurance described on Schedule 5.02
hereof), (b) provide that such insurance cannot terminate, expire, be cancelled
or amended in any material respect without 30 days' prior notice to the Agent,
(c) furnish to each Lender from time to time upon reasonable request the
policies under which such insurance is issued, certificates of insurance and
such other information relating to such insurance as such Lender may reasonably
request, (d) cause the insurance policies to contain (i) a "replacement cost
endorsement", (ii) a standard first mortgagee endorsement, without
contribution, substantially equivalent to the New York standard mortgagee
endorsement, and (iii) an endorsement that any loss shall be payable in
accordance with the terms of such policy notwithstanding any act or negligence
of any Loan Party which might otherwise give rise to a defense by the insurer,
and (e) provide such other insurance and endorsements as are required by this
Agreement and the other Loan Documents.
5.03. Payment of Taxes and Other Potential Charges and
Priority Claims. The Borrower shall, and shall cause each other Loan Party to,
pay or discharge
(a) on or prior to the date on which penalties attach
thereto, all taxes, assessments and other governmental charges imposed
upon it or any of its properties;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons which, if unpaid, might result in the creation of a Lien
upon any such property; and
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such
property or which, if unpaid, might give rise to a claim entitled to
priority over general creditors of the Borrower or such Loan Party in
a case under Title 11 (Bankruptcy) of the United States Code, as
amended;
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provided, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced the Loan Parties need not pay or
discharge any such tax, assessment, charge or claim so long as (x) the validity
thereof is contested in good faith and by appropriate proceedings diligently
conducted and (y) such reserves or other appropriate provisions as may be
required by GAAP shall have been made therefor.
5.04. Preservation of Corporate Status. The Borrower shall,
and shall cause each other Loan Party to, maintain its status as a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and, unless failure to do so could not have a
Material Adverse Effect, to be duly qualified to do business as a foreign
corporation and in good standing in all jurisdictions in which the ownership of
its properties or the nature of its business or both make such qualification
necessary or advisable.
5.05. Governmental Approvals and Filings. The Borrower
shall, and shall cause each other Loan Party to, keep and maintain in full
force and effect all Governmental Actions necessary or advisable in connection
with execution and delivery of any Loan Document by any Loan Party,
consummation by each Loan Party of the transactions herein or therein
contemplated, performance of or compliance with the terms and conditions hereof
or thereof by any Loan Party or to ensure the legality, validity, binding
effect, enforceability or admissibility in evidence hereof or thereof.
5.06. Maintenance of Properties. The Borrower shall, and
shall cause each other Loan Party to, maintain or cause to be maintained in
good repair, working order and condition (ordinary wear and tear excepted) the
properties now or hereafter owned, leased or otherwise possessed by it so that
the business carried on in connection therewith may be conducted at all times
in accordance with customary mini-mill practice.
5.07. Avoidance of Other Conflicts. The Borrower shall, and
shall cause each other Loan Party to, not violate or conflict with, be in
violation of or conflict with, or be or remain subject to any liability
(contingent or otherwise) on account of any violation or conflict with
(a) any Requirement of Law (including without limitation any
Environmental Law),
(b) its certificate or articles of incorporation of by-
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laws (or other constituent documents), or
(c) any Contractual Obligations to which it is party,
which violation could have Material Adverse Effect.
5.08. Financial Accounting Practices. The Borrower shall,
and shall cause each other Loan Party to, make and keep books, records and
accounts which, in reasonable detail, accurately and fairly reflect its
transactions and dispositions of its assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or specific
authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP, and (ii) to
maintain accountability for assets, (c) access to assets is permitted only in
accordance with management's general or specific authorization and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5.09. Use of Proceeds. The Borrower shall apply the proceeds
of the Revolving Credit Loans for working capital purposes (which shall be
deemed to include repayment of Phase I Project Costs in an amount not exceeding
the principal amount of Term Loans of which the proceeds were used to purchase
or finance working capital assets) or to pay Phase II Project Costs in an
aggregate amount not exceeding $20,000,000 (after giving effect to the
repayment of Revolving Credit Loans with the proceeds of Tranche D Loans), the
proceeds of the Tranche A Loans, Tranche B Loans and Tranche C Loans only to
pay Phase I Project Costs and the proceeds of Tranche D Loans only to pay Phase
II Project Costs. The Borrower shall not use, or permit the use of, the
proceeds of any Loans hereunder directly or indirectly for any unlawful
purpose, in any manner inconsistent with Section 3.12 hereof, or inconsistent
with any other provision of any Loan Document.
5.10. Continuation of or Change in Business. The Borrower
shall, and shall cause each other Loan Party to, continue to engage in its
business as currently contemplated, and, except as specifically permitted by
Section 6.05(e), no Loan Party shall engage in any other business.
5.11. Consolidated Tax Return. The Borrower shall not, and
shall not permit any other Loan Party to, file or consent to the filing of any
consolidated income tax return with any Person other than a Loan Party.
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5.12. Fiscal Year. The Borrower shall not change its fiscal
year or fiscal quarter or permit any other Loan Party to do so.
5.13. Interest Rate Protection Agreements. The term
"Interest Rate Protection Agreements" shall mean one or more
contracts with one or more Lenders, having terms and conditions reasonably
satisfactory to the Agent, as contemplated by this Section 5.13. The Borrower
shall, within 90 days of the Closing Date, enter into one or more contracts
with one or more Lenders providing to the Borrower interest rate cap protection
or interest rate swaps or other interest rate protection in an aggregate amount
not less than 50% of the outstanding principal amount of the Term Loan
Commitments on the Closing Date. The Borrower shall, within 90 days of such
date on or after the Initial Tranche D Funding Availability Date as the
Euro-Rate for a hypothetical borrowing of $10,000,000 for ninety days first is
equal to or greater than 8% per annum, enter into and maintain one or more
Interest Rate Protection Agreements in an aggregate amount not less than 50% of
the outstanding principal amount of the Tranche D Loan Commitments on the
Initial Tranche D Funding Availability Date; provided that, the principal
amount of the Tranche D Loan Commitments for which Interest Rate Protection
Agreements is required pursuant to this sentence may be reduced by the amount
by which Interest Rate Protection Agreements then in place with respect to the
Tranche A Loan Commitments and Tranche B Loan Commitments exceeds 50% of the
principal amount of such Tranche A Loan Commitments and Tranche B Loan
Commitments. In addition, the Borrower may enter into and maintain one or more
additional interest rate protection contracts, having terms and conditions
reasonably satisfactory to the Agent, with one or more Lenders, provided that
if, at the time of incurrence by the Borrower of payment obligations under an
Interest Rate Protection Agreement contemplated by this sentence, the aggregate
notional amount of all Interest Rate Protection Agreements as to which the
Borrower has payment obligations is greater than 50% of the outstanding
principal amount of Term Loans at such time, then such terms and conditions
shall also be reasonably satisfactory to the Required Lenders.
5.14. Construction of the Phase I Project and of the Phase II
Project. (a) The Borrower shall, promptly after the Closing Date, cause the
construction of the Phase I Project to commence and will prosecute the same
with diligence and continuity to Completion. The Borrower will cause the Phase
I Project to be designed, constructed and Completed in accordance with the
Design and Construction Standard, will cause the Phase I
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Project Commissioning Date to be achieved on or before September 30, 1996, and
will cause construction of the Phase I Project to be Completed, free and clear
of all Liens (or claims of Liens) for material supplied or work performed in
connection therewith (except as permitted by clause (i)(C) of the definition of
"Completion"), on or before September 30, 1997. Upon demand of the Agent, the
Borrower will correct any material departure from the Design and Construction
Standard with respect to the Phase I Project.
(b) The Borrower will furnish to the Agent (i) within 45 days
after the foundations of the Phase I Project have been located on the Project
Site, a survey certified by a registered engineer or surveyor reasonably
satisfactory to the Agent, in form and scope reasonably acceptable to the
Agent, showing that the foundations are located within the perimeter of the
Project Site and any setback lines and at the location shown in the
Specifications, and (ii) as promptly as practicable upon completion of
construction of the Phase I Project, (A) an "as- built" survey certified by a
registered engineer or surveyor reasonably satisfactory to the Agent, in form
and scope reasonably acceptable to the Agent, showing the completed Phase I
Project, (B) the final "as-built" Specifications for the Phase I Project and
(C) the complete releases of Liens described in clause (i)(C) of the definition
of "Completion" contained in Section 1.01 hereof. The Borrower shall not make
final payment under any construction or supply contract with respect to the
Phase I Project unless concurrently with or prior to such payment it receives
such a complete release of Liens for such contract.
(c) At all times during the period commencing on the earlier
of the date the first Loan is made and April 30, 1995 and ending on the Phase I
Adequacy of Funds End Date, the Borrower shall be in compliance with the
adequacy of funds test described in Section 4.02(h).
(d) The Borrower shall, promptly after the Initial Tranche D
Funding Availability Date, cause the construction of the Phase II Project to
commence and will prosecute the same with diligence and continuity to
Completion. The Borrower will cause the Phase II Project to be designed,
constructed and Completed in accordance with the Design and Construction
Standard, will cause the Phase II Project Commissioning Date to be achieved on
or before June 30, 1998, and will cause construction of the Phase II Project to
be Completed, free and clear of all Liens (or claims of Liens) for material
supplied or work performed in connection therewith (except as permitted by
clause (ii)(C) of the definition of "Completion"), on or before September 30,
1998. Upon demand of the Agent, the Borrower will correct any material
departure from the Design and Construction Standard with respect
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to the Phase II Project.
(e) The Borrower will furnish to the Agent (i) within 45 days
after the foundations of the Phase II Project have been located on the Project
Site, a survey certified by a registered engineer or surveyor reasonably
satisfactory to the Agent, in form and scope reasonably acceptable to the
Agent, showing that the foundations are located within the perimeter of the
Project Site and any setback lines and at the location shown in the
Specifications, and (ii) as promptly as practicable upon completion of
construction of the Phase II Project, (A) an "as- built" survey certified by a
registered engineer or surveyor reasonably satisfactory to the Agent, in form
and scope reasonably acceptable to the Agent, showing the completed Phase II
Project, (B) the final "as-built" Specifications for the Phase II Project and
(C) the complete releases of Liens described in clause (ii)(C) of the
definition of "Completion" contained in Section 1.01 hereof. The Borrower
shall not make final payment under any construction or supply contract with
respect to the Phase II Project unless concurrently with or prior to such
payment it receives such a complete release of Liens for such contract.
(f) At all times during the period commencing on the date the
first Tranche D Loan is made and ending on the Phase II Adequacy of Funds End
Date, the Borrower shall be in compliance with the adequacy of funds test
described in Section 4.06(h).
5.15. Future Project Agreements. The Borrower shall furnish
to the Agent, with a copy for each Lender, certified copies of any Future
Project Agreements within five days of the execution and delivery thereof,
together with (i) a duly executed consent and agreement from each other party
to such Future Project Agreements, in substantially the form attached hereto as
Exhibit V, with such changes therein as the Required Lenders may reasonably
approve and with the blanks appropriately filled, (ii) if such Future Project
Agreement is with a Loan Party other than the Borrower, a duly executed
assignment of contract executed by such Loan Party substantially in the form of
Exhibit HH hereto and (iii) if such Future Project Agreement involves amounts
in excess of $5,000,000, an opinion addressed to the Agent and each Lender, of
each such other party's counsel addressing such matters as may reasonably be
requested by the Agent. Each such consent and agreement shall be in
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form and substance, and each such Future Project Agreement which is listed on
Schedule 1.01E or Schedule 1.01B-1996 hereof or is of the type described in
clause (c) of the definition thereof shall be in form and substance, reasonably
satisfactory to the Agent and the Required Lenders prior to execution and
delivery thereof. Each such Future Project Agreement of the type described in
clause (d) or clause (e) of the definition thereof shall be in form and
substance reasonably satisfactory to the Agent, or shall be on a standard form
(without material modification thereto) included in Exhibit FF hereto or
otherwise satisfactory to the Agent and the Required Lenders.
5.16. Memorandum of Understanding. The Borrower shall use
reasonable and diligent efforts to work with the Governments (as defined in the
Memorandum of Understanding referred to below) and the Agent in order to reach
agreement as soon as reasonably practicable on the forms of the documentation
described in clause (4) of Section 5(e) of the Memorandum of Understanding
listed as the first Phase I Project Agreement in Schedule 1.01(B) hereto.
5.17. Consents to Assignment of Contract. The Borrower
shall, within ninety days of the Closing Date, cause fully executed Consents to
Assignment of Contract, in form reasonably satisfactory to the Agent, to be
delivered to the Agent, with a copy for each Lender, with respect to the
contracts listed on Schedule 5.17 hereto. The Borrower shall, within five days
of the the date of execution and delivery of each Future Project Agreement
executed and delivered after the Initial Tranche D Funding Availability Date,
cause fully executed Consents to Assignment of Contract, in form reasonably
satisfactory to the Agent, to be delivered to the Agent, with a copy for each
Lender, with respect thereto.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Agent and each Lender as
follows:
6.01. Financial Covenants.
(a) Current Ratio. From and after the Financial Covenant
Date, the Current Ratio shall not at any time be less than 1.3.
(b) Leverage Ratio. The Leverage Ratio shall not, at any
time during any fiscal quarter commencing with the fiscal quarter in which the
Financial Covenant Date occurs, exceed the applicable number set forth below
(it being understood that one or more of the first entries below may not be
applicable depending on when the Financial Covenant Date occurs):
<PAGE> 147
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio shall not exceed
-------------------- ----------------------
<S> <C>
June 30, 1996 2.25
September 30, 1996 2.25
December 31, 1996 2.25
March 31, 1997 2.10
June 30, 1997 2.10
September 30, 1997 2.10
December 31, 1997 2.10
March 31, 1998 1.90
June 30, 1998 1.90
September 30, 1998 1.90
December 31, 1998 1.90
March 31, 1999 1.40
June 30, 1999 1.40
September 30, 1999 1.40
December 31, 1999 1.40
March 31, 2000 1.00
June 30, 2000 1.00
September 30, 2000 1.00
December 31, 2000 1.00
March 31, 2001 1.00
June 30, 2001 1.00
September 30, 2001 1.00
December 31, 2001 1.00
March 31, 2002 1.00
</TABLE>
(c) Tangible Net Worth. From and after the Financial
Covenant Date, Tangible Net Worth shall not at any time be less than the sum of
(i) $45,000,000 and (ii) 50% of Cumulative Net Income at such time.
(d) Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter commencing with the fiscal quarter in which the Financial
Covenant Date occurs (each such last day of the fiscal quarter being called a
"test day"), the Fixed Charge Coverage Ratio for the period of four consecutive
fiscal quarters ending on such test day (or in the case of the first three test
days, for the period from and including the Financial Covenant
<PAGE> 148
Date to and including such test day) shall not be less than the applicable
number set forth below (it being understood that one or more of the first
entries below may not be applicable depending on when the Financial Covenant
Date occurs):
<TABLE>
<CAPTION>
Ratio shall not be
Test Day less than:
--------------- ------------------
<S> <C>
June 30, 1996 1.00
September 30, 1996 1.00
December 31, 1996 1.00
March 31, 1997 1.15
June 30, 1997 1.15
September 30, 1997 1.15
December 31, 1997 1.15
March 31, 1998 1.15
June 30, 1998 1.15
September 30, 1998 1.15
December 31, 1998 1.15
March 31, 1999 1.25
June 30, 1999 1.25
September 30, 1999 1.25
December 31, 1999 1.25
March 31, 2000 1.25
June 30, 2000 1.25
September 30, 2000 1.25
December 31, 2000 1.25
March 31, 2001 1.25
June 30, 2001 1.25
September 30, 2001 1.25
December 31, 2001 1.25
March 31, 2002 1.25
</TABLE>
(e) Negative EBITDA. (i) At all times prior to the Financial
Covenant Date, the Borrower Group's cumulative negative EBITDA for the period
from January 1, 1994 until the end of the calendar month completed most
recently at the time of measurement shall not exceed $32,000,000.
(ii) As of the last day of each calendar month commencing with
June 30, 1994 and ending with the day immediately preceding the Financial
Covenant Date, either (x) the Borrower
<PAGE> 149
Group's cumulative negative EBITDA for the period of three consecutive calendar
months ending on such last day of the calendar month shall not exceed
$8,000,000 or (y) the Borrower Group's cumulative negative EBITDA for the
period from January 1, 1994 until such last day of the calendar month shall not
exceed $22,000,000.
6.02. Liens. The Borrower shall not, and shall not permit
any other Loan Party to, at any time create, incur, assume or suffer to exist
any Lien on any of its property (now owned or hereafter acquired), or agree,
become or remain liable (contingently or otherwise) to do any of the foregoing,
except for the following ("Permitted Liens"):
(a) Liens pursuant to the Security Documents in favor of the
Agent for the benefit of the Lenders and the Agent to secure the
Obligations;
(b) Liens which are granted by the Borrower pursuant to the
Development Package, or permitted refinancings thereof, whether
existing on or after the date hereof (and described on Schedule 6.02
hereof);
(c) Liens arising from taxes, assessments, charges or claims
described in Section 5.03 hereof that are not yet due or that remain
payable without penalty or to the extent permitted to remain unpaid
under the proviso to such Section 5.03 and under the second proviso
contained in Section 2.07 of the Mortgage;
(d) Deposits or pledges of cash or securities in the ordinary
course of business to secure (i) workmen's compensation, unemployment
insurance or other social security obligations, (ii) performance of
bids, tenders, trade contracts (other than for payment of money) or
leases, (iii) stay, surety or appeal bonds, or (iv) other obligations
of a like nature incurred in the ordinary course of business; and
(e) Easements, rights of way and other restrictions on the
use of real property which are described in Schedule B-I of the title
insurance policy insuring the Lien of the Mortgage.
(f) Liens described on Schedule 6.02(f) and Liens on property
of the Borrower securing all or part of the
<PAGE> 150
purchase price thereof, provided that: (i) such Lien is created before
or substantially simultaneously with the purchase of such property by
the Borrower and in any event after the Phase II Project Acceptance
Date, (ii) such Lien is confined solely to the property so purchased
and proceeds thereof, (iii) the aggregate amount secured by all such
Liens on any particular property at the time purchased by the Borrower
shall not exceed the lesser of the purchase price of such property and
the fair market value of such property at the time of purchase, (iv)
such property shall not consist of anything integral to the caster,
the rolling mill, the furnaces or the production of steel, (v) the
purchase price of such property shall have been included in the
calculation required by Section 6.13 hereof and (vi) the aggregate
amount secured by all Liens described in this Section 6.02(f) shall
not at any time exceed $5,000,000.
(g) Liens on accounts receivable of any Loan Party in favor
of the Borrower.
"Permitted Lien" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law. Nothing in this
Section 6.02 shall be construed to limit any other restriction on Liens imposed
by the Security Documents or otherwise in the Loan Documents.
6.03. Indebtedness. The Borrower shall not, and shall not
permit any other Loan Party to, at any time create, incur, assume or suffer to
exist any Indebtedness, or agree, become or remain liable (contingently or
otherwise) to do any of the foregoing, except:
(a) Indebtedness to the Lenders and the Agent pursuant to
this Agreement and the other Loan Documents;
(b) The Indebtedness of the Borrower incurred pursuant to the
Development Package and the Subordinated Notes, and refinancings
thereof on the same terms (other than interest rate or a longer
maturity), each as listed on Schedule 6.03 hereof, but in no case any
extensions or renewals thereof, and the Indebtedness of the Borrower
incurred pursuant to the Reimbursement Agreement, dated as of May 23,
1995, between the Borrower, National City Bank, Indiana and Indiana
Development Finance Authority and refinancings thereof on the same
terms (other than interest rate or a longer maturity);
(c) Accounts payable to to Salesco as contemplated by Exhibit
CC or to trade creditors arising out of purchases of goods or services
in the ordinary course of business,
<PAGE> 151
provided that (i) such accounts payable are payable not later than 90
days after the original invoice date according to the original terms
of sale, and (ii) as of the end of each calendar month, not more than
15% of such accounts payable are more than 90 days past due, and not
more than 5% of such accounts payable are more than 120 days past due,
in each case according to the original terms of sale (except to the
extent that any such account payable is being contested in good faith
and by appropriate proceedings diligently conducted and so long as
such reserves or other appropriate provisions as may be required by
GAAP shall have been made with respect therefor);
(d) Any licensing or royalty fees owed by the Borrower in the
ordinary course of business, including such fees payable to SMS
pursuant to the SMS documents;
(e) Indebtedness secured by Liens permitted by Section
6.02(f) hereof;
(f) Unsecured Indebtedness of the Borrower in an aggregate
principal amount not exceeding $5,000,000 at any time outstanding;
(g) Indebtedness of another Loan Party to the Borrower as to
which the Borrower's rights are subject to a first perfected Lien in
favor of the Agent;
(h) Indebtedness of a Subsidiary of the Borrower to the
Borrower to the extent permitted by Exhibit DD hereto;
(i) Indebtedness of Holdings to the Borrower in an aggregate
annual principal amount not exceeding $100,000 (less any amounts
distributed, by loan or otherwise, by the Borrower to Holdings as
otherwise permitted hereunder); provided, that the proceeds from such
Indebtedness will only be used to make Permitted Payments; and
(j) Indebtedness of Salesco to the Borrower in an aggregate
principal amount not to exceed $2,000,000 at any time outstanding
(less any amounts distributed, by loan or otherwise, by the Borrower
to Salesco as otherwise permitted hereunder); provided, that the
proceeds from such Indebtedness will only be used to make Permitted
Payments.
6.04. Guaranties, Indemnities, etc. The Borrower shall not
be or become subject to or bound by any Guaranty
<PAGE> 152
Equivalent, or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing, and shall not permit any other Loan Party to do so,
except:
(a) Guaranty Equivalents existing on the date hereof and
listed in Schedule 6.04 hereto;
(b) Contingent liabilities arising from the endorsement of
negotiable or other instruments for deposit or collection or similar
transactions in the ordinary course of business;
(c) Indemnities by the Borrower or another Loan Party of the
liabilities of its directors or officers in their capacities as such
pursuant to provisions presently contained in their certificate or
articles of incorporation or by-laws (or other constituent documents)
or as permitted by Law;
(d) Contingent liabilities arising from the Interest Rate
Protection Agreements;
(e) The Salesco/Holdings Guaranty and any Subsidiary
Guaranty;
(f) Guaranty Equivalents by the Borrower with respect to
aggregate obligations (other than for money borrowed) of Salesco and
Holdings in an aggregate amount not to exceed $500,000 at any one time
outstanding;
(g) The Subordinated Guarantee and any Subordinated
Subsidiary Guarantee Equivalent provided by a Subsidiary of the
Borrower for the benefit of the holders of the Subordinated Notes; and
(h) Indemnities by the Borrower under the Reimbursement
Agreement described in Section 6.03(b) hereof or related documents
with respect to the bond transactions contemplated by such
Reimbursement Agreement.
6.05. Loans, Advances and Investments. The Borrower shall
not, and shall not permit any Loan Party to, at any time make or suffer to
exist or remain outstanding any loan or advance to, or purchase, acquire or own
(beneficially or of record) any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) in, or any other interest in,
or make any capital contribution to or other investment in, any other Person,
or agree, become or remain liable (contingently or otherwise) to do any of the
foregoing, except:
<PAGE> 153
(a) Loans and investments existing on the date hereof and
listed in Schedule 6.05 hereof and an investment in an amount not
exceeding $1,000,000 in Qualitech Steel Corporation, which intends to
build and operate a special quality bar mini-mill and iron carbide
production facility (which investment the Borrower will treat as a
Phase I Project Cost);
(b) Receivables owing to the Borrower or Salesco arising from
sales of inventory under usual and customary terms in the ordinary
course of business; and loans and advances extended by the Borrower to
subcontractors or suppliers (excluding subcontractors or suppliers who
are Affiliates of the Borrower) under usual and customary terms in the
ordinary course of business;
(c) Advances to officers and employees, other agents and
independent contractors of the Borrower to meet expenses incurred by
such persons in the ordinary course of business or for relocation and
in amounts at any time outstanding not exceeding $50,000 to any one
officer or employee and $500,000 in the aggregate;
(d) Cash Equivalent Investments;
(e) From and after the Phase I Project Acceptance Date,
investments of the Borrower (or, to the extent permitted by paragraph
(g) below, of a Subsidiary of the Borrower) in partnerships or other
joint ventures related to the Borrower's steel production business
which are included in the calculations to determine compliance with
Section 6.13 hereof and which in the aggregate, when added to the
aggregate amount paid for all acquisitions by the Borrower of all or a
substantial portion of the properties of another Person, do not exceed
$5,000,000;
(f) Holdings' investment in Salesco, and Salesco's investment
in the Borrower, in each case as described on Schedule 6.05;
(g) Investments in one or more Subsidiaries of the Borrower
at the times and in the amounts set forth on Exhibit DD hereto, but
only for so long as the operations of each such Subsidiary are
conducted in accordance with the requirements of such Exhibit and the
Agent retains pursuant to the Security Agreement a first perfected
security interest in all outstanding shares of capital stock of each
<PAGE> 154
such Subsidiary;
(h) Loans and advances of the Borrower to Holdings permitted
by Section 6.03(i) or to Salesco permitted by Section 6.03(j); and
(i) An investment not exceeding $15,000,000, funded solely
with the proceeds of equity sales by Holdings, in a scrap substitute
manufacturing venture as to which no Loan Party has any obligation to
make further investment.
By way of illustration, and without limitation, it is understood that the
Borrower (for example) shall be deemed to have made an advance to an Affiliate
of the Borrower (for example): (x) to the extent that the Borrower transfers
any property to or performs any service for such Affiliate, and (y) to the
extent that the Borrower pays any obligation of such Affiliate. The amount of
such advance shall be deemed to be, in the case of clause (x), the fair value
of the property so transferred or services so performed (but not less than
cost), and in the case of clause (y), the amount so paid by the Borrower.
6.06. Dividends and Related Distributions. The Borrower
shall not declare or make any Stock Payment, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, and shall not permit
any other Loan Party to do so, except as follows:
(a) The Borrower may, if no Event of Default or Potential
Default exists or is continuing or would result from the payment of
the dividend described hereinafter, pay a dividend in cash to Salesco
the full amount of which is (and may be) used by Salesco to pay a
dividend in cash to Holdings (not to exceed $5,500,000), the full
amount of which is (and may be) used by Holdings to repurchase stock
from any of the individuals employed by the Borrower listed on
Schedule 6.06 hereof, provided that a minimum aggregate equity
interest in Holdings of 7.5% shall be owned by the remaining members
of the Borrower's management;
(b) A wholly-owned Subsidiary of the Borrower may pay
dividends to the Borrower; and
(c) The Borrower may, if no Event of Default or Potential
Default exists or is continuing or would result from the payment of
the dividend described hereinafter, after the Phase II Project has
been Completed and after the Second Caster Date, make Stock Payments
in an aggregate cumulative amount not exceeding $10,000,000, of which
not more than $5,000,000 shall be made in any year, and which in
<PAGE> 155
any event shall not exceed the amount of Excess Cash Flow which has
theretofore not been applied to the payment of Obligations or the
costs of the second continuous caster project described in Section
2.10(b). "Second Caster Date" shall mean the earlier to occur of (i)
the date of completion of the Borrower's second continuous caster
project and (ii) the first date on which the Borrower shall have given
notice to the Agent that such second continuous caster project will
not be built or completed and on which all amounts in the Second
Caster Account shall have been expended for costs of such second
continuous caster project or applied to payment of the Obligations.
6.07. Sale-Leasebacks. Except as part of the Development
Package as described on Schedule 1.01A, the Borrower shall not at any time
enter into or suffer to remain in effect any transaction to which the Borrower
is a party involving the sale, transfer or other disposition by the Borrower of
any property (now owned or hereafter acquired), with a view directly or
indirectly to the leasing back of any part of the same property or any other
property used for the same or a similar purpose or purposes, or agree, become
or remain liable (contingently or otherwise) to do any of the foregoing, and
shall not permit any other Loan Party to do so.
6.08. Leases. Except as part of the Development Package as
described on Schedule 1.01A, the Borrower shall not at any time enter into or
suffer to remain in effect any lease, as lessee, of any property, or agree,
become or remain liable (contingently or otherwise) to do any of the foregoing,
or permit any other Loan Party to do so, except operating leases of data
processing equipment, office equipment, transportation equipment and other
manufacturing equipment or office space used by the lessee in the ordinary
course of business, provided that such leases will not result in the payment or
accrual by the Borrower Group of more than $2,000,000 in the aggregate in any
twelve-month period and no such lease has a term longer than seven years; and
provided further that such leases will not result in the payment or accrual by
all Loan Parties other than the Borrower of more than $100,000 in the aggregate
in any twelve-month period.
6.09. Mergers, Acquisitions, etc. The Borrower shall not,
and shall not permit any other Loan Party to, (v) merge with or into or
consolidate with any other Person, except that a Loan Party which is a
wholly-owned Subsidiary of the Borrower may
<PAGE> 156
merge with the Borrower, provided that the Borrower shall be the surviving
corporation and no Event of Default or Potential Default shall occur and be
continuing or shall exist at such time or after giving effect to such
transaction, (w) liquidate, wind-up, dissolve or divide, (x) acquire all or any
substantial portion of the properties of any going concern or going line of
business, (y) acquire all or any substantial portion of the properties of any
other Person other than in the ordinary course of business, unless such
acquisition is made by the Borrower after the Phase II Project Acceptance Date
and would not result in the sum of (i) the aggregate amount paid for all such
acquisitions plus (ii) the aggregate amount of investments made under Section
6.05(e) exceeding $5,000,000 or (z) agree, become or remain liable
(contingently or otherwise) to do any of the foregoing.
6.10. Dispositions of Properties. The Borrower shall not,
and shall not permit any other Loan Party to, sell, convey, assign, lease,
transfer, abandon or otherwise dispose of, voluntarily or involuntarily, any of
its properties, or agree, become or remain liable (contingently or otherwise)
to do any of the foregoing, except:
(a) The Borrower and any other Loan Party may sell Inventory
in the ordinary course of business;
(b) The Borrower may, for cash, dispose of assets to
non-Affiliates in a maximum aggregate annual amount of $9,000,000,
provided that all of the Net Cash Proceeds from the sale are used to
purchase replacement assets or, if the disposed assets are not
necessary for the efficient operation of its business, to prepay Term
Loans in accordance with Section 2.10;
(c) In addition to the asset sales permitted by paragraph (b)
above and notwithstanding the limitations set forth therein, the
Borrower may dispose of assets in a maximum aggregate annual amount of
$1,000,000; and
(d) Salesco may transfer Receivables to the Borrower in
accordance with the practices more fully described on Exhibit CC.
By way of illustration, and without limitation, it is understood that the
following are dispositions of property subject to this Section 6.10: any
disposition of accounts, chattel paper or general intangibles, with or without
recourse; and any disposition of any leasehold interest. Nothing in this
Section 6.10 shall be construed to limit any other restriction on dispositions
of property imposed by the Security Documents or
<PAGE> 157
otherwise in the Loan Documents.
6.11. No Plans. The Borrower will not, and will not permit
any other Loan Party to, enter into any contract or arrangement pursuant to
which any Plan is maintained for any of its employees.
6.12. Dealings with Affiliates. The Borrower shall not, and
shall not permit any other Loan Party to, enter into or carry out any
transaction with (including, without limitation, purchase or lease property or
services from, sell or lease property or services to, loan or advance to, or
enter into, suffer to remain in existence or amend any contract, agreement or
arrangement with) any Affiliate of the Borrower, directly or indirectly, or
agree, become or remain liable (contingently or otherwise) to do any of the
foregoing, except:
(a) Execution and performance of contracts, agreements and
arrangements in existence as of the date hereof and set forth in
Schedule 6.12 hereof;
(b) Directors, officers and employees of a Loan Party may be
compensated for services rendered in such capacity to such Loan Party
(including without limitation management fees paid by the Borrower to
Keith Busse and the Designated Managers), provided that such
compensation is in good faith and on terms no less favorable to such
Loan Party than those that could have been obtained in a comparable
transaction on an arm's-length basis from an unrelated Person, and the
board of directors of the Borrower (including a majority of the
directors having no direct or indirect interest in such transaction)
approve the same;
(c) The transactions between the Borrower and Salesco
described on Exhibit CC hereto;
(d) Other transactions in the ordinary course of the
Borrower's business with Affiliates in good faith and on terms no less
favorable to the Borrower than those that could have been obtained in
a comparable transaction on an arm's-length basis from an unrelated
Person, and, in the case of any transaction involving consideration of
$100,000 or more (other than such a transaction involving
consideration less than $1,000,000 and the subject Affiliate would not
be an Affiliate if the 5% figure appearing in the penultimate sentence
of the definition of "Affiliate" in Section 1.01 hereof were deemed to
be 25% in the case of
<PAGE> 158
ownership or voting power by GECC and its Affiliates or by J.H.
Whitney and Company and its Affiliates), as to which the board of
directors of such Borrower (including a majority of the directors
having no direct or indirect interest in such transaction) approve
such transaction and determine that such terms are no less favorable
to the Borrower than those that could have been obtained in a
comparable transaction on an arm's-length basis from an unrelated
Person; provided, that the Borrower shall not enter into any such
transaction or series of related transactions (other than purchases of
scrap inventory and sales of finished goods) having a value in excess
of $2,000,000 unless the Agent has received a copy of the foregoing
resolution of such board of directors to the effect that such
transaction is fair to the Borrower from a financial point of view.
6.13. Capital Expenditures. On or after the Phase I Project
Commissioning Date, Borrower shall not, and shall not permit any other Loan
Party to, make any Capital Expenditures in any fiscal year except for Specified
Permitted Capital Expenditures and except for Capital Expenditures of the
Borrower not in excess of the lesser of (i) $20 million and (ii) the sum of
$12,000,000, plus 25% of Excess Cash Flow for the immediately preceding fiscal
year (but not less than zero), plus 70% of the amount which was permitted to be
used for Capital Expenditures (other than Specified Permitted Capital
Expenditures) in the immediately preceding fiscal year but was not used, in
each case less the sum equal to actual expenditures made in such fiscal year
towards completion of the Phase I Project. Notwithstanding the foregoing, in
the event that the Phase I Project Commissioning Date occurs on any day that is
not the first day of a fiscal year, the amount set forth in clause (i) and the
amount determined pursuant to clause (ii) in the immediately preceding sentence
shall be reduced to the amount determined by multiplying such amount by a
fraction, the numerator of which is the number of days from and excluding the
Phase I Project Commissioning Date to and including the last day of the fiscal
year and the denominator of which is 365. "Specified Permitted Capital
Expenditures" shall mean (x) Phase II Project Costs not exceeding $230,000,000
in the aggregate, and (y) the costs of acquisition and construction of a second
continuous caster project (as described in Section 2.10(b) hereof) which are
consistent with projections provided to, and found acceptable by, the Agent and
the Required Lenders, which are paid solely with funds from the Second Caster
Account, which do not exceed $55,000,000 in the aggregate, and of which not
more than $10,000,000 are incurred prior to the Phase II Project Commissioning
Date.
6.14. Limitations on Modification of Certain
<PAGE> 159
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 Holdings or its or Salesco's
or Holdings' respective certificate of incorporation or by-laws (or similar
constituent documents) except that each of Holdings, Salesco and 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.
6.15. Limitation on Payments and Modification of Restricted
Indebtedness. The Borrower shall not, and shall not permit any other Loan
Party to, directly or indirectly, pay, prepay, purchase, redeem, retire,
defease or acquire, or make any payment (on account of principal, interest,
premium or otherwise) of, or grant or suffer the existence of any Lien (other
than Permitted Liens) on any of its property (now owned or hereafter acquired)
to secure any indebtedness, obligation or liability with respect to, or amend,
modify or supplement any of the terms and conditions of, any Restricted
Indebtedness, or agree, become or remain liable (contingently or otherwise) to
do any of the foregoing, except as follows:
(a) The Borrower may pay principal of Restricted Indebtedness
at the regularly scheduled maturity thereof, and may make mandatory
prepayments or mandatory sinking fund payments when due, and may pay
interest thereon when due, all to the extent consistent with the
subordination provisions, if any, of such Restricted Indebtedness;
(b) The Borrower may amend, modify or supplement the terms of
Restricted Indebtedness to extend the maturity or reduce the amount of
any payment of principal thereof, or to reduce the rate or extend the
date for payment of interest thereon, or to reduce the amount or
extend the date for
<PAGE> 160
payment by the Borrower of any other amount payable in connection
therewith, or to release any Lien provided or required to be provided
by the Borrower to secure such Restricted Indebtedness, or (except
with respect to the Subordinated Debt Purchase Agreement or any other
agreements governing the Subordinated Notes) to eliminate, waive or
render less restrictive on the Borrower any covenant, term or
condition applicable to the Borrower.
6.16. Limitation on Other Restrictions on Liens. The
Borrower shall not, and shall not permit any other Loan Party to, enter into,
become or remain subject to any agreement or instrument to which the Borrower
or such Loan Party, as the case may be, is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or bound that would
prohibit the grant of any Lien upon any of its properties (now owned or
hereafter required), except:
(a) The Loan Documents;
(b) Restrictions set forth in Section 10.02 of the
Subordinated Debt Purchase Agreement; and
(c) (i) Restrictions pursuant to non-assignment provisions of
any executory contract or of any lease by the Borrower as lessee, and
(ii) restrictions on granting Liens on property subject to a Permitted
Lien for the benefit of the holder of such Permitted Lien to the
extent in existence on the date hereof.
6.17. Limitation on Other Restrictions on Amendment of the
Loan Documents, etc. Except for the restrictions set forth in Section 10.12 of
the Subordinated Debt Purchase Agreement, the Borrower shall not, and shall not
permit any other Loan Party to, enter into, become or remain subject to any
agreement or instrument to which the Borrower or such Loan Party, as the case
may be, is a party or by it or any of its properties (now owned or hereafter
acquired) may be subject or bound that would prohibit or require the consent of
any Person to any amendment, modification or supplement to any of the Loan
Documents, except for the Loan Documents.
6.18. Maintenance of Business. The Borrower shall not change
its primary line of business from that of constructing, owning and operating a
steel mini-mill, shall not permit either Holdings or Salesco to change its
respective sole line of business from that described on Exhibit CC hereto and
shall not permit either Holdings or Salesco to fail to conduct its respective
operations in accordance with the requirements of such Exhibit.
<PAGE> 161
6.19. Subsidiaries. The Borrower shall not organize,
incorporate, acquire or otherwise suffer to exist any Subsidiaries, except as
permitted by Exhibit DD hereto, Salesco shall not organize, incorporate,
acquire or otherwise suffer to exist any Subsidiaries except the Borrower and
Subsidiaries of the Borrower, and Holdings shall not organize, incorporate,
acquire or otherwise suffer to exist any Subsidiaries except Salesco and
Subsidiaries of Salesco.
6.20. Change Orders. The Borrower will not modify the
Specifications or accept any change order without the prior written consent of
the Required Lenders, except that (i) the Specifications for the Phase I
Project may, without such consent, be modified by a change order as to which
all documentation has been delivered to the Phase I Project Monitor to the
extent that such modifications do not change the Phase I Project from the
definition thereof set forth in Section 1.01 hereof, are consistent with the
Design and Construction Standard (except for that portion of the Design and
Construction Standard relating to the Specifications), do not involve any delay
in the Phase I Project Commissioning Date beyond September 30, 1996 or an
increase in Phase I Project Costs (other than increases of less than $5,000,000
for any change order or series of related change orders which are not
inconsistent with the Required Phase I Contingency), do not adversely affect
the capacity, efficiency or performance of the Phase I Project and are not the
subject of a notice delivered by the Phase I Project Monitor to the effect that
such change order does not comply, in the Phase I Project Monitor's opinion,
with the foregoing requirements (provided that such requirements shall not be
deemed to have been met solely because of the absence of delivery of such
notice by the Phase I Project Monitor) and (ii) the Specifications for the
Phase II Project may, without such consent, be modified by a change order as to
which all documentation has been delivered to the Phase II Project Monitor to
the extent that such modifications do not change the Phase II Project from the
definition thereof set forth in Section 1.01 hereof, are consistent with the
Design and Construction Standard (except for that portion of the Design and
Construction Standard relating to the Specifications), do not involve any delay
in the Phase II Project Commissioning Date beyond June 30, 1998 or an increase
in Phase II Project Costs (other than increases of less than $5,000,000 for any
change order or series of related change orders which are not inconsistent with
the Required Phase II Contingency), do not adversely affect the capacity,
efficiency or performance of the Phase II Project and are not the subject of a
notice delivered by the Phase II Project Monitor to the effect that such change
order
<PAGE> 162
does not comply, in the Phase II Project Monitor's opinion, with the foregoing
requirements (provided that such requirements shall not be deemed to have been
met solely because of the absence of delivery of such notice by the Phase II
Project Monitor).
ARTICLE VII
DEFAULTS
7.01. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(for any reason, whether voluntary, involuntary or effected or required by
Law):
(a) The Borrower shall fail to pay when due principal of any
Loan or any Letter of Credit Reimbursement Obligation, or shall fail
to make any required cash collateralization of outstanding Letters of
Credit.
(b) Any Loan Party shall fail to pay when due interest on any
Loan, any fees, indemnity or expenses, or any other amount due
hereunder or under any other Loan Document and, if such failure is
unintentional, such failure shall have continued for a period of five
Business Days.
(c) Any representation or warranty made by any Loan Party in
or pursuant to or in connection with any Loan Document, or deemed made
by any Loan Party in or pursuant to any Loan Document, or any
statement made by any Loan Party in any financial statement,
certificate, report (excluding projections, the Phase I Project Budget
and the Phase II Project Budget) or exhibit furnished by any Loan
Party to the Agent or any Lender pursuant to or in connection with any
Loan Document, shall prove to have been false or misleading in any
material respect as of the time when made or deemed made (including by
omission of material information necessary to make such
representation, warranty or statement not misleading).
(d) The Borrower or any Loan Party shall default in the
performance or observance of any covenant contained in Article VI
hereof, other than Section 6.12, or any of the covenants contained in
Sections 2.10, 2.16, 5.01(k)(i), 5.09, 5.10, or 5.12 hereof or any
Section of the Security Documents listed on Schedule 7.01(d) hereto.
(e) Any Loan Party shall default in the performance or
observance of any other covenant, agreement or duty under this
Agreement or any other Loan Document and (i) in the case of a default
under Section 5.01 hereof (other than as
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referred to in subsection (k)(i) thereof) such default shall have
continued for a period of ten days and (ii) in the case of any other
default such default shall have continued for a period of 30 days.
(f) Any Cross-Default Event shall occur with respect to any
Cross-Default Obligation; provided, that if a Cross-Default Event
would have occurred with respect to a Cross-Default Obligation but for
the grant of a waiver or similar indulgence, a Cross-Default Event
shall nevertheless be deemed to have occurred if the Borrower gave or
agreed to give any fee or other monetary compensation for such waiver
or indulgence. As used herein, "Cross-Default Obligation" shall mean
any Indebtedness of the Borrower in excess of $2,000,000 in aggregate
principal amount, or commitment of any Person to make a loan or loans
to the Borrower in the aggregate principal amount in excess of
$2,000,000. As used herein, "Cross-Default Event" with respect to a
Cross-Default Obligation shall mean the occurrence of any default,
event or condition which causes or which would permit any Person or
Persons to cause or which would with the giving of notice or the
passage of time or both would permit any Person or Persons to cause
all or any part of such Cross-Default Obligation to become due (by
acceleration, mandatory prepayment or repurchase, or otherwise) before
its otherwise stated maturity or to terminate its commitment to make
loans to the Borrower, or failure to pay all or any part of such
Cross-Default Obligation at its stated maturity.
(g) One or more judgments for the payment of money shall have
been entered against the Borrower or any other Loan Party, which
judgment or judgments exceed $1,000,000 in the aggregate, and such
judgment or judgments shall have remained undischarged and unstayed
for a period of forty-five consecutive days.
(h) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the
aggregate amount of $1,000,000 shall have been issued against the
Borrower or any other Loan Party or any of their respective properties
and shall have remained undischarged and unstayed for a period of
forty-five consecutive days.
(i) Any Governmental Action now or hereafter made by or with
any Governmental Authority in connection with any Loan Document is not
obtained or shall have ceased to be in
<PAGE> 164
full force and effect or shall have been modified or amended or shall
have been held to be illegal or invalid, unless the same could not
have a Material Adverse Effect.
(j) Any Security Document shall cease to be in full force and
effect, or any Lien created or purported to be created in any
Collateral pursuant to any Security Document shall fail to be valid,
enforceable and perfected Lien in favor of the Agent for the benefit
of the Lenders and the Agent securing the Obligations, prior to all
other Liens (except for Permitted Liens under Section 6.02(b), (e) or
(f)), or any Loan Party shall assert any of the foregoing.
(k) Any Loan Document shall cease to be in full force and
effect, or any Loan Party shall, or shall purport to, terminate,
repudiate, declare voidable or void or otherwise contest, any Loan
Document or any obligation or liability of any Loan Party thereunder.
(l) Any term or provision of the subordination provisions
contained in the Subordinated Debt Purchase Agreement shall cease to
be in full force and effect, or the Borrower, any holder of any
Subordinated Note (or any trustee or agent on behalf of such holders)
shall, or shall purport to, terminate, repudiate, declare voidable or
void or otherwise contest any term or provision relating to
subordination.
(m) The Required Lenders shall have determined in good faith
that an event or condition has occurred which could have a Material
Adverse Effect.
(n) Any one or more Pension-Related Events referred to in
subsection (a)(ii) or (b) of the definition of "Pension-Related Event"
shall have occurred; any one or more Pension-Related Events referred
to in subsection (e)(i) of the definition of "Pension- Related Event"
shall have occurred and such event shall not have been cured within
fifteen days after the occurrence thereof; or any one or more other
one or more other Pension-Related Events shall have occurred and the
Required Lenders shall determine in good faith (which determination
shall be conclusive) that such other Pension-Related Events,
individually or in the aggregate, could have a Material Adverse
Effect.
(o) Any one or more of the events or conditions set forth in
the following clauses (i) or (ii) shall have occurred in respect of
any Loan Party or any of its Environmental Affiliates, and the
Required Lenders shall determine in good faith that such events or
conditions,
<PAGE> 165
individually or in the aggregate, could have a Material Adverse
Effect: (i) any past or present violation of any Environmental Law by
such Person, or (ii) existence of any pending or threatened
Environmental Claim against any such Person, or existence of any past
or present acts, omissions, events or circumstances that could form
the basis of any Environmental Claim against any such Person.
(p) A Change of Control or a Change of Management shall have
occurred.
(q) The Borrower or any other Person shall default under the
SMS Documents, the Heidtman Documents, the OmniSource Documents or any
of the Phase II Project Major Equipment Supply Contracts, and such
defaults shall have continued without cure for such a period as to
have a material adverse impact on construction or operation of the
Phase I Project or of the Phase II Project.
(r) The Phase I Project Commissioning Date does not occur on
or before September 30, 1996, Completion of construction of the Phase
I Project does not occur on or before September 30, 1997, the Phase II
Project Commissioning Date does not occur on or before June 30, 1998,
or Completion of construction of the Phase II Project does not occur
on or before September 30, 1998.
(s) Any action or proceeding for the Condemnation (as defined
in the Mortgage) of all or a substantial portion of the Phase I
Project or of the Phase II Project shall be commenced and continue
undismissed for a period of forty-five days.
(t) The Development Package shall fail to be in full force and
effect without material adverse amendment with respect to at least
$35,000,000 of proceeds or benefits received or to be received, and
the Borrower shall not, within twenty days after the occurrence of
such condition, have cured such condition by receiving cash proceeds
of additional equity in the amount of, and segregated as a replacement
for, such shortfall.
(u) Any of the Heidtman Documents or the OmniSource Documents
shall be materially and adversely amended or shall fail to be in full
force and effect if such amendment or failure could have a Material
Adverse Effect.
<PAGE> 166
(v) A proceeding shall have been instituted in respect of the
Borrower, any other Loan Party, SMS, Heidtman or OmniSource
(i) seeking to have an order for relief entered in
respect of such Person, or seeking a declaration or entailing a
finding that such Person is insolvent or a similar declaration
or finding, or seeking dissolution, winding-up, charter
revocation or forfeiture, liquidation, reorganization,
arrangement, adjustment, composition or other similar relief
with respect to such Person, its assets or its debts under any
Law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any
other similar Law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee,
liquidator, assignee, sequestrator or other custodian for such
Person or for all or any substantial part of its property
and (A) in the case of the Borrower or any other Loan Party only, such
proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed, undischarged and unstayed for a
period of sixty consecutive days, (B) in the case of SMS, Heidtman or
OmniSource only, such proceeding shall result in the entry, making or
grant of any such order for relief, declaration, finding, relief or
appointment, or such proceeding shall remain undismissed, undischarged
and unstayed for a period of sixty (of, if such period is within the
Early Period, of one-hundred-twenty) consecutive days (C) in the case
of SMS only, the Phase I Project Acceptance Date shall not yet have
occurred and (D) in the case of Heidtman or OmniSource only, the
Required Lenders shall determine in good faith that such event could
have a Material Adverse Effect.
(w) The Borrower, any other Loan Party, SMS, Heidtman or
OmniSource shall become insolvent; shall fail to pay, become unable
to pay, or state that it is or will be unable to pay, its debts as
they become due; shall voluntarily suspend transaction of its or his
business; shall make a general assignment for the benefit of
creditors; shall institute (or fail to controvert in a timely and
appropriate manner) a proceeding described in Section 7.01(v)(i)
hereof, or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such order for relief,
declaration, finding or relief described therein; shall
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institute or take corporate action authorizing the institution of (or
fail to controvert in a timely and appropriate manner) a proceeding
described in Section 7.01(v)(ii) hereof, or (whether or not any such
proceeding has been instituted) shall consent to or acquiesce in any
such appointment or to the taking of possession by any such custodian
of all or any substantial part of its or his property; shall dissolve,
wind-up, revoke or forfeit its charter (or other constituent
documents) or liquidate itself or any substantial part of its
property; provided, however, that, in the case of SMS only, none of
the foregoing events or conditions set forth in this paragraph (w)
shall constitute an Event of Default if the Phase I Project Acceptance
Date shall have occurred, and provided, further, that, in the case of
Heidtman or OmniSource only, none of the foregoing events or
conditions set forth in this paragraph (w) shall constitute an Event
of Default unless the Required Lenders shall have determined (which
determination shall be conclusive) that such event or condition could
have a Material Adverse Effect.
(x) Any party shall obtain an order or decree in any court of
competent jurisdiction enjoining or delaying the construction or
operation of the Phase I Project or of the Phase II Project or
enjoining or prohibiting the carrying out of any of the Loan
Documents, SMS Documents, Heidtman Documents, OmniSource Documents or
Phase II Project Major Equipment Supply Contracts or any of the other
Phase I Project Agreements or Phase II Project Agreements and such
order or decree is not vacated within thirty days or, in the case of
an order or decree enjoining or delaying the construction of the Phase
I Project or of the Phase II Project, such order or decree is not
vacated within such period of time as is necessary to permit the
Borrower (without non-concurrence by the Phase I Project Monitor or
the Phase II Project Monitor, as the case may be) to certify that it
is reasonably to be expected that the Phase I Project Commissioning
Date will occur on or before September 30, 1996 and that the Phase II
Project Commissioning Date will occur on or before June 30, 1998.
(y) The Borrower shall abandon construction or operation of
the Phase I Project or of the Phase II Project.
7.02. Consequences of an Event of Default.
<PAGE> 168
(a) If an Event of Default under Section 7.01 hereof (other
than a Specified Early Period Default and other than an Event of Default
specified in subsection (v) or (w) thereof) shall occur and be continuing or
shall exist, then, in addition to all other rights and remedies which the Agent
or any Lender may have hereunder or under any other Loan Document, at law, in
equity or otherwise, the Lenders (other than the Tranche C Lenders) shall be
under no further obligation to make Loans and the Issuing Bank shall be under
no further obligation to issue Letters of Credit hereunder, and the Agent
shall, upon the written request of the Required Lenders, by notice to the
Borrower, from time to time do any or all of the following:
(i) Declare the Commitments terminated, whereupon the
Commitments will terminate and any fees hereunder shall be immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby waived, and an action therefor
shall immediately accrue.
(ii) Declare the unpaid principal amount of any or all of the
Loans, interest accrued thereon and all other Obligations (including
without limitation the obligation to cash collateralize outstanding
Letters of Credit) to be immediately due and payable without
presentment, demand, protest or further notice of any kind, all of
which are hereby waived, and an action therefor shall immediately
accrue.
(iii) Exercise one or more of the remedies set forth in the
Security Documents.
(b) If an Event of Default specified in subsection (v) or (w)
of Section 7.01 hereof shall occur or exist, then, in addition to all other
rights and remedies which the Agent or any Lender may have hereunder or under
any other Loan Document, at law, in equity or otherwise, the Commitments shall
automatically terminate and the Lenders shall be under no further obligation to
make Loans and the Issuing Bank shall be under no further obligation to issue
Letters of Credit, and the unpaid principal amount of the Loans, interest
accrued thereon and all other Obligations (including without limitation the
obligation to cash collateralize outstanding Letters of Credit) shall become
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby waived, and an action therefor shall
immediately accrue.
(c) If a Specified Early Period Default shall occur and be
continuing or shall exist, then the Lenders shall be under no obligation to
make Loans and the Issuing Bank shall be under
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no obligation to issue Letters of Credit hereunder and, unless the Cure Period,
if any, applicable to such Specified Early Period Default shall not have
expired, in addition to all other rights and remedies which the Agent or any
Lender may have hereunder or under any other Loan Document, at law, in equity
or otherwise, the Agent may, and upon the written request of the Required
Lenders shall, by notice to the Borrower, from time to time do any or all of
the following:
(i) Declare the Commitments terminated, whereupon the
Commitments will terminate and any fees hereunder shall be immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby waived, and an action therefor
shall immediately accrue.
(ii) Declare the unpaid principal amount of all Obligations
(including without limitation the obligation to cash collateralize
outstanding Letters of Credit) to be immediately due and payable
without presentment, demand, protest or further notice of any kind,
all of which are hereby waived, and an action therefor shall
immediately accrue.
(iii) Exercise one or more of the remedies set forth in the
Security Documents.
The term "Cure Period" with respect to a Specified Early Period Default shall
mean the period of time (commencing on the date such Specified Early Period
Default occurs or first exists and expiring not later than the earlier to occur
of the last day of the Early Period and the date on which such Specified Early
Period Default is cured in a manner which could not have a Material Adverse
Effect) during which the Borrower proceeds with all due diligence to cure such
Specified Early Period Default and during which the Borrower has provided and
continuously maintained Cash Collateral in an amount at least equal to the
aggregate Letter of Credit Exposure. A Cure Period shall be applicable to a
Specified Early Period Default only if such Specified Early Period Default is
and remains curable by the Borrower in a manner which could not have a Material
Adverse Effect and the Borrower commences its reasonable and diligent efforts
to cure such Specified Early Period Default promptly after becoming aware
thereof. With respect to a Special Specified Early Period Default, the cure
referred to in the second preceding sentence shall include the designation by
the Borrower on a supplement to Schedule 3.26 of additional Required
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Phase I Project Permits which have been obtained within the applicable Cure
Period.
ARTICLE VIII
THE AGENT
8.01. Appointment. Each Lender Party hereby irrevocably
(subject to the second sentence of Section 8.10 hereof) appoints Mellon to act
as Agent for such Lender Party under this Agreement and the other Loan
Documents. Each Lender Party hereby irrevocably (subject to the second
sentence of Section 8.10 hereof) authorizes the Agent to take such action on
behalf of such Lender under the provisions of this Agreement and the other Loan
Documents, and to exercise such powers and to perform such duties, as are
expressly delegated to or required of the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto. Mellon hereby
agrees to act as Agent on behalf of the Lender Parties on the terms and
conditions set forth in this Agreement and the other Loan Documents, subject to
its right to resign as provided in Section 8.10 hereof. Each Lender Party
hereby irrevocably authorizes the Agent to execute and deliver each of the Loan
Documents and to accept delivery of such of the other Loan Documents as may not
require execution by the Agent. Each Lender Party agrees that the rights and
remedies granted to the Agent under the Loan Documents shall be exercised
exclusively by the Agent, and that no Lender Party shall have any right
individually to exercise any such right or remedy, except to the extent
expressly provided herein or therein.
8.02. General Nature of Agent's Duties. Notwithstanding
anything to the contrary elsewhere in this Agreement or in any other Loan
Document:
(a) The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the other Loan
Documents, and no implied duties or responsibilities on the part of
the Agent shall be read into this Agreement or any Loan Document or
shall otherwise exist.
(b) The duties and responsibilities of the Agent under this
Agreement and the other Loan Documents shall be mechanical and
administrative in nature, and the Agent shall not have a fiduciary
relationship in respect of any Lender Party.
(c) The Agent is and shall be solely the agent of the Lender
Parties. The Agent does not assume, and shall not at
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any time be deemed to have, any relationship of agency or trust with
or for, or any other duty or responsibility to, the Borrower or any
other Person (except only for its relationship as agent for, and its
express duties and responsibilities to, the Lender Parties as provided
in this Agreement and the other Loan Documents).
(d) The Agent shall be under no obligation to take any action
hereunder or under any other Loan Document if the Agent believes in
good faith that taking such action may conflict with any Law or any
provision of this Agreement or any other Loan Document, or may require
the Agent to qualify to do business in any jurisdiction where it is
not then so qualified.
8.03. Exercise of Powers. The Agent shall take any action of
the type specified in this Agreement or any other Loan Document as being within
the Agent's rights, powers or discretion in accordance with directions from the
Required Lenders (or, to the extent this Agreement or such Loan Document
expressly requires the direction or consent of some other Person or set of
Persons, then instead in accordance with the directions of such other Person or
set of Persons). In the absence of such directions, the Agent shall have the
authority (but under no circumstances shall be obligated), in its sole
discretion, to take any such action, except to the extent this Agreement or
such Loan Document expressly requires the direction or consent of the Required
Lenders (or some other Person or set of Persons), in which case the Agent shall
not take such action absent such direction or consent. Any action or inaction
pursuant to such direction, discretion or consent shall be binding on all the
Lender Parties. The Agent shall not have any liability to any Person as a
result of (x) the Agent acting or refraining from acting in accordance with the
directions of the Required Lenders (or other applicable Person or set of
Persons), (y) the Agent refraining from acting in the absence of instructions
to act from the Required Lenders (or other applicable Person or set of
Persons), whether or not the Agent has discretionary power to take such action,
or (z) the Agent taking discretionary action it is authorized to take under
this Section (subject, in the case of this clause (z), to the provisions of
Section 8.04(a) hereof).
8.04. General Exculpatory Provisions. Notwithstanding
anything to the contrary elsewhere in this Agreement or any other Loan
Document:
(a) The Agent shall not be liable for any action taken
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or omitted to be taken by it under or in connection with this
Agreement or any other Loan Document, unless caused by its own gross
negligence or willful misconduct.
(b) The Agent shall not be responsible for (i) the execution,
delivery, effectiveness, enforceability, genuineness, validity or
adequacy of this Agreement or any other Loan Document, (ii) any
recital, representation, warranty, document, certificate, report or
statement in, provided for in, or received under or in connection
with, this Agreement or any other Loan Document, (iii) any failure of
any Loan Party or any Lender or Issuing Bank to perform any of their
respective obligations under this Agreement or any other Loan
Document, (iv) the existence, validity, enforceability, perfection,
recordation, priority, adequacy or value, now or hereafter, of any
Lien or other direct or indirect security afforded or purported to be
afforded by any of the Loan Documents or otherwise from time to time,
(v) caring for, protecting, insuring, or paying any taxes, charges or
assessments with respect to any Collateral or (vi) whether any
Collateral meets any requirement for eligibility, whether under the
requirements of Section 2.16 hereof or otherwise.
(c) The Agent shall not be under any obligation to ascertain,
inquire or give any notice relating to (i) the performance or
observance of any of the terms or conditions of this Agreement or any
other Loan Document on the part of any Loan Party, (ii) the business,
operations, condition (financial or otherwise) or prospects of any
Loan Party, the Borrower Group or any other Person, or (iii) except to
the extent set forth in Section 8.05(f) hereof, the existence of any
Event of Default or Potential Default.
(d) The Agent shall not be under any obligation, either
initially or on a continuing basis, to provide any Lender Party with
any notices, reports or information of any nature, whether in its
possession presently or hereafter, except for such notices, reports
and other information expressly required by this Agreement or any
other Loan Document to be furnished by the Agent to such Lender Party.
8.05. Administration by the Agent.
(a) The Agent may rely upon any notice or other communication
of any nature (written or oral, including but not limited to telephone
conversations, whether or not such notice or other communication is made in a
manner permitted or required by this Agreement or any Loan Document)
purportedly made by or on behalf of the proper party or parties, and the Agent
shall not
<PAGE> 173
have any duty to verify the identity or authority of any Person giving such
notice or other communication.
(b) The Agent may consult with legal counsel (including,
without limitation, in-house counsel for the Agent or in-house or other counsel
for the Borrower), independent public accountants and any other experts
selected by it from time to time, and the Agent shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts.
(c) The Agent may conclusively rely upon the truth of the
statements and the correctness of the opinions expressed in any certificates or
opinions furnished to the Agent in accordance with the requirements of this
Agreement or any other Loan Document. Whenever the Agent shall deem it
necessary or desirable that a matter be proved or established with respect to
any Loan Party or any Lender or Issuing Bank, such matter may be established by
a certificate of the Borrower or such Lender or Issuing Bank, as the case may
be, and the Agent may conclusively rely upon such certificate (unless other
evidence with respect to such matter is specifically prescribed in this
Agreement or another Loan Document).
(d) The Agent may fail or refuse to take any action unless it
shall be indemnified to its satisfaction from time to time against any and all
amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature which
may be imposed on, incurred by or asserted against the Agent by reason of
taking or continuing to take any such action.
(e) The Agent may perform any of its duties under this
Agreement or any other Loan Document by or through agents or attorneys-in-fact.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected and supervised by it with reasonable care.
(f) The Agent shall not be deemed to have any knowledge or
notice of the occurrence of any Event of Default or Potential Default unless
the Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Event of Default or Potential Default, and stating
that such notice is a "notice of default". If the Agent receives such a
notice, the Agent shall give prompt notice thereof to each Lender and Issuing
Bank.
8.06. Lender Not Relying on Agent or Other Lenders.
<PAGE> 174
Each Lender acknowledges as follows: (a) Neither the Agent nor any other
Lender has made any representations or warranties to it, and no act taken
hereafter by the Agent or any other Lender shall be deemed to constitute any
representation or warranty by the Agent or such other Lender to it. (b) It
has, independently and without reliance upon the Agent or any other Lender, and
based upon such documents and information as it has deemed appropriate, made
its own credit and legal analysis and decision to enter into this Agreement and
the other Loan Documents. (c) It will, independently and without reliance upon
the Agent or any other Lender, and based upon such documents and information as
it shall deem appropriate at the time, make its own decisions to take or not
take action under or in connection with this Agreement and the other Loan
Documents.
8.07. Indemnification. Each Lender agrees to reimburse and
indemnify the Agent and its directors, officers, employees and agents (to the
extent not reimbursed by the Borrower and without limitation of the obligations
of the Borrower to do so), Pro Rata, from and against any and all amounts,
losses, liabilities, claims, damages, reasonable expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements of any kind or
nature (including, without limitation, the fees and disbursements of counsel
for the Agent or such other Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Agent or such other Person shall be designated a party thereto) that may at
any time be imposed on, incurred by or asserted against the Agent or such other
Person as a result of, or arising out of, or in any way related to or by reason
of, this Agreement, any other Loan Document, any transaction from time to time
contemplated hereby or thereby, or any transaction financed in whole or in part
or directly or indirectly with the proceeds of any Loan or Letter of Credit,
provided that no Lender shall be liable for any portion of such amounts,
losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements resulting solely from the
gross negligence or willful misconduct of the Agent or such other Person, as
finally determined by a court of competent jurisdiction. Payments under this
Section shall be due and payable on demand, and to the extent that any Lender
fails to pay any such amount on demand, such amount shall bear interest for
each day from the fifth day after the date of demand until paid (before and
after judgment) at a rate per annum (calculated on the basis of a year of 360
days and actual days elapsed) which shall be equal to 2% plus the Federal Funds
Effective Rate.
8.08. Agent in its Individual Capacity. With respect to its
Commitments and the Obligations owing to it, the Agent shall have the same
rights and powers under this Agreement and
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each other Loan Document as any other Lender and may exercise the same as
though it were not the Agent, and the terms "Issuing Bank," "Lenders," "holders
of Notes" and like terms shall include the Agent in its individual capacity as
such. The Agent and its affiliates may, without liability to account, make
loans to, accept deposits from, acquire debt or equity interests in, act as
trustee under indentures of, and engage in any other business with, the
Borrower and any stockholder or affiliate of the Borrower, as though the Agent
were not the Agent hereunder.
8.09. Holders of Notes. The Agent may deem and treat the
Lender which is payee of a Note as the owner and holder of such Note for all
purposes hereof unless and until a Transfer Supplement with respect to the
assignment or transfer thereof shall have been filed with the Agent in
accordance with Section 9.14 hereof. Any authority, direction or consent of
any Person who at the time of giving such authority, direction or consent is
shown in the Register as being a Lender shall be conclusive and binding on each
present and subsequent holder, transferee or assignee of any Note or Notes
payable to such Lender or of any Note or Notes issued in exchange therefor.
8.10. Successor Agent. The Agent may resign at any time by
giving 30 days' prior written notice thereof to the Lenders and the Borrower.
The Agent may be removed by the Required Lenders at any time by giving 30 days'
prior written notice thereof to the Agent, the other Lenders and the Borrower.
Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed and consented to, and shall have accepted such appointment, within 90
days after such notice of resignation or removal, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent. Each successor Agent
shall be a commercial bank or trust company organized, or having a branch or
agency organized, under the laws of the United States of America or any State
thereof and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance by a successor Agent of its appointment as Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
properties, rights, powers, privileges and duties of the former Agent, without
further act, deed or conveyance. Upon the effective date of resignation or
removal of a retiring Agent, such Agent shall be discharged from its duties
under this Agreement and the other Loan Documents, but the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted by it
while it was Agent under this Agreement. If and so long as no successor Agent
shall have been appointed, then any
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notice or other communication required or permitted to be given by the Agent
shall be sufficiently given if given by the Required Lenders, all notices or
other communications required or permitted to be given to the Agent shall be
given to each Lender, and all payments to be made to the Agent shall be made
directly to the Borrower or Lender for whose account such payment is made.
8.11. Additional Agents. If the Agent shall from time to
time deem it necessary or advisable, for its own protection in the performance
of its duties hereunder or in the interest of the Lender Parties, the Agent and
the Borrower shall execute and deliver a supplemental agreement and all other
instruments and agreements necessary or advisable, in the opinion of the Agent,
to constitute another commercial bank or trust company, or one or more other
Persons approved by the Agent, to act as co-agent or separate agent with
respect to any part of the Collateral, with such powers of the Agent as may be
provided in such supplemental agreement, and to vest in such bank, trust
company or Person as such co-Agent or separate agent, as the case may be, any
properties, rights, powers, privileges and duties of the Agent under this
Agreement or any other Loan Document.
8.12. Calculations. The Agent shall not be liable for any
calculation, apportionment or distribution of payments made by it in good
faith. If such calculation, apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Lender Party to
whom payment was due but not made shall be to recover from the other Lender
Parties any payment in excess of the amount to which they are determined to be
entitled or, if the amount due was not paid by the Borrower, to recover such
amount from the Borrower.
8.13. Agent's Fee. The Borrower agrees to pay to the Agent,
for its individual account, a nonrefundable Agent's fee of $100,000 per annum,
payable yearly in advance.
8.14. Funding by Agent. Unless the Agent shall have been
notified in writing by any Lender not later than 4:00 p.m., Pittsburgh time, on
the day before the day on which Loans are requested by the Borrower to be made
that (or, if the request for a Loan is made by the Borrower on the date such
Loan is to be made, then not later than 11:00 a.m. on such day.) such Lender
will not make its ratable share of such Loans, the Agent may assume that such
Lender will make its ratable share of the Loans, and in reliance upon such
assumption the Agent may (but in no circumstances shall be required to) make
available to the Borrower a corresponding amount. If and to the extent that
any Lender fails to make such payment to the Agent on such date, such Lender
shall pay such amount on demand (or, if such Lender fails
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to pay such amount on demand, the Borrower shall pay such amount on demand),
together with interest, for the Agent's own account, for each day from and
including the date of the Agent's payment to and including the date of
repayment to the Agent (before and after judgment) at the rate or rates per
annum set forth below. All payments to the Agent under this Section shall be
made to the Agent at its Office in Dollars in funds immediately available at
such Office, without set-off, withholding, counterclaim or other deduction of
any nature. If funds deliverable by any Lender to the Agent or by the Agent to
any Lender are not made available when required hereunder, the party which has
not made such funds available shall pay interest to the other at the Federal
Funds Effective Rate for the first three days such funds are not made available
and 2% in excess of the Federal Funds Effective Rate thereafter.
8.15. Co-Agents. The Co-Agents shall have no rights, duties
or responsibilities in such capacity hereunder.
ARTICLE IX
MISCELLANEOUS
9.01. Holidays. Whenever any payment or action to be made or
taken hereunder or under any other Loan Document shall be stated to be due on a
day which is not a Business Day, such payment or action shall be made or taken
on the next following Business Day and such extension of time shall be included
in computing interest or fees, if any, in connection with such payment or
action.
9.02. Records. The unpaid principal amount of the Loans
owing to each Lender, the unpaid interest accrued thereon, the interest rate or
rates applicable to such unpaid principal amount, the duration of such
applicability, each Lender's Revolving Credit Committed Amount, and the accrued
and unpaid Revolving Credit Commitment Fees shall at all times be ascertained
from the records of the Agent, which shall be conclusive absent manifest error.
The unpaid Letter of Credit Reimbursement Obligation, the unpaid interest
accrued thereon and the interest rate or rates applicable thereto shall at all
times be ascertained from the records of the Issuing Bank, which shall be
conclusive absent manifest error.
9.03. Amendments and Waivers. Neither this Agreement nor any
Loan Document may be amended, modified or supplemented except in accordance
with the provisions of this Section. The
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Agent, the Borrower and, if applicable, any other Loan Party may from time to
time amend, modify or supplement the provisions of this Agreement or any other
Loan Document for the purpose of amending, adding to, or waiving any provisions
thereof, releasing any Collateral, or changing in any manner the rights and
duties of the Borrower or any Lender Party thereunder. Any such amendment,
modification, waiver or supplement made by Borrower and the Agent in accordance
with the provisions of this Section shall be binding upon the Borrower, each
Loan Party and each Lender Party. The Agent shall enter into such amendments,
modifications or supplements from time to time as directed by the Required
Lenders, and only as so directed, provided, that no such amendment,
modification or supplement may be made which will:
(a) Increase the Revolving Credit Committed Amount of any
Lender over the amount thereof then in effect, or extend the Revolving
Credit Maturity Date, without the written consent of each Lender
affected thereby or increase the Term Loan Committed Amount of any
Lender over the amount thereof then in effect without the written
consent of each Lender (including without limitation the Designated
Lender) affected thereby or amend the proviso to Section 2.17(a)
without the consent of all the Revolving Credit Lenders or;
(b) Reduce the principal amount of or extend the scheduled
final maturity or time for any scheduled payment of principal of any
Loan or Letter of Credit Reimbursement Obligation, or reduce the rate
of interest or extend the time for payment of interest borne by any
Loan or Letter of Credit Reimbursement Obligation, or reduce or
postpone the date for payment of any fees, expenses, indemnities or
amounts payable under any Loan Document, without the written consent
of each Lender Party (other than the Designated Lender) affected
thereby;
(c) Change the definition of "Required Lenders" or amend this
Section 9.03, without the written consent of all the Lenders (other
than the Designated Lender, except that the written consent of the
Designated Lender shall be required to amend Section 9.03(a) hereof
and except that the written consent of the Commerzbank Lenders shall
be required to amend Sections 9.03(a) and 9.03(b) hereof);
(d) Amend or waive any of the provisions of Article VIII
hereof, or impose additional duties upon the Agent or otherwise
adversely affect the rights, interests or obligations of the Agent,
without the written consent of the Agent;
(e) Release any Collateral or Guaranty Equivalent,
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other than Liens on Collateral, the disposition of which is expressly
permitted under Section 6.10 hereof or any other section of the Loan
Documents and Liens on after-acquired Equipment to the extent such
Equipment is the subject of a purchase money security interest
permitted under Section 6.02(f) hereof without the written consent of
all the Lenders (other than the Designated Lender and other than the
Commerzbank Lenders);
(f) Reduce any Letter of Credit Unreimbursed Draw, or extend
the time for payment by the Borrower of any Letter of Credit
Reimbursement Obligation, without the written consent of each Lender
affected thereby;
(g) Amend or waive any of the provisions of Sections 2.17
through 2.26, or impose additional duties upon the Issuing Bank or
otherwise adversely affect the rights, interests or obligations of the
Issuing Bank, without the written consent of the Issuing Bank;
(h) Change any requirement for the consent of all Lenders
without the written consent of all Lenders or change any requirement
for the consent of all of a category of Lenders (that is, Revolving
Credit Lenders, Term Lenders, Tranche A Lenders, Tranche B Lenders,
Tranche C Lenders and Tranche D Lenders) without the written consent
of all Lenders in such category; or
(i) Change the definition of "Cost Overrun", "Cost Overrun
Event" or "Required Overrun Decision Lenders" or amend the provisions
of Section 4.04, without the consent of all the Commerzbank Lenders;
and provided further, that Transfer Supplements may be entered into in the
manner provided in Section 9.14 hereof. Any such amendment, modification or
supplement must be in writing and shall be effective only to the extent set
forth in such writing. Any Event of Default or Potential Default waived or
consented to in any such amendment, modification or supplement shall be deemed
to be cured and not continuing to the extent and for the period set forth in
such waiver or consent, but no such waiver or consent shall extend to any other
or subsequent Event of Default or Potential Default or impair any right
consequent thereto.
9.04. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Agent or any
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Lender Party in exercising any right, power or privilege under this Agreement
or any other Loan Document shall affect any other or future exercise thereof or
exercise of any other right, power or privilege; nor shall any single or
partial exercise of any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or privilege preclude
any further exercise thereof or of any other right, power or privilege. The
rights and remedies of the Agent and the Lender Parties under this Agreement
and any other Loan Document are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender Party would otherwise have hereunder or
thereunder, at law, in equity or otherwise.
9.05. Notices.
(a) Except to the extent otherwise expressly permitted
hereunder or thereunder, all notices, requests, demands, directions and other
communications (collectively "notices") under this Agreement or any Loan
Document shall be in writing (including telexed and telecopied communication)
and shall be sent by first-class mail, or by nationally-recognized overnight
courier, or by telex or telecopier (with confirmation in writing mailed
first-class or sent by such an overnight courier), or by personal delivery.
All notices shall be sent to the applicable party at the address stated on the
signature pages hereof or in accordance with the last unrevoked written
direction from such party to the other parties hereto, in all cases with
postage or other charges prepaid. Any such properly given notice to the Agent
or any Lender Party shall be effective when received. Any such properly given
notice to the Borrower shall be effective on the earliest to occur of receipt,
telephone confirmation of receipt of telex or telecopy communication, one
Business Day after delivery to a nationally-recognized overnight courier, or
three Business Days after deposit in the mail.
(b) Any Lender Party giving any notice to the Borrower or any
other party to a Loan Document shall simultaneously send a copy thereof to the
Agent, and the Agent shall promptly notify the other Lenders of the receipt by
it of any such notice.
(c) The Agent and each Lender Party may rely on any notice
(whether or not such notice is made in a manner permitted or required by this
Agreement or any Loan Document) purportedly made by or on behalf of the
Borrower, and neither the Agent nor any Lender Party shall have any duty to
verify the identity or authority of any Person giving such notice.
9.06. Expenses; Taxes; Indemnity.
(a) The Borrower agrees to pay or cause to be paid and
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to save the Agent, the Issuing Bank and each of the Lender Parties harmless
against liability for the payment of all reasonable out-of-pocket costs and
expenses (including but not limited to reasonable fees and expenses of counsel,
including local counsel (but not separate counsel for any Lender other than
Mellon in connection with clause (i) below), auditors, consulting engineers,
appraisers, and all other professional, accounting, evaluation and consulting
costs) incurred by the Agent or any Lender from time to time arising from or
relating to (i) the negotiation, preparation, execution, delivery,
administration, syndication and performance of this Agreement and the other
Loan Documents (including but not limited to collateral management fees and
expenses of field examinations and periodic commercial finance audits of the
Borrower), (ii) any requested amendments, modifications, supplements, waivers
or consents (whether or not ultimately entered into or granted) to this
Agreement or any Loan Document (other than the Fifth Amendment and the
documents to be delivered on the Initial Tranche D Funding Availability Date,
as to which payment of such costs and expenses shall be the sole obligation of
the Agent), and (iii) the enforcement or preservation of rights under this
Agreement or any Loan Document (including but not limited to any such costs or
expenses arising from or relating to (A) the creation, perfection or protection
of the Agent's Lien on any Collateral, (B) the protection, collection, lease,
sale, taking possession of, preservation of, or realization on, any Collateral,
including without limitation advances for storage, insurance premiums,
transportation charges, taxes, filing fees and the like, (C) collection or
enforcement of an outstanding Loan, Letter of Credit Reimbursement Obligation
or any other amount owing hereunder or thereunder by the Agent or any Lender
Party, and (D) any litigation, proceeding, dispute, work-out, restructuring or
rescheduling related in any way to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer,
recording, filing, registration, search, sales and excise fees and taxes and
all similar impositions now or hereafter determined by the Agent or any Lender
Parties to be payable in connection with this Agreement or any other Loan
Documents or any other documents, instruments or transactions pursuant to or in
connection herewith or therewith, and the Borrower agrees to save the Agent and
each Lender Party harmless from and against any and all present or future
claims, liabilities or losses with respect to or resulting from any omission to
pay or delay in paying any such fees, taxes or impositions.
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(c) The Borrower hereby agrees to reimburse and indemnify
each of the Indemnified Parties from and against any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnified Party in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnified
Party shall be designated a party thereto) that may at any time be imposed on,
asserted against or incurred by such Indemnified Party as a result of, or
arising out of, or in any way related to or by reason of, this Agreement or any
other Loan Document, any transaction from time to time contemplated hereby or
thereby, or any transaction financed in whole or in part or directly or
indirectly with the proceeds of any Loan (and without in any way limiting the
generality of the foregoing, including any violation or breach of any
Environmental Law or any other Law by any Loan Party or any of its
Environmental Affiliates; any Environmental Claim arising out of the
management, use, control, ownership or operation of property by any of such
Persons, including all on-site and off-site activities involving Environmental
Concern Materials; any grant of Collateral; or any exercise by the Agent or any
Lender Party of any of its rights or remedies under this Agreement or any other
Loan Document; any breach of any representation or warranty, covenant or
agreement of any Loan Party); but excluding any such losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements to the extent resulting from the gross negligence or
willful misconduct of such Indemnified Party, as finally determined by a court
of competent jurisdiction. If and to the extent that the foregoing obligations
of the Borrower under this subsection (c), or any other indemnification
obligation of the Borrower hereunder or under any other Loan Document, are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable Law.
9.07. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
9.08. Prior Understandings. This Agreement and the other
Loan Documents supersede all prior and contemporaneous understandings and
agreements, whether written or oral, among the
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parties hereto relating to the transactions provided for herein and therein.
9.09. Duration; Survival. All representations and warranties
of the Borrower and each other Loan Party contained herein or in any other in
the Loan Document or made in connection herewith or therewith shall survive the
making of, and shall not be waived by the execution and delivery, of this
Agreement or any other Loan Document, any investigation by or knowledge of the
Agent or any Lender Party, the making of any Loan, the issuance of any Letter
of Credit, or any other event or condition whatever. All covenants and
agreements of the Borrower and each other Loan Party contained herein or in any
other Loan Document shall continue in full force and effect from and after the
date hereof so long as the Borrower may borrow hereunder and until payment in
full of all Obligations. Without limitation, all obligations of the Borrower
hereunder or under any other Loan Document to make payments to or indemnify the
Agent or any Lender shall survive the payment in full of all other Obligations,
termination of the Borrower's right to borrow hereunder, and all other events
and conditions whatever. In addition, all obligations of each Lender to make
payments to or indemnify the Agent or Issuing Bank shall survive the payment in
full by the Borrower of all Obligations, termination of the Borrower's right to
borrow hereunder, and all other events or conditions whatever.
9.10. Counterparts. This Agreement 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.
9.11. Limitation on Payments. The parties hereto intend to
conform to all applicable Laws in effect from time to time limiting the maximum
rate of interest that may be charged or collected. Accordingly,
notwithstanding any other provision hereof or of any other Loan Document, the
Borrower shall not be required to make any payment to or for the account of any
Lender, and each Lender shall refund any payment made by the Borrower, to the
extent that such requirement or such failure to refund would violate or
conflict with nonwaivable provisions of applicable Laws limiting the maximum
amount of interest which may be charged or collected by such Lender.
9.12. Set-Off. The Borrower hereby agrees that, to the
fullest extent permitted by law, if an Event of Default shall have occurred and
be continuing or shall exist and if any
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Obligation of the Borrower shall be due and payable (by acceleration or
otherwise), each Lender Party shall have the right, without notice to the
Borrower, to set-off against and to appropriate and apply to such Obligation
any indebtedness, liability or obligation of any nature owing to the Borrower
by such Lender Party, including but not limited to all deposits (whether time
or demand, general or special, provisionally credited or finally credited,
whether or not evidenced by a certificate of deposit, and including without
limitation accounts in foreign currencies) now or hereafter maintained by the
Borrower with such Lender Party. Such right shall be absolute and
unconditional in all circumstances and, without limitation, shall exist whether
or not such Lender Party or any other Person shall have given notice or made
any demand to the Borrower or any other Person, whether such indebtedness,
obligation or liability owed to the Borrower is contingent, absolute, matured
or unmatured (it being agreed that such Lender Party may deem such
indebtedness, obligation or liability to be then due and payable at the time of
such setoff), and regardless of the existence or adequacy of any collateral,
guaranty or any other security, right or remedy available to any Lender Party
or any other Person. The Borrower hereby agrees that, to the fullest extent
permitted by law, any Participant and any branch, subsidiary or affiliate of
any Lender Party or any Participant shall have the same rights of set-off as a
Lender Party as provided in this Section (regardless of whether such
Participant, branch, subsidiary or affiliate would otherwise be deemed in
privity with or a direct creditor of the Borrower). The rights provided by
this Section are in addition to all other rights of set-off and banker's lien
and all other rights and remedies which any Lender Party (or any such
Participant, branch, subsidiary or affiliate) may otherwise have under this
Agreement, any other Loan Document, at law or in equity, or otherwise, and
nothing in this Agreement or any Loan Document shall be deemed a waiver or
prohibition of or restriction on the rights of set-off or bankers' lien of any
such Person.
9.13. Sharing of Collections. The Lenders hereby agree among
themselves that if any Lender shall receive (by voluntary payment, realization
upon security, set-off or from any other source) any amount on account of the
Loans, interest thereon, or any other Obligation contemplated by this Agreement
or the other Loan Documents to be made by the Borrower pro rata to all Lenders
(or pro rata to holders of Notes of a particular series or to another class of
Lenders) in greater proportion than any such amount received by any other
applicable Lender, then the Lender receiving such proportionately greater
payment shall notify each other Lender and the Agent of such receipt, and
equitable adjustment will be made in the manner stated in this Section so that,
in effect, all such excess amounts will be
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shared ratably among all of the applicable Lenders. The Lender receiving such
excess amount shall purchase (which it shall be deemed to have done
simultaneously upon the receipt of such excess amount) for cash from the other
applicable Lenders a participation in the applicable Obligations owed to such
other Lenders in such amount as shall result in a ratable sharing by all
applicable Lenders of such excess amount (and to such extent the receiving
Lender shall be a Participant). If all or any portion of such excess amount is
thereafter recovered from the Lender making such purchase, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
together with interest or other amounts, if any, required by Law to be paid by
the Lender making such purchase. The Borrower hereby consents to and confirms
the foregoing arrangements. Each Participant shall be bound by this Section as
fully as if it were a Lender hereunder.
9.14. Successors and Assigns; Participations; Assignments.
(a) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lender Parties, all future
holders of the Notes, the Agent and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights hereunder
or interests herein without the prior written consent of all the Lenders and
the Agent, and any purported assignment without such consent shall be void.
(b) Participations. Any Lender may, in the ordinary course
of its commercial banking business and in accordance with applicable Law, at
any time sell participations to one or more commercial banks or other Persons
(each a "Participant") in a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitments and the Loans owing to it and any Note held by it);
provided, that
(i) any such participation sold to a Participant which is not
a Lender, an affiliate of a Lender or a Federal Reserve Bank shall be
made only with the consent (which in each case shall not be
unreasonably withheld) of the Borrower and the Agent, unless an Event
of Default has occurred and is continuing, in which case the consent
of the Borrower shall not be required,
(ii) any such Lender's obligations under this Agreement
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and the other Loan Documents shall remain unchanged,
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations,
(iv) the parties hereto shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents,
(v) such Participant shall be bound by the provisions of
Section 9.13 hereof, and the Lender selling such participation shall
obtain from such Participant a written confirmation of its agreement
to be so bound,
(vi) no Participant (unless such Participant is an affiliate
of such Lender, or is itself a Lender) shall be entitled to require
such Lender to take or refrain from taking action under this Agreement
or under any other Loan Document, except that such Lender may agree
with such Participant that such Lender will not, without such
Participant's consent, take action of the type described in
subsections (a), (b), (c) or (e) of Section 9.03 hereof, and
(vii) a Participant shall have the right to vote regarding
amendments to this Agreement only in connection with amendments which
effect changes in the amount of principal, interest rates, fees,
maturity and material releases of Collateral.
The Borrower agrees that any such Participant shall be entitled to the benefits
of Sections 2.13, 2.14, 2.22 and 9.06 with respect to its participation in the
Commitments and the Loans and Letters of Credit outstanding from time to time;
provided, that no such Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
to such Participant had no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary course of
its commercial banking business and in accordance with applicable Law, at any
time assign all or a portion of its rights and obligations under this Agreement
and the other Loan Documents (including, without limitation, all or any portion
of its Commitments and Loans owing to it and any Note held by it) to any
Lender, any affiliate of a Lender or to one or more additional commercial banks
or other Persons (each a "Purchasing Lender"); provided, that
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(i) any such assignment to a Purchasing Lender which is not a
Lender or an affiliate of a Lender shall be made only with the consent
(which in each case shall not be unreasonably withheld) of the
Borrower, the Agent and, if the Purchasing Lender is to be a Revolving
Credit Lender, the Issuing Bank, unless an Event of Default has
occurred and is continuing or exists, in which case the consent of the
Borrower shall not be required,
(ii) if a Lender makes such an assignment of less than all of
its then remaining rights and obligations under this Agreement and the
other Loan Documents, such assignment shall be in a minimum aggregate
principal amount of $5,000,000 of the Commitments and Loans then
outstanding,
(iii) each such assignment shall be of a constant, and not a
varying, percentage of each Commitment of the transferor Lender and of
all of the transferor Lender's rights and obligations under this
Agreement and the other Loan Documents, and
(iv) each such assignment shall be made pursuant to a
Transfer Supplement in substantially the form of Exhibit C to this
Agreement, duly completed (a "Transfer Supplement").
In order to effect any such assignment, the transferor Lender and the
Purchasing Lender shall execute and deliver to the Agent a duly completed
Transfer Supplement (including the consents required by clause (i) of the
preceding sentence) with respect to such assignment, together with any Note or
Notes subject to such assignment (the "Transferor Lender Notes") and a
processing and recording fee of $2,500; and, upon receipt thereof, the Agent
shall accept such Transfer Supplement. Upon receipt of the Purchase Price
Receipt Notice pursuant to such Transfer Supplement, the Agent shall record
such acceptance in the Register. Upon such execution, delivery, acceptance and
recording, from and after the close of business at the Agent's Office on the
Transfer Effective Date specified in such Transfer Supplement
(x) the Purchasing Lender shall be a party hereto and, to the
extent provided in such Transfer Supplement, shall have the rights and
obligations of a Lender hereunder, and
(y) the transferor Lender thereunder shall be released from
its obligations under this Agreement to the extent so transferred
(and, in the case of an Transfer Supplement
<PAGE> 188
covering all or the remaining portion of a transferor Lender's rights
and obligations under this Agreement, such transferor Lender shall
cease to be a party to this Agreement) from and after the Transfer
Effective Date.
On or prior to the Transfer Effective Date specified in an Transfer Supplement,
the Borrower, at its expense, shall execute and deliver to the Agent (for
delivery to the Purchasing Lender) new Notes evidencing such Purchasing
Lender's assigned Commitments or Loans and (for delivery to the transferor
Lender) replacement Notes in the principal amount of the Loans or Commitments
retained by the transferor Lender (such Notes to be in exchange for, but not in
payment of, those Notes then held by such transferor Lender). Each such Note
shall be dated the date and be substantially in the form of the predecessor
Note. The Agent shall mark the predecessor Notes "exchanged" and deliver them
to the Borrower. Accrued interest and accrued fees shall be paid to the
Purchasing Lender at the same time or times provided in the predecessor Notes
and this Agreement.
(d) Register. The Agent shall maintain at its office a copy
of each Transfer Supplement delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to time.
The entries in the Register shall be conclusive absent manifest error and the
Borrower, the Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of the
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Financial and Other Information. The Borrower authorizes
the Agent and each Lender to disclose to any Participant or Purchasing Lender
(each, a "transferee") and any prospective transferee any and all financial and
other information in such Person's possession concerning the Borrower, any Loan
Party and their affiliates which has been or may be delivered to such Person by
or on behalf of the Borrower in connection with this Agreement or any other
Loan Document or such Person's credit evaluation of the Borrower and
affiliates. At the request of any Lender, the Borrower, at the Borrower's
expense, shall provide to each prospective transferee the conformed copies of
documents referred to in Section 4 of the form of Transfer Supplement.
(f) Subordinated Debt Purchase Agreement. No Revolving
Credit Lender, Term Lender (except the Designated Lender), Purchasing Lender,
Participant or other assignee or successor of any Lender shall acquire or hold
any interest in any
<PAGE> 189
of the Subordinated Debt Purchase Agreement.
(g) Transferee of Designated Lender. The Designated Lender
shall notify the Borrower and the Agent of any transfer of all or part of its
rights under this Agreement and the Borrower shall record such transfer on its
books. If the Designated Lender transfers any of its rights under this
Agreement to a transferee that is organized under the laws of any jurisdiction
other than the United States or any state thereof, the Borrower, in its
discretion, or the Agent, on behalf of the Borrower, may require the transferee
to make representations and covenants similar to those set forth on behalf of
the Designated Lender in Section 2.14(f)(iv) of this Agreement.
9.15. Confidentiality. Each of the Agent and the Lenders
agree to keep confidential any information relating to the Borrower or to the
Phase I Project or to the Phase II Project received by it pursuant to or in
connection with this Agreement which is (a) trade information which the Agent
and the Lenders reasonably expect that the Borrower would want to keep
confidential, (b) technical information with respect to the equipment or
operations of the Phase I Project or of the Phase II Project, (c) information
contained in the contracts described in Schedule 9.15 hereto, (d) financial or
environmental information or (e) information which is clearly marked
"CONFIDENTIAL"; provided, however, that this Section 9.15 shall not be
construed to prevent the Agent or any Lender from disclosing such information
(i) to any Affiliate that shall agree to be bound by this obligation of
confidentiality, (ii) upon the order of any court or administrative agency of
competent jurisdiction, (iii) upon the request or demand of any regulatory
agency or authority having jurisdiction over the Agent or such Lender (whether
or not such request or demand has the force of law), (iv) that has been
publicly disclosed, other than from a breach of this provision by the Agent or
any Lender, (v) that has been obtained from any person that is neither a party
to this Agreement nor an Affiliate of any such party, (vi) in connection with
the exercise of any right or remedy hereunder or under any other Loan Document,
(vii) as expressly contemplated by this Agreement or any other Loan Document or
(viii) to any prospective purchaser of all or any part of the interest of any
Lender which shall agree to be bound by the obligation of confidentiality in
this Agreement or the other Loan Documents if such prospective purchaser is a
financial institution or has been consented to by the Borrower, which consent
will not be withheld if such purchaser is not a competitor of the Borrower or
an Affiliate of a competitor of the Borrower. The Borrower acknowledges that
the
<PAGE> 190
Phase I Project Monitor, the Phase II Project Monitor and agents of the Agent
and the Lenders may visit the Project Site and collect information relating to
the Phase I Project and the Phase II Project, subject to the terms of this
Section 9.15.
9.16. Governing Law; Submission to Jurisdiction: Waiver of
Jury Trial; Limitation of Liability.
(a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN
DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH
OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF
LAW PRINCIPLES.
(b) Certain Waivers. THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON
ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING
IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED
LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN ALLEGHENY COUNTY, PENNSYLVANIA OR NEW YORK
COUNTY, NEW YORK, SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND TO
THE FULLEST EXTENT PERMITTED BY LAW AGREES THAT IT WILL NOT BRING ANY
RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE AGENT OR ANY LENDER PARTY TO BRING ANY ACTION, SUIT
OR PROCEEDING IN ANY OTHER FORUM);
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO
THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH
COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH
RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH
COURT DOES NOT HAVE JURISDICTION OVER THE BORROWER;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT
THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 9.05 HEREOF, AND CONSENTS
AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW);
AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED
LITIGATION.
<PAGE> 191
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED
BY LAW, NO CLAIM MAY BE MADE BY THE BORROWER AGAINST THE AGENT, ANY LENDER
PARTY OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF ANY
OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR
EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF
CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). THE BORROWER HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER
SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM
IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. THIS PARAGRAPH (C) SHALL NOT
LIMIT ANY RIGHTS OF THE BORROWER ARISING SOLELY OUT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the date first
above written.
STEEL DYNAMICS, INC.
By
Title: President
<PAGE> 1
Exhibit 10.3
CONTRACT FOR ELECTRIC SERVICE
BETWEEN STEEL DYNAMICS, INC.
AND INDIANA MICHIGAN POWER COMPANY
THIS CONTRACT, made and entered into this first day of June, 1994, by
and between the INDIANA MICHIGAN POWER COMPANY, an Indiana corporation (the
Company), and STEEL DYNAMICS, INC., an Indiana corporation (the Customer),
WITNESSETH:
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Indiana with its principal place of business at Fort Wayne,
Indiana, and owns and operates facilities for the generation, transmission and
distribution of electric power and energy in the State of Indiana; and
WHEREAS, the Customer is a corporation chartered and existing under the
laws of the State of Indiana with its principal place of business to be near
Butler, Indiana; and
WHEREAS, the Customer has announced plans to install a new
manufacturing facility (SDI Plant) in the State of Indiana, located at a site
near Butler, Indiana, at a capital cost in excess of $250 million; and
WHEREAS, economy and stability in the cost of electric service to the
SDI Plant are important factors to the Customer's decision concerning the
location of this manufacturing facility; and
WHEREAS, in order to facilitate the location of the SDI Plant in the
State of Indiana, the economics of which are heavily
<PAGE> 2
dependent upon the cost of electric service, the Company is agreeable to
providing capacity and energy for the operation of the SDI Plant under the terms
and conditions contained herein; and
WHEREAS, in recognition of the need for business expansion, in the
interest of creating new jobs, and the efficient use of existing utility
generation and transmission facilities, the Company and the Customer agree to
implement an innovative rate design that incorporates demand side management
characteristics; and
WHEREAS, the service the Company is to provide the Customer pursuant to
this Contract will provide benefits to the Company, the Company's ratepayers,
and the State of Indiana.
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained, the
Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Whenever used herein, the following terms shall have the respective
meanings set forth below, unless a different meaning is plainly required by the
context:
A. "AEP System" shall mean the integrated, interconnected
electric system operated and owned by the operating company
subsidiaries of American Electric Power Company, Inc.
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<PAGE> 3
B. "AEP System Interconnection Agreement" shall mean the
contractual arrangement, or any successor thereto, by which
the members of the AEP System share the costs of capacity to
serve the customers of the AEP System Companies, as approved
by the Federal Energy Regulatory Commission (FERC) or any
successor regulatory body.
C. "AEP System Lambda" shall mean the total incremental cost of
supplying energy to the Customer in each hour of the Peak
Period as defined in Article 5.1. This includes all fuel,
operating, maintenance, tax, transmission loss, purchased
power, emission control and other expenses that otherwise
would not have been incurred if such energy had not been
supplied to the Customer. This incremental cost will be
determined after meeting all other AEP System energy
commitments during each hour of the Peak Period.
D. "Commission" shall mean the Indiana Utility Regulatory
Commission, the regulatory agency having jurisdiction over the
retail electric service of the Company in Indiana, including
the electric service covered by this Contract, or any
successor thereto.
E. "Contract" shall mean this Contract for Electric Service
between the Company and the Customer, as the same may, from
time to time, be amended. Said Contract is set forth in its
entirety herein.
F. "MLR" shall mean the Member Load Ratio, or any successor
thereto, as defined in the AEP System Interconnection
Agreement.
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<PAGE> 4
G. "Parties" shall mean the Company and the Customer.
H. "Party" shall mean either the Company or the Customer.
I. "Pool Capacity Rate" shall mean the rate the Company receives
from or pays to other members of the AEP System for capacity,
as determined in the AEP System Interchange Power Statement,
or any successor thereto.
J. "Tariff I.P." shall mean the Company's Industrial Power
Tariff, or any successor thereto, approved by the Commission.
1.2 Unless the context plainly indicates otherwise, words importing the
singular number shall be deemed to include the plural number (and vice versa);
terms such as "hereof," "herein," "hereunder" and other similar compounds of the
word "here" shall mean and refer to the entire Contract rather than any
particular. part of the same. Certain other definitions, as required, appear in
subsequent parts of this Contract.
ARTICLE 2
DELIVERY POINT
2.1 Subject to the terms and conditions specified herein, the Company
agrees to furnish to the Customer, during the term of this Contract, and the
Customer agrees to take and pay for, all of the electric energy of the character
specified herein that shall be purchased by the Customer at its plant located
near Butler, Indiana.
2.2 The Delivery Point for electric power and energy delivered
hereunder shall be the 345 kV bus located within the 345
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<PAGE> 5
kV-34.5 kV substation, which is the subject of a separate Substation Facilities
Agreement (Substation Agreement) dated June 1, 1994, between the Parties.
2.3 The Customer will provide any substation and transformation
equipment and any other facilities required to take delivery of the electric
service to be taken hereunder, subject to the Substation Agreement, at the
voltage and at the Delivery Point designated herein.
ARTICLE 3
DELIVERY
3.1 The electric energy delivered hereunder shall be 3-phase alternating
current having a frequency of approximately 60 cycles per second at
approximately 345,000 volts and shall be delivered at the Delivery Point
specified in Article 2.2. The said electric energy shall be delivered and
maintained reasonably close to constant potential and frequency and it shall be
measured by a meter or meters owned and installed by the Company and located on
SDI's site.
3.2 The Company will construct and the Customer will pay a contribution
in aid of construction for Transmission Facilities as, and to the extent,
described in the Transmission Facilities Agreement dated June 1, 1994 between
the Company and the Customer. Electric service hereunder will be provided over
the Transmission Facilities. The Transmission Facilities, when constructed, will
have capacity to transmit 500 megawatts of electric energy at 345,000 volts and
will comply in all material respects with
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<PAGE> 6
standards observed by the company with respect to other similar facilities and
with all applicable laws, rules, regulations and orders. The Company makes no
representation or warranty that the single-line design of the Transmission
Facilities which has been selected by the Customer will have the reliability of
the double line design proposed by the Company. If requested by the Customer,
the Company will enter into good faith negotiations to provide Additional
Facilities in accordance with Section 3.01 of the Transmission Facilities
Agreement.
3.3 The Company will maintain, and replace all necessary components of,
the Transmission Facilities in accordance with the maintenance and replacement
standards observed by the Company with respect to its extra high voltage
transmission system. Customer agrees that it will pay to Company all reasonable
direct and indirect costs incurred by Company for such maintenance and
replacement, including all overhead costs which are determined on the basis of a
percentage factor in accordance with the Company's standard practice, minus a
reasonable allocation of these costs to the Transmission Facilities that
directly connect other customers of the Company. Customer shall pay such costs
incurred by the Company within thirty (30) days of receipt of a bill therefor.
If the Customer disputes the accuracy of such bill, the Customer shall make
timely payment of the bill and the Customer and the Company shall use their best
efforts to resolve the dispute and the Company shall return any adjustment to
the bill within thirty (30) days of resolution. The existence of a dispute as to
any such bill shall
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<PAGE> 7
not relieve either Party of compliance with the terms of this Contract.
3.4 The Company will retain all ownership rights with respect to the
Transmission Facilities. The Company will not allow service to other customers
connected directly to the Transmission Facilities to impair service to the
Customer. Upon termination of the Contract, the Customer will have the right to
receive service over the Transmission Facilities in accordance with the rates,
terms and conditions established by a regulatory authority having jurisdiction
over the transaction.
ARTICLE 4
CAPACITY RESERVATION
4.1 The Capacity Reservation contracted for by Customer is fixed at
150,000 kVa. At the Customer's request, the Capacity Reservation under this
Contract will be increased by up to 80,000 kva for new load connected within
five (5) years of the effective date of this Contract. The Customer shall give
the Company one (1) year's advance notice of its intention to increase the
Capacity Reservation. The increased Capacity Reservation will become effective
when the new load is connected. The Customer's Maximum Demand shall not exceed
the Capacity Reservation except by mutual agreement of the Parties.
4.2 The Company shall not be required to supply capacity in excess of
that contracted for except by mutual agreement.
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<PAGE> 8
ARTICLE 5
PEAK AND BASE PERIODS
5.1 The Peak Period in Eastern standard time (EST) is defined
as follows:
December, January, & February Weekdays 7:00 A.M. to 9:00 P.M.
March & November Weekdays 7:00 A.M. to 11:00 A.M.
May & September Weekdays 12:00 P.M. to 2:00 P.M.
June, July & August Weekdays 10:00 A.M. to 8:00 P.M.
5.2 The Base Period is defined as those hours not in the Peak
Period.
5.3 The Company reserves the right to modify the hours in the Peak
Period, subject to the condition that the total hours in the Peak Period cannot
exceed 21% of the total hours in the year.
ARTICLE 6
INTERRUPTIBILITY OF SERVICE
6.1 The Company reserves the right to interrupt service to the Customer
at any time (either during Base or Peak Periods as defined in Article 5) and for
such period of time that, in the Company's sole judgment, such interruption is
required for either (a) the operation of the AEP System or (b) MLR purposes. MLR
purposes shall be defined as for the purposes of avoiding higher settlement
payments under the AEP System Interconnection Agreement.
6.2 The Company will endeavor to provide the Customer as much advance
notice as possible of interruptions of service described in Article 6.1.
However, the Customer shall interrupt service within ten (10) minutes if so
requested.
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<PAGE> 9
6.3 If the Customer fails to interrupt load as requested by the Company
for the operation of the AEP System, the Company shall bill the entire
uninterrupted demand at a rate equal to three (3) times the Adjusted Demand
Charge (as defined in Article 10.1) for that billing month.
6.4 If the Customer fails to interrupt load as requested by the Company
for MLR purposes, the Company shall bill the entire uninterrupted demand at a
rate equal to twelve (12) times the Pool Capacity Rate applicable to the
Company.
6.5 In addition to being subject to interruption as specified in
Article 6.1, the Company also reserves the right to interrupt the Customer at
any time during the Peak Period and for such period of time that, in the
Company's sole judgment, the Company can receive a higher market price from an
alternative buyer for the energy that otherwise would be sold to the Customer.
Such type of interruption shall be designated as an Economic Interruption.
6.6 The Company shall provide the Customer with a minimum of one (1)
hour's notice of a pending Economic Interruption. The Technical Services
Committee shall designate in writing the methodology pursuant to which the
Company shall provide such notice. All such designations, and changes from time
to time in such designations, shall be furnished as provided in Article 19.6.
This section shall be implemented through the Technical Services Committee as
provided in Article 21.1.
6.7 The Customer reserves the right to avoid an Economic Interruption
by promptly agreeing, upon notification, to pay the market price available to
the Company from the alternative buyer.
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<PAGE> 10
This section shall be implemented through the Technical Services Committee as
provided in Article 21.1.
6.8 If the Customer fails to interrupt load when the Company declares
an Economic Interruption, and the Customer has not exercised its right to avoid
such Economic Interruption as specified in Article 6.7, the Company shall bill
the entire uninterrupted energy for the duration of the requested Economic
Interruption at two (2) times the market price available to the Company from the
alternative buyer.
6.9 All required telemetering and communications equipment shall be
paid for by the Customer and shall be owned and maintained by the Company. Such
equipment shall be provided pursuant to the Transmission Facilities Agreement.
6.10 No responsibility or liability of any kind shall attach to or be
incurred by the Company for, or on account of, any loss, cost, expense or damage
caused by or resulting from, either directly or indirectly, an interruption of
service under this Article and Article 16.
ARTICLE 7
DESIGNATION OF FIRM SERVICE
7.1 In the event the Customer requires electric service which is not
subject to interruptions as provided for under this Contract, the Customer shall
specify a Firm Contract Demand not to exceed 20,000 kVa. Designation of the Firm
Contract Demand shall be provided in accordance with Article 19.6. Such service
shall be
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<PAGE> 11
billed under the provisions of the Company's applicable tariff, or by a special
contract to reflect 345 kV delivery, by either:
A. Being separately metered, or
B. Assuming a monthly load factor of 100% for the designated
Firm Contract Demand. Metered energy in excess of such
calculated Firm Contract Energy shall be billed under the
terms of Article 10.
ARTICLE 8
POWER FACTOR PROVISION
8.1 Average Monthly Power Factor shall be calculated by the following
formula:
Monthly Energy
---------------------------------------------
/(Monthly Energy(2) + Monthly Reactive Energy(2))
8.2 The Power Factor Correction Constant (PFCC) shall be calculated to
the nearest 0.0001 by the following formula:
PFCC = .9510 + 0.1275 Monthly Reactive Energy (2)
------------------------
Monthly Energy
8.3 Monthly Energy shall be measured as the total kWh registered by an
energy meter during the month.
8.4 Monthly Reactive Energy shall be measured as the total RKVAH
registered by leading and lagging reactive energy meters during the month.
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<PAGE> 12
ARTICLE 9
DETERMINATION OF MONTHLY BILLING KWH
9.1 Monthly Base Billing kWh shall be equal to the product of Base
Metered kWh and the PFCC. Base Metered kWh shall be measured each calendar month
as the total kWh registered by an energy meter during the Base Period less the
product of Firm Contract Demand and the number of hours in the Base Period for
the calendar month. In no event shall the Monthly Base Billing kWh be less than
zero (0).
9.2 Hourly Peak Billing kWh shall be equal to the product of Hourly
Peak Metered kWh and the PFCC. Hourly Peak Metered kWh shall be measured as the
kWh registered by an energy meter during each hour of the Peak Period less the
Hourly Peak Firm Contract Demand. In no event shall the Hourly Peak kWh be less
than zero (0).
9.3 Total Billing kWh shall be equal to the sum of Monthly Base Billing
kWh and Hourly Peak Billing kWh.
ARTICLE 10
RATES
10.1 The Customer agrees to pay the Company for all electric service
supplied hereunder in accordance with the following provisions, which throughout
the life of this Contract, may require adjustment pursuant to Article 10.2.
A. The Monthly Service Charge shall be equal to the greater of
(a) the Tariff I.P. Transmission Service Monthly Service
Charge or (b) $462.70.
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<PAGE> 13
B. The Monthly Base Energy Charge (MBEC) for all Monthly Billing
kWh used during the Base Period shall be calcu- lated by the
following formula:
MBEC = DC + EC + FC
where:
MBEC = Monthly Base Energy Charge
DC = Demand Component
EC = Energy Component
FC = Fuel Component
The above components of the MBEC shall be determined as follows:
1. The Demand Component (DC) shall be calculated by the following
formula:
DC = Adjusted Demand Charge x Maximum Demand
---------------------------------------
Total Billing Kwh
The Adjusted Demand Charge used in the above formula shall be
equal to the greater of (a) the Tariff I.P. Transmission
Service Demand Charge as adjusted using the procedure
specified in Appendix I (which is incorporated herein by
reference), or (b) $6.947/kVa.
Maximum Demand shall be measured as the single highest
15-minute integrated peak in kW, as registered by an
integrating demand meter during each calendar month, divided
by the Average Monthly
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<PAGE> 14
Power Factor established during the same calendar month,
rounded to the nearest whole kVa.
2. The Energy Component (EC) shall be equal to the Tariff I.P.
Transmission Service Energy Charge as adjusted using the
procedure specified in Appendix II (which is incorporated
herein by reference).
3. The Fuel Component (FC) shall be equal to the Company's Fuel
Cost Adjustment determined in accor- dance with the provisions
of Item No. 23 of the Company's Terms and Conditions of
Service.
C. The Hourly Peak Energy Charge for all Billing kWh used during each hour
of the Peak Period shall be calculated as the sum of (a) the AEP System
Lambda in each hour and (b) the Fixed Cost Increment (FCI) calculated
as follows:
FCI = MBEC - Minimum Peak Period AEP System Lambda
The Minimum Peak Period AEP System Lambda shall be defined as the
lowest AEP System Lambda recorded during the Peak Period of the prior
calendar year.
10.2 The Company will adjust the Rates contained in Article 10.1 as follows:
A. To reflect changes to the Tariff I.P. Transmission Service Monthly
Service, Demand and Energy Charges, as approved by the Commission, to
the extent permitted by Article 10.1.
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<PAGE> 15
B. To reflect any changes to the Company's Fuel Cost Adjustment,
as approved by the Commission.
C. The Minimum Peak Period AEP System Lambda shall be revised
annually on January 1 and will remain in effect through
December 31 of the current calendar year.
10.3 The rate adjustments described above shall be effective for
service on and after the effective date of the respective modification and shall
not require further regulatory approval by the Commission.
10.4 Appendix 4 contains the computation of a sample bill.
ARTICLE 11
NOTIFICATION BY COMPANY TO CUSTOMER
OF ESTIMATED AEP SYSTEM LAMBDA
11.1 The Company will make available to the Customer no later than 4:00
P.M. EST the Company's best estimate of the AEP System Lambda for each hour of
the Peak Period of the succeeding day. The Customer acknowledges that this
information is considered proprietary by the Company and agrees that it will not
disclose the information to any person, firm or other entity, other than the
employees of the Customer who need to know the information for carrying out
their responsibilities associated with the SDI Plant, without the express,
written consent of the Company.
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<PAGE> 16
ARTICLE 12
DETERMINATION OF MONTHLY BILL
12.1 The Monthly Bill shall be the sum of the following:
A. The Monthly Service Charge;
B. The product of the Monthly Base Billing kWh and the Monthly Base Energy
Charge;
C. The product of the Hourly Peak Billing kWh and the most recently
estimated Hourly Peak Energy Charge in each hour of the Peak Period,
excluding those hours in which the Customer exercises the right to pay
a higher market price available to the Company. An adjustment will be
made to reflect any differences between estimated and actual Hourly
Peak Energy Charges in the subsequent month's bill rendered to the
Customer;
D. The product of the Hourly Peak Billing kWh and the market price
available to the Company from an alternative buyer in each hour of the
Peak Period in which the Customer exercises the right to pay the market
price available to the Company;
E. Charges for firm service as specified in Article 7;
F. In addition to the Fuel Cost Adjustment, any additional adjustment
clauses which may be approved by the Commis- sion in the future;
G. Any penalties specified in Article 6 resulting from the failure of the
Customer to interrupt load when requested by the Company; and
H. Any applicable taxes.
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<PAGE> 17
12.2 In no event, however, shall the Monthly Bill be less than the
Minimum Charge as specified in Article 13.
ARTICLE 13
MINIMUM CHARGE
13.1 Service under this Contract is subject to a Monthly Minimum Charge
equal to the sum of (1) the Monthly Service Charge, (2) the product of the
Adjusted Demand Charge and the greater of 60% of (a) the Customer's Capacity
Reservation or (b) the Customer's highest previously established billing demand
in kVa during the past eleven (11) calendar months, (3) any applicable
adjustment clauses as approved by the Commission and (4) any applicable taxes.
The Monthly Minimum Charge will not apply in the event of a force majeure, as
defined in Article 22.1. The term of this Contract shall be extended one (1)
month for each month in which the Monthly Minimum Charge is not so applied.
ARTICLE 14
BILLING, PAYMENT AND RECORDS
14.1 All Monthly Bills under this Contract shall be due and payable
when rendered. Monthly Bills shall be paid by wire transfer. If not paid within
seventeen (17) days after the Monthly Bill is rendered, there shall be added to
the Customer's next Monthly Bill a Delayed Payment Charge equal to that applied
to all Indiana retail customers.
14.2 If the Customer disputes the accuracy of a Monthly Bill, timely
payment of the Monthly Bill, as rendered, shall be made and
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<PAGE> 18
the Parties shall use their best efforts to resolve the dispute and shall make
such adjustment, if any, by credit or additional charge on the next Monthly Bill
rendered. The existence of a dispute as to any Monthly Bill shall not relieve
either Party of compliance with the terms of this Contract. Other than as
required by law or regulatory action, Monthly Bill adjustments must be made
within six (6) months of the rendering of the initial Monthly Bill.
14.3 If the Customer fails or refuses to pay the Monthly Bill rendered
by the Company in accordance with the provisions of this Contract, the Company
may, after fourteen (14) days' written notice, suspend the delivery of capacity
and energy to the Customer until all Monthly Bills, together with the Delayed
Payment Charge as computed under the provisions of Article 14.1, shall have been
paid. Any such suspension of delivery of capacity and energy to the Customer for
such non-payment of a Monthly Bill shall not relieve the Customer from liability
to continue the payment of the Monthly Minimum Charge hereunder and shall not
terminate this Contract.
ARTICLE 15
EFFECTIVE DATE AND TERM OF CONTRACT
15.1 The effective date of this Contract shall be the later of (a) the
date on which any and all applicable requirements shall have been complied with
(including the expiration of any requisite period after filing) as to approval
of, or filing with, the Commission, (b) the date on which a 345 kV transmission
line to serve the Customer has been constructed and placed in service by
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<PAGE> 19
the Company or (c) the date on which the Customer's SDI Plant commences
commercial operation.
15.2 The terms of this Contract shall extend for a period of ten (10)
years from the effective date of this Contract, as established under Article
15.1 herein, and thereafter until either Party shall give the other not less
than three (3) years' notice in writing of its election to discontinue the
service. If the Customer desires firm service, it shall give not less than five
(5) years' notice in writing of its intention to request firm service. Upon the
delivery of such notice, the Parties shall enter into negotiations on a new
agreement to take effect upon the expiration of this Contract. If, upon the
expiration of this Contract, a new agreement has not been reached and, if
necessary, approved by the Commission, the Customer shall receive electric
service in accordance with the Company's then applicable interruptible retail
tariff until (a) a new agreement for electric service has been reached and, if
necessary, approved by the Commission, or (b) the Commission has issued an order
establishing the rates, terms and conditions of electric service to the SDI
Plant. Each Party may avail itself of its respective legal rights in effect at
the time of the expiration of this Contract. This provision will be administered
by the Technical Services Committee.
15.3 Temporary electric service for the purpose of constructing the SDI
Plant and back-up emergency service will be supplied under the Company's
applicable tariffs pursuant to separate contract.
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<PAGE> 20
15.4 Before commercial operation of the SDI Plant, Customer will begin
a period of testing the major systems of the mill, including the electric arc
furnace and strip mill. During the testing periods, the Company will designate
up to two (2) weekdays per week as Demand Free. The demand created by Customer
on such a designated day will not be used for billing purposes. Company will
notify Customer by 2:00 p.m. on the weekday immediately preceding the Demand
Free day. Demand Free days will apply to testing only before commercial
operation or any second furnace incremental load that Customer may later bring
on line under Section 4.1 of this Agreement. This provision will be administered
by the Technical Services Committee.
ARTICLE 16
SERVICE CONDITIONS
16.1 Each Party shall exercise reasonable care to design, construct,
maintain and operate, or to cause to be designed, constructed, maintained and
operated, their respective facilities in accordance with good engineering
practices.
16.2 All wiring and other electrical equipment owned by the Customer
shall be maintained by the Customer at all times in conformity with the
requirements of the National Board of Fire Underwriters and other authorities
having jurisdiction.
16.3 To the extent not specifically modified by this Contract, the
Company's Terms and Conditions of Service, on file with the Commission, are
incorporated herein by reference and made a part hereof. The Customer
acknowledges receipt of the currently
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<PAGE> 21
approved Terms and Conditions of Service. In the event of a conflict between the
provisions of this Contract and the provisions of the Company's Terms and
Conditions of Service, the provisions of this Contract shall control.
16.4 In addition to the interruptibility provisions set forth in
Article 6, any service being provided under this Contract may be interrupted or
reduced (a) by operation of equipment installed for power system protection, (b)
after adequate notice to and consultation with the Customer for routine
installation, maintenance, inspection, repairs, or replacement of equipment or
(c) when, in the Company's sole judgment, such action is necessary to preserve
the integrity of, or to prevent or limit any instability or material disturbance
on, its electric system or an interconnected system. This Article 16.4 shall not
apply to voltage flicker and harmonic distortions covered by Article 16.6.
16.5 The Company reserves the right to disconnect from its system the
Customer's conductors or apparatus without notice when, in the exercise of
reasonable care, the Company determines that it is necessary in the interest of
preserving or protecting life and/or property.
16.6 The Customer agrees to comply with the voltage flicker and
harmonic distortion conditions and requirements set forth in Appendix III, which
are attached hereto and incorporated herein by reference. The Company reserves
the right to immediately disconnect the Customer from the Company's system,
without notice and without prejudice to any other remedies at law or in equity,
when the Customer fails to comply with these conditions and require-
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<PAGE> 22
ments. This Section 16.6 shall be implemented through the Technical Services
Committee as provided in Article 21.1.
16.7 The Customer's SDI Plant shall not be connected to any source of
power other than the Delivery Point described in Article 2, without written
notice and mutual agreement between the Parties.
16.8 The Company will have the right of access at the Delivery Point,
at all reasonable times, for the purposes of reading meters or installing,
maintaining, changing or removing any property it owns or for any other proper
purpose required to carry out the provisions of this Contract.
16.9 In case of impaired or defective service, the Customer shall
immediately give notice to the Company by telephone, confirming such notice in
writing on the same day notice is given.
16.10 The Customer shall notify the Company in advance of any changes
to be made to its SDI Plant that have the potential of materially affecting the
Company's system.
ARTICLE 17
METERING
17.1 Electric power and energy delivered under this Contract shall be
measured by metering equipment owned, installed, operated and maintained by the
Company.
17.2 Metering equipment provided under this Contract shall include
electric meters, potential and current sources of electric meters and such other
equipment as may be needed to provide for a record of kilowatt hours, kilovar
hours and kilowatt and kilovar demands at the meter locations.
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<PAGE> 23
17.3 Any Party on whose property another Party's equipment is to be
located under this Contract shall furnish suitable space without cost to the
owning Party. All such equipment shall retain its character as personal property
of the owner regardless of its method of attachment to any other property, and
authorized representatives of the owner shall have access thereto at all
reasonable times. Upon termination of this Contract, all such equipment shall be
removed by its owner from the premises on which it is located.
17.4 The Company shall at all times have the right to inspect and test
meters and, if found defective, to repair or replace them at its option. Meters
shall be tested periodically in accordance with the Rules and Standards of
Service prescribed by the Commission. At the Customer's request, the Company
shall inspect and test such meters once each calendar year, at the expense of
the Company. If the Customer shall request a test of such meters more frequently
than once each calendar year, the Customer shall bear the expense of such
additional test, except that if the meters are found to be inaccurate in excess
of the standard prescribed by the Commission, the Company shall bear the expense
of such test.
17.5 If any test of metering equipment discloses an inaccuracy
exceeding one percent (1%) of the registered volume, the Customer's account
shall be adjusted for the period, not exceeding a preceding period of twelve
(12) months, in which such inaccuracy is estimated to have existed. Should any
metering equipment fail to register, the amounts of energy and capacity
delivered shall be estimated
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<PAGE> 24
based upon use of energy and/or demand for power in a similar period of like use
or other data available to the Company.
17.6 The Company shall repair and re-test or replace a defective meter
within a reasonable time. During the time there is no meter in service, it shall
be assumed that the power consumed is the same as the usage of the Customer
during similar periods of the Customer's operations.
ARTICLE 18
REGULATORY AUTHORITIES
18.1 The Parties hereto recognize that this Contract is subject to the
jurisdiction of the Commission, and is also subject to such lawful action as any
regulatory authority having jurisdiction shall take hereafter with respect
thereto. The performance of any obligation of either Party hereto shall be
subject to the receipt from time to time as required of such authorizations,
approvals or actions of regulatory authorities having jurisdiction as shall be
required by law.
18.2 The Company and the Customer agree that this Contract reflects the
steps required to insure adequate service to the Customer and that the Company
will file this Contract for approval by the Commission. This Contract is
expressly conditioned upon (a) a finding by the Commission that the rates herein
are justified on a cost-of-service basis and reflect the total cost incurred by
the Company in serving the Customer, and (b) approval by the Commission of this
Contract without change or condition. In the event that the Commission does not
so find or approve, then this Contract
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<PAGE> 25
shall not become effective, unless the Parties agree otherwise in writing, it
being the intent of the Parties that such findings and approval, without change
or condition, are prerequisite to the validity of this Contract.
18.3 The Parties agree to use their best efforts to seek and obtain the
prompt approval of this Contract by the Commission. Further, the Parties agree
not to seek in any subsequent Commission proceeding an order that would modify
or terminate this Contract.
18.4 The Parties expressly agree and understand that the Commission has
jurisdiction over the rates and charges contained herein.
ARTICLE 19
GENERAL
19.1 Any waiver at any time of any rights as to any default or other
matter arising hereunder shall not be deemed a waiver as to any subsequent
default or matter. Any delay, short of the statutory period of limitation, in
asserting or enforcing any right hereunder shall not be deemed a waiver of such
right.
19.2 In the event that any of the provisions, or portions thereof, of
this Contract are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforce- ability of the remaining provisions, or
portions thereof, shall not be affected thereby.
19.3 All terms and stipulations made or agreed to regarding the subject
matter of this Contract are completely expressed and merged in this Contract,
and no previous promises, representations
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<PAGE> 26
or agreements made by the Company's or the Customer's officers or agents shall
be binding on either Party unless contained herein.
19.4 The Parties recognize that other agreements regarding the
transmission line and the substation to be constructed to serve the SDI Plant
may be entered into by the Parties. Nothing in this Contract is intended to
modify, alter, or otherwise affect the terms and conditions of such agreements.
19.5 This Contract is conditional upon the Company receiving approval
to construct, and completion of construction of, a 345 kV transmission line to
serve the Customer. In the event the Company does not receive such approval, or
complete construction, this Contract shall be null and void and the Customer
acknowledges that it irrevocably relinquishes any rights to damages.
19.6 Any notice given pursuant to this Contract shall be in writing and
addressed as follows:
If to Customer:
Keith E. Busse, President and CEO
Steel Dynamics, Inc.
2780 Waterfront Parkway East Drive
Suite 325
Indianapolis, Indiana 46214
If to Company:
Richard C. Menge, President
Indiana Michigan Power Company
Post Office Box 60
One Summit Square
Fort Wayne, Indiana 46801
The above names and addresses may be changed at any time by written
notice to the other Party.
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<PAGE> 27
19.7 The rights and remedies granted under this Contract shall not be
exclusive rights and remedies but shall be in addition to all other rights and
remedies available at law or in equity.
19.8 The validity and meaning of this Contract shall be governed by the
laws of the State of Indiana.
ARTICLE 20
ASSIGNMENT
20.1 This Contract shall inure to the benefit of and be binding upon
the successors and assigns of the Parties.
20.2 This Contract shall not be assigned by either Party without the
written consent of the other Party. Such consent shall not be unreasonably
withheld.
20.3 Any assignment by one Party to this Contract shall not relieve
that Party of its financial obligation hereunder unless the other Party to this
Contract so consents in writing.
ARTICLE 21
TECHNICAL SERVICES COMMITTEE
21.1 The Parties agree to establish a Technical Services Committee of
authorized representatives to coordinate the provision of electric service by
the Company to the SDI Plant. Each Party shall appoint one person, along with
one alternate, to serve as the representative of the Party on the Committee. The
representative and the alternate shall be familiar with the terms of this
Contract and the facilities used in the furnishing of electric service to the
SDI Plant. The Committee shall cooperate in good faith, as the
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<PAGE> 28
occasion arises, to discuss and resolve operating matters arising under the
provision of electric service under this Contract. The representatives on the
Committee shall, from time to time, exchange information regarding the expected
maintenance schedules of their facilities relevant to this Contract.
ARTICLE 22
LIABILITY
22.1 Neither the Company nor the Customer shall be liable to the other
for damages caused by the interruption, suspension, reduction or curtailment of
the delivery of electric energy hereunder due to, occasioned by or in
consequence of, any of the following causes or contingencies, viz: acts of God,
the elements, storms, hurricanes, tornadoes, cyclones, sleet, floods, backwaters
caused by floods, lightning, earthquakes, landslides, washouts or other
revulsions of nature, epidemics, accidents, fires, failures of facilities,
collisions, explosions, strikes, lockouts, differences with workmen and other
labor disturbances, vandalism, sabotage, riots, inability to secure cars, coal,
fuel, or other materials, supplies or equipment from usual sources, breakage or
failure of machinery, generating equipment, electrical lines or equipment, wars,
insurrections, blockades, acts of the public enemy, arrests and restraints of
rulers and people, civil disturbances, acts or restraints of federal, state or
other governmental authorities, and any other causes or contingencies not within
the control of the Party whose performance is interfered with, whether of the
kind herein enumerated or otherwise. Settlement of strikes
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<PAGE> 29
and lockouts shall be wholly within the discretion of the Party having the
difficulty. Such causes or contingencies affecting performance shall not relieve
the Company or Customer of liability in the event of its concurring negligence
or in the event of failure of either to use reasonable means to remedy the
situation and remove the cause in an adequate manner and with reasonable
dispatch, nor shall such causes, or contingencies of any thereof, relieve either
from its obligation to pay amounts due hereunder.
22.2 The Company assumes no responsibility of any kind with respect to
construction, maintenance or operation of the electric facilities or other
property owned or controlled by the Customer and shall not be liable for any
loss, injury (including death), damage to or destruction of property (including
loss of use thereof) arising out of such installation, maintenance or operation
or out of any use by the Customer or others, of said energy and/or capacity
provided by the Company except to the extent such damage or injury shall be
caused by the negligence or willful misconduct of the Company, its agents, or
employees. The Customer shall provide and maintain suitable protective devices
on its equipment to prevent any loss, injury or damage that might result from
any irregularity, fluctuation or interruption of service. The Company shall not
be liable for any loss, injury or damage which could have been prevented by the
use of such protective devices.
22.3 To the extent permitted by law, the Customer shall protect,
defend, indemnify, and hold harmless the Company from and against any losses,
liabilities, costs, expenses, suits, actions, claims, and all other obligations
and proceedings whatsoever,
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<PAGE> 30
including, without limitation, all judgments rendered against and all fines and
penalties imposed upon the Company, and any reasonable attorneys' fees and other
costs of defense arising out of injuries to persons, including death, or damage
to third-party property to the extent caused by, or occurring in connection
with, any willful or negligent act or omission of the Customer, its employees,
agents or contractors, or which are due to or arise out of defective electrical
equipment belonging to the Customer. The Company shall not be liable for any
indirect, special, incidental or consequential damages, including loss of
profits due to business interruptions or otherwise, in connection with this
Contract. To the extent permitted by law, the Company shall protect, defend,
indemnify, and hold harmless the Customer from and against any losses,
liabilities, costs, expense, suits, actions, claims, and all other obligations
whatsoever, including, without limitation, all judgments rendered against and
all fines and penalties imposed upon the Customer, any reasonable attorneys'
fees and other costs of defense arising out of injuries to persons, including
death, or damages to third-party property, to the extent caused by or occurring
in connection with any willful or negligent act or omission of the Company, its
employees, agents or contractors.
22.4 No responsibility or liability of any kind shall attach to or be
incurred by the Company for, or on account of, any loss, cost, expense or damage
caused by or resulting from, either directly or indirectly, an interruption of
this service.
22.5 Any indemnification of the Parties or any limitation of the
Parties' liability which is made or granted under this Contract
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<PAGE> 31
shall to the same extent apply to the Parties' directors, officers, employees
and agents, and to the Parties' affiliated companies, including any directors,
officers, employees and agents thereof.
IN WITNESS WHEREOF, the Parties hereto have caused this Contract to be
duly executed the day and year first above written.
STEEL DYNAMICS, INC.
By /s/ Keith E. Busse
----------------------------------
Keith E. Busse
President and C.E .0.
INDIANA MICHIGAN POWER COMPANY
By /s/ Richard C. Menge
----------------------------------
Richard C. Menge
President
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<PAGE> 1
Exhibit 10.5
INTERRUPTIBLE GAS SUPPLY CONTRACT
This AGREEMENT for interruptible gas supply ("Gas Supply Agreement"),
entered into this 27th day of February, 1995, by and between Northern Indiana
Trading Co. ("NITCO") and Steel Dynamics, Inc. ("Customer"), WITNESSES that:
WHEREAS, both parties are also parties, along with Northern Indiana
Fuel & Light Company, Inc. ("NIFL"), and Crossroads Pipeline Company
("Crossroads") to a gas services agreement dated February 28, 1995 ("Gas
Services Agreement"), for the rendering of interruptible gas transportation
service by Crossroads and NIFL of Customer-owned gas, and the Gas Services
Agreement contemplates, from time to time, the Customer's purchasing gas through
arrangements made by NITCO on a best efforts basis;
NOW, THEREFORE, in consideration of the mutual commitments hereinafter
described, the parties agree that:
1. Term. The term of this Agreement shall be coterminous with the term
of the Gas Services Agreement.
2. Gas Supply Service. The Customer shall notify NITCO of any Daily
Supply Deliveries (as defined in the Gas Services Agreement) requested by it
from NITCO, in accordance with the nomination procedures of the Gas Services
Agreement. Upon NITCO's receipt of the Customer's timely nomination for Daily
Supply Deliveries, NITCO will use its best efforts to obtain such deliveries for
the Customer's account. NITCO will inform the Customer of the current price of
available gas at the time of the Customer's nomination for Daily Supply
Deliveries,
<PAGE> 2
and the Customer will then inform NITCO as to whether or not it desires to
purchase the gas and how much, if any. If the Customer desires to purchase the
gas, it will make the required nomination, and NITCO, as Customer's agent, will
use its best efforts to acquire the gas for the Customer's account. NITCO
reserves the right, in its reasonable discretion, to limit or reject the
Customer's nomination due to the unavailability of interruptible gas supplies
for sale to the Customer at a price which the Customer has specified as
acceptable or for any other reason specified in the Gas Services Agreement. The
Customer shall pay NITCO, as its agent, for gas purchased under this Agreement,
and NITCO promptly thereafter shall pay the supplier for the gas.
3. Ownership of the Gas. All gas purchased pursuant to this Agreement
shall be titled in the name of, and owned by, the Customer. The services
provided by NITCO hereunder will be solely those of an agent for the Customer.
4. Miscellaneous. This Agreement is subject to all provisions of the
Gas Services Agreement and intended to be supplemental thereto.
This Agreement has been executed in duplicate by the duly authorized
representatives of the Parties.
STEEL DYNAMIC , INC.
Date: 02/17/95 By: /s/
---------------------- ----------------------------
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<PAGE> 3
NORTHERN INDIANA TRADING
COMPANY, INC.
Date: 02/27/95 By: /s/ H.P. Conrad
---------------------- ----------------------------
H.P. Conrad
President
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<PAGE> 4
PRIVILEGED AND CONFIDENTIAL
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
<PAGE> 5
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
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<PAGE> 6
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
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<PAGE> 7
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:
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<PAGE> 8
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
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<PAGE> 9
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.
- 6 -
<PAGE> 10
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
-7-
<PAGE> 11
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
-8-
<PAGE> 12
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.
-9-
<PAGE> 13
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 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.
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.
-10-
<PAGE> 14
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
-11-
<PAGE> 15
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
-12-
<PAGE> 16
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.
-13-
<PAGE> 17
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
------------------------- ------------------------------------
NORTHERN INDIANA FUEL AND LIGHT COMPANY
Date: 4/5/95 By: /s/ H.P. Conrad, Jr.
------------------------- ------------------------------------
H.P. Conrad
President
-14-
<PAGE> 18
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.
<PAGE> 19
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
-2-
<PAGE> 1
Exhibit 10.9
PANHANDLE EASTERN PIPE LINE COMPANY
A UNIT OF PanEnergy CORP
July 22, 1996
Mr. James R. Hopton
Steel Dynamics, Inc.
4500 County Rd 59
Butler, IN 46721
Re: Discounted Rate for Enhanced Firm Transportation
Panhandle Eastern Pipe Line Company Agreement 014694
Dear Mr. Hopton:
Panhandle Eastern Pipe Line Company ("Panhandle") hereby offers Steel
Dynamics, Inc., ("Shipper") a transportation rate discount applicable to service
performed for Shipper under the Panhandle firm transportation agreement
referenced above ("Transportation Agreement"), pursuant to Section 3 of
Panhandle's FERC Gas Tariff First Revised Volume No.1, Rate Schedule FT, and in
accordance with the following terms and conditions.
1) Discount Period: September 1, 1996 through May 31, 2000
2) Discounted Rate(s) on a 100% load factor basis shall be: 42.00 cents/Dth.
The discounted rates shall consist of the minimum commodity charges with the
remainder in reservation charges.
3) Rates or surcharges included in discounted rate(s): Field Zone Transmission,
Market Zone Access, Market Zone Mileage, ACA, GRI Funding Unit (where
applicable), Take Or Pay Volumetric Surcharge, Settlement Surcharge, Canadian
Resolution Surcharge, GSR Surcharge, Unrecovered PGA Surcharge, Stranded
Transportation Costs Surcharge, and Miscellaneous Stranded Costs or other future
rates or surcharges permitted to be included in Panhandle's tariff (or any
successor thereto).
4) Rates or surcharges excluded from discounted rate(s) and shall be the
responsibility of the Shipper in accordance with Panhandle's tariff: Fuel
Reimbursement.
5) Discounted rate(s) shall only apply to the transportation service provided
from the receipt point(s) to the delivery point(s) specified below and only to
the quantities up to that set out below:
<TABLE>
<CAPTION>
Receipt Point Delivery Point Quantity Limit (Dth/D) Effective Period
- ------------- -------------- ---------------------- ----------------
<S> <C> <C> <C>
Field Zone Transmission CRSRD 3600 09/01/1996 - 05/31/1997
Field Zone Transmission CRSRD 5600 06/01/1997 - 05/31/2000
Field Zone Transmission ANRDF - secondary 06/01/1996 - 05/31/2000
Field Zone Transmission COLGA - secondary** 06/01/1996 - 05/31/2000
Field Zone Transmission UNION - secondary** 06/01/1996 - 05/31/2000
</TABLE>
** These secondary delivery points will receive the Discounted Rate up to and
including the primary reserved path.
The incremental mileage falling outside of this reserved path will get
billed the maximum applicable tariff rates and such charges shall not be
included in the Discounted Rate.
5400 Westheimer Ct. Houston, Texas 77056-5310 (713) 627-4795
<PAGE> 2
6) Discounted rate(s) shall not apply to the following:
a) Overrun transportation service;
b) Gathering service;
c) Transportation from receipt point(s) located in Panhandle's Market Zone;
d) Transportation other than from the Receipt Point(s) to the Delivery
Point(s) as listed above;
e) Capacity release service or similar program which may be available under
Panhandle's tariff; which services shall be provided at the applicable
maximum tariff rates.
7) Nothing in this agreement shall constitute an agreement to extend the
Transportation Agreement.
8) For the period of September 1, 1996 through December 31, 1996, Panhandle
shall bill and Shipper shall pay for the first 2,600 Dth/day of MDCQ based on a
100% load factor based at the Discounted Rate. For volumes delivered between
2,600 and 3,600 Dth/day, Panhandle shall bill and Shipper shall pay based on a
commoditized rate of 42 cents/Dth.
9) Shipper shall have a one time right to reduce the MDCQ of the Transportation
Agreement to between 2,600 and 3,600 Dth/day by providing written notice to
Panhandle by December 1, 1996 to be effective January 1, 1997.
10) For the period June 1,1997 through December 31, 1997, Panhandle shall bill
and Shipper shall pay for the first 3,600 Dth/day (or the MDCQ as adjusted in
(9) above) of MDCQ based on a 100% load factor basis at the Discounted Rate. For
volumes delivered between 3,600 (or the MDCQ as adjusted in (9) above) and 5,600
Dth/day, Panhandle shall bill and Shipper shall pay based on a commoditized rate
of 42 cents/Dth.
11) Shipper shall have a one time right to reduce the MDCQ of the Transportation
Agreement to between 3,600 (or the MDCQ as adjusted in (9) above) and 5,600
Dth/day by providing written notice to Panhandle by December 1, 1997 to be
effective January 1, 1998.
12) If the discounted rate(s) either exceed the then effective applicable
maximum rate or are lower than the then effective applicable minimum rate set
forth in Panhandle's tariff at any time during the Discount Period, then the
discounted rate(s) will be decreased or increased to equal the respective
maximum or minimum tariff rate. Panhandle reserves the Fight to adjust the rates
charged Shipper between reservation and commodity components so long as it does
not exceed the discounted rate(s) on a 100% load factor basis.
13) If during the Discount Period, Panhandle's effective maximum rates are being
collected subject to refund, Panhandle's only refund obligation shall be the
excess if any, of the total rate charged over and above the 100% load factor
maximum rate, as finally approved. If Panhandle collects and flows through
penalty, cash out, or excess interruptible or short term firm revenues,
discounts agreed to herein shall be adjusted so that any portion of such flow
through allocated to the Transportation Agreement shall be retained by
Panhandle.
14) Unless otherwise agreed to by Panhandle, Shipper may not assign this letter
agreement to any other party. However, should substantially all of the assets of
Shipper be sold to another entity this agreement shall continue in effect
pursuant to the terms outlined herewith.
<PAGE> 3
15) Any written notices or other communications pertaining to this agreement may
be sent to Panhandle to the attention of Sales Administration by facsimile at
(713) 627-4829 or by mail to Panhandle at the letterhead address.
If you are in agreement with the foregoing, please so indicate by having a
duly authorized representative execute both originals of this agreement in the
appropriate space provided below, and return both executed originals to the
letterhead address.
Sincerely,
PANHANDLE EASTERN PIPE LINE COMPANY
/s/ Bobby J. Gropard
-----------------------------------
Accepted and Agreed to this
12th day of August, 1996:
STEEL DYNAMICS, INC.
BY: /s/ Tracy Shellabarger
--------------------------
[Name]
VICE PRESIDENT
--------------------------
[Title]
<PAGE> 4
PANHANDLE EASTERN PIPE LINE COMPANY
A Unit of PanEnergy Corp
March 22, 1996
Mr. James R. Hopton
Steel Dynamics, Inc.
4500 County Rd 59
Butler, IN 46721
Re: Discounted Rate for Enhanced Firm Transportation
Panhandle Eastern Pipe Line Company Agreement 014694
Dear Mr. Hopton:
Panhandle Eastern Pipe Line Company ("Panhandle") hereby offers Steel
Dynamics, Inc., ("Shipper") a transportation rate discount applicable to service
performed far Shipper under the Panhandle term transportation agreement
referenced above ("Transportation Agreement"), pursuant to Section 3 of
Panhandle's FERC Gas Tariff First Revised Volume No. 1, Rate Schedule FT, and in
accordance with the following terms and conditions.
1) Discount Period: June 1, 1996 through May 31, 1999
2) Discounted Rate(s) on a 100% load factor basis shall be: 42.00 cents/Dth.
The discounted rates shall consist of the minimum commodity charges with
the remainder in reservation charges.
3) Rates or surcharges included in discounted rate(s): Field Zone
Transmission, Market Zone Access, Market Zone Mileage, ACA, GRI Fundi Unit
(where applicable), Take Or Pay Volumetric Surcharge, Settlement Surcharge,
Canadian Resolution Surcharge, GSR Surcharge, Unrecovered PGA surcharge,
Stranded Transportation Costs Surcharge) and Miscellaneous Stranded Costs or
other future rates or surcharges permitted to be included in Panhandle's tariff
(or any successor thereto).
4) Rates or surcharges excluded from discounted rate(s) and shall be the
responsibility of the Shipper in accordance with Panhandle's tariff: Fuel
Reimbursement.
5) Discounted rate(s) shall wily apply to the transportation service provided
from the receipt point(s) to the delivery point(s) specified below and only to
the quantities up to that set out below:
<TABLE>
<CAPTION>
Receipt Point Delivery Point Quantity Limit (Dth/D) Effective Period
- ------------- -------------- ---------------------- ----------------
<S> <C> <C> <C>
Field Zone Transmission CRSRD 3000 06/01/1996 - 05/31/1997
Field Zone Transmission CRSRD 5000 06/01/1997 - 05/31/1999
Field Zone Transmission ANRDF - secondary 06/01/1996 - 05/31/1999
Field Zone Transmission COLGA - secondary** 06/01/1996 - 05/31/1999
Field Zone Transmission UNION - secondary** 06/01/1996 - 05/31/1999
</TABLE>
** These secondary delivery points will receive the Discounted Rate up to and
including the primary reserved path.
The incremental mileage falling outside of this reserved path will get
billed the maximum applicable tariff rates and such charges shall not be
included in the Discounted Rate.
5400 Westheimer Ct. Houston, Texas 77056-5310 (713) 627-4795
<PAGE> 5
6) Discounted rate(s) shall not apply to the following:
a) Overrun transportation service;
b) Gathering service;
c) Transportation from receipt point(s) located in Panhandle's Market
Zone;
d) Transportation other than from the Receipt Point(s) to the Delivery
Point(s) as listed above;
e) Capacity release service or similar program which may be available
under Panhandle's tariff; which services shall be provided at the
applicable maximum tariff rates.
7) Nothing this agreement shall constitute an agreement to extend the
Transportation Agreement.
8) For the period of June 1, 1996 through December 31, 1996, Panhandle shall
bill arid Shipper shall pay for the first 2,000 Dth/day of MDCQ based on a 100%
load factor based at the Discounted Rate. For volumes delivered between 2,000
arid 3,000 Dth/day, Panhandle shall bill and Shipper shall pay based on a
commoditized rate of 42 cents/Dth.
9) Shipper shall have a one time right to reduce the MDCQ of the
Transportation Agreement to between 2,000 and 3,000 Dth/day by providing written
notice to Panhandle by December 1, 1996 to be effective January 1, 1997.
10) Forth; period June 1, 1997 through December 31, 1997, Panhandle shall bill
arid Shipper shall pay for the first 3,000 Dth/day (or the MDCQ as adjusted in
(9) above) of MDCQ based on a 100% load factor basis at the Discounted Rate, Far
volumes delivered between 3,000 (or the MDCQ as adjusted in (9) above) and 5,000
Dth/day, Panhandle shall bill arid Shipper shall pay based on a commoditized
rate of 42 cents/Dth.
11) Shipper shall have a one time right to reduce the MDCQ of the
Transportation Agreement to between 3,000 (or the MDCQ as adjusted in (9) above)
arid 5,000 Dth/day by providing written notice to Panhandle by December 1, 1997
to be effective January 1, 1998.
12) If the discounted rate(s) either exceed the then effective applicable
maximum rate or are lower than the then effective applicable minimum rate set
forth in Panhandle's tariff at any time during the Discount Period, then the
discounted rate(s) will be deceased or increased to equal the respective maximum
or minimum tariff rate. Panhandle reserves the right to adjust the rates charged
Shipper between reservation and commodity components so long as it does not
exceed the discounted rate(s) on a 100% load factor basis.
13) If during tile Discount Period, Panhandle's effective maximum rates are
being collected subject to refund, Panhandle's only refund obligation shall be
the excess if any, of the total rate charged over and above the 100% load factor
maximum rate, as finally approved. If Panhandle collects and flows through
penalty, cash out, or excess interruptible or short term firm revenues,
discounts agreed to herein shall be adjusted so that any portion of such flow
through allocated to the Transportation Agreement shall be retained by
Panhandle.
14) Unless otherwise agreed to by Panhandle, Shipper may not assign this letter
agreement to any other party. However, should substantially all of the assets of
Shipper be sold to another entity this agreement shall continue in effect
pursuant to the terms outlined herewith.
<PAGE> 6
15) Any written notices or other communications pertaining to this agreement
may be sent to Panhandle to the attention of Sales Administration by facsimile
at (713) 627-4829 or by mail to Panhandle at the letterhead address.
If you are in agreement with the foregoing, please so indicate by having a
duly authorized representative execute bath originals of this agreement in the
appropriate space provided below, and return both executed originals to the
letterhead address.
Sincerely,
PANHANDLE EASTERN PIPE LINE COMPANY
/s/ Bobby J. Gropard
Accepted and Agreed to this
10TH day of April, 1996:
STEEL DYNAMICS, INC.
BY: /s/ Tracy Shellabarger
--------------------------
[Name]
CFO
--------------------------
[Title]
<PAGE> 7
CONTRACT NO. 014694
AMENDMENT NO. 00002
284G
AMENDMENT TO TRANSPORTATION AGREEMENT
Parties: PANHANDLE EASTERN PIPE LINE COMPANY and
STEEL DYNAMICS, INC.
The above parties, by their execution of the Exhibit A referenced
below, hereby agree to amend their Transportation Agreement dated
04/11/1996 designated as Contract Number 014694 as follows:
1. Exhibit A is hereby deleted in its entirety and replaced with the
Exhibit A attached hereto.
2. This Amendment shall be effective from the Effective Date as set out on
Exhibit A.
3. Except as provided herein, all other terms and conditions of this
Agreement will remain in full force and effect.
<PAGE> 8
AMENDMENT NO. 00002
SUPERSEDING
EXHIBIT A
TRANSPORTATION AGREEMENT
BETWEEN
PANHANDLE EASTERN PIPE LINE COMPANY
FOR
FIRM SERVICE
UNDER RATE SCHEDULE FT
AND
STEEL DYNAMICS, INC.
CONTRACT NO. 014694
EFFECTIVE DATE SEPTEMBER 1, 1996
SUPERSEDES EXHIBIT A DATED AUGUST 1, 1996
MAXIMUM DAILY CONTRACT QUANTITY (DT./DAY) 3,600
PANHANDLE EASTERN PIPE LINE COMPANY
By
---------------------------------
Title
------------------------------
Executed
---------------------------
STEEL DYNAMICS, INC
By /s/ Tracy Shellabarger
----------------------------
Tracy Shellabarger
----------------------------
(Please type or print name)
Title VP Finance/CFO
Executed
----------------------
<PAGE> 9
EXHIBIT A
TRANSPORTATION AGREEMENT
BETWEEN
PANHANDLE EASTERN PIPE LINE COMPANY
FOR
FIRM SERVICE
UNDER RATE SCHEDULE FT
AND
STEEL DYNAMICS, INC.
CONTRACT NO. 014694
Maximum Daily Contract Quantities (Dt./Day)
Effective from 09/01/1996 through 05/31/1997: 3,600 Dt./Day
Effective from 06/01/1997 through 05/31/2000: 5,600 Dt./Day
<PAGE> 10
CONTRACT-NO:.014694
EXHIBIT A
TRANSPORTATION AGREEMENT
FOR
FIRM SERVICE
UNDER RATE SCHEDULE FT
PRIMARY FIRM POINT(s) OF DELIVERY
<TABLE>
<CAPTION>
FUNCTION-
ALIZATION/
NO. DELIVERED TO METER NO. MILEAGE COUNTY STATE QUANTITY
- --- ------------------------- --------- --------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Effective from: 09/01/1996 Through: 05/31/1997
1 NIPSCO DEFIANCE - CROSSRD CRSRD* T/ 788 DEFIAN OH 3,600
Effective from: 06/01/1997 Through: 05/31/2000
2 NIPSCO DEFIANCE - CROSSRD CRSRD* T/ 788 DEFIAN OH 5,600
</TABLE>
* Amended Point(s) for this amendment
DESCRIPTION OF FACILITIES
<TABLE>
<CAPTION>
ATMOS.
EXISTING/ OPERATED AND PRES.
NO. PROPOSED INSTALLED BY MAINTAINED BY (PSIA)
- --- -------- ------------------------------- --------------------------- ------
<S> <C> <C> <C> <C>
Effective from: 09/01/1996 Through: 05/31/1997
EXISTING ---- PANHANDLE EASTERN PIPE LINE 0
Effective from: 06/01/1997 Through: 05/31/2000
EXISTING ---- PANHANDLE EASTERN PIPE LINE 0
</TABLE>
<PAGE> 11
CONTRACT-NO:.014694
EXHIBIT A
TRANSPORTATION AGREEMENT
FOR
FIRM SERVICE
UNDER RET. SCHEDULE FT
PRIMARY FIRM POINT(s) OF RECEIPT
<TABLE>
<CAPTION>
FUNCTION-
ALIZATION/
NO. DELIVERED TO METER NO. MILEAGE COUNTY STATE QUANTITY
- ------ ------------ --------- ---------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Effective from: 09/01/1996 Through: 05/31/1997
1 ANADARKO LIBERAL RECEIPT 13214* T/FIELD SEWARD KS 600
2 K-N ALEDO CHECK PURCHASE 06132* T/FIELD DEWEY OK 600
3 MOBIL HICKOK - WIT 40554* T/FIELD GRANT KS 600
4 PEPL CIG EXCHANGE 06204* T/FIELD KEARNY KS 600
5 PHILLIPS HANSFORD RESIDUE 09900* T/FIELD HANSFO TX 600
6 TRANSOK - BECKHAM - WIT 40466* T/FIELD BECKHA OK 600
Effective from: 06/01/1997 Through: 05/31/2000
7 ANADARKO LIBERAL RECEIPT 13214* T/FIELD SEWARD KS 933
8 K-N ALEDO CHECK PURCHASE 06132* T/FIELD DEWEY OK 935
9 MOBIL HICKOK - WIT 40554* T/FIELD GRANT KS 933
10 PEPL CIG EXCHANGE 06204* T/FIELD KEARNY KS 933
11 PHILLIPS HANSFORD RESIDUE 09900* T/FIELD HANSFO TX 933
12 TRANSOK - BECKHAM - WIT 40466* T/FIELD BECKHA OK 933
</TABLE>
* Amended point(s) for this amendment
DESCRIPTION OF FACILITIES
<TABLE>
<CAPTION>
ATMOS.
EXISTING/ OPERATED AND PRES.
NO. PROPOSED INSTALLED BY. MAINTAINED BY (PSIA)
- --- -------- ------------------------------- --------------------------- ------
<S> <C> <C> <C> <C>
Effective from; 09/01/1996 Through: 05/31/1997
EXISTING ----- PANHANDLE EASTERN PIPE LINE 15
EXISTING ----- PANHANDLE EASTERN PIPE LINE 14
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 14
Effective from: 06/01/1997 Through: 05/31/2000
EXISTING ----- PANHANDLE EASTERN PIPE LINE 15
EXISTING ----- PANHANDLE EASTERN PIPE LINE 14
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 13
EXISTING ----- PANHANDLE EASTERN PIPE LINE 14
</TABLE>
<PAGE> 1
Exhibit 10.10
[PANENERGY LETTERHEAD]
August 8, 1996
Mr. James R. Hopton
Steel Dynamics, Inc.
4500 County Road 59
Butler, Indiana 46721
This letter represents written confirmation of our previous verbal agreement
regarding the purchase of natural gas by Steel Dynamics, Inc. (Buyer) from
PanEnergy Gas Services, Inc. (Seller). The following is a recap of the terms of
the transaction:
NATURE OF SERVICE: Firm Supply
DELIVERY PERIOD: 09/1/96 - 07/31/97
QUANTITY: 3,390 MMBtu/D
SALES PRICE: $1.91 per MMBtu
DELIVERY POINT: PEPL Fieldzone
Please return one executed copy of this sales confirmation via facsimile to
(317) 879-3009. I will follow-up with a Firm Gas Sales Agreement. Should the
terms of this transaction not meet your understanding please contact me at your
earliest convenience at (317) 879-3022.
ACCEPTED AND AGREED TO:
This 8th day of August, 1996
PANENERGY GAS SERVICES, INC. STEEL DYNAMICS, INC.
By: /s/ (illegible) By: /s/ James R. Hopton
------------------------- ------------------------
Title: MGR. MIDWEST REGION Title:
------------------------
<PAGE> 1
Exhibit 10.11
AGREEMENT FOR WASTEWATER SERVICES BETWEEN
THE CITY OF BUTLER INDIANA AND STEEL DYNAMICS, INC.
THIS AGREEMENT is made and entered into this 5th day of September 1995,
by and between THE CITY OF BUTLER, INDIANA (the "City"), for and on behalf of
itself and the Dekalb County Redevelopment Commission (the "Commission"), and on
behalf of the Dekalb County Redevelopment Authority (the "Authority"), and STEEL
DYNAMICS, INC., an Indiana Corporation ("SDI").
WHEREAS, SDI, the City, the County of Dekalb, Indiana (the "County"),
the Authority, the Commission, and the State of Indiana (the "State") have
entered into a Memorandum of Understanding (the "MOU") dated as of the 20th day
of June, 1 994, pursuant to which SDI agreed to undertake the construction and
development of a thin slab casting steel scrap recycling mini-mill and related
facilities in the County (the "Mini-Mill") and the governmental entities
referred to herein agreed to provide certain economic incentives all as more
particularly provided in the MOU; and
WHEREAS, the MOU provided for the City and SDI to negotiate and agree
upon a "Service Agreement" for SDI to pay expenses and debt service and other
customary costs related to the issuance of bonds to finance the construction of
the improvements necessary to provide wastewater treatment services to the
Mini-Mill all as particularly provided in the MOU; and
WHEREAS, SDI, the City, the Authority, and the Commission signed a
letter agreement dated January 24, 1995 (the "Letter Agreement"), pursuant to
which (i) the Authority agreed to issue its lease rental revenue bonds (the
"Bonds") to finance certain sewer line improvements, a lift station (referred to
herein as the "SDI lift station") and one treatment unit at the City's sewage
treatment plant which treatment unit consists of aeration tanks, final settling
tanks, an aerobic digester and necessary related appurtenances and improvements
(collectively referred to herein as the "Project") and as more particularly
described in the plans and specifications prepared by Philip L. Schnelker, Inc.
dated _____________,199___ and (ii) SDI agreed to pay a rate or rates sufficient
to pay debt service on such Bonds and the
<PAGE> 2
operation, maintenance, replacement costs of the Project all as more
particularly provided in the Letter Agreement; and
WHEREAS, the Authority will lease the Project upon completion to the
Commission pursuant to a lease dated as of the 1st day of March, 1995 (the
"Lease"); and
WHEREAS, the Authority and the City have entered into an agreement dated
as of the 15th day of May, 1995, (the "Agency Agreement") pursuant to which the
City has agreed to serve as the Agent of the Authority to construct the Project;
and
WHEREAS, the Commission and the City shall enter into an agreement (the
"Operation and Management Agreement") pursuant to which the City shall to serve
as agent of the Commission to operate and manage the Project; and
WHEREAS, the City and SDI have negotiated and agreed upon the terms and
conditions of the Service Agreement and desire to enter into this Agreement as
the "Service Agreement" contemplated by the MOU.
NOW, THEREFORE, IN CONSIDERATION of these premises and in further
consideration of the promises and agreements hereinafter contained, the City,
for and on behalf of itself and the Authority, and the Commission, and SDI agree
as follows:
SECTION 1. CONSTRUCTION, OPERATION AND USE. The City agrees, pursuant to
its obligations under the MOU, this Agreement, the Agency Agreement and the
Operation and Management Agreement, subject to the satisfaction by SDI of its
obligations hereunder, to construct, operate and maintain the Project (the
Project and the City's sewage utility system being sometimes referred to herein
as the "Sewerage System") in a manner which will permit SDI to use the Project
as contemplated by this Agreement and the MOU. The City agrees to make available
as needed, at least 201,800 gallons per day (G.P.D) capacity of the Project for
SDI's use and the use of all other users within the "Current Allocation Area"
(as described on
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<PAGE> 3
Exhibit A) of the Authority, and to accept, treat, and process all of SDI's
wastewater not otherwise prohibited by this Agreement, and the wastewater of all
other users located within the Current Allocation Area of the Authority using
the SDI lift station, and/or force sewer line improvements in accordance with
all applicable standards of the Indiana Department of Environmental Management
("IDEM"), the Indiana State Board of Health, the U.S. Environmental Protection
Agency, and all applicable laws, regulations and ordinances. SDI shall have the
option to accept and discharge to the City, as part of SDI's flow, the flow and
discharge of any users within the Current Allocation Area of the Authority, and
all such flow and discharge so accepted by SDI, and discharged by SDI into the
Sewerage System shall be subject to all of the terms of this Agreement. As to
any wastewater discharge needs of any users located within the Current
Allocation Area of the Authority not accepted by SDI and processed as a part of
SDI's flow, the City shall not unreasonably withhold its approval or consent to
provide sewerage services at reasonable charges and rates to such other users.
SDI agrees to use the Project in accordance with and pay the amounts required to
be paid under this Agreement. The City and Authority agree that the Project
completion date of the Utility Improvements set forth in paragraph 1(c) of the
MOU is extended to August 1, 1996. All other provisions of paragraph 1(c) of the
MOU remain in full force and effect.
SECTION 2. TERM; TERMINATION. The term of this Agreement shall be for a
period of 25 years (the "Term"). Except as otherwise provided in this Agreement,
SDI acknowledges that the obligation to pay the rate or rates required by this
Agreement shall extend throughout the Term. SDI may not terminate this Agreement
prior to the expiration date of this Agreement except due to an uncured material
default or breach of this Agreement by the City which remains uncured after
thirty (30) days prior written notice of same from SDI SDI shall have five
options of five years each to renew this Agreement, upon 90 days prior written
notice, upon all of the same terms and conditions as existed during the original
term except that there shall be no Debt Service Charge due pursuant to paragraph
15. During the Term or any option term, The City may terminate this Agreement
(i) only after 60 days prior written notice to SDI of any uncured default as a
result of a failure by SDI to pay amounts that are due and owing under this
Agreement, or (ii) or only after 10 days written notice for failing to cease and
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<PAGE> 4
desist the discharge of prohibited discharges, or (iii) only after 60 days prior
written notice of any other uncured default for failure to adhere to any other
provision of this Agreement; provided, however, in the event of a bona fide good
faith dispute (and during such bona fide good faith dispute SDI shall continue,
however, to pay to the City the Debt Service Charge and any other undisputed
amount or portion thereof of any other User Charge) by SDI and the City as to
the amount owed as User Charges, the City shall not have the right to terminate
the agreement during the pendency of such dispute unless and until the same is
finally determined, and after such final determination (including appeals), SDI
fails to within 60 days thereafter pay the amount actually found to be due and
owing; and provided further and not withstanding any other provision herein to
the contrary, in the event of accidental discharges or discharges with wastes or
substances not permitted or in excess of those permitted by this Agreement, SDI
shall have failed, after 10 days prior written notice from the City, to cease
and terminate such prohibited discharges. In the event SDI cures any default or
breach of this Agreement within the above time limits, the City shall not have
the right to terminate this Agreement due to such default or breach.
Notwithstanding any other provision herein to the contrary, the City may
temporarily shut-off, cut-off, and temporarily terminate SDI's flow and
discharge (without terminating this Agreement) into the Sewerage System to
effectuate a cessation of any illegal or prohibited discharge, but with such
sewerage service to be reinstated at such time as SDI ceases to discharge such
prohibited or illegal waste. For all purposes of this Agreement, discharges
subject to extra strength surcharges shall not be deemed to be prohibited
discharges.
SECTION 3. METERING OF SEWAGE. SDI shall, at its expense, install and
maintain an approved device to measure directly the volumes of wastes discharged
to the Sewerage System by SDI To that end, a meter shall be installed on the
potable water input to determine the volume of discharge from the potable water
system and a wastewater flow meter shall be used to determine the volume of all
other discharges. The City shall inspect and approve such meter installations,
which approval shall not be unreasonably withheld and no such meters, once
installed, shall be removed without the City's approval.
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<PAGE> 5
SECTION 4. WASTE SAMPLING.
(a) SDI shall be subject to periodic and random inspections by the City
for the purpose of determining compliance with discharge limitations or
other matters related to the sewerage service provided by the City.
These inspections may consist of sampling/monitoring of waste streams,
the tap in point, as well as the right to request and receive
pre-treatment operating records and other records or data reasonably
deemed necessary by the inspector of the City for the
sampling/monitoring purposes stated above.
(b) The installation, operation and maintenance of the
sampling/monitoring facilities shall be the responsibility of SDI and
shall be subject to the approval of the City which approval shall not be
unreasonably withheld. Reasonable access to the sampling/monitoring
facilities shall be granted, at all reasonable times, to the City. SDI's
security measures shall include procedures to allow access by City
personnel, upon showing of proper identification, without delay, for the
purpose of observing or sampling/monitoring of wastes being discharged
at a given point or points, or alternatively SDI may install suitable
control manholes outside of the security area or in public right of way
or other sewer easement areas which at all times shall be immediately
available to City personnel .
(C) SDI shall routinely and regularly provide the City with the test
results of all testing/sampling required to be done pursuant to its
pre-treatment permit from IDEM. Laboratory procedures used in the
examination of SDI's wastes shall be those set forth in "Standard
Methods" Code of Federal Regulations 40 CFR 136, or other approved EPA
methods. The City, at its option, may accept such test results provided
by SDI for the purpose of determining compliance with discharge
limitations. If the City chooses to periodically have an independent
laboratory test SDI's wastes for the purpose of determining compliance,
the results of the test made by the City will be used to determine any
extra-strength surcharges, but SDI will pay for the costs of any such
independent tests in accordance with the rate ordinance of the City then
in effect only in the event such independent tests determine
extra-strengths discharges in excess of those reported by SDI In the
event of a dispute between SDI and the City as to the characteristics,
strength, toxic nature or other particulars of the samples, either party
may request that the sample in dispute be analyzed by a second mutually
acceptable independent laboratory whose fee for such test shall be paid
by the party requesting the analysis. The results of the independent
laboratory test accepted by the City, or as determined by the second
mutually acceptable independent laboratory in the event of a dispute,
shall be binding in determining the strength-of-waste surcharges and
other matters dependent upon the character and concentration of wastes.
-5-
<PAGE> 6
SECTION 5. PRIOR APPROVAL FOR CERTAIN WASTES. Except for accidental
discharges, SDI shall obtain approval, prior to the discharge into the Sewerage
System of any wastes which contain constituents in excess of normal domestic
limits (based on a daily average) as defined below:
(a) A BOD content greater than 225 milligrams per liter.
(b) A suspended solids content greater than 225 milligrams per liter.
(c) A phosphorus content greater than 10 milligrams per liter.
(d) An ammonia content greater than 25 milligrams per liter.
(e) A total nitrogen content greater than 40 milligrams per liter.
Prior approval for discharge shall not be required and SDI shall not be
in breach of this Agreement for discharges in excess of the limits permitted by
this Agreement if not known at the time of discharge, but SDI shall nonetheless
owe extra strength surcharges if and as permitted by the Agreement. The City
shall not unreasonably withhold its consent for approval of discharges in excess
of normal domestic limits for wastes for which surcharges may be imposed.
SECTION 6. PROHIBITED WASTES. SDI shall not discharge or cause or permit
to be discharged into the Sewerage System any of the following described
substances, wastes or waters:
(a) Any liquid or vapor having a temperature greater than 140 degrees
Fahrenheit.
(b) Any waters or wastes containing more than 100 milligrams per liter
of grease, oils, fats or waxes.
(c) Any gasoline, benzene, naphtha, fuel oil, mineral oil or any other
flammable or explosive solid, liquid or gas.
-6-
<PAGE> 7
(d) Any noxious or malodorous gas or substance which either alone or by
interaction with other wastes, is capable of creating a public nuisance
or hazard to life or of preventing entry into the sewers for their
maintenance or repair.
(e) Any garbage that has not been properly pre-treated and reduced.
(f) Any ashes, cinders, sand, mud, straw, shavings, wood, metal, glass,
rags, feathers, tar, plastics, paunch manure, butchers' offal or any
other solid or viscous substances capable of causing obstruction to the
flow in sewers or other interference with the normal operation of the
Sewerage System or the treatment plant.
(g) Any waters or wastes having a pH less then 6.0 or greater than 10.0
or having any other corrosive property capable of causing damage or
posing hazards to the structures, equipment or personnel of the sewage
works.
(h) Any waters or wastes containing toxic ions, compounds or substances,
as defined in the Federal Clean Water Act, in sufficient quantity to
interfere with the normal biological process of the treatment plant or
that will pass through the treatment plant after normal treatment
process into the receiving stream in amounts exceeding the standards set
forth by federal, interstate, state or other competent authority having
jurisdiction, or will accumulate in the sludge of the treatment plant in
amounts exceeding the limitations set forth by any federal, interstate,
state or other competent authority having jurisdiction thereof.
(i) Any toxic radioactive isotopes.
(j) Any waters or wastes that for a duration of 30 minutes or more have
a concentration more than one and one half (1.5) times the permitted
concentration of BOD or suspended solids as defined in Section 5 (a) and
(b) of this Agreement.
(k) Any waters or wastes containing suspended solids of such character
and quantity that extraordinary provisions, attention and expense would
be required to handle such materials at the treatment plant, its pumping
stations or other facilities.
(l) Any waters or wastes containing incompatible pollutants.
(m) Any substances with objectionable color not removed by normal
treatment process.
(n) Pollutants which create a fire or explosion hazard in the treatment
plant or-Sewerage System, including, but not limited to, wastestreams
with a closed cup flashpoint of less than 140 degrees Fahrenheit.
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<PAGE> 8
SECTION 7. ACCIDENTAL/PROHIBITED DISCHARGES.
(a) SDI shall provide reasonable protection from accidental discharge of
prohibited or regulated materials or substances into the Sewerage
System. Where reasonably necessary, procedures and facilities to prevent
the accidental discharge of prohibited materials shall be provided and
maintained at SDI's expense.
(b) SDI shall notify the City promptly when an accidental discharge
occurs. A written report shall be submitted within five (5) days of the
incident. The notification must include, to the extent known, the date
and time of occurrence, type of waste, concentration and volume and
corrective actions taken. SDI shall be liable for any directly caused
actual damages related to the discharge of prohibited materials by SDI
including loss or damage to the Sewerage System and treatment
facilities, SDI shall be liable to the City for any claims of third-
parties asserted against SDI or the City resulting from accidental or
prohibited discharges (but only to the extent not covered by liability
insurance of SDI and the City, and as to claims asserted solely against
the City, only to the extent of the City's liability taking into account
any liability insurance of the City to the extent of coverage thereof
and the then current tort claims amount limitation, if any), and in
addition thereto SDI shall be liable to the City for the amount of any
fines imposed upon the City under state or federal law; provided,
however, SDI shall not be liable for any incidental or consequential
damages of the City.
(c) If any portion of the Sewerage System becomes obstructed or damaged
directly due to any prohibited discharge by SDI, SDI shall reimburse the
City for reasonable expenses of cleaning out, repairing, or rebuilding
the affected portion of the Sewerage System.
SECTION 8. EMERGENCY. The City reserves the right in the event of an
emergency, to restrict the allowable discharge received from SDI, but only
during the time of such emergency.
SECTION 9. OPERATION OF PRETREATMENT FACILITIES. SDI shall maintain its
pretreatment facilities continuously in normal operating condition at SDI's
expense and shall be subject to periodic and random inspection by the City. SDI
shall maintain suitable operating records which shall be open to inspection by
the City and shall submit to the City monthly summary reports of the character
of the influent and effluent of the facilities in the form and substance
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<PAGE> 9
required by IDEM for its pre-treatment permit. All such records and reports
shall be retained for a minimum of three (3) years.
SECTION 10. USER CHARGES. Charges for service under this Agreement will
consist of a Base Charge and a Flow Charge as set out below. The Base Charge
consists of a debt service charge and a replacement charge and is expressed as a
fixed amount per month. The Flow Charge consists of a volumetric Flow Charge for
operation and maintenance costs associated with the treatment of SDI's wastes.
In addition, the City may impose a surveillance charge as set forth in Section
12 to defray the costs of inspection and testing of SDI's waste and shall impose
extra-strength surcharges as set out below.
SECTION 11. BASE CHARGE. SDI's monthly Base Charge shall be expressed as
a fixed dollar amount per month for each full or partial month of operation.
Except as otherwise provided in this Agreement, no adjustment in the Base Charge
shall be made due to volume, usage or other factor except as provided herein.
The City shall monthly pay the debt service portion of the Base Charge to the
Commission. The City shall hold the replacement charge portion of the Base
Charge in a separate interest earning fund to be known as the SDI Replacement
Fund. The SDI Replacement Fund may be used for any necessary repairs to the
Project. Any uses of the SDI Replacement Fund by the City for replacement of the
City's portion (66 2/3%) of replaceable equipment of the Project at the
wastewater treatment plant shall be replenished by the City within 24 months by
a charge to operation and maintenance expenses to City customers other than SDI
Any uses of the SDI Replacement Fund by the City for replacement of SDI's
portion (33 1/3%) of replaceable equipment at the wastewater treatment plant, or
the SDI lift station, or the force main and the SDI portion of appurtenances
thereto shall be replenished by SDI for its share (33 1/3% of treatment plant
and 100% of replaceable equipment for the force main , SDI lift station and
appurtenances thereto), within 24 months.
SECTION 12. FLOW CHARGE. SDI's monthly flow charge shall be expressed as
a dollar amount per 1,000 gallons of metered flow that flows into the Sewerage
System of the City .
-9-
<PAGE> 10
The City will calculate and bill SDI monthly based on the actual metered usage
times the then applicable flow charge. In no event, however, shall SDI's Flow
Charge be less than $1,200.00 per month during the initial Term of this
Agreement.
SECTION 13. NORMAL SURVEILLANCE CHARGE. SDI's Normal Surveillance Charge
shall be expressed as a dollar amount per incident of inspection and testing of
SDI's wastes by the City. The City may, at SDI's request, calculate the monthly
equivalent of a per incident surveillance charge and prepare a monthly billing
surveillance charge equivalents to SDI A Normal Surveillance Charge is defined
as a random inspection/testing by the City not more than once every three
months. Except as provided in paragraph 4(c), SDI shall only be responsible for
Normal Surveillance Charges.
SECTION 14. EXTRA-STRENGTH SURCHARGES. SDI's extra-strength surcharges
shall be expressed as a dollar amount per unit of measure for each type of
constituent measured for all waste which exceeds the limitations set out herein.
SECTION 15. ADJUSTMENTS TO CHARGES. Before December 1st of each year,
the City shall calculate the Base Charge and the Flow Charge applicable to SDI
for the ensuing calendar year based on the following methodology:
(a) BASE CHARGE. The monthly Base Charge shall be calculated as the
monthly Debt Service Charge plus the monthly Replacement Charge.
(b) DEBT SERVICE CHARGE. The monthly Debt Service Charge shall be
calculated as one-twelfth of the amount necessary to pay the ensuing
twelve month's debt service requirements on the Bonds which Bonds shall
be amortized and payable over a term of approximately twenty-two (22)
years, and shall be of substantially level interest and principal
payments, or other amortization reasonably acceptable to SDI or any
replacement bonds that may refinance or refund said Bonds. The Bonds,
for which SDI assumes the Debt Service thereof, shall be in the amount
of $1,800,000.00 plus a reasonable amount to fund the bond reserve
account for the three payment test, but in no event shall SDI be
responsible for any debt service on Bonds that exceed $2,375.000.00 (but
less any amount funded by SDI as Capitalized Interest pursuant to
paragraph 15 (g) hereof) without its prior written consent. It is
-10-
<PAGE> 11
understood and agreed, however, that the City or the Authority shall,
prior to the semi-annual payment of the debt service portion of the Base
Charge on the bonds, place SDI's monthly portion thereof in an interest
bearing account, and all earnings and interest shall, annually be
credited against and reduce SDI's next year's Base Charge.
(c) ADJUSTMENTS TO DEBT SERVICE CHARGES. To the extent that the
Authority has accumulated sufficient funds to defease the Bonds or any
replacement bonds, or if such Bonds are defeased without any replacement
bonds, the monthly Debt Service Charge shall be zero. The authority
agrees to consider, in good faith, to refinance the Bonds if lower
interest rates are obtainable, and to equitably reduce SDI's Debt
Service Charge, based upon reduced interest rates obtained on any
replacement bonds. The Bonds may not be refinanced at higher interest
rates or shorter terms or at interest rates including costs of issuance
which would cause SDI's Debt Service Charge to increase without the
prior written consent of SDI To the extent that any user connects into
the SDI lift station or force main used by SDI and a debt service charge
is charged to that user, SDI's debt service charge shall be
proportionately reduced by the amount of the new user's debt service
charge. The City agrees that it will not allow a connection by a user
located within the Benefited Real Estate (as defined in the attached
Sewer Reimbursement Contract) into the SDI Lift Station or force main
without allocating a portion of the debt service charge in the manner
and amount as set forth in paragraph 2 of the Sewer Reimbursement
Contract attached hereto to that user, without prior approval of SDI SDI
and the City may by mutual agreement waive the assessment of a debt
service charge to new users, and provided further, as to any new user
located within the Current Allocation Area of the Authority, SDI may in
its sole discretion charge and receive such tap in fees and connection
charges for reimbursement of previously paid and future debt service
charges as it deems appropriate.
(d) INITIAL DEBT SERVICE CHARGE. The per month initial debt service
charge due from SDI to the City shall be imposed beginning with the
month of January, 1997; provided, however, SDI may suspend its Debt
Service Charge payments after July 1, 1997, during any payment period
that the Project is not substantially complete. In the event payments
were so suspended, upon substantial completion, such monthly payments
shall resume with the next payment that would have been due had there
been no suspension of payments so that the net effect would be to
extend, as to SDI, the time for making monthly payments set forth on the
to be attached schedule by the duration of the time period for which the
Project is not substantially complete. After issuance of the Bonds, this
Agreement shall be amended by attaching a schedule setting forth the
monthly Debt Service Charge due by SDI to the City.
(e) REPLACEMENT CHARGE. The monthly Replacement Charge shall be
calculated as one-twelfth of the amount necessary to fund the annual
replacement charge on 33 1/3% of the original cost of all replaceable
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<PAGE> 12
equipment installed at the treatment plant as a part of the Project plus
one-twelfth of the amount necessary to fund the annual replacement
charge on 100% of the original cost of all replaceable equipment
installed at the lift station on SDI's property, and the force main, and
appurtenances connected thereto. During any option term, SDI's
Replacement Charge shall be equitably reduced and based upon its then
proportional share (based upon use) of the applicable items, taking into
account any other users.
(f) ADJUSTMENTS TO REPLACEMENT CHARGE. To the extent that SDI has fully
funded the SDI Replacement Fund (including any accumulated interest),
the monthly Replacement Charge shall be zero. To the extent that any
user connects into the SDI lift station or force main used by SDI and a
replacement charge is charged to that user, SDI's Replacement Charge
shall be reduced by the amount of the new user's replacement charge. The
City agrees that it will not allow a connection by any user into the SDI
lift station or force main used by SDI without allocating a reasonable
portion of the replacement charge to that user, without prior approval
of SDI.
(g) CAPITALIZED INTEREST CHARGE. At the time of issuance of the Bonds,
SDI may, at its option, provide, by direct payment to the Authority,
with an amount reasonably calculated to meet and fund the Capitalized
Interest requirements of the Bonds for one year, but any amount so
funded by SDI for Capitalized Interest shall be credited against and
reduce SDI's Debt Service Charges as set forth in this Agreement at such
time or times as there is any excess in reserve for such Capitalized
Interest.
SECTION 16. FLOW CHARGE. The volumetric flow charge shall be calculated
as a dollar amount per 1,000 gallons of flow discharged into the system by SDI
that will approximate the actual operating and maintenance costs (but excluding
capital charges, amortization, depreciation and replacement charges, and other
non-cash expenses/deductions) plus a reasonable return for the City.
(a) RATE DEVELOPMENT. Prior to December 1st of each year, the City will
notify SDI of its flow charge for the ensuing calendar year. The flow
charge shall be calculated as follows:
(i) The City shall develop a reasonable, fair, and equitable budget
for the cost of operation and maintenance of the Sewerage System
(but excluding capital charges, amortization, depreciation and
replacement charges and other non-cash expenses/deductions)for the
ensuing year.
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<PAGE> 13
(ii) The City shall reasonably estimate SDI's discharge flows for
the ensuing year taking into account prior year's flows.
(iii) The City shall reasonably estimate the total system discharge
flows for the ensuing year.
(iv) The City shall calculate the flow charge as follows: Take the
total budget for normal operating and maintenance expenses of the
Sewerage System (but excluding capital charges, amortization,
depreciation and replacement charges, and other non-cash
expenses/deductions) plus a reasonable return of not more than 5% of
the cost of maintenance and operation, times a fraction the
numerator of which is SDI's estimated discharge flows for the year
and the denominator of which is the total system reasonably
estimated flows for the year to arrive at a product. The product of
that calculation is divided by SDI's reasonably estimated discharge
flows expressed in 1,000 gallon increments to calculate the flow
charge per 1,000 gallons of flow.
(v) In all years after the initial period, the City shall calculate
the variance between the (1) actual flow charges collected from SDI
during the period from October 1st of the second preceding year and
ending on September 30th of the preceding year and (2) the total
operating and maintenance costs of the Sewerage System for such
period plus an amount of not more than 5% of the cost of maintenance
and operation, times a fraction the numerator of which is SDI's
actual discharge flows into the Sewerage System for such period and
the denominator of which is the total system actual flows To the
extent that SDI has paid an amount in (1), above, greater than the
amount in (2), above, the City shall deduct that amount from SDI's
Flow Charge for purposes of determining the ensuing year's Flow
Charge to SDI To the extent that SDI has paid an amount in (1),
above, less than the amount in (2), above, the City shall add that
amount to SDI's Flow Charge for purposes of determining the ensuing
year's Flow Charge to SDI
(b) INITIAL FLOW CHARGE. The initial flow charge is calculated based on
an estimated sewerage system budget of $14,500 per month plus a
reasonable return of 5% ($725) for a total of $15,225. This amount is
multiplied by a fraction of 2,350,000 estimated SDI flow per month over
9,100,000 estimated total system flow per month which results in a
product of $3,932. This product of $3,932 is divided by estimated SDI
discharge flows of 2,350 increments of
-13-
<PAGE> 14
1,000 gallons for the month for a volumetric flow charge of $1.67 per
1,000 gallons.
SECTION 17. INITIAL SURVEILLANCE CHARGE. The initial surveillance charge
for SDI, if the City performs inspection and, testing is $300 per quarter.
SECTION 18. INITIAL EXTRA-STRENGTH SURCHARGE. The initial extra-strength
surcharges, in the event SDI contributes waste having a toxic strength in excess
of domestic waste characteristics, shall be based on the following unit process
charge expressed in cents per pound, for all waste found to be in excess of
limitations:
<TABLE>
<CAPTION>
CENTS PER-POUND
---------------
<S> <C>
Suspended Solids (SS) 24.00
Biochemical Oxygen Demand (BOD) 21.00
Phosphorus (P) 102.00
Ammonia (NH,) 622.00
</TABLE>
Extra Strength Surcharges may be increased by the City only after a cost
of service study determining that the City's actual cost and expenses of
treating such extra strength item has increased, with the increase to be based
upon such actual increase in costs and expenses of treating such extra strength
items.
SECTION 19. CONRAIL CHARGES. It is understood and agreed that
Consolidated Rail Corp. ("Conrail") has or will require the City to enter into
an agreement whereby the City will obligate itself for various charges,
expenses, and obligations for the right and privilege of placing the force main
in the Conrail right-of-way. During the Term of this Agreement, SDI shall pay
directly to Conrail any and all such costs, expenses, and liabilities of the
City assumed under such agreement with Conrail.
SECTION 20. PROJECT CONSTRUCTION ADVANCES. The Authority shall issue and
sell the Bonds in the amount specified in paragraph 15 (b). The Authority shall
use its best efforts and good faith to secure a sale of such Bonds on a
tax-exempt basis, provided, however, there has been no warranty, representation,
or assurance to SDI that such Bonds may be sold on a tax exempt basis and SDI
understands that all or any portion of the Bonds may be taxable which
-14-
<PAGE> 15
will result in increased Debt Service Charges to SDI The Authority intends to
issue a notice to proceed to the contractors of the Project no later than
September 8, 1995. SDI agrees to pay, as due, all sums due the contractors of
the Project, if, as, and when such payments are otherwise due by the Authority
pursuant to the contracts with respect thereto and under applicable law,
provided, however, in no event shall SDI be responsible for any such payments
that first become due after the sale of the Bonds, nor shall SDI be liable for
any payments to any such contractors due for any amounts in excess of the total
amount of the Bonds determined in accordance with paragraph 15 (b) hereof.
Immediately upon the sale of the Bonds, the Authority shall reimburse SDI for
100% of all payments made to all contractors of the Project pursuant to the
terms hereof. The obligation of SDI assumed herein with respect to advancing
payments for construction of the Project are strictly limited to actual
construction expenses of the Project and only for SDI's portion thereof (100%
with respect to the SDI lift Station and force main, and 1/3 of treatment plant
expansion expenses). Until the Bonds are sold, for any month in which the
reasonably anticipated next month's construction draw would exceed $50,000.00,
SDI shall, thirty days in advance, pay into an interest bearing . account of the
Authority, the amount of the next month's reasonably anticipated construction
draw for the Project, with SDI paying any additional sums to the contractors in
excess of the funds placed on the deposit, as they may be due pursuant to the
terms hereof. All interest shall accrue to the benefit of SDI.
SECTION 21. NON-DISTURBANCE. This Agreement and the rights of SDI
hereunder shall not be affected in any way by any amendment to, termination of,
default under, or any other matter, with respect to the Lease, the Agency
Agreement, or the Operation and Management Agreement.
SECTION 22. FORCE MAJEURE. The City shall exercise diligence in the
operation and maintenance of the Sewerage System to furnish SDI continuous
wastewater services consistent with the type and level of service specified
herein, and SDI shall exercise diligence in the use of said wastewater service
so as not to interfere unreasonably with service to others dependent upon the
City for such services; but, neither party shall be liable for damages, breach
of contract or otherwise by reason of the failure, suspension, diminution or
other variance in
-15-
<PAGE> 16
wastewater service as the result of injunction, fire, strike, riot, explosion,
flood, accident, or curtailment, or interruption resulting therefrom, failure or
depletion of the City's water supply and/or wastewater collection and treatment
system, failure or breakdown of equipment or facilities, acts of God or the
public enemy or other acts or conditions beyond the control of the party.
Furthermore, neither party shall be liable for damages resulting from
interruption of service, when such interruption is necessary to make repairs,
replacements or adjustments in equipment and facilities. It is understood and
agreed that the settlement of strikes or lockouts shall be entirely within the
discretion of the party affected and, notwithstanding the intent of the parties
that any interruption in services shall be remedied with all reasonable
dispatch, the settlement of strikes and lockouts shall not be required when such
course is inadvisable in the discretion of the party affected thereby.
SECTION 23. MISCELLANEOUS.
(a) NOTICES. The parties hereto agree that whenever notice to the other
party is required by the terms of this Agreement, such notice shall be
in writing and (i) sent by hand delivery, with signed receipt obtained
therefor, (ii) sent postage pre-paid by United States registered or
certified mail, return receipt requested, or (iii) sent by recognized
overnight courier service with all charges prepaid or billed to the
sender, directed or addressed in each case to the other party at its
address set forth below, or such other address as either party may
designate by notice given from time to time in accordance the provisions
contained herein. The addresses for the parties hereto are as follows:
Steel Dynamics, Inc. City of Butler
4500 County Road 59 Office of the Mayor
Butler, Indiana 46721 201 South Broadway
Butler, Indiana 46721
(b) PREVAILING LAW. The provision of wastewater service under this
Agreement are subject to all lawful orders, rules, and regulations of
duly constituted governmental authorities having jurisdiction over
either or both the City or SDI.
(c) NON-WAIVER. Failure of either party hereto to exercise any right
hereunder shall not be deemed a waiver of such party's right and shall
not affect the right of such party to exercise at some future time said
right or any other right it may have hereunder.
-16-
<PAGE> 17
(d) EXHAUSTION OF REMEDIES. None of the remedies provided for under this
Agreement need be exhausted or exercised as a prerequisite to resort to
further relief to which the party may then be entitled in the event of
an emergency or imminent threat to health or property.
(e) ASSIGNMENT. No assignment by SDI of its rights under this Agreement
shall be binding upon the City unless the City shall have assented to
such assignment with the same formality as employed in the execution of
this Agreement which assent shall not be unreasonably withheld. Subject
to such assent as provided herein, the benefits and burdens of this
Agreement shall inure to and be binding upon the respective legal
representatives, successors and assigns of the respective parties
hereto.
(f) PRIOR AGREEMENTS. This Agreement, upon taking effect, shall
supersede any and all previous agreements between the City and SDI
relative to the provision of wastewater services covered by this
Agreement.
(g) NO REQUIREMENT CONTRACT. It is the express intent of the parties
hereto that this Agreement shall not be construed to be a Requirement
Contract within the jurisdiction of the Uniform Commercial Code.
(h) GOVERNING LAW. This Agreement and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the State
of Indiana.
(i) PARTIAL INVALIDITY. If any term, covenant, condition or provision of
this Agreement, or the application thereof, to any person or
circumstance, shall at any time or to any extent be held invalid or
unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected
thereby, and each such term, covenant, condition and provision of this
Agreement shall continue to be valid, binding and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have subscribed their names on
the day and year above written.
CITY OF BUTLER, INDIANA For Itself
And As Agent For The Dekalb County
Redevelopment Authority And The
Dekalb County Redevelopment Commission
BY: /s/ Larry Moore
--------------------------------
LARRY MOORE, Mayor
-17-
<PAGE> 18
(Seal)
ATTEST:
/s/ Catharine Minehart,
- -----------------------------------
Catharine Minehart, Clerk-Treasurer STEEL DYNAMICS, INC.
BY: /s/ KEITH E. BUSSE
-------------------------
KEITH E. BUSSE, President
ATTEST:
BY:
--------------------------------
-18-
<PAGE> 19
LEGAL DESCRIPTION
A tract of land situated in Sections 27, 28, and 33, in T34N, R14E, DeKalb
County, the State of Indiana, more fully described as follows:
Commencing at the Northwest corner of the Southwest Quarter of said Section 28;
thence Southerly along the West line of said Southwest Quarter to the Southwest
corner thereof; thence Southerly along the West line of the Northwest Quarter of
said Section 33 to the Southwest corner thereof; thence Southerly along the West
line of the Southwest Quarter of said Section 33 to the centerline of State
Highway #8; thence Easterly along said centerline to a point 300 feet West of
the East line of the West half of said Southwest Quarter; thence Northerly along
a line parallel with and 300 feet West of the East line of the West half of said
Southwest Quarter to the North line thereof; thence Easterly along the North
line of said Southwest Quarter to the Northeast corner thereof; thence Easterly
along the South line of the Northeast Quarter of said Section 33 to the
Southeast corner thereof; thence Northerly along the East line of said Northeast
Quarter to the Northeast corner thereof; thence Northerly along the West line of
the Southwest Quarter of said Section 27 to the Southwest corner of the North
half of said Southwest Quarter; thence Easterly along the South line of the
North half of said Southwest Quarter to the West right-of-way line of the
Norfolk and Southern Railroad; thence Northeasterly along said West right-of-way
line to the North line of the Southeast Quarter of said Section 27; thence
Westerly along the North line of said Southeast Quarter to the Northwest corner
thereof; thence Westerly along the North line of the Southwest Quarter of said
Section 27 to the Northwest corner thereof; thence Westerly along the North line
of the Southeast Quarter of said Section 28 to the Northwest corner thereof;
thence Westerly along the North line of the Southwest Quarter of said Section 28
to the place of commencing, said tract containing 745 Acres, more or less, and
being subject to all public road rights-of-way and to all easements of record.
<PAGE> 20
SEWER REIMBURSEMENT CONTRACT
This Agreement made and entered into this ___ day of _____________,
1995, by and between STEEL DYNAMICS, INC., hereinafter called ("Contributor"),
and THE CITY OF BUTLER, by and through its Mayor and Board of Public Works of
said City, hereinafter called ("City").
WITNESSETH:
Pursuant to a certain AGREEMENT for Wastewater Services between the City
of Butler and Steel Dynamics, Inc. dated __________________, 1995 (hereinafter
"Wastewater Services Agreement"), Contributor has agreed to pay the City certain
Debt Service Charges (as defined in the Wastewater Services Agreement) in order
to provide reimbursement to the City for design, construction, and installation
of a certain force main, a lift station (referred to as "SDI lift station"), and
one treatment unit at the City's sewage treatment plant which treatment unit
consists of aeration tanks, final settling tanks, an aerobic digester and
necessary related appurtenances and improvements (collectively referred to in
the Wastewater Services Agreement and herein as the "Project").
The Project is being constructed by the City of Butler as agent for the
Dekalb County Redevelopment Commission and Authority, and shall be constructed
in accordance with the standards, plan and specifications as approved by the
City as prepared by Philip L. Schnelker, Inc. which are incorporated herein by
reference.
It is understood and agreed that the Project being designed, constructed
and installed provides for additional capacity in excess of that needed by
Contributor. The purpose of this Agreement is to provide for the reimbursement
to the Contributor of Debt Service Charges due and to be due from Contributor to
City pursuant to the Wastewater Services Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for all other good and valuable consideration, the
Contributor and the City hereby agree as follows:
1. The Project, when completed, is intended for the benefit of real
estate described as follows:
Commencing at the centerline of the intersection of County Road 44 and
County Road 59 in Dekalb County, Indiana, thence South along the
centerline
<PAGE> 21
of County Road 59 to its point of intersection with the centerline of
State Road #8, thence East along the centerline of State Road #8 to its
point of intersection with the centerline of County Road 63, thence
North along the centerline of County Road 63 to its point of
intersection with the centerline of State Highway #6, thence West along
the centerline of State Highway #6 to its point of intersection with the
centerline of County Road 55, thence South along the centerline of
County Road 55 to its point of intersection with the centerline of
County Road 42, thence East along the centerline of County Road 42 to
its point of intersection with the westerly right-of-way line of the
Norfolk and Southern railroad right-of-way, thence South 1412.60 feet
along the westerly right-of-way line of railroad said railroad
right-of-way, thence East 2340.70 feet along the South line of the North
half of the Southwest quarter of Section 27, T34N,R14E, to its point of
intersection with the centerline of County Road 59, thence South along
the centerline of County Road 59 to the place of beginning.
A diagram showing the aforedescribed parcel of real estate is attached
hereto and incorporated herein as Exhibit A, and said real estate is
hereinafter called the Benefited Real Estate.
2. It is agreed that any present or future owner, lessee, or user
(hereinafter "User") of the Benefited Real Estate that desires to use the
sewerage system made available to the Benefited Real Estate by the Project, by
direct tap or through the extension or connection of lateral or local lines to
service such Benefited Real Estate shall, before connecting, pay to the City,
in addition to the costs of standard tap in and inspection fees and monthly
sewage treatment charges as are then customarily charged by the City for
connection to City main and treatment of sewage therefrom, additional fees
computed and determined as follows:
(a) Any such user shall pay to the City a Debt Service Charge,
monthly, equal to the average gallons per minute of any flow
discharged by such user in the preceding month multiplied by
$40.31, which amount shall be in addition to all other charges
due the City from such user. The said gallon per month charge due
from each such user shall reduce, dollar for dollar, the monthly
Debt Service Charge due from Contributor pursuant to the
Wastewater Services Agreement. The said gallon per minute charge
shall be payable by any such user until such time as the Bonds,
including any replacement Bonds, (as defined in the Wastewater
Services Agreement) for the Project are paid in full or until
December 31, 2017, whichever is earlier (hereinafter referred to
as the "Debt Service Charge Termination Date").
-2-
<PAGE> 22
(b) In addition to the monthly gallon per minute charge as set forth
immediately hereinabove, any such user shall also pay a
connection fee at the time of tap-in to the City, calculated in
the manner and amount as set forth on Exhibit B. Opposite each
calendar year on Exhibit B is a charge per gallon per minute.
Prior to any connection, the user shall furnish to City its best
reasonable estimate of the average gallon per minute (rounded to
the nearest full gallon) of anticipated average flow and
discharge into the sewage system of the City of such user for the
next ten years, and the amount so determined shall be multiplied
by the amount set forth for the applicable year in which the
connection occurs to arrive at the connection fee due to the
City. After the first three full calendar years of connection and
use by such user, the actual average gallons per minute of flow
and discharge shall be determined, and if the actual average
gallon per minute flow and discharge during such three calendar
years is greater than the best reasonable estimate so provided to
the City at the time of connection and tap-in, the excess thereof
shall be multiplied by the charge per gallon per minute in the
calendar year for the third year after such connection, and the
amount so determined shall then also be immediately due and
payable to the City. In the event such user materially increases
its flow volume after the first three years, due to expansion or
otherwise, such user shall also pay, at the time of increase, an
additional connection fee, based upon the then calendar year's
assessment amount set forth on Exhibit B on any such increased
flow in excess of the G.P.M Flow Charge assessed at the time of
initial connection. A material increase is defined as a G.P.M
flow of 10% or greater than the best reasonable estimate of
flow used to determine the initial connection charge. The City
shall reimburse and pay SDI, as received, 100% of the assessment
received pursuant to this paragraph 2(b) from any such user of
Benefited Real Estate located south of County Road 36. The City
may in its sole discretion waive any such assessment for
Benefited Real Estate located north of County Road 36, but no
such waiver of assessment for Benefited Real Estate located south
of County Road 36 shall be made without the prior written
approval of SDI The City shall retain 100% of the assessment
received pursuant to this paragraph 2(b) from any such user of
Benefited Real Estate located north of County Road 36.
(c) The charges due pursuant to this Agreement have been based upon
an assumed Project cost to SDI of $2,200,000.00, an interest rate
on the Bonds of 9 1/2% per annum, amortized over approximately
twenty-two (22) years, and a total additional Project capacity of
500 G.P.M all as set forth on Exhibit C. Within ninety (90) days
of issuance of the Bonds, the City and SDI shall amend this
Agreement to revise and recalculate the amounts due from the
Benefited Real Estate using the same methodology that was used in
Exhibit C to calculate the amounts set forth hereinabove in
paragraphs 2(a) and 2(b). In such recalculation, there shall
first be determined the total of SDI's actual costs and expenses,
which shall include the principal amount of any Bonds, any
prepaid or advanced Capitalized Interest, any three payment
reserve account amounts, and any charges, fees or expenses due
Consolidated Rail Corp. for use of its right-of-way for
installation of the force main, and a total thereof shall be
amortized over a term of twenty-two (22) years, using the average
effective
-3-
<PAGE> 23
interest rate of the Bonds, using an assumed total additional
capacity of the Project of 500 gallons per minute to arrive at
the final assessments so due from the Benefited Real Estate.
3. Any and all owners of the Benefited Real Estate who connect into the
force main (whether by direct tap or lateral or local lines) of the Project
shall be deemed to thereby waive his, her, their or its right to remonstrate
against or otherwise object to or interfere with any pending or future
annexation by the City of such Benefited Real Estate.
4. This Agreement shall run with and bind the real estate described in
paragraph 1 above and as depicted on Exhibit A, and shall be binding upon the
owners thereof and any persons owning, leasing, using or occupying any of said
Benefited Real Estate, their personal representatives, heirs, devisees,
grantees, successors and assigns. Nothing contained herein, however, shall
prevent SDI and the City from mutually agreeing to the full or partial waiver of
any charges due herein. This Agreement shall be binding upon the parties hereto
and their successors and assigns.
STEEL DYNAMICS, INC. THE CITY OF BUTLER
BY: /s/ KEITH E. BUSSE BY: /s/ LARRY MOORE
------------------------- -----------------------
KEITH E. BUSSE, President LARRY MOORE, Mayor
BOARD OF PUBLIC WORKS,
CITY OF BUTLER
BY: /s/ Catherine Minehart
-----------------------
BY: /s/ Ron L. Walter
-----------------------
BY: /s/ Michael E. Mayer
-----------------------
STATE OF INDIANA)
) SS:
COUNTY OF )
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared Keith E. Busse, the President of Steel Dynamics Inc.,
and acknowledged the execution of the above and foregoing to be his voluntary
act and deed this 5th day of September, 1995.
My Commission Expires:
June 23, 1996
/s/ Illegible
-------------------------
Resident of: Notary Public
Allen County
-4-
<PAGE> 24
STATE OF INDIANA)
) SS:
COUNTY OF DeKalb)
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared Larry Moore, the Mayor of the City of Butler, and
acknowledged the execution of the above and foregoing to be his voluntary act
and deed this 5th day of Sept., 1995.
My Commission Expires:
2/5/97 /s/ Kathryn A. McNerney
-----------------------------
Resident of: [NOTARY SEAL/INDIANA] Notary Public
Stephen County /s/ Kathryn A. McNerney
STATE OF INDIANA)
)SS:
COUNTY OF DeKalb)
Before me, the undersigned Notary Public in and for said County and
State, personally appeared, Catherine Minehart, Ron L. Walter, and Michael E.
Mayer, the ___________________________________ of the Board of Public Works,
City of Butler, and acknowledged the execution of the above and foregoing to be
their voluntary act and deed this 5th day of Sept., 1995.
My Commission Expires:
2/5/97 /s/ Kathryn A. McNerney
-----------------------------
Resident of: [NOTARY SEAL/INDIANA] Notary Public
Stephen County /s/ Kathryn A. McNerney
The instrument prepared by Vincent J. Heiny, Esq., Hailer & Colvin, P.C., 444
East Main Street, Fort Wayne, Indiana 46802.
-5-
<PAGE> 25
EXHIBIT A
[COUNTY RECORDERS MAP]
WILMINGTON TOWNSHIP
<PAGE> 26
EXHIBIT B
<TABLE>
<CAPTION>
YEAR CHARGE PER GALLON
PER MINUTE
<S> <C>
1996 $ 483.68
1997 $ 967.37
1998 $ 1,451.05
1999 $ 1,934.73
2000 $ 2,418.41
2001 $ 2,902.10
2002 $ 3,385.78
2003 $ 3,869.46
2004 $ 4,353.14
2005 $ 4,836.83
2006 $ 5,320.51
2007 $ 5,804.19
2008 $ 6,287.87
2009 $ 6,771.56
2010 $ 7,255.24
2011 $ 7,738.92
2012 $ 8,222.60
2013 $ 8,706.29
2014 $ 9,189.97
2015 $ 9,673.65
2016 $10,157.33
2017 $10,641.02
</TABLE>
<PAGE> 27
EXHIBIT C
STEEL DYNAMICS INCORPORATED
ANNUAL TAP IN CHARGE FOR FORCE MAIN
STARTING PRINCIPAL AMOUNT $2,200,000
<TABLE>
<CAPTION>
YEAR PAYMENT ACCUMULATED CAPACITY* CHARGE PER
INTEREST 9.5% AMOUNT 500 GPM GPM
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 $241,841.26 $ 241,841.26 500 gpm $ 483.68
1997 $241,841.26 $ 483,682.51 500 gpm $ 967.37
1998 $241,841.26 $ 725,523.77 500 gpm $ 1,451.05
1999 $241,841.26 $ 967,365.03 500 gpm $ 1,934.73
2000 $241,841.26 $1,209,206.28 500 gpm $ 2,418.41
2001 $241,641.26 $1,451,047.54 500 gpm $ 2,902.10
2002 $241,641.26 $1,692,888.80 500 gpm $ 3,355.78
2003 $241,841.26 $1,934,730.05 500 gpm $ 3,869.46
2004 $241,841.26 $2,176,571.31 500 gpm $ 4,353.14
2005 $241,841.26 $2,418,412.57 500 gpm $ 4,836.53
2006 $241,841.26 $2,660,253.53 500 gpm $ 5,320,51
2007 $241,841.26 $2,902,095.08 500 gpm $ 5,804.19
2008 $241,841.26 $3,143,936.34 500 gpm $ 6,287.87
2009 $241,641.26 $3,365,777.60 500 gpm $ 6,771.56
2010 $241,841.26 $3,627,618.85 500 gpm $ 7,255.24
2011 $241,841.26 $3,869,460.11 500 gpm $ 7,738.92
2012 $241,841.26 $4,111,301.37 500 gpm $ 8,222.60
2013 $241,841.26 $4,353,142.62 500 gpm $ 6,706.29
2014 $241,841.26 $4,594,983.88 500 gpm $ 9,189.97
2015 $241,841.26 $4,836,825.14 500 gpm $ 9,673.65
2016 $241,841.26 $5,078,666.39 500 gpm $10,157.33
2017 $241,841.26 $5,320,507.65 500 gpm $10,641.02
</TABLE>
<PAGE> 1
Exhibit 10.12
SLAG PROCESSING AGREEMENT
This Agreement is made and entered into and is effective as of the
5th day of February, 1994 (the "Effective Date") by and between BUTLER
MILL SERVICE COMPANY (hereinafter "BMS") and STEEL DYNAMICS, INC., an Indiana
corporation with its principal office and place of business in Butler, Indiana
(hereinafter "SDI").
WHEREAS, SDI desires to enter into a contractual relationship with a
financially capable, experienced company to carry on a slag processing
operation on the site of its Butler, Indiana steel mill facility (the "Steel
Mill"), as an independent contractor, and believes that BMS has the capability
and knowledge to perform all of the necessary services in a timely and
professional manner; and
WHEREAS, BMS represents that it has the financial capability,
expertise and desire to design, build, and operate a facility for the
processing of slag at SDI's Steel Mill,
NOW, THEREFORE, in consideration of the mutual covenants of the
parties set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, BMS and SDI hereby
agree as follows:
1. Definitions.
(a) "Furnace" shall mean the twin shell arc furnace
manufactured by Fuchs for installation in the Steel Mill. BMS acknowledges
that it has reviewed and has made itself familiar with the layout, design and
general configuration of the Steel Mill and the Premises, as defined herein.
(b) "Melt Shop Debris" shall mean certain residual
products, consisting of slag, stone, refractory fragments and metal, removed
from the Furnace, ladles, tundish, and caster at the Steel Mill and which are
to be processed by BMS at the Slag Plant Site to yield the following products:
(i) "Processed Scrap" containing a minimum of 85%
metallics as measured by the water displacement method;
(ii) "Usable Processed Metallics," not containing
at least 85% metallics but, nonetheless, containing a commercially valuable
metallic content that is either usable by SDI or saleable to others;
(iii) "Processed Slag," not containing a
commercially valuable metallic content but, nonetheless, still either usable by
SDI or saleable to others; and
<PAGE> 2
(iv) "Processed Waste," neither containing
commercially valuable metallics nor usable by SDI nor saleable to others.
(c) "Premises" shall include SDI's Steel Mill at Butler,
Indiana and its associated real property,
(d) "Slag Plant Site" shall mean the specific location
designated by SDI, within the Premises of the Steel Mill as more particularly
shown in the drawings constituting Exhibit A attached hereto and by this
reference deemed incorporated herein, for the location of BMS' outdoor slag
processing operation, consisting of approximately 800 feet x 800 feet on the
east side of the charging scrap railroad tracks, which BMS shall lease from
SDI, for nominal consideration, and from and upon which BMS shall carry on its
business as an independent contractor to process the Melt Shop Debris.
(e) "Slag Pots" shall mean large vessels with a capacity
of approximately 650 cubic feet, which shall be furnished by BMS to collect
Melt Shop Debris and which shall be positioned in areas designated by SDI
underneath the Furnaces and in the caster slag out pits within the Steel Mill.
(f) "Ton" shall mean one net ton consisting of 2,000
pounds,
2. Services. During the term of this Agreement, BMS shall be the
exclusive processor of all Melt Shop Debris produced by and at the Steel Mill,
and shall timely, properly and without interruption process all such Melt Shop
Debris, tundish "skulls," and material remaining in the ladle after casting,
without interference with SDI's own steel production practices, procedures, or
processes. BMS' services shall include (but shall not necessarily be limited
to) the following (hereinafter "Services"):
(a) Provision of adequate Slag Pots at sites within the
Steel Mill, to be designated by SDI from time to time; collection in Slag Pots
of all Melt Shop Debris produced by and at SDI's Furnaces; regular removal of
the Slag Pots containing the Melt Shop Debris from such designated areas;
transfer of the Melt Shop Debris to the Slag Plant Site for processing;
processing of all Melt Shop Debris as contemplated herein (by equipment
designed and operated to maximize metal recovery); production and disposition
of the products resulting from the processing of the Melt Shop Debris, in
accordance with the terms of this Agreement; and clean-up and maintenance of
"slag out pits" and approach areas under the Furnace.
(b) Provision of two (2) Slag Pot carriers of suitable
size and quality ("Slag Pot Haulers") to haul the Slag Pots from the Steel Mill
to the Slag Plant Site for processing and scrap removal, and the provision,
repair and maintenance of a minimum of seven (7) Slag Pots with the ongoing
obligation to regularly and properly maintain and replace such equipment and
Slag Pots as SDI and BMS may mutually agree. Damage to interior Slag Pot walls
due to direct steel
2
<PAGE> 3
discharge into the Slag Pots by SDI will be charged back to SDI at the actual
cost of repairs by BMS.
(c) Hauling away of all Melt Shop Debris to the Slag
Plant Site for processing and scrap removal.
(d) Without additional charges other than those
contemplated by Paragraph 5 of this Agreement:
(i) The return of all Processed Scrap to SDI by
SDI rail cars within two weeks after generation, processed to SDI's regular
quality standards, as determined from time to time by SDI, and sized nominally
no greater than 48 inches nor less than 1/2 inch, with no single piece to
exceed 5 tons in total weight,
(ii) The return to SDI of as much of the Usable
Processed Metallics produced by BMS as SDI shall from time to time request;
(iii) The return to SDI of as much of the available
Processed Slag produced by BMS as SDI shall from time to time request,
(iv) The loading from piles, transportation,
processing, hauling and screening through a 1/2 inch screen of all "mill
scale" generated by SDI at the scale pit; the maintenance of piles of scale for
SDI's use or sale; and either the loading of screened mill scale for SDI's melt
shop, upon SDI's request, or the loading of customer trucks with mill scale
sold to others by SDI; and
(v) The collection, weighing, and transportation
in containers to be furnished by SDI of the "caster crops" to an on-Premises
location to be designated by SDI.
SDI reserves the exclusive right to market such mill scale, but BMS shall have
the right, for its own account, to sell to others any remaining Usable
Processed Metallics or Processed Slag not required by SDI, and shall regularly
clear this material out in an ongoing and timely manner.
3 . Performance of Services by BMS. In performing its Services
under this Agreement, BMS shall be required to do the following:
(a) Furnish such equipment, including (but not
necessarily limited to) that which is specifically enumerated in Paragraph 2
(b) or elsewhere in this Agreement, as is necessary for the prompt, efficient
and safe performance of its Services in light of the Steel Mill's present plans
and capacities, and, in addition, provide such additional equipment and
Services as may be required as and when SDI adds additional furnaces or other
equipment in the future to increase the Steel Mill's capabilities and
production;
3
<PAGE> 4
(b) Provide its Services at such a speed and in such a
manner as is satisfactory to SDI;
(c) Construct and maintain the approximately one thousand
feet of dedicated Slag Pot road and provide periodic application of suitable
dust suppressant to meet EPA, state and local requirements;
(d) Provide all necessary land improvements associated
with a slag processing site, including a Slag Pot dump pit, drainage pond and
pumps that meet all applicable local, state and federal legal and regulatory
requirements, both during construction and on an ongoing basis;
(e) Apply for and maintain in effect, to the extent
required of BMS by law, or, if required of SDI, assist SDI in obtaining and
maintaining in effect, and secure compliance with, all environmental permits,
laws, rules, and regulations necessary for Melt Shop Debris operation,
processing, and waste disposal as such;
(f) Supply to SDI all phone numbers for all BMS' local
employees who are available for use on a 24-hour per day basis;
(g) Make available to SDI (when not needed by BMS) such of
BMS' mobile equipment, or replacements thereof, and BMS' employees, as is set
forth (by way of example and not by way of limitation) in Exhibit B attached
hereto, on a rental basis for equipment (including BMS' labor to operate it) at
the rate set forth in said Exhibit B, and at the hourly labor rate for BMS
employees (other than those operating the equipment) likewise as set forth
therein. Such rate will be adjusted annually, in the manner set forth in
paragraph 5 hereof The relationship between SDI and BMS with respect to the
provision of such equipment and labor shall be that of an independent
contractor, and shall be governed by an equipment rental and temporary labor
agreement, in form satisfactory to both parties.
(h) Procure all licenses, permits, approvals, operating
authority, and other documents required by law or regulations for the
performance of its Services under this Agreement, and comply with all local,
state, and federal laws and regulations in the performance of such Services
under this Agreement, including those applicable to employees.
(i) Maintain to the satisfaction of SDI proper grade and
housekeeping in all areas in the Steel Mill or on the Premises, after removing
Slag Pots and cleaning and removing Melt Shop Debris from such areas, using (if
BMS so desires) Processed Slag or any other permitted material;
(j) Maintain all operating/processing areas on the
Premises, including the Slag Plant Site, at a reasonable grade and in a clean
and safe condition that is satisfactory to SDI;
(k) Maintain operations in accordance with such
additional operating rules, regulations and procedures as SDI may from time to
time reasonably require, including (but not limited to)
4
<PAGE> 5
suitable and permissible pre- and post-employment drug screening and testing of
BMS' own employees, so as to maintain a work force that is both safety
conscious and capable of meeting any job-related requirements.
(l) Maintain all necessary insurance coverages in
accordance with Paragraph 10, naming SDI as an additional insured, for
commercial liability, workmen's compensation, and other coverages, in form,
amount, and substance, and with carriers, satisfactory to SDI, for the perils
and risks generally associated with the provision of Services hereunder.
(m) Provide SDI with evidence of properly prepared and
timely recorded "no lien contracts" covering all vendors of labor and/or
materials in connection with BMS' own construction work required hereunder, or,
alternatively, provide SDI with adequate security (satisfactory to SDI and its
lenders) against any and all claims by mechanics and/or materialmen for
services or materials provided to the Slag Plant Site as part of BMS'
responsibilities hereunder.
4. SDI's Obligations. During the term of this Agreement, SDI
agrees to:
(a) Accept all Processed Scrap returned by BMS in
accordance with the provisions of this Agreement;
(b) Provide BMS reasonable access to and egress from the
Slag Plant Site, Slag Pots, melt shop, caster, and disposal areas,
(c) Provide process water, for BMS' use to spray it
through BMS' pipes and system onto the slag, together with the required three
phase 480 volt electric power, both water and electric power source to be
delivered to the processing site at no charge, for use by BMS in accordance
with the schedule captioned "Power Supply-Mill Service Operation at SDI,"
attached hereto as Exhibit B.
(d) Provide and maintain roads and rail track and
crossings, save for the dedicated roads for the Slag Pot Haulers required to be
provided by BMS pursuant to Paragraph 3(c), and necessary utilities and
drainage for the same, including the dedicated road for the Slag Pot Haulers;
(e) Cooperate with BMS in applying for any necessary
environmental permits which BMS determines are necessary or appropriate, or
which are otherwise required; provided that BMS shall be responsible to know
which permits are required and to take the necessary steps to obtain them; and
(f) Provide burning gases and the necessary
environmentally compatible enclosure in which to cut any unbreakable skulls and
in which to cut coils. The location of such facility will
5
<PAGE> 6
be as mutually determined by SDI and BMS. Hookup to the bag house will be the
responsibility of SDI.
(g) Modify the slag processing water system, if required
due to water quality, pressure or environmental impact, as may be mutually
agreed.
(h) Provide disposal for "processed wastes."
(i) Provide adequate lighting and safety warning devices
at locations within the steel mill where BMS will perform its duties hereunder.
5. Fees. For its services rendered under this Agreement, BMS
shall be compensated according to the following fee schedule:
(a) Base Fee for Melt Shop Debris Processing (All Services
other than paragraphs 2(d)(i), 2(d)(ii), 2(d)(iii),
and 2(d)(iv)):
Less than 750,000 liquid metal tons $ 1.35/ton
Greater than 750,001 liquid metal tons $ .96/ton
(b) Additional Fee for Processed Scrap $15.00/ton
Returned by BMS to SDI (paragraph 2(d)(i) and
2(d)(ii))
(c) Sand and Slag Products for SDI Consumption (paragraph
2(d)(111)):
First 24 months:
Sand (fine slag) $ 1.25/ton
Slag $ 2.00/ton
Remainder of Contract:
Sand (fine slag) $ 1.25/ton
Slag 60% of standard selling price
(d) Mill Scale Processing (paragraph 2(d)(iv)) $ 3.50/ton
(e) Truck Delivery $ 1.00/ton
(f) Caster Crop Hauling Rental Per Exhibit C
The fees set forth in the foregoing schedule shall be adjusted
annually each October 1, commencing October 1, 1995, using the Bureau of Labor
Statistics Industrial Commodities Producer Price Index, ("ICPPI") with August,
1994 as the base index, using the following formula:
6
<PAGE> 7
Latest August ICPPI x Base Rate = Revised Fee
-------------------
August, 1994 ICPPI
and shall be further adjusted, by good faith negotiation and agreement of the
parties, to reflect additional Tons of slag, resulting from future production
capacity that may be added to the Steel Mill by SDI.
6. Weights and Scale Usage. BMS shall weigh all materials,
except for Processed Scrap, on certified scales and shall deliver weight
tickets to SDI. Processed Scrap, which is to be returned by rail, will be
weighed by SDI on certified scales, and copies of such weight tickets will be
provided to BMS. All billings will be in accordance with such weight tickets.
7. Billings and Accountings. Billings by BMS to SDI shall be
made on the 15th and 30th of each calendar month, for services rendered prior
to such billing period. All billings shall be rendered and all accountings
shall be submitted upon such forms and with such information as SDI shall
request. SDI shall pay all billings within thirty (30) days after receipt
thereof.
8. Performance Criteria. If the services performed by BMS
hereunder are unsatisfactory to SDI, then SDI shall attempt to resolve the
problems with the local management of BMS. If such problems cannot be resolved
to the satisfaction of SDI, then SDI shall submit a detailed written statement
of its complaints to BMS. If such problems have not been reasonably resolved
within sixty (60) days after submission of the written statement of complaint,
SDI may terminate this contract without penalty upon five (5) days written
notice to BMS.
9. Indemnification.
(a) BMS shall indemnify and hold SDI harmless and defend
SDI from and against any and all claims, demands, losses, damages, liabilities
and/or expenses, including attorney fees ("Losses") which SDI incurs by reason
of any act or omission by BMS or any of its employees or agents which renders
SDI liable, or by reason of BMS failing to properly perform its duties under
this Agreement.
(b) SDI shall indemnify and hold BMS harmless and defend
BMS from and against any and all claims, demands, losses, damages liabilities
and/or expenses, including attorney fees ("Losses") which BMS incurs by reason
of any act or omission by SDI or any of its employees or agents which renders
BMS liable, or by reason of SDI failing to properly perform its duties under
this Agreement.
10. Insurance. Prior to undertaking any work pursuant to this
Agreement, BMS shall procure and thereafter throughout the term of this
Agreement maintain with an insurance carrier satisfactory to SDI the following
minimum insurance coverages, in addition to those contemplated by Paragraph
3(1), for the benefit of SDI, specifically naming SDI as an additional insured:
7
<PAGE> 8
(a) Comprehensive General Liability Insurance, with
minimum limits of $1,000,000 per person and $2,000,000 per incident, and
property damage limits of $1,000,000 per incident;
(b) Workmen's Compensation Insurance, as required by the
State of Indiana; and
(c) Employee dishonesty, in an amount satisfactory to
SDI.
BMS shall furnish to SDI certificates of insurance, with
respect to all coverages, together with such additional evidence of SDI's
actual status as an additional insured as SDI shall reasonably require, and BMS
shall likewise furnish SDI with true and correct copies of all insurance
policies describing such coverage. All such insurance policies shall contain a
provision requiring the insurance carrier to give SDI no less than ten (I0)
days written notice of any cancellation of such coverage, for whatever reason.
11. Term. This Agreement shall commence as of the Effective Date
and shall terminate on September 1, 2007, unless earlier terminated pursuant to
Paragraph 8, or otherwise for cause. At the termination of this Agreement, BMS
shall be required to remove from the Premises, within six (6) months of the
date of termination, any and all of its plant, buildings, and equipment, as
well as any Processed Slag at the Slag Plant Site not theretofore removed;
provided, however, that SDI shall have the right and option, exercisable by
written notice to BMS within 30 days after termination (regardless of by whom
and under what circumstances) to purchase BMS' plant, buildings, and/or
equipment at their fair market value "in place," for cash, free and clear of
any and all liens, defects, and encumbrances, determined as follows: SDI shall
appoint a qualified industrial property real estate appraiser with a knowledge
of the steel business and, in particular, of the type of plant, buildings, and
equipment that constitute the Slag Plant Site; BMS shall likewise appoint a
similarly qualified appraiser; and the two appraisers shall themselves agree
upon a third similarly qualified "neutral" appraiser; and the determination of
a majority of the three appraisers shall establish the purchase price that will
govern SDI's option. If the two appraisers cannot agree upon the third,
neutral appraiser, either party may petition the Circuit or Superior Court in
DeKalb County, Indiana to appoint such appraiser. If SDI exercises its
purchase option, then all appraisal costs will be home equally. If SDI does
not exercises its option after appraisal, then SDI shall bear all appraisal
costs. If SDI exercises the option, BMS shall be obligated to close and
deliver clear title to the property so purchased within 60 days after SDI's
exercise of its option. If SDI fails to exercise its option, BMS shall remove
its plant, buildings, and equipment as provided herein. Any environmental
damage occurring at the Slag Plant Site by reason of the operation of BMS' slag
processing facility shall be the responsibility of BMS, and BMS shall indemnify
and hold SDI harmless from and against any and all costs and expenses that may
be associated with SDI's having to correct or bear the cost of all or any
portion of such damage, whether by reason of SDI's status as an "owner" of the
site, or as a generator, or as an "operator", to the extent provided by law.
12. Safety. The parties acknowledge that safety on the Premises
is of paramount importance to SDI. Accordingly, BMS agrees to use its best
efforts to insure the safety of: (a)
8
<PAGE> 9
its employees, SDI's employees and all others persons who may be affected by
the Services to be performed hereunder; (b) the Steel Mill, the Premises, and
the Slag Plant Site; (c) all materials and equipment to be utilized by BMS in
performing Services under this Agreement- and (d) any other property at or
adjacent to the Premises. BMS shall comply with, and give all notices required
by, the applicable provisions of any federal, state, county, and municipal
laws, ordinances, or regulations bearing on the safety of persons or property
or their protection from damage, injury, or loss, and shall conduct suitable
training for all employees or invitees before permitting them on site. BMS
shall erect and properly maintain at all times as required by the conditions on
the Premises, all safeguards for safety and protection of persons and property
and shall post danger signs and other warnings against the hazards created by
such features of its work as might cause injury or damage to person or
property.
13. Relationship of Parties. The relationship of BMS to SDI under
this Agreement shall be that of an independent contractor. Subject to its
obligations set forth in this Agreement, BMS shall exercise its own discretion
regarding the methods and manner of performing its duties hereunder, and all
employees, methods, equipment and operations at and involving the Slag Plant
Site operated by BMS shall be under BMS' exclusive direction and control. BMS'
employees, whether employed at the Slag Plant Site, or otherwise, shall be
solely the employees of BMS and shall not be considered at any time as
servants, agents, or employees of SDI. Nothing contained within this Agreement
shall constitute BMS the agent, partner, or joint venturer of SDI, and nothing
contained herein shall be deemed to grant BMS the right or authority to create
any obligation of any kind for or on behalf of SDI.
14. Dispute Resolution. In the event that a dispute arises
between the parties as a result of the operation of this Agreement, save for
matters for which an injunction or some other form of equitable relief is
necessary or appropriate, such dispute, if not resolved by negotiation between
the parties, shall be resolved by arbitration with a single arbitrator, if
mutually agreeable to the parties, or by a three member panel of arbitrators,
in accordance with the Commercial Arbitration Rules of American Arbitration
Association. The award of the arbitrator(s) shall be final and may be entered
as a judgement in the Circuit or Superior Court of DeKalb County, Indiana or in
the United States District Court for the Northern District of Indiana, Fort
Wayne Division. The method of dispute resolution set forth herein, however,
shall be in addition to and not by way of limitation of any other right or
remedy set forth herein.
15. Applicable Law. The parties agree that the law of the State
of Indiana shall govern the construction, interpretation, and operation of this
Agreement.
16. Entire Agreement. This Agreement sets forth the entire
agreement of the parties with the respect to the subject matter hereof, and
there are no other oral or contemporaneous written agreements that exist with
respect thereto. This Agreement may not be altered or amended unless in
writing, signed by both parties hereto.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the Effective Date Hereof.
BUTLER MILL SERVICE COMPANY
By: /s/ Edward C. L------
---------------------------------------
Vice President
STEEL DYNAMICS, INC.
By: /s/ Mark D. Millett
---------------------------------------
10
<PAGE> 11
<TABLE>
<CAPTION>
EQUIPMENT (with Labor) RATE PER HOUR
---------------------- -------------
<S> <C> <C>
E-1. NW95 - 60 Ton Crawler Crane $80.00
E-2. NW I 8D - I 00 Ton Crawler Crane $112.00
E-3. 5.5 Cu. Yard Rubber Tire Endloader $75.00
E-5. 8.0 Cu. Yard Rubber Tire Endloader $95.00
E-4. 35 Ton Euclid Truck $65.00
E-6. Tractor/Trailer/Lowboy $55.00
E-7. Kress Pothauler (Slag Pot Hauler) $160.00
E-8. Grader $48.00
E-9. 1-1/2 Cu. Yard Backhoe $45.23
LABOR ALONE
-----------
L-1. Labor (Straight time) $23.53
L-2. Labor (Overtime) $35.29
</TABLE>
EXHIBIT B
<PAGE> 1
Exhibit 10.14
PURCHASING AGREEMENT
This Agreement describing purchasing arrangements and certain priority
purchase rights (the "Agreement") is entered into on this 29th day of October,
1993, ("Effective Date") by and between Heidtman Steel Products, Inc., an Ohio
corporation with its principal office and place of business at 2401 Front
Street, Toledo, Ohio ("HSP") and Steel Dynamics, Inc., an Indiana corporation
with its principal office 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-band steel of varying sizes, grades,
and specifications (hereinafter, from time to time, the "Mini-Mill");
WHEREAS, the Mini-Mill requires, as an inducement to its construction
financing and satisfaction of its business plan, a reliable outlet for its
production, which outlet must also be able to provide distribution and related
processing services; and
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings of the parties set forth herein, the parties agree as follows:
I. PURCHASE AND SALE COMMITMENT
A. 30,000 TON COMMITMENT. HSP agrees to purchase, and SDI agrees to
sell, at least 30,000 tons of mini-mill hot-band products
("Products") per month upon the terms and conditions set forth
below.
1. SPECIFICATIONS. Periodically each month. HSP will inform
SDI of the grade, quantity, chemistry, gauge and width of
SDI Products that
<PAGE> 2
HSP desires to purchase. These specifications shall be
within the capabilities of the Mini-Mill.
2. PRODUCTION. SDI shall produce sufficient quantities of
Products each month to ensure that HSP may purchase at
least 30,000 tons of Products each month satisfying HSP's
specifications. HSP shall have an exclusive and prior right
to purchase each month at least 30,000 tons of Products
satisfying its specifications.
3. PRICE. For purposes of determining the price of any SDI
Product, HSP shall be required to pay, and SDI shall accept
payment, as follows:
a. MARKET PRICE. SDI's price to HSP for Products shall
be at the market price, subject to the discount
provisions of this Agreement. The market price, for
purposes of this Agreement, shall be determined by
reference to the prevailing market price charged to
large customers by other thin-slab casting
mini-mills and/or conventional mills, as may be
appropriate, for the same products. The prices shall
be the FOB mill prices. The parties agree that
market price will not include (i) large run or
single run discounts referred to in 3(c) below; (ii)
freight equalization variances, or (iii) special
one-time prices so long as these special prices do
not amount to material portion of SDI's price
offerings. The foregoing notwithstanding, the
parties agree that during the start up phase of
SDI's marketing of its Products, special incentive
pricing will be permitted without any breach of this
Agreement.
b. VOLUME DISCOUNTS. HSP shall receive a discount from
the market price of $5.00 per ton on all tons
purchased each month in which HSP shall purchase at
least 30,000 tons of Products in that month, under
any combination of purchase orders. This discount
shall be in addition to any other discounts to which
HSP shall be entitled.
c. SINGLE RUN DISCOUNT. HSP shall receive a discount
from market price for purchase orders in large run
format, e.g. of
-2-
<PAGE> 3
"1,500 tons, one chemistry, one width". This
discount shall be in addition to any other discounts
to which HSP shall be entitled.
d. BEST PRICE. In no event shall the price charged to
HSP be higher than the best price, FOB the
Mini-Mill, at which SDI offers its products to any
other customer. The parties agree that the best
price will not include the prices charged by SDI for
small trial offers used to attract new customers or
to qualify new grades of material to existing
customers, so long as these incentive price offers
do not amount to a material portion of SDI's price
offerings.
4. PAYMENT. Payment methods for all SDI Products purchased by
HSP shall be as agreed between SDI and HSP, and shall be
due on net thirty (30) day terms, prox. tenth (10) and
twenty-fifth (25) days. SDI shall not be required to
provide extended credit terms to HSP.
5. CRITERIA. In addition to conformity with the specifications
which HSP shall provide to SDI from time to time, all
Products purchased by HSP hereunder shall also conform to
the Acceptable Product Criteria set forth in Section II
hereof.
B. PRIORITY PURCHASE RIGHTS TO SECONDARY PRODUCTS AND FIELD CLAIM
MATERIAL. HSP and SDI shall regularly advise each other of all
field claims material. SDI agrees to provide HSP, on a regular
basis, with grade, quantity, availability and related information
regarding all secondary material. HSP shall be entitled to
acquire, at the lowest cost still providing a reasonable profit
margin to SDI, all such secondary material and field claim
material available for sale from SDI.
PAYMENT. Payment for secondary and field claim material shall be
upon terms identical to the terms of payment for SDI Products as
set forth in Section I.A.4.
-3-
<PAGE> 4
II. QUALITY PERFORMANCE CRITERIA
In order to qualify as an Acceptable Product, purchased hot bands shall
meet or exceed all of the Criteria set forth below. The Criteria are divided
into four general categories: (1) Dimensional Criteria; (2) Shape Criteria; (3)
Surface Criteria; and (4) Metallurgical Criteria. Specific Criteria may differ
by grade and such material grades are divided into two general categories; (1)
Plain Carbon which shall be defined as the industry acceptable Carbon/Manganese
grades with AISI or SAE designations of 1006 up to and inclusive of 1055, also
including Non-Alloyed Structural Steels such as ASTM A-570; and (2) HSLA which
shall be defined as any grade where Micro-Alloy agents such as, but not limited
to, Columbium and/or Vanadium are used for the specific purpose of meeting
minimum yield and/or tensile strength requirements as in the case of ASTM A-
607.
-4-
<PAGE> 5
Within each major Criteria are several subcriteria, outlined below:
A. DIMENSIONAL CRITERIA
1. Thickness Pg. 5
2. Crown Pg. 6
3. Width Pg. 7
B. SHAPE CRITERIA
4. Camber Pg. 7
5. Flatness Pg. 8
C. SURFACE CRITERIA
6. General Surface Pg. 8
7. Pickling Pg. 8
D. METALLURGICAL CRITERIA
8. Physical Properties Pg. 9
9. Chemistry Pg. 9
10. Internal Soundness Pg. 9
-5-
<PAGE> 6
A. DIMENSIONAL CRITERIA
Criteria 1: Thickness
Thickness performance shall be subject to up to 1/2 ASTM tolerances per ASTM
A-568 and ASTM A-635 as summarized below, regardless of width. It is expected
that 98% of the lineal footage of each individual coil and 98% of coils meet
this requirement. Measurements based at any point across the width not less than
3/4" in from a mill edge.
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
THICKNESS TOLERANCE (all +) TOLERANCE (all +)
- -------------------------------------------------------------------
<S> <C> <C>
0.054"/0.71" .006" .006"
0.072"/0.098" .007" .008"
0.099"/0.179" .007" .009"
0.180"/0.229" .008" .009"
0.230"/0.313" 0.11" .011"
0.314"/0.375" 0.12" .012"
0.375"/0.500" 0.14" .014"
0.501"/0.625" .015" .015"
</TABLE>
-6-
<PAGE> 7
A. DIMENSIONAL CRITERIA (CONTINUED)
Criteria 2: Crown
Crown shall be considered the difference in thickness across the width of a
hot-band, with thickness measured at the center point of the width and at a
point 3/4" in from a mill edge. It is expected that 95% of the lineal footage of
each coil and 90% of all coils meet this requirement. Uncropped ends do not
apply.
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
THICKNESS MAXIMUM CROWN MAXIMUM CROWN
- -----------------------------------------------------------------------
<S> <C> <C>
0.054"/0.071" .003" .003"
0.072"/0.098" .003" .003"
0.099"/0.179" .003" .003"
0.180"/0.229" .003" .003"
0.230"/0.313" 1.0% 1.0%
0.314"/0.375" 1.0% 1.0%
0.375"/0.500" 1.0% 1.0%
0.501"/0.625" 1.0% 1.0%
</TABLE>
-7-
<PAGE> 8
A. DIMENSIONAL CRITERIA (CONTINUED)
Criteria 3: Width
Width performance shall be subject to up to 1/2 ASTM tolerances per ASTM A-568
and ASTM A-635 as summarized below. It is expected that 90% of the lineal
footage of each individual coil and 90% of all coils meet this requirement.
Uncropped ends do not apply.
<TABLE>
<CAPTION>
ORDERED PLAIN CARBON HSLA
MINIMUM ORDERED TOLERANCE TOLERANCE
THICKNESS WIDTH (all +) (all +)
- -----------------------------------------------------------------
<S> <C> <C> <C>
0.054"/0.229" 24.00"/35.00" 0.600" 0.600"
35.01"/50.00" 0.700" 0.700"
50.01/60.00" 0.750" 0.750"
0.230"/0.625" 24.00"/35.00" 0.650" 0.650"
35.01"/50.00" 0.750" 0.750"
50.01"/60.00" 0.800" 0.800"
</TABLE>
B. SHAPE CRITERIA
Criteria 4: Camber
Camber shall be defined as the deviation of a side edge from a straight line,
the measurement being taken on the concave side utilizing a straight edge.
Maximum allowable camber shall be 3/4 ASTM tolerance per ASTM A-568 or 3/4" in
20' of length.
-8-
<PAGE> 9
It is expected that 95% of the lineal footage of each individual and 95% of all
coils meet the requirement. Uncropped ends do not apply.
Criteria 5: Flatness
Flatness shall be defined as the deviation from a horizontal flat surface and
shall include those shape defects industry recognized to be (1) Edge Wave; (2)
Center Buckle; and (3) Cross Bow. Maximum allowable flatness deviation shall be
100% ASTM tolerance per ASTM A-568, not to exceed 1.00" at a maximum ordered
width of 60.00". It is expected that 95% of the lineal footage of each
individual and 95% of all coils meet this requirement. Uncropped ends do not
apply.
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
THICKNESS MAXIMUM MAXIMUM
DEVIATION DEVIATION
- -----------------------------------------------------------------
<S> <C> <C>
0.054"/0.180" 0.500" 0.750"
0.181/0.230" 0.500" 0.750"
0.231"/0.625" 0.750" 1.00"
</TABLE>
note: HSLA MAXIMUM DEVIATION does not apply to material ordered to minimum yield
strength levels in excess of 55,00 psi.
C. SURFACE CRITERIA
Criteria 6: General Surface
The intended use of the subject hot bands does not include Class I exposed
applications, however this does not preclude the need for a commercially
acceptable surface. The surface must be generally free of skin lamination,
slivers, scabs, roll marks, friction digs, scratches, rolled-in-dirt, and
rolled-in-scale.
Criteria 7: Pickling
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<PAGE> 10
The majority of the subject hot bands are intended for pickling and as such
require a surface conducive to scale removal under normal conditions. The
material shall be capable of being pickled using current HCL Push/Pull
technology, with complete oxide removal, at line speeds of not less than 180
feet per minute.
D. METALLURGICAL CRITERIA
Criteria 8: Physical Properties
In the event material is ordered to comply with physical requirements, SDI must
not only meet said requirements but in addition be capable of containing the
properties within a given range. SDI shall be capable of producing to a Rockwell
Hardness range of 15 on the B scale. When minimum strength levels are required
as in the case of but not limited to, ASTM A-S 70 or ASTM A-607, SDI shall be
capable not only of producing material with Yield and Tensile strengths which
satisfy the required minimums but also material which does not exceed 10,000 psi
above the specified minimums.
Criteria 9: Chemistry
Unless requested otherwise, material shall be produced using a Fine-Grained
practice with a minimum total Aluminum content of .015%. Where material is
produced using Electric Furnace Melt technology a reasonable mutually acceptable
maximum must be established for all residual elements.
Criteria 10: Internal Soundness
The intended use of the subject hot bands does not include Deep Drawn items.
However, this does not preclude the need for a product with commercial internal
soundness capable of shearing, blanking, various angle bends transverse and
longitudinal to the rolling direction, forming, and minor drawing. As such the
material shall be free of centerline segregation, pipe lamination, and achieve
an inclusion severity rating of 2 or better on all 4 types of inclusions: (1)
Sulfides; (2) Aluminates; (3) Silicates; and (4) Globular Oxides; per ASTM
E-45-87 Methods A or D.
Fine Grained material shall be produced to a minimum grain size of 5 to 6 in
accordance with ASTM E122-58T.
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<PAGE> 11
III. ADDITIONAL HSP RIGHTS AND OBLIGATIONS
SDI and HSP agree that HSP is hereby granted a first option to install,
construct and operate a pickling and slitting facility in, on or adjacent to, or
to serve the Mini-Mill on or near SDI's premises. To exercise this option, HSP
shall be required to place an order for equipment to construct a pickling and
slitting facility within ninety (90) days of the closing of SDI's construction
financing. "Closing", for purposes of this Agreement, shall be the date upon
which SDI, its lenders and investors have executed agreements permitting the
construction of the Mini-Mill, the date upon which funds are actually available
to SDI, or the later of those dates.
If HSP fails to place an order for pickling and slitting equipment
within the ninety (90) day option period, the option will expire and SDI will be
permitted to proceed to construct, or invite the construction of a pickling and
slitting facility without any liability to HSP.
HSP and SDI agree to cooperate and assist each other in site selection,
site procurement and facility specifications and shall negotiate in good faith
to achieve a mutually beneficial and economic facility.
IV. EFFECTIVE DATE AND TERM OF AGREEMENT
This Agreement shall commence on the Effective Date and shall continue
until the later of:
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<PAGE> 12
1. six (6) years from the date upon which HSP enters its first HSP
Purchase Order and SDI delivers its first Acceptable Product
under such a purchase order; or
2. eight (8) years from the Effective Date.
After the expiration of the initial term, whichever is longer, and
unless the parties hereto have specifically extended this Agreement by a written
renewal, this Agreement shall continue on a year to year basis, subject to
termination by either party, with or without cause, upon six (6) months' advance
written notice.
V. DEFAULT AND EARLY TERMINATION
A. BREACH OF PERFORMANCE BY HSP. In the event that SDI alleges HSP'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 HSP 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 HSP's default; provided however that in the event that
prior to the lapse of the thirty (30) day cure period set forth
herein HSP has taken reasonable steps to correct the default and
if HSP can reasonably correct and cure the problem within an
additional thirty (30) day period, HSP shall be entitled to the
additional period of thirty (30) days before SDI shall be
entitled to declare a default.
Any termination of this Agreement shall not relieve HSP from any
liability which may have arisen hereunder prior to such
termination, nor shall any such termination relieve HSP of any
claim for damages or other liabilities arising as a consequence
of its default hereunder. If HSP 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 HSP 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
HSP, then, at SDI's
-12-
<PAGE> 13
election, this Agreement may be immediately terminated.
B. BREACH OF PERFORMANCE BY SDI. In the event that HSP 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, then HSP at its
option shall have the right to terminate this Agreement based
upon SDI's default; 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 HSP 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 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 HSP's election, this
Agreement may be immediately terminated.
VI. MISCELLANEOUS PROVISIONS
A. CONFIDENTIALITY. Each party hereto agrees to receive and hold any
information acquired by it in confidence and to not use or
disclose such information to any person unless first authorized
by the other party in writing or as required by law.
B. FORCE MAJEURE OR EXTRAORDINARY CIRCUMSTANCES. In the event that
HSP or SDI may be delayed or prevented from performing under this
Agreement by reason of strikes, casualties, Acts of God, labor
troubles, power failures,
-13-
<PAGE> 14
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 two
(2) 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.
C. NOTICES. Communication required to be given hereunder shall be in
writing and 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 HSP:
Mark E. Ridenour
HEIDTMAN STEEL PRODUCTS, INC.
2401 Front Street
Toledo, Ohio 43605
with a copy to:
John M. Carey, Esq.
WATKINS, BATES & CAREY
608 Madison Avenue
Suite 1200
Toledo, Ohio 43604-1157
If to SDI:
Keith E. Busse
STEEL DYNAMICS, INC.
12953 Brighton Avenue
Carmel, IN 46032
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<PAGE> 15
with a copy to:
Mark C. Chambers, Esq.
HALLER & Colvin
444 East Main Street
Fort Wayne, IN 46802
D. GOVERNING LAW. This Agreement shall be governed in all respects
in accordance with the provisions of the laws of the State of
Ohio.
E. LITIGATION VENUE. In the event of any dispute hereunder,
including but not limited to any disputes relating to a breach of
this Agreement, such disputes shall be heard in any state or
federal court, with jurisdiction, in or serving the county in
which SDI's Mini-Mill is located.
F. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties and supersedes any prior understandings. No
changes to this Agreement shall be binding unless in writing and
Signed by each party.
G. ASSIGNMENT. SDI may assign its rights and obligations under this
Agreement to a purchaser of SDI or of the Mini-Mill and to its
lenders for collateral security purposes. HSP may not assign its
rights and obligations hereunder, except as to Section III
hereof, without the prior written consent of SDI.
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEIDTMAN STEEL PRODUCTS, INC.
By: /s/ John C. Bates
----------------------------
John C. Bates
STEEL DYNAMICS, INC.
By: /s/ Keith E. Busse
----------------------------
Keith E. Busse
-16-
<PAGE> 1
Exhibit 10.16
PURCHASING, DOMESTIC SALES AND EXPORT DISTRIBUTION AGREEMENT
This Agreement describing certain purchasing, domestic sales and
export distribution arrangements (the "Agreement") is entered into this _____
day of December, 1995, ("Effective Date") by and between Preussag Stahl AG, a
German corporation with its principal office and place of business in
Salzgitter, Germany ("Preussag") and Steel Dynamics, Inc., an Indiana
corporation with its principal office in Butler, Indiana, U.S.A. ("SDI").
WHEREAS, SDI is currently planning and constructing and will operate a
hot rolled steel plant (the "Phase I Project") and is studying the expansion of
such plant to manufacture hot rolled pickled and oiled, cold rolled and
galvanized steel products (the "Phase II Project") in Butler, Indiana, U.S.A.
(hereinafter, from time to time, the Phase I Project and the Phase II Project
being referred to individually and collectively as the "Mini-Mill");
WHEREAS, subject to the conditions herein, Preussag intends to
delegate some of its responsibilities and assign its rights hereunder to one or
more of its present and/or future majority owned and Preussag controlled
subsidiaries (direct or indirect), affiliates and joint ventures in which it or
they participate as identified from time to time by Preussag to SDI
(collectively, including Preussag, hereinafter referred to as "PSAG");
provided, however, that Preussag shall remain responsible for the performance
of its obligations under this Agreement. Attached hereto as Appendix 1 is a
list of the PSAG members which, along with Preussag's central trading company
("PHD"), will initially participate in the Agreement. This list includes PSAG
members in the United States, Canada, and Mexico.
WHEREAS, SDI requires, as an inducement to the construction financing
and satisfaction of its business plan of the Phase II Project, a reliable
outlet for production from the Mini-Mill, which outlet must also be able to
provide distribution and related processing services;
WHEREAS, PSAG represents that it possesses the facilities
(warehousing, processing and trading), skill and marketing experience to
promote and solicit orders for SDI products in the United States, Canada and
Mexico (hereinafter referred to as "Domestic"), as well as in export markets;
WHEREAS, PSAG is willing to purchase part of the output of the
Mini-Mill and to provide sales representation and marketing services to SDI;
and
NOW THEREFORE, in consideration of the mutual covenants and
undertakings of the parties set forth herein, the parties agree as follows:
<PAGE> 2
I. PURCHASE AND SALE COMMITMENT
A. Commitment.
Preussag shall cause PSAG to purchase from SDI, and SDI shall sell to
PSAG, subject at all times to SDI's existing sales commitments under
its Agreement with Heidtman Steel Products, Inc. of October 29, 1993
("SDI's Existing Commitment"), at least 12,000 net tons per month
(subject to the adjustments provided for in I.A.7 through I.A.9 below)
of various steel products from among SDI's list of available products
produced from time to time by the Mini-Mill. All Product sales will
be pursuant to SDI's sales orders and Standard Terms and Conditions of
Sale as in effect at the time of sale, as well as the terms and
conditions set forth below. In the event that any express term herein
conflicts with any express or implied term in SDI's Standard Terms and
Conditions of Sale, the express term herein shall govern. PSAG will
endeavor, as soon as practical, to designate a single representative
through whom general information can be communicated. However, each
member of PSAG shall individually order and purchase from SDI, and
the members of PSAG will coordinate commitments and appropriate
rebates individually.
1. Specifications.
Within the lead time periods prescribed from time to time by
SDI, for each of its Products, PSAG will place firm orders for
the particular grade, quality, chemistry, gauge and width of
SDI Products (the "Products") that PSAG desires to purchase.
If PSAG at any time or from time to time desires to purchase a
product that is not on SDI's list of available products, but
is within the reasonable capability of the Mini-Mill to
produce, PSAG will so inform SDI, including the necessary
grade, quality, chemistry, gauge, width, quantity, and desired
shipping dates, and, upon receiving SDI's price quote and
necessary lead times, will thereupon place such firm orders
therefor as it deems appropriate.
2. Production.
Subject to the adjustments provided for in I.A. 7 through I.A.
9, as well as to limitations on availability of Products due
to raw material supplies or to interruption in steel
production for reasons beyond SDI's control, SDI shall produce
sufficient quantities of Products each month to ensure that
PSAG may purchase at least 12,000 prime tons of Products each
month satisfying PSAG's specifications. PSAG shall have an
exclusive and prior right, subject to SDI's Existing
Commitment, to purchase at least 12,000 tons per month of
Products satisfying its specifications.
<PAGE> 3
3. Price.
For purposes of determining the price of any SDI Product, PSAG
shall be required to pay, and SDI shall accept payment, as
follows:
a. Market Price. SDI's price to PSAG for
Products shall be at Market Price, inclusive of all discounts,
except for the volume rebate provisions of 3.c hereof, which
shall constitute a further discount from Market Price. The
Market Price, for purposes of this Agreement, shall be
determined by reference to SDI's price sheet, which shall
itself be determined by reference to prevailing competitive
market prices charged to large customers by other thin-slab
casting mini-mills and/or conventional mills, as may be
appropriate, for the same products. All prices shall be FOB
Mini-Mill, Butler, Indiana. Both parties understand that the
FOB Mini-Mill prices will be adjusted up or down, from time to
time such as quarterly, to be competitive with prevailing
prices available to PSAG plants situated within SDI's normal
marketing area. SDI's normal marketing area includes PSAG
plants at Cleveland, Ohio, Detroit, Michigan, Granite City,
Illinois, Chicago, Illinois, Portage, Indiana, and potential
future locations within this geographical area. Prevailing
prices would exclude spot, or short term one-time "deals" or
introductory or "bargain" prices by new entrants to the
market, made to PSAG plants. In determining the Market Price,
and the prevailing competitive market price, and in order to
achieve the goals of this Agreement, the parties will give due
consideration to the following: (i) large run or single run
discounts referred to in 3.d below; (ii) freight equalization
variances, or (iii) special one-time prices, so long as these
special prices do not amount to a material portion of SDI's
price offerings. The foregoing notwithstanding, the parties
agree that during the start up phase of SDI's marketing of its
Products, special incentive pricing to certain customers will
be permitted without any breach of this Agreement.
b. Competitive Prices for Sales to Canada and
Mexico. SDI will consider, on a case by case basis, but will
not be required to accept, competitive prices for sales to the
Canadian and Mexican markets which might be below SDI's Market
Price as defined by I.A.3(a) above for sales to customers in
the United States.
c. Volume Rebates. PSAG shall receive each
month a quantity rebate from the Market Price on all paid
invoices.. Such rebate shall be calculated on the basis of
the Monthly Rebate Quantity in accordance with Appendix 3 of
this Agreement. "Monthly Rebate Quantity" shall mean the sum
of Purchase Orders invoiced in a given month subject to the
Aggregation provision in I.A.3(e) below. This rebate shall be
in addition to any other rebates or discounts to which PSAG
shall be entitled.
3
<PAGE> 4
d. Single Run Discount. PSAG shall receive a
discount as determined in Appendix 4 for purchase orders in
large run format, e.g. of "1,500 tons, one chemistry, one
width" (the "Single Run Discount Quantity"). For purposes of
eligibility, the Single Run Discount Quantity is: (1)
purchase orders received at approximately the same time by SDI
(so that SDI can schedule a single production run of one
product) from PSAG; and, (2) deviations of plus or minus two
inches (a total range of four inches) in width from the
average width specified in such orders shall be permitted and
treated as "one width." This discount shall be in addition to
any other rebates or discounts to which PSAG shall be
entitled, and is subject to the Aggregation provision in
I.A.3(e) below.
e. Aggregation of Sales. For the purpose of
calculating the rebates or discounts to which PSAG may be
entitled under 3(c) and 3(d) of this Part I, all purchases of
Products made during the applicable time period by various
members of PSAG shall be aggregated together as though such
purchases had been made solely by Preussag. The exceptions
will be Export, Canadian or Mexican orders sold below SDI's
Market Price as defined in I.A.3(a) above for which orders the
negotiated price will solely apply.
f. Payment of Rebates. All rebates, especially
those to which PSAG may be entitled under I.A.3(c) above,
shall be payable, with respect to all paid invoices, on or
before the twenty-fifth (25th) day of the month following the
month in which the applicable quantities were invoiced.
Rebates shall be paid by SDI, directly to the PSAG members
which ordered or sold the applicable quantities.
g. Best Price. In no event shall the Market
Price charged to PSAG be higher than the best price, FOB
Mini-Mill, at which SDI offers its products to any other
customer for comparable grades and quantities. The parties
agree that the best price will not include the prices charged
by SDI for small trial offers used to attract new customers or
to qualify new grades of material to existing customers, so
long as these incentive price offers do not amount to a
material portion of SDI's price offerings.
4. Payment.
Payment methods and credit terms for all Products purchased by
PSAG shall be as agreed between SDI and PSAG, and payment for
products sold on credit shall be due on net thirty (30) day
terms, prox. tenth and twenty-fifth, with a cash discount of
1/2% on invoices dated from the first to the fifteenth of the
month if payment is received by the twenty-fifth of the current
month, and a like discount on invoices dated from the sixteenth
to the last day of the month if payment is
4
<PAGE> 5
received by the tenth of the following month. For credit
purposes, Preussag shall be deemed a direct obligor to SDI, on
all sales to PSAG members, and not a mere guarantor or
accommodation party. SDI shall not be required to provide
extended credit terms to PSAG.
5. Criteria.
The Products shall comply with the quality performance
criteria specified in Appendix 2 hereto, as such Appendix may
from time to time be amended by mutual written agreement of
the parties.
6. Claims Handling.
If any Product purchased by PSAG fails to meet the
specifications provided by PSAG or the acceptable product
criteria in Appendix 2, then, prior to invoking any other
remedy either party may have at law or in equity, PSAG shall
notify SDI of the defect, provide SDI an opportunity to
inspect the potentially defective Product, and propose a
reduced Market Price for said Product, if appropriate. If the
parties cannot successfully negotiate an appropriate reduced
Market Price for any defective Products or cannot otherwise
resolve the problem within thirty (30) days, PSAG shall return
the Product to SDI, if such return is authorized by SDI. In
such event, SDI shall fully refund the purchase price of the
Product to PSAG and promptly replace the defective Product.
SDI shall bear the shipping costs incurred by PSAG in
returning any defective Product. If such return is not
authorized, however, the parties agree that prior to invoking
any other remedy, the parties will continue to utilize
informal attempts to resolve their differences. After the
expiration of sixty (60) days from notice of a claim
hereunder, the Parties shall be required to resort to the
informal arbitration procedures contemplated by IV.C.8. After
the expiration of ninety (90) days from notice of a claim
hereunder, either party shall be entitled to resort to its
available legal or equitable remedies. The quantity of
defective Products received by PSAG shall count towards the
satisfaction of PSAG's monthly tonnage commitment and shall be
included in the monthly purchase quantity for all purposes of
this Part I, including specifically 3(c), 3(d), 3(e), 7 and 8
of this Article A of Part I, unless SDI replaces the defective
products, wherein the rejected tons would not count toward
PSAG's commitment.
7. Tonnage Commitment in Interim Period.
PSAG's commitment to purchase, and SDI's commitment to sell
at least 12,000 tons of Products per month shall commence in
the month following the First Closing (as defined in the Stock
Purchase Agreement, as amended on or about the Effective Date
hereof). In the period between the Effective Date of this
5
<PAGE> 6
Agreement and such closing, SDI shall use reasonable efforts
to produce and sell, and PSAG shall use reasonable efforts to
purchase 12,000 tons per month of Products. Both parties
recognize, however, that restricted production and ranges of
available Phase I Products during the first twelve (12) months
of operation may make this commitment unfeasible.
8. Flexibility in Monthly Quantities.
In any month, PSAG may purchase less than 12,000 tons of
Products, but not less than 75% or 9,000 tons. PSAG shall
make up any monthly shortfall below 12,000 tons in subsequent
months, such that the average amount purchased by PSAG shall
be at least 12,000 tons per month measured over the calendar
year.
9. Adjustment of Monthly Tonnage Commitment.
The parties may adjust the monthly tonnage commitment, and the
flexibility in this commitment, for years beginning with
calendar year 1996. The parties shall attempt to agree on
such revised monthly tonnage commitment by September 30 of the
year before the calendar year for which adjustment is to be
made. If the parties are unable to agree on the amount of the
minimum tonnage commitment and flexibility, the commitment
shall be 12,000 tons per month for the next immediate calendar
year.
10. PSAG Service Center.
SDI will permit PSAG to construct and operate a steel service
center adequate for PSAG's needs in reasonable proximity to
the Mini-Mill. SDI shall provide such information, support
and assistance as PSAG may reasonably request in order to
enable PSAG to construct and operate the steel service center
in an effective and efficient manner. To the extent that any
such request by PSAG shall cause SDI to incur significant
cost, SDI shall so inform PSAG in advance of incurring such
expense. In such event, PSAG shall at its sole discretion:
(I) withdraw its request; (ii) modify its request so as to
reduce SDI's cost below a significant level; or (iii) maintain
its request and agree to pay SDI for its expenses in complying
with the request.
6
<PAGE> 7
II. APPOINTMENT OF PSAG AS NON-EXCLUSIVE SALES REPRESENTATIVES FOR MASTER
COIL SALES IN CERTAIN DOMESTIC MARKETS
A. Scope.
Both parties anticipate negotiating a separate relationship for
possible additional sales representation in certain markets. SDI will
consider appointing PSAG members Delta Steel (Houston), Preussag
International Steel Corporation (Atlanta), and Preussag Handel -
Canada (Vancouver) (collectively "the PSAG Master Coil Sales
Representatives") as SDI's non-exclusive sales representatives in the
Southeast and Southwest United States and Canada for the purpose of
soliciting and obtaining orders for master coil. The provisions for
any such separate sales representation relationship with or involving
such PSAG Master Coil Sales Representatives, or with others, shall be
subject to separate negotiation and agreement between the parties.
III. EXPORT DISTRIBUTION
A. Appointment of Preussag as SDI's Preferred Distributor.
1. Scope of Appointment.
Subject to the terms of this Part III and Part IV of this
Agreement, SDI hereby appoints Preussag, and Preussag hereby
accepts appointment, as SDI's preferred distributor for all
sales to customers outside of the United States, Canada and
Mexico (hereinafter the "Export Territory") during the term of
this Agreement. Preussag shall use its commercially
reasonable best efforts to promote and sell Products to
customers in the Export Territory.
2. Preussag Affiliates and Partners.
For the purposes of fulfilling any of its obligations or
exercising any of its rights and benefits under this Part III,
Preussag may elect to make use of any member of PSAG, and SDI
hereby consents to such use; provided, however, that Preussag
shall remain responsible for the performance of all PSAG
obligations under this Part III.
7
<PAGE> 8
B. Solicitation and Acceptance of Orders.
1. Solicitations and Communications with Prospective
Customers.
PSAG shall be principally responsible for all solicitations
and sales of Products in the Export Territory and for all
communications with prospective customers concerning possible
sales of Products in the Export Territory. SDI shall not
during the term of this Agreement solicit any orders for the
Export Territory, but will be allowed to entertain unsolicited
offers, subject, however, to PSAG's right of first refusal
described in III. B. 8. To the extent requested or approved
by PSAG, SDI may communicate directly with prospective
customers in the Export Territory. SDI shall not maintain an
international marketing department or staff, nor shall SDI
authorize any international distributor, commission agent,
broker or sales representative, other than PSAG, to solicit
sales in the Export Territory.
2. Available Quantity and SDI Price.
SDI shall provide to PSAG no later than the fifteenth (15th)
day of each month, or, if such day is not a business day in
Butler, Indiana, then the immediately preceding business day,
the following information by facsimile to PSAG's designated
representative for each Product for the following calendar
month and later if appropriate:
(a) estimated quantities available for sales to
PSAG for the Export Territory; and,
(b) the price in United States dollars at which
SDI would sell Products to PSAG for the Export Territory, such
price to be quoted "FOB", Mini-Mill, Butler, Indiana.
3. Purchase Orders.
PSAG shall submit purchase orders under this Part III in
writing, to SDI, specifying the Product ordered, quantity,
delivery date, and other proposed terms and conditions of the
purchase order. From time to time, PSAG, in the exercise of
its international marketing expertise, may propose to SDI
purchase prices lower than the SDI Market Price; provided,
however, that PSAG agrees that it will, in no event, attempt
to negotiate prices below SDI's Market Price as defined by
I.A.3(a) of this Agreement for Products that PSAG could sell
in the Export Territory at a premium to SDI's Market Price,
once adjustments for freight, taxes, duties, other charges,
etc. have been considered. SDI shall not however, be required
to accept orders at such prices unless it advises PSAG in
writing that it is willing to do so.
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<PAGE> 9
4. Acceptance of Orders.
All purchase orders submitted by PSAG hereunder are subject to
acceptance or rejection by SDI, which approval or rejection
shall, in all cases, be given in writing to PSAG. No such
order or offer shall be binding upon SDI until so accepted.
All SDI sales to PSAG hereunder will be pursuant to SDI's
sales order acknowledgments and its standard terms and
conditions of sale, unless specifically modified herein.
5. Resale by PSAG.
All purchases by PSAG for the Export Territory shall be for
PSAG's account, regardless of whether PSAG is purchasing
Products for its use (including incorporation or processing
into other products) in the Export Territory or for resale to
customers in the Export Territory. It is understood by SDI
that the price and terms and conditions of resale by PSAG in
the Export Territory shall be determined by PSAG in its sole
discretion, and any and all payments made by customers in the
Export Territory for Products sold under this Part III shall
be retained by PSAG for its own account.
6. Cancellation or Modification of Orders.
SDI, in the exercise of its sole discretion, shall determine
whether to accept PSAG requests for modifications to or
cancellations of, any PSAG purchase orders that have already
been accepted by SDI. SDI shall use its best efforts,
however, to accommodate, to the extent possible, such
modification or cancellation requests, so long as it does not
entail any losses or disruption in production. PSAG may in
its sole discretion withdraw or modify any purchase order
submitted to SDI for which PSAG has not yet received SDI's
sales order acknowledgment.
7. Delivery and Payment.
Subject to adjustments provided for in I.A. 7 through I.A. 9,
as well as to limitations on availability of Products due to
raw material supplies or to interruption in steel production
for reasons beyond SDI's control, SDI shall produce sufficient
quantities of Products to complete the Export orders it has
accepted, and shall use its best efforts to meet the delivery
dates proposed in any such PSAG Export orders it has accepted;
provided that PSAG will use its best efforts to accommodate,
to the extent possible, any SDI request for modification or
cancellation of a particular Export purchase order that has
been accepted by SDI, so long as it does not entail any losses
on the part of PSAG. Unless otherwise specified in the
purchase order accepted by SDI, delivery shall be "FOB"
Mini-Mill, and PSAG shall accept title to, and risk of loss
of, the Products
9
<PAGE> 10
for the Export Territory at that point. In the event that SDI
accepts a purchase order for Products for the Export Territory
on an accumulation basis, the terms thereof and any period of
"free" storage pending shipment, shall be specified in SDI's
sales order acknowledgement applicable thereto. Payment for
all Products purchased by PSAG under this Part III shall be
made in the same manner as specified in I.A.4, unless other
terms are negotiated.
8. Right of First Refusal.
In the event that SDI receives an unsolicited offer to
purchase Products from a prospective customer in the Export
Territory, SDI shall promptly notify PSAG of all terms of such
unsolicited offer. Upon receipt of such notice from SDI, PSAG
shall have five (5) business days to exercise a right of first
refusal. PSAG may elect to purchase the same Products itself
at the same price and on terms substantially similar to those
submitted by the offeror.
C. Compensation to PSAG.
1. Calculation of Commissions.
Subject to the provisions of this Section C, PSAG shall be
entitled, in addition to the rebates and discounts specified
in III.C.2, 3, and 4, to one United States Dollar per ton of
Product purchased from SDI for sale in the Export Territory.
2. Volume Rebates.
Any quantity of Product in any month purchased by PSAG under
this Part III for which the purchase price is at least equal
to SDI's Market Price per I.A.3(a) of this Agreement shall
constitute a Qualified Export Quantity. All Qualified Export
Quantities for the applicable month shall qualify for
aggregation under I.A.3(e) of this Agreement for the purpose
of calculating the Monthly Rebate Quantity in accordance with
I.A.3(c) of this Agreement.
3. Single Run Discount.
Qualified Export Quantities shall be included in the Single
Run Discount Quantity calculated in accordance with I.A.3(d),
provided that such Qualified Export Quantities otherwise
satisfy the criteria for single run discounts specified in
that paragraph.
10
<PAGE> 11
4. Other Incentives and Discounts.
PSAG shall be entitled to any other incentives, discounts and
bonuses offered generally by SDI, including discounts to
promote sales to new markets and new customers.
5. Aggregation of Sales.
For the purpose of calculating the discounts and rebates to
which PSAG may be entitled under III.C.2, 3, and 4, all
purchases of Products during the applicable time period by
various members of PSAG under this Part III shall be subject
to the Aggregation provision in I.A.3(e) of this Agreement.
6. Payment of Commissions.
Payment of the commission to PSAG shall be made on or before
the twenty-fifth (25th) day of the month following the month
in which the applicable quantities were invoiced. SDI shall
pay commissions by check or wire transfer in accordance with
instructions timely received from PSAG.
7. PSAG Responsible for Own Expenses.
PSAG shall bear the entire cost and expense, without
reimbursement by SDI, of conducting its marketing efforts in
the Export Territory, including but not limited to salaries
and commissions of its marketing personnel, the cost of any
sales or marketing office, marketing-related travel expenses,
and advertising expenses.
8. Currency
All payments to PSAG of compensation under this Part III shall
be made in United States Dollars, unless PSAG and SDI shall
otherwise agree in writing.
9. Taxes, Duties, and other Governmental Charges.
PSAG shall be solely responsible for payment of all such
charges which may be due to any governmental agency of any
country, or subdivision thereof, as a result of compensation
paid by SDI to PSAG, and SDI shall not be responsible for any
withholding, collection or payment of such taxes.
11
<PAGE> 12
D. General Obligations of SDI.
In addition to the other specific obligations imposed on SDI
herein, SDI shall (i) confirm or reject orders, including
requests for modifications or cancellation, transmitted to it
by PSAG within five (5) days; (ii) cooperate fully with PSAG
in dealing fairly with any customer complaints concerning the
Products and take such action to resolve justified complaints
as may be reasonably requested by PSAG; and, (iii) cooperate
fully with PSAG in regard to all sales and customer support
activities related to the Products.
E. Quality Performance Criteria.
The Products shall comply with the quality performance
criteria specified in Appendix 2 hereto, as such Appendix may
from time to time be amended by mutual written agreement of
the parties.
F. Invoicing and Collections.
1. PSAG Shall Invoice and Collect.
Because all sales by SDI to PSAG for PSAG's resale in the
Export Territory are for PSAG's sole account, all PSAG
invoices to customers in the Export Territory shall be
rendered directly to customers by PSAG. It is expressly
understood that full power and authority for all collections
rests with PSAG, which shall exercise complete control over
the approval of all customers credits, orders and contracts.
2. Bad Debts and Currency Fluctuations Losses.
PSAG shall be solely responsible for any bad debts or currency
exchange losses arising from its sales.
G. Import and Export.
PSAG shall be responsible for obtaining all required
governmental licenses and permits and for satisfying all
formalities as may be required to export Products from the
United States and to import Products into the Export Territory.
SDI shall cooperate with PSAG, as PSAG may request, in
connection with obtaining any such licenses and permits, and
satisfying any such formalities.
12
<PAGE> 13
H. Claims Handling.
If any Product purchased by PSAG fails to meet the
specifications provided by PSAG or the acceptable product
criteria in Appendix 2, then, prior to invoking any other
remedy either party may have at law or in equity, PSAG shall
notify SDI of the defect, provide SDI an opportunity to inspect
the potentially defective Product, and propose a reduced Market
Price for the defective Product, if appropriate. If the
parties cannot successfully negotiate an appropriate reduced
Market Price for any defective Product or cannot otherwise
resolve the problem within thirty (30) days, then, prior to
invoking any other remedy, the parties will continue to utilize
informal attempts to resolve their differences. After the
expiration of sixty (60) days from notice of a claim hereunder,
the Parties shall be required to resort to the informal
arbitration procedures contemplated by IV.C.8. After the
expiration of ninety (90) days from the notice of a claim
hereunder, either party shall be entitled to resort to its
available legal or equitable remedies. The quantity of
defective Products received by PSAG shall count towards the
satisfaction of PSAG's monthly tonnage commitment and shall be
included in the monthly purchase quantity for all purposes of
Part I, Article A, 3(c), 3(d), 3(e), 7 and 8, unless SDI
replaces the defective products, wherein the rejected tons
would not count toward PSAG's volume commitment.
IV. GENERAL PROVISIONS
A. Term of Agreement.
This Agreement shall commence on the Effective Date and shall
continue until the earlier of:
1. Six (6) years from the date upon which PSAG enters
its first purchase order for Products from SDI; or,
2. December 31, 2002.
After the expiration of the initial term, and unless the
parties hereto have specifically extended this Agreement by a
written renewal, this Agreement shall continue on a month to
month basis, subject to termination, with or without cause,
upon three (3) months' advance written notice by either party.
13
<PAGE> 14
B. Default and Early Termination.
1. Breach of Performance by PSAG.
In the event that SDI alleges PSAG's failure to perform in
accordance with this Agreement and in the further event that
such failure continues unabated for a period in excess of
thirty (30) days, after notification to PSAG 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 PSAG's default; provided
however, that in the event that prior to the lapse of the
thirty (30) day cure period set forth herein PSAG has taken
reasonable steps to correct the default and if PSAG can
reasonably correct and cure the problem within an additional
thirty (30) day period, PSAG shall be entitled to the
additional period of thirty (30) days before SDI shall be
entitled to declare a default.
Any termination of this Agreement shall not relieve PSAG from
any liability which may have arisen hereunder prior to such
termination, nor shall any such termination relieve PSAG of
any claim for damages or other liabilities arising as a
consequence of its default hereunder.
If PSAG 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 PSAG 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 PSAG,
then, at SDI's election, this Agreement may be immediately
terminated.
2. Breach of Performance by SDI.
In the event that, apart from a particular dispute from time
to time involving individual shipments by SDI of allegedly
non-conforming goods that is subject to the "Claims Handling"
procedures described in I.A.G or III. H, PSAG alleges SDI's
failure to perform in accordance with 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, then PSAG at its option shall have the
right to terminate this Agreement based upon SDI's default;
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 if SDI can
reasonably correct and cure the problem within an additional
thirty (30) day period, SDI shall be entitled to the
additional period of thirty (30) days before PSAG shall be
entitled to declare a default.
14
<PAGE> 15
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 PSAG's election, this Agreement may be immediately
terminated.
3. Non-Occurrence of Third Closing or Alternate Third
Closing.
Notwithstanding any other provision of this Article IV, each
Party shall have the right to terminate this Agreement after
March 15, 1996, upon thirty (30) days' advance notice to the
other Party, either if the Third Closing or Alternate Third
Closing, as defined in the Stock Purchase Agreement between
the Parties, does not take place.
C. Miscellaneous Provisions.
1. Incoterms.
Wherever used herein, "FOB" shall have the meaning prescribed
by the applicable definition in the 1990 edition of Incoterms,
published by the International Chamber of Commerce.
2. Force Majeure.
In the event that performance of obligations hereunder by
either party hereto is legally excusable because of force
majeure, the following terms shall apply:
(a) Either party who believes that his
performance is excused by force majeure shall give
written notice to the other as soon as possible and
with sufficient detail to permit the other to
minimize inconvenience and expense.
(b) Both parties will cooperate to minimize the
financial consequences of the force majeure.
15
<PAGE> 16
(c) Either party hereto shall have the right to
request the termination of this Agreement if the
force majeure continues for a period of greater than
360 days.
(d) Force majeure shall include (but not be
limited to) natural disasters, wars, acts of
government (including refusal to grant authorizations
required to effectuate performance), power failures
or interruptions, unanticipated breakdown of
equipment, extraordinary market or supply conditions
beyond the party's control, legal restrictions on
performance, and work stoppages.
3. Notices.
All communications required by this Agreement to be given by a
party shall be in writing and delivered by hand, by certified
or registered mail, postage prepaid, return receipt requested,
or by any other express delivery technique (including
facsimile) which provides evidence of receipt, addressed to
the appropriate party at the address set forth below:
If to PSAG:
Dr. Jurgen Kolb
Preussag Stahl AG
Karl-Wiechert-Allee 4
D-3025 Hannover
Germany
Fax: 011-49-5341-212045
with copies to:
Mr. Thomas B. Treadwell
Feralloy Corporation
8755 West Higgins Road
Chicago, Illinois 60631
Fax: 312-380-1812
John D. Hushon, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
202-857-6395
16
<PAGE> 17
If to SDI:
Keith E. Busse
STEEL DYNAMICS, INC.
4500 County Road 59
Butler, Indiana 46721
with copies to:
Robert S. Walters, Esq.
Barrett & McNagny
215 East Berry Street
PO Box 2263
Fort Wayne, Indiana 46801-2263
Any such notice shall be deemed to have been delivered when
received, but in no event later than seven (7) days after
posting, if sent by mail. Each party may, by giving the other
party notice as provided for herein, designate for itself
addresses and persons other than as indicated above.
4. Independent Contractors.
The relationship between SDI and PSAG shall be that of
independent contractors and nothing contained in this
Agreement shall be construed to (I) give either party the
power to direct and control the day-to-day activities of the
other, (ii) constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint
or common undertaking, or (iii) constitute either party, its
agents or employees as the agents or employees of the other
party, or to grant to them any power or authority to act for,
bind or otherwise create or assume any obligation on behalf of
the other party for any purpose whatsoever.
5. Compliance with Laws.
The parties shall comply with all applicable laws affecting
this Agreement and their performance of this Agreement.
6. Governing Law.
This Agreement and the rights and obligations of the parties
hereunder, except as specifically otherwise provided, shall be
governed by and construed in accordance with the laws of the
State of Indiana in the United States of America. The parties
agree that their rights and obligations under this Agreement
shall not be governed by either the provisions of the 1980
U.N. Convention for the International Sale of Goods nor by
the laws of any jurisdiction other than as specified herein.
17
<PAGE> 18
7. Entire Agreement.
This Agreement, including the Appendices attached hereto,
constitutes the entire agreement of the parties with respect
to the matters addressed herein and supersedes any prior
understandings. Except as noted herein, no changes to this
Agreement shall be binding unless in writing and signed by
each party.
8. Informal Attempt to Resolve Differences.
In the event that PSAG and SDI are unable to resolve a claim
or an alleged breach of this Agreement to both parties' mutual
satisfaction, either as contemplated by I.A.6 or III.H, or
otherwise, then, at any time after the expiration of sixty
(60) days in the case of a claim pursuant to I.A.6 or III.H.,
or at any time in the case of any other claim or an alleged
breach, and prior to either party independently proceeding to
enforce their rights under the law, the parties' differences
shall be submitted to a single arbitrator (if the parties so
agree) or to a three-member arbitration committee (one member
of which shall be selected by PSAG, one member of which shall
be selected by SDI, and the third member of which shall be
selected by the other two members), and the arbitrator(s)
shall hear and make a non-binding recommendation, including a
written record of the basis thereof, with respect to the
disputed issues between the parties. This arbitration process
may be initiated by either party. Such non-binding
recommendation shall be rendered no later than ninety (90)
days from notice of a claim pursuant to I.A.6 or III.A,
including the period of time contemplated therein; and such
non-binding recommendation shall be rendered in all other
cases no later than sixty (60) days from notice of such other
claim, or from notice of an alleged breach pursuant to IV.B.1
or 2. Following expiration of either the sixty-or ninety-day
period referred to above, whichever is applicable, the parties
may, but shall not be required to, pursue any rights that they
may have at law or in equity before any court of competent
jurisdiction. Notwithstanding the foregoing, however, nothing
herein shall be deemed to prohibit either Party from seeking
immediate injunctive relief to prevent or restrain a breach of
any of the provisions of this Agreement. While this
arbitration is intended to operate informally and
expeditiously, if a matter of procedure needs to be
determined, and the parties are otherwise unable to agree, the
International Arbitration Rules of the American Arbitration
Association then in effect shall govern. The arbitration
shall take place in such place as the parties may mutually
agree, or in lieu of agreement, shall take place in Chicago,
Illinois. The language of the arbitration shall be English.
18
<PAGE> 19
9. Headings.
The headings and captions used in this Agreement are for
reference purposes only and shall not limit or otherwise
affect the meaning, interpretation or application of this
Agreement.
10. Assignment.
SDI may assign its rights and obligations under this Agreement
to a purchaser of SDI or of the Mini-Mill and to its lenders
for collateral security purposes. Preussag may assign its
rights and obligations hereunder to any member of PSAG,
provided however, that Preussag's obligations of performance
and payment specified herein shall not be assignable except to
a successor to all or substantially all of the steel-related
subsidiaries of PSAG in the United States. Except as provided
above, neither party may assign its rights and obligations
under this Agreement except with the prior written consent of
the other party.
11. Severability.
In the event that any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction,
such part shall be deemed severed from this Agreement, and the
remainder of this Agreement shall continue in full force and
effect. This parties shall consult as to the manner in which
their original intention can be fulfilled as closely as
possible, and if appropriate, shall amend this Agreement
accordingly.
12. Waiver.
No delay or failure of any party in exercising any right
hereunder and no partial or single waiver shall be deemed to
constitute a waiver of any subsequent delay or failure. No
waiver of any one duty, agreement, condition or breach of this
Agreement shall constitute a waiver of any other duty,
agreement, condition or breach.
13. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall constitute an original version of the
Agreement.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers or representatives as of this
date first above written.
PREUSSAG STAHL AG
/s/ Jurgen Kolb
BY:___________________________________
/s/ Hans J. Selenz
BY:___________________________________
STEEL DYNAMICS, INC.
/s/ Keith E. Busse
BY:___________________________________
20
<PAGE> 21
APPENDIX I
PSAG MEMBERS
DELTA STEEL, INC.
5599 SAN FELIPE
SUITE 600
HOUSTON, TX 77252
FERALLOY CORPORATION
8755 W. HIGGINS RD.
SUITE 970
CHICAGO, IL 60631
FERALLOY NORTH AMERICAN STEEL CO., L.P.
18030 RIALTO
MELVINDALE, MI 48122
PREUSSAG HANDEL, CANADA
300-1450 CREEKSIDE DRIVE
VANCOUVER, B.C.
CANADA V6J 5B3
PREUSSAG HANDEL GMBH
BURO MEXICO
REFORMA NO. 107
12 PISO
COL. REVOLUCION
C.P. 06030 MEXICO, D.F.
MEXICO
PREUSSAG INTERNATIONAL STEEL CORPORATION
5780 PEACHTREE-DUNWOODY RD. N.E.
ATLANTA, GA 30342
APPENDIX 2
21
<PAGE> 22
QUALITY PERFORMANCE CRITERIA
In order to qualify as an Acceptable Product, purchased hot bands
shall meet or exceed all of the Criteria set forth below. The Criteria are
divided into four general categories: (1) Dimensional Criteria; (2) Shape
Criteria; (3) Surface Criteria; and (4) Metallurgical Criteria. Specific
Criteria may differ by grade and such material grades are divided into two
general categories; (1) Plain Carbon which shall be defined as the industry
acceptable Carbon/Manganese grades with AISI or SAE designations of 1006 up to
and inclusive of 1055, also including Non-Alloyed Structural Steels such as
ASTM A 570; and (2) HSLA which shall be defined as any grade where Micro-Alloy
agents such as, but not limited to, Columbium and/or Vanadium are used for the
specific purpose of meeting minimum yield and/or tensile strength requirements
as in the case of ASTM A 607.
Within each major Criteria are several sub-criteria, outlined below:
A. DIMENSIONAL CRITERIA
<TABLE>
<S> <C> <C>
1. Thickness Pg. A2.2
- ---------------------------------------------------------------------------------
2. Crown Pg. A2.2,A2.3
- ---------------------------------------------------------------------------------
3. Width Pg. A2.3
- ---------------------------------------------------------------------------------
B. SHAPE CRITERIA
4. Camber Pg. A2.3
- ---------------------------------------------------------------------------------
5. Flatness Pg. A2.4
- ---------------------------------------------------------------------------------
C. SURFACE CRITERIA
6. General Surface Pg. A2.4
- ---------------------------------------------------------------------------------
7. Pickling Pg. A2.5
- ---------------------------------------------------------------------------------
D. METALLURGICAL CRITERIA
8. Mechanical Properties Pg. A2.5
- ---------------------------------------------------------------------------------
9. Chemistry Pg. A2.5
- ---------------------------------------------------------------------------------
10. Internal Soundness Pg. A2.5
- ---------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
A. DIMENSIONAL CRITERIA
Criteria l: Thickness
Thickness performance shall initially be subject to l/2 ASTM tolerances, with
an ultimate objective of 1/8 ASTM tolerances per ASTM A 568 and ASTM A 635 as
summarized below, regardless of width. It is expected that 95% of the lineal
footage of each individual coil and 98% of coils meet this requirement.
Measurements based at any point across the width not less than 3/4" in from a
mill edge. Uncropped ends do not apply.
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
<S> <C> <C>
over 0.044"/0.051" 0.005" not available
- ------------------------------------------------------------------------------------------------------------
over 0.051"/0.057" 0.005" not available
- ------------------------------------------------------------------------------------------------------------
over 0.057"/0.071" 0.006" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.071"/0.098" 0.007" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.098"/0.180" 0.007" 0.009"
- ------------------------------------------------------------------------------------------------------------
over 0.180"/0.230" 0.008" 0.009"
- ------------------------------------------------------------------------------------------------------------
over 0.230"/0.313" 0.011" 0.011"
- ------------------------------------------------------------------------------------------------------------
over 0.313"/0.375" 0.012" 0.012"
- ------------------------------------------------------------------------------------------------------------
over 0.375"/0.500" 0.014" 0.014"
- ------------------------------------------------------------------------------------------------------------
over 0.500"/0.625" subject to development subject to development
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Criteria 2: Crown
Crown shall be considered the difference in thickness across the width of a
hot-band, with thickness measured at the center point of the width and at a
point 3/4" in from a mill edge. It is expected that 95% of the lineal footage
of each coil and 98% of all coils meet this requirement. Uncropped ends do not
apply.
23
<PAGE> 24
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
<S> <C> <C>
over 0.044"/0.051" 0.002" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.051"/0.057" 0.002" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.057"/0.071" 0.003" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.071"/0.099" 0.003" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.099"/0.313" 0.003" 0.003"
- ------------------------------------------------------------------------------------------------------------
over 0.313"/0.375" 0.004" 0.004"
- ------------------------------------------------------------------------------------------------------------
over 0.375"/0.500" 0.005" 0.005"
- ------------------------------------------------------------------------------------------------------------
over 0.500"/0.625" subject to development subject to development
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Criteria 3: Width
Width performance shall be subject to 1/2 ASTM tolerances per ASTM A 568 and
ASTM A 635 as summarized below. It is expected that 95% of the lineal footage
of each individual coil and 98% of all coils meet this requirement. Uncropped
ends do not apply.
<TABLE>
<CAPTION>
PLAIN CARBON HSLA
<S> <C> <C>
39"/50" 0.563" 0.625"
-----------------------------------------------------------------
over 50"/64" 0.750" 0.813"
-----------------------------------------------------------------
</TABLE>
B. SHAPE CRITERIA
Criteria 4: Camber
Camber shall be defined as the deviation of a side edge from a straight line,
the measurement being taken on the concave side utilizing a straight edge.
Maximum allowable camber shall be 1/2 ASTM tolerance per ASTM A 568 or 1/2" in
20' of length. It is expected that 95% of the lineal footage of each
individual and 98% of all coils will meet the requirement. Uncropped ends do
not apply.
24
<PAGE> 25
Criteria 5: Flatness
Flatness shall be defined as the deviation from a horizontal flat surface and
shall include those shape defects industry recognized to be (1) Edge Wave; (2)
Center Buckle; and (3) Cross Bow. Maximum allowable flatness deviation shall
be 1/2 ASTM tolerance per ASTM A 568. It is expected that 95% of the lineal
footage of each individual and 98% of all coils meet this requirement.
Uncropped ends do not apply.
<TABLE>
<CAPTION>
ORDERED MINIMUM PLAIN CARBON HSLA
<S> <C> <C>
0.044"/0.0570" 0.375" up to 60" not available
- ------------------------------------------------------------------------------------------------------------
over 0.057"/0.180" 0.250" up to 60" subject to development
- ------------------------------------------------------------------------------------------------------------
over 0.180"/0.230" 0.250" up to 48" 0.375" up to 64"
- ------------------------------------------------------------------------------------------------------------
over 0.230"/0.500" 0.375" up to 64" 0.500" up to 64"
- ------------------------------------------------------------------------------------------------------------
over 0.500"/0.625" subject to development subject to development
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Note: HSLA MAXIMUM DEVIATION does not apply to material ordered to minimum
yield strength levels in excess of 55,00 psi.
C. SURFACE CRITERIA
Criteria 6: General Surface
The intended use of the subject hot bands does not include critical surface
applications. However, this does not preclude the need for a commercially
acceptable surface. The surface must be generally free of imperfections such as
skin lamination, slivers, scabs, roll marks, friction digs, scratches,
rolled-in-dirt, and rolled-in-scale. Where necessary, specific surface
criteria will be negotiated.
25
<PAGE> 26
Criteria 7: Pickling
The majority of the subject hot bands are intended for pickling and as such
require a surface conducive to scale removal under standard operating
conditions. Low carbon products shall be capable of being pickled, scale
free, using commercially available pickling technologies, at pickler line
speeds of not less than 180 feet per minute. HSLA, higher carbon products,
silicon-modified products, etc., shall be capable of being pickled, scale free,
at reasonable pickler line speeds.
D. METALLURGICAL CRITERIA
Criteria 8: Mechanical Properties
In the event material is ordered to comply with physical requirements, SDI must
not only meet said requirements but in addition be capable of containing the
properties within a given range. SDI shall be capable of producing to a
Rockwell Hardness range of 15 on the B scale. When minimum strength levels are
required as in the case of, but not limited to, ASTM A 570 or ASTM A 607, SDI
shall be capable of producing material with Yield and Tensile strengths which
satisfy the required minimums, and which do not exceed the required minimums by
more than 15,000 psi.
Criteria 9: Chemistry
Unless requested otherwise, material shall be produced using a Fine-Grained
practice with a minimum total Aluminum content of .015%. All material will be
produced using Electric Arc Furnace technology.
Criteria 10: Internal Soundness
The intended use of the subject hot bands does not include Deep Drawn items.
However, this does not preclude the need for a product with commercial internal
soundness capable of shearing, blanking, various angle bends transverse and
longitudinal to the rolling direction, forming, and minor drawing. The
material shall be free of excessive centerline segregation, pipe, etc., and
achieve an inclusion severity rating of 2 or better on all 4 types of
inclusions: (1) Sulfides; (2) Aluminates; (3) Silicates; and (4) Globular
Oxides; per ASTM E 45-95 Methods A or D.
Fine Grained material shall be produced to a grain size of 5 or finer, in
accordance with ASTM E 112-88.
26
<PAGE> 27
APPENDIX 3
VOLUME REBATE SCHEDULE
<TABLE>
<CAPTION>
Aggregate Monthly Tons Purchased Rebate Per Ton for All
Tons Purchased
<S> <C> <C> <C> <C>
0 - 5,999 US $ 1
- ---------------------------------
6,000 - 11,999 2
- ---------------------------------
12,000 - 17,999 3
- ---------------------------------
18,000 - 23,999 4
- ---------------------------------
OVER 24,000 5
- ---------------------------------
</TABLE>
27
<PAGE> 28
APPENDIX 4
ITEM QUANTITY OR "SINGLE RUN" EXTRAS / DEDUCTS
<TABLE>
<CAPTION>
Single Width Orders $ / cwt.
<S> <C>
20 to 164 tons $1.00
165 to 499 tons BASE
500 to 1499 tons ($0.50)
1500 tons AND OVER ($1.00)
</TABLE>
AN ITEM OR "SINGLE RUN DISCOUNT" QUANTITY, AS DEFINED IN I.A.3(d) OF THIS
AGREEMENT, PERTAINS TO ORDER QUANTITIES PRODUCED AT THE SAME TIME, AND SHIPPED
WITHIN FIVE (5) WORKING DAYS AFTER NOTIFICATION OF AVAILABILITY. IF THE
REQUIRED ORDER QUANTITY IS NOT SHIPPED WITHIN FIVE (5) WORKING DAYS, THE SINGLE
RUN DISCOUNT WILL BE DISALLOWED.
28
<PAGE> 1
Exhibit 10.17
RECIPROCAL PATENT AND TECHNICAL INFORMATION
TRANSFER AND LICENSE AGREEMENT
THIS AGREEMENT describing the parties' reciprocal rights of access to
certain kinds of technical information, their rights to technical assistance in
connection therewith, and their rights to license the use of any related
intellectual property owned by the other and related thereto (the "Agreement")
is made this ____ day of December, 1995, by and between Preussag Stahl A.G., a
German corporation with its principal office and place of business in
Salzgitter, Germany ("Preussag Stahl"), Steel Dynamics Holdings, Inc. ("SDHI")
and Steel Dynamics, Inc. ("Steel Dynamics"), both Indiana corporations with
their principal offices in Butler, Indiana (SDHI and Steel Dynamics
collectively referred to as "SDI").
WHEREAS, SDI has expertise, know-how and technical capabilities in,
and is currently planning and constructing, and will operate, a
state-of-the-art hot rolling mini-mill steel plant in Butler, Indiana, USA (the
"Phase I Project") and is studying and planning for the expansion of such plant
to manufacture hot rolled pickled and oiled, cold rolled and galvanized steel
products (the "Phase II Project") (hereinafter, from time to time, the Phase I
Project and the Phase II Project being referred to individually and
collectively as the "Mini- Mill");
WHEREAS, Preussag Stahl has expertise, know-how, and technical
capabilities in the steel industry with respect to conventional and specialty
steel manufacturing (melting, casting, hot rolling, cold rolling and coating);
WHEREAS, Preussag Stahl desires to obtain, and SDI is willing to grant
to Preussag, access to and the right to use such of its technical information,
know-how, and any patent license rights which SDI is empowered to grant,
relating to SDI's hot rolling and mini-mill technology, to the extent that SDI
possesses the rights to provide such access and licenses, in accordance with
the terms and conditions hereinafter set forth; and
WHEREAS, SDI desires to obtain, and Preussag Stahl is willing to grant
to SDI access to and the right to use such of its technical information,
know-how, and any patent license rights which Preussag is empowered to grant,
relating to Preussag Stahl's hot and cold rolling technology for use in
constructing and/or operating its Mini-Mill, to the extent that Preussag Stahl
possesses the rights to provide such access and licenses, in accordance with
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings of the parties set forth herein, the parties agree as follows:
<PAGE> 2
ARTICLE 1 --DEFINITIONS
1.1. For the purposes of this Agreement, the following words and
phrases, where written with an initial capital letter, shall have the meanings
assigned to them below unless the context otherwise requires:
1.1.1. "Acquired Technology" shall mean technical trade secrets,
know-how, or proprietary information, which would constitute
Technical Information if it had been developed by the Party,
for which the Party first acquires ownership, control or the
right to use, after the Effective Date of this Agreement.
1.1.2. "Party" shall mean SDI or PSAG.
1.1.3. "Patents" shall mean all those patents of any country of the
world (a) owned or controlled by, or which lawfully may be
used by, either Party hereto at any time prior to the
expiration or termination of this Agreement (including
patented technology developed jointly by both Parties and
patented by either or both parties), and (b) under which that
same Party has or has the right to acquire the right to grant
a license or sublicense to the other Party without incurring
any obligation or payment of compensation to any third party;
and (c) which relate either to SDI Technology (for patents
which SDI owns, controls or is allowed to use) or PSAG
Technology (for patents which PSAG owns, controls or is
allowed to use).
1.1.4. "PSAG" shall mean, collectively, Preussag Stahl and all of its
subsidiaries (direct or indirect) which are wholly-owned by
Preussag Stahl. Such subsidiaries shall be included in the
definition of PSAG if they exist at any time during the term
of this Agreement, as such term may be extended by the
parties.
1.1.5. "PSAG Technology" shall mean technology owned, controlled or
utilized by PSAG in the manufacture of hot rolled or cold
rolled steel, and useful to SDI for such purpose.
1.1.6. "PSAG Territory" shall mean all countries in Europe.
1.1.7. "Providing Party" shall mean the Party which is asked to
provide Technical Information, Technical Assistance, a Patent
license, or other proprietary information.
1.1.8. "Requesting Party" shall mean the Party which asks for
Technical Information, Technical Assistance, a Patent license,
or other proprietary information.
2
<PAGE> 3
1.1.9. "SDI" shall mean, collectively, SDHI, Steel Dynamics, Inc. and
all their subsidiaries (direct or indirect) which are wholly-
owned by SDHI, Steel Dynamics, Inc. or both. Such
subsidiaries shall be included in the definition of SDI if
they exist at any time during the term of this Agreement, as
such term may be extended by the parties.
1.1.10. "SDI Technology" shall mean technology owned, controlled, or
utilized by SDI in the application of its thin-slab casting
techniques, including the application of SMS proprietary
technology, in the manufacture of steel, as well as its rolled
products, and useful to PSAG for such purpose.
1.1.11. "SDI Territory" shall mean the United States.
1.1.12. "Stock Purchase Agreement" shall mean that Stock Purchase
Agreement of even date herewith between SDHI and Preussag
Stahl.
1.1.13. "Technical Assistance" shall mean demonstrations, technical
discussions, guidance and/or technical training given by or on
behalf of the Providing Party to the Requesting Party
concerning Technical Information furnished by the Providing
Party to the Requesting Party. Technical Assistance also
includes furnishing the Requesting Party an opportunity to
observe and study manufacturing and other processes at the
Providing Party's facilities, to the extent that such
processes relate to Technical Information provided to the
Requesting Party by qualified employees.
1.1.14. "Technical Information" shall mean information and data that
includes all four of the following elements:
(a) any technical trade secrets, know-how, or proprietary
information, including (but not limited to)
inventions (whether or not patentable), patent
applications (but not including Patents), licenses,
software programs, prototypes, designs, methods,
diagrams, blueprints, analysis codes, techniques,
concepts, digitally stored or other data, engineering
and manufacturing information or procedures,
specifications, drawings, schematics and parts lists,
(b) relating either to SDI Technology (for information
owned or controlled by SDI) or to PSAG Technology
(for information owned or controlled by PSAG),
(c) which a Party has, or has the right to permit the
other Party to use, without incurring any obligation
or payment of compensation to any third party; and
3
<PAGE> 4
(d) which either:
(i) a Party owns, controls or has a right to use
on the Effective Date of this Agreement, or
(ii) is developed by either Party or by both
Parties jointly at any time prior to
expiration or termination of this Agreement.
ARTICLE 2 -- ACCESS TO TECHNICAL INFORMATION
2.1. Upon the written request of Requesting Party made from time to
time during the term of this Agreement, the Providing Party, on a non-exclusive
basis, during reasonable business hours, and when such Technical Assistance
will not disrupt the Providing Parties' business or production activities,
shall provide the Requesting Party, for use either by Preussag within the PSAG
Territory or by SDI within the SDI Territory, as the case may be, access to
such Technical Information, including the right (i) to interview the necessary
operating, engineering, or administrative personnel, (ii) to observe the
necessary processes, procedures, or applications, (iii) to videotape,
photograph, draw, diagram, or record such processes, procedures, or
applications, (iv) to make photocopies of any pertinent existing materials,
with respect to such Technical Information, and (v) to copy digitally stored
data, relating to the specific request.
2.2. The Providing Party shall be under no continuing obligation to
the Requesting Party, but shall make a good faith effort, to update or revise
any Technical Information that has previously been made available to the
Requesting Party.
2.3. A Providing Party makes no warranty or representation for any
purpose with respect to Technical Information furnished hereunder, except that
the Providing Party shall use its best efforts to verify that such Technical
Information is the same information and data as is used by it at the time of
access.
2.4. Each Party hereby grants to the other Party a license, during
the term of this Agreement, to use Technical Information provided by the
Providing Party to the Requesting Party for any purpose, including
manufacturing, using, selling or otherwise disposing of steel products. Unless
otherwise agreed between the parties, the license granted under this Section
2.4 to SDI shall be for the SDI Territory only, and the license granted under
this Section 2.4 to Preussag Stahl shall be for the PSAG Territory only. The
licenses granted hereby are nonexclusive, nontransferable, paid-up, and do not
include the right to sublicense to any third party.
2.5. The Requesting Party shall reimburse the Providing Party for
all reasonable out-of-pocket expenses incurred by the Providing Party in
complying with a request for Technical Information under this Article. The
Requesting Party shall not be responsible for paying any
4
<PAGE> 5
salaries, benefits or per diem charges for employees of the Providing Party
involved in providing the Technical Information, although the Requesting Party
shall be responsible for reasonable travel and related out-of-pocket expenses
if any are incurred in rendering or delivering Technical Information away from
the Providing Party's plant site.
ARTICLE 3 -- TECHNICAL ASSISTANCE
3.1. In order to assist the Requesting Party in understanding
Technical Information furnished under Article 2 and to assist the Requesting
Party in the manufacture of steel products to which such Technical Information
relates, the Providing Party shall, upon receipt of a request of the Requesting
Party made from time to time during the term of this Agreement, provide
Technical Assistance to personnel employed and specifically designated by the
Requesting Party, subject to the availability of qualified personnel within the
employ of the Providing Party.
3.2. In the event Requesting Party asks the Providing Party to make
its personnel available to provide Technical Assistance at the Requesting
Party's facilities, the following terms and conditions shall apply:
3.2.1. The Parties shall agree upon a mutually acceptable time
schedule for the provision of such services. In the case of
an urgent or emergency situation, the Requesting Party shall
so indicate and shall submit its request for Technical
Assistance to the Providing Party as soon as possible. While
the Providing Party is expected to attempt in good faith to
accommodate the Requesting Party's schedule, the Providing
Party shall not be required to disrupt its operations or incur
additional expense in order to do so.
3.2.2. The Requesting Party shall receive and make necessary
arrangements for the Providing Party's personnel being sent to
the Requesting Party's facilities and shall reimburse the
Providing Party for all reasonable travel and living expenses
incurred by such personnel. Requesting Party shall not be
responsible for salaries, benefits or per diem expenses of the
Providing Party's personnel providing Technical Assistance,
unless the assignment involves an extended period of time, an
unusual number of employees, or other extraordinary
circumstances, in which event the Parties shall negotiate
appropriate terms and conditions for such engagement. The
Requesting Party shall bear all of its own expenses related to
such Technical Assistance.
3.2.3. The personnel of the Providing Party sent to the Requesting
Party's facility to provide Technical Assistance shall not be
considered for any purpose to be employees, agents or
representatives of the Requesting Party, nor shall they assume
any responsibility for the Requesting Party's manufacture of
products.
5
<PAGE> 6
Such personnel shall not be placed on the Requesting Party's
payroll and the Providing Party shall be required to insure
that such personnel are covered under applicable Workmen's
Compensation or comparable laws, including health and accident
insurance policies, for any injury that may occur to such
personnel.
3.3. In the event the Requesting Party requests that the Providing
Party accept the Requesting Party's personnel at the facilities of the
Providing Party for the purpose of receiving Technical Assistance, such
assistance shall be made available under the following conditions:
3.3.1. The Parties shall agree upon a mutually acceptable time
schedule for the provision of such services. In the case of
an urgent or emergency situation, the Requesting Party shall
so indicate and shall submit its request for Technical
Assistance to the Providing Party as soon as possible. While
the Providing Party is expected to attempt in good faith to
accommodate the Requesting Party's schedule, the Providing
Party shall not be required to disrupt its operations or incur
additional expense in order to do so.
3.3.2. The Requesting Party shall bear all expenses (including travel
and living expenses) incurred by the Requesting Party's
personnel assigned to receive Technical Assistance under this
Article, plus all reasonable out-of-pocket training costs
incurred by the Providing Party. Requesting Party shall not
be responsible for salaries, benefits or per diem expenses of
the Providing Party's personnel providing Technical
Assistance, unless the assignment involves an extended period
of time, an unusual number of employees, or other
extraordinary circumstances, in which event the Parties shall
negotiate appropriate terms and conditions for such
engagement.
3.3.3. Technical Assistance shall be provided in such manner as the
Providing Party may allow (a) in accordance with safety
requirements, (b) with due consideration to prevention of
unreasonable disturbance of its manufacturing operations or
production scheduling, and (c) under the guidance of the
Providing Party's personnel.
3.3.4. The personnel of the Requesting Party sent to the Providing
Party's facility to receive Technical Assistance shall not be
considered for any purpose to be employees, agents or
representatives of the Providing Party, nor shall they assume
any responsibility for the Providing Party's manufacture of
products. Such personnel shall not be placed on the Providing
Party's payroll, and the Requesting Party shall be required to
insure that such personnel are covered under applicable
Workmen's Compensation or comparable laws, including health
and accident insurance policies, for any injury that may occur
to such personnel.
6
<PAGE> 7
3.4. The Providing Party warrants that the Providing Party's
personnel assigned to provide Technical Assistance shall be reasonably
qualified to provide such assistance, in accordance with good professional
practice, and shall use their best efforts for said purpose, but no other
warranty with respect to Technical Assistance is or shall be deemed to be given
to the Requesting Party by the Providing Party.
ARTICLE 4 -- PATENT LICENSE
4.1. PSAG shall grant to SDI a license under any of PSAG's Patents
to manufacture steel products, and to use, sell or otherwise dispose of such
products under the Patents, in the SDI Territory, unless otherwise agreed upon
by the Parties. The license granted to SDI shall be nonexclusive,
nontransferable, and shall not include the right to sublicense to any third
party.
4.2. SDI shall grant to PSAG a license under any of SDI's Patents
to manufacture steel products, and to use, sell or otherwise dispose of such
products under the Patents, in the PSAG Territory, unless otherwise agreed upon
by the Parties. The license granted to PSAG shall be nonexclusive,
nontransferable, and shall not include the right to sublicense to any third
party.
4.3. PSAG and SDI agree that each will charge the other no more
than a reasonable royalty fee under the applicable circumstances, with respect
to each Patent License requested by and granted to the other Party pursuant to
Sections 4.1 and 4.2 hereof during the term of this Agreement; provided,
however, that this limitation shall not apply with respect to and to the extent
of any royalty fees which, by contract in existence on the Effective Date with
one or more other licensees, are required to be charged to the Requesting
Party. To the extent applicable in any such case, the Parties intend that such
royalty fee shall reflect the royalty fee so required to be charged.
4.4. Any warranty regarding Patents shall be subject to negotiation
and inclusion in the Patent license agreement negotiated by the Parties.
ARTICLE 5 -- CONFIDENTIALITY
5.1. All Technical Information, technical trade secrets, know-how,
proprietary information, data, and any of the methods, techniques, or other
information furnished or made available by either Party hereunder, whether
directly or indirectly through furnishing of Technical Assistance (hereinafter
"Confidential Information"), and when designated as confidential when
furnished, is for Requesting Party's own use in the Requesting Party's
Territory and is to be kept confidential, in accordance with the standards set
forth in the next paragraph, by the Requesting Party during and following the
expiration or termination of this Agreement. This Article shall survive
expiration or termination of this Agreement.
7
<PAGE> 8
Such Confidential Information is not to be made available, given, sold
or disclosed by the Requesting Party to any other party without the prior
written consent of the Providing Party. Each Party agrees to use its best
efforts to maintain the confidentiality of the Confidential Information
disclosed to it and each shall use no less than the same safeguards as it uses
to protect its own Confidential Information of a similar nature. A Requesting
Party shall disclose Confidential Information received from the Providing Party
only to the Requesting Party's officers and employees whose duties reasonably
require familiarity with such information, and the Requesting Party shall
obtain from such officers and employees legally enforceable undertakings, in
form and substance satisfactory to the Providing Party, not to personally use
or disclose Confidential Information, or knowledge derived therefrom, to or for
the benefit of any third party. Copies of all such undertakings shall be given
to the Providing Party. Except as otherwise agreed by the Parties, the
Requesting Party shall be required at its own expense to take such legal
actions as may be reasonably necessary to enforce such undertakings.
5.2. The confidentiality obligation of the Requesting Party under
Section 5.1. above shall not apply to Confidential Information which:
5.2.1. Is or becomes publicly known through no wrongful act of the
Requesting Party or its employees;
5.2.2. Is received by the Requesting Party without restriction from a
third party without breach of any obligation of nondisclosure;
5.2.3. Is or has been independently developed by the Requesting
Party;
5.2.4. Is contained in any published patent or published patent
application or which becomes otherwise published or generally
known to Requesting Party through no wrongful act of
Requesting Party, from and after the date it becomes published
or generally known; or
5.2.5. Is disclosed pursuant to governmental or judicial requirement.
5.3. Nothing in this Article 5 is intended to limit, replace or
terminate any rights or obligations provided in the Confidentiality Agreement
between Preussag Stahl and SDHI, dated May 25, 1995.
ARTICLE 6 -- LICENSE TO IMPROVEMENTS MADE BY REQUESTING PARTY
6.1. A Requesting Party shall make available to a Providing Party
on a fully-paid, nonexclusive, non-assignable, non-sublicensable, and as-is
basis, a license to use information, patentable or not, inventions,
improvements and innovations developed and owned by the Requesting Party
substantially through the use of Technical Information and/or Patent licenses
provided by the Providing Party pursuant to this Agreement. Such right is to
manufacture,
8
<PAGE> 9
assemble, use, sell, or otherwise dispose of products during the term of this
Agreement using the information, inventions, improvements, innovations
developed and owned by the Requesting Party. Unless otherwise agreed by the
Parties, a license granted to SDI under this Section 6.1 shall be for the SDI
Territory only, and a license granted to PSAG under this Section 6.1 shall be
for the PSAG Territory only.
ARTICLE 7 -- OBTAINING RIGHTS TO PATENTS AND TECHNICAL INFORMATION FROM THIRD
PARTIES
7.1. Neither Party represents that it, by virtue of its use of
certain machinery, equipment, processes or technology, necessarily possesses
the legal right to disclose the trade secrets, know-how, or proprietary
information involved in such activity, or that such Party has the legal right
to authorize and license others to use or employ such machinery, equipment,
processes or technology.
7.2. Notwithstanding Section 7.1, and subject to Section 7.3, each
Party, upon receipt of a written request from the other Party for disclosure of
and/or the right to use any trade secrets, know-how and proprietary information
which, if solely owned and licensable by the Providing Party, would constitute
Technical Information, shall use its best efforts to ascertain whether it has
the legal right to make the disclosure and/or whether the Requesting Party may
need to obtain third party approvals, consents, licenses (with or without
royalties), or other rights in advance of disclosure or in connection with the
matter of use. In the event that the Providing Party does not have such
rights, the Providing Party shall so advise the Requesting Party, together with
the name(s) of the person(s) to contact regarding such rights, if known, and
the Providing Party shall use its best efforts to cooperate with the Requesting
Party in obtaining any such necessary permission, but subject to such terms,
conditions, and restrictions as the third party may impose. These provisions
shall also apply to any patents which relate to SDI Technology or to PSAG
Technology. In the event that the Providing Party, after using its best
efforts, is unable to obtain the necessary legal rights or licenses, the
Providing Party shall be under no further obligation hereunder nor to violate
the terms of any license or other agreements it may have with such third party.
7.3. To the extent that any obligation for compensation, for
indemnity, for performance, or otherwise to a third party is required to be
undertaken in connection with the disclosures or rights to use described in
Section 7.2, any such obligations shall be direct obligations between the
Requesting Party and the third party; and the Providing Party shall not be
required to incur any primary or secondary obligations, as guarantor or
otherwise, to any such third party, nor to place its own rights with such party
in jeopardy by reason of such disclosures and/or use.
7.4. In the event that either Party shall, during the term of this
Agreement, obtain by the payment of compensation any Acquired Technology from a
third party (except from its
9
<PAGE> 10
employees who are paid only their normal salaries for such Acquired
Technology), such Acquired Technology shall come within the scope of this
Agreement; provided, however, that the Party possessing such Acquired
Technology may, as a condition to including such Acquired Technology within the
license granted to the other Party under Section 2.4, require the Requesting
Party to contribute a fair proportion of the cost incurred in acquiring the
Acquired Technology from the third party. In such event, the Parties shall
determine by mutual agreement the amount of such compensation by the Requesting
Party to the Providing Party. If the Parties do not so agree, the Acquired
Technology shall not be included within the scope of this Agreement, and the
Requesting Party shall incur no financial obligation or liability regarding
such Acquired Technology.
ARTICLE 8 -- COMPENSATION
8.1. This Agreement establishes a reciprocal right between the
Parties to share and transfer Technical Information, Technical Assistance and
Patents. Accordingly, except for the expense reimbursement expressly provided
for in Sections 2.5, 3.2.2, and 3.3.2, and for the royalties, third-party
payments and Acquired Technology cost-sharing expressly provided for in
Sections 4.3, 7.3 and 7.4, respectively, of this Agreement, all such
disclosures, transfers, licenses and other authorizations, whether related to
Technical Information, Technical Assistance, Patents or otherwise, are deemed
to be fully paid-up, and neither Party shall incur any obligation to pay any
royalty or other compensation therefor.
8.2. Unless otherwise agreed by the Parties, any amounts owed by
one Party to the other Party shall be paid in United States dollars within
forty-five (45) days following receipt of an invoice therefor from the other
Party in accordance with the instructions stated in such invoice.
8.3. All amounts payable under this Agreement shall, when overdue,
bear interest, in the case of amounts payable to SDI, at the prime rate then
offered by the largest commercial bank in Indianapolis, Indiana, or, in the
case of amounts payable to PSAG, at the prime rate offered by the largest
commercial bank in Hannover, Federal Republic of Germany.
ARTICLE 9 -- TERM OF AGREEMENT
9.1. This Agreement shall become effective concurrently with the
First Closing.
9.2. Unless sooner terminated under Article 10, this Agreement
shall continue in effect until December 31, 2002.
10
<PAGE> 11
After the expiration of the initial term, and unless the Parties hereto have
specifically extended this Agreement by a written renewal, this Agreement shall
continue, subject to termination, with or without cause, upon three (3) months'
advance written notice by either Party.
ARTICLE 10 -- TERMINATION
10.1. In the event that either Party fails to perform any material
obligation or undertaking to be performed by it under this Agreement, and such
failure shall not be cured within ninety (90) days after written notice thereof
from the other Party, then a default shall have occurred and the other Party
shall have the right to terminate this Agreement forthwith by giving written
notice of termination to the defaulting Party.
10.2. Notwithstanding Section 10.1, each Party reserves the right at
any time during the term of this Agreement to terminate this Agreement at its
sole discretion upon giving the other Party thirty (30) days' written notice
if:
10.2.1. The normal business of the other Party as a steel-producing
enterprise ceases; or
10.2.2. The other Party becomes insolvent or goes into liquidation or
bankruptcy.
10.3. Notwithstanding any other provision of Article 9 or this
Article 10, each Party shall have the right to terminate this Agreement after
March 15, 1996, upon thirty (30) days advance notice to the other Party, either
if the Third Closing or Alternate Third Closing, as defined in the Stock
Purchase Agreement between the Parties, does not take place, or, in any event,
at any time that PSAG does not have the exclusive right to select at least one
(1) member of the Board of Directors of SDHI.
10.4. Upon expiration or termination of this Agreement, as provided
for in this Article or by the operation of law or otherwise, all rights granted
to, and obligations undertaken by, the Parties hereunder shall terminate
immediately, except the following, all of which shall survive expiration or
termination of this Agreement:
10.4.1. Each Party's obligation to pay all amounts accrued hereunder
upon or prior to expiration or termination of this Agreement;
10.4.2. Each Party's confidentiality obligations under Article 5
hereof;
10.4.3. The licenses granted pursuant to Sections 2.4 and 6.1 allowing
PSAG to employ for its own use any Technical Information which
it may then already possess under this Agreement, unless this
Agreement is terminated by SDI pursuant to the provisions of
Section 10.1 or 10.2 of this Article;
11
<PAGE> 12
10.4.4. The licenses granted pursuant to Sections 2.4 and 6.1 allowing
SDI to employ for its own use any Technical Information which
it may then already possess under this Agreement, unless this
Agreement is terminated by PSAG pursuant to the provisions of
Section 10.1 or 10.2 of this Article; and
10.4.5. The Patent licenses granted to the Parties pursuant to
Sections 4.1, 4.2 and 6.1.
10.5. In the event of termination of this Agreement by SDI pursuant
to Section 10.1 or 10.2, PSAG shall promptly return to SDI the original and
return, or certify to the destruction of, all copies of all Technical
Information furnished by SDI, and all licenses granted to PSAG to use Technical
Information pursuant to Sections 2.4 and 6.1 shall be deemed to be granted back
to SDI.
10.6. In the event of termination of this Agreement by PSAG pursuant
to Section 10.1 or 10.2, SDI shall promptly return to PSAG the original and
return, or certify to the destruction of, all copies of all Technical
Information furnished by PSAG, and all licenses granted to SDI to use Technical
Information pursuant to Sections 2.4 and 6.1 shall be deemed to be granted back
to PSAG.
10.7. In the event of termination of this Agreement by either Party
pursuant to Section 10.3, the provisions of Sections 10.5 and 10.6 regarding
the return or destruction of Technical Information shall apply, as the case may
be. Additionally, if SDI, either before or after the Effective Date has sent
its employees to PSAG for Technical Assistance training at PSAG's facilities
pursuant to Section 3.3 hereof, and PSAG has not yet sent its employees to
receive Technical Assistance training at SDI's facilities pursuant to that same
Section, then PSAG shall have the right to receive Technical Assistance
training at SDI's facilities. PSAG's on-site Technical Assistance pursuant to
this Section shall be comparable in duration and number of employees to the
on-site Technical Assistance training received by SDI. This provision survives
termination of this Agreement.
ARTICLE 11 -- FORCE MAJEURE
11.1. In the event that performance of obligations hereunder by
either Party hereto is legally excusable because of force majeure, the
following terms shall apply:
11.1.1. Either Party who believes that his performance is excused by
force majeure shall give written notice to the other as soon
as possible and with sufficient detail to permit the other to
minimize inconvenience and expense.
11.1.2. Both Parties will cooperate to minimize the financial
consequences of the force majeure.
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11.1.3. Either Party hereto shall have the right to request the
termination of this Agreement if the force majeure continues
for a period greater than 180 days.
11.1.4. Force majeure shall mean natural disasters, wars, acts of
government (including refusal to grant authorizations required
to effectuate performance), legal restrictions on performance
and work stoppages occurring as a result of strikes or
lockouts by or of a significant proportion of production
employees.
ARTICLE 12 --NOTICE
All communications required by this Agreement to be given by a Party shall be
in writing and delivered by hand, by certified or registered mail, postage
prepaid, return receipt requested, or by any other express delivery technique
(including facsimile) which provides evidence of receipt, addressed to the
appropriate Party at the address set forth below:
If to PSAG: Preussag Stahl AG
Department 01 UP
Attention: Dr. Enss
D-38223 Salzgitter
Germany
Fax: 011-49-5341-212307
with a copy to: John D. Hushon, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Fax: 1-202-857-6395
If to SDI: Keith E. Busse
Steel Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Fax: 1-219-868-8951
with a copy to: Robert S. Walters, Esq.
Barrett & McNagny
215 East Berry Street
Fort Wayne, IN 46802
Fax: 1-219-423-8924
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Any such notice shall be deemed to have been delivered when received, but in no
event later than seven (7) days after posting, if sent by mail. Each party
may, by giving the other Party notice as provided for herein, designate for
itself addresses and persons other than as indicated above.
ARTICLE 13 -- GOVERNING LAW
This Agreement and the rights and obligations of the Parties hereunder, except
as specifically otherwise provided, shall be governed by and construed in
accordance with the laws of the State of Indiana. The Parties agree that their
rights and obligations under this Agreement shall not be governed by either the
provisions of the 1980 U.N. Convention for the International Sale of Goods nor
by the laws of any jurisdiction other than as specified herein.
ARTICLE 14--INFORMAL ATTEMPT TO RESOLVE DIFFERENCES
In the event that PSAG and SDI are unable to resolve a claim or an alleged
breach of this Agreement to both Parties' mutual satisfaction, and prior to
either Party independently proceeding to enforce its rights under the law, the
Parties' differences shall be submitted to a single arbitrator (if the parties
so agree) or to a three member arbitration committee (one member of which shall
be selected by PSAG, one member of which shall be selected by SDI, and the
third member of which shall be selected by the other two members), and the
arbitrator(s) shall hear and make a non-binding recommendation, including a
written record of the basis thereof, with respect to the disputed issue between
the Parties within sixty (60) days after notice of a claim or of an alleged
breach hereunder. This arbitration process may be initiated by either Party.
While this arbitration is intended to operate informally and expeditiously, if
a matter of procedure needs to be determined, and the Parties are otherwise
unable to agree, the International Arbitration Rules of the American
Arbitration Association then in effect shall govern. The arbitration shall
take place in such place as the Parties may mutually agree, or in lieu of
agreement, shall take place in Chicago, Illinois. The language of the
arbitration shall be English. Notwithstanding the foregoing, however, nothing
herein shall be deemed to prohibit either Party from seeking immediate
injunctive relief from any court or other forum to prevent or restrain a breach
of any of the provisions of this Agreement. Following expiration of the
sixty-day period referred to above, the Parties may, but shall not be required
to, pursue any rights that they may have at law or in equity before any court
of competent jurisdiction.
ARTICLE 15--MISCELLANEOUS
15.1. The relationship between SDI and PSAG shall be that of
independent contractors, and nothing contained in this Agreement shall be
construed to (i) give either Party the power to direct and control the
day-to-day activities of the other, (ii) constitute the Parties as partners,
joint venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (iii)
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constitute either Party, its agents or employees, as the agents or employees of
the other Party, or to grant to them any power or authority to act for, bind or
otherwise create or assume any obligation on behalf of the other Party for any
purpose whatsoever.
15.2. The Parties shall comply with all applicable laws affecting
this Agreement and their performance of this Agreement. However, each Party
specifically represents and warrants to the other that none of the rights
granted or obligations incurred hereunder requires any consent or approval of
any government, government agency, administrative agency, or third party
(except for third parties whose consents or approvals are required by reason of
their ownership of intellectual property rights governed by this Agreement) is
required in order to render any of such rights or obligations enforceable; and
each Party represents and warrants to the other that its obligations described
herein are enforceable against it in accordance with the terms hereof.
15.3. Neither Party shall attempt to patent or otherwise register
any right to exclude other persons from using the Technical Information that it
receives from the other Party pursuant to this Agreement. Neither Party shall
attempt to patent in another country the subject matter of any Patent for which
it has received a license from the other Party under this Agreement.
15.4. This Agreement constitutes the entire agreement of the Parties
with respect to the matters addressed herein and supersedes any prior
understandings. Except as noted herein, no changes to this Agreement shall be
binding unless in writing and signed by each Party.
15.5. The headings and captions used in this Agreement are for
reference purposes only and shall not limit or otherwise affect the meaning,
interpretation or application of this Agreement.
15.6. Neither Party may assign its rights or obligations under this
Agreement and this agreement shall not inure to the benefit of any trustee in
bankruptcy, receiver, or other successor of either Party, without the express
written approval of the other Party, except that:
15.6.1. SDI may assign its rights and obligations under this Agreement
to a purchaser of SDI or of the Mini-Mill or to SDI's lenders
for collateral security purposes;
15.6.2. PSAG may assign any of its rights and obligations hereunder to
one or more members of PSAG; provided, however, that PSAG
shall continue to remain primarily liable to SDI with respect
to any of such obligations; and
15.6.3. Any assignee, purchaser or other successor in interest to any
rights of a Party in a Patent shall acquire such interest
subject to the rights that the other Party would have
hereunder if such interest were still held by the first Party.
15.7. In the event that any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect in any jurisdiction such
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part shall be deemed severed from this Agreement, and the remainder of this
Agreement shall continue in full force and effect. The Parties shall consult
as to the manner in which their original intention can be fulfilled as closely
as possible, and if appropriate, shall amend this Agreement accordingly.
15.8. No delay or failure of any Party in exercising any right
hereunder and no partial or single waiver shall be deemed to constitute a
waiver of any subsequent delay or failure. No waiver of any one duty,
agreement, condition or breach of this Agreement shall constitute a waiver of
any other duty, agreement, condition or breach.
15.9. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original version of the Agreement.
IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be executed as of the date first above written by its duly
authorized officer or representative.
PREUSSAG STAHL AG
By: /s/ Jurgen Kolb
----------------------------------
By: /s/ Hans J. Selenz
----------------------------------
STEEL DYNAMICS HOLDINGS, INC.
By: /s/ Keith E. Busse, President
----------------------------------
STEEL DYNAMICS, INC.
By: Keith E. Busse, President
----------------------------------
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Exhibit 10.24
EMPLOYMENT AGREEMENT
This Agreement is entered into as of the 26th day of July, 1994, by
and between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, STEEL
DYNAMICS HOLDINGS, INC., an Indiana corporation ("Holdings"), and Tracy L.
Shellabarger ("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 four (4) 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 9.1). 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 9.1, 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 be all duties
of a chief financial officer, which include (but shall not be limited to)
preparing the financial statements and budgets, maintaining or causing to be
maintained adequate and current accounts of the properties and business
transactions of Employer, monitoring compliance with Employer's financing
agreements, being responsible for all financial and accounting matters; and
shall include the performance of such duties as Chief Financial 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.
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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, in the amount of Thirty Thousand Dollars
($30,000.00).
3.2 A base salary of One Hundred Ten Thousand Dollars
($110,000.00) per year, payable in periodic installments as shall be mutually
agreeable between the parties but not less than monthly payments of Nine
Thousand One Hundred Sixty Seven Dollars ($9,167.00).
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 Holdings stock under terms and
conditions to be prescribed from time to time by Holdings. 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 their 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 four (4) year employment term, 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
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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 addition to the bonus described above, Employer will pay to
Employee an annual bonus of Seventy Thousand Dollars ($70,000.00), so long as
the Note (as defined in Section 6.1 below) is outstanding and Employee is
employed by Employer. If Employee's employment terminates, as contemplated by
Sections 7.1(a), (b), or (c), Employee shall not thereafter be entitled to any
additional payments pursuant to this Section 3.4.
ARTICLE IV
Employee Benefits
4.1 Subject only to the Employee's passing of any required
physical examinations in connection therewith, 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 the other
executive officers of the Company, 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 $1,000.00, 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
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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 four (4) 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
four (4) year term hereof; and provided, further, that there shall be no
doubling or overlap of salary continuation payments under both this Section 4.5
and the preceding Section 4.4.
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
Purchase and Sale of Stock
6.1 Upon execution of this Agreement, Employee will purchase, and
Holdings will sell, 10,000 shares of its Common Stock at a price of $75.001 per
share. Holdings will deliver to Employee the certificate representing such
Common Stock, and Employee will deliver to Holdings a check or wire transfer of
funds in the aggregate amount of $10.00 and a promissory note in the form of
Exhibit A attached hereto in an aggregate principal amount of $750,000 (the
"Note"). Executive's obligations under the Note shall be secured by a pledge
of all of the shares of Common Stock to Holdings and in connection therewith
Employee shall enter into a pledge agreement in the form of Exhibit B attached
hereto.
6.2 Within 30 days after Employee purchases the Common Stock from
Holdings, pursuant to Section 6.1, Employee shall make an effective election
with the Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder, in the form of Exhibit C
attached hereto.
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6.3 In connection with the purchase and sale of the Common Stock
hereunder, Employee represents and warrants to Holdings that:
(i) The Common Stock to be acquired by Employee pursuant
to this Agreement will be acquired for Employee's own account and not
with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the "1933 Act"), or any
applicable state securities laws, and the Common Stock will not be
disposed of in contravention of the 1933 Act or any applicable state
securities laws. The certificate representing the Common Stock will
bear a legend on the face thereof disclosing such transfer
restrictions.
(ii) Employee is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Common Stock.
(iii) Employee is able to bear the economic risk of his
investment in the Common Stock for an indefinite period of time
because the Common Stock has not been registered under the 1933 Act
and, therefore, cannot be sold unless subsequently registered under
the 1933 Act or an exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of his purchase of
Common Stock, to inspect and review all material documents relating to
Holdings and to the Employer, and to obtain any additional information
that he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its
terms, and the execution, delivery and performance of this Agreement
by Employee does not and will not conflict with, violate or cause a
breach of any agreement, contract or instrument to which Employee is a
party or any judgment, order or decree to which Employee is subject.
ARTICLE VII
Post-Employment Ownership of Stock
7.1 Limited only until the seventh anniversary of this Agreement,
but ending, if sooner, on the date the Common Stock of Holdings is sold in an
initial public offering and Holdings' Common Stock is listed on any national
securities exchange or quoted on the NASD automated quotation system, should
the Employee's employment terminate hereunder, then:
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(a) If termination shall have occurred because the
Employee voluntarily resigns prior to the Mill Completion, or if
termination shall have occurred prior to one year after the date of
Mill Completion (the "First Anniversary"), for cause as defined in
Section 9.1, Holdings shall automatically become entitled to a
reconveyance of the Employee's Common Stock, and in exchange therefor
and as full consideration for such reconveyance, Holdings shall pay to
Employee an amount, payable in cash, equal to the price paid by the
Employee for such shares, less any unpaid principal and interest owing
under the Note (which Note shall concurrently therewith be canceled
and returned to Employee). Holdings shall be entitled to petition
any court with jurisdiction herein for the appointment of a special
master to effect such reconveyance, such grant of authority herein
being deemed to constitute, a proxy coupled with an interest.
(b) 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 right, but not the obligation,
exercisable within one (1) year following termination, to "put" or
exchange his Common Stock to Holdings (if, as, and when permitted
under applicable state corporate law and any applicable loan
agreements or similar restrictions), for a consideration payable in
cash, in an amount equal to two (2) years of his base salary, as
described in Section 3.2, plus the cancellation of the Note.
(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 right, but not the obligation, exercisable within one (1)
year following termination, to "put" or exchange his Common Stock to
Holdings (if, as, and when permitted under applicable state corporate
law and applicable loan agreements or similar restrictions, and
subject, in any event, to the limitations set forth in Section
7.1(d)), for cash, in quarterly installments over a period of two (2)
years, with interest at the Employer's prime or "reference" rate for
short-term commercial borrowing, for an amount, determined as of the
date of termination, and on a share by share basis for each "put"
share, equal to the greater of (i) the fair market value of such
shares, or (ii) the price paid by the Employee for such shares, in all
instances less any unpaid principal and interest owing in respect
thereto under the Note (which Note or portion thereof shall
concurrently therewith be canceled and returned to Employee). In the
event, however, that Holdings is precluded by applicable corporate law
or Holdings is precluded by or would be in default under a loan or
other covenant from making any payment hereunder, otherwise required
by this Section 7.1(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 interest would also be
payable to Employee on such amount for the period Holdings was
restricted from making the required payment. Holdings shall use
reasonable efforts to
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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 any
"call" pursuant to Section 7.2, fair market value shall be determined
by a mutually agreeable appraiser, or if no mutually agreeable
appraiser is able to be selected, then by a majority vote of a panel
of appraisers one of whom shall be appointed by the Employer, one of
whom shall be appointed by the Employee, and the third of whom shall
be a certified business valuation professional selected by the other
two appraisers.
For purposes of this Section 7.1 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 Section 7.1(c), the Employee shall
only have the right to "put" to Employer an amount of Common Stock
with a fair market value of up to a cap of $750,000. Any Common Stock
not put to the Employer hereunder shall remain the property of
Employee.
7.2 In the event that during the term of this Employment
Agreement, or within one (1) year thereafter, the Employee's employment
hereunder ends, for any reason, and Employee becomes employed by or for the
benefit of 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 7.1(c) and the same rights to compel
the reconveyance described in Section 7.1(a).
7.3 In the event that Employee's employment has not been
terminated, as of the earlier of (a) the initial public offering of Holdings'
Common Stock, or (b) the fourth anniversary hereof, Holdings agrees that it
will forgive in full the principal amount of any remaining indebtedness owed to
Holdings under the Note at such time. Should Employee's employment terminate
prior thereto, regardless of the reason or by whom initiated, Employee's rights
with respect to the Common Stock and obligations with respect to the Note shall
be governed by the provisions of Sections 7.1(a), (b), or (c).
ARTICLE VIII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the
best of his knowledge and belief, that:
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8.1 He is neither a party to nor bound by any contract of
employment and 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.
8.2 He is neither a party to nor bound by any covenant not to
compete or similar covenant which could affect his right to undertake the
employment and perform the duties contemplated hereunder.
8.3 He is neither in possession of nor will he under any
circumstances disclose to or employ for the benefit of Employer or Holdings any
proprietary or confidential information that is the subject of any contract,
non-disclosure agreement, or prior work relationship involving any other person
or company.
8.4 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 of 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 IX
Termination
9.1 The Employer 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 7.1(a); and in such event, all further obligations of the
Employer hereunder shall cease and terminate. "Cause" for termination, within
the meaning of this Section 9.1, shall include dishonesty of the Employee with
respect to the Employer or Holdings or any of its subsidiaries; the unexcused
failure, neglect, or refusal by the Employee to perform his duties and
responsibilities, despite being apprised of such failure, neglect or refusal
and given a reasonable period to correct such problem; willful misfeasance or
nonfeasance of duty intended to injure or having the effect of injuring the
business or business
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opportunities of the Employer, Holdings, or any of its subsidiaries; or
conviction of the Employee of a crime that materially adversely affects the
business of the Employer, Holdings, or any of its subsidiaries, or the
Employee's ability to perform his duties and responsibilities as contemplated
by this Employment Agreement.
9.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 9.1, 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.
9.3 Should employment be terminated without cause by the Employer,
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 any 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 X
Miscellaneous Provisions
10.1 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.
2780 Waterfront Parkway, East Drive
Suite 325
Indianapolis, IN 46214
Attention: President
If to the Employee, to: Tracy L. Shellabarger
7439 Cherryhill Drive
Indianapolis, IN 46254
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.
10.2 This Agreement supersedes all other oral and written
agreements between the parties with regard to the Employer's employment of the
Employee, and this Agreement contains
9
<PAGE> 10
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.
10.3 Based upon and subject to the correctness of the Employee's
representations and warranties to the Employer as set forth in Section 8.3, and
in Employee's Pre-Employment Application, the Employer hereby agrees that in
the event of any claims made against the Employee by any 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 misappropriated any trade secrets,
violated any such agreement, or misappropriated proprietary documents.
10.4 This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
10.5 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /S/ Keith Busse
-------------------------------------
KEITH BUSSE, President
DATE: July _______, 1994
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<PAGE> 11
HOLDINGS:
STEEL DYNAMICS HOLDINGS, INC.
BY: /S/ Keith Busse
-------------------------------------
KEITH BUSSE, President
DATE: July ______, 1994
EMPLOYEE:
/S/ Tracy L. Shellabarger
------------------------------------------
TRACY L. SHELLABARGER
DATE: July ______, 1994
11
<PAGE> 12
EXHIBIT A
PROMISSORY NOTE
$750,000 Indianapolis, Indiana
July ______, 1994
For value received, ______________________ ("Purchaser") promises to
pay to the order of Steel Dynamics Holdings, Inc., an Indiana corporation (the
"Company"), the aggregate principal sum of $750,000. This Note was issued
pursuant to and is subject to the terms of stock purchase provisions of that
certain Employment Agreement, dated as of July 26, 1994, between the Company
and Purchaser.
Interest will accrue on the outstanding principal amount of this Note
at a rate equal to the lesser of (i) 7% per annum or (ii) the highest rate
permitted by applicable law, and shall be payable on July 26 of each year,
beginning July 26, 1995.
The entire principal amount of this note will become due and payable
on the earlier to occur of (a) July 26, 1998 or (b) the date Purchaser is no
longer employed by the Company or any of its Subsidiaries. This Note may be
prepaid in whole or in part without premium or penalty.
The amounts due under this Note are secured by the Executive's pledge
of 10,000 shares of the Company's Common Stock that he purchased in connection
herewith.
In the event Purchaser fails to pay any amounts due hereunder when
due, Purchaser shall pay to the holder hereof, in addition to such amounts due,
all costs of collection, including reasonable attorneys fees.
Purchaser, or his successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Notice or release security for this Note, all without
in any way affecting the liability of Purchaser hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of Indiana.
/s/ Tracy L. Shellabarger
------------------------------------
Tracy L. Shellabarger
<PAGE> 13
EXHIBIT B
STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of July 26, 1994, between Tracy L.
Shellabarger ("Pledgor"), and Steel Dynamics Holdings, Inc., an Indiana
corporation (the "Company").
The Company and Pledgor are parties to an Employment Agreement, dated
July 26, 1994, pursuant to which Pledgor purchased 10,000 shares of the
Company's Common Stock, $.001 par value (the "Pledged Shares"), for an
aggregate purchase price of $750,010.00. The Company has allowed Pledgor to
purchase the Pledged Shares by delivery to the Company of $10.00 in cash plus a
promissory note (the "Note") in the aggregate principal amount of $750,000.
This Pledge Agreement provides the terms and conditions upon which the Note is
secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note as
payment for the Pledged Shares, Pledgor and the Company hereby agree as
follows:
1. Pledge. Pledgor hereby pledges to the Company, and grants tot
he Company a security interest in, the Pledged Shares as security for the
prompt and complete payment when due of the unpaid principal of and interest on
the Note.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment sufficient
to transfer title thereto to the Company.
3. Voting Rights; Cash Dividends. Notwithstanding anything to
the contrary contained herein, during the term of this Pledge Agreement until
such time as there exists a default in the payment of principal or interest on
the Note or any other default under the Note, Pledgor shall be entitled to all
voting rights with respect to the Pledged Shares and shall be entitled to
receive all cash dividends paid in respect of the Pledged Shares. Upon the
occurrence of and during the continuance of any such default, the Company shall
retain all such cash dividends payable on the Pledged Shares as additional
security hereunder.
4. Stock Dividends; Distributions, etc. If, while this Pledge
Agreement is in effect, Pledgor becomes entitled to receive or receives any
securities or other property in addition to, in substitution of, or in exchange
for any of the Pledged Shares (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a stock dividend or
otherwise), Pledgor shall accept such securities or other property on behalf of
and for the benefit
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<PAGE> 14
of the Company as additional security for Pledgor's obligations under the Note
and shall promptly deliver such additional security to the Company together
with duly executed forms of assignment, and such additional security shall be
deemed to be part of the Pledged Shares hereunder.
5. Default. If Pledgor defaults in the payment of the principal
or interest under the Note as it becomes due (whether upon demand, acceleration
or otherwise) or any other event of default under the Note occurs (including
the bankruptcy or insolvency of Pledgor), the Company may exercise any and al
the rights, powers and remedies of any owner of the Pledged Shares (including
the right to vote the shares and receive dividends and distributions with
respect to such shares) and shall have and may exercise without demand any and
all the rights and remedies granted to a secured party upon default under the
Uniform Commercial Code of the State of Indiana or otherwise available to the
Company under applicable law. Without limiting the foregoing, the Company is
authorized to sell, assign and deliver at its discretion, from time to time,
all or any part of the Pledged Shares at any private sale or public auction, on
not less than ten days written notice to Pledgor, at such price or prices and
upon such terms as the Company may deem advisable. Pledgor shall have no right
to redeem the Pledged Shares after any such sale or assignment. At any such
sale or action, the Company may bid for, and become the purchaser of, the whole
or any part of the Pledged Shares offered for sale. In case of any such sale,
after deducting the costs, attorneys' fees and other expenses of sale and
delivery, the remaining proceeds of such sale shall be applied to the principal
of and accrued interest on the Note; provided, however, that after payment in
full of the indebtedness evidenced by the Note, the balance of the proceeds of
sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to
the return of any of the Pledged Shares remaining in the hands of the Company.
6. Payment of Indebtedness and Release of Pledged Shares. Upon
payment in full of the indebtedness evidenced by the Note, the Company shall
surrender the Pledged Shares to Pledgor together with all forms of assignment.
7. Further Assurances. Pledgor agrees that at any time and from
time to time upon the written request of the Company, Pledgor will execute and
deliver such further documents and do such further acts and things as the
Company may reasonably request in order to effect the purposes of this Pledge
Agreement.
8. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9. No Waiver; Cumulative Remedies. The Company shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company, and then only to the extent
2
<PAGE> 15
therein set forth. A waiver by the Company, and then only to the extent
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Company would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of the Company, any
right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right or further exercise thereof
of the exercise of any right, power or privilege. The rights and remedies
herein provided are cumulative and may be exercise singly or concurrently, and
are not exclusive of any rights or remedies provided by law.
10. Waivers, Amendments; Applicable Law. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto. This
Agreement and all obligations of the pledgor hereunder shall together with the
rights and remedies of the Company hereunder, inure to the benefit of the
Company and its successors and assigns. This Pledge Agreement shall be
governed by, and be construed and interpreted in accordance with, the laws of
the State of Indiana.
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the
date first above written.
/s/ Tracy L. Shellabarger
-----------------------------------
Tracy L. Shellabarger
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith Busse
BY
---------------------------------
ITS
-------------------------------
3
<PAGE> 1
Exhibit 10.27
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of June
__, 1994, by and among Steel Dynamics Holdings, Inc., an Indiana corporation
(the "Company"), each of the Persons listed on Schedule I attached hereto (the
"Bain Group"), General Electric Capital Corporation, a New York corporation
("GECC"), each of the Persons listed on Schedule II attached hereto (the
"Whitney Group"), Heavy Metal, L.C., a Virginia limited liability company
("Heavy Metal"), each of the persons listed on Schedule IV attached hereto (the
"Keylock Group"), Low Cost Limited Partnership, an Ohio limited partnership
("Low Cost"), each of the persons listed on Schedule IV attached hereto (the
"Subdebt Group"), and each of the persons set forth on Schedule V attached
hereto (the "Management Group"). The entities and individuals which compose
the Bain Group, GECC, Heavy Metal, the Keylock Group, Low Cost and the
Management Group are collectively referred to herein as the "Stockholders," and
each as a "Stockholder." Unless otherwise indicated herein, capitalized terms
used herein are defined in Section 7 hereof.
WHEREAS, the Company, as of the date hereof, is authorized by its
Articles of Incorporation to issue capital stock consisting of 10,000,000
shares of its Class A Common Stock, par value $.01 per share (the "Class A
Common"), and 500,000 shares of its Class B Common Stock, par value $.01 per
share (the "Class B Common");
WHEREAS, pursuant to a Stock Purchase Agreement dated the date
hereof among the Bain Group, GECC, Heavy Metal, the Keylock Group, the Whitney
Group, Low Cost, the Company and certain other parties (the "Purchase
Agreement"), the Bain Group, GECC, Heavy Metal, the Keylock Group, Low Cost and
the Whitney Group will purchase from the Company shares of Class A Common, and
the execution and delivery of this Agreement is a condition to consummation of
the transactions contemplated by the Purchase Agreement;
WHEREAS, pursuant to a Subordinated Note and Warrant Purchase
Agreement dated the date hereof (the "Subordinated Loan Agreement"), each
Stockholder of the Subdebt Group will purchase from the Company from time to
time warrants to purchase Class A Common (each such warrant, a "Class A
Warrant"), and the execution and delivery of this Agreement is a condition to
the consummation of the transactions contemplated by the Subordinated Loan
Agreement;
WHEREAS, pursuant to a warrant purchase agreement, Mellon Bank,
N.A., or an affiliate thereof, will purchase from the Company warrants to
purchase Class B Common (each such warrant, a "Class B Warrant") (the Class A
Warrants and the Class B Warrants, each a
<PAGE> 2
"Warrant" and collectively the "Warrants");
WHEREAS, each Stockholder of the Management Group owns shares of
Class A Common; and
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Stockholder
Shares and the Warrants and to provide for certain rights and obligations with
respect thereto as hereinafter provided;
NOW, THEREFORE, the parties to this Agreement hereby agree as
follows:
i. Voting Agreement.
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this Section 1 cease to be effective,
each holder of Stockholder Shares shall vote all of his Stockholder Shares and
shall take all other necessary or desirable actions within his control (whether
in his capacity as a shareholder or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary and desirable actions
within its control (including, without limitation, calling special Board and
shareholder meetings), so that:
(i) subject to Section 1(d) below, the authorized number of
directors on the Board shall be established at nine directors;
(ii) the following persons shall be elected to the Board:
(A) one representative designated by the holders of a
majority of the Bain Shares;
(B) one representative designated by the holders of a
majority of the GECC Shares;
(C) one representative designated by the holders of a
majority of the Heavy Metal Shares;
(D) one representative designated by the holders of a
majority of the Keylock Shares;
(E) one representative, who shall be a Senior Manager,
designated by the holders of a majority of the Busse Shares;
(F) one representative, who shall be a Senior Manager,
designated by
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<PAGE> 3
the holders of a majority of the Millet Shares;
(G) one representative, who shall be a Senior Manager,
designated by the holders of a majority of the Teets Shares;
(H) one representative, who shall be a Senior Manager,
designated by the holders of a majority of the Busse Shares,
Millett Shares and Teets Shares (the representatives designated
pursuant to clauses (E) through (H) hereof, collectively the
"Management Directors"); and
(I) one representative designated by the holders of a
majority of the Whitney Shares;
(iii) the removal from the Board (with or without cause) of (a) any
representative designated hereunder by the holders of a majority of the
Bain Shares, the GECC Shares, the Heavy Metal Shares, the Keylock Shares,
the Busse Shares, the Millett Shares, the Teets Shares or the Whitney
Shares shall be at the written request of such holders, but only upon
such written request and under no other circumstances (determined on the
basis of a vote of the holders of a majority of such shares held by such
holders); provided, that if any director elected pursuant to clause (ii)
(E) through (H) above ceases to be a Senior Manager of the Company, such
director shall be removed as a director;
(iv) in the event that any representative designated hereunder by
the holders of a majority of the Bain Shares, the GECC Shares, the Heavy
Metal Shares, the Keylock Shares, the Busse Shares, the Millett Shares,
the Teets Shares or the Whitney Shares for any reason ceases to serve as
a member of the Board during his term of office, the resulting vacancy on
the Board shall be filled by a representative designated by such holders,
respectively, as provided hereunder;
(v) the Company complies with all covenants, agreements and
obligations of the Company set forth herein;
(vi) the Company elects to, and removes from, the board of
directors of the Sales Subsidiary those individuals elected to, and
removed from, the board of directors of the Company; and
(vii) the Company causes the Sales Subsidiary to elect to, and
remove from, the board of directors of the Operating Company those
individuals elected to, and removed from, the board of directors of the
Sales Subsidiary.
(b) The Company shall pay, and cause the Sales Subsidiary and the
Operating Company to pay, the reasonable out-of-pocket expenses incurred by
each director of the Company, the Sales Subsidiary and the Operating Company in
connection with attending the
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<PAGE> 4
meetings of the respective boards of directors and any committees thereof.
(c) The provisions of this Section 1 shall terminate
automatically and be of no further force and effect upon the earlier of (i) the
tenth anniversary of the date hereof unless extended by the parties hereto in
accordance with Section 23-1-31-2 of the Indiana Business Corporation Law (or
any similar provision then in force) and (ii) the realization of a Public
Float.
(d) If any group of holders of Stockholder Shares fails to
designate a representative to fill a directorship or committee membership
pursuant to the terms of this Section 1 within 30 days after such vacancy
occurs, the election of a person to such directorship shall be accomplished in
accordance with the Company's By-Laws and applicable law; provided, that in the
event that such group of holders then designates a representative to fill such
membership, such designee will replace the person elected.
(e) The Management Directors shall have sole discretion (A) to
cause the Company to exercise or refrain from exercising the Company's rights
under Section 2 of the Purchase Agreement and to determine the timing thereof
and (B) to cause the Company to consent to, or refrain from consenting to, any
modification, amendment or waiver of any provision of the Purchase Agreement or
the Escrow Agreement (as defined in the Purchase Agreement).
ii. Restrictions on Transfer of Stockholder Shares
and Warrants.
(a) Transfer of Stockholder Shares and Warrants. No holder of
Stockholder Shares or Warrants shall sell, transfer, assign, pledge or
otherwise dispose of (a "Transfer") any interest in any Stockholder Shares or
Warrants except pursuant to an Exempt Transfer or in accordance with the
provisions of this Section 2.
(b) Notice of Proposed Transfer. At least 20 days prior to
making any Transfer of any Stockholder Shares or Warrants (other than an Exempt
Transfer), the transferring holder of Stockholder Shares which are not Warrant
Shares (the "Transferring Stockholder"), or the transferring holder of Warrants
or Warrant Shares (the "Transferring Warrant Holder"), as the case may be,
shall deliver a written notice (the "Offer Notice") to all other holders of
Stockholder Shares or Warrants. The Offer Notice shall disclose in reasonable
detail the proposed number of Stockholder Shares which are not Warrant Shares
(the "Offered Stockholder Shares"), Warrants (the "Offered Warrants") or
Warrant Shares (the "Offered Warrant Shares") to be transferred, the price at
which such securities are proposed to be sold (the "Offer Price") and other
proposed terms and conditions of the Transfer. Notwithstanding the previous
sentence, a holder of Class B Warrants or Class B Warrant Shares which proposes
to transfer such Class B Warrants or Class B Warrant Shares shall be deemed to
be a "Transferring Stockholder" (and not a "Transferring Warrantholder"), and
such Class B Warrants or Class B Warrant Shares shall be deemed to be Offered
Stockholder Shares (and not Offered Warrants or Offered Warrant Shares), for
purposes of Sections 2(b), 2(c) and 2(d) hereof.
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<PAGE> 5
(c) Stockholder Shares First Offer Right.
(i) Any one or more of the holders of Stockholder Shares or
Warrants (other than the Transferring Stockholder) may individually or
collectively elect to purchase all (but not less than all) of the Offered
Stockholder Shares for the Offer Price and on the other terms and
conditions set forth in the Offer Notice by delivering written notice
(the "Stockholder Acceptance Notice") of such election to the
Transferring Stockholder within 20 days after the delivery of the Offer
Notice. In the event more than one holder of Stockholder Shares or
Warrants elects to participate in the purchase set forth in the
Stockholder Acceptance Notice, each participating holder shall be
entitled to purchase his Pro Rata Share of the Offered Stockholder
Shares, or such other portion as all of such participating holders agree.
Each holder's "Pro Rata Share" shall be that number of Offered
Stockholder Shares equal to the total number of Offered Stockholder
Shares multiplied by a fraction, the numerator of which is the number of
shares of Stockholder Shares (treating for this purpose the holders of
Warrants as holding the maximum number of Warrant Shares then issuable
upon the exercise of such Warrants) then held by the participating
holder, and the denominator of which is the total number of Stockholder
Shares (including the Warrant Shares deemed to be held by holders of
Warrants) held by all participating holders;
(ii) If Stockholder Acceptance Notices with respect to all Offered
Stockholder Shares are not given within the time period set forth in
Section 2(c)(i), the Transferring Stockholder may, within 90 days after
the end of the 20-day period following delivery of the Offer Notice,
Transfer all (but not less than all) of the Offered Stockholder Shares to
one or more third parties at a price no less than the Offer Price and on
other terms no more favorable to the transferees than the terms contained
in the Offer Notice;
(iii) All holders of Stockholder Shares and Warrants to which an
Offer Notice is given shall maintain in confidence and shall not disclose
or permit to be disclosed to any third party (other than such holder's
legal counsel, accountants or other agents) the Offer Price and the other
terms and conditions contained in the Offer Notice and, if any holder of
Stockholder Shares or Warrants fails to comply with the foregoing
sentence, then such holder shall not be entitled to exercise such rights
with respect to the transaction contemplated by the Offer Notice and in
the next succeeding Offer Notice which may be given by a holder of
Stockholder Shares or Warrants hereunder;
(iv) All Transfers of Offered Stockholder Shares pursuant to
Section 2(c)(i) shall be consummated as soon as practicable after the
delivery of the applicable Stockholder Acceptance Notice, but in any
event within 90 days after delivery of the Offer Notice; and
(v) The Transferring Stockholder's ability to effect any Transfer
pursuant to this Section 2(c) to the other holders of Stockholder Shares
or Warrants or any third party
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<PAGE> 6
shall in all cases be subject to the participation rights of other
Stockholders and Warrant Holders pursuant to Section 2(e) below.
(d) Warrant and Warrant Shares First Offer Right.
(i) Any one or more of the holders of Stockholder Shares or
Warrants may, individually or collectively, elect to purchase all (but
not less than all) of the Offered Warrants or Offered Warrant Shares for
the Offer Price and on the other terms and conditions set forth in the
Offer Notice by delivering written notice (the "Warrant Acceptance
Notice") of such election to the Transferring Warrant Holder as soon as
practicable but in any event within 20 days after the delivery of the
Offer Notice; provided, however, that holders of Heavy Metal/Keylock
Shares shall have the right (subject to the following sentence) to
purchase Offered Shares and Offered Warrant Shares prior to the right of
any other holder of Stockholder Shares or Warrants to purchase Offered
Shares or Warrant Shares. In the event more than one holder of Heavy
Metal/Keylock Shares elects to participate in the purchase set forth in
the Warrant Acceptance Notice, each participating holder shall be
entitled to purchase his Pro Rata Share of the Offered Warrants or the
Offered Warrant Shares, or such other portion as all of such
participating holders agree. In the event and to the extent that (A)
holders of Heavy Metal/Keylock Shares give Warrant Acceptance Notices
with respect to less than all of the Offered Warrants or Offered Warrant
Shares and (B) more than one other holder of Warrants or Stockholder
Shares ("Remaining Holders") gives Warrant Acceptance Notices with
respect to all Warrants or Warrant Shares for which Warrant Acceptance
Notices were not given by holders of Heavy Metal/Keylock Shares (the
"Remaining Securities"), each participating Remaining Holder shall be
entitled to purchase his Pro Rata Share of the Remaining Securities, or
such other portion as all of such participating Remaining Holders agree.
For the purposes of this Section 1(d), the "Pro Rata Share" of each
holder of Heavy Metal/Keylock Shares or Remaining Holders shall be (i)
with respect to Offered Warrants, that portion of the Offered Warrants
attributable to that number of Warrant Shares obtainable upon exercise of
such Offered Warrants multiplied by a fraction, the numerator of which is
the number of Stockholder Shares (treating for this purpose the holders
of Warrants as holding the maximum number of Warrant Shares issuable upon
the exercise of such Warrants) then held by the participating holders of
Heavy Metal/Keylock Shares or Remaining Holders, as the case may be, and
the denominator of which is the total number of Stockholder Shares
(including the Warrant Shares deemed to be held by holders of Warrants)
held by all participating holders of Heavy Metal/Keylock Shares or
Remaining Holders, as the case may be, and (ii) with respect to Offered
Warrant Shares, that number of Offered Warrant Shares equal to the total
number of Offered Warrant Shares multiplied by a fraction, the numerator
of which is the number of Stockholder Shares (treating for this purpose
the holders of Warrants as holding the maximum number of Warrant Shares
issuable upon the exercise of such Warrants) then held by the
participating holders of Heavy Metal/Keylock Shares or Remaining Holders,
as the case may be, and the denominator of which is the total number
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<PAGE> 7
of Stockholder Shares (including Warrant Shares deemed to be held by
holders of Warrants) held by all participating holders of Heavy
Metal/Keylock Shares or Remaining Holders, as the case may be;
(ii) If Warrant Acceptance Notices with respect to all Offered
Warrants or Offered Warrant Shares are not given within the time period
set forth in this Section 2(d), the Transferring Warrant Holder may,
within 90 days after the end of the 20-day period following delivery of
the Offer Notice, Transfer all (but not less than all) of the Offered
Warrants or Offered Warrant Shares to one or more third parties at a
price no less than the Offer Price and on other terms and conditions no
more favorable to the transferees than the terms and conditions contained
in the Offer Notice;
(iii) All holders of Heavy Metal/Keylock Shares, other Stockholder
Shares or Warrants to which an Offer Notice is given shall maintain in
confidence and shall not disclose or permit to be disclosed to any third
party (other than such holders' legal counsel, accountants or other
agents) the Offer Price and other terms and conditions contained in the
Offer Notice and, if any holder of Heavy Metal/Keylock Shares,
Stockholder Shares or Warrants fails to comply with the foregoing
sentence, then such holder shall not be entitled to exercise such rights
with respect to the transaction contemplated by the Offer Notice and in
the next succeeding Offer Notice which may be given by a holder of
Stockholder Shares or Warrants hereunder;
(iv) All Transfers of Offered Warrants and Offered Warrant Shares
shall be consummated as soon as practicable after the delivery of the
applicable Warrant Acceptance Notice, but in any event within 90 days
after delivery of the Offer Notice; and
(v) The Transferring Warrant Holder's ability to effect any
Transfer pursuant to this Section 2(d) shall in all cases be subject to
the participation rights of other Stockholders and Warrant Holders
pursuant to Section 2(e) below.
(e) Participation Rights. Each holder of Stockholder Shares and
Warrants (collectively, "Qualifying Shares") (other than the Transferring
Stockholder or Transferring Warrant Holder and any holders who have elected to
purchase Offered Stockholder Shares, Offered Warrants or Offered Warrant Shares
pursuant to Sections 2(c) or 2(d)) may elect to participate as a selling holder
in the contemplated Transfer by delivering written notice to the Transferring
Stockholder or Transferring Warrant Holder within 20 days after delivery of the
Offer Notice. If any holders of Qualifying Shares have elected to participate
in such Transfer, the Transferring Stockholder or Transferring Warrant Holder
and such other holders shall be required to include in the contemplated
Transfer, at the same price and on the same terms, a number or portion of such
Stockholder Shares or Warrants (the "Included Shares") equal to the product of
(i) the quotient determined by dividing the percentage of the total number of
outstanding Qualifying Shares (treating, for this purpose, the holders of
Warrants which are
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<PAGE> 8
Qualifying Shares as holding the maximum number of Warrant Shares obtainable
upon exercise of such Warrants) owned by such person by the aggregate
percentage of the total number of outstanding Qualifying Shares owned by the
Transferring Stockholder or Transferring Warrant Holder and all holders
electing to participate in such transfer and (ii) the aggregate number of
Offered Stockholder Shares and Offered Warrant Shares (treating as Offered
Warrant Shares the Warrant Shares obtainable upon the exercise of all Offered
Warrants); provided, however, that (A) if Warrants are proposed to be
transferred by the Transferring Warrant Holder, then Qualifying Shares which
are not Warrants shall be sold in the contemplated Transfer for a per share
price equal to the price at which the Warrants are proposed to be sold, plus
the per share amount payable to the Company upon the exercise of such Warrants,
and (B) if Stockholder Shares are being Transferred by the Transferring
Stockholder, then Qualifying Shares which are Warrants shall be sold in the
contemplated Transfer for a per share price equal to the price at which the
Stockholder Shares are proposed to be sold, less the amount per share payable
to the Company upon the exercise of such Warrants.
For example, if the contemplated Transfer involves 100 Offered Stockholder
Shares and if the Transferring Stockholder at such time owns 30% of all
Qualifying Shares and if one other holder elects to participate and owns
20% of all such Qualifying Shares, the Transferring Stockholder would be
entitled to sell 60 shares ((30% divided by 50%) x 100 shares) and the
other holder would be entitled to sell 40 shares ((20% divided by 50%) x
100 shares).
Each holder of Qualifying Shares participating as a selling Stockholder or
Warrant Holder in any proposed transfer pursuant to this Section 2(e)
(including, without limitation, the Transferring Stockholder or Transferring
Warrant Holder) shall use his or its reasonable efforts to obtain the agreement
of the prospective transferee(s) to the participation of the other holders in
any contemplated Transfer. No such Transferring Stockholder or Transferring
Warrant Holder shall transfer any of his or its Qualifying Shares to the
prospective transferee(s) unless the prospective transferee signs a counterpart
of this Agreement, in form and substance reasonably satisfactory to the
Company, and agrees to be bound thereby and (A) the prospective transferee(s)
agrees to allow the participation of the other holders or (B) the Transferring
Stockholder or Transferring Warrant Holder agrees to purchase the number of
Qualifying Shares from the other holders which such other holders would have
been entitled to sell pursuant to this Section 2(e). In the event of a
Transfer in which Qualifying Shares are included, all Stockholders (including
the Transferring Stockholder or Transferring Warrant Holder) participating in
such Transfer shall share the out-of- pocket expenses of the Transferring
Shareholder or Transferring Warrant Holder (including, without limitation,
legal, accounting, consulting and brokerage expenses), pro rata based on the
number of Qualifying shares, Warrants and Stockholder Shares included in the
Transfer.
(f) Permitted Transfers. The restrictions contained in this
Section 2 shall not apply to (i) any Transfer of Stockholder Shares or Warrants
by any holder thereof to one or more of its Affiliates, (ii) a Public Sale,
(iii) a Sale of the Company, (iv) a Transfer of Stockholder Shares or Warrants
between or among members of the Bain Group, (v) a Transfer of Stockholder
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<PAGE> 9
Shares or Warrants between or among members of the Keylock Group, (vi) a
Transfer of Stockholder Shares or Warrants between or among members of the
Whitney Group (including for this purpose the Whitney Subordinated Debt Fund,
L.P.), (vii) a Transfer of Stockholder Shares or Warrants between or among
members of the Management Group, (viii) a Transfer of Stockholder Shares or
Warrants by any holder thereof by will or pursuant to the laws of descent and
distribution to, between or among such Stockholder's Family Group, (ix) a
Transfer pursuant to Sections 1 or 2 of the Purchase Agreement, (x) a Transfer
by a Stockholder to a member of such Stockholder's Family Group, (xi) any
transfer of Stockholder Shares or Warrants pursuant to any employment agreement
executed by the Company or its Subsidiaries, (xii) a Transfer of Warrants
between or among Warrant Holders, or (xiii) a Transfer of Warrants or
Stockholder Shares in conjunction with a sale of the Company's subordinated
indebtedness or senior indebtedness. Any Transfer permitted by this Section
2(f) is referred to herein as an "Exempt Transfer."
(g) Termination of Restrictions. The restrictions set forth in
Sections 2(a) through 2(f) shall continue with respect to each Stockholder
Share and Warrant until the earlier of (i) the date on which such Stockholder
Share or Warrant has been transferred in a Public Sale, (ii) the consummation
of a Sale of the Company and (iii) the realization of a Public Float.
(h) Confidential Information. Prior to the provision of
confidential non-public information regarding the Company and/or its
Subsidiaries to a proposed transferee of any Stockholder Share or Warrant by
any holder thereof, such holder shall cause such proposed transferee to agree
in writing to be bound by an appropriate confidentiality and nondisclosure
agreement pursuant to which such proposed transferee will agree not to disclose
or allow the disclosure of any nonpublic information obtained by such proposed
transferee; provided, that each such proposed transferee may disclose such
information if required by law or court order.
(i) Additional Transfer Restrictions. Notwithstanding any
provision in this Agreement to the contrary, no holder of Stockholder Shares or
any Warrant shall Transfer any such Stockholder Shares or Warrant (i) to any
third party, if such third party (or any member of such third party's Family
Group or any Affiliate of such third party) is engaged, directly or indirectly,
whether as an owner of 10% or more of its voting stock or an employee, in the
production of raw steel, (ii) unless the transferor provides, if required by
the Company, an opinion of counsel satisfactory to the Company that such
Transfer is made in compliance with all applicable Federal and state securities
laws and regulations, and (iii) unless the transferee and the Company (on
behalf of itself and the other parties hereunto) execute and deliver a written
instrument, in form and substance satisfactory to the Company, acknowledging
the receipt of a copy of the provisions and restrictions contained in this
Agreement and agreeing to comply herewith and be bound hereby. Notwithstanding
any provision in this Agreement to the contrary, no holder of Stockholder
Shares or Warrants shall transfer any such Stockholder Shares or Warrants while
the Escrow Agreement (as defined in the Purchase Agreement) remains in effect,
unless the transferee and the Company (on behalf of itself and the other
parties hereto) execute and deliver a written instrument, in form and substance
satisfactory to the Company,
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<PAGE> 10
acknowledging receipt of a copy of the provisions and restrictions of Section 2
of the Purchase Agreement and the agreement of the transferee to comply
therewith and be bound thereby and by the provisions thereof to the extent the
securities to be Transferred to such transferee are subject thereto.
iii. Sale of the Company.
(a) In the event the Board approves a Sale of the Company and
such Sale of the Company is not prohibited under Section 5(d) below (an
"Approved Sale"), each holder of the Stockholder Shares will consent to and
raise no objections to the Approved Sale. If the Approved Sale is structured
as a (i) merger or consolidation, each holder of Stockholder Shares shall waive
all dissenter rights, appraisal rights or similar rights in connection with
such merger or consolidation or (ii) sale of stock (whether by merger,
consolidation, reorganization or otherwise), each of the holders of Stockholder
Shares and the holders of the Warrants will agree to sell all of their
Stockholder Shares and Warrants and rights to acquire Stockholder Shares on the
reasonable terms and conditions approved by the Board. Each of the holders of
the Stockholder Shares and Warrants will use their reasonable efforts to
cooperate in the Approved Sale and will take all necessary or desirable actions
in connection with the consummation of the Approved Sale as are reasonably
requested by the Board. If the Approved Sale is structured as a sale of
assets, each of the holders of Stockholder Shares will take all actions
necessary to cause a liquidation of the Company following the consummation of
such Approved Sale. Notwithstanding the foregoing provisions of this Section
3(a), any holder of Busse Shares, Teets Shares or Millett Shares may elect that
this Section 3(a) shall not apply to such holder with respect to an Approved
Sale, except to the extent that the failure of such holder to consent to and
raise no objections to such Approved Sale would have a material adverse
economic impact on the other holders of Stockholder Shares.
(b) The obligations of the holders of the Stockholder Shares with
respect to an Approved Sale are also subject to the satisfaction of the
following conditions: (i) the consideration received in an Approved Sale shall
be distributed among the holders of Stockholder Shares in the manner which such
proceeds would be distributed in a complete liquidation of the Company pursuant
to the rights and preferences set forth in the Articles of Incorporation as in
effect immediately prior to such Approved Sale; and (ii) all holders of then
currently exercisable rights to acquire, directly or indirectly, Stockholder
Shares will be given an opportunity either to (A) exercise such rights prior to
the consummation of the Approved Sale and participate in such sale as holders
of Stockholder Shares or (B) upon the consummation of the Approved Sale,
receive in exchange for such rights consideration equal to the amount
determined by multiplying (1) the same amount of consideration per Stockholder
Share receivable by the holders of Stockholder Shares in connection with the
Approved Sale, less the exercise price or conversion price per Stockholder
Share of such right to acquire, directly or indirectly, Stockholder Shares by
(2) the number of shares of such class of Stockholder Shares represented by
such rights.
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(c) If the Company or the Stockholders enter into any negotiation
or transaction for which Rule 506 promulgated under the Securities Act (or any
similar rule then in effect) may be available with respect to such negotiation
or transaction (including a merger, consolidation or other reorganization), the
holders of Stockholder Shares will, at the request of the Board, appoint a
purchaser representative (as such term is defined in Rule 501 promulgated under
the Securities Act) reasonably acceptable to the Board. If any holder of
Stockholder Shares appoints the purchaser representative designated by the
Board, the Company will pay the fees of such purchaser representative, but if
any holder of Stockholder Shares or Stockholder Shares declines to appoint the
purchaser representative designated by the Board, such holder will appoint
another purchaser representative (reasonably acceptable to the Board) and such
holder will be responsible for the fees of the purchaser representative so
appointed.
(d) The Company or the acquiring party will pay the costs of any
sale of Stockholder Shares pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Stockholder Shares;
provided, that if it is not possible for the Company or the acquiring party to
pay such costs, each holder of Stockholder Shares will bear its pro rata share
(based upon the aggregate proceeds received by such holder) of such costs to
the extent not otherwise paid by the Company or the acquiring party. Costs
incurred by any holder of Stockholder Shares on its own behalf will not be
considered costs of the transaction hereunder.
(e) The provisions of this Section 4 shall terminate upon the
earlier to occur of (i) the consummation of a Sale of the Company and (ii) the
realization of a Public Float.
iv. Limited Preemptive Rights.
(a) Except for the issuance of the Class A Common or Class B
Common (i) to the Company's or its Subsidiaries' employees (or pursuant to
options or rights granted to persons who were employees at the Company or its
Subsidiaries as of the date of grant) pursuant to an employee stock purchase or
option plan adopted by the Board, (ii) pursuant to a Public Offering, (iii) in
connection with an acquisition by the Company or its Subsidiaries, (iv) upon
the exercise of any Warrant, (v) pursuant to Section 2 of the Purchase
Agreement, or (vi) pursuant to a stock split, if the Company or any of its
Subsidiaries authorizes the issuance or sale of any of its equity securities
(other than as a dividend on the outstanding Common Stock) to any Person, the
Company shall first offer to sell to each holder of Stockholder Shares or
Warrants (an "Eligible Holder") a portion of such stock or securities equal to
the quotient determined by dividing (A) the number of Stockholder Shares held
by such holder by (B) the total number of outstanding Stockholder Shares
(treating for purposes of this sentence the holder of Warrants as holding the
maximum number of Warrant Shares into which such Warrants are exercisable).
Each Eligible Holder shall be entitled to purchase such stock or securities at
the most favorable price and on the most favorable terms as such stock or
securities are to be offered to such other Persons. If such stock or
securities are being offered in a manner such that each offeree purchasing such
stock or securities is required to purchase a "strip" of more than one type of
stock and/or securities, each Eligible Holder exercising his or its limited
preemptive rights under this Section
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<PAGE> 12
4 shall likewise be required to purchase each of the shares of stock and/or
securities included in the strip if any are purchased. The purchase price for
all stock and securities offered to the purchasers shall be payable in cash.
(b) In order to exercise its purchase rights hereunder, an
Eligible Holder shall within 15 days after receipt of written notice from the
Company describing in reasonable detail the stock or securities being offered,
the purchase price thereof, the payment terms and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to Eligible Holders is
not fully subscribed by such holders, the remaining stock and securities shall
be reoffered by the Company to the holders purchasing their full allotment upon
the terms set forth in this Section, except that such holders must exercise
their purchase rights within five days after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the
Eligible Holders have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the Eligible Holders
pursuant to the terms of this Section.
(d) The provisions of this Section 4 will terminate upon the sale
of common stock of the Company to the public pursuant to an effective
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act.
v. Covenants.
(a) Financial Statements and Other Information. The Company
shall deliver to each Qualified Holder:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each
case comparisons to the corresponding period in the preceding fiscal year
(except for the balance sheet, which shall set forth in comparative form
the corresponding balance sheet as of the prior fiscal year end), and all
such statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to the absence of
footnote disclosures and to normal year-end adjustments;
(ii) as soon as available but in any event within 30 days after
the end of each quarterly accounting period in each fiscal year,
unaudited consolidating and consolidated
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<PAGE> 13
statements of income and cash flows of the Company and its Subsidiaries
for such quarterly period and for the period from the beginning of the
fiscal year to the end of such quarter, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such quarterly period, setting forth in each case comparisons to
the annual budget and to the corresponding period in the preceding fiscal
year (except for the balance sheet, which shall set forth in comparative
form the corresponding balance sheet as of the prior fiscal year end),
and all such statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied, subject to the
absence of footnote disclosures and to normal year-end adjustments;
(iii) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
annual budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by (A) with respect to the consolidated portions
of such statements, an opinion of an independent accounting firm of
national recognized standing and (B) a copy of such firm's annual
management letter to the Board;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other information concerning significant aspects of
the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials
provided hereunder); and
(v) at least 30 days prior to the beginning of each fiscal year,
an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows and balance sheets), and promptly upon preparation
thereof any other budgets prepared by the Company and any revisions of
such annual or other budgets.
Except as otherwise required by law or judicial order or decree or
by any governmental agency or authority, each Stockholder entitled to receive
information regarding the Company and its Subsidiaries under this Section 5(a)
shall maintain the confidentiality of and shall not disclose or allow the
disclosure of all nonpublic information obtained by it hereunder; provided that
each such Stockholder may disclose such information if required by law or court
order or in connection with the actual or proposed sale or transfer of any
equity securities of the Company if such Stockholder's transferee agrees in
writing to be bound by the provisions hereof.
(b) Inspection of Property. The Company shall permit any
representative designated by any Qualified Holder, upon reasonable notice and
during normal business hours, to (i) visit and inspect any of the properties of
the Company and its Subsidiaries, (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof or
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<PAGE> 14
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such entities with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries; provided, that clause (ii)
shall be deemed to permit an audit of the books and records of the Company and
its Subsidiaries only by a representative designated a Qualified Holder that is
a party to this Agreement on the date hereof. The presentation of an executed
copy of this Agreement by any Qualified Holder to the Company's independent
accountants shall constitute the Company's permission to its independent
accountants to participate in such discussions.
(c) Board Information. The Company shall deliver to each member
of the Board, (i) as soon as available but in any event within 30 days after
each monthly accounting period in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries, and (ii) any
other information reasonably requested by such member. In addition, each
member of the Board shall have the right to meetings with the Company's
management to discuss performance and other related matters.
(d) Restrictions. Except with the prior written consent of the
holders of 70% of the outstanding Stockholder Shares (other than Warrant
Shares) (excluding (i) any of the Bain/GECC Shares, the Heavy Metal/Keylock
Shares or the Management Shares where the original holders of such group of
Stockholder Shares or its Affiliates or Family Group cease to own at least
two-thirds of such Stockholder Shares originally purchased by such group, and
(ii) any Stockholder Shares held by any Defaulting Purchaser (as defined in
Section 2B of the Purchase Agreement)), the Company shall not, nor permit any
Subsidiary to (except as otherwise provided below):
(i) with respect to the Company only, directly or indirectly
declare or pay any dividends or make any distributions upon any of its
equity securities, except for dividends payable in shares of its Common
Stock issued upon the outstanding shares of its Common Stock;
(ii) directly or indirectly redeem, purchase or otherwise acquire
any of the Company's or any Subsidiary's equity securities (including,
without limitation, warrants, options and other rights to acquire equity
securities), except for (A) repurchases of Class A Common from employees
of the Company and its Subsidiaries upon termination of employment
pursuant to arrangements approved by the Board, including, without
limitation, pursuant to any stock option plan adopted by the Company, or
(B) redemptions or cancellations of shares pursuant to Sections 1 or 2 of
the Purchase Agreement;
(iii) authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of (A) any notes or debt
securities, or (B) any equity securities (or any
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<PAGE> 15
securities convertible into or exchangeable for any equity securities),
the CFO as contemplated by Section 5(h) hereof except (w) pursuant to the
Bank Agreement (as defined in the Stock Purchase Agreement), (x) pursuant
to the Subordinated Loan Agreement (as defined in the Purchase
Agreement), (y) the shares of Class A Common, or options therefor or a
combination thereof, to the CFO as contemplated by Section 5(h), or (z)
any stock option plan adopted by the Company (including the Stock Option
Plan), except, with respect to clause (z), to the extent that the equity
securities issuable upon the exercise of options thereunder exceeds
21,800 shares (adjusted equitably for stock dividends, stock splits and
similar events);
(iv) except pursuant to the Bank Agreement or the Subordinated
Loan Agreement, make any loans or advances to, or guarantees for the
benefit of, any Person, except for (A) reasonable advances to employees
in the ordinary course of business, and (B) guarantees in the ordinary
course of business;
(v) make Investments in excess of $5 million, except for (A)
investments made in connection with the construction of the Project and
(B) Investments having a stated maturity no greater than one year from
the date the Company makes such Investment in (i) obligations of the
United States government or any agency thereof or obligations guaranteed
by the United States government, (2) certificates of deposit of
commercial banks having combined capital and surplus of at least $50
million or (3) commercial paper with a rating of at least "Prime-1" by
Moody's Investor Service, Inc.;
(vi) merge or consolidate with any Person (other than a
wholly-owned Subsidiary);
(vii) sell, lease or otherwise dispose of, or permit any Subsidiary
to sell, lease or otherwise dispose of, more than $5 million of assets of
the Company and its Subsidiaries (computed on the basis of book value,
determined in accordance with generally accepted accounting principles
consistently applied, or fair market value, determined by the Board in
its reasonable good faith judgment) in any transactions or series of
related transactions (other than sales in the ordinary course of
business);
(viii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(ix) acquire any interest in any business (whether by a purchase
of assets, purchase of stock, merger or otherwise), or enter into a joint
venture, involving an aggregate consideration (including the assumption
of liabilities whether direct or indirect) exceeding $2 million in any
one transaction or exceeding $5 million in any twelve-month period;
(x) enter into the ownership, active management or operation of,
(A) any business which is unrelated to the operation of a thin slab cast
mini-mill (the "Business"),
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<PAGE> 16
or (B) any business directly related to the Business whose cost to the
Company or its Subsidiaries exceeds $5 million;
(xi) make any amendment to the Articles of Incorporation or the
Company's By-Laws;
(xii) enter into any transaction with any of its or any
Subsidiary's officers, directors, employees or Affiliates or any
individual related by blood or marriage to any such Person or any entity
in which such Person or individual owns a beneficial interest, or amend
any such existing arrangement, except for (A) normal employment
arrangements and benefit programs on reasonable terms and any such
arrangements in effect as of the date of Closing and previously disclosed
to the Stockholders, (B) the sales agreement between the Company and the
Operating Company, and (C) pursuant to any stock option plan adopted by
the Company, including, without limitation, the Stock Option Plan;
(xiii) make any capital expenditures (including, without limitation,
payments with respect to capitalized leases, as determined in accordance
with generally accepted accounting principles consistently applied)
exceeding $5 million on a consolidated basis for any twelve-month period,
except in connection with the construction of the Project;
(xiv) hire, terminate, or enter into or amend any compensation
arrangement with, any of the Company's senior management, except for any
such arrangements in effect as of the date of Closing and previously
disclosed to the Stockholders;
(xv) amend in any material respect or restructure any of the
Company's or the Operating Company's existing financing arrangements;
provided, that the following shall be deemed to be material: (A) any
amendment to any event of default, negative covenant or the components of
any borrowing base, or definition relating to any of the foregoing, (B)
an increase in the availability of principal or the maximum rate of
interest pursuant thereto or (C) a shortening of the maturity of the
indebtedness thereunder;
(xvi) file a voluntary petition for bankruptcy;
(xvii) select any underwriter for any public sale of Securities of
the Company;
(xviii) adopt any stock option plan, other than the Stock Option
Plan;
(xix) amend in any material respect the Omnisource Agreement or the
Heidtman Agreement (each as defined in the Purchase Agreement); or
(xx) permit a Sale of the Company.
(e) Confidentiality. All Qualified Holders to which information is
provided pursuant to this Section 5 shall maintain in confidence and not
disclose or permit to be disclosed
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<PAGE> 17
to any third party any such information (other than to such Qualified Holder's
legal counsel, accounts or other agents), except to the extent (i) such
disclosure is required by law or court order, (ii) the information to be
disclosed has previously been publicly disclosed, other than as a result of the
breach of this Agreement, (iii) requested or demanded of a regulatory authority
or agency having jurisdiction over such Qualified Holder, (iv) such disclosure
is reasonably required to enforce the rights of such Qualified Holder
hereunder, or (v) is made in compliance with Section 2(h) hereof.
(f) Termination. The provisions of paragraphs (a) through (e) of
this Section 5 will terminate upon the realization of a Public Float.
(g) Stock Option Plan. The Company shall adopt as soon as
practicable an employee stock option plan which shall reserve for issuance to
the Senior Managers and other employees of the Company, the Operating Company
and the Sales Subsidiary of options to purchase not less than 21,800 shares
(adjusted equitably for stock dividends, stock splits and similar events) (the
"Stock Option Plan"). A committee consisting of the Company's President, its
chief financial officer and one of the directors appointed pursuant to clauses
(A) through (D) of Section 1(a)(ii) hereof shall make recommendations to the
entire board of directors, which entire board shall determine the optionees and
the terms of the options to be granted under the Stock Option Plan.
(h) Senior Manager. The parties acknowledge that, when a chief
financial officer of the Company is hired, the Company plans to issue to such
individual (the "CFO") up to 10,000 shares of Class A Common, or options to
purchase the same (which, if options, shall be in addition to the options
granted under the Stock Option Plan), or a combination thereof. The terms of
such issuance shall be determined in consultation with the Company's
independent accountants. The parties hereto agree that the CFO shall be a
holder of Management Shares for purposes hereof and a holder of Management
Registrable Securities for purposes of the Registration Agreement, so long as
the CFO enters into this Agreement and the Registration Agreement and agrees to
be bound by the terms hereof and thereof. The parties agree to execute and
deliver amendments to this Agreement and the Registration Agreement in order to
effectuate the foregoing.
vi. Legends. Each certificate evidencing
Stockholder Shares, each certificate issued
in exchange for or upon the transfer or
exercise of any Stockholder Share (unless
such Stockholder Shares have been (i)
effectively registered under the Securities
Act and disposed of in accordance with the
registration statement covering them, or
(ii) sold to the public through a broker,
dealer or market maker pursuant to Rule 144
(or by similar provision then in force
under the Securities Act)) and each Warrant
and replacement thereof shall be stamped or
otherwise imprinted with legends in
substantially the following forms:
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(a) "The securities represented by this certificate are subject
to certain transfer and voting restrictions pursuant to a Stockholders
Agreement dated as of June __, 1994, among the issuer of such securities
(the "Company") and certain holders of the Company's securities. A copy
of such Stockholders Agreement will be furnished without charge by the
Company to the holder hereof upon written request."
(b) "The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state and may not be sold or otherwise disposed of except pursuant to
an effective registration statement under such Act and applicable state
securities laws or there is presented to the Company an opinion of
counsel satisfactory to the Company to the effect that such registration
is not necessary."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The Company will deliver new
certificates with respect to certificates evidencing any Stockholder Shares or
Warrants which, pursuant to this Section 6, are no longer required to bear such
legend.
vii. Definitions.
"Additional Capital Contribution" means any additional capital
contribution required of any Stockholder pursuant to and in accordance with
Sections 1 and 2 of the Purchase Agreement.
"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 and, in the case of a Stockholder
which is a partnership, any partner of the Stockholder.
"Articles of Incorporation" means the Company's certificate of
incorporation in effect at the time as of which any determination is being
made.
"Bain Shares" means (i) any Class A Common acquired by the Bain
Group pursuant to the Purchase Agreement and (ii) any equity securities issued
or issuable directly or indirectly with respect to the Class A Common referred
to in clause (i) by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Bain Shares, such
shares will cease to be Bain Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
-18-
<PAGE> 19
"Bain/GECC Shares" means the Bain Shares and the GECC Shares.
"Board" means the board of directors of the Company.
"Busse Shares" mean (i) any shares of Class A Common owned by the
Keith E. Busse on the date hereof, and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Class A Common referred to
in clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Busse Shares, such
shares will cease to be Busse Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Family Group" means a stockholder's spouse and descendants
(whether or not adopted) and any trust solely for the benefit of the
Stockholder and/or the Stockholder's spouse and/or descendants.
"GECC Shares" means (i) any Class A Common acquired by GECC
pursuant to the Purchase Agreement and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Class A Common referred to
in clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting GECC Shares, such
shares will cease to be GECC Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Heavy Metal/Keylock Shares" means the Heavy Metal Shares and the
Keylock Shares.
"Heavy Metal Shares" means (i) any Class A Common owned by Heavy
Metal on the date hereof, (ii) any shares of Class A Common acquired by Heavy
Metal pursuant to the Purchase Agreement, and (ii) any equity securities issued
or issuable directly or indirectly with respect to the Class A Common referred
to in clause (i) and (ii) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares
constituting Heavy Metal Shares, such shares will cease to be Heavy Metal
Shares when they have been (x) effectively registered under the Securities Act
and disposed of in accordance with the registration statement covering them, or
(y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or by similar provision then in force) under the Securities Act.
"Independent Third Party" means any person who, immediately prior
to the
-19-
<PAGE> 20
contemplated transaction, does not own in excess of 5% of the Company's Class A
Common on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner, and who is not
the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust
for the benefit of any such 5% Owner and/or such other person.
"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 Shares" means (i) any Class A Common owned by the Keylock
Group on the date hereof, (ii) any Class A Common acquired by the Keylock Group
pursuant to the Purchase Agreement and (iii) any equity securities issued or
issuable directly or indirectly with respect to the Class A Common referred to
in clause (i) or (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Keylock Shares, such
shares will cease to be Keylock Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Low Cost Shares" means (i) any Class A Common acquired by Low Cost
pursuant to the Purchase Agreement and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Class A Common referred to
in clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Low Cost Shares, such
shares will cease to be Low Cost Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering the, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Management Shares" mean (i) any shares of Class A Common owned by
the Management Group on the date hereof (including, without limitation, Busse
Shares, Millett Shares and Teets Shares) or issued to the CFO as referenced in
Section 5 hereof and (ii) any equity securities issued or issuable directly or
indirectly with respect to the Class A Common referred to in clause (i) by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Management Shares, such shares will cease to be
Management Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, or (y) sold to the public through a broker, dealer or market
maker pursuant to Rule 144 (or by similar provision then in force) under the
Securities Act.
-20-
<PAGE> 21
"Millett Shares" mean (i) any shares of Class A Common owned by the
Mark D. Millett on the date hereof, and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Class A Common referred to
in clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Millett Shares, such
shares will cease to be Millett Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Operating Company" means Steel Dynamics, Inc., an Indiana
corporation.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Float" means the date upon which common stock of the
Company representing at least 25% of the outstanding common stock of the
Company has been sold pursuant to effective registration statements under the
Securities Act.
"Public Offering" means any sale of common stock of the Company
pursuant to an offering registered under the Securities Act.
"Public Sale" means any sale of Stockholder Shares in a Public
Offering or to the public through a broker, dealer or market maker pursuant to
the provisions of Rule 144 adopted under the Securities Act.
"Project" means the Company's approximately 1.1 million ton thin
slab cast mini-mill in Butler, Indiana.
"Qualified Holder" means any holder of Stockholder Shares
representing 5% or more of the outstanding Stockholder Shares; provided, that
(i) the Whitney Group shall be deemed to be a "Qualified Holder" for purposes
of Section 5(a) hereof so long as such group in the aggregate continues to hold
at least 50% of the Class A Common acquired collectively by the Whitney Group
pursuant to the Purchase Agreement and (ii) the Whitney Group shall be deemed
to be a "Qualified Holder" for purposes of Section 5(b) so long as J. H.
Whitney & Co., the Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt
Fund, L.P. and Affiliates thereof continue to own at least 2% of the
outstanding Class A Common of the Company on a fully diluted basis.
"Sale of the Company" means the sale of the Company to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i)
-21-
<PAGE> 22
capital stock of the Company possessing the voting power under normal
circumstances to elect a majority of the Board (whether by merger,
consolidation, sale, transfer or exchange of the Company's capital stock), (ii)
at least 50% of the Company's issued and outstanding Class A Common (whether by
merger, consolidation, sale, transfer or exchange of the Company's capital
stock) or (iii) all or substantially all of the Company's assets determined on
a consolidated basis.
"Sales Subsidiary" means Steel Dynamics Sales Corp., Inc., an
Indiana corporation.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Manager" means an officer of the Company at a level of Vice
President or above.
"Stockholder Shares" means all or any of the Bain Shares, the GECC
Shares, the Keylock Shares, the Heavy Metal Shares, the Whitney Shares, the
Management Shares, the Low Cost Shares and the Warrant Shares.
"Subsidiary" means 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.
"Teets Shares" mean (i) any shares of Class A Common owned by the
Richard P. Teets, Jr. on the date hereof, and (ii) any equity securities issued
or issuable directly or indirectly with respect to the Class A Common referred
to in clause (i) by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares constituting Teets Shares, such
shares will cease to be Teets Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Warrant Holder" means a holder of Warrants.
"Warrant Shares" mean (i) any shares of Class A Common or Class B
Common issued or issuable pursuant to Warrants and, (ii) any equity securities
issued or issuable directly or indirectly with respect to the Class A Common or
Class B Common referred to in clause (i) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares
constituting Warrant Shares, such shares will cease to be Warrant Shares when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market
-22-
<PAGE> 23
maker pursuant to Rule 144 (or by similar provision then in force) under the
Securities Act.
"Whitney Shares" mean (i) any shares of Class A Common acquired by
the Whitney Group pursuant to the Purchase Agreement and, (ii) any equity
securities issued or issuable directly or indirectly with respect to the Class
A Common referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares
constituting Whitney Shares, such shares will cease to be Whitney Shares when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
viii. Transfer in Violation of
Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares or
Warrants in violation of any
provision of this Agreement shall be
void, and the Company shall not
record such Transfer on its books or
treat any purported transferee of
such Class A Common or Warrant as the
owner of such shares for any purpose.
ix. Additional Restriction.
Notwithstanding any provision in this
Agreement to the contrary, no holder of
Stockholder Shares shall take or omit to
take any action (including, without
limitation, the Transfer of any Stockholder
Shares) if such action or omission would
constitute or result in or with the passage
of time or notice or both would constitute
or result in, a violation of or an event of
default under the Bank Agreement or
Subordinated Loan Agreement (each as
defined in the Purchase Agreement) as in
effect on the date hereof and as may be
hereafter amended to the extent such
amendment does not effect the provisions
thereof relating to such violation or event
of default with respect to such holder;
provided, that the Company shall use its
reasonable best efforts to obtain a waiver
of any proposed transfer which, if
consummated, would result in any such
violation or event of default. This
Section 9 shall survive the expiration or
earlier termination of this Agreement.
x. Amendment and Waiver. Except as
otherwise provided herein, no modification,
amendment or waiver of any provision of
this Agreement shall be effective against
the Company or the Stockholders unless such
modification, amendment or waiver is
approved in writing by the Company and the
holders of at least a majority of the then
outstanding Bain Shares, the holders of at
least a majority of the then outstanding
GECC Shares, the holders of a majority of
the then outstanding Keylock Shares, the
holders of a majority of the then
outstanding Heavy Metal Shares, the holders
of a majority of the outstanding Whitney
Shares and the holders of a majority of the
then outstanding Management Shares,
-23-
<PAGE> 24
respectively; provided, however, that in
the event that such amendment or waiver
would treat a holder or group of holders of
Stockholder Shares in a manner different
from any other holders of Stockholder
Shares, then such amendment or waiver shall
require the consent of such holder or the
holders of a majority of the Stockholder
Shares of such group adversely treated.
The failure of any party to enforce any of
the provisions of this Agreement 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 in
accordance with its terms.
xi. Severability. Whenever possible,
each provision of this Agreement shall 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,
such invalidity, illegality or
unenforceability shall not affect any other
provision or the effectiveness or validity
of any provision in any other jurisdiction,
and this Agreement shall be reformed,
construed and enforced in such jurisdiction
as if such invalid, illegal or
unenforceable provision had never been
contained herein.
xii. 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.
xiii. Successors and Assigns. Except
as otherwise provided herein, this
Agreement shall bind and inure to the
benefit of and be enforceable by the
Company and its successors and
assigns and the Stockholders and any
subsequent holders of Stockholder
Shares or Warrants and the respective
successors and assigns of each of
them, so long as they hold
Stockholder Shares or Warrants and
have executed a counterpart of this
Agreement and have agreed to be bound
hereby.
xiv. Counterparts. This Agreement may be
executed in separate counterparts each of
which shall be an original and all of which
taken together shall constitute one and the
same agreement.
xv. Remedies. The parties hereto agree
and acknowledge that money damages may not
be an adequate remedy for any breach of the
provisions of this Agreement and that the
Company and any Stockholder shall have
-24-
<PAGE> 25
the right to the remedies of specific
performance and injunctive relief, in
addition to all of his or its rights and
remedies at law or in equity, to enforce
the provisions of this Agreement. Nothing
contained in this Agreement shall be
construed to confer upon any Person who is
not a signatory hereto any rights or
benefits, as a third party beneficiary or
otherwise.
xvi. Notices. Any notice provided for in
his Agreement shall be in writing and shall
be either personally delivered, or received
by certified mail, return receipt requested,
or sent by reputable overnight courier
service (charges prepaid) to the Company at
the address set forth below with a copy to
the Company's counsel as set forth below
and to any other recipient at the address
indicated on the schedules hereto and to
any subsequent holder of Stockholder Shares
subject to this Agreement at such address
as indicated by the Company's records, or
at such address or to the attention of such
other person as the recipient party has
specified by prior written notice to the
sending party. Notices will be deemed to
have been given hereunder when delivered
personally, three days after deposit in the
U.S. mail and one day after deposit with a
reputable overnight courier service. The
Company's address is:
Steel Dynamics Holdings, Inc.
2780 Waterfront Parkway
Indianapolis, IN 46214
Attention: President
The Company's Counsel Address is:
Albert T. Adams
Baker & Hostetler
1900 East 9th Street
3200 National City Center
Cleveland, Ohio 44114
xvii. Governing Law. All issues concerning
the relative rights of the Company and its
shareholders shall be governed by and
construed in accordance with the laws of
the State of Indiana. All other issues
concerning this Agreement 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 provision or rule (whether of the State
of Indiana or any other jurisdiction) that
would cause the application of the law of
any jurisdiction other than the State of
Indiana.
-25-
<PAGE> 26
xviii. Descriptive Headings. The
descriptive headings of this
Agreement are inserted for
convenience only and do not
constitute a part of this Agreement.
-26-
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse, President
By:
--------------------------------
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
/s/ Paul B. Edgerley,
A General Partner
By:
------------------------------
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
/s/ Paul B. Edgerley,
A General Partner
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley,
A General Partner
By:
--------------------------------
, A General Partner
---------------
<PAGE> 28
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley,
A General Partner
By:
--------------------------------
, A General Partner
---------------
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ Molly S. Fergusson,
Manager, Operations
By:
--------------------------------
Name:
---------------------------
Title:
---------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ John M. Carey,
Attorney-in-Fact
By:
--------------------------------
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ John M. Carey,
Attorney-in-Fact
By:
--------------------------------
HEAVY METAL L.C.
/s/ Robin K. Kanner,
Signatory Member
By:
--------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its
general partner
/s/ David L. Stickler, President
By:
-----------------------------
<PAGE> 29
KLANS ASSOCIATES
/s/ James Learner
By:
---------------------------------
General Partner
STEEL INK COMPANY
/s/ Peter Brickfield
By:
---------------------------------
<PAGE> 30
/s/ Keith E. Busse
------------------------------------
KEITH E. BUSSE
/s/ Richard P. Teets, Jr.
------------------------------------
RICHARD P. TEETS, JR.
/s/ Mark D. Millett
------------------------------------
MARK D. MILLETT
WHITNEY SUBORDINATED DEBT FUND,
L.P.
/s/ William Laverack, Jr.,
A General Partner
By:
--------------------------------
, A General Partner
---------------
SUMITOMO CORPORATION OF AMERICA
/s/ Tsunehiro Ichiki,
Senior Vice-President
and General Manager
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By: Lincoln National Investment
Management Company,
its attorney-in-fact
/s/ William Hall, Jr.,
Vice-President
By:
----------------------------
<PAGE> 31
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment
Management Company,
its attorney-in-fact
/s/ William Hall, Jr.
By:
----------------------------
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David L. Stickler, Secretary
Name:
---------------------------
Title:
--------------------------
LDI, LTD., an Indiana limited
partnership
By: LDI Management, Inc.,
an Indiana corporation,
general partner
/s/ Andre B. Lacy, President
By:
-----------------------------
<PAGE> 32
SCHEDULE I
Bain Group
Bain Capital Fund IV, L.P.
Bain Capital Fund IV-B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
<PAGE> 33
SCHEDULE II
Whitney Group
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
<PAGE> 34
SCHEDULE III
Keylock Group
Keylock Investments Limited
Mazelina Anstalt
<PAGE> 35
SCHEDULE IV
Subdebt Group
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
<PAGE> 36
SCHEDULE V
Management Group
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Steel Ink Company
<PAGE> 1
Exhibit 10.28
STOCKHOLDERS JOINDER AGREEMENT
AND
AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
This Stockholders Joinder Agreement and Amendment No. 1 to
Stockholders Agreement (this "Stockholders Joinder Agreement") is entered into
on this day of 1995, by and among Steel Dynamics Holdings, Inc. (the
"Company"), each of the persons listed on Schedule I attached hereto (the "Bain
Group"), General Electric Capital Corporation ("GECC"), each of the persons
listed on Schedule II attached hereto (the "Whitney Group"), Heavy Metal, L.C.
("Heavy Metal"), Keylock Investments Limited ("Keylock"), Mazelina Anstalt
("Mazelina"), Low Cost Limited Partnership ("Low Cost"), each of the persons
listed on Schedule III attached hereto (the "Subdebt Group"), and each of the
persons listed on Schedule IV attached hereto (the "Management Group"). The
entities and individuals which comprise the Bain Group, GECC, the Whitney
Group, Heavy Metal, Keylock, Mazelina, Low Cost and the Management Group are
collectively referred to herein as the "Stockholders," and each as a
"Stockholder." The entities and individuals which comprise the Subdebt Group
are collectively referred to herein as the holders of "Warrants," and each as a
"Warrant Holder." APT Holdings Corporation, a non-signatory, shall be a third
party beneficiary of this Stockholders Joinder Agreement.
For purposes of this Stockholders Joinder Agreement, all capitalized
terms shall have the same meaning as those terms have under the Stockholders
Agreement.
WHEREAS, the Company, the Stockholders, and the Warrant Holders are
parties to a Stockholders Agreement dated June 30, 1994 (the "Stockholders
Agreement");
WHEREAS, Section 5 ("Covenants"), subsection (h) ("Senior Manager"),
contemplates that when a chief financial officer (a "CFO") of the Company is
hired, the Company plans to issue to such individual certain shares of the
Company's Class A Common, which, when issued, will render that individual a
"holder of Management Shares" for purposes of the Stockholders Agreement, so
long as the CFO enters into the Stockholders Agreement and agrees to be bound
by the terms thereof;
WHEREAS, pursuant to Section 5(h) of the Stockholders Agreement, all of
the signatory parties pre-agreed "to execute and deliver" an amendment to the
Stockholders Agreement "in order to effectuate" the provisions of Section 5(h);
and
WHEREAS, on July 26, 1994, the Company hired Tracy L. Shellabarger
("Shellabarger") as its vice president and CFO, duly entered into an Employment
<PAGE> 2
Agreement with him on the same date, and, pursuant to the intent of Section
5(h) of the Stockholders Agreement and the authorization of its board of
directors, issued to Tracy L. Shellabarger Ten Thousand (1 0,000) shares of its
Class A Common (the "Shellabarger Shares"),
NOW, THEREFORE, in consideration of the issuance by the Company to
Shellabarger of the Shellabarger Shares, and of the mutual covenants between
the parties to the Stockholders Agreement, the parties agree as follows:
1. SHELLABARGER AGREEMENT. Shellabarger agrees to and does
hereby enter into the Stockholders Agreement with the Company, with the other
Stockholders, and with the members of the Subdebt Group, and agrees to be bound
by all of the terms thereof, including, without limitation, the voting
agreement described in Section 1, the restrictions on transfer described in
Section 2, the provisions regarding a sale of the Company described in Section
3, the agreements concerning limited preemptive rights described in Section 4,
the covenants set forth in Section 5, the legending of the share certificates
set forth in Section 6, the Additional Restrictions described in Section 9, and
the provisions on amendment and waiver in Section IO.
2. THE OTHER PARTIES' AGREEMENT. The Company, the Stockholders,
and the members of the Subdebt Group agree to and do hereby enter into the
Stockholders Agreement with Shellabarger, agree to be bound by all of the terms
thereof, including, without limitation, the provisions described in Section I
of this Stockholders Joinder Agreement, and agree that, from and after the
Effective Date hereof, Shellabarger shall be deemed to have been a Stockholder,
a member of the Management Group; and a Management Director, and Shellabarger's
shares shall be deemed to have been Management Shares for all purposes under
the Stockholders Agreement from and after their issuance to him.
3. SPECIFIC AMENDMENTS. Without limiting the generality of the
foregoing agreements, the following specific amendments shall be deemed made to
the Stockholders Agreement:
(a) "Tracy L. Shellabarger" shall be added to Schedule IV as part of
the "Management Group" and a signature line added immediately
below Mark D. Millet on the signature page;
2
<PAGE> 3
(b) Tracy L. Shellabarger is deemed to have been elected as a
director of the Company on September 9, 1995 by reason of his
designation pursuant to Section I (a)(ii)(H);
(c) A definition of "Shellabarger Shares" shall be added to Section
7 ("Definitions"), immediately following the definition of
"Service Manager," and the text of such definition shall be
patterned after the definition of "Busse Shares," substituting
"Tracy L. Shellabarger" or "Shellabarger" for "Busse" or "Keith
E. Busse," as the case may be; and
(d) The last sentence of Section 3(a) shall be amended by striking
the word "or" after "Teets Shares," adding, instead, a comma,
and inserting ", or Shellabarger" after "Millett."
4. ADDRESS FOR NOTICE. For purposes of any notice under Section 16
of this Stockholders Joinder Agreement, Shellabarger's address is:
Tracy L. Shellabarger
11125 Spring Pond Cove
Fort Wayne, IN 46804
5. EFFECTIVE DATE. The Effective Date of this Stockholders
Joinder Agreement shall be September 9, 1994.
IN WITNESS WHEREOF, the parties have executed this Stockholders Joinder
Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse
By
-------------------------------
Name
------------------------------
Its
------------------------------
3
<PAGE> 4
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley
By
-------------------------------
Name
------------------------------
Its
------------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley
By
-------------------------------
Name
------------------------------
Its
------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley
By
-------------------------------
Name
------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley
By
-------------------------------
Name
------------------------------
A General Partner
4
<PAGE> 5
GENERAL ELECTRIC CAPITAL
CORPORATION
/S/ William D. Strittmatter
By
-------------------------------
Name
------------------------------
Its
------------------------------
J. H. WHITNEY & CO.
/s/ William Laverack, Jr.
By
-------------------------------
Name
------------------------------
Its
------------------------------
WHITNEY 1990 EQUITY FUND, L.P.
/s/ William Laverack, Jr.
By
-------------------------------
Name
------------------------------
Its
------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ John M. Carey, POA
By
-------------------------------
Name
------------------------------
Its
------------------------------
5
<PAGE> 6
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ John M. Carey, POA
By
-------------------------------
Name
------------------------------
Its
------------------------------
HEAVY METAL, L.C.
/s/ Robin K. Kanner
By
-------------------------------
Name
------------------------------
Its
------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc.,
its General Partner
/s/ David L. Stickler
By
-------------------------------
Name
------------------------------
Its
------------------------------
KLANS ASSOCIATES
/s/
By
-------------------------------
Name
------------------------------
Its
------------------------------
6
<PAGE> 7
STEEL INK COMPANY
/s/ Peter B. Brickfield
By
-------------------------------
Name
------------------------------
Its
------------------------------
/s/ Keith E. Busse
-----------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
------------------------------------
Mark D. Millett
WHITNEY SUBORDINATED DEBT FUND,
L.P.
/s/ William Laverack, Jr.
By
-------------------------------
Name
------------------------------
A General Partner
7
<PAGE> 8
SUMITOMO CORPORATION OF AMERICA
/s/
By
-------------------------------
Name
------------------------------
Its
------------------------------
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln National Investment
Management Company,
its attorney-in-fact
/s/ Richard L. Corwin
By
-------------------------------
Name
------------------------------
Its
------------------------------
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment
Management Company,
its attorney-in-fact
/s/ Richard L. Corwin
By
-------------------------------
Name
------------------------------
Its
------------------------------
8
<PAGE> 9
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David L. Stickler
By
-------------------------------
Name
------------------------------
Its
------------------------------
LDI, LTD., an Indiana limited partnership
By: LDI Management, Inc.,
an Indiana corporation,
General Partner
/s/ Andre B. Lacy
By
-------------------------------
Name
------------------------------
Its
------------------------------
9
<PAGE> 10
SCHEDULE I
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
10
<PAGE> 11
SCHEDULE II
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
11
<PAGE> 12
SCHEDULE III
SUBDEBT GROUP
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
12
<PAGE> 13
SCHEDULE IV
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Steel Ink Company
13
<PAGE> 1
Exhibit 10.29
STOCKHOLDERS JOINDER AGREEMENT
AND
AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT
This Stockholders Joinder Agreement and Amendment No. 2 to
Stockholders Agreement (this "Stockholders Joinder Agreement") is entered into
on this _____ day of _______________, 1995, by and among Steel Dynamics
Holdings, Inc. (the "Company"), each of the persons listed on Schedule I
attached hereto (the "Bain Group"), General Electric Capital Corporation
("GECC"), each of the persons listed on Schedule II attached hereto (the
"Whitney Group"), Heavy Metal, L.C. ("Heavy Metal"), Keylock Investments
Limited ("Keylock"), Mazelina Anstalt ("Mazelina"), Low Cost Limited
Partnership ("Low Cost"), each of the persons listed on Schedule III attached
hereto (the "Subdebt Group"), each of the persons listed on Schedule IV
attached hereto (the "Management Group"), and Preussag Stahl AG, a company
incorporated under the laws of the Federal Republic of Germany ("Preussag").
The entities and individuals which comprise the Bain Group, GECC, the Whitney
Group, Heavy Metal, Keylock, Mazelina, Low Cost and the Management Group are
collectively referred to herein as the "Stockholders," and each as a
"Stockholder." The entities and individuals which comprise the Subdebt Group
are collectively referred to herein as the holders of "Warrants," and each as a
"Warrant Holder." APT Holdings Corporation, a non-signatory, shall be a third
party beneficiary of this Stockholders Joinder Agreement.
For purposes of this Stockholders Joinder Agreement, all capitalized
terms shall have the same meaning as those terms have under the Stockholders
Agreement.
WHEREAS, the Company, the Stockholders, and the Warrant Holders are
parties to a Stockholders Agreement dated June 30, 1994 (the "Stockholders
Agreement");
WHEREAS, Section 10 of the Stockholders Agreement provides that the
Stockholders Agreement may be modified or amended if approved in writing by the
Company and the holders of a majority of the then outstanding "Bain Shares,"
the holders of a majority of the then outstanding "GECC Shares," the holders of
a majority of the then outstanding "Keylock Shares," the holders of a majority
of the then outstanding "Heavy Metal Shares," the holders of a majority of the
then outstanding "Whitney Shares," and the holders of a majority of the then
outstanding "Management Shares;"
WHEREAS, the Company and Preussag have agreed upon the terms of and
propose to enter into a stock purchase agreement (the "Preussag Purchase
Agreement"), in substantially the form attached hereto as Exhibit A, pursuant
to the terms of which the Company has agreed to sell to Preussag and Preussag
has agreed to purchase from the Company shares of the Company's Class A Common
Stock (the "Preussag Shares");
<PAGE> 2
WHEREAS, one of the conditions to Preussag's commitment to purchase at
least Twenty-five Million U.S. Dollars (U.S. $25,000,00.00) of Preussag Shares
under the Preussag Purchase Agreement is that Preussag join in and become a
party to that certain Stockholders Agreement dated June 30, 1994 (the
"Stockholders Agreement"), thereby becoming entitled to the benefits and
subjecting itself to the obligations thereunder that are accorded to the
Stockholders in general;
NOW, THEREFORE, in consideration of the mutual covenants of the
parties to the Preussag Purchase Agreement and to other good and valuable
consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. PREUSSAG AGREEMENT. Preussag agrees to and does hereby enter
into the Stockholders Agreement with the Company, with the other Stockholders,
and with the members of the Subdebt Group, and agrees to be bound by all of the
terms thereof, including, without limitation, the voting agreement described in
Section 1, the restrictions on transfer described in Section 2, the provisions
regarding a sale of the Company described in Section 3, the agreements
concerning limited preemptive rights described in Section 4, the covenants set
forth in Section 5, the legending of the share certificates set forth in
Section 6, the Additional Restrictions described in Section 9, and the
provisions on amendment and waiver in Section 10.
2. THE OTHER PARTIES' AGREEMENT. The Company, the Stockholders,
and the members of the Subdebt Group agree to and do hereby enter into the
Stockholders Agreement with Preussag, agree to be bound by all of the terms
thereof, including, without limitation, the provisions described in Section 1
of this Stockholders Joinder Agreement, and agree that, from and after the
Effective Date hereof, Preussag shall be deemed to have been a Stockholder, and
Preussag's Shares shall be deemed to have been "Preussag Shares" for all
purposes under the Stockholders Agreement, as amended hereby.
3. SPECIFIC AMENDMENTS. Without limiting the generality of the
foregoing agreements, the following specific amendments shall be deemed made to
the Stockholders Agreement, to operate prospectively from and after the
Effective Date hereof:
(a) "Preussag Stahl AG" shall be added to the introductory
paragraph as a "Stockholder" and a separate signature line for
Preussag shall be added to the signature pages immediately
following the signature lines for the "Management Group;"
(b) A new Section 1(a)(ii)(J) shall be added, providing for "one
representative designated by the holders of a majority of the
Preussag Shares;"
(c) The phrase "Preussag Shares" shall be added to Sections 1(a),
(iii) and (iv);
2
<PAGE> 3
(d) The word "or" in the fourth line of Section 5(d) shall be
deleted and a comma inserted after the word "Shares," and,
after the words "Management Shares" in line five thereof, the
words ", or Preussag Shares" shall be added;
(e) A definition of "Preussag Shares" shall be added to Section 7
("Definitions"), immediately following the definition of
"Person," and the text of such definition shall be patterned
after the definition of "Bain Shares," substituting "Preussag"
for the words "the Bain Group" or "Pressuag Shares" for "Bain
Shares" wherever such terms appear within the definition; and
(f) In connection with the definition of "Stockholders Shares" in
Section 7, the word "and" immediately following the word
"Shares" in the fourth line thereof shall be deleted and,
following the words "Warrant Shares" at the end of the
definition, the words ", and the Preussag Shares." shall be
added.
4. ADDRESS FOR NOTICE. For purposes of any notice under Section
16 of this Stockholders Joinder Agreement, Preussag's address is:
Preussag Stahl AG
Eisenhuttenstrasse 99 D-38223
38239 Salzgitter, Germany
Attn: Jens Schneider
5. EFFECTIVE DATE. The Effective Date of this Stockholders
Joinder Agreement shall be concurrent with the Third Closing contemplated by
Section 1.3 or the Alternative Third Closing contemplated by Section 1.4 of the
Preussag Purchase Agreement, as the case may be, in reference to Preussag's
satisfaction of the aggregate $25,000,000.00 minimum purchase amount of SDI
Stock as contemplated therein; provided, however, that the provisions of
Sections 2, 3, and 5-19 of the Stockholders Agreement shall be deemed as
temporarily effective as between the parties thereto and hereto during the
"Interim Period" between the First Closing and the Third Closing or Alternative
Third Closing, as set forth in Section 2.3 of the Preussag Purchase Agreement.
In the event that Preussag fails to meet such minimum purchase amount, this
Stockholders Joinder Agreement shall not become effective; and if a Third
Closing or Alternative Third Closing does not occur within the time set forth
in Section 5 of the Preussag Purchase Agreement, then, unless extended by
mutual agreement of the parties thereto and hereto, the temporary rights
conferred and burdens imposed hereby during the Interim Period shall
automatically terminate.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Stockholders
Joinder Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse, President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley,
Managing Director
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley,
Managing Director
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley,
A General Partner
By
-------------------------------------
Name
-------------------------------------
A General Partner
4
<PAGE> 5
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley,
A General Partner
By
-------------------------------------
Name
-------------------------------------
A General Partner
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ William D. Strittmatter,
Vice President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
J. H. WHITNEY & CO.
/s/ William Laverack, Jr.,
A General Partner
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
WHITNEY 1990 EQUITY FUND, L.P.
/s/ William Laverack, Jr.,
A General Partner
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ M. Hagetslafe, Director
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
5
<PAGE> 6
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ M. Hagetslafe, Director
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
HEAVY METAL, L.C.
/s/ Robin K. Kanner, Signatory Member
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its General Partner
/s/ David L. Stickler, President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
KLANS ASSOCIATES
/s/ Karl E. Lutz, A General Partner
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
STEEL INK COMPANY
/s/ Peter J.P. Brickfield, President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
6
<PAGE> 7
/s/ Keith E. Busse
-----------------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
-----------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
-----------------------------------------
Mark D. Millett
/s/ Tracy L. Shellabarger
-----------------------------------------
Tracy L. Shellabarger
WHITNEY SUBORDINATED DEBT FUND, L.P.
/s/ William Laverack, Jr.,
A Genearl Partner
By
-------------------------------------
Name
-------------------------------------
A General Partner
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President and
General Manager
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
7
<PAGE> 8
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin, Second Vice President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin, Vice President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David Stickler, Secretary
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
LDI, LTD., an Indiana limited partnership
By: LDI Management, Inc., an Indiana
corporation, General Partner
/s/ Andre B. Lacy, President
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
8
<PAGE> 9
PREUSSAG STAHL AG
/s/ Jens Schneider
By
-------------------------------------
Name
-------------------------------------
Its
-------------------------------------
9
<PAGE> 10
SCHEDULE I
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
10
<PAGE> 11
SCHEDULE II
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
11
<PAGE> 12
SCHEDULE III
SUBDEBT GROUP
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
12
<PAGE> 13
SCHEDULE IV
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Tracy L. Shellabarger
Steel Ink Company
13
<PAGE> 1
Exhibit 10.30
STOCKHOLDERS JOINDER AGREEMENT
AND
AMENDMENT NO. 3 TO STOCKHOLDERS AGREEMENT
This Stockholders Joinder Agreement and Amendment No. 3 to
Stockholders Agreement (this "Stockholders Joinder Agreement") is entered into
on this _____ day of September, 1996, by and among Steel Dynamics Holdings,
Inc. (the "Company"), each of the persons listed on Schedule I attached hereto
(the "Bain Group"), General Electric Capital Corporation ("GECC"), each of the
persons listed on Schedule II attached hereto (the "Whitney Group"), Heavy
Metal, L.C. ("Heavy Metal"), Keylock Investments Limited ("Keylock"), Mazelina
Anstalt ("Mazelina"), Low Cost Limited Partnership ("Low Cost"), each of the
persons listed on Schedule III attached hereto (the "Subdebt Group"), each of
the persons listed on Schedule IV attached hereto (the "Management Group"),
Preussag Stahl AG, a company incorporated under the laws of the Federal
Republic of Germany ("Preussag"), and Sumitomo Corporation, a corporation
organized and existing under the laws of Japan, and Sumitomo Corporation of
America, a company incorporated under the laws of the State of New York,
hereinafter collectively the "Sumitomo Group" or "Sumitomo". The entities and
individuals which comprise the Bain Group, GECC, the Whitney Group, Heavy
Metal, Keylock, Mazelina, Low Cost, the Management Group and Preussag are
collectively referred to herein as the "Stockholders," and each as a
"Stockholder." The entities and individuals which comprise the Subdebt Group
are collectively referred to herein as the holders of "Warrants," and each as a
"Warrant Holder." APT Holdings Corporation, a non-signatory, shall be a third
party beneficiary of this Stockholders Joinder Agreement.
For purposes of this Stockholders Joinder Agreement, all capitalized
terms shall have the same meaning as those terms have under the Stockholders
Agreement.
WHEREAS, the Company, the Stockholders, and the Warrant Holders are
parties to a Stockholders Agreement dated June 30, 1994, as amended by
Stockholders Joinder Agreement and Amendment No. 1 to Stockholders Agreement
and Stockholders Joinder Agreement and Amendment No. 2 to Stockholders
Agreement (the "Stockholders Agreement");
WHEREAS, Section 10 of the Stockholders Agreement provides that the
Stockholders Agreement may be modified or amended if approved in writing by the
Company and the holders of a majority of the then outstanding "Bain Shares,"
the holders of a majority of the then outstanding "GECC Shares," the holders of
a majority of the then outstanding "Keylock Shares," the holders of a majority
of the then outstanding "Heavy Metal Shares," the holders of a majority of the
then outstanding "Whitney Shares," and the holders of a majority of the then
outstanding "Management Shares", and the holders of a majority of the
outstanding "Preussag Shares";
WHEREAS, the Company and the Sumitomo Group have agreed upon the terms
of and propose to enter into a Stock Purchase Agreement (the "Sumitomo Purchase
Agreement"), in
<PAGE> 2
substantially the form attached hereto as Exhibit A, pursuant to the terms of
which the Company has agreed to sell to the Sumitomo Group, and the Sumitomo
Group has agreed to purchase from the Company certain shares of the Company's
Class A Common Stock (the "Sumitomo Shares");
WHEREAS, one of the conditions to the Sumitomo Group's purchase of the
Sumitomo Shares under the Sumitomo Purchase Agreement is that the Sumitomo
Group join in and become a party to the Stockholders Agreement, thereby
becoming entitled to the benefits and subjecting itself to the obligations
thereunder that are accorded to the Stockholders in general, subject, however,
to those limitations as are set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants of the
parties to the Sumitomo Purchase Agreement and to other good and valuable
consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. SUMITOMO AGREEMENT. Sumitomo agrees to and does hereby enter
into the Stockholders Agreement with the Company, with the other Stockholders,
and with the members of the Subdebt Group, and agrees to be bound by all of the
terms thereof, including, without limitation, the voting agreement described in
Section 1, the restrictions on transfer described in Section 2, the provisions
regarding a sale of the Company described in Section 3, the agreements
concerning limited preemptive rights described in Section 4, the covenants set
forth in Section 5, the legending of the share certificates set forth in
Section 6, the Additional Restrictions described in Section 9, and the
provisions on amendment and waiver in Section 10; it being understood, however,
that for purposes of Section 1 of the Stockholders Agreement, the Sumitomo
Group shall not be entitled to elect one of its own representatives to the
Company's Board of Directors, the number of Directors shall remain at 10 and
that the Sumitomo Group shall nonetheless be bound by the provisions of Section
1 to vote its Stockholder Shares in the manner otherwise required by Section 1.
2. THE OTHER PARTIES' AGREEMENT. The Company, the Stockholders,
and the members of the Subdebt Group agree to and do hereby enter into the
Stockholders Agreement with Sumitomo, agree to be bound by all of the terms
thereof, and agree that, from and after the Effective Date hereof, the Sumitomo
Group shall be deemed to have been a Stockholder, and the Sumitomo Group's
Shares shall be deemed to have been "Sumitomo Shares" for all purposes under
the Stockholders Agreement, as amended hereby.
3. SPECIFIC AMENDMENTS. Without limiting the generality of the
foregoing agreements, the following specific amendments shall be deemed made to
the Stockholders Agreement, to operate prospectively from and after the
Effective Date hereof:
(a) The phrase, "and each of the persons set forth on Schedule V
attached hereto (the "Sumitomo Group")" shall be added to the
end of the first sentence of the introductory paragraph and
the phrase "and the Sumitomo Group" shall be added after the
words "Management Group" in the second sentence of the
introductory
2
<PAGE> 3
paragraph, and separate signature lines for Sumitomo
Corporation and Sumitomo Corporation of America shall be added
to the signature pages immediately following the signature
lines for "Preussag Stahl AG,"
(b) The word "or" before the words "Preussag Shares" in Section
5(d) shall be deleted and, after the words "Preussag Shares"
the words ", or Sumitomo Shares" shall be added;
(c) A definition of "Sumitomo Shares" shall be added to Section 7
("Definitions"), immediately following the definition of
"Subsidiary," and the text of such definition shall be
patterned after the definition of "Bain Shares," substituting
"Sumitomo" for the words "the Bain Group" or "Sumitomo Shares"
for "Bain Shares" wherever such terms appear within the
definition; and
(d) In connection with the definition of "Stockholders Shares" in
Section 7, the word "and" immediately following the word
"Shares" in the fourth line thereof shall be deleted and,
following the words "Preussag Shares" at the end of the
definition, the words ", and the Sumitomo Shares." shall be
added.
4. ADDRESS FOR NOTICE. For purposes of any notice under Section
16 of this Stockholders Joinder Agreement, Sumitomo's address is:
Sumitomo Corporation Sumitomo Corporation of America
ATTN: Tsunehiro Ichiki ATTN: Kei Kato
Josuika Building 2750 USX Tower
2-1-1 Hitotsubashi 600 Grant St.
Chiyodo - Ku Pittsburg, PA 15219-2751
Tokyo, 101, Japan Tele: 412-391-9672
Tele: 011-03-3237-3180 Fax: 412-391-9756
Fax: 011-03-3237-3179
5. EFFECTIVE DATE. The Effective Date of this Stockholders
Joinder Agreement shall be September ______, 1996, concurrently with the
Closing of the Sumitomo Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Stockholders
Joinder Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
3
<PAGE> 4
STOCKHOLDERS
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley, A General Partner
By
--------------------------------------
Name
------------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley, A General Partner
By
--------------------------------------
Name
------------------------------------
A General Partner
4
<PAGE> 5
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ E.S. Christie, Manager Operations
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
J. H. WHITNEY & CO.
/s/ David J. O'Brien, A General Partner
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
WHITNEY 1990 EQUITY FUND, L.P.
/s/ Daniel J. O'Brien, A General Partner
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ M. Hugelshefen, Director
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
5
<PAGE> 6
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ M. Hugelshefen, Director
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
HEAVY METAL, L.C.
/s/ Robin K. Kanner, Signatory Member
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its General Partner
/s/ David L. Stickler, President
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
KLANS ASSOCIATES
/s/ James Learner, A General Partner
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
6
<PAGE> 7
STEEL INK COMPANY
/s/ Peter Brickfield, President
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
/s/ Keith E. Busse
-----------------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
-----------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
-----------------------------------------
Mark D. Millett
/s/ Tracy L. Shellabarger
-----------------------------------------
Tracy L. Shellabarger
McDONALD & COMPANY INVESTMENTS, INC.
/s/ David L. Stickler,
Senior Vice President
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
McD VENTURE CAPITAL FUND, L.P.
/s/ Ralph M. Della Ratta, Jr.,
A General Partner
By
--------------------------------------
Name
------------------------------------
A General Partner
7
<PAGE> 8
APT HOLDINGS CORPORATION
/s/ Charles J. Billerbeck
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
PREUSSAG STAHL AG
/s/ Jurgen Kolb
By
--------------------------------------
SUMITOMO CORPORATION
/s/ Tsunehiro Ichiki, Director,
Iron & Steel Raw
Materials Iron & Steel Div., No. 1
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President
and General Manager, Pittsburgh Office
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
8
<PAGE> 9
SUBORDINATED DEBT NOTE HOLDERS
WHITNEY SUBORDINATED DEBT FUND, L.P.
/s/ Daniel J. O'Brien
By
--------------------------------------
Name
------------------------------------
A General Partner
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ E. S. Christie, Manager Operations
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President
and General Manager, Pittsburgh Office
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
(formerly known as Lincoln Investment
Management Company), its
attorney-in-fact
/s/ Richard L. Corwin,
Second Vice President
By
--------------------------------------
Name Richard L. Corwin
Its Second Vice President
9
<PAGE> 10
LINCOLN NATIONAL INCOME FUND, INC.
/s/ David C. Fischer, Vice President
By
--------------------------------------
Name David C. Fischer
Its Vice President
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc., its General Partner
/s/ David Knoll, President
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
LDI, LTD., an Indiana limited partnership
by: LDI Management, Inc., an Indiana
corporation, General Partner
By
--------------------------------------
Name
------------------------------------
Its
------------------------------------
10
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SCHEDULE I
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
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SCHEDULE II
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
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SCHEDULE III
SUBDEBT GROUP
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
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SCHEDULE IV
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Tracy L. Shellabarger
Steel Ink Company
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SCHEDULE V
SUMITOMO GROUP
Sumitomo Corporation
Sumitomo Corporation of America
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Exhibit 10.31
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of June ___, 1994 is made by and among
Steel Dynamics Holdings, Inc., an Indiana corporation (the "Company"), the
Persons listed on Schedule A attached hereto (the "Bain Stockholders"), General
Electric Capital Corporation, a New York corporation ("GECC"), Heavy Metal,
L.C., a Virginia limited liability company ("Heavy Metal"), the Persons listed
on Schedule B hereto (the "Keylock Stockholders"), the Persons listed on
Schedule C attached hereto (the "Whitney Stockholders"), the Persons listed on
Schedule D attached hereto (the "Management Stockholders"), and the Persons
listed on Schedule E hereto (the "Warrant Holders") (the Bain Stockholders,
GECC, the Whitney Stockholders, Heavy Metal, the Keylock Stockholders, the
Management Stockholders and the Warrant Holders are collectively referred to
herein as the "Stockholders," and each as a "Stockholder").
The Company, the Bain Stockholders, GECC, Heavy Metal, the
Keylock Stockholders, the Whitney Stockholders, K Associates and Low Cost are
parties to a Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"). In order to induce the Bain Stockholders, GECC, Heavy Metal, the
Keylock Stockholders, K Associates, Low Cost and the Whitney Stockholders to
enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement.
Steel Dynamics, Inc., an Indiana corporation (the "Operating
Company") and the wholly owned subsidiary of Salesco and the Warrant Holders
are parties to a Subordinated Note and Warrant Purchase Agreement of even date
herewith (the "Subordinated Loan Agreement"). In order to induce the Warrant
Holders to enter into the Subordinated Loan Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement.
Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in section 10 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after the
first to occur of (i) the second anniversary of the date on which Hot
Commissioning of the Project occurs, and (ii) such date as the Company has
completed a public offering of its equity securities pursuant to an effective
registration statement filed under the Securities Act, the holders of a
majority of the Bain Registrable Securities, the holders of a majority of the
GECC Registrable Securities, the holders of a majority of the Heavy Metal
Registrable Securities and the holders of a majority of the Keylock Registrable
Securities may each request registration under the Securities Act of all
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or part of their Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations") or, if available, on Form S-2 or S-3
or any similar short-form registration ("Short-Form Registrations"). All
registrations requested pursuant to this section 1(a) are referred to herein as
"Demand Registrations". Unless otherwise requested by the holders of a
majority of the Registrable Securities held by the holders of Registrable
Securities that request registration, Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form. After the Company has become subject to the reporting requirements of
the Securities Exchange Act, the Company shall use its reasonable best efforts
to make Short-Form Registrations available for the sale of Registrable
Securities. Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Within ten days after
receipt of any such request, the Company will give written notice of such
requested registration to all other holders of Registrable Securities and,
subject to section 1(d) below, will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the
Company's notice. The holders of Bain Registrable Securities, GECC Registrable
Securities, Heavy Metal Registrable Securities and Keylock Registrable
Securities agree to use their reasonable best efforts, in the timing and size
of any requested Demand Registration, not adversely to affect the valuation of
the Company's Common Stock.
(b) Number of Demand Registrations. The holders of a
majority of the Bain Registrable Securities and the holders of a majority of
the GECC Registrable Securities will each be entitled to request two Demand
Registrations, and the holders of a majority of the Heavy Metal Registrable
Securities and the holders of a majority of the Keylock Registrable Securities
will each be entitled to request one Demand Registration, provided that all
such requests must request that such registration include at least 50% of the
Registrable Securities held at the time of such request by the holders of
Registrable Securities making such request. The Company will pay all
Registration Expenses (as defined in Section 6) relating to Demand
Registrations. A registration will not count as one of the permitted Demand
Registrations until it has become effective and a Demand Registration will not
count as one of the permitted Demand Registrations unless the holders of
Registrable Securities initially requesting such registration have been able to
register and sell at least 50% of the Registrable Securities initially
requested to be registered by such holders; provided that in any event the
Company will pay all Registration Expenses in connection with any registration
initiated as a Demand Registration whether or not it has become effective. All
Demand Registrations shall be underwritten (whether on a best efforts or firm
commitment basis) registrations.
(c) Priority on Demand Registrations.
(i) The Company will not include in any Demand Registration
any securities (other than securities to be sold on behalf of the Company)
which are not Registrable Securities without the prior written consent of the
holders of a majority of the Registrable Securities included in such
registration.
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(ii) If a Demand Registration is a request by holders of
Registrable Securities to register and sell Registrable Securities in an
offering prior to the date on which the Company has completed an offering of
its equity securities pursuant to an effective registration statement filed
under the Securities Act (the "IPO"), and the managing underwriters advise the
Company in writing that in their opinion the number of (A) Registrable
Securities requested to be included in the offering, (B) securities desired by
the Company to be included in such offering and (C) if permitted hereunder,
other securities requested to be included in such offering exceeds the number
of securities which can be sold therein without adversely affecting the
marketability of the offering, there shall be included in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the amount of
Registrable Securities owned by each such holder, and (iii) third, other
securities requested to be included in such registration. Any Demand
Registration in which the Company elects to register and sell its securities in
preemption of the holders of Registrable Securities in reliance on this Section
1(c)(ii) will not count as one of the permitted Demand Registrations unless the
holders of Registrable Securities initially requesting such Demand Registration
have been able to register and sell at least 50% of the Registrable Securities
initially requested to be registered by such holders.
(iii) If, in a Demand Registration other than the IPO, the
managing underwriters advise the Company in writing that in their opinion (A)
the number of Registrable Securities requested to be included in the offering,
(B) securities desired to be included by the Company in the offering and (C) if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of securities which can be sold therein without adversely
affecting the marketability of the offering, there shall be included in the
offering (i) first, the securities the Company proposes to sell, only if the
Company notifies the holders of Registrable Securities requesting the Demand
Registration, within twenty-one days of receiving the request from such
holders, that the Board of Directors of the Company has identified a need for
the proceeds of the sale of its securities and that the Company elects to
register and sell its securities in preemption of the priority of such holders,
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the amount of Registrable Securities owned by each such holder, and
(iii) third, other securities requested to be included in such registration.
Any Demand Registration in which the Company elects to register and sell its
securities in preemption of the priority of the holders of Registrable
Securities in reliance on this Section 1(c)(iii) will not count as one of the
permitted Demand Registrations unless the holders of Registrable Securities
initially requesting such Demand Registration have been able to register and
sell at least 50% of the Registrable Securities initially requested to be
registered by such holders.
(iv) If in any Demand Registration the Company does not
elect to register and sell its securities in preemption of the priority of the
holders of Registrable Securities pursuant to and in accordance with Sections
1(c)(ii) or 1(c)(iii) and the managing underwriters advise the Company in
writing that in their opinion the number of (A) Registrable Securities
requested to be included
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in the offering, (B) securities desired to be included by the Company in the
offering and (C) if permitted hereunder, other securities requested to be
included in such offering, exceeds the number of securities which can be sold
therein without adversely affecting the marketability of the offering, there
shall be included in the offering (i) first, the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the amount of Registrable
Securities owned by each such holder, (ii) second, the securities the Company
proposes to sell, and (iii) third, other securities requested to be included in
such registration.
(d) Restrictions on Demand Registrations. The Company
will not be obligated to effect any Demand Registration within six months after
the effective date of a previous offering made pursuant to a request for a
Demand Registration that has not been preempted by holders of Registrable
Securities. Once during any twelve-month period, the Company may postpone
for up to 90 days the filing or the effectiveness of a registration statement
for a Demand Registration provided the Company reasonably expects that any such
Demand Registration would have an adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets
(other than in the ordinary course of business) or any merger, consolidation,
tender offer or similar transaction; provided that in such event, the holders
of Registrable Securities initially requesting such Demand Registration will be
entitled to withdraw such request and, if such request is withdrawn, such
Demand Registration will not count as one of the permitted Demand Registrations
hereunder, and the Company will pay all Registration Expenses in connection
with such withdrawn registrations. In addition, and notwithstanding anything
to the contrary contained in this Section 1, the Company shall not be required
to take any action to effect any registration pursuant to this Section 1 if the
securities covered by such registration statement will not represent at least
5% in number of the then outstanding shares of the Company's Common Stock,
assuming the exercise or conversion of all warrants, options and similar rights
to acquire Common Stock.
(e) Selection of Underwriters. The Company shall have
the right to select investment banker(s) and manager(s) to administer the IPO,
if the Company determines to register and sell equity securities on its behalf
in the IPO. Following the IPO, the holders of a majority of the Investor
Registrable Securities included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer any public
offering of equity securities of the Company pursuant to a Demand Registration,
subject to the Company's approval, which approval shall not be unreasonably
withheld.
(f) Other Registration Rights. Except as provided in or
contemplated by this Agreement, the Company will not grant to any Persons the
right to request the Company to register any equity securities of the Company,
or any securities convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the holders of a majority of
the Investor Registrable Securities.
2. Piggyback Registrations.
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(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration or a registration on Form S-4 or S-8 or any successor
forms thereto) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), whether or
not for sale for its own account, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing (with a copy to
each party hereto requesting registration of Registrable Securities) that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of such offering, the Company will
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) other
securities requested to be included in such registration.
(d) Other Registrations. If the Company has previously
filed a registration statement with respect to Registrable Securities pursuant
to section 1 or pursuant to this section 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form thereto),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least six months has elapsed from the
effective date of such previous registration.
(e) Selection of Underwriters. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
the Company will have the right to select the investment banker(s) and
manager(s) to administer the offering.
3. Certain Rights Relating to Warrants. In the event of
a proposed registration under section 1 or section 2 hereof, if any Warrant is
then outstanding, the Company shall notify the holder thereof, and the holder
thereof shall have the right, within 15 days from the date of receipt of such
notice, to exercise any rights such holder may have to exercise such Warrant to
acquire Registrable Securities, the effectiveness of which may be expressly
conditioned on the effectiveness of the registration statement.
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4. Holdback Agreements.
(a) To the extent not inconsistent with applicable law,
each holder of Registrable Securities agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Company, or any securities, options or rights convertible into or exchangeable
or exercisable for such securities, during the seven days prior to and the
180-day period beginning on the effective date of any Demand Registration or
any underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company agrees (i) not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or
any successor form thereto), unless the underwriters managing the registered
public offering otherwise agree, and (ii) to cause each holder of its Common
Stock, or any securities convertible into or exchangeable or exercisable for
Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
5. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will use its reasonable best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible:
(a) prepare and (within the applicable number of days
after the end of the applicable periods within which requests for registration
may be given to the Company, as applicable: (i) with respect to the IPO, 120
days, (ii) with respect to Long-Form Registrations other than the IPO, 90 days,
and (iii) with respect to Short-Form Registrations, 60 days) file with the
Securities and Exchange Commission a registration statement with respect to
such Registrable Securities and thereafter use its reasonable efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority
of the Registrable Securities covered by such registration statement copies of
all such documents proposed to be filed, which documents will be subject to
review of such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in
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connection therewith as may be necessary to keep such registration statement
effective for a period of either (i) not less than six months (subject to
extension pursuant to section 8(b)) or, if such registration statement relates
to an underwritten offering, such longer period as in the opinion of counsel
for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered
by such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of
such securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this subsection, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the happening
of any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
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(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on NASDAQ;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in such registration statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(l) obtain a comfort letter, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request (provided that such Registrable Securities constitute at
least 10% of the securities covered by such registration statement); and
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(m) provide a legal opinion of the Company's outside
counsel, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), with respect to the registration
statement, each amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other documents
relating thereto in customary form and covering such matters of the type
customarily covered by legal opinions of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.
6. Registration Expenses.
(a) All expenses incident to the Company's performance of
or compliance with this Agreement, including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery expenses, and fees
and disbursements of counsel for the Company and all independent certified
public accountants, underwriters (excluding discounts and commissions) and
other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne as provided in this Agreement, and the
Company will, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on NASDAQ.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company will reimburse the holders of Registrable
Securities covered by such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration.
(c) To the extent Registration Expenses are not required
to be paid by the Company, each holder of securities included in any
registration hereunder will pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable will be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless, to
the extent permitted by law, each holder of Registrable Securities, its
officers and directors and each Person
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who controls such holder (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities, joint or several, to which such holder or
any such director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged
untrue statement of material fact contained (A) in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (B) in any application or other document or communication (in this
section 7, collectively called an "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify any securities covered by
such registration statement under the "blue sky" or securities laws thereof, or
(ii) any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such holder and each such director, officer and
controlling person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission, made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written information
furnished to the Company by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto after the Company has furnished such
holder with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
will furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify and
hold harmless the Company, its directors and officers and each other Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities, joint or several, to which the Company or
any such director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or in any application or (ii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or
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supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company by such holder expressly for
use therein, and such holder will reimburse the Company and each such director,
officer and controlling Person for any legal or any other expenses incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the obligation to
indemnify will be individual to each holder and will be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties exists or is reasonably likely to arise with respect to
such claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party shall not agree to any settlement that does
not provide for the complete release from liability of the indemnified party
without the indemnified party's prior written consent, which consent will not
be unreasonably withheld, and the indemnified party will not be subject to any
liability for any settlement made by the indemnifying party without the
indemnified party's consent. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest exists or is
reasonable likely to arise between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
8. Participation in Underwritten Registrations.
(a) Notwithstanding anything to the contrary contained
herein, no Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of
Registrable Securities will be required to sell more than the number of
Registrable Securities that such holder has requested the Company to include in
any registration) and (ii) completes and executes all questionnaires, powers of
-11-
<PAGE> 12
attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
(b) Each Person that is participating in any registration
hereunder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in section 5(e) above, such Person
will forthwith discontinue the disposition of its Registrable Securities
pursuant to the registration statement until such Person's receipt of the
copies of a supplemented or amended prospectus as contemplated by such section
5(e). In the event the Company shall give any such notice, the applicable time
period mentioned in section 5(b) during which a Registration Statement is to
remain effective shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to this section to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by section 5(e).
9. Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Company will file all reports required to be filed
by it under the Securities Act and the Securities Exchange Act and the rules
and regulations adopted by the Securities and Exchange Commission thereunder,
and will take such further action as any holder or holders of Registrable
Securities may reasonably request, all to the extent required to enable such
holders to sell Registrable Securities pursuant to Rule 144 adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may
be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission.
10. Definitions.
"Bain Registrable Securities" means (i) any shares of Class A
Common acquired by the Bain Stockholders pursuant to the Purchase Agreement and
(ii) any shares of Common Stock issued or issuable directly or indirectly with
respect to the securities referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, including a
recapitalization or exchange. As to any particular shares constituting Bain
Registrable Securities, such shares will cease to be Bain Registrable
Securities when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them, or (y) sold to the public through a broker, dealer or market maker
pursuant to Rule 144 (or by similar provision then in force) under the
Securities Act.
"Class A Common" means the Class A Common Stock, par value
$.01 per share, of the Company.
-12-
<PAGE> 13
"Class B Common" means the Class B Common Stock, par value
$.01 per share, of the Company.
"Class A Warrant Holder Registrable Securities" means (i) any
shares of Class A Common issued upon the exercise of Warrants issued from time
to time pursuant to the Subordinated Loan Agreement, (ii) any shares of Common
Stock issued or issuable directly or indirectly with respect to the securities
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange
and (iii) such Warrants, to the extent that a managing underwriter of an
offering in which holders of other Class A Warrant Holder Registrable
Securities have the right to exercise rights pursuant to Section 1 or 2 hereof
requests that such Warrants be registered in such offering. As to any
particular shares constituting Class A Warrant Holder Registrable Securities,
such shares will cease to be Class A Warrant Holder Registrable Securities when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
"Class B Warrant Holder Registrable Securities" means (i) any
shares of Class B Common issued upon the exercise of Warrants to purchase Class
B Common issued to Mellon Bank, N.A. or an affiliate thereof pursuant to the
Mellon Warrant Purchase Agreement and (ii) any shares of Common Stock issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) above by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization, including a recapitalization or exchange. As to any particular
shares constituting Class B Warrant Holder Registrable Securities, such shares
will cease to be Class B Warrant Holder Registrable Securities when they have
been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
"Common Stock" means, collectively, the Class A Common and the
Class B Common.
"GECC Registrable Securities" means (i) any shares of Class A
Common acquired by GECC pursuant to the Purchase Agreement and (ii) any shares
of Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or
exchange. As to any particular shares constituting GECC Registrable
Securities, such shares will cease to be GECC Registrable Securities when they
have been (x) effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them,
-13-
<PAGE> 14
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or by similar provision then in force) under the Securities Act.
"Heavy Metal" means Heavy Metal, L.C., a Virginia limited
liability company.
"Heavy Metal Registrable Securities" means (i) any shares of
Class A Common owned by Heavy Metal on the date hereof, (ii) any shares of
Class A Common acquired by the Heavy Metal Stockholders pursuant to the
Purchase Agreement and (iii) any shares of Common Stock issued or issuable
directly or indirectly with respect to the securities referred to in clauses
(i) and (ii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, including a recapitalization or exchange. As to any particular
shares constituting Heavy Metal Registrable Securities, such shares will cease
to be Heavy Metal Registrable Securities when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Hot Commissioning of the Project" means the production by the
Company or the Operating Company of the first saleable steel coil.
"Investor Registrable Securities" means collectively Bain
Registrable Securities, GECC Registrable Securities, Heavy Metal Registrable
Securities, Whitney Registrable Securities and Keylock Registrable Securities.
"Keylock Registrable Securities" means (i) any shares of Class
A Common owned by the Keylock Stockholders on the date hereof, (ii) any shares
of Class A Common acquired by the Keylock Stockholders pursuant to the Purchase
Agreement and (iii) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i) and (ii)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, including a recapitalization or exchange. As to any particular
shares constituting Keylock Registrable Securities, such shares will cease to
be Keylock Registrable Securities when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, or (y) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or by similar provision
then in force) under the Securities Act.
"Management Registrable Securities" means (i) any shares of
Class A Common owned by the Management Stockholders on the date hereof or
issued to the chief financial officer of the Company as referenced in Section
5(h) of the Stockholders Agreement and (ii) any shares of Common Stock issued
or issuable directly or indirectly with respect to the securities referred to
in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, including a recapitalization or exchange. As to any particular
shares constituting Management Registrable
-14-
<PAGE> 15
Securities, such shares will cease to be Management Registrable Securities when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.
"Mellon Warrant Purchase Agreement" means the agreement
pursuant to which the Company will issue to Mellon Bank, N.A., or an affiliate
thereof a Warrant to purchase Class B Common.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"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 approximately 1.1 million ton
thin slab cast mini-mill in Butler, Indiana.
"Registrable Securities" means collectively Bain Registrable
Securities, GECC Registrable Securities, Heavy Metal Registrable Securities,
Keylock Registrable Securities, Warrant Holder Registrable Securities, Low Cost
Registrable Securities, K Associates Registrable Securities and Whitney
Registrable Securities.
"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.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Stockholders Agreement" means the Stockholders Agreement of
even date herewith by and among the Company and the parties hereto.
"Warrant Holder Registrable Securities" means, collectively,
the Class A Warrant Holder Registrable Securities and the Class B Warrant
Holder Registrable Securities.
"Warrants" means, collectively, the warrants to purchase Class
A Common issued pursuant to the Subordinated Loan Agreement and the warrants to
purchase Class B Common issued pursuant to the Mellon Warrant Purchase
Agreement.
-15-
<PAGE> 16
"Whitney Registrable Securities" means (i) any shares of Class
A Common acquired by the Whitney Stockholders pursuant to the Purchase
Agreement and (ii) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
including a recapitalization or exchange. As to any particular shares
constituting Whitney Registrable Securities, such shares will cease to be
Whitney Registrable Securities when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or by similar provision then in force) under
the Securities Act.
Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
11. Miscellaneous.
(a) Duration of Rights. Notwithstanding any other
provision of this Agreement to the contrary, the rights of all holders of
Registrable Securities shall terminate on the seventh anniversary of the date
of the consummation of the sale of the Company's Common Stock pursuant to an
effective registration statement under the Securities Act.
(b) No Violative Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(c) Adjustments Affecting Registrable Securities. The
Company will not take any action, or permit any change to occur, with respect
to its securities which would materially and adversely affect the ability of
the holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement or which would materially
and adversely affect the marketability of such Registrable Securities in any
such registration (including, without limitation, effecting a stock split or a
combination of shares).
(d) Remedies. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party hereto shall have the right to
injunctive relief, in addition to all of its other rights and remedies at law
or in equity, to enforce the provisions of this Agreement.
(e) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may be amended or waived only
upon the prior written consent of the Company, holders of a majority of the
Bain Registrable Securities, holders of a majority of the GECC Registrable
Securities, holders of a majority of the Heavy Metal Registrable Securities,
holders of a majority of the Keylock Registrable Securities, holders of a
majority of the Warrant Holder Registrable Securities and holders of a majority
of the Whitney Registrable
-16-
<PAGE> 17
Securities; provided, however, that in the event that such amendment or waiver
would treat a holder or group of holders of Registrable Securities in a manner
different from any other holders of Registrable Securities, then such amendment
or waiver will require the consent of such holder or the holders of a majority
of the Registrable Securities of such group adversely treated.
(f) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns. In addition, and whether
or not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the holders of Registrable Securities
(or any portion thereof) as such shall be for the benefit of and enforceable by
any subsequent holder of any Registrable Securities (or of such portion
thereof), subject to the provisions respecting the minimum numbers or
percentages of shares of Registrable Securities (or of such portion thereof)
required in order to be entitled to certain rights, or take certain actions,
contained herein.
(g) Severability. Whenever possible, each provision of
this Agreement shall 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, such invalidity, illegality or unenforceability shall
not affect any other provision or the effectiveness or validity of any
provision in any other jurisdiction, and this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(h) 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.
(i) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
(j) Governing Law. All issues concerning this Agreement
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
provision or rule (whether of the State of Indiana or any other jurisdiction)
that would cause the application of the law of any Jurisdiction other than the
State of Indiana.
(k) Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall 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. Such notices, demands and other communications will be sent to the
Bain Stockholders and GECC at the addresses indicated on the Schedule of
Purchasers
-17-
<PAGE> 18
attached to the Purchase Agreement, to the Warrant Holders at the addresses
indicated on the Schedule of Purchasers attached to the Purchase Agreement, to
the Other Stockholders at the addresses indicated on Schedule D attached hereto
and to the Company at the address indicated below:
Steel Dynamics Holdings, Inc.
c/o Steel Dynamics, Inc.
2780 Waterfront Parkway East Drive
Suite 325
Indianapolis, IN 46214
Attention: President
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.
(l) Entire Agreement. Except as otherwise expressly set
forth herein, this Agreement and any other agreements and instruments 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.
(m) Third Party Beneficiary. APT Holdings Corporation
shall be a third party beneficiary of this Agreement.
-18-
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this
Registration Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse
By:
---------------------------------
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
/s/ Paul D. Edgerley
By:
---------------------------------
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
/s/ Paul B. Edgerley
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley
By:
--------------------------------
, A General Partner
------------
<PAGE> 20
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley
By:
--------------------------------
, A General Partner
------------
GENERAL ELECTRIC CAPITAL CORPORATION
/s/ Molly S. Fergusson
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ John M. Carey
By:
---------------------------------
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ John M. Carey
By:
---------------------------------
HEAVY METAL L.C.
/s/ Robin K. Kanner
By:
---------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its
general partner
/s/ David L. Stickler
By:
---------------------------------
<PAGE> 21
KLANS ASSOCIATES
/s/ James L. Learner
By:
---------------------------------
General Partner
STEEL INK COMPANY
/s/ Peter Brickfield
By:
---------------------------------
<PAGE> 22
/s/ Keith E. Busse
-----------------------------------
KEITH E. BUSSE
/s/ Richard P. Teets, Jr.
-----------------------------------
RICHARD P. TEETS, JR.
/s/ Mark D. Millett
-----------------------------------
MARK D. MILLETT
<PAGE> 23
WHITNEY SUBORDINATED DEBT FUND,
L.P.
/s/ William Laverack, Jr.
By:
--------------------------------
, a General Partner
-----------
SUMITOMO CORPORATION OF AMERICA
/s/ Tsunehiro Ichiki
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ William Hall, Jr.
By:
---------------------------------
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ William Hall, Jr.
By:
---------------------------------
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David Stickler
Name:
----------------------------
Title:
---------------------------
<PAGE> 24
LDI, LTD., an Indiana limited
partnership
By: LDI Management, Inc., an Indiana
corporation, general partner
/s/ Andre B. Lacy
By:
---------------------------------
<PAGE> 25
SCHEDULE A
Bain Stockholders
Bain Capital Fund IV, L.P.
Bain Capital Fund IV-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
KLANS Associates
Low Cost Limited Partnership
<PAGE> 26
SCHEDULE B
Keylock Stockholders
Keylock Investments Limited
Mazelina Anstalt
<PAGE> 27
SCHEDULE C
Whitney Stockholders
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
<PAGE> 28
SCHEDULE D
Management Stockholders
Keith E. Busse
Richard P. Teets, Jr.
Mark D. Millett
Steel Ink Company
<PAGE> 29
SCHEDULE E
Warrant Holders
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
<PAGE> 1
Exhibit 10.32
REGISTRATION JOINDER AGREEMENT
AND
AMENDMENT NO. 1 TO REGISTRATION AGREEMENT
This Registration Joinder Agreement and Amendment No. 1 to
Registration Agreement (this "Registration Joinder Agreement") is entered into
on this day of 1995, by and among Steel Dynamics Holdings, Inc. (the
"Company"), each of the Persons listed on Schedule A attached hereto (the "Bain
Stockholders"), General Electric Capital Corporation ("GECC"), Heavy Metal,
L.C. ("Heavy Metal"), the Persons listed on Schedule B attached hereto (the
"Keylock Stockholders"), the Persons listed on Schedule C attached hereto (the
"Whitney Stockholders"), the Persons listed on Schedule D attached hereto (the
"Management Stockholders"), and the Persons listed on Schedule E attached
hereto (the "Warrant Holders"). The entities and individuals which comprise
the Bain Stockholders, GECC, the Whitney Stockholders, Heavy Metal, the Keylock
Stockholders, the Management Stockholders, and the Warrant Holders are
collectively referred to herein as the "Stockholders," and each as a
"Stockholder."
APT Holdings Corporation, a non-signatory, shall be a third party
beneficiary of this Registration Joinder Agreement.
For purposes of this Registration Joinder Agreement, all capitalized
ten-ns shall have the same meaning as those terms have under the Registration
Agreement.
WHEREAS, the Company, the Bain Stockholders, GECC, Heavy Metal, the
Keylock Stockholders, the Whitney Stockholders, the Management Stockholders and
the Warrant Holders are parties to a Registration Agreement dated June 30, 1994
(the "Registration Agreement") pursuant to which the Company agreed to provide
certain registration rights to the Stockholders and Warrant Holders as set
forth therein;
WHEREAS, Section I 1 (f) of the Registration Agreement provides that the
Registration Agreement may be amended if approved in writing by the Company and
the holders of a majority of the then outstanding "Bain Registrable
Securities," the holders of a majority of the then outstanding "GECC
Registrable Securities," the holders of a majority of the then outstanding
"Heavy Metal Registrable Securities," the holders of a majority of the then
outstanding "Keylock Registrable Securities," the holders of a majority of the
then outstanding "Warrant Holder Registrable Securities," and the holders of a
majority of the then outstanding "Whitney Registrable Securities;"
WHEREAS, the Company, the Stockholders, and the Warrant Holders are
parties to a Stockholders Agreement dated June 30, 1994 (the "Stockholders
Agreement");
WHEREAS, Section 5 ("Covenants'.'), subsection (h) ("Senior Manager") of
the Stockholders Agreement contemplates that when a chief financial officer (a
"CFO") of the Company is hired, the Company plans to issue to such individual
certain shares of the Company's
<PAGE> 2
Class A Common, which, when issued, will render that individual a "holder of
Registrable Securities" for purposes of the Registration Agreement, so long as
the CFO enters into the Registration Agreement and agrees to be bound by the
terms thereof-,
WHEREAS, pursuant to Section 5(h) of the Stockholders Agreement, all of
the signatory parties pre-agreed "to execute and deliver" an amendment to the
Registration Agreement "in order to effectuate" the provisions of Section 5(h);
WHEREAS, on July 26, 1994, the Company hired Tracy L. Shellabarger ("
Shellabarger") as its vice president and CFO, duly entered into an Employment
Agreement with him on the same date, and, pursuant to the intent of Section
5(h) of the Stockholders Agreement and the authorization of its board of
directors, issued to Tracy L. Shellabarger Ten Thousand (I 0,000) shares of its
Class A Common (the "Shellabarger Shares"); and
WHEREAS, in connection with the Registration Agreement, and as the
result of a scrivener's error in connection with the drafting and execution
thereof, the term "Management Registrable Securities" was inadvertently omitted
from the definitions of "Investor Registrable Securities" and "Registrable
Securities" in Section 10 ("Definitions"), and the "holders of a majority of
the Management Registrable Shares" were omitted from the listing of persons
whose consent must be obtained for any amendments or waivers pursuant to
Section I 1 (e) of the Registration Agreement;
NOW, THEREFORE, in consideration of the issuance by the Company to
Shellabarger of the Shellabarger Shares, and of the mutual covenants between
the parties to the Registration Agreement, the parties agree as follows:
1. SHELLABARGER AGREEMENT. Shellabarger agrees to and does
hereby enter into the Registration Agreement with the Company, with the other
Stockholders, and with the members of the Subdebt Group, and agrees to be bound
by all of the ten-ns thereof, including, without limitation, the provisions
thereof regarding Demand Registrations, Piggyback Registrations, Holdback
Agreements, agreements regarding registration procedures and expenses,
indemnification, amendment, and the like.
2. THE OTHER PARTIES' AGREEMENT. The Company, the Stockholders,
and the members of the Subdebt Group agree to and do hereby enter into the
Registration Agreement with Shellabarger, agree to be bound by all of the terms
thereof; including, without limitation, the provisions described in Section I
of this Registration Joinder Agreement; agree that, from and after the
Effective Date hereof, Shellabarger shall be deemed to have been a holder of
"Investor Registrable Securities" within the meaning of Section I (f) of the
Registration Agreement, and shall be deemed to have been a holder of
"Management Registrable Securities" as defined in Section 1 0 for all purposes
under the Registration Agreement; and agree, further, that, for purposes of
Section I (f), this Registration Joinder Agreement shall be deemed to operate
as the "prior written consent" of each holder of Investor Registrable
Securities to the grant of
2
<PAGE> 3
registration rights by the Company to Shellabarger. Specifically, "Tracy L.
Shellabarger" shall be added to Schedule D as part of the "Management
Stockholders" and a signature line shall be added immediately below Mark D.
Millet on the signature page.
3. ACKNOWLEDGMENT AND AGREEMENT REGARDING SCRIVENER'S ERROR. The
Company and the Stockholders acknowledge and agree that, in order to correct a
scrivener's omission in various definitions in the Registration Agreement:
(a) The defined term "Management Registrable Securities" in Section
IO of the Registration Agreement shall be inserted immediately following "Heavy
Metal Registrable Securities" in the definition of "Investor Registrable
Securities;"
(b) The defined term "Management Registrable Securities" in Section
10 of the Registration Agreement shall be inserted immediately following "Heavy
Metal Registrable Securities" in the definition of "Registrable Securities" in
Section 1 0 of the Registration Agreement; and
(c) The phrase "holders of a majority of the Management Registrable
Securities" shall be inserted immediately following the words "Keylock
Registrable Securities" in Section II (e) of the Registration Agreement
regarding amendments and waivers.
4. ADDRESS FOR NOTICE. For purposes of any notice under Section
II (k) of this Registration Joinder Agreement, Shellabarger's address is:
Tracy L. Shellabarger
11125 Spring Pond Cove
Fort Wayne, IN 46845
5. EFFECTIVE DATE. The Effective Date of this Registration
Joinder Agreement shall be September 9, 1994.
IN WITNESS WHEREOF, the parties have executed this Registration Joinder
Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
3
<PAGE> 4
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley
By
---------------------------------
Name
-------------------------------
A General Partner
4
<PAGE> 5
GENERAL ELECTRIC CAPITAL
CORPORATION
/S/ William D. Strittmatter
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
J. H. WHITNEY & CO.
/s/ William Laverack, Jr.
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
WHITNEY 1990 EQUITY FUND, L.P.
/s/ William Laverack, Jr.
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ John M. Carey, POA
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
5
<PAGE> 6
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ John M. Carey, POA
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
HEAVY METAL, L.C.
/s/ Robin K. Kanner
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its General Partner
/s/ David L. Stickler
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
KLANS ASSOCIATES
/s/
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
6
<PAGE> 7
STEEL INK COMPANY
/s/ Peter B. Brickfield
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
/s/ Keith E. Busse
--------------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
--------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
--------------------------------------
Mark D. Millett
WHITNEY SUBORDINATED DEBT FUND, L.P.
/s/ William Laverack, Jr.
By
---------------------------------
Name
-------------------------------
A General Partner
SUMITOMO CORPORATION OF AMERICA
/s/
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
7
<PAGE> 8
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David L. Stickler
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
LDI, LTD., an Indiana limited partnership
By: LDI Management, Inc., an Indiana
corporation, General Partner
/s/ Andre B. Lacy
By
---------------------------------
Name
-------------------------------
Its
-------------------------------
8
<PAGE> 9
SCHEDULE A
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
Low Cost Limited Partnership
9
<PAGE> 10
SCHEDULE B
KEYLOCK STOCKHOLDERS
Keylock Investments Limited
Mazelina Anstalt
10
<PAGE> 11
SCHEDULE C
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
11
<PAGE> 12
SCHEDULE D
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Steel Ink Company
12
<PAGE> 13
SCHEDULE E
WARRANT HOLDERS
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
13
<PAGE> 1
Exhibit 10.33
REGISTRATION JOINDER AGREEMENT
AND
AMENDMENT NO. 2 TO REGISTRATION AGREEMENT
This Registration Joinder Agreement and Amendment No. 2 to
Registration Agreement (this "Registration Joinder Agreement") is entered into
on this _____ day of _______________, 1995, by and among Steel Dynamics
Holdings, Inc. (the "Company"), each of the Persons listed on Schedule A
attached hereto (the "Bain Stockholders"), General Electric Capital Corporation
("GECC"), Heavy Metal, L.C. ("Heavy Metal"), the Persons listed on Schedule B
attached hereto (the "Keylock Stockholders"), the Persons listed on Schedule C
attached hereto (the "Whitney Stockholders"), the Persons listed on Schedule D
attached hereto (the "Management Stockholders"), the Persons listed on Schedule
E attached hereto (the "Warrant Holders"), and Preussag Stahl AG, a company
incorporated under the laws of the Federal Republic of Germany ("Preussag").
The entities and individuals which comprise the Bain Stockholders, GECC, the
Whitney Stockholders, Heavy Metal, the Keylock Stockholders, the Management
Stockholders, and the Warrant Holders are collectively referred to herein as
the "Stockholders," and each as a "Stockholder."
APT Holdings Corporation, a non-signatory, shall be a third party
beneficiary of this Registration Joinder Agreement.
For purposes of this Registration Joinder Agreement, all capitalized
terms shall have the same meaning as those terms have under the Registration
Agreement.
WHEREAS, the Company, the Bain Stockholders, GECC, Heavy Metal, the
Keylock Stockholders, the Whitney Stockholders, the Management Stockholders and
the Warrant Holders are parties to a Registration Agreement dated June 30, 1994
(the "Registration Agreement") pursuant to which the Company agreed to provide
certain registration rights to the Stockholders and Warrant Holders as set
forth therein;
WHEREAS, the parties to the Registration Agreement, effective
September 9, 1994, amended the Registration Agreement by "Registration Joinder
Agreement and Amendment No. 1 to Registration Agreement" by and between such
parties and Tracy L. Shellabarger;
WHEREAS, Section 11(f) of the Registration Agreement provides that the
Registration Agreement may be amended if approved in writing by the Company and
the holders of a majority of the then outstanding "Bain Registrable
Securities," the holders of a majority of the then outstanding "GECC
Registrable Securities," the holders of a majority of the then outstanding
"Heavy Metal Registrable Securities," the holders of a majority of the then
outstanding "Keylock Registrable Securities," the holders of a majority of the
then outstanding
<PAGE> 2
"Warrant Holder Registrable Securities," and the holders of a majority of the
then outstanding "Whitney Registrable Securities;"
WHEREAS, the Company and Preussag have agreed upon the terms of and
propose to enter into a stock purchase agreement (the "Preussag Purchase
Agreement"), in substantially the form attached hereto as Exhibit A, pursuant
to the terms of which the Company has agreed to sell to Preussag and Preussag
has agreed to purchase from the Company shares of the Company's Class A Common
Stock (the "Preussag Shares");
WHEREAS, one of the conditions to Preussag's commitment to purchase at
least Twenty-Five Million U.S. Dollars (U.S. $25,000,000.00) of Preussag Shares
under the Preussag Purchase Agreement is that Preussag join in and become a
party to that certain Registration Agreement dated June 30, 1994 (the
"Registration Agreement"), thereby becoming entitled to the benefits and
subjecting itself to the obligations thereunder that are accorded to the
holders of Registrable Securities thereunder;
NOW, THEREFORE, in consideration of the mutual covenants of the
parties to the Preussag Purchase Agreement and to other good and valuable
consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. PREUSSAG AGREEMENT. Preussag agrees to and does hereby enter
into the Registration Agreement with the Company, and with the other
Stockholders, and agrees to be bound by all of the terms thereof, including,
without limitation, the provisions thereof regarding Demand Registrations,
Piggyback Registrations, Holdback Agreements, agreements regarding registration
procedures and expenses, indemnification, amendment, and the like.
2. THE OTHER PARTIES' AGREEMENT. The Company and the other
Stockholders agree to and do hereby enter into the Registration Agreement with
Preussag, agree to be bound by all of the terms thereof, including, without
limitation, the provisions described in Section 1 of this Registration Joinder
Agreement, and agree that, from and after the Effective Date hereof, Preussag
shall be deemed to have been a holder of "Investor Registrable Securities"
within the meaning of Section 1(f) of the Registration Agreement, and shall be
deemed to have been a holder of "Preussag Registrable Securities" as defined
below, for all purposes under the Registration Agreement, as amended hereby;
and agree, further, that, for purposes of Section 1(f), this Registration
Joinder Agreement shall be deemed to operate as the "prior written consent" of
each holder of Investor Registrable Securities to the grant of registration
rights by the Company to Preussag.
3. SPECIFIC AMENDMENTS. Without limiting the generality of the
foregoing agreements, the following specific amendments shall be deemed made to
the Registration Agreement, to operate prospectively from and after the
Effective Date hereof:
2
<PAGE> 3
(a) "Preussag Stahl AG ("Preussag")" shall be added to the
introductory paragraph as "Stockholder" and a separate
signature line for Preussag shall be added to the signature
pages immediately following the signature lines for the
"Management Stockholders;"
(b) The word "and" in the ninth line of Section 1 ("Demand
Registrations"), subsection (a) ("Requests for Registration"),
shall be deleted and replaced with a comma, the phrase ", and
the holders of a majority of the Preussag Registrable
Securities" shall be added after the words "Keylock
Registrable Securities" in the tenth line of Section 1(a), and
the same addition shall be made to the last full sentence in
Section 1(a);
(c) In Section 1(b) ("Number of Demand Registrations"), the word
"and" shall be deleted immediately following "Heavy Metal
Registrable Securities" in line five of Section 1(b) and
replaced with a comma, and the phrase ", and the holders of a
majority of the Preussag Registrable Securities" shall be
added immediately following the phrase "Keylock Registrable
Securities" in line six of Section 1(b), entitling Preussag to
one Demand Registration;
(d) A definition of "Preussag Registrable Securities" shall be
added to Section 10 ("Definitions"), immediately following the
definition of the word "Person," and the text of such
definition shall be patterned after the definition of "Bain
Registrable Securities," substituting "Preussag Registrable
Securities" for "Bain Registrable Securities" wherever such
term appears within the definition;
(e) In connection with the definition of "Investor Registrable
Securities" in Section 10, the word "and" immediately
following "Whitney Registrable Securities" shall be deleted
and a comma inserted in its place, and the words ", and
Preussag Registrable Securities" shall be added immediately
following "Keylock Registrable Securities;"
(f) The definition of "Registrable Securities" in Section 10 shall
be amended by deleting the word "and" immediately preceding
"Whitney Registrable Securities," replacing the period
immediately following "Whitney Registrable Securities," and by
adding the phrase ", and Preussag Registrable Securities" at
the end thereof.
(g) In Section 11 ("Miscellaneous"), Subsection (a) ("Duration of
Rights"), the word "or" immediately preceding "Keylock
Registrable Securities" shall be deleted and, immediately
following "Keylock Registrable Securities" the words ", or
Preussag Registrable Securities" shall be added; and
3
<PAGE> 4
(h) In Section 11 ("Miscellaneous"), Subsection (e) ("Amendments
and Waivers"), the word "and" immediately following "Warrant
Holder Registrable Securities" shall be deleted and replaced
with a comma, and the words ", and holders of a majority of
the Preussag Registrable Securities" shall be added
immediately following the words "Whitney Registrable
Securities."
4. ADDRESS FOR NOTICE. For purposes of any notice under Section
11(k) of this Registration Joinder Agreement, Preussag's address is:
Preussag Stahl AG
Eisenhuttenstrasse 99 D-38223
38239 Salzgitter, Germany
Attn: Jens Schneider
5. EFFECTIVE DATE. The Effective Date of this Registration
Joinder Agreement shall be concurrent with the First Closing contemplated by
Section 1.1 of the Preussag Purchase Agreement; provided, however, that the
provisions of Sections 1 and 11(a) of the Registration Agreement, as hereby
amended, and the provisions of Sections 3(b) and (c) hereof, shall not be
deemed effective, notwithstanding anything to the contrary expressed therein or
herein, unless and until Preussag has completed the purchase 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 of the Preussag Purchase Agreement. In the
event that Preussag fails to meet such $25,000,000.00 minimum purchase amount,
and if a Third Closing or Alternative Third Closing does not occur within the
time set forth in Section 5 of the Preussag Purchase Agreement, then, unless
extended by mutual agreement of the parties thereto and hereto, the provisions
of Sections 1 and 11(a) of the Registration Agreement, as hereby amended, and
the provisions of Sections 3(b) and (c) hereof shall automatically, and without
the necessity of any further action, be deemed inapplicable to Preussag.
IN WITNESS WHEREOF, the parties have executed this Registration
Joinder Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
4
<PAGE> 5
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley, A General Partner
By
-----------------------------------
Name
----------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley, A General Partner
By
-----------------------------------
Name
----------------------------------
A General Partner
5
<PAGE> 6
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ William D. Strittmatter, Vice President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ M. Hagetslafe, Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ M. Hagetslafe, Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
HEAVY METAL, L.C.
/s/ Robin K. Kanner, Signatory Member
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
J. H. WHITNEY & CO.
/s/ William Laverack, Jr.,
A General Partner
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
6
<PAGE> 7
WHITNEY 1990 EQUITY FUND, L.P.
/s/ William Laverack, Jr.,
A General Partner
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc.,
its General Partner
/s/ David L. Stickler, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
KLANS ASSOCIATES
/s/ Karen E. Lutz, A General Partner
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
7
<PAGE> 8
STEEL INK COMPANY
/s/ Peter J.P. Brickfield, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
/s/ Keith E. Busse
--------------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
--------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
--------------------------------------
Mark D. Millett
/s/ Tracy L. Shellabarger
--------------------------------------
Tracy L. Shellabarger
WHITNEY SUBORDINATED DEBT FUND, L.P.
/s/ William Laverack, Jr.,
A General Partner
By
-----------------------------------
Name
----------------------------------
A General Partner
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President and
General Manager
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
8
<PAGE> 9
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin,
Second Vice President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
LINCOLN NATIONAL INCOME FUND, INC.
By: Lincoln National Investment Management
Company, its attorney-in-fact
/s/ Richard L. Corwin, Vice President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.
/s/ David Stickler, Secretary
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
LDI, LTD., an Indiana limited partnership
By: LDI Management, Inc., an Indiana
corporation, General Partner
/s/ Andre B. Lacy, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
9
<PAGE> 10
PREUSSAG STAHL AG
/s/ Jens Schneider
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
10
<PAGE> 11
SCHEDULE A
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
11
<PAGE> 12
SCHEDULE B
KEYLOCK STOCKHOLDERS
Keylock Investments Limited
Mazelina Anstalt
12
<PAGE> 13
SCHEDULE C
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
13
<PAGE> 14
SCHEDULE D
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Tracy L. Shellabarger
Steel Ink Company
14
<PAGE> 15
SCHEDULE E
WARRANT HOLDERS
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
15
<PAGE> 1
Exhibit 10.34
REGISTRATION JOINDER AGREEMENT
AND
AMENDMENT NO. 3 TO REGISTRATION AGREEMENT
This Registration Joinder Agreement and Amendment No. 3 to
Registration Agreement (this "Registration Joinder Agreement") is entered into
on this _____ day of _______________, 1996, by and among Steel Dynamics
Holdings, Inc. (the "Company"), each of the Persons listed on Schedule A
attached hereto (the "Bain Stockholders"), General Electric Capital Corporation
("GECC"), Heavy Metal, L.C. ("Heavy Metal"), the Persons listed on Schedule B
attached hereto (the "Keylock Stockholders"), the Persons listed on Schedule C
attached hereto (the "Whitney Stockholders"), the Persons listed on Schedule D
attached hereto (the "Management Stockholders"), the Persons listed on Schedule
E attached hereto (the "Warrant Holders"), Preussag Stahl AG, ("Preussag"), and
Sumitomo Corporation, a corporation existing under the laws of Japan, and
Sumitomo Corporation of America, a corporation existing under the laws of the
State of New York (hereinafter collectively the "Sumitomo Stockholders" or
"Sumitomo"). The entities and individuals which comprise the Bain
Stockholders, GECC, the Whitney Stockholders, Heavy Metal, the Keylock
Stockholders, the Management Stockholders, the Warrant Holders, and Preussag
are collectively referred to herein as the "Stockholders," and each as a
"Stockholder."
APT Holdings Corporation, a non-signatory, shall be a third party
beneficiary of this Registration Joinder Agreement.
For purposes of this Registration Joinder Agreement, all capitalized
terms shall have the same meaning as those terms have under the Registration
Agreement.
WHEREAS, the Company, the Bain Stockholders, GECC, Heavy Metal, the
Keylock Stockholders, the Whitney Stockholders, the Management Stockholders,
the Warrant Holders, and Preussag are parties to a Registration Agreement dated
June 30, 1994 (the "Registration Agreement") pursuant to which the Company
agreed to provide certain registration rights to the Stockholders and Warrant
Holders as set forth therein;
WHEREAS, the parties to the Registration Agreement previously
amended the Registration Agreement by (i) "Registration Joinder Agreement and
Amendment No. 1 to Registration Agreement" by and between such parties and
Tracy L. Shellabarger, and (ii) Registration Joinder Agreement and Amendment
No. 2 to Registration Agreement by and between such parties and Preussag;
WHEREAS, Section 11(e) of the Registration Agreement provides that the
Registration Agreement may be amended if approved in writing by the Company and
the holders of a majority of the then outstanding "Bain Registrable
Securities," the holders of a majority of the then
<PAGE> 2
outstanding "GECC Registrable Securities," the holders of a majority of the
then outstanding "Heavy Metal Registrable Securities," the holders of a
majority of the then outstanding "Keylock Registrable Securities," the holders
of a majority of the then outstanding "Warrant Holder Registrable Securities,"
the holders of a majority of the then outstanding "Whitney Registrable
Securities, and the holders of a majority of the then outstanding "Preussag
Registrable Securities;"
WHEREAS, the Company and Sumitomo have agreed upon the terms of and
propose to enter into a Stock Purchase Agreement (the "Sumitomo Purchase
Agreement"), in substantially the form attached hereto as Exhibit A, pursuant
to the terms of which the Company has agreed to sell to Sumitomo and Sumitomo
has agreed to purchase from the Company certain shares of the Company's Class A
Common Stock (the "Sumitomo Shares");
WHEREAS, one of the conditions to Sumitomo's commitment to purchase
the Sumitomo Shares under the Sumitomo Purchase Agreement is that Sumitomo join
in and become a party to the Registration Agreement, thereby becoming entitled
to the benefits and subjecting itself to the obligations thereunder that are
accorded to the holders of Registrable Securities thereunder, subject, however,
to the limitations set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants of the
parties to the Sumitomo Purchase Agreement and to other good and valuable
consideration described herein, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. SUMITOMO AGREEMENT. The Sumitomo Stockholders agree to and do
hereby enter into the Registration Agreement with the Company, and with the
other Stockholders, and agree to be bound by all of the terms thereof,
including, without limitation, the provisions thereof regarding Demand
Registrations, Piggyback Registrations, Holdback Agreements, agreements
regarding registration procedures and expenses, indemnification, amendment, and
the like; provided, however, that Sumitomo shall not have any rights to any
Demand Registrations as contemplated by Section 1 of the Registration
Agreement, and Sumitomo's rights with respect to Piggyback Registrations and
participation rights described in Sections 2 and 8 of the Registration
Agreement, respectively, but not Sumitomo's obligations under the Registration
Agreement, shall not become effective until six (6) months after the Effective
Date as defined below.
2. THE OTHER PARTIES' AGREEMENT. The Company and the other
Stockholders agree to and do hereby enter into the Registration Agreement with
the Sumitomo Stockholders, agree to be bound by all of the terms thereof,
including, without limitation, the provisions described in Section 1 of this
Registration Joinder Agreement, and agree that, from and after the Effective
Date hereof, the Sumitomo Stockholders shall be deemed to have been holders of
"Registrable Securities" within the meaning of Sections 2(a), 4, 5, 6, 7, and 8
of the Registration Agreement, and shall be deemed to have been a holder of
"Sumitomo Registrable Securities" as defined below, for all purposes under the
Registration Agreement as amended hereby; provided, however, that nothing
herein shall be deemed to constitute an agreement to afford the Sumitomo
Stockholders any demand registration
2
<PAGE> 3
rights under the Registration Agreement.
3. SPECIFIC AMENDMENTS. Without limiting the generality of the
foregoing agreements, the following specific amendments shall be deemed made to
the Registration Agreement, to operate prospectively from and after the
Effective Date hereof:
(a) The phrase "and the Persons listed on Schedule F attached
hereto (the "Sumitomo Stockholders)" shall be added to the
first sentence of the introductory paragraph and the phrase
"and the Sumitomo Stockholders" shall be added in the
parenthetical in the introductory paragraph after the words
"Warrant Holders", and separate signature lines for Sumitomo
Corporation and Sumitomo Corporation of America shall be added
to the signature pages immediately following the signature
lines for "Preussag";
(b) A definition of "Sumitomo Registrable Securities" shall be
added to Section 10 ("Definitions"), immediately following the
definition of the words "Stockholders Agreement," and the text
of such definition shall be patterned after the definition of
"Bain Registrable Securities," substituting "Sumitomo
Registrable Securities" for "Bain Registrable Securities"
wherever such term appears within the definition, provided,
however, that the words "the Sumitomo Purchase Agreement" as
defined herein shall be substituted for the words "the
Purchase Agreement" in (i) thereof;
(c) The definition of "Registrable Securities" in Section 10 shall
be amended by deleting the word "and" immediately preceding
"Preussag Registrable Securities," replacing the period
immediately following "Preussag Registrable Securities," and
by adding the phrase ", and Sumitomo Registrable Securities."
at the end thereof.
(d) In Section 11 ("Miscellaneous"), Subsection (e) ("Amendments
and Waivers"), the word "and" immediately following "Whitney
Registrable Securities" shall be deleted and replaced with a
comma, and the words ", and holders of a majority of the
Sumitomo Registrable Securities" shall be added immediately
following the words "Preussag Registrable Securities."
3
<PAGE> 4
4. ADDRESS FOR NOTICE. For purposes of any notice under Section
11(k) of this Registration Joinder Agreement, the Sumitomo Stockholder's
addresses are:
Sumitomo Corporation Sumitomo Corporation of America
ATTN: Tsunehiro Ichiki ATTN: Kei Kato
Josuika Building 2750 USX Tower
2-1-1 Hitotsubashi 600 Grant St.
Chiyodo - Ku Pittsburg, PA 15219-2751
Tokyo, 101, Japan Tele: 412-391-9672
Tele: 011-03-3237-3180 Fax: 412-391-9756
Fax: 011-03-3237-3179
5. EFFECTIVE DATE. The Effective Date of this Registration
Joinder Agreement shall be September _____, 1996, concurrent with the Closing
contemplated by the Sumitomo Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Registration
Joinder Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
/s/ Keith E. Busse
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
STOCKHOLDERS
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
4
<PAGE> 5
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
/s/ Paul B. Edgerley, Managing Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
BCIP ASSOCIATES
/s/ Paul B. Edgerley, General Partner
By
-----------------------------------
Name
----------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
/s/ Paul B. Edgerley, General Partner
By
-----------------------------------
Name
----------------------------------
A General Partner
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ E. S. Christie, Manager Operations
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
5
<PAGE> 6
J. H. WHITNEY & CO.
/s/ William Laverack, Jr.
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
WHITNEY 1990 EQUITY FUND, L.P.
/s/ William Laverack, Jr.
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
KEYLOCK INVESTMENTS LIMITED
/s/ M. Hugelshefen, Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
/s/ M. Hugelshefen, Director
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
6
<PAGE> 7
HEAVY METAL, L.C.
/s/ Robin K. Kanner, Signatory Member
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., its General Partner
/s/ David L. Stickler, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
KLANS ASSOCIATES
/s/ James Learner, General Partner
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
STEEL INK COMPANY
/s/ Peter Brickfield, President
By
-----------------------------------
Name
-----------------------------------
Its
----------------------------------
7
<PAGE> 8
/s/ Keith E. Busse
------------------------------------------
Keith E. Busse
/s/ Richard P. Teets, Jr.
------------------------------------------
Richard P. Teets, Jr.
/s/ Mark D. Millett
------------------------------------------
Mark D. Millett
/s/ Tracy L. Shellabarger
------------------------------------------
Tracy L. Shellabarger
McDONALD & COMPANY INVESTMENTS, INC.
/s/ David L. Stickler,
Senior Vice President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
McD VENTURE CAPITAL FUND, L.P.
Ralph M. Della Ratta, Jr.
By
-----------------------------------
Name
----------------------------------
A General Partner
8
<PAGE> 9
APT HOLDINGS CORPORATION
/s/ Charles J. Billerbeck,
Vice President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
PREUSSAG STAHL AG
/s/ Jurgen Kolb
By
-----------------------------------
SUMITOMO CORPORATION
/s/ Tsunehiro Ichiki, Director,
Iron & Steel Raw Materials iron &
Steel Division, No.1
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President
and General Manager, Pittsburgh Office
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
9
<PAGE> 10
SUBORDINATED DEBT NOTE HOLDERS
WHITNEY SUBORDINATED DEBT FUND, L.P.
/s/ William Laverack, Jr.
By
-----------------------------------
Name
----------------------------------
A General Partner
GENERAL ELECTRIC CAPITAL
CORPORATION
/s/ E. S. Christie, Manager Operations
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
SUMITOMO CORPORATION OF AMERICA
/s/ Masahiko Nakagawa,
Senior Vice President
and General Manager, Pittsburgh Office
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
(formerly known as Lincoln
Investment Management Company),
its attorney-in-fact
/s/ Richard L. Corwin
By
-----------------------------------
Name Richard L. Corwin
Its Second Vice President
10
<PAGE> 11
LINCOLN NATIONAL INCOME FUND, INC.
/s/ David C. Fischer
By
-----------------------------------
Name David C. Fischer
Its Vice President
SDI LIMITED PARTNERSHIP
By: SDI Investors, Inc.,
its General Partner
/s/ David Knoll, President
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
LDI, LTD., an Indiana limited partnership
by: LDI Management, Inc., an Indiana
corporation, General Partner
By
-----------------------------------
Name
----------------------------------
Its
----------------------------------
11
<PAGE> 12
SCHEDULE A
BAIN GROUP
Bain Capital Fund IV, L.P.
Bain Capital Fund IV - B, L.P.
BCIP Associates, L.P.
BCIP Trust Associates, L.P.
KLANS Associates
12
<PAGE> 13
SCHEDULE B
KEYLOCK STOCKHOLDERS
Keylock Investments Limited
Mazelina Anstalt
13
<PAGE> 14
SCHEDULE C
WHITNEY GROUP
J.H. Whitney & Co.
Whitney 1990 Equity Fund, L.P.
14
<PAGE> 15
SCHEDULE D
MANAGEMENT GROUP
Keith E. Busse
Mark D. Millett
Richard P. Teets, Jr.
Tracy L. Shellabarger
Steel Ink Company
15
<PAGE> 16
SCHEDULE E
WARRANT HOLDERS
Whitney Subordinated Debt Fund, L.P.
Sumitomo Corporation of America
General Electric Capital Corporation
The Lincoln National Life Insurance Company
Lincoln National Income Fund, Inc.
SDI Limited Partnership
LDI, Ltd.
16
<PAGE> 17
SCHEDULE F
THE SUMITOMO GROUP
Sumitomo Corporation
Sumitomo Corporation of America
17
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this registration statement of Steel Dynamics, Inc. on
Form S-1 of our report dated September 12, 1996 on the Consolidated Financial
Statements of Steel Dynamics Holdings, Inc. and subsidiaries appearing in the
prospectus, which is part of this registration statement.
We also consent to the reference to us under the headings "Selected Consolidated
Financial Data" and "Experts" in such prospectus.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
September 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Steel Dynamics Holdings, Inc. and subsidiaries at
December 31, 1995 and the Consolidated Statement of Operations for the year
ended December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,884
<SECURITIES> 0
<RECEIVABLES> 125
<ALLOWANCES> 0
<INVENTORY> 13,580
<CURRENT-ASSETS> 22,223
<PP&E> 274,197
<DEPRECIATION> 150
<TOTAL-ASSETS> 320,679
<CURRENT-LIABILITIES> 36,711
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 63,431
<TOTAL-LIABILITY-AND-EQUITY> 320,679
<SALES> 137
<TOTAL-REVENUES> 137
<CGS> 3,169
<TOTAL-COSTS> 16,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564
<INCOME-PRETAX> (19,888)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,888)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
