<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1996
REGISTRATION NO. 333-12521
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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> <C> <C>
- --------------------------------------------------------------------------------
NUMBER OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- ---------------------------------------
Common Stock, $.01 par value........... 11,320,312 Shares $17.00 $192,445,304 $58,316.76
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
(1) Includes 1,476,562 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
(3) $61,465.52 was previously paid.
------------------------
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 October 31, 1996
9,843,750 Shares
Steel Dynamics, Inc.
COMMON STOCK
------------------------
OF THE 9,843,750 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 9,375,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 468,750 SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES OF COMMON STOCK
BY THE SELLING STOCKHOLDERS. OF THE 9,843,750 SHARES OF COMMON STOCK
BEING OFFERED, 7,875,000 SHARES ARE BEING OFFERED INITIALLY IN THE
UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 1,968,750
SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS."
PRIOR TO THE OFFERINGS, THERE HAS BEEN NO PUBLIC MARKET FOR
THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED
THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $15 AND $17. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
------------------------
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 $875,000.
(3) Certain stockholders have granted the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 1,476,562 additional Shares of Common Stock at the price to
public less underwriting discounts and commissions, for the purpose of
covering over-allotments, if any. If the U.S. Underwriters exercise such
option in full, the total price to public, underwriting discounts and
commissions, and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
------------------------
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 SALOMON BROTHERS INC
Securities, Inc.
, 1996
<PAGE> 4
[Various photographs of mini-mill equipment]
THE EXISTING MILL
JANUARY 1996
- - Twin Shell, 195t, AC, Electric Arc Furnace Battery
- - Ladle Metallurgy Facility, Desulphurization
- - SMS, Thin-Slab Caster
- - Tunnel Furnace for Direct Charge
- - Six Stand, SMS Hot Mill, Single Downcoiler
- - CAPACITY @ 1,400,000 TONS
THE COLD MILL PROJECT
MID 1997
- - Continuous Pickle Line
- - Hot-Rolled Products Galvanizing Line
- - Semi-Tandem 2-Stand Reversing Cold-Rolling Mill
- - Cold-Rolled Products Galvanizing Line
- - Batch Annealing Furnaces
- - Temper Mill
- - PLANNED CAPACITY @ 1,000,000 TONS
THE IRON DYNAMICS PROJECT
LATE 1998
- - Pelletizing Plant
- - Rotary Hearth Reduction Furnace
- - PLANNED DRI CAPACITY @ 520,000 TONNES
THE CASTER PROJECT
LATE 1998
- - Second Hybrid Electric Arc Furnace
- - Second Thin-Slab Caster
- - Second Tunnel Furnace
- - Second Downcoiler
- - PLANNED INCREMENTAL CAPACITY @ 1,000,000 TONS
[LOGO] SDI
STEEL DYNAMICS, INC.]
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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....................... 18
Dividend Policy....................... 18
Dilution.............................. 19
Capitalization........................ 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 29
Management............................ 52
Certain Transactions.................. 61
<CAPTION>
PAGE
----
<S> <C>
Principal and Selling Stockholders.... 64
Description of Certain Indebtedness... 66
Description of Capital Stock.......... 68
Shares Eligible for Future Sale....... 71
Certain United States Federal Tax
Consequences for Non-United States
Holders............................. 73
Underwriters.......................... 76
Legal Matters......................... 79
Experts............................... 79
Available Information................. 79
Index to Consolidated Financial
Statements.......................... F-1
</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 $16.00 per share and that the U.S. Underwriters'
over-allotment option is not exercised and (ii) gives effect to a 28.06 for 1.00
split of the Common Stock to be effected in November 1996. As used in this
Prospectus, the term "tonne" means a metric tonne, equal to 2,204.6 pounds, and
the term "ton" means a net ton, equal to 2,000 pounds. Certain information
contained in this summary and elsewhere in this Prospectus, including
information with respect to the Company's plans and strategy for its business,
are forward-looking statements. For a discussion of important factors which
could cause actual results to differ materially from the forward-looking
statements contained herein, see "Risk Factors."
THE COMPANY
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel
mini-mill, which commenced operations in January 1996. The Company was founded
by executives and managers who pioneered the development of
thin-slab/flat-rolled compact strip production ("CSP") technology and directed
the construction and operation of the world's first thin-slab/flat-rolled
mini-mill. Building upon their past experience with CSP technology, management
founded SDI to produce steel more efficiently, at a lower cost and of higher
quality. Steel Dynamics' goal is to become the low cost producer of a broad
range of flat-rolled steel products, including hot-rolled, cold-rolled and
galvanized sheet, and to serve more markets than any other flat-rolled
mini-mill. In addition, the Company intends to participate in the development
and use of new technologies to produce a broad range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D.
Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the
mini-mill in October 1994 and commissioned it in December 1995. The Company
believes that this 14-month construction period is the fastest ever for this
kind of facility. In addition, the Company believes that the approximately
$275.7 million initial capital cost of its mini-mill is approximately $75.0
million, or approximately 20%, less than the cost of comparable mini-mills
currently operating. Actual production at the mini-mill of primary grade steel
commenced on January 2, 1996. The mill achieved an annualized production rate of
930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million
tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities
to produce further value-added steel products, Steel Dynamics is currently
constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton
annual capacity (the "Cold Mill Project") which is scheduled for completion
during the second half of 1997. Steel Dynamics also plans to add a second
melting furnace, a second caster and tunnel furnace, and an additional coiler in
1998 to expand its annual production capacity of hot-rolled steel from 1.4
million tons to approximately 2.4 million tons (the "Caster Project"). In
addition, through its wholly-owned subsidiary, Iron Dynamics, Inc. ("IDI"), the
Company intends to construct a 520,000 tonne annual capacity plant for the
manufacture of direct reduced iron ("DRI"), which the Company expects to be
completed in 1998 (the "IDI Project"). The DRI, after further processing into
430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel
scrap substitute.
Management strategically located the Company's mini-mill within close
proximity to its natural customer base, steel service centers and other end
users, abundant supplies of automotive and other steel scrap (SDI's principal
raw material), competitive sources of power, and numerous rail and truck
transportation routes. Steel Dynamics believes that its strategic location
provides it with sales and marketing as well as production cost advantages. The
Company has secured a stable baseload of sales through long-term "off-take"
contracts with
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.
Although the Company reported net income for July, August and September
1996, the Company had incurred aggregate net losses since commencing commercial
operations in January 1996 through June 29, 1996 of approximately $14.1 million.
In addition, from September 7, 1993 through December 31, 1995, the Company had
incurred an aggregate of approximately $29.9 million of net losses, resulting
principally from operating expenses during start-up.
STRATEGY
The Company's business strategy is to use advanced CSP hot-rolled
steelmaking and cold-rolling technologies to produce high surface quality
flat-rolled steel in a variety of value-added sizes, gauges and surface
treatments, emphasizing low production costs, reliable product quality and
excellent customer service. In addition, SDI intends to remain financially
strong and competitive through the selective purchasing of scrap and scrap
substitutes to offset the effects of cyclical cost/price imbalances. The
principal elements of the Company's strategy include:
- Achieve Lowest Conversion Costs in Industry. Steel Dynamics' electric
arc furnace ("EAF"), caster and rolling mill designs represent
substantial improvements over earlier mini-mills using CSP technology.
These improvements have been designed to speed the steelmaking process,
to limit "power off time" and other non-productive time in the EAF, to
reduce the per ton cost of consumables and to yield higher quality
finished steel product. By designing and using equipment that is more
efficient, requires less periodic maintenance or rebuilding, requires
less consumables and improves the consistency and reliability of the
steelmaking process, the Company believes that it will achieve lower unit
costs for converting metallics and other raw materials into flat-rolled
steel. The Company believes that its per ton manufacturing costs are
already among the lowest in the industry.
- Emphasize Value-Added Products. Steel Dynamics believes that it will be
able to produce thinner gauge (down to .040") steel in hot-rolled form
with consistently better surface and edge characteristics than most other
flat-rolled producers. The Company believes that its high quality,
thinner hot-rolled products will compete favorably with certain more
expensive cold-rolled (further processed) products, enabling it to obtain
higher margins. In addition, with the completion of the Cold Mill
Project, SDI expects to devote a substantial portion of its hot-rolled
products to the production of higher value-added cold-rolled and
galvanized products, as well as thinner gauges, down to .015". This
increased product breadth should also allow the Company to broaden its
customer base.
- Secure Reliable Sources of Low Cost Metallics. The principal raw
material used in the Company's mini-mill is steel scrap which represents
approximately 45% to 50% of the Company's total manufacturing costs.
Steel Dynamics has pursued a three-part strategy to secure access to
adequate low cost supplies of steel scrap and steel scrap substitute
materials. First, the Company has entered into a long-term steel scrap
contract with OmniSource. Second, SDI has sought to further this strategy
through its iron carbide "off-take" contract with Qualitech. Third, Steel
Dynamics is pursuing the IDI Project to produce DRI as a lower cost
complement for use in the melt mix with steel scrap.
5
<PAGE> 8
- Secure a Solid Baseload of Hot Band Sales. In order to help ensure
consistent and efficient plant utilization, SDI has entered into six-year
"off-take" sales and distribution agreements with Heidtman and Preussag,
pursuant to which Heidtman has agreed to purchase at least 30,000 tons
and Preussag has agreed to purchase at least an average of 12,000 tons of
the Company's flat-rolled products per month, at the Company's market
price, subject to certain volume and single run discounts.
- Increase Unit Growth at Low Capital Cost. SDI seeks to continue to grow
its production of flat-rolled steel coil at low capital and unit costs.
The Company plans to use approximately $75.0 million of the net proceeds
of the offerings to finance its Caster Project. The Caster Project, which
is expected to be completed in 1998, will increase the annual production
capacity of the Company's mini-mill from 1.4 to approximately 2.4 million
tons of hot-rolled steel. The Caster Project will enable the Company to
better use the increased rolling and finishing capacity that its Cold
Mill Project will provide when completed in 1997. The foundations and
infrastructure necessary to house and support the second caster have been
pre-planned into the existing plant and, therefore, the 1.0 million
additional tons of annual hot-rolled steel capacity should be added at a
relatively low capital cost. In addition, management intends to continue
to explore new production technologies to further lower its unit costs of
production.
- Incentivize Employees. In contrast to the high fixed labor costs of many
of the Company's competitors, SDI has established certain incentive
compensation programs specifically designed to reward employee teams for
their efforts towards enhancing productivity, thereby encouraging a sense
of ownership throughout Steel Dynamics. Production employees actively
share in the Company's success through a production bonus and a
conversion cost bonus. The production bonus is directly tied to the
quantity and quality of products manufactured during a particular shift.
The conversion cost bonus encourages employees to use materials and
resources more efficiently. Steel Dynamics' employees' bonuses may equal
or exceed their base hourly wage.
- Pursue Future Opportunities. Steel Dynamics believes that technology
development and management's experience will provide significant
opportunities for SDI in a broad range of markets, potentially including
flat-rolled, non-flat-rolled, stainless and specialty steels. The Company
plans to pursue opportunities through greenfield projects, strategic
alliances or acquisitions to secure the long-term future growth and
profitability of SDI. Steel Dynamics will seek to enter new steel markets
and to produce new steel products using the latest technology, with the
objective of being a low cost producer. In addition, the Company has a
technology sharing agreement with Preussag which will provide SDI with
Preussag's expertise and know-how in steel manufacturing, particularly
steel finishing.
6
<PAGE> 9
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered:
By the Company............................. 9,375,000 shares
By the Selling Stockholders................ 468,750 shares
Total.............................. 9,843,750 shares
United States offering..................... 7,875,000 shares
International offering..................... 1,968,750 shares
Common Stock to be outstanding after the
offerings(1)............................... 47,803,341 shares
Use of proceeds.............................. The net proceeds to the Company will be used
to prepay approximately $65.5 million of
outstanding indebtedness (including
prepayment premiums and accrued interest
thereon) and to finance the Caster Project
(approximately $75.0 million). The Company
will not receive any proceeds from the sale
by the Selling Stockholders of Common Stock
in the offerings. See "Use of Proceeds."
Nasdaq National Market symbol................ "STLD"
</TABLE>
- ---------------
(1) Based on approximately 36,636,869 shares of Common Stock outstanding on
September 28, 1996, as adjusted to reflect the exercise of warrants (the
"Warrants") to purchase 1,791,472 shares of Common Stock at an aggregate
purchase price of $400,585 which were exercised after such date. Excludes
634,159 shares of Common Stock issuable upon exercise of outstanding stock
options at a weighted average exercise price of $4.25 per share.
RISK FACTORS
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS." The risk factors include
(i) Start-up; Limited Operating History; Recent Losses, (ii) Variability of
Financial Results; Production Shutdowns, (iii) Significant Capital Requirements,
(iv) Cost of Steel Scrap and Other Raw Materials, (v) Cyclicality of Steel
Industry and End User Markets, (vi) Competition, (vii) Risks Related to Scrap
Substitutes, (viii) Reliance on Major Customers, (ix) Potential Costs of
Environmental Compliance, (x) Dependence upon Key Management, (xi) Restrictions
on Payment of Dividends on Common Stock, (xii) Restrictive Covenants, (xiii)
Absence of Prior Public Market and Possible Volatility of Stock Prices, (xiv)
Shares Eligible for Future Sale, (xv) Anti-Takeover Provisions and (xvi)
Dilution.
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 monthly summary statement of
operations data are derived from unaudited consolidated financial statements of
the Company and, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary to present fairly such data.
Operating results for interim periods are not necessarily indicative of a full
year's operations. The consolidated financial data as of and for the nine months
ended September 28, 1996 are derived from the Company's audited consolidated
financial statements appearing elsewhere in this Prospectus. The information
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
MONTH ENDED(1) ENDED
--------------------------------------------------------------------------------------------------------------- SEPTEMBER
JANUARY 27, FEBRUARY 24, MARCH 30, APRIL 27, MAY 25, JUNE 29, JULY 27, AUGUST 24, SEPTEMBER 28, 28,
1996 1996 1996 1996 1996 1996 1996(2) 1996 1996 1996
----------- ------------ --------- --------- -------- -------- -------- ---------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER TON AMOUNTS)
<S> <C> <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 $32,394 $174,619
Cost
of
products
sold... 5,610 11,281 18,294 16,532 18,951 24,925 15,704 20,546 26,414 158,257
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Gross
profit
(loss)... (2,052) (1,098) 252 1,342 1,990 2,635 2,582 4,731 5,980 16,362
Selling,
general
and
administrative
expenses... 776 799 1,234 1,006 1,154 924 863 1,178 1,413 9,347
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Income
(loss)
from
operations... (2,828) (1,897) (982 ) 336 836 1,711 1,719 3,553 4,567 7,015
Foreign
currency
gain
(loss)... 235 (189) 108 127 20 (41 ) (94 ) (6) 100 260
Interest
expense(3)... 1,650 1,896 2,291 1,879 1,930 2,482 1,675 1,887 2,360 18,050
Interest
income... 33 28 32 101 176 209 117 92 169 957
-------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Net
income
(loss)(4)... $ (4,210) $ (3,954) $ (3,133 ) $ (1,315 ) $ (898) $ (603 ) $ 67 $ 1,752 $ 2,476 $ (9,818)
======== ========= ======== ======== ======== ======== ======== ======== ======== ========
Net
income
(loss)
per
share(4)... $ (.13) $ (.12) $ (.10 ) $ (.04 ) $ (.02) $ (.02 ) $ -- $ .04 $ .06 $ (.27)
Weighted
average
common
shares
outstanding(4)(5)... 32,537 32,537 32,871 34,123 37,798 37,798 39,729 39,758 41,162 35,940
OTHER
DATA:
Shipments
(net
tons)... 13,093 35,966 65,855 60,187 69,384 89,069 56,280 75,629 96,659 562,122
Hot
band
production
(net
tons)(6)... 22,282 38,777 66,871 62,226 66,407 84,758 58,411 76,033 92,984 568,749
Prime
tons
produced(6).. 15,495 28,690 50,220 54,215 58,242 78,577 53,996 73,096 85,470 498,001
Prime
ton
percentage... 69.5% 74.0% 75.1% 87.1% 87.7% 92.7% 92.4% 96.1% 91.9% 87.6%
Yield
percentage(7)... 78.3% 85.4% 84.9% 84.9% 89.2% 87.0% 88.3% 87.8% 89.2% 86.9%
Average
sales
price
per
prime
ton... $ 302 $ 313 $ 313 $ 319 $ 317 $ 322 $ 336 $ 346 $ 348 $ 330
Effective
capacity
utilization(8)... 19.9% 34.6% 47.8% 55.6% 59.3% 60.5% 69.5% 67.9% 66.4% 53.5%
Man-hours
per net
ton
produced... 1.77 .83 .66 .73 .69 .65 .61 .61 .61 .73
Number
of
employees
(end
of
period)... 224 230 238 248 252 255 256 259 263 263
Operating
profit
(loss)
per
net
ton
shipped... $ (215.99) $ (52.74) $ (14.91 ) $ 5.58 $ 12.05 $ 19.21 $ 30.54 $ 46.98 $ 47.25 $ 12.48
Depreciation
and
amortization... $ 466 $ 951 $ 1,453 $ 1,413 $ 1,532 $ 1,844 $ 1,219 $ 1,616 $ 2,224 $ 12,718
Net
cash
provided
by
(used
in):
Operating
activities... $ (13,293) $ (4,040) $(10,404 ) $(13,434 ) $ (9,784) $ 7,019 $(6,623 ) $ 12,108 $(7,174) $(45,625)
Investing
activities... $ 114 $ (247) $ (4,682 ) $ (1,268 ) $(32,153) $ 1,639 $ 757 $ 9,015 $(4,888) $(31,713)
Financing
activities... $ 12,953 $ 3,917 $ 19,486 $ 43,683 $ 484 $(4,048 ) $ (652 ) $ (32) $25,227 $101,018
EBITDA(9)... $ (2,362) $ (946) $ 471 $ 1,749 $ 2,368 $ 3,555 $ 2,938 $ 5,169 $ 6,791 $ 19,733
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
---------------------------
AS
ACTUAL ADJUSTED(10)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................... $ 30,564 $105,965
Working capital..................................................................................... 58,848 134,249
Property, plant, and equipment, net................................................................. 289,431 289,431
Total assets........................................................................................ 422,368 496,299
Long-term debt (including current portion).......................................................... 257,705 198,700
Stockholders' equity................................................................................ 123,636 256,746
</TABLE>
(footnotes on following page)
8
<PAGE> 11
(1) The Company commenced actual production of primary grade steel in January
1996. Accordingly, management believes that the Company's results of
operations prior to 1996 are not indicative of results to be expected in
the future. See "Selected Consolidated Financial Data." Management believes
that during the start-up phase, while the Company is in the process of
ramping up steel production, monthly data provides a potential investor
with meaningful information to evaluate an investment in the Company. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus. The Company does not intend to
continue to disclose its statement of operations and other data on a
monthly basis.
(2) The Company's accounting year, which ends on December 31, consists of
quarterly reporting periods of two four-week months, followed by a
five-week month. For operational purposes July 1996, which would have been
a four-week month, and December 1996, which would typically be a five-week
month, are three week- and four week-months, respectively, to take into
account scheduled semi-annual shutdowns for maintenance. Beginning in 1997,
the Company intends to change to a quarterly maintenance shutdown schedule
and, as a result, for operational purposes, each fiscal quarter will
consist of two four-week months and a four and one half-week month.
(3) Interest expense for the nine months ended September 28, 1996 would have
been approximately $12.3 million, giving pro forma effect to the offerings
and the application of net proceeds therefrom to prepay (a) all $55.0
million principal amount of the Company's outstanding 11% Subordinated
Notes due 2002 (the "Subordinated Notes") and (b) approximately $9.1
million of the Company's Senior Term Loan Notes (the "Term Loan Notes").
These adjustments (i) assume that the transactions occurred as of January
1, 1996 and (ii) assume that the average interest rate on the Term Loan
Notes during the period was 7.6%. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) For the nine months ended September 28, 1996, on a pro forma basis, giving
effect to the transactions described in footnote 3 above and the exercise
of the Warrants as if they had occurred as of January 1, 1996, the
Company's net loss and net loss per share would have been approximately
$4.1 million and $.09, respectively. The pro forma net loss and net loss
per share does not give effect to an extraordinary charge of approximately
$8.3 million ($.9 million in cash) that the Company expects to incur as a
result of the prepayment of the Subordinated Notes. Pro forma net loss per
share is based on the weighted average number of common shares outstanding
during the period plus the issuance of 9,375,000 shares of Common Stock
offered by the Company hereby and 1,791,472 shares of Common Stock upon
exercise of the Warrants.
(5) Weighted average common shares outstanding for each period presented give
effect to the anti-dilutive effect of shares issued from September 23, 1995
through September 23, 1996 using the treasury stock method. Common Stock
equivalents are included only when dilutive.
(6) Hot band production refers to the total production of finished coiled
products. Prime tons refer to hot bands produced which meet or exceed
metallurgical and quality standards for surface, shape, and metallurgical
properties.
(7) Yield percentage refers to tons of finished products divided by tons of raw
materials.
(8) Effective capacity utilization is the ratio of tons produced for the
operational month to the operational month's capacity based on an annual
capacity of 1.4 million tons.
(9) EBITDA represents operating income before depreciation and amortization.
Based on its experience in the steel industry, the Company believes that
EBITDA and related measures of cash flow serve as important financial
analysis tools for measuring and comparing steel companies in several
areas, such as liquidity, operating performance and leverage. However,
EBITDA is not a measurement of financial performance under generally
accepted accounting principles ("GAAP") and may not be comparable to other
similarly titled measures of other companies. EBITDA should not be
considered as an alternative to operating or net income (as determined in
accordance with GAAP), as an indicator of the Company's performance or as
an alternative to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. See the Company's
Consolidated Statements of Operations and Consolidated Statements of Cash
Flows, including the notes thereto, appearing elsewhere in this Prospectus.
(10) As adjusted to give effect to the transactions described in footnote 3
above and the exercise of the Warrants as if they had occurred as of
September 28, 1996. See "Use of Proceeds." As adjusted stockholders' equity
reflects an extraordinary charge of approximately $8.3 million ($.9 million
in cash) that the Company expects to incur as a result of the prepayment of
the Subordinated Notes.
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 September 1996, the Company was operating at an
annualized production rate of 930,000 tons, or 66% of full capacity. Because of
the high fixed cost nature of operating a steel mill, failure to bring
production to, or maintain production at, full capacity could have a material
adverse effect on the Company's cost and pricing structure and on its resulting
ability to compete and results of operations. Although the Company believes that
the start-up difficulties it experienced are typical of those encountered when a
new steel mill commences production, there is no assurance that the Company will
not continue to experience operational difficulties beyond start-up
difficulties, or that it will ultimately achieve or be able to sustain full
production. In addition, the Company could experience construction, start-up or
operational difficulties as it implements the Cold Mill, IDI and Caster
Projects. There can be no assurance that the Company will be able to operate its
mini-mill at full capacity or that the Cold Mill, IDI and Caster Projects will
be successfully built, started-up, and integrated with the Company's existing
operations. Management has no experience in building or operating scrap
substitute manufacturing plants. The Company's continued rapid development and
the implementation of the Cold Mill, IDI and Caster Projects may place a strain
on its administrative, operational and financial resources. As the Company
increases its production and expands its customer base, there will be additional
demands on the Company's ability to coordinate sales and marketing efforts with
production. The failure to produce at full capacity, coordinate its sales and
marketing efforts with production or manage its future development and growth,
or the emergence of unexpected production difficulties could adversely affect
the Company's business, results of operations and financial condition.
Because the Company commenced commercial quality production in January
1996, the Company's results of operations for prior periods will not be
comparable with future periods. As a result, there is only limited financial and
operating information available for a potential investor to evaluate an
investment in the Common Stock. Although the Company reported net income for
July, August and September 1996, the Company has incurred aggregate net losses
since start-up of production of prime grade flat-rolled steel on January 2, 1996
and through September 28, 1996 of approximately $9.8 million. As of September
28, 1996 the Company had an accumulated deficit of approximately $39.7 million.
These losses have resulted principally from operating expenses during start-up.
The Company will experience additional start-up losses in connection with the
Cold Mill, IDI and Caster Projects. There can be no assurance that the Company's
operations will continue to be profitable. If the Company cannot maintain
profitability it may not be able to make required debt service payments and the
value of the Common Stock could be adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
VARIABILITY OF FINANCIAL RESULTS; PRODUCTION SHUTDOWNS
The Company's results of operations are substantially affected by
variations in the realized sales prices of its products, which in turn depend
both on prevailing prices for steel and demand for particular products. In 1995,
spot prices for hot bands dropped in the second and third quarters by
approximately $40 and $20 per ton, respectively. Operating results have been,
and in the future will be, affected by numerous factors, including the prices
and availability of raw materials, particularly steel scrap and scrap
substitutes, the demand for and prices of the Company's products, the level of
competition, the level of unutilized production capacity in the steel industry,
the mix of products sold by the Company, the timing and pricing of large orders,
start-up difficulties with respect to the Cold Mill Project, IDI Project or
Caster Project, the integration and modification of facilities and other
factors. There can be no assurance that these events and circumstances or other
events or circumstances, such as seasonal factors like weather, disruptions in
the transportation, energy
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 quarterly, for three days at a time, and involve routine maintenance work.
Other routine scheduled maintenance could limit the Company's production for a
period of less than a day, while unanticipated equipment failures could limit
the Company's production for a longer period.
Equipment failures at its plant could limit or shut down the Company's
production. During the first ten months of its operations, the Company
experienced some equipment failures, none of which lasted more than two days. In
order to reduce the risk of equipment failure, the Company follows a
comprehensive maintenance and loss prevention program, has on-site maintenance
and repair facilities, and maintains an inventory of spare parts and machinery.
For example, the Company maintains a spare EAF transformer as well as spare
caster parts, mechanical parts and electrical controls for its cranes and other
tools. No assurance can be given, however, that material shutdowns will not
occur in the future or that a shutdown would not have a material adverse affect
on the Company. In addition to equipment failures, the mill is also subject to
the risk of catastrophic loss.
SIGNIFICANT CAPITAL REQUIREMENTS
The Company's business is capital intensive and will require substantial
expenditures for, among other things, the purchase and maintenance of equipment
used in its steelmaking and finishing operations and compliance with
environmental laws. In addition, the construction and start-up of the Cold Mill,
IDI and Caster Projects (collectively, the "Expansion Projects") will require
substantial capital.
The Company currently estimates that the funds required for the
construction and start-up of (i) the Cold Mill Project, which is expected to be
completed in the second half of 1997, will total approximately $200.0 million,
(ii) the IDI Project, which is expected to be completed in 1998, will total
approximately $65.0 million and (iii) the Caster Project, which is expected to
be completed in the second quarter of 1998, will total approximately $75.0
million. There can be no assurance that the Expansion Projects will be completed
as planned or at the costs currently budgeted or that the Company will have
adequate sources of funds for any such future capital expenditures. The Company
may also require additional financing in the event it decides to enter into
strategic alliances or make acquisitions.
The Company intends to use cash on hand, funds from operations and
borrowings under the Credit Agreement (as defined) to finance the construction
and startup of the Cold Mill Project. The Company's Credit Agreement provides
for a $150.0 million senior term loan facility for the construction of the Cold
Mill Project. Borrowings under the Credit Agreement are conditioned upon the
Company's compliance with various financial and other covenants and other
conditions set forth therein and, as a result, there can be no assurance that
such financing will be available to the Company as planned. See "Description of
Certain Indebtedness." The Company intends to use $20.0 million of the $25.4
million of net proceeds it recently received from the private placement of its
Common Stock to finance a portion of the IDI Project and intends to finance the
remaining $45.0 million of expenditures required to construct and fund the
start-up operating losses for the IDI Project with indebtedness (the "IDI
Financing"). The IDI Financing will be raised by IDI, the Company's wholly owned
subsidiary. Although IDI is negotiating to obtain such indebtedness, it has not
yet secured a commitment. No assurances can be given that the IDI Financing will
be obtained on terms acceptable to the Company or within the limitations
contained in the Credit Agreement. The Company intends to use approximately
$75.0 million of the net proceeds from the offerings to finance the Caster
Project. The extent of additional financing will depend on the success of the
Company's business. There can be no assurance that additional financing, if
needed, will be available to the Company or, if available, that it can be
11
<PAGE> 14
obtained on terms acceptable to the Company and within the limitations contained
in the Credit Agreement or any future financing, including the IDI Financing.
Failure to obtain the required funds could delay or prevent some portion of the
Expansion Projects from being implemented or completed, which could have a
material adverse effect on the Company. See "-- Restrictive Covenants."
COST OF STEEL SCRAP AND OTHER RAW MATERIALS
The Company's principal raw material is scrap metal derived from, among
other sources, junked automobiles, industrial scrap, railroad cars and railroad
track materials, agricultural machinery and demolition scrap from obsolete
structures, containers and machines. The prices for scrap are subject to market
forces largely beyond the control of the Company, including demand by U.S. and
international steel producers, freight costs and speculation. The prices for
scrap have varied significantly and may vary significantly in the future. In
addition, the Company's operations require substantial amounts of other raw
materials, including various types of pig iron, alloys, refractories, oxygen,
natural gas and electricity, the price and availability of which are also
subject to market conditions. The Company may not be able to adjust its product
prices, especially in the short-term, to recover the costs of increases in scrap
and other raw material prices. The Company's future profitability may be
adversely affected to the extent it is unable to pass on higher raw material and
energy costs to its customers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Steel Scrap and
Scrap Substitute Resources" and "-- Energy Resources."
CYCLICALITY OF STEEL INDUSTRY AND END USER MARKETS
The steel industry is highly cyclical in nature and sensitive to general
economic conditions. The financial condition and results of operations of
companies in the steel industry are generally affected by macroeconomic
fluctuations in the U.S. and global economies. The Company is particularly
sensitive to trends in the automotive, oil and gas, gas transmission,
construction, commercial equipment, rail transportation, agriculture and durable
goods industries, because these industries are significant markets for the
Company's products and are highly cyclical. In the early 1980s, U.S. integrated
steel producers incurred significant restructuring charges associated with
efforts to reduce excess capacity. Significant losses and bankruptcies in
certain cases, occurred as a result of a number of factors, including worldwide
production overcapacity, increased U.S. and global competition, low levels of
steel demand, substitution of alternative materials for steel, high labor costs,
inefficient plants and the strength of the U.S. dollar relative to other
currencies. In the late 1980s, earnings of U.S. steel producers benefitted from
improved industry conditions. During the 1990 to 1992 downturn, substantial
excess worldwide manufacturing capacity for steel products, combined with a
worldwide economic slowdown, resulted in a substantial decrease in the demand
for steel products, increased competition and a decline in financial performance
for the steel industry. Although demand for steel products recovered and the
profitability of the industry has improved recently, there can be no assurance
that economic conditions will remain favorable to the steel industry. Future
economic downturns, a stagnant economy or currency fluctuations may adversely
affect business, results of operations, and financial condition of the Company.
COMPETITION
Competition within the steel industry can be intense. The Company competes
primarily on the basis of price, quality, and the ability to meet customers'
product specifications and delivery schedules. Many of the Company's competitors
are integrated steel producers which are larger, have substantially greater
capital resources and experience, and, in some cases, have lower raw material
costs than the Company. The Company also competes with other mini-mills which
may have greater financial resources. The highly competitive nature of the
industry, combined with excess production capacity in some products, may in the
future exert downward pressure on prices for certain of the Company's products.
In addition, in the case of certain product applications, steel competes with
other materials, including plastics, aluminum, graphite composites, ceramics,
glass, wood and concrete. There can be no assurance that the Company will be
able to compete effectively in the future.
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 61% in the 1982 to 1986 period to
approximately 83% in the 1987 to 1991 period, was approximately 89% in 1993, 93%
in 1994 and 93% in 1995. Recent improved production efficiencies also have begun
to increase overall production capacity in the United States. Excess production
capacity exists in certain product lines in U.S. markets and, to a greater
extent, worldwide. Increased industry overcapacity, coupled with economic
recession, would intensify an already competitive environment.
Over the last decade, extensive downsizings have necessitated costly
restructuring charges that, when combined with highly competitive market
conditions, have resulted at times in substantial losses for some U.S.
integrated steel producers. A number of U.S. integrated steel producers have
gone through bankruptcy reorganization. These reorganizations have resulted in
somewhat reduced capital costs for these producers and may permit them to price
their steel products at levels below those that they could have otherwise
maintained.
An increasing number of mini-mills have entered or are expected to enter
the EAF-based thin-slab/flat-rolled steel market in the next several years.
These mini-mills have cost structures and management cultures more closely akin
to those of the Company than to the integrated producers. Flat-rolled mini-mill
production capacity increased from 4.0 million tons in 1994 to approximately 5.0
million tons in 1995, and industry sources expect this cumulative flat-rolled
mini-mill capacity to reach 12.0 million tons in 1997 and 14.0 million tons in
1998. The Company's penetration into the flat-rolled steel market is limited by
geographic considerations, to some extent by gauge and width of product
specifications and by metallurgical and physical quality requirements. Based on
product type and geographic location, the Company believes it will most closely
compete with the following mini-mills: Nucor's Crawfordsville, Indiana facility,
Gallatin Steel's Ghent, Kentucky facility, Delta Steel's Delta, Ohio facility,
and, to a more limited extent, Nucor's Hickman, Arkansas facility, Nucor's
Berkeley County, South Carolina facility, and TRICO Steel's facility in northern
Alabama. Each of these mills produces hot-rolled product, however, only an
affiliate of the anticipated Delta Steel facility in Delta, Ohio is expected to
produce hot-rolled galvanized product, and only Nucor's Crawfordsville, Indiana
facility produces cold-rolled and cold-rolled galvanized products.
Non-U.S. U.S. steel producers face significant competition from certain
non-U.S. steel producers who may have lower labor costs. In addition, U.S. steel
producers may be adversely affected by fluctuations in the relationship between
the U.S. dollar and non-U.S. currencies. Furthermore, some non-U.S. steel
producers have been owned, controlled or subsidized by their governments, and
their decisions with respect to production and sales may be, or may have been in
the past, influenced more by political and economic policy considerations than
by prevailing market conditions. Some non-U.S. producers of steel and steel
products have continued to ship into the U.S. market despite decreasing profit
margins or losses. If certain pending trade proceedings ultimately do not halt
or otherwise provide relief from such trade practices, if other relevant U.S.
trade laws are weakened, if world demand for steel eases or if the U.S. dollar
strengthens, an increase in the market share of imports may occur, which could
adversely affect the pricing of the Company's products. The costs for current
and future environmental compliance may place U.S. steel producers, including
the Company, at a competitive disadvantage with respect to non-U.S. steel
producers, which are not subject to environmental requirements as stringent as
those in the U.S.
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 nine months ended September 28, 1996, these customers
accounted for 37% and 10%, respectively, of the Company's total net sales, and
the Company's top five customers accounted for approximately 66% of its total
net sales. Although the Company expects to continue to depend upon certain
customers for a significant percentage of its net sales, there can be no
assurance that any of the Company's customers will continue to purchase its
steel from the Company. A loss of one or more of them, or of a group of its next
largest customers could have a material adverse effect on the Company's results
of operations and financial condition. Heidtman is an affiliate of a stockholder
of the Company. The President and Chief Executive Officer of Heidtman serves as
the designated director of such stockholder and another stockholder on the
Company's Board of Directors. Preussag is a stockholder of the Company and a
representative of Preussag serves on the Company's Board of Directors. If the
terms of the "off-take" contracts are or become burdensome to these companies,
or if a dispute arises over the contracts, either or both of the "off-take"
providers could be viewed as having a conflict of interest between what they
perceive to be best for their companies as "off-take" buyers and what is best
for the Company as the product seller.
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
U.S. steel producers, including the Company, are subject to stringent
federal, state and local laws and regulations relating to, among other things,
wastewater, air emissions, toxic use reduction and hazardous material disposal.
The Company believes that its facility is in material compliance with these laws
and regulations and does not believe that future compliance with such laws and
regulations will have a material adverse effect on its results of operations or
financial condition. The Company has made, and will continue to make,
expenditures to comply with such provisions. The Company generates certain waste
products, such as EAF dust, that are classified as hazardous waste and must be
properly disposed of under applicable environmental laws, which, despite the
Company's due care, could result in the imposition of strict liability for the
costs of clean-up of any landfills to which the waste may have been transported.
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, except (i) refinancings of indebtedness incurred under
the Credit Agreement and other existing indebtedness, (ii) licensing or royalty
fees payable to SMS Schloemann-Siemag AG and (iii) unsecured indebtedness in an
aggregate principal amount at any one time not greater than $5.0 million. In
addition, the Credit Agreement prohibits the Company from making capital
expenditures (other than specified permitted capital expenditures) in any fiscal
year in excess of the lesser of (i) $20.0 million and (ii) the sum of $12.0
million plus 25% of excess cash flow for the immediately preceding year plus 70%
of the amount of capital expenditures allowed but not made in the immediately
preceding fiscal year. The Company may make specified permitted capital
expenditures including up to $230.0 million for the Cold Mill Project, up to
$55.0 million for the Caster Project and an equity investment of up to $25.0
million for the IDI Project. The Company is also prohibited from creating liens
on its properties except (i) liens created in connection with its indebtedness
under the Credit Agreement and in connection with its existing indebtedness,
(ii) liens created and/or deposits made in the ordinary course of business for
taxes and assessments, workmen's compensation, unemployment insurance and other
social security obligations, bids, surety and appeal bonds and the like and
(iii) purchase money liens on assets acquired after completion of the Cold Mill
Project in an aggregate amount not to exceed $5.0 million. The Credit Agreement
contains additional restrictive covenants, including among others, covenants
restricting the Company and its subsidiaries with respect to: investments in
additional equipment and business opportunities, entering into certain
contracts, disposition of property or assets, the payment of dividends, entering
into sale-leaseback transactions, entering into transactions with affiliates,
mergers and consolidations, the making of payments on and modifications of
certain indebtedness and modification of certain agreements. In addition, the
Credit Agreement requires the Company to meet certain financial tests, including
maintaining (a) its current ratio at or above 1.3, (b) its leverage ratio at or
below 2.25 for 1996, 2.10 for 1997, 1.90 for 1998, 1.40 for 1999 and 1.00
thereafter, (c) its tangible net worth at or above the sum of (i) $45.0 million
and
15
<PAGE> 18
(ii) 50% of cumulative net income at such time and (d) its fixed charge coverage
ratio at or above 1.00 for 1996, 1.15 for 1997 and 1998, and 1.25 thereafter.
See "Description of Certain Indebtedness." In addition, the Stockholders
Agreement dated as of June 30, 1994 (the "Stockholders Agreement"), among the
Company and the stockholders party thereto, contains a number of restrictive
covenants. See "Description of Capital Stock -- The Stockholders Agreement." In
addition to a voting agreement for the election of all ten of the Company's
Directors, the Stockholders Agreement restricts the stockholders from selling,
transferring, assigning, pledging, or otherwise disposing of their shares
without first according all other parties "first offer" rights, and, even if
declined, enables any stockholder who wishes to do so to particpate with the
selling stockholder in any proposed sale (thereby reducing the amount of shares
the selling stockholder would otherwise be entitled to sell). These restrictions
do not apply to affiliate Transfers (as defined) within a stockholder group, to
public sales, or to a sale of the Company, and the restriction will cease to
apply entirely upon the realization of a "public float" (defined as the date
upon which at least 25% of the Company's Common Stock has been sold pursuant to
effective registration statements under the Securities Act). Except with the
prior written consent of holders of 70% of the outstanding shares of Common
Stock subject to the Stockholders Agreement, until a Public Float has been
realized, the Company is not permitted to pay dividends or make distributions,
redeem, purchase, or acquire its own equity securities, issue debt or equity
securities (except for stock options), make investments (except for investments
in limited financial instruments) in excess of $5.0 million, merge, sell or
dispose of assets in excess of $5.0 million, acquire an interest in any business
involving consideration of $2.0 million or more, or make capital expenditures in
excess of $5.0 million. These restrictions may make it more difficult for the
Company to operate in a manner that it deems necessary or appropriate to take
advantage of opportunities, to adjust to operational difficulties or to respond
to other difficulties.
ABSENCE OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICES
Prior to the offerings, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock will be determined
by negotiations among the Company, the Selling Stockholders and the Underwriters
and may not be indicative of the market price for shares of the Common Stock
after the offerings. For a description of the factors to be considered in
determining the initial public offering price, see "Underwriters -- Pricing of
the Offerings." Although the Common Stock is expected to be approved for
quotation on the Nasdaq National Market ("Nasdaq"), there can be no assurance
that an active trading market for the Common Stock will develop or if developed,
that such a market will be sustained. The market price for shares of the Common
Stock may be significantly affected by such factors as the Company's net sales,
earnings and cash flow, the difference between the Company's actual results and
results expected by investors and analysts, news announcements including price
reductions by the Company or its competitors or changes in general market
conditions. In addition, broad market fluctuation and general economic
conditions may adversely affect the market price of the Common Stock, regardless
of the Company's actual performance.
SHARES ELIGIBLE FOR FUTURE SALE
The future sale of a substantial number of shares of Common Stock in the
public market following the offerings, or the perception that such sales could
occur, could adversely affect the market price for the Common Stock and could
make it more difficult for the Company to raise funds through equity offerings
in the future. Upon completion of the offerings, the Company expects to have
47,803,341 shares of Common Stock outstanding. Of these shares, the 9,843,750
shares of Common Stock sold in the offerings will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
except for any such shares which may be acquired by an "affiliate" of the
Company. The remaining 37,959,591 shares of Common Stock outstanding will be
"restricted securities" and may in the future be sold without registration under
the Securities Act to the extent permitted by Rule 144 under the Securities Act
or any applicable exemption under the Securities Act. See "Shares Eligible for
Future Sale." In connection with the offerings, the Company, its executive
officers and directors, the Selling Stockholders, and certain other stockholders
of the Company, have agreed that, subject to certain exceptions, they will not
sell, offer or contract to sell any shares of Common Stock without the prior
written consent of Morgan Stanley & Co. Incorporated, for a period of 180 days
after the date of this Prospectus. Certain of the Company's existing
stockholders also have
16
<PAGE> 19
registration rights with respect to their Common Stock. In addition, as soon as
practicable after the offerings, the Company intends to file a registration
statement under the Securities Act to register shares of Common Stock reserved
for issuance under the Company's 1994 and 1996 Incentive Stock Option Plans,
thus permitting the resale of such shares by non-affiliates upon issuance in the
public market without restriction under the Securities Act. As of October 26,
1996, options to purchase 634,159 shares were outstanding under these Plans. See
"Management -- Employee Plans," "Description of Capital Stock -- The
Registration Agreement," "Shares Eligible for Future Sale" and "Underwriters."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Indiana Business Corporation Law (the "BCL"), and
certain provisions of the Stockholders Agreement may have the effect of delaying
or preventing transactions involving a change of control of the Company,
including transactions in which stockholders might otherwise receive a
substantial premium for their shares over then current market prices, may limit
the ability of stockholders to approve transactions that they may deem to be in
their best interests or may delay or frustrate the removal of incumbent
directors. In addition, as long as the stockholders party to the Stockholders
Agreement hold a majority of the Company's outstanding Common Stock, they will
be able to elect all of the Company's directors. After giving effect to the
offerings, the stockholders party to the Stockholders Agreement will hold 79.4 %
of the outstanding shares of Common Stock. See "Description of Capital
Stock -- Certain Provisions of Indiana Law Regarding Takeovers" and "-- The
Stockholders Agreement."
DILUTION
Investors in the Common Stock offered hereby will experience an immediate
dilution of $10.90 per share (assuming an initial public offering price of
$16.00 per share) in the net tangible book value of their shares of Common
Stock. See "Dilution."
17
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the offerings are estimated to be
approximately $140.5 million (assuming an initial public offering price of
$16.00 per share), after deducting estimated underwriting discounts and
commissions and offering expenses. The Company will not receive any proceeds
from the sale of Common Stock by the Selling Stockholders.
The Company will use the net proceeds of the offerings: (i) to prepay
approximately $55.0 million principal amount of the Company's Subordinated Notes
(which bear interest at 11% per annum and mature on September 30, 2002),
together with accrued interest to the date of payment (estimated to be
approximately $.5 million) and a prepayment premium of approximately $.9
million, (ii) to finance approximately $75.0 million of construction and
start-up costs for the Caster Project and (iii) to prepay approximately $9.1
million of Term Loan Notes outstanding under the Credit Agreement, together with
accrued interest to the date of prepayment. The Term Loan Notes outstanding
under the Credit Agreement bear interest at variable rates (8.0% weighted
average rate at September 28, 1996) and mature in 2002. See "Description of
Certain Indebtedness." The Company intends on funding its Caster Project over
the next 30 months. Pending such use, the Company will invest these funds in
short-term, marketable, investment grade securities. See "Risk
Factors -- Significant Capital Requirements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company currently anticipates that all of its future earnings will be
retained to finance the expansion of its business and does not anticipate paying
cash dividends on its Common Stock in the foreseeable future. Any determination
to pay cash dividends in the future will be at the discretion of the Company's
Board of Directors after taking into account various factors, including the
Company's financial condition, results of operations, outstanding indebtedness,
current and anticipated cash needs and plans for expansion. The payment of
dividends on the Company's Common Stock is subject, in any event, to limitations
under the terms of the Company's Credit Agreement. See "Description of Certain
Indebtedness."
18
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company at September 28, 1996
after giving effect to the exercise of the Warrants would have been
approximately $109.4 million or $2.85 per share of Common Stock. Pro forma net
tangible book value per share is determined by dividing the net tangible book
value (total assets less net intangibles and less total liabilities) by the
number of outstanding shares of Common Stock. After giving effect to the sale by
the Company of 9,375,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $16.00 per share and the application of the net
proceeds as set forth under "Use of Proceeds," the net tangible book value of
the Company as of September 28, 1996, would have been approximately $244.0
million or $5.10 per share, representing an immediate increase in net tangible
book value of $2.25 per share to the existing stockholders and an immediate
dilution to investors purchasing shares in the offerings of $10.90 per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.............................. $ 16.00
Pro forma net tangible book value per share at September 28,
1996.......................................................... $ 2.85
Increase per share attributable to sale of Common Stock in the
offerings..................................................... 2.25
------
Pro forma net tangible book value per share after the offerings.... 5.10
-------
---
Dilution per share to investors who purchase Common Stock in the
offerings........................................................ $ 10.90
==========
</TABLE>
The foregoing table does not give effect to the exercise of outstanding
options granted to employees to purchase 634,159 shares of Common Stock at a
weighted average exercise price of $4.25 per share. If all such outstanding
options were exercised, the dilution to new investors would be $10.96 per share.
The following table sets forth on a pro forma basis as of September 28,
1996, the number of shares and percentage of total outstanding Common Stock
purchased, the total consideration and percentage of total consideration paid
and the weighted average price per share paid by existing stockholders
(including the holders of the Warrants) and by investors purchasing the shares
of Common Stock offered by the Company hereby (assuming an initial public
offering price of $16.00 per share).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION WEIGHTED
---------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......... 38,428,341 80.4% $158,559,705 51.4% $ 4.12
New investors..................... 9,375,000 19.6 150,000,000 48.6 16.00
--------- --- --------- ---
Total................... 47,803,341 100.0% $308,559,705 100.0%
========= === ========= ===
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in the offerings (assuming no exercise of
the U.S. Underwriters' over-allotment option) will cause the number of
shares held by existing stockholders to be reduced, and the number of shares
held by new investors to be increased by 468,750. See "Principal and Selling
Stockholders."
19
<PAGE> 22
CAPITALIZATION
The following table sets forth the actual cash and cash equivalents,
current maturities of long-term debt and capitalization of the Company as of
September 28, 1996, and as adjusted to give effect to the offerings and the
exercise of the Warrants and the application of the net proceeds therefrom
(assuming an initial public offering price of $16.00 per share). This
information should be read in conjunction with "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE INFORMATION)
<S> <C> <C>
Cash and cash equivalents............................................. $ 30,564 $ 105,965
======== ========
Current maturities of long-term debt.................................. $ 5,840 $ 5,840
======== ========
Long-term debt, excluding current maturities:
Revolving credit facility........................................... $ -- $ --
Senior term loans................................................... 150,000 140,900
11% subordinated notes.............................................. 49,905(1) --
Other(2)............................................................ 51,960 51,960
-------- --------
Total long-term debt........................................ 251,865 192,860
Stockholders' equity:
Common Stock, $.01 par value per share, 100,000,000 shares
authorized, 36,636,869 shares issued and outstanding; 47,803,341
shares issued and outstanding, as adjusted....................... 366 478
Additional paid-in capital.......................................... 163,341 303,804
Amounts due from stockholders....................................... (325) --
Accumulated deficit................................................. (39,746) (47,536)
-------- --------
Total stockholders' equity.................................. 123,636 256,746
-------- --------
Total capitalization...................................... $375,501 $ 449,606
======== ========
</TABLE>
- ---------------
(1) The Subordinated Notes are recorded net of unamortized debt discount
(approximately $5.1 million as of September 28, 1996). The Subordinated
Notes were originally issued with warrants to purchase Common Stock. A
portion of the net proceeds from the sale of the Subordinated Notes was
allocated to additional paid-in capital to reflect the issuance of the
warrants. The remaining debt discount will be expensed in connection with
the prepayment of the Subordinated Notes with a portion of the net proceeds
of the offerings.
(2) For a description of other long-term debt, see Note 3 to the Company's
Consolidated Financial Statements appearing elsewhere in this Prospectus.
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company for the periods indicated. The selected consolidated financial data for
the period from September 7, 1993 (date of inception) through December 31, 1993,
as of December 31, 1993, 1994 and 1995 and September 28, 1996, for each of the
two years in the period ended December 31, 1995 and for the nine months ended
September 28, 1996 are derived from the Company's Consolidated Financial
Statements appearing elsewhere in this Prospectus which have been audited by
Deloitte & Touche LLP. The selected consolidated financial data for the nine
months ended September 30, 1995 are derived from the unaudited consolidated
financial statements of the Company and, in the opinion of management, include
all adjustments (consisting only of normal recurring accruals) necessary to
present fairly such data. Operating results for interim periods are not
necessarily indicative of a full year's operations. The information below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Consolidated Financial
Statements, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 7, 1993 YEAR ENDED
(DATE OF INCEPTION) DECEMBER 31, NINE MONTHS ENDED
THROUGH ------------------- ---------------------------------------
DECEMBER 31, 1993 1994 1995 SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------- -------- -------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ -- $ -- $ 137 $ -- $ 174,619
Cost of products sold........... -- -- 3,169 -- 158,257
-------- -------- ---------- ---------- ----------
Gross profit (loss)......... -- -- (3,032) -- 16,362
Selling, general and
administrative expenses....... 1,159 4,192 13,580 8,640 9,347
-------- -------- ---------- ---------- ----------
Income (loss) from
operations................ (1,159) (4,192) (16,612) (8,640) 7,015
Foreign currency gain (loss).... (4,952) (3,272) (2,658) 260
Interest expense(1)............. 2 43 564 139 18,050
Interest income................. 1 307 560 463 957
-------- -------- ---------- ---------- ----------
Net loss(2)................. $(1,160) $ (8,880) $(19,888) $ (10,974) $ (9,818)
======== ======== ========== ========== ==========
Net loss per share(2)........... $ (.07) $ (.36) $ (.62) $ (.34) $ (.27)
Weighted average common shares
outstanding(2)(3)............. 15,931 24,679 31,975 31,952 35,940
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents....... $ 117 $ 28,108 $ 6,884 $ 3,202 $ 30,564
Working capital................. (29) 8,230 (14,488) (2,995) 58,848
Property, plant, and equipment,
net........................... 200 54,566 274,197 204,796 289,431
Total assets.................... 521 94,618 320,679 227,989 422,368
Long-term debt (including
current maturities)........... 800 11,949 223,054 151,012 257,705
Stockholders' equity
(deficiency).................. (429) 62,536 62,972 66,820 123,636
</TABLE>
- ---------------
(1) Interest expense for the nine months ended September 28, 1996 would have
been approximately $12.3 million, giving pro forma effect to the offerings
and the application of net proceeds therefrom to prepay (a) all $55.0
million principal amount of the Company's outstanding Subordinated Notes and
(b) approximately $9.1 million of the Company's Term Loan Notes. These
adjustments assume that (i) the transactions occurred as of January 1, 1996
and (ii) the average interest rate on the Term Loan Notes during the period
was 7.6%. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) For the nine months ended September 28, 1996, on a pro forma basis, giving
effect to the transactions described in footnote 1 above and the exercise of
the Warrants as if they had occurred as of January 1, 1996, the Company's
net loss and net loss per share would have been approximately $4.1 million
and $.09, respectively. The pro forma net loss and net loss per share does
not give effect to an extraordinary charge of approximately $8.3 million
($.9 million in cash) that the Company expects to incur as a result of the
prepayment of the Subordinated Notes. Pro forma net loss per share is based
on the weighted average number of common shares outstanding during the
period plus the issuance of 9,375,000 shares of Common Stock offered by the
Company hereby and the 1,791,472 shares of Common Stock upon exercise of the
Warrants.
(3) Weighted average common shares outstanding for each period presented give
effect to the anti-dilutive effect of shares issued from September 23, 1995
through September 23, 1996 using the treasury stock method. Common Stock
equivalents are included only when dilutive.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the Company's Consolidated Financial
Statements, including the notes thereto, appearing elsewhere in this Prospectus.
Certain information contained below, including information with respect to the
Company's plans with respect to the Cold Mill, IDI and Caster Projects, are
forward-looking statements. See "Risk Factors" for a discussion of important
factors which could cause actual results to differ materially from the forward-
looking statements contained herein.
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel
mini-mill, which commenced operations in January 1996. The Company was founded
by executives and managers who pioneered the development of
thin-slab/flat-rolled CSP technology and directed the construction and operation
of the world's first thin-slab/flat-rolled mini-mill. Building upon their past
experience with CSP technology, management founded SDI to produce steel more
efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to
become the low cost producer of a broad range of flat-rolled steel products,
including hot-rolled, cold-rolled and galvanized sheet, and to serve more
markets than any other flat-rolled mini-mill. In addition, the Company intends
to participate in the development and use of new technologies to produce a broad
range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D.
Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the
mini-mill in October 1994 and commissioned it in December 1995. The Company
believes that this 14-month construction period is the fastest ever for this
kind of facility. In addition, the Company believes that the approximately
$275.7 million initial capital cost of its mini-mill is approximately $75.0
million, or approximately 20%, less than the cost of comparable mini-mills
currently operating. Actual production at the mini-mill of primary grade steel
commenced on January 2, 1996. The mill achieved an annualized production rate of
930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million
tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities
to produce further value-added steel products, Steel Dynamics is currently
constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton
annual capacity which is scheduled for completion during the second half of
1997. Steel Dynamics also plans to add a second melting furnace, a second caster
and tunnel furnace, and an additional coiler in 1998 to expand its annual
production capacity of hot-rolled steel from 1.4 million tons to approximately
2.4 million tons. In addition, through IDI, the Company intends to construct a
520,000 tonne annual capacity plant for the manufacture of DRI, which the
Company expects to be completed in 1998. The DRI, after further processing into
430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel
scrap substitute.
Management strategically located the Company's mini-mill within close
proximity to its natural customer base, steel service centers and other end
users, abundant supplies of automotive and other steel scrap (SDI's principal
raw material), competitive sources of power, and numerous rail and truck
transportation routes. Steel Dynamics believes that its strategic location
provides it with sales and marketing as well as production cost advantages. The
Company has secured a stable baseload of sales through long-term "off-take"
contracts with two major steel consumers, a 30,000 ton per month sales contract
with Heidtman, a major Midwest-based steel service center and distributor and an
affiliate of one of the Company's stockholders, and a 12,000 ton per month sales
contract with Preussag, a major German steel manufacturer and a stockholder of
the Company, with affiliate distributors and steel service centers throughout
the United States. The Company has also sought to assure itself of a secure
supply of steel scrap and scrap substitute. To accomplish this objective, SDI
has entered into a long-term scrap purchasing services contract with OmniSource,
one of the largest scrap dealers in the Midwest and an affiliate of one of the
Company's stockholders. In addition, the Company has also sought to assure
itself of a secure supply of scrap substitute material for use as a lower cost
complement to steel scrap as part of the Company's melt mix. SDI has entered
into a long-term 300,000 tonne per year
22
<PAGE> 25
"off-take" contract to purchase iron carbide from Qualitech's iron carbide
facility currently under construction in Corpus Christi, Texas which is expected
to be completed in 1998. Additional scrap substitute material will be provided
through the IDI Project.
The Company's business strategy is to use advanced CSP hot-rolled steel
making and cold-rolling technologies to produce high surface quality flat-rolled
steel in a variety of value-added sizes, gauges and surface treatments,
emphasizing low production costs, reliable product quality and excellent
customer service. In addition, SDI intends to remain financially strong and
competitive through the selective purchasing of scrap and scrap substitutes to
offset the effects of cyclical cost/price imbalances.
Since commencing commercial operations in January 1996, through June 29,
1996, the Company incurred net losses of approximately $14.1 million and had an
accumulated deficit of approximately $44.0 million. However, in July, a
three-week operating period, August 1996, a four-week operating period, and
September 1996, a five-week operating period, SDI reported monthly net income of
approximately $67,000, approximately $1.8 million and approximately $2.5 million
as a result of shipments of approximately 56,000, 76,000 and 97,000 tons,
respectively, representing approximately 67%, 68% and 69%, respectively, of
capacity.
The Company's operations are subject to the cyclical nature of the steel
industry and the U.S. economy as a whole. U.S. steel industry production was
approximately 104.9 million tons in 1995, an increase of 8.0% from an average
during the prior three-year period of approximately 97.1 million tons. This
increase was due primarily to an improvement of general economic conditions and
increased demand for durable goods. For instance, the production of U.S. cars
and trucks in 1995 increased to approximately 12.0 million units from an annual
average during the prior three-year period of approximately 11.0 million units.
U.S. steel production in 1995 increased approximately 4.3% to approximately
104.9 million tons compared to approximately 100.6 million tons in 1994.
Shipments increased over the same corresponding period from approximately 95.1
million tons to approximately 97.5 million tons, an increase of approximately
2.5%. Other factors which affect the performance of the Company include
increasing competition from U.S. and international steel producers (both
integrated mills and mini-mills), worldwide supply and demand for hot bands and
the strength of the U.S. dollar relative to the currencies of other steel
producing countries.
The following table summarizes the annual raw steel capacity, raw steel
production, utilization rates and finished shipments information for the U.S.
steel industry (as reported by the AISI) for the years 1993 through 1995:
<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
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ability of the Company to take advantage of price increases. All of the
Company's orders are taken at its announced pricing levels with price discounts
for high volume purchases when appropriate. SDI is also able to charge premium
prices for certain grades of steel, dimensions of product, or certain smaller
volumes, based upon the cost of production. When the Cold Mill Project is
completed in the second half of 1997, the Company will be able to manufacture
more value-added products requiring more exacting tolerances, thinner gauges,
finer surface conditions, and galvanized coatings, thereby enabling it to charge
premium prices.
Of the Company's shipments through September 28, 1996, approximately 37%
have been purchased by Heidtman and 10% have been purchased by Preussag pursuant
to long-term "off-take" contracts based upon market pricing. In addition to this
stable baseload of demand, the Company is continually seeking to attract new
customers for its products. The Company had 18 customers at the end of January
1996 and the number of the Company's customers has grown to 100 at the end of
September. SDI is also continually seeking to enter new markets. Of the
Company's shipments since start-up, the Company believes that approximately 23%
has been used in the automotive industry, approximately 18% for tubing,
approximately 13% for construction, approximately 12% for commercial equipment,
with the balance for appliances and rail, machinery, agriculture and
recreational equipment. Steel Dynamics believes that when the Cold Mill Project
is completed, it will be able to broaden its customer base, diversify its
product mix and access more profitable markets. See "Business -- The Flat-Rolled
Market."
Cost of Products Sold. All direct and indirect manufacturing costs are
included in costs of products sold. The principal elements comprising Steel
Dynamics' current costs of products sold are steel scrap and scrap substitutes,
electricity, natural gas, oxygen and argon, electrodes, alloys, depreciation and
direct and indirect labor and benefits.
Steel scrap and scrap substitutes represent the most significant component
of the Company's total cost of products sold. Although SDI believes that there
will be an ample supply of high quality, low residual scrap in the future, the
Company recognizes that the construction of additional mini-mills, increased
efficiency of the steel making process and the continuing general recovery in
steel prices have led to increased demand for, and higher prices of, steel
scrap. The Company believes that, over the long-term, prices of steel scrap will
continue to be volatile but its price ranges will likely increase. As a result,
Steel Dynamics has pursued a three-part strategy to secure access to adequate
supplies of steel scrap and lower cost steel scrap substitute materials. First,
the Company has entered into a long-term steel scrap contract with OmniSource.
Second, SDI has sought to assure itself of a secure supply of scrap substitute
material as a lower cost complement for use in the melt mix with steel scrap
through its iron carbide "off-take" contract with Qualitech. Third, the Company
is pursuing the IDI Project to develop DRI.
The Company purchases its electricity from American Electric Power ("AEP"),
pursuant to a contract which extends through 2005. The contract designates a
portion of the Company's load as "firm" with the majority of the load designated
as "interruptible." The blended rate under the contract is favorable and when
the mill reaches full production is expected to be between $.024 and $.025 per
kilowatt hour ("kWh"). The Company has a "primary firm" natural gas delivery
contract on the Panhandle Eastern Pipeline that extends through May 2000 and an
interruptible delivery contract with NIPSCO/NIFL/Crossroads that extends through
December 2000. The Company believes the combined negotiated cost of natural gas
and its transportation to be favorable. The Company has also contracted for all
of its estimated requirements of natural gas at $1.91 per decatherm through July
1997. The Company maintains a liquid propane tank farm on site with sufficient
reserves to sustain operations for approximately two weeks in the event of an
interruption in the natural gas supply. SDI purchases all of its requirements
for oxygen and argon from Air Products and Chemicals, Inc. ("Air Products"),
which built a large plant adjacent to the mini-mill. Air Products uses its plant
to supply other customers as well as the Company. As a result, the Company has
been able to buy its oxygen and argon at what SDI believes to be favorable
prices. Steel Dynamics generally purchases its other raw materials, such as
electrodes and alloys, in the open market from various sources and their
availability and price are subject to market conditions.
For manufacturing plant and equipment, the Company uses the
units-of-production method of depreciation.
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<PAGE> 27
The current work force of Steel Dynamics consists of approximately 200
hourly and 60 salaried personnel. For September 1996, the Company's employment
costs per ton shipped were approximately $14. The Company has established
certain incentive compensation programs specifically designed to reward employee
teams for their productivity efforts. Production employees actively share in
SDI's success through a production bonus, a conversion cost bonus and a profit
sharing plan. The Company's employees are not represented by any labor unions.
Selling, General & Administrative. Selling, general and administrative
expenses are comprised of all costs associated with the sales,
finance/accounting, materials and transportation, and administrative
departments. These costs include labor and benefits, advertising, promotional
materials, bad debt expenses and professional fees. These costs are not directly
affected by sales volumes. SDI has established a Profit Sharing Plan for
eligible employees under which a minimum of 5% of pretax profits are paid into a
"profit sharing pool." The majority of the profit sharing pool is used to fund
the Profit Sharing Plan, with the balance paid to employees as a cash bonus in
March of each year. Selling, general and administrative expenses also include
all non-capitalized start-up costs associated with the construction of the Cold
Mill Project, including all labor and benefits, utilities and general supplies
and services. The Company expects that these costs will increase through the
construction and start-up of the Cold Mill Project. The Company may incur
additional selling, general and administrative expenses as a result of becoming
a publicly-held company.
Foreign Currency Gain (Loss). The foreign currency gains and losses
represent transaction gains and losses incurred by the Company for purchases of
equipment used within the Company's mini-mill. A portion of the purchase price,
as stated within the contract to purchase the equipment, was denominated in
German marks. The Company committed to purchase the equipment in December 1993
with settlement of the liability primarily occurring during the construction
period of the mini-mill. No foreign currency financial instruments were entered
into as a result of this equipment purchase to hedge the foreign currency risk.
No commitments for equipment purchases denominated in a foreign currency exist
at December 31, 1995 or September 28, 1996. The Company's strategy for managing
foreign currency risk will depend on the facts and circumstances of the related
transactions and the Company will consider risk management strategies, as
appropriate.
Interest Expense. During the construction of the mini-mill, the costs
related to construction expenditures are considered to be assets qualifying for
interest capitalization under Statement of Financial Accounting Standards
("SFAS") No. 34, "Capitalization of Interest Cost." Capitalized interest for the
year ended December 31, 1994 ("Fiscal 1994"), the year ended December 31, 1995
("Fiscal 1995"), the nine months ended September 30, 1995 (the "1995 Nine-Month
Period") and the nine months ended September 28, 1996 (the "1996 Nine-Month
Period") was approximately $.3 million, $10.1 million, $6.0 million and $.1
million, respectively. There was no capitalized interest for the period from
September 7, 1993 (date of inception) to December 31, 1993 ("Fiscal 1993").
Management expects that a majority of the interest on the indebtedness incurred
to finance the construction of the Cold Mill and the IDI Projects will be
capitalized.
Taxes. At December 1995, the Company had available net operating loss
carryforwards ("NOLs") for federal income tax purposes of approximately $2.5
million of which $.2 million expire in 2009 and $2.3 million expire in 2010.
Because of the Company's limited operating history, a valuation allowance for
net deferred tax assets has been provided.
RESULTS OF OPERATIONS
Founded in September 1993, SDI commenced actual production of primary grade
steel in January 1996. Accordingly, the Company's historical results of
operations are not indicative of results to be expected in the future.
Net Sales. Net sales totaled approximately $174.6 million for the 1996
Nine-Month Period. SDI commenced commercial production of primary grade steel on
January 2, 1996 and has continued to increase its net sales as its production of
prime tons increased. By the end of September 1996, the Company was operating at
an annualized rate of 930,000 tons, or at 66% of full capacity. In addition, the
average sales price per prime ton increased from $302 for January 1996 to $348
for September 1996. For Fiscal 1993, Fiscal 1994
and Fiscal 1995, during which time the mini-mill was under construction, Steel
Dynamics had no net sales other than $137,000 in December 1995 from the sale of
approximately 600 tons of secondary grade steel.
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<PAGE> 28
Cost of Products Sold. Cost of products sold totaled approximately $158.3
million, or 91% of net sales, for the 1996 Nine-Month Period. As the Company
continues to increase the number of prime tons sold, the Company expects that
cost of products sold will continue to increase but, as a percentage of net
sales, the cost of products sold will decrease. For Fiscal 1995 cost of products
sold was $3.2 million.
Selling, General and Administrative. Selling, general and administrative
was approximately $1.2 million, $4.2 million and $13.6 million for Fiscal 1993,
Fiscal 1994 and Fiscal 1995, respectively and approximately $8.6 million and
$9.3 million for the 1995 Nine-Month Period and the 1996 Nine-Month Period,
respectively. The increasing costs through 1995 were due to the increasing
employee base as construction activity accelerated toward completion in December
1995. All costs normally classified as operating costs were classified as
selling, general and administrative expenses until start-up of the mini-mill
commenced in December 1995. Subsequently, once the Company began producing
products for sale, such expenses were classified as cost of products sold.
Interest Expense. Interest expense totaled approximately $2,000, $43,000
and $564,000 for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and
approximately $139,000 and $18.1 million for the 1995 Nine-Month Period and the
1996 Nine-Month Period, respectively. The low level of interest expense during
Fiscal 1993, Fiscal 1994 and Fiscal 1995 reflects the effect of capitalizing
interest relating to construction costs.
Foreign Currency Gain (Loss). Foreign currency loss totaled approximately
$0, $5.0 million and $3.3 million for Fiscal 1993, Fiscal 1994 and Fiscal 1995,
respectively, and approximately $2.7 million for the 1995 Nine-Month Period. In
the 1996 Nine-Month Period, foreign currency gain totaled $260,000.
Interest Income. Interest income totaled approximately $1,000, $307,000
and $560,000 for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively, and
approximately $463,000 and $957,000 for the 1995 Nine-Month Period and the 1996
Nine-Month Period, respectively.
Taxes. At December 1995, the Company had available NOLs for federal income
tax purposes of approximately $2.5 million of which $.2 million expire in 2009
and $2.3 million expire in 2010. Because of the Company's limited operating
history, a valuation allowance for net deferred tax assets has been provided.
LIQUIDITY AND CAPITAL RESOURCES
Steel Dynamics' business is capital intensive and requires substantial
expenditures for, among other things, the purchase and maintenance of equipment
used in its steelmaking and finishing operations and compliance with
environmental laws. See "Risk Factors -- Significant Capital Requirements" and
"-- Potential Costs of Environmental Compliance." The Company's liquidity needs
arise primarily from capital investments, working capital requirements and
principal and interest payments on its indebtedness. Since its inception, SDI
has met these liquidity requirements with cash provided by equity and long-term
borrowings.
Net cash used in operating activities totaled approximately $22.7 million
for Fiscal 1993 through Fiscal 1995. During the 1996 Nine-Month Period, the
Company used net cash of approximately $45.6 million in operating activities.
Net cash used in investing activities totaled approximately $246.4 million for
Fiscal 1993 through Fiscal 1995 and approximately $31.7 million for the 1996
Nine-Month Period. Investing activities primarily consisted of capital
expenditures of approximately $268.4 million for the construction of the
Company's existing facility and the beginning of the Cold Mill Project. Cash
provided by financing activities totaled approximately $276.0 million for Fiscal
1993 through Fiscal 1995 and approximately $101.0 million for the 1996
Nine-Month Period.
In June 1994, the Company issued $55.0 million principal amount of the
Subordinated Notes (together with warrants to purchase Common Stock) to finance
a portion of the construction of the mini-mill. All of the Subordinated Notes
will be repaid with a portion of the net proceeds from the offerings. See "Use
of Proceeds."
The Credit Agreement provides for (i) up to an aggregate of $320.0 million
of senior term loans and (ii) a $45.0 million revolving credit facility (the
"Revolving Credit Facility") for working capital purposes, subject to borrowing
base restrictions. Indebtedness outstanding under the Credit Agreement is
secured by a first priority lien on substantially all of the assets of the
Company. Of the $320.0 million in senior term loan commitments the Company
borrowed $150.0 million for the construction of the mini-mill and $150.0 million
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<PAGE> 29
was designated and remains available for the construction of the Cold Mill
Project. Commitments for $20.0 million were designated for mini-mill
construction cost overruns (none of which is outstanding). See "Description of
Certain Indebtedness." As of September 28, 1996, $150.0 million of senior term
loans were outstanding and there were no outstanding borrowings under the
Revolving Credit Facility. The Company will prepay $9.1 million of such
indebtedness with a portion of the net proceeds from the offerings. See "Use of
Proceeds."
As of September 28, 1996, after giving pro forma effect to the offerings
and the application of the net proceeds therefrom, the Company's long-term debt
(including current portion) would have been approximately $198.7 million and SDI
would have had approximately $150.0 million available under the Credit Agreement
to finance the Cold Mill Project. Most of the Company's indebtedness will bear
interest at floating rates, causing the Company's results of operations to be
affected by prevailing interest rates.
The Company currently estimates that the funds required for the
construction and start-up (including capital expenditures) of the Expansion
Projects will total approximately $340.0 million (approximately $200.0 million
for the Cold Mill Project; approximately $65.0 million for the IDI Project and
approximately $75.0 million for the Caster Project). The Company may also
require additional financing in the event it decides to enter into strategic
alliances or make acquisitions. See "Risk Factors -- Significant Capital
Requirements."
The Company intends to use $20.0 million of the $25.4 million of net
proceeds it recently received from the private placement of its Common Stock to
finance a portion of the IDI Project and intends to finance the remaining $45.0
million with the IDI Financing. Although IDI is negotiating to obtain the IDI
Financing, it has not yet secured a commitment. No assurance can be given that
the IDI Financing will be obtained on terms acceptable to the Company or at all.
See "Certain Transactions."
The Company intends to use approximately $75.0 million of the net proceeds
from the offerings to finance the Caster Project. The Company intends to finance
the Cold Mill Project with cash on hand and borrowings under the Credit
Agreement. Borrowings under the Credit Agreement are conditioned upon the
Company's compliance with various financial and other covenants and other
conditions set forth therein and, as a result, there can be no assurance that
such financing will be available to the Company as planned. See "Description of
Certain Indebtedness." The extent of additional financing required, if any, by
the Company will depend on the success of the Company's business. There can be
no assurance that additional financing, if needed, will be available to the
Company or, if available, that it can be obtained on terms acceptable to the
Company and within the limitations contained in the Credit Agreement or the
terms of any future financings, including the IDI Financing. Failure to obtain
the required funds could delay or prevent some portion of the Expansion Projects
from being implemented or completed, which could have a material adverse effect
on the Company. See "Risk-Factors -- Significant Capital Requirements."
ENVIRONMENTAL EXPENDITURES AND OTHER CONTINGENCIES
SDI has incurred and, in the future, will continue to incur capital
expenditures and operating expenses for matters relating to environmental
control, remediation, monitoring and compliance. Capital expenditures for
environmental control for the Fiscal 1994, Fiscal 1995 and 1996 Nine-Month
Period were approximately $595,000, $15.9 million, and $790,000, respectively,
and operating expenses relating to environmental matters were approximately $0,
$30,000, and $2.1 million, for the same periods. SDI has planned environmental
capital expenditures for the years ending December 31, 1996, 1997, and 1998 of
approximately $1.0 million, $3.0 million, and $6.1 million, respectively. In
addition, the Company expects to incur expenses relating to environmental
matters of approximately $2.7 million, $4.3 million, and $4.4 million, for the
years ending December 31, 1996, 1997, and 1998, respectively. Steel Dynamics
believes that compliance with current environmental laws and regulations is not
likely to have a material adverse effect on the Company's financial condition,
results of operations or liquidity; however, environmental laws and regulations
have changed rapidly in recent years and SDI may become subject to more
stringent environmental laws and regulations in the future. See "Risk
Factors -- Potential Costs of Environmental Compliance."
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RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets, and for
Long-Lived Assets to be Disposed of " and SFAS No. 123, "Accounting for
Stock-Based Compensation" were adopted effective January 1, 1996. Adopting these
standards had no effect on the Company's financial position, results of
operations or cash flows in 1996.
INFLATION
SDI does not believe that inflation has had a material effect on its
results of operations over the periods presented.
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<PAGE> 31
BUSINESS
OVERVIEW
Steel Dynamics owns and operates a new, state-of-the-art flat-rolled steel
mini-mill, which commenced operations in January 1996. The Company was founded
by executives and managers who pioneered the development of
thin-slab/flat-rolled CSP technology and directed the construction and operation
of the world's first thin-slab/flat-rolled mini-mill. Building upon their past
experience with CSP technology, management founded SDI to produce steel more
efficiently, at a lower cost and of higher quality. Steel Dynamics' goal is to
become the low cost producer of a broad range of flat-rolled steel products,
including hot-rolled, cold-rolled and galvanized sheet, and to serve more
markets than any other flat-rolled mini-mill. In addition, the Company intends
to participate in the development and use of new technologies to produce a broad
range of steel products.
The Company was founded in September 1993 by Keith E. Busse, Mark D.
Millett and Richard P. Teets, Jr. Steel Dynamics commenced construction of the
mini-mill in October 1994 and commissioned it in December 1995. The Company
believes that this 14-month construction period is the fastest ever for this
kind of facility. In addition, the Company believes that the approximately
$275.7 million initial capital cost of its mini-mill is approximately $75.0
million, or approximately 20%, less than the cost of comparable mini-mills
currently operating. Actual production at the mini-mill of primary grade steel
commenced on January 2, 1996. The mill achieved an annualized production rate of
930,000 tons by the end of September 1996, or 66% of its capacity of 1.4 million
tons, making the mini-mill's start-up and ramp-up the fastest in the industry.
Pursuant to the Company's plan to develop downstream processing facilities
to produce further value-added steel products, Steel Dynamics is currently
constructing a cold mill, contiguous to the mini-mill, with a 1.0 million ton
annual capacity which is scheduled for completion during the second half of
1997. Steel Dynamics also plans to add a second melting furnace, a second caster
and tunnel furnace, and an additional coiler in 1998 to expand its annual
production capacity of hot-rolled steel from 1.4 million tons to approximately
2.4 million tons. In addition, through IDI, the Company intends to construct a
520,000 tonne annual capacity plant for the manufacture of DRI, which the
Company expects to be completed in 1998. The DRI, after further processing into
430,000 tonnes of liquid pig iron, will be used in SDI's mini-mill as a steel
scrap substitute.
Management strategically located the Company's mini-mill within close
proximity to its natural customer base, steel service centers and other end
users, abundant supplies of automotive and other steel scrap (SDI's principal
raw material), competitive sources of power, and numerous rail and truck
transportation routes. Steel Dynamics believes that its strategic location
provides it with sales and marketing as well as production cost advantages. The
Company has secured a stable baseload of sales through long-term "off-take"
contracts with two major steel consumers, a 30,000 ton per month sales contract
with Heidtman, a major Midwest-based steel service center and distributor and an
affiliate of one of the Company's stockholders, and a 12,000 ton per month sales
contract with Preussag, a major German steel manufacturer and a stockholder of
the Company, with affiliate distributors and steel service centers throughout
the United States. The Company has also sought to assure itself of a secure
supply of steel scrap and scrap substitute. To accomplish this objective, SDI
has entered into a long-term scrap purchasing services contract with OmniSource,
one of the largest scrap dealers in the Midwest and an affiliate of one of the
Company's stockholders. In addition, the Company has also sought to assure
itself of a secure supply of scrap substitute material for use as a lower cost
complement to steel scrap as part of the Company's melt mix. SDI has entered
into a long-term 300,000 tonne per year "off-take" contract to purchase iron
carbide from Qualitech's iron carbide facility currently under construction in
Corpus Christi, Texas which is expected to be completed in 1998. Additional
scrap substitute material will be provided through the Company's IDI Project.
STRATEGY
The Company's business strategy is to use advanced CSP hot-rolled
steelmaking and cold-rolling technologies to produce high surface quality
flat-rolled steel in a variety of value-added sizes, gauges and
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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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encourages employees to use materials and resources more efficiently.
Steel Dynamics' employees' bonuses may equal or exceed their base hourly
wage.
- Pursue Future Opportunities. Steel Dynamics believes that technology
development and management's experience will provide significant
opportunities for SDI in a broad range of markets, potentially including
flat-rolled, non-flat-rolled, stainless and specialty steels. See "-- The
Flat-Rolled Market." The Company plans to pursue opportunities through
greenfield projects, strategic alliances or acquisitions to secure the
long-term future growth and profitability of SDI. Steel Dynamics will
seek to enter new steel markets and to produce new steel products using
the latest technology, with the objective of being a low cost producer.
In addition, the Company has a technology sharing agreement with Preussag
which will provide SDI with Preussag's expertise and know-how in steel
manufacturing, particularly steel finishing.
INDUSTRY OVERVIEW
The steel industry has historically been and continues to be highly
cyclical in nature, influenced by a combination of factors including periods of
economic growth or recession, strength or weakness of the U.S. dollar, worldwide
production capacity, levels of steel imports and tariffs. The industry has also
been affected by other company-specific factors such as failure to adapt to
technological change, plant inefficiency, and high labor costs. As an industry,
most U.S. steel producers suffered losses between 1982 and 1986, earned profits
between 1987 and 1989, weakened again through the end of 1992, strengthened
during 1993 and 1994, weakened again in 1995 and appear to be strengthening at
the present time. Steel, regardless of product type, is a commodity that
responds to forces of supply and demand, and prices have been volatile and have
fluctuated in reaction to general and industry specific economic conditions.
Under such conditions, a steel company must be a low cost, efficient producer
and a quality manufacturer.
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There are generally two kinds of primary steel producers, "integrated" and
"mini-mill." The following diagram illustrates the differences in production
methodologies between the typical multi-step integrated mill production process
and the typical continuous mini-mill melting-casting-rolling process.
[FLOW CHART]
Steel manufacturing by an "integrated" producer involves a series of
distinct but related processes, often separated in time and in plant geography.
This process generally involves ironmaking followed by steelmaking, followed by
billet or slab making, followed by reheating and further rolling into steel
plate or bar, or flat-rolling into sheet steel or coil. These processes may, in
turn, be followed by various finishing processes (including cold-rolling) or
various coating processes (including galvanizing). In integrated producer
steelmaking, coal is converted to coke in a coke oven, then combined in a blast
furnace with iron ore (or pellets) and limestone to produce pig iron, and then
combined with scrap in a "basic oxygen" or other furnace to produce raw or
liquid steel. Once produced, the liquid steel is metallurgically refined and
then either poured as ingots for later reheating and processing or transported
to a continuous caster for casting into a billet or slab, which is then further
shaped or rolled into its final form. Typically, though not always, and whether
by design or as a result of downsizing or re-configuration, many of these
processes take place in separate and remote facilities.
In contrast, a mini-mill employs an electric arc furnace to directly melt
scrap steel or steel scrap substitute, thus entirely eliminating the
energy-intensive blast furnace. A mini-mill incorporates the melt shop, ladle
metallurgical station, casting, and rolling into a unified continuous flow. The
melting process begins
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<PAGE> 35
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> 36
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> 37
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]
35
<PAGE> 38
Coated Products. Coated steel is usually cold-rolled sheet that has been
coated with a non-ferrous metal to render it corrosion-resistant and to improve
its paintability. Hot-dipped galvanized, electrogalvanized and aluminized
products are types of coated steels. These are also the highest value-added
sheet products because they require the greatest degree of processing and tend
to have the strictest quality requirements. Coated steel is used in high volume
applications such as automotive, household appliances, roofing and siding,
heating and air conditioning equipment, air ducts, switch boxes, chimney flues,
awnings, garbage cans and food containers. The use of coated steels in the U.S.
has increased dramatically over the last 40 years. The U.S. market for coated
steels in 1995 was approximately 19.9 million tons, excluding imports. This
market segment will be served by SDI's cold mill when completed in 1997. The
following chart presents 1995 U.S. industry coated product shipments by market
segment (as reported by the AISI):
[PIE CHART]
THE COMPANY'S PRODUCTS AND APPLICATIONS
The Company's current array of hot-rolled products includes a variety of
high quality mild and medium carbon and high strength low alloy hot-rolled bands
in 40" to 62" widths and in thicknesses from .500" down to .040" (1 mm). These
products are suitable for mechanical and structural tubing, gas and fluid
transmission piping, metal building systems, parts and components for
automobiles, trucks, trailers, and recreational vehicles, rail cars, ships,
barges, and other marine equipment, agricultural equipment and farm implements,
lawn, garden, and recreational equipment, industrial machinery and shipping
containers. SDI believes that, because of innovations made in its
state-of-the-art caster, its basic production hot band has surface and edge
quality characteristics that exceed those of the other thin-slab/flat-rolled
mini-mills operating currently. The Company also believes that the surface and
edge quality of its hot bands compares favorably with conventional mills. Steel
Dynamics believes that it is able to access a substantial portion of the current
U.S. shipped hot-rolled market of 26.8 million tons. Based on information from
its customers, the following chart displays SDI's 1996 flat-rolled shipments,
for the first nine months of its operations, by market classification of the
ultimate end user, regardless of whether the Company's hot band was further
processed by a steel service center or other intermediate processor before being
shipped to the end user.
<TABLE>
<CAPTION>
END USER INDUSTRY PERCENTAGE TYPICAL APPLICATIONS
---------------------- ---------- ----------------------------------------------------
<S> <C> <C>
Automotive............ 23% Safety restraints, suspension, frame
Tubing................ 18 Structural, tube, mechanical tube, conduit
Construction.......... 13 Metal buildings, piling, safety grating
Commercial equipment.. 12 Racks, shelving, hardware
Machinery............. 6 Construction equipment, machine tools
Rail.................. 4 Rail car sides, tops, end caps
Residential
equipment........... 4 Lawn equipment, garden implements, motion furniture
Appliances............ 3 Liners, backs, brackets
Agriculture........... 2 Farm equipment, feeders, bins
Other................. 15 Exercise and recreational equipment
----------
Total....... 100%
==========
</TABLE>
36
<PAGE> 39
After completion of the Cold Mill Project (expected to occur during the
second half of 1997), SDI expects to produce a full range of hot-rolled,
hot-rolled coated, cold-rolled and cold-rolled coated products. At that time,
the Company expects to devote a substantial portion of its hot bands to the
production of higher value added products, including galvanized coatings, as
well as thinner gauge cold-rolled, down to .015(). This increased product
breadth should also allow SDI to broaden its direct customer base, so that many
of the products required by end user consumers could be purchased directly from
the Company, instead of through an intermediate processor or steel service
center. The Company believes that upon completion of the Cold Mill Project it
will be able to access a substantial portion of the current U.S. shipped
flat-rolled market of 60.8 million tons.
THE COMPANY'S CUSTOMERS AND MARKETS
Intermediate Steel Processors and Steel Service Centers. The Company's
customers currently are primarily intermediate steel processors and steel
service centers. Of Steel Dynamics' total net sales since the Company commenced
operations, 81% were to steel processors or service centers. These steel
processors and service centers typically act as intermediaries between primary
steel producers, such as SDI, and the various end user manufacturers that
require further processing of hot bands. The additional processing performed by
the intermediate steel processors and service centers include pickling,
galvanizing, cutting to length, slitting to size, leveling, blanking, shape
correcting, edge rolling, shearing and stamping. After the completion of the
Cold Mill Project, the Company expects to provide additional value-added
cold-rolling and coating services. The Company expects, however, that its
intermediate steel processor and service center customers will remain an
integral part of its future customer base and plans to continue to sell its hot
bands and other products to these customers after the Cold Mill Project is
complete.
The Company's largest customers, Heidtman and Preussag, accounted in the
aggregate for approximately 47% of Steel Dynamics' total net sales through
September 28, 1996. While the loss of either Heidtman or Preussag as a customer,
or a significant reduction in the business generated by Heidtman or Preussag,
might have a material adverse effect on SDI's results of operations, the Company
believes its relationships with these two companies have enabled it to baseload
the mill, thus helping to ensure consistent and sufficient plant utilization.
Heidtman and Preussag are the only two customers of SDI that have accounted,
individually, for more than 10% of the Company's total net sales through
September 28, 1996. Heidtman is an affiliate of one of the Company's
stockholders and Preussag is a stockholder. See "Principal and Selling
Stockholders." The Company's five largest customers in the aggregate accounted
for approximately 66% of total net sales through September 28, 1996. See "Risk
Factors -- Reliance on Major Customers."
SDI has a six-year purchasing agreement with Heidtman for the purchase of
at least 30,000 tons of the Company's hot band products per month, at market
prices, determined by reference to the lowest prices charged by other thin-slab
mini-mills or conventional mills for the same products. The price at which the
Company is required to sell 30,000 tons of steel coil to Heidtman cannot be
higher than the lowest price at which SDI offers its products to any other
customer. Heidtman is entitled to single run as well as certain volume
discounts. In addition, Heidtman has priority purchase rights to the Company's
secondary material and field claim material. The Company's aggregate sales to
Heidtman (including its affiliated companies) through September 28, 1996 has
amounted to 201,500 tons.
SDI also has a six-year Purchasing, U.S. Sales and Export Distribution
Agreement (the "Preussag Purchasing Agreement") with Preussag pursuant to which,
and subject to the Company's obligations to fill Heidtman's orders, Preussag is
obligated to purchase an average of at least 12,000 tons per month of the
Company's available products, at a market price determined by reference to the
Company's price sheet and by reference to prevailing competitive market prices
charged to large customers by other mills within the Company's typical marketing
area. Preussag is entitled to single run and certain volume discounts. Under the
Preussag Purchasing Agreement, the Company has also appointed Preussag as its
preferred distributor for all sales to customers outside the United States,
Canada and Mexico. See "-- International Sales." Preussag's affiliated companies
include: Delta Steel, Inc., located in Houston, Texas; Feralloy Corporation,
located in Chicago, Illinois; Feralloy North American Steel Co., LP, located in
Melvindale, Michigan; Preussag Handel, Canada, located in Vancouver, British
Columbia, Canada; Preussag Handel, GmbH, located in Mexico City,
37
<PAGE> 40
Mexico; and Preussag International Steel Corporation, located in Atlanta,
Georgia. The Company's aggregate sales to Preussag (including its affiliated
companies) through September 28, 1996 has amounted to 56,800 tons.
Direct Sales to End Users. The Company sells directly to end users,
including manufacturers of cold-rolled strip, oil and gas transmission pipe, and
mechanical and structural tubing. The Company employs a 12-person direct sales
staff, consisting of a Manager of Sales and Marketing, three Field Sales
Managers, a Manager of Secondary Sales, with the balance dedicated to inside
sales and administration. Steel Dynamics plans on keeping its end user sales and
support staff small and efficient, reflecting the Company's emphasis on
cost-containment and productivity.
Geographic Proximity to Customers. The following map illustrates the
geographic proximity of certain of the more significant U.S. markets for
flat-rolled sheet to the Company's mini-mill in Butler, Indiana.
[MAP]
Of the Company's total net sales through September 28, 1996, more than 80%
were to customers within 300 miles of SDI. In addition to its low production
costs, the Company believes that it also enjoys a pricing advantage over most of
its competitors due to freight savings to its customers to the north and east of
SDI's mini-mill, where it sold 60% of its flat-rolled steel through September
28, 1996.
International Sales. Of the Company's total net sales through September
28, 1996, sales outside the continental United States accounted for less than
5%. Pursuant to the Preussag Purchasing Agreement, the Company has appointed
Preussag its preferred distributor for all sales to customers outside the United
States, Canada and Mexico (the "Export Territory"). Under the Preussag
Purchasing Agreement, if the Company wishes to sell in the Export Territory, it
must notify Preussag of the products available for sale and the price of these
products. Preussag must then use its best efforts to solicit these sales and to
present the Company with any purchase orders for the product, which the Company
may then accept or reject. Sales within the Export Territory are for Preussag's
own account, regardless of whether Preussag is purchasing for its use or for
resale. If the Company receives an unsolicited offer to purchase any products
from a prospective customer in the Export Territory, the Company must notify
Preussag of the terms and Preussag has a right of first refusal to effect the
purchase. For sales in the Export Territory, Preussag is entitled to a sales
commission in addition to
38
<PAGE> 41
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
39
<PAGE> 42
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
40
<PAGE> 43
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> 44
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,
an affiliate of Heavy Metal, L.C., a stockholder of the Company. See "Principal
and Selling Stockholders." Pursuant to this agreement, OmniSource has agreed to
act as the Company's exclusive scrap purchasing agent and to use its best
efforts to locate and secure for the Company's mini-mill such scrap supplies as
SDI may from time-to-time wish to purchase, at the lowest then available market
prices for material of like grade, quantity and delivery dates. The cost to the
Company of OmniSource-owned scrap is the price at which OmniSource, in bona fide
market transactions, can actually sell material of like grade, quality and
quantity. With respect to general market scrap, the cost to the Company is the
price at which OmniSource can actually purchase that scrap in the market
(without mark-up or any other additional cost). For its services, OmniSource
receives a commission per gross ton of scrap received by Steel Dynamics at its
mini-mill. All final decisions regarding scrap purchases belong to the Company,
and SDI maintains the sole right to determine its periodic scrap needs,
including the extent to which it may employ steel scrap substitutes in lieu of
or in addition to steel scrap. No commission is payable to OmniSource for scrap
substitutes purchased or manufactured by the Company.
During the first nine months of 1996, the Company purchased 661,000 tons of
steel scrap from OmniSource, and expects to purchase an average of 100,000 to
120,000 tons of steel scrap per month once full production is reached in 1997.
Thereafter, although SDI expects that its total output in tons of flat-rolled
steel coil will increase from 1.4 million to approximately 2.4 million after the
completion of the Cold Mill and Caster Projects, the Company expects that its
receipt of substantial quantities of steel scrap substitute material, both iron
carbide from Qualitech and DRI from the IDI Project, will mitigate its continued
dependency on low residual steel scrap. Steel Dynamics believes that its scrap
purchasing relationship with OmniSource, an affiliate of one of the Company's
stockholders, provides the Company with excellent access to available steel
scrap within its primary scrap generation area.
Steel Scrap Substitutes. In June 1996, the Company entered into an Iron
Carbide Off-Take Agreement (the "Iron Carbide Agreement") with Qualitech, in
whose parent SDI is a 4% stockholder. The Iron Carbide Agreement is for five
years, running from the time that Qualitech begins commercial production of iron
carbide, and is subject to renewal. Qualitech is building a 660,000 tonne annual
capacity iron carbide facility in Corpus Christi, Texas, of which 300,000 tonnes
annually is expected to be sold to Steel Dynamics at a formula purchase price
based on various components of Qualitech's costs of production, which the
Company believes is favorable, and with a ceiling price which SDI believes will
be favorable relative to the price of steel scrap. The Company will also
purchase iron carbide from Qualitech during Qualitech's ramp-up commencing as
early as 1998, although the amount of iron carbide that SDI can anticipate
receiving during that period is unknown. In addition to the Iron Carbide
Agreement, the Company has formed IDI, which is designing and
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will construct a 520,000 tonne capacity rotary hearth-based DRI production
facility. See "Certain Transactions."
ENERGY RESOURCES
SDI believes that it has very favorable energy rates, both electricity and
gas, as well as for oxygen. These rates are critical to the Company in
maintaining its status as a low-cost provider of flat-rolled steel.
Electricity. The plant operates at an average electrical power consumption
level of 100 million watts, under an electric service contract with AEP that
extends through 2005. The contract designates a capacity reservation of 150,000
kVa with provisions allowing for a total capacity increase of 80,000 kVa for new
load connected within five years of the commencement date with a one-year notice
of intent requirement. The contract designates a portion of the Company's load
as "firm," which is billed under the applicable AEP retail tariff. All of the
rest of the Company's load is designated as "interruptible service," which
allows customers the option of accepting varying levels of risk of power
interruption as a trade-off for discounted energy prices. With interruptible
service, the Company is subject to risk of interruption at any time in the
operation of the AEP System, as a result of an AEP annual peak demand, or even
when AEP can receive a higher market price from an alternate buyer. Under such
circumstances, the Company has the option of matching the market price of the
alternate buyer in order to avoid interruption.
The interruptible load is billed as either "base" energy or as "peak"
energy. The base energy charge is derived monthly from a formula that includes a
discounted demand component, an energy component, and a fuel component. A peak
energy charge, or "real-time price," is calculated hourly for differing
peak-period hours throughout the year. The real-time price is defined as AEP's
incremental cost of supplying energy that otherwise would not have been incurred
if such energy had not been supplied to the Company, plus a fixed cost
increment. The Company's average price of electricity for the month of September
1996 was $.027 per kWh. The Company's negotiated rate with AEP, once it reaches
full capacity, however, should be in the range of $.024 and $.025 per kWh, which
SDI believes is relatively attractive.
Electrical power to the plant site is supplied by AEP over its 14-mile,
345,000 volt transmission line directly to the Company's own electrical
substation. The Company entered into a Transmission Facilities Agreement with
AEP to pay "contributions in aid of construction" for the electric transmission
lines, and these payments to AEP from the Company, pursuant to a $7.8 million
20-year note, at 8% interest, which commenced January 1, 1996, amounts to
$65,400 per month. According to the Transmission Facilities Agreement, if any
other users use these transmission lines, the amount owed by SDI would decrease.
Additionally, the Company entered into a Substation Facilities Agreement with
AEP whereby AEP provided the financing for Steel Dynamics' on-site substation
and related facilities. This financing totaled $13.0 million as of January 1,
1996, and requires repayment, at 8% interest, commencing January 1, 1996, over a
15-year period, amounting to monthly payments of $125,000.
Gas. The Company uses approximately 3,200 decatherms (equivalent to 1,000
BTUs or 1,000 cubic feet) of natural gas per day. The Company holds a "Primary
Firm" delivery contract on the Panhandle Eastern Pipeline that extends through
May 2000, costing the Company $.42 per decatherm, with a current fuel surcharge
equal to 5.72% of the gas the Company flows. The Company also has an
interruptible delivery contract with NIPSCO/NIFL/Crossroads ("LDC") that extends
through December 2000, costing the Company $.20 per decatherm with a fuel
surcharge of .2%. LDC takes the gas from the Panhandle Eastern Pipeline and
delivers it to the mini-mill.
The actual purchase of the gas itself is currently contracted through July
1997 for $1.91 per decatherm. The Company maintains a liquid propane tank farm
on site with sufficient reserves to sustain operations for approximately two
weeks in the event of an interruption in the natural gas supply. During February
1996, when severe weather conditions disrupted the flow of natural gas, the
Company operated on liquid propane for a period of eight days.
Oxygen. Steel Dynamics uses oxygen, as well as nitrogen and argon for
production purposes, which it purchases from Air Products, which built a plant
on land adjacent to the Butler, Indiana mill site. Air
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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 61% in the
1982 to 1986 period to approximately 83% in the 1987 to 1991 period, was
approximately 89% in 1993, 93% in 1994 and 93% in 1995. Recent improved
production efficiencies also have begun to increase overall production capacity
in the United States. Excess production capacity exists in certain product lines
in U.S. markets and, to a greater extent, worldwide. Increased industry
overcapacity, coupled with economic recession, would intensify an already
competitive environment.
Over the last decade, extensive downsizings have necessitated costly
restructuring charges that, when combined with highly competitive market
conditions, have resulted at times in substantial losses for some U.S.
integrated steel producers. A number of U.S. integrated steel producers have
gone through bankruptcy reorganization. These reorganizations have resulted in
somewhat reduced capital costs for these producers and may permit them to price
their steel products at levels below those that they could have otherwise
maintained.
An increasing number of mini-mills have entered or are expected to enter
the EAF-based thin-slab/flat-rolled steel market in the next several years.
These mini-mills have cost structures and management cultures more closely akin
to those of the Company than to the integrated producers. Flat-rolled mini-mill
production capacity increased from 4.0 million tons in 1994 to approximately 5.0
million tons in 1995, and industry sources expect this cumulative flat-rolled
mini-mill capacity to reach 12.0 million tons in 1997 and 14.0 million tons in
1998. The Company's penetration into the total flat-rolled steel market is
limited by geographic considerations, to some extent by gauge and width of
product specifications, and by metallurgical and physical quality requirements.
Based on product type and geographic location, the Company believes it will most
closely compete with the following mini-mills: Nucor's Crawfordsville, Indiana
facility, Gallatin Steel's Ghent, Kentucky facility, Delta Steel's Delta, Ohio
facility, and, to a more limited extent, Nucor's Hickman, Arkansas facility,
Nucor's Berkeley County, South Carolina facility, and TRICO Steel's facility in
northern Alabama. Of the anticipated 12.0 million tons of 1997 flat-rolled
mini-mill capacity, the Company believes that it will most closely compete for
approximately 4.6 million of those flat-rolled tons. Each of these mills will
produce hot-rolled product, however, only an affiliate of the anticipated Delta
Steel facility in Delta, Ohio is expected to produce hot-rolled galvanized
product, and only Nucor's Crawfordsville, Indiana facility is expected to
produce cold-rolled and cold-rolled galvanized products.
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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 248,000 tons of flat-rolled product or
$87.0 million as of September 28, 1996.
FACILITIES
The Company's plant is situated on a greenfield 806-acre site in DeKalb
County, Indiana, strategically located within eight miles of Interstate 69
(north-south), twenty miles from the Indiana Toll Road System (east-west
Interstate 80). In addition, a cross-country high pressure gas line is located
three-quarters of a mile north of the plant, and a 14-mile, 345,000 volt
transmission line brings electrical power to the Company's own electrical
sub-station. In addition, two truck scales and one rail scale have been
installed. The land was formerly farm land, and 67 acres are still being farmed.
The site is served by the east-west rail lines of Conrail, the north-south lines
of the Norfolk & Southern Railway, and the east-west lines of CSX. Railroad
spurs and switching apparatus link the plant with all three railroads. Within
the plant site, the Company has 10 1/2 miles of railroad track, serving both the
plant and the on-site 20-acre scrap yard facility operated by the Company to
receive, hold, and stage its scrap. Water is supplied by two 12" 2,500 gallon
per minute wells which are located on site and which pump out of an aquifer,
located between 160 and 190 feet down, into a 13.0 million gallon reservoir.
Water from this reservoir is pumped to a service water piping system that links
the reservoir to the various water treatment facilities that support the
steelmaking processes.
There are three main buildings that comprise the mill. They are the melt
shop building, containing four bays totaling 103,740 square feet, the tunnel
furnace building, which is 675 feet long and which is, 54,511 square feet in
area (connecting the melt shop to the hot mill), and the hot mill building,
283,558 square feet in size, consisting of two bays in width and is 1,146 feet
in length. The tunnel furnace building is serviced by a 10-ton crane, and the
hot mill building is serviced by three 80 ton cranes. Office buildings on site
include a general administrative corporate headquarters building, consisting of
12,000 square feet, a building for the hot rolling, engineering and safety
personnel, consisting of 6,000 square feet, a melt shop office, consisting of
2,000 square feet, and a shipping office of 1,000 square feet. There is an
employee services building of 8,000 square feet that includes a shower and
locker room facility, as well as the plant cafeteria. A 22,000 square foot
warehouse has been constructed to receive, store, and manage necessary parts and
materials to maintain the plant.
Other support facilities include a bag house and a water treatment system
with buildings located at various places in the plant. The bag house captures
the gasses from the melting operation and cleans them to comply with all federal
emissions standards. The bag house is capable of cleaning 1.5 million cubic feet
per minute of these gasses. The water treatment system cleans, cools, and
recirculates the water used by the plant in various processes at the overall
rate of 100,000 gallons per minute.
The Company considers its manufacturing and operating facilities adequate
for its needs, including the Expansion Projects, and for the foreseeable future.
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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 as of September 28, 1996. The Company's employees are not represented
by labor unions. The Company believes that its relationship with its employees
is good.
Performance Based Incentive Compensation Program. SDI has established
certain incentive compensation programs for its employees, designed to encourage
them to be productive by paying bonuses to groups of employees, based on various
measures of productivity. The programs are designed to reward employees for
productivity efforts. It is not unusual for a significant amount of an
employee's total compensation to consist of such bonuses.
The productivity of the employees is measured by focusing on groups of
employees and not individual performance. Three groups of employees participate
in the bonus program: production, administrative and clerical, and department
managers and officers. Each group of employees has its own bonus program or
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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 not opposed
within 30 days. A notice of allowance is expected to be issued.
LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal course of
business. In management's opinion, the ultimate outcome of these lawsuits will
not have a material effect on the results of operations or on the financial
condition of the Company.
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<PAGE> 54
MANAGEMENT
The Company's Board of Directors consists of ten directors. Directors and
executive officers of the Company are elected to serve until they resign or are
removed or are otherwise disqualified to serve or until their successors are
elected and qualified. Directors of the Company are elected at the annual
meeting of stockholders. The directors and executive officers of the Company,
their ages as of August 31, 1996 and positions are as follows:
<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.
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<PAGE> 55
Richard P. Teets, Jr. co-founded the Company in September 1993 and has been
its Vice President of Rolling and Finishing and a director since its inception.
Previously, Mr. Teets worked for LTV Steel Co., Inc., in its engineering,
maintenance, and production areas, and in 1987, was hired by Nucor to be one of
the senior managers to assist Messrs. Busse and Millett in the construction of
the Crawfordsville Mini-Mill, overseeing the actual engineering and construction
process, including its electrical, mechanical, and environmental aspects. In
1991, Mr. Teets assumed the responsibilities for the Crawfordsville Mini-Mill's
cold-rolling and finishing operations as its Manager.
Tracy L. Shellabarger joined the Company as its Vice President of Finance
and Chief Financial Officer and a director in July 1994. Previously, from 1987,
Mr. Shellabarger worked for Nucor, first as its Manager of Internal Audit in its
Charlotte, North Carolina home office, and, eight months later, as its
Controller at the Crawfordsville Mini-Mill, where he also served as a member of
the senior management team that constructed and operated that facility for
Nucor.
John C. Bates was elected a director of the Company in September 1994, as
the designated director of the "Keylock/Mazelina Shares" under the Stockholders
Agreement. Mr. Bates is the President and Chief Executive Officer of Heidtman,
which he joined in 1963, and for which he has served as its President and Chief
Executive Officer since 1969. Mr. Bates is also a director of Heidtman and of
National City Bank, N.W.
Leonard Rifkin was elected a director of the Company in November 1994, as
the designated director of the "Heavy Metal Shares" under the Stockholders
Agreement. Mr. Rifkin has been the President and Chief Executive Officer of
OmniSource since 1959 and since September 1996 has been Chairman of the Board.
He is also a director of Qualitech Steel Holdings, Inc.
Paul B. Edgerley was elected a director of the Company in September 1996,
as the designated director of the "Bain Shares" under the Stockholders
Agreement, having previously served as an alternate director from September
1994. Mr. Edgerley has been a Managing Director of Bain Capital, Inc. since May
1993 and has been a general partner of Bain Venture Capital since 1990. Mr.
Edgerley was a principal of Bain Capital Partners from 1988 through 1990. Mr.
Edgerley is also a director of GS Industries, Inc. and AMF Group, Inc.
William D. Strittmatter was elected a director of the Company in September
1994, as the designated director of the "GECC Shares" under the Stockholders
Agreement. Mr. Strittmatter is a Vice-President and Senior Credit Officer of
General Electric Capital Corporation, which he joined in 1982. Mr. Strittmatter
is also a director of Newsprint South, Inc. and is Vice Chairman of Shanghai
Zhadian Gas Turbine Power Generation Co., Ltd.
William Laverack, Jr. was elected a director of the Company in September
1994, as the designated director of the "Whitney Shares" under the Stockholders
Agreement. Mr. Laverack is a general partner of J.H. Whitney & Co., a private
equity and mezzanine capital investment firm, which he joined in 1993. Prior to
joining Whitney, he was with Gleacher & Co., a mergers and acquisitions advisory
firm, from 1991 to 1993, and from 1985 to 1991 was employed by Morgan Stanley &
Co. Incorporated in its Merchant Banking Group. Mr. Laverack is also a director
of CRA Managed Care, Inc., The North Face, Inc. and Qualitech Steel Holdings,
Inc.
Dr. Jurgen Kolb was elected a director of the Company in April 1996, as the
designated director of the "Preussag Shares" under the Stockholders Agreement.
Dr. Kolb is a member of the Executive Board of Preussag Stahl AG, which he
joined in 1986. Dr. Kolb is also a member of the Supervisory Board of Preussag
Handel Gmbh and of Ruhrkohle Bergbau A.G., is Chairman of the Supervisory Board
of Universal GmbH and of Peiner Agrar and Huttenstoffe GmbH; and is a director
of Feralloy Corporation.
Daniel M. Rifkin was elected as an alternate director of the Company in
November 1994, having been designated as such by "Heavy Metal Shares" to serve
as director of the Company in Leonard Rifkin's absence or unavailability. Daniel
M. Rifkin is the son of Leonard Rifkin. Mr. Rifkin is the President and Chief
Operating Officer of OmniSource, which he joined in 1979.
Robert C. Gay was elected as an alternate director of the Company in
September 1996, having been designated as such by the "Bain Shares" to serve as
director of the Company in Mr. Edgerley's absence or
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<PAGE> 56
unavailability. Mr. Gay has been a managing director of Bain Capital, Inc. since
1996 and has been a general partner of Bain Venture Capital since 1989. From
1988 through 1989, Mr. Gay was a principal of Bain Venture Capital. Mr. Gay is a
Vice Chairman of the Board of Directors of IHF Capital, Inc., parent of ICON
Health & Fitness, Inc. In addition, Mr. Gay is a director of Alliance
Entertainment Corp., GT Bicycles, Inc., GS Industries, Inc. and its subsidiary,
GS Technologies Operating Co., Inc. and Physio-Control International
Corporation.
Molly Ferguson was elected as an alternate director of the Company in
September 1994, having been designated as such by the "GECC Shares" to serve as
director of the Company in Mr. Strittmatter's absence or unavailability. Ms.
Ferguson is a Manager, Operations of General Electric Capital Corporation which
she joined in 1987.
Michael L. Stone was elected as an alternate director of the Company in
September, 1994, having been designated as such by the "Whitney Shares" to serve
as a director of the Company in Mr. Laverack's absence or unavailability. Mr.
Stone is a general partner of J.H. Whitney & Co., a private equity and mezzanine
capital investment firm, which he joined in 1989. Mr. Stone was an associate of
the firm from 1989 through January 1992, at which time he became a general
partner.
Dr. Jorg Fuhrmann was elected as an alternate director of the Company in
November 1994, having been designated as such by the "Preussag Shares" to serve
as a director of the Company in Dr. Kolb's absence or unavailability. Dr.
Fuhrmann is a member of the Executive Board of Preussag Stahl AG, which he
joined in 1995.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered for 1995 for the Chief
Executive Officer and the other three most highly compensated executive officers
of the Company whose salary and bonus amounts exceeded $100,000 (collectively,
the "Named Executive Officers"). The amounts shown include compensation for
services rendered in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) 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.
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<PAGE> 57
DIRECTOR COMPENSATION
At present, no separate compensation or fees are payable to directors of
the Company for their services, other than reimbursement of expenses incurred
with respect to such services. The Company expects, however, that new directors
that are not employed by or otherwise affiliated with the Company or its
stockholders will be paid in a manner and at a level consistent with industry
practice.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the offerings, the Board of Directors of the Company had no formal
committees. Immediately prior to the completion of the offerings, the Board of
Directors will establish an Audit Committee. The Board of Directors may also
establish other committees to assist in the discharge of its responsibilities.
The Audit Committee will make recommendations to the Board of Directors
regarding the independent auditors to be nominated for election by the
stockholders and will review the independence of such auditors, approve the
scope of the annual audit activities of the independent auditors, approve the
audit fee payable to the independent auditors and review such audit results.
Deloitte & Touche LLP presently serves as the independent auditors of the
Company.
The Board of Directors, acting as a compensation committee, will provide a
general review of the Company's compensation and benefit plans to ensure that
they meet corporate objectives. In addition, the Board of Directors will review
the Chief Executive Officer's recommendations on (i) compensation of all
officers of the Company and (ii) adopting and changing major Company
compensation policies and practices.
EMPLOYMENT AGREEMENTS
Effective as of June 24, 1994, the Company entered into an Employment
Agreement with Mr. Busse for a term of five years, to serve as President and
Chief Executive Officer. Mr. Busse received a Base Salary of $275,000 for 1995
and will receive a Base Salary of $290,000 for 1996. The Employment Agreement
provides for an annual bonus (an "Annual Bonus"). The bonus is determined by
making an award among executive employees selected by the Board of Directors in
proportion to their respective base salaries, out of an "Annual Bonus Pool"
consisting of 4% of the Company's pre-tax earnings, less an amount equal to 10%
of the "equity investment" in the Company, determined as of the beginning of the
year. The Annual Bonus is subject to first, a maximum of 200% of Base Salary
paid in cash, then, a maximum of 100% of Base Salary paid in restricted stock
vesting ratably over four years. For the first five years of employment, the
Annual Bonus is guaranteed at not less than 60% of Base Salary, regardless of
the Company's profitability. In addition, Mr. Busse received an additional sum
of $30,000 during 1995 and will receive $30,000 during 1996 and 1997.
In the event that Mr. Busse's employment is terminated by the Company for
cause, Mr. Busse is entitled to compensation earned prior to the date of
termination computed pro rata up to and including the date of termination and
all further obligations of the Company will terminate. For purposes of Mr.
Busse's Employment Agreement, "cause" is defined as Mr. Busse's willful and
knowing commission of a criminal act under applicable state or federal law. In
the event that Mr. Busse's employment is terminated by the Company without
"cause" or if he terminates his employment for certain specified reasons, Mr.
Busse is entitled to all compensation set forth in his Employment Agreement,
subject to Mr. Busse's reasonable duty to mitigate his damages, and provided
that compensation payable to Mr. Busse will be reduced on a dollar for dollar
basis to the extent of pre-tax compensation received by Mr. Busse from any
competitor of the Company. In the event that Mr. Busse terminates his employment
for any other reason, he will receive no further compensation under his
employment agreement. Upon termination of Mr. Busse's employment due to his
disability or death, the Company will continue paying to Mr. Busse or his
estate, as the case may be, a base salary during the remainder of the five-year
term; provided that in the case of disability, such payments will be reduced to
the extent of any benefits paid by workers' compensation, or under any state
disability benefit program or under any disability policy maintained by the
Company.
Effective June 24, 1994, the Company entered into five-year Employment
Agreements with Mr. Millett and Mr. Teets, pursuant to which Mr. Millett, as
Vice President of Melting and Casting, and Mr. Teets, as
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Vice President of Rolling and Finishing, received a Base Salary of $165,000 for
1995 and will receive a Base Salary of $175,000 for 1996. Both Mr. Millett and
Mr. Teets are entitled to an Annual Bonus, calculated in the same manner and
subject to the same limitations discussed above for Mr. Busse. The termination
provisions contained in the Employment Agreements with Messrs. Millett and Teets
are identical to those contained in the Employment Agreement with Mr. Busse.
Effective July 7, 1994, the Company entered into a four-year Employment
Agreement with Mr. Shellabarger, to serve as Chief Financial Officer, at a Base
Salary for 1995 of $120,000 ($135,000 for 1996). Mr. Shellabarger is entitled to
an Annual Bonus calculated in the same manner and subject to the same
limitations discussed above for Mr. Busse. In addition, the Company sold to Mr.
Shellabarger, at the commencement of his employment, 280,601 shares of its
Common Stock, at an aggregate purchase price of $750,100, for which he executed
a promissory note for $750,000, secured by a pledge of the stock, due and
payable in July 1998. Installments of interest are payable in July 1995 through
1997. Mr. Shellabarger is to receive an additional $70,000 annual bonus so long
as the promissory note is outstanding and Mr. Shellabarger is employed by the
Company to offset the interest payments due on the note. Pursuant to the terms
of his employment agreement the note will be forgiven in connection with the
offerings. See "Certain Transactions."
The termination provisions contained in Mr. Shellabarger's Employment
Agreement are substantially similar to those contained in the other Employment
Agreements. For purposes of Mr. Shellabarger's Employment Agreement, "cause" is
defined as (i) dishonesty with respect to the Company or any of its
subsidiaries; (ii) the unexcused failure, neglect, or refusal to perform his
duties and responsibilities, despite being apprised of such failure, neglect or
refusal and given a reasonable period to correct such problem; (iii) willful
misfeasance or nonfeasance of duty intended to injure or having the effects of
injuring the business or business opportunities of the Company or any of its
subsidiaries; or (iv) his conviction of a crime that materially adversely
affects the business of the Company or any of its subsidiaries, or his ability
to perform his duties and responsibilities as contemplated by the Employment
Agreement.
After the initial employment term expires, and although each of the
foregoing Employment Agreements continues only on a month-to-month basis
thereafter (unless renewed), Messrs. Busse, Millett, Teets, and Shellabarger are
entitled to six months of severance pay, at their Base Salary, if employment is
in fact not continued.
All four Named Executive Officers receive major medical, long-term
disability, and term life insurance equal to twice their Base Salaries.
EMPLOYEE PLANS
Officer and Manager Cash and Stock Bonus Plan. In October 1996, the board
of directors adopted and the stockholders approved an Officer and Manager Cash
and Stock Bonus Plan (the "Bonus Plan"), which prescribes cash and stock bonus
awards based upon the Company's profitability and the Officer's and Manager's
relative base salaries.
Under the Bonus Plan, 5% of an amount determined by subtracting from the
Company's "Adjusted Pre-Tax Net Income" an amount equal to 10% of "Stockholder's
Equity" as determined by the Company's audited Consolidated Balance Sheets, is
placed into a "Distribution Pool," from which the bonus awards are made.
Adjusted Pre-Tax Net Income for any of the Company's fiscal years, commencing
January 1, 1997, is defined as the Company's net income before taxes,
extraordinary items and bonuses payable to Participants under the Bonus Plan, as
determined by the Company's outside auditors, except that, to the extent
reasonably determinable, the effect upon Adjusted Pre-Tax Net Income of any
income and start-up expenses associated with significant capital expenditures,
for a period not to exceed twelve months following start-up, are to be excluded
from and not taken into account in determining Adjusted Pre-Tax Net Income.
"Participants" under the Bonus Plan include "Officers" and "Managers" selected
from time to time to participate in the Bonus Plan by a committee of the Board
which administers the Bonus Plan, consisting of at least two members of the
Board, each of whom should be both a "non-employee director" (as defined in Rule
16(b)-3 under Section 16 of the Exchange Act) and an "outside director" as
defined in Section 162 of the Code. The Board currently serves as the committee,
in the absence of the appointment of a separate committee. At the present time,
four
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<PAGE> 59
Officers (the President and three Vice-Presidents) and four Managers have been
selected to participate in the Bonus Plan.
Once the Distribution Pool has been calculated, and if it is a positive
number, the Participants are entitled to receive a bonus, payable in cash and,
if the Distribution Pool is sufficient, in stock of the Company, up to the
amount prescribed in the Bonus Plan's formula. Specifically, each Participant is
entitled to receive a cash bonus in an amount determined by multiplying the
amount in the Distribution Pool by the "Participant's Bonus Percentage," except
that, with respect to an Officer, the cash bonus is not to exceed two times the
Officer's base salary and, with respect to a Manager, the cash bonus is not to
exceed the Manager's base salary. Inasmuch as Keith E. Busse, Mark D. Millett,
Richard P. Teets, Jr. and Tracy L. Shellabarger, the four Officers currently
covered by the Bonus Plan, have existing employment agreements which provide for
the payment of a cash bonus, and in order to preclude duplication of bonus
payments, the Bonus Plan provides that the amount of any cash bonus payable to
those Officers under their existing employment agreements is to be deducted from
the cash bonus, if any, payable to them under the Bonus Plan.
If there is any excess in the Distribution Pool over the sum of the
aggregate cash bonuses payable under the Bonus Plan to all Participants and the
amounts deducted from the cash bonuses otherwise payable to Messrs. Busse,
Millett, Teets and Shellabarger because of bonuses already payable to them under
their employment agreements (which sum is defined as the "Adjusted Distribution
Pool"), the amount thereof is to be distributed to the Participants in the form
of "Restricted Stock." Each Participant is to receive that number of shares of
Restricted Stock having a fair market value, at the time of issuance, equal to
the product of that Participant's Bonus Percentage and the Adjusted Distribution
Pool, except that, with respect to an Officer, the aggregate fair market value
of the Restricted Stock so issued is not to exceed the Officer's Base Salary,
and, with respect to a Manager, the aggregate fair market value of the
Restricted Stock so issued is not to exceed 50% of the Manager's Base Salary.
The Bonus Plan provides that Restricted Stock will vest and become
nonforfeitable over a four year period. Commencing on January 1 following the
year with respect to which the Restricted Stock was issued, the stock will vest
and become nonforfeitable at the rate of 25% thereof for each full year
following the year with respect to which the Restricted Stock was issued. Upon
termination of a Participant's employment for any reason other than retirement,
all shares of Restricted Stock of that Participant which were not vested at the
time of termination of employment are required to be forfeited and returned to
the Company (although the committee, in its discretion, may waive the forfeiture
provisions). Until vested, Restricted Stock is not permitted to be transferred,
assigned, sold, pledged, or otherwise disposed of in any manner, nor subject to
levy, attachment or other legal process, and, while restricted, the stock
certificates evidencing those shares are required to be legended and held by the
Company. Subject to these limitations, however, and as long as a forfeiture has
not occurred, the Participant is treated as the owner of the Restricted Stock
with full dividend and voting rights.
The total number of shares of Common Stock of the Company reserved for
distribution pursuant to the Restricted Stock portion of the Bonus Plan is
450,000 shares, subject to adjustment in the event of any stock dividends, stock
splits, combinations or exchanges of shares, recapitalizations or other changes
in the capital structure of the Company, as well as any other corporate
transaction or event having any effect similar to any of the foregoing. If any
such event occurs, the aggregate number of shares reserved for issuance under
the Bonus Plan would be adjusted to equitably reflect the effect of such
changes. The Bonus Plan will commence with the Company's fiscal year beginning
January 1, 1997, and no cash or stock bonuses under this Bonus Plan will accrue
until after the conclusion of the Company's 1997 fiscal year.
Because the attainment of the performance goals is not certain, it is not
possible to determine the benefits and amounts that will be received by any
individual participant or group of participants in the future.
The Company has also established other bonus plans for its employees. See
"Business -- Employees."
Stock Option Plans. The following general discussion of certain features
of the Company's 1994 Incentive Stock Option Plan (the "1994 Plan") and the 1996
Incentive Stock Option Plan (the "1996 Plan") is subject to and qualified in its
entirety by reference to the 1994 Plan and the 1996 Plan, copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part.
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1994 Incentive Stock Option Plan. In December 1994, the Company adopted
the 1994 Plan, which was approved by stockholders in March 1995. Under the 1994
Plan, the Company's Board of Directors, or a committee designated by the Board
of Directors, grants to managers, supervisors and professionals of the Company
(48 employees) incentive stock options ("ISOs") intended to qualify as such
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The exercise price of an ISO granted to any participant is the fair market value
at the time of the grant (110% of fair market value in the case of an ISO
granted to a 10% stockholder). ISOs granted under the 1994 Plan become
exercisable on the fifth anniversary of the date of grant or at such time and
subject to such terms and conditions as determined by the Board of Directors or
a committee designated by the Board of Directors. In no event will exercise be
permitted after ten years from the date of grant (five years, in the case of an
ISO granted to a 10% stockholder). If an option expires or terminates without
having been exercised in full, the unpurchased shares will continue to be
available for award under the 1994 Plan. An ISO may be exercised during the life
of the participant solely by the participant or the participant's duly appointed
guardian or personal representative. The total number of shares of Common Stock
available for awards under the 1994 Plan is 1,102,764 shares, subject to
adjustment for future stock splits, stock dividends and similar events. As of
September 28, 1996, there were options for 634,159 shares outstanding under the
1994 Plan, none of which were exercisable.
Awards under the 1994 Plan are determined by the Board of Directors (or a
committee designated by the Board of Directors) in its discretion. For this
reason, it is not possible to determine the benefits and amounts that will be
received by any individual participant or group of participants in the future.
1996 Incentive Stock Option Plan. In October 1996, the Company adopted and
the stockholders approved the 1996 Plan. The 1996 Plan covers all full-time
employees of SDI (approximately 260 employees as of October 28, 1996) and its
subsidiaries, including officers, department managers, supervisors, professional
staff, and hourly employees, and provides for automatic semi-annual grants of
stock options to all such employees, by position category, in the following
amounts, based upon the fair market value of the Company's Common Stock on each
semi-annual grant date, with an exercise price equal to the same fair market
value on such date (110% of fair market value in the case of 10% stockholders).
The stock options are intended to qualify as ISOs under the Code, except that to
the extent that the aggregate fair market value (determined as of the time of
the option grant) of all shares of Common Stock with respect to which ISOs are
first exercisable by an individual optionee in any calendar year (under all
plans of the Company and any parent or subsidiary) exceeds $100,000, the excess
of the options over $100,000 will be issued as nonstatutory stock options, not
qualifying as ISOs. In any fiscal year of the Company, no employee may be
granted options to purchase more than 300,000 shares of the Company's Common
Stock.
The 1996 Plan is a five year plan, which terminates December 31, 2001.
Options issued under the 1996 Plan become exercisable six months after the date
of grant and must be exercised no later than five years thereafter. The employee
must remain in the continuous employment of the Company or any of its
subsidiaries from the date of grant to and including the date of exercise.
Options are not transferable, except by will or pursuant to a qualified domestic
relations order, or as permitted under Section 422 of the Code or under
applicable Securities and Exchange Commission rules, and may be exercised,
during the optionee's lifetime, only by the optionee. No shares of Common Stock
may be issued until full payment has been made, and an optionee has no right to
any dividends or other rights of a stockholder with respect to shares subject to
an option until such time as the stock has actually been issued in the
optionee's name in accordance with the 1996 Plan. If an option expires or
terminates without having been exercised in full, the unpurchased shares will
continue to be available for award under the 1996 Plan.
The 1996 Plan is to be administered by a committee of directors appointed
by the Board from time to time and consisting of at least two members of the
Board each of whom must be both a "non-employee director," as defined in Rule
16(b)-3 promulgated under Section 16 of the Securities Exchange Act of 1934, and
an "outside director" as that term is used in Section 162 of the Code and the
regulations thereunder. Currently, in the absence of the appointment of a
committee by the Board, the Board is serving as the committee. The committee is
required to administer the 1996 Plan so as to comply at all times with Rule
16(b)-3 of the Exchange Act and Sections 162, 421, 422, and 424 of the Code.
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<PAGE> 61
The Board may amend, alter, or discontinue the 1996 Plan at any time and
from time to time. The total number of shares of Common Stock available for
award under the 1996 Plan is 1,403,000, subject to adjustment for future stock
splits, stock dividends and similar events. As of October 28, 1996, no options
had been issued under the 1996 Plan.
Set forth below is a chart summarizing the grants that will be made under
the 1996 Plan upon completion of the offerings:
1996 INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS(1)
------------------------------------------------------------------ --------------------
<S> <C>
Keith E. Busse.................................................... 5,000
President and Chief Executive Officer
Mark D. Millett................................................... 3,750
Vice President
Richard P. Teets, Jr.............................................. 3,750
Vice President
Tracy L. Shellabarger............................................. 3,750
Vice President and Chief Financial Officer
Executive Group................................................... 23,750
Non-Employee Director Group....................................... --
Non-Executive Officer Employee Group.............................. 64,531
</TABLE>
- ---------------
(1) The number of options is calculated on an assumed per share price of $16.00.
Certain Federal Income Tax Consequences of ISOs. Certain federal income
tax consequences to optionees and the Company of ISOs granted under the 1994 and
1996 Plans are set forth in the following summary.
An employee to whom an ISO is granted will not recognize income at the time
of grant or exercise of such ISO. No federal income tax deduction will be
allowable to the employee's employer upon the grant or exercise of such ISO.
However, upon the exercise of an ISO, any excess in the fair market price of the
Common Stock over the exercise price constitutes a tax preference item which may
have alternative minimum tax consequences for the employee. When the employee
sells such shares more than one year after the date of transfer of such shares
and more than two years after the date of grant of such ISO, the employee will
normally recognize a long-term capital gain or loss equal to the difference, if
any, between the sale prices of such shares and the exercise price. If the
employee does not hold such shares for the required period, when the employee
sells such shares, the employee will recognize ordinary compensation income and
possibly capital gain or loss in such amounts as are prescribed by the Code and
the regulations thereunder and the Company will generally be entitled to a
federal income deduction in the amount of such ordinary compensation issues.
Profit Sharing Plan. Steel Dynamics has also established a Profit Sharing
Plan, for eligible employees. The plan is a "qualified plan" for federal income
tax purposes. Under the Profit Sharing Plan, the Company allocates each year to
a trust fund such sum, if any, as the Board of Directors determines, up to an
amount equal to 15% of the wages paid to Profit Sharing Plan participants
("profit sharing pool"). The profit sharing pool is used to fund the Profit
Sharing Plan as well as a separate cash profit sharing bonus which is paid to
employees in March of the following year. The allocation between the Profit
Sharing Plan contribution and the cash bonus amount is determined by the Board
of Directors each year. Employees become eligible to participate in the Profit
Sharing Plan after they have completed 30 days of employment with the Company.
An employee is entitled to a Profit Sharing Plan allocation only if that
employee has worked at least 1,000 hours during the year. An employee becomes
fully vested over a period of seven years of service with the Company, subject
to prior vesting in the event of retirement, death or disability. Contributions
to the Profit Sharing Plan by Steel Dynamics are deductible by the Company and
the contributions and the income earned thereon are not taxable to an employee
until actually received by the employee at a later date.
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<PAGE> 62
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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<PAGE> 63
CERTAIN TRANSACTIONS
Since commencing commercial production of steel in January 1996, through
September 28, 1996, the Company has sold 201,500 tons of its hot bands to
Heidtman (and its affiliated companies) for $65.1 million, pursuant to a
six-year "off-take" agreement. See "Business -- The Company's Customers and
Markets." John Bates is the President and Chief Executive Officer of Heidtman
and is a member of Steel Dynamics' Board of Directors, designated by the Keylock
Investments Limited stockholder in which Heidtman and Mr. Bates own a
controlling interest, and by the Mazelina Anstalt stockholder (collectively, the
owners of 5,823,097 shares of the Company's Common Stock, or 15.2% of the total
outstanding shares prior to the offerings). Keylock Investments Limited was one
of the Company's initial investors, becoming a stockholder in September 1993.
Pursuant to the Company's off-take agreement with Heidtman, Heidtman has a
6-year obligation to purchase from the Company, and the Company is obligated to
sell to Heidtman, at least 30,000 tons of the Company's hot band products per
month. Heidtman also has priority purchase rights to the Company's secondary and
field claim material. The Company's pricing to Heidtman is determined by
reference to the lowest prices charged by other thin-slab mini-mills or
conventional mills for the same products, and the Company cannot charge Heidtman
higher prices than the lowest prices at which it offers its products to any
other customer. In addition, in 1995 the Company sold approximately 32
unimproved acres of its plant site to Heidtman for $96,000, for the construction
by Heidtman of a steel center processing and storage facility. See "Principal
and Selling Stockholders."
Pursuant to a six-year "off-take" agreement, the Company has sold 56,800
tons of its steel coil to Preussag for an aggregate of $18.5 million during the
nine months ended September 28, 1996. Under this agreement, the Company is
obligated to sell to Preussag, and Preussag is required to purchase, not less
than 12,000 tons per month of the Company's available products, for either
domestic or export use or resale, at market prices determined by reference to
the Company's price sheet and by reference to prevailing competitive market
prices charged to large customers by other mills within the Company's marketing
area. In addition, Preussag has been appointed as the Company's preferred
distributor for all export sales to customers outside the United States, Canada
and Mexico. See "Business -- The Company's Customers and Markets." Dr. Jurgen
Kolb, a director of the Company, is a member of the Executive Board of Preussag
Stahl AG and Preussag owns 6,089,865 shares of Common Stock, or 15.8% of the
total outstanding shares prior to the offerings. See "Principal and Selling
Stockholders."
Pursuant to a six-year scrap purchasing agreement with OmniSource, the
Company purchased an aggregate of 661,000 tons of steel scrap for $91.1 million
during the nine months ended September 28, 1996, and paid OmniSource a total of
$1.2 million in fees. See "Business -- Steel Scrap and Scrap Substitute
Resources." Leonard Rifkin is the Chairman of the Board and Chief Executive
Officer of OmniSource and is a member of Steel Dynamics' Board of Directors
designated by the Heavy Metal, L.C. stockholder (the owner of 6,233,926 shares
of the Company's Common Stock, or 16.2% of the total outstanding shares prior to
the offerings). Leonard Rifkin, together with members of his family, and
OmniSource collectively own a controlling interest in Heavy Metal, L.C. See
"Principal and Selling Stockholders." Heavy Metal, L.C. was one of the Company's
initial investors, becoming a stockholder in September 1993. Pursuant to the
OmniSource scrap purchasing agreement, OmniSource acts as the exclusive scrap
purchasing agent for the Company's steel scrap, which may involve sales of
OmniSource's own scrap, at the prevailing market prices which OmniSource can get
for the same product, or it may involve brokering of general market scrap, for
which the Company pays whatever is the lowest market price for which OmniSource
can purchase that product. OmniSource is paid a commission per gross ton of
scrap received by the Company at its mini-mill. In addition, OmniSource
maintains a scrap handling facility, with its own equipment and staff, on the
Company's plant site. OmniSource does not pay rent for this facility.
The Company has entered into a five-year "off-take" agreement with
Qualitech, pursuant to which the Company has agreed to purchase from Qualitech
approximately 300,000 tonnes of iron carbide that Qualitech intends to produce
commencing in 1998. See "Business -- Steel Scrap and Scrap Substitute
Resources." Steel Dynamics owns approximately 4.3% of the common stock of
Qualitech Steel Holdings, Inc. ("Holdings"), the parent company of Qualitech. In
addition, Keith E. Busse, Leonard Rifkin, and William Laverack, directors of the
Company, also serve on Holdings' 12-member board of directors. OmniSource and
Leonard
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<PAGE> 64
Rifkin, affiliates of Heavy Metal, L.C., one of the Company's stockholders, own
approximately 6% of Holdings' common stock, and Whitney Equity Partners, L.P.,
an affiliate of J.H. Whitney & Co., a stockholder of the Company (of which Mr.
Laverack is a general partner) owns approximately 10% of Holdings' common stock.
The Company's iron carbide supply contact with Qualitech represents
approximately 45% of Qualitech's estimated plant capacity, and the contract was
considered vital to Qualitech's successful financing of its iron carbide
project, which is presently under construction. OmniSource also has an iron
carbide off-take contract with Qualitech, for 120,000 tonnes of iron carbide
annually.
The Company has entered into a six year "second look" export sales
agreement with Sumitomo. See "Business -- The Company's Customers and Markets."
Sumitomo and its parent Sumitomo Corporation (Japan) own in the aggregate
1,582,620 shares of Common Stock or 4.1% of the total outstanding shares prior
to the offerings. The export sales agreement applies if Preussag declines to
handle the particular export sale. In addition, Sumitomo and IDI have entered
into a Sale of Excess Product Agreement, pursuant to which Sumitomo will
represent IDI, once it is producing DRI, in selling up to half of any of IDI's
excess DRI that is not needed by the company for its own use and consumption. No
export sales have been made to date under this agreement.
The Company's wholly owned subsidiary, IDI, has also entered into an
agreement with Sumitomo, pursuant to which IDI has agreed to sell to or through
Sumitomo up to 50% of any DRI that IDI manufactures starting in 1998 which Steel
Dynamics does not retain for its own consumption. Such sales would be at the
then prevailing market prices, either for Sumitomo's own account or on a sales
commission basis for sale to third parties. In addition, IDI has agreed to enter
into a license agreement with Sumitomo pursuant to which Sumitomo would be
authorized, on an exclusive worldwide basis, except for the United States and
Canada, and except for additional plants that IDI may wish to construct for its
own use or for SDI's use, to sublicense others or to use any proprietary
know-how or other intellectual property that constitutes the IDI Process or is
part of the IDI Project and which may be developed by IDI in connection with the
manufacture of DRI, or by Steel Dynamics either in connection with the
conversion of DRI into liquid pig iron or in connection with the use thereof in
the steelmaking process. Such license rights contemplate that Sumitomo would
build and construct plants using this technology for itself or for others within
the licensed territory. IDI would be entitled to receive a one-time license fee
from Sumitomo, based upon each plant's rated production capacity, plus a
negotiated royalty fee for the use of any IDI or SDI patents that may be
acquired by IDI or SDI in connection with the enterprise. Any underlying
royalties or fees that might have to be paid to third parties would be passed
through to Sumitomo or to its sub-licensees. IDI has also agreed to afford
Sumitomo an opportunity to provide its proposed DRI plant with its raw material
and equipment supplies, on a competitive basis that is intended to secure for
IDI the lowest and best prices for the supplies and products.
In September 1996, the Company closed two interrelated private placements
of Common Stock pursuant to agreements that were entered into during the first
and second quarters of 1996. In February 1996, the Company accepted
subscriptions from existing stockholders and others, all "accredited"
purchasers, for the purchase, at approximately $8.20 per share, of approximately
$11.9 million of Common Stock, as part of the Company's efforts to place an
aggregate of $25.0 million of Common Stock to be used in whole or in part to
finance its IDI Project. In the exercise or waiver of their limited preemptive
rights under the Stockholders Agreement existing stockholders and others, owning
collectively (prior to the purchase) an aggregate of 26,444,666 shares of the
Company's Common Stock, or 78.0% of the total then outstanding, agreed to
purchase that amount. The purchase price was determined by reference to the
arm's length Stock Purchase Agreement of December 1995 with Preussag, relating
to the purchase by Preussag of $50.0 million of Common Stock at approximately
$8.55 per share, which contained a provision that contemplated the Company's
sale to existing stockholders or to others of up to $10 million of its shares of
Common Stock at a purchase price of approximately $8.20 per share. Because of
the interrelatedness of the Company's placement of the balance of approximately
$13.0 million before the IDI Project could be undertaken, the approximately
$11.9 million private placement was not closed until September 1996, at which
time the Company also closed a $13.5 million private placement of its Common
Stock with Sumitomo and Sumitomo Corporation (Japan), which was agreed to by the
parties in April 1996, at a per share purchase price of approximately $10.51.
This
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<PAGE> 65
purchase price was determined at arm's length by the Company's Board of
Directors, in negotiations with Sumitomo.
During August and September, 1996, in connection with its Cold Mill
Project, the Company entered into two agreements with units of General Electric
Corporation, of which General Electric Capital Corporation, the owner of
5,759,738 of the Company's shares of Common Stock, or 15.0% of the total
outstanding shares prior to the offerings is a wholly-owned subsidiary, for the
purchase of equipment for the Cold Mill Project in the aggregate amount of
approximately $23.4 million. This contract was entered into as a result of a
competitive bidding process conducted by the Company in the same manner that it
has used in connection with the letting of other equipment and supply agreements
for its existing mini mill and for its Cold Mill Project.
The Company is intending to use a portion of the proceeds of the offerings
to prepay all $55.0 million principal amount of the Subordinated Notes, together
with accrued interest thereon and a prepayment premium. General Electric Capital
Corporation and Whitney Subordinated Debt Fund, L.P., which owned $15.0 million
principal amount and $18.5 million principal amount of the Subordinated Notes,
respectively, are also each stockholders of the Company, owning 15.0% and 1.4%
respectively, of the Company's shares of Common Stock prior to the offerings.
In July 1994, the Company sold Mr. Shellabarger, the Chief Financial
Officer and a director of the Company, 280,601 shares of Common Stock, and
accepted a $750,000 promissory note in partial payment of the purchase price.
Pursuant to the terms of his employment agreement, the note will be forgiven in
connection with the offerings. See "Management -- Employment Agreements."
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<PAGE> 66
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 28, 1996, and as adjusted to
reflect the sale of the Common Stock offered hereby, by (i) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director of the Company, (iii) each Named Executive Officer, (iv) each
Selling Stockholder and (v) all executive officers and directors as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of Common Stock beneficially owned
by them.
<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)...................... 6,233,926 16.2% -- 6,233,926 13.0%
Preussag Stahl AG(2)...................... 6,089,865 15.8 -- 6,089,865 12.7
Bain Capital Entities(3).................. 5,128,889 13.3 -- 5,128,889 10.7
General Electric Capital Corporation(4)... 5,759,738 15.0 -- 5,759,738 12.0
Keylock Investments Limited(5)............ 3,017,139 7.9 -- 3,017,139 6.3
Mazelina Anstalt(6)....................... 2,805,958 7.3 -- 2,805,958 5.9
J.H. Whitney & Co.(7)..................... 1,753,591 4.6 -- 1,753,591 3.7
Sumitomo Corporation of America(8)........ 812,173 2.1 135,561 676,612 1.4
Sumitomo Corporation (Japan)(9)........... 770,447 2.0 -- 770,447 1.6
Keith E. Busse(10)........................ 1,823,909 4.7 140,301 1,683,608 3.5
Richard P. Teets, Jr...................... 1,122,406 2.9 -- 1,122,406 2.3
Mark D. Millett........................... 1,063,957 2.8 -- 1,063,957 2.2
Tracy L. Shellabarger..................... 280,601 .7 -- 280,601 .6
Leonard Rifkin(11)........................ 6,233,926 16.2 -- 6,233,926 13.0
OmniSource Corporation(12)................ 6,233,926 16.2 -- 6,233,926 13.0
John C. Bates(13)......................... 3,017,139 7.9 -- 3,017,139 6.3
Heidtman Steel Products, Inc.(14)......... 3,017,139 7.9 -- 3,017,139 6.3
Paul B. Edgerley(15)...................... 5,128,889 13.3 -- 5,128,889 10.7
William D. Strittmatter(16)............... 5,759,738 15.0 -- 5,759,738 12.0
William Laverack, Jr.(17)................. 1,753,591 4.6 -- 1,753,591 3.7
Dr. Jurgen Kolb(18)....................... 6,089,865 15.8 -- 6,089,865 12.7
Steel Dynamics, L.P.(19).................. 164,180 .4 13,780 150,400 .3
Lincoln National Life Insurance Company... 119,396 .3 119,396 -- --
Lincoln National Income Fund, Inc......... 29,856 .1 29,856 -- --
LDI, Ltd. ................................ 29,856 .1 29,856 -- --
APT Holdings Corporation(20).............. 208,094 .5 -- 208,094 .4
Directors and Executive Officers
as a Group (10 persons)(13, 15-18)...... 32,274,021 83.9 140,301 32,133,720 67.0
</TABLE>
- ------------
(1) The address of this stockholder is 1650 21st Street, Santa Monica, CA
90404.
(2) The address of this stockholder is Eisenhuttenstrasse 99 D-38223, 38239
Salzgitter, Germany.
(3) The address for these stockholders is Two Copley Place, Boston, MA 02116.
Consists of 2,140,456 held of record by Bain Capital Fund IV, L.P. ("Fund
IV"), 2,449,538 held by Bain Capital Fund IV-B, L.P. ("Fund IV-B"), 412,568
held by BCIP Associates, L.P., and 126,327 held by BCIP Trust Associates,
L.P. (collectively, the "Bain Capital Entities"). If the U.S. Underwriters
exercise their over-allotment option in full, the shares beneficially owned
after the offerings by Fund IV would be 1,679,365, Fund IV-B would be
1,921,865, BCIP Associates, L.P. would be 323,694 and BCIP Trust
Associates, L.P. would be 99,113.
(4) The address of this stockholder is 1600 Summer Street, Fifth Floor,
Stamford, CT 06927.
(5) The address of this stockholder is 17 Dame Street, Dublin 2, Republic of
Ireland.
(6) The address of this stockholder is c/o Lic. for Gertrud Beck, Stadtle 36,
9490 Vaduz, Liechtenstein.
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<PAGE> 67
(7) The address of this stockholder is 177 Broad Street, Stamford, CT 06901.
Consists of 961,060 held of record by Whitney 1990 Equity Fund, L.P. (the
"Whitney Equity Fund"), 240,279 held of record by J.H. Whitney & Co., and
552,252 shares held of record by the Whitney Subordinated Debt Fund.
(8) The address of this stockholder is 2750 USX Tower, 1600 Grant Street,
Pittsburgh, PA 15219. In September 1996 Sumitomo Corporation entered into a
"second look" export distribution agreement with the Company, and in
October 1996 entered into a Sale of Excess Product Agreement with IDI. Two
representatives designated by Sumitomo Corporation serve on IDI's five
person Board of Directors. If the U.S. Underwriters exercise their
over-allotment option in full, the shares beneficially owned by Sumitomo
Corporation of America would be 513,751.
(9) The address of this stockholder is Josuika Building, 2-1-1 Hirotsubashi,
Chiyodo-ku, Tokyo, 101, Japan. Sumitomo Corporation is an affiliate of
Sumitomo Corporation of America. See footnote (8).
(10) Mr. Busse is the President and Chief Executive Officer and a director of
the Company, and is one of the Company's founders.
(11) Consists of 6,233,926 shares of Common Stock held of record by Heavy Metal,
L.C. that Mr. Rifkin may be deemed to beneficially own due to his
relationship with other beneficial owners of that entity. Mr. Rifkin is a
member of Heavy Metal, L.C., a member-managed limited liability company.
Three of Mr. Rifkin's adult sons also hold membership units, as does
OmniSource, of which Mr. Rifkin is Chairman of the Board and a director.
See "Certain Transactions." Mr. Rifkin disclaims beneficial ownership of
all but 587,018 of these shares.
(12) Consists of 6,233,926 shares of Common Stock held of record by Heavy Metal,
L.C. that OmniSource may be deemed to beneficially own due to its
relationship with Heavy Metal, L.C. OmniSource is a member of Heavy Metal,
L.C., a member-managed limited liability company. Leonard Rifkin,
OmniSource's Chairman of the Board and a director, is also a member of
Heavy Metal, L.C. OmniSource disclaims beneficial ownership of all but
1,716,439 of these shares.
(13) Consists of all 3,017,139 shares of Common Stock held of record by Keylock
Investments Limited that Mr. Bates may be deemed to beneficially own due to
his relationship with Keylock Investments Limited. Mr. Bates and Heidtman
own a controlling interest in Keylock Investments Limited.
(14) Consists of 3,017,139 shares of Common Stock held of record by Keylock
Investments Limited that Heidtman may be deemed to beneficially own due to
its relationship with Keylock Investments Limited. Heidtman and its
President, John F. Bates, own a controlling interest in Keylock Investments
Limited.
(15) Consists of all 5,128,889 shares of Common Stock held of record by the Bain
Entities that Mr. Edgerley may be deemed to beneficially own due to his
relationship with those entities. Mr. Edgerley is a Managing Director of
Bain Capital, Inc., which manages the Bain Capital Entities. Mr. Edgerley
disclaims beneficial ownership of these shares.
(16) Consists of all 5,759,738 shares of Common Stock held of record by General
Electric Capital Corporation that Mr. Strittmatter may be deemed to
beneficially own due to his relationship with that entity. Mr. Strittmatter
is a Vice President and Senior Credit Officer of General Electric Capital
Corporation. Mr. Strittmatter disclaims beneficial ownership of these
shares.
(17) Consists of all 1,753,591 shares of Common Stock held of record by the
Whitney Equity Fund, J.H. Whitney & Co., and Whitney Subordinated Debt Fund
that Mr. Laverack may be deemed to beneficially own due to his relationship
with those entities. Mr. Laverack is a general partner of J.H. Whitney &
Co., an affiliate of Whitney Equity Fund and Whitney Subordinated Debt
Fund. Mr. Laverack disclaims beneficial ownership of these shares.
(18) Consists of all 6,089,865 shares of Common Stock held of record by Preussag
that Mr. Kolb may be deemed to beneficially own due to his relationship
with that entity. Mr. Kolb is a member of the Executive Board of Preussag
Stahl AG. Mr. Kolb disclaims beneficial ownership of these shares.
(19) If the U.S. Underwriters exercise their over-allotment option in full,
Steel Dynamics, L.P. would sell its remaining shares of Common Stock.
(20) APT Holdings Corporation is an affiliate of Mellon Bank, N.A., one of the
Company's lenders and the agent under its Credit Agreement. If the U.S.
Underwriters exercise their over-allotment option in full, the shares
beneficially owned after the offerings by APT Holdings Corporation would be
149,645.
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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 "Base Rate"
for any day is defined as the greater of (A) the prime rate for such day or (B)
.50% plus the federal funds effective rate for such day. The "Euro-Rate" for any
day is defined as the rate for each funding segment determined by the Agent by
dividing the rate of interest quoted on the Reuter's screen ISDA page to be the
average of the rates per annum for deposits in dollars offered to major money
center banks in the London interbank market two business days prior to the first
day of the funding period in amounts comparable to the funding segment and with
maturities comparable to such funding period by 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate Reserve Percentage is the percentage as determined by
the Agent which is in effect on such day as prescribed by the Board of Governors
of the Federal Reserve System representing the maximum reserve requirement with
respect to eurocurrency funding of a member bank.
The Company's Credit Agreement restricts the Company's ability to incur
additional indebtedness, except (i) refinancings of indebtedness incurred under
the Credit Agreement and other existing indebtedness, (ii) licensing or royalty
fees payable to SMS Schloemann-Siemag AG and (iii) unsecured indebtedness in an
aggregate principal amount at any one time not greater than $5.0 million. In
addition, the Credit Agreement prohibits the Company from making capital
expenditures (other than specified permitted capital expenditures) in any fiscal
year in excess of the lesser of (i) $20.0 million and (ii) the sum of $12.0
million plus 25% of excess cash flow for the immediately preceding year plus 70%
of the amount of capital expenditures allowed but not made in the immediately
preceding fiscal year. The Company may make specified permitted capital
expenditures including up to $230.0 million for the Cold Mill Project, up to
$55.0 million for the Caster Project and an equity investment of up to $25.0
million for the IDI Project. The Company is also prohibited from creating liens
on its properties except (i) liens created in connection with its indebtedness
under the Credit Agreement and in connection with its existing indebtedness,
(ii) liens created and/or deposits made in the ordinary course of business for
taxes and assessments, workmen's compensation, unemployment insurance and other
social security obligations, bids, surety and appeal bonds and the like and
(iii) purchase money liens on assets acquired after completion of the Cold Mill
Project in an aggregate amounted not to exceed $5.0 million. The Credit
Agreement contains additional restrictive covenants, including among others,
covenants
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restricting the Company and its subsidiaries with respect to: investments in
additional equipment and business opportunities, entering into certain
contracts, disposition of property or assets, the payment of dividends, entering
into sale-leaseback transactions, entering into transactions with affiliates,
mergers and consolidations, the making of payments on and modification of
certain indebtedness and modification of certain agreements. In addition, the
Credit Agreement requires the Company to meet certain financial tests, including
maintaining (a) its current ratio at or above 1.3, (b) its leverage ratio at or
below 2.25 for 1996, 2.10 for 1997, 1.90 for 1998, 1.40 for 1999 and 1.00
thereafter, (c) its tangible net worth at or above the sum of (i) $45.0 million
and (ii) 50% of cumulative net income at such time and (d) its fixed charge
coverage ratio at or above 1.00 for 1996, 1.15 for 1997 and 1998, and 1.25
thereafter.
The failure of the Company to satisfy any of the covenants will constitute
an event of default under the Credit Agreement, notwithstanding the Company's
ability to meet its debt service obligations. The Credit Agreement also contains
customary events of default, including the nonpayment of principal, interest,
fees and other amounts, change of control, change of management and
cross-defaults to certain other obligations of the Company and certain events
including bankruptcy, reorganization and insolvency of the Company, SMS
Schloemann-Siemag AG, Heidtman or OmniSource.
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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 100,000,000 shares of
Common Stock, par value $.01 per share. As of October 30, 1996 there were
38,428,341 shares of Common Stock issued and outstanding, validly issued and
fully paid and non-assessable, that were held of record by 29 stockholders. As
of September 28, 1996, 634,159 shares of Common Stock were reserved for issuance
upon exercise of outstanding stock options.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders, including the
election of directors. The Articles do not provide for cumulative voting in the
election of directors and, thus, holders of a majority of the shares of Common
Stock may elect all of the directors standing for election. However, under the
Stockholders Agreement, stockholders of the Company having the power to vote in
the aggregate 79.4% of the shares of the Company's Common Stock outstanding
after the offerings, have agreed to vote their shares in the election of
directors for representatives of stockholder parties designated by them. All 10
of the Company's directors have been elected in this manner and will continue to
be so long as the Stockholders Agreement is in effect and the stockholders party
to the Stockholders Agreement hold a majority of the Company's outstanding
Common Stock. See "-- The Stockholders Agreement." Accordingly, these
stockholder parties will retain the power to elect the entire Board of Directors
of the Company.
All holders of Common Stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor. Upon the liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company that are available
after the payment of all debts and liabilities. Holders of Common Stock have no
preemptive rights or rights to convert their Common Stock into any other
securities, nor are there any redemption or sinking fund provisions applicable
to the Common Stock.
All outstanding shares of Common Stock are, and the shares to be issued in
the offerings will be, validly issued, fully paid, and non-assessable.
CERTAIN PROVISIONS OF INDIANA LAW REGARDING TAKEOVERS
As an Indiana corporation, the Company is subject to certain provisions of
Indiana law which may discourage or render more difficult an unsolicited
takeover of the Company. There are two principal statutes relating to this issue
that constitute part of the BCL, the statute regulating "business combinations"
and the statute regulating "control share acquisitions."
Under Chapter 43 of the BCL relating to "business combinations" a
corporation (with 100 or more stockholders) may not engage in any "business
combination" with any "interested" stockholder for a period of five years
following the interested stockholder's "share acquisition date" unless the
business combination or the purchase of shares made by the interested
stockholder was approved by the corporation's board of directors prior to the
interested stockholder's share acquisition date. The term "business combination"
is broadly defined to apply to any merger or consolidation of the corporation
and the interested stockholder, as well as any sale, lease, exchange, mortgage,
pledge, transfer, or other disposition (in a single or a series of transactions)
to or with the interested stockholder (or any affiliate or associate thereof) of
any assets of the corporation if the transaction represents 10% or more of the
corporation's assets, outstanding shares of stock, or consolidated net income of
the corporation. Similarly, the issuance or transfer by the corporation of any
of its (or its subsidiary's) stock that has an aggregate market value equal to
5% or more of all the outstanding shares of stock to the interested stockholder
(or any affiliate or associate thereof) is a "business combination," except if
it is in connection with the distribution of a dividend or the exercise of
warrants paid or made pro rata to all stockholders. The term is applicable as
well to the adoption of any plan of liquidation or dissolution
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proposed by or under any understanding with an interested stockholder (or an
affiliate or associate thereof), and to any reclassification of securities,
recapitalization, merger or consolidation with any subsidiary, or any other
transaction proposed by or under any arrangement with the interested stockholder
(or any affiliate or associate thereof) that has the "effect" of increasing the
proportionate interest of the interested stockholder in the corporation.
An "interested stockholder," as defined, is any person (other than the
corporation or a subsidiary) that is the beneficial owner of 10% or more of the
voting power, or an affiliate or associate of the corporation that at any time
within the five prior years was the beneficial owner of 10% or more of the
voting power. For purposes of the statute, the "share acquisition date" is the
date upon which the person first becomes an interested stockholder of a
corporation. So long as the board of directors does not approve of the business
combination with the interested stockholder, the five year "blackout" period, in
which the business combination is prohibited, applies, and the board of
directors is required to render its decision within a 30-day period (or sooner
if required by the Securities Exchange Act of 1934 (the "Exchange Act")).
In addition to the absolute five-year business combination prohibition, the
statute also requires that, any business combination between the corporation and
an interested stockholder must satisfy additional statutory conditions. The
board of directors must have approved of the business combination before the
interested stockholder's share acquisition date, or a majority of the
outstanding voting stock not beneficially owned by the interested stockholder
must have approved the business combination at a meeting held no earlier than
five years after the interested stockholder's share acquisition date, or the
business combination transaction must meet certain per share values to all
stockholders (keyed to the highest per share price paid by the interested
stockholder within the prior five-year period). All consideration must also be
paid either in cash or in the same form as the interested stockholder has used
to acquire the largest number of shares acquired by it. Furthermore, the statute
requires an interested stockholder to purchase all remaining shares of stock, if
any are purchased, not just one class or series.
Under Chapter 42 of the BCL, the "control share acquisition" statute,
"control shares" (shares that, in the election of directors, could exercise or
direct the exercise of voting power of one-fifth, one-third or a majority or
more of all of the voting power) of any "issuing public corporation" (one
hundred or more stockholders, principal office or place of business, or
substantial assets within Indiana, or 10% of its stockholders resident in
Indiana) that are acquired in a "control share acquisition" by an "acquiring
person" will be accorded only such voting rights, after the acquisition, as are
specifically conferred by the stockholders, voting as a group, excluding all
"interested shares." If a person holding "interested shares" engages in a
control share acquisition of control shares, and the stockholders have not acted
to specifically grant those acquired shares the voting rights they had prior to
the control share acquisition, the acquired shares lose their voting rights. A
majority of the shares (excluding interested shares) must be voted to confer
voting rights upon the acquiring person. The only exemption from this statute is
if the corporation's articles of incorporation or its bylaws provide that this
statute does not apply to control share acquisitions of the corporation's
shares, and such provisions must exist prior to the occurrence of any "control
share acquisition." However, the Company does not have such a provision in
either its Articles or in its Bylaws. Furthermore, if the Articles or Bylaws so
provide (and the Articles and Bylaws do not so provide at this time), control
shares acquired in a control share acquisition with respect to which the shares
have not been accorded full voting rights by the stockholders can be redeemed by
the corporation at "fair value." But if in fact the stockholders of the
corporation do vote to accord full voting rights to the acquiring person's
control shares, and if the acquiring person has acquired control with a majority
or more of the voting power, all stockholders of the issuing public corporation
are allowed to invoke dissenters' rights, providing "fair value" to them
(defined as not less than the highest price paid per share by the acquiring
person in the control share acquisition. In order to secure stockholder
approval, as required, the acquiring person must deliver an acquiring person
"statement" to the corporation, setting forth pertinent information concerning
the identity of the acquiring person, the number of shares already owned, the
range of voting power that the control share acquisition seeks, and the terms of
the proposed acquisition. Thereafter, the directors for the issuing public
corporation, within ten days, are required to call a special meeting of the
stockholders to consider the voting rights issue, and the stockholders meeting
must be held within 50 days after receipt of the statement by the issuing public
corporation. The acquiring person can
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specifically request that the special stockholders meeting not be held sooner
than thirty days after delivery of the acquiring person's statement to the
issuing public corporation. The corporation's notice of the special stockholders
meeting must be accompanied by the acquiring person's statement, as well as a
statement by the Board of Directors of the corporation concerning its position
or recommendation (or that it is taking no position or making no recommendation)
with respect to the voting rights issue in the proposed control share
acquisition.
THE STOCKHOLDERS AGREEMENT
Under the Stockholders Agreement between the Company and various
stockholder groups identified therein as the "Bain Group," "GECC" (General
Electric Capital Corporation), the "Whitney Group," "Heavy Metal" (Heavy Metal,
L.C.), the "Keylock Group," "Low Cost" (Low Cost Limited Partnership), the
"Management Group" (Messrs. Busse, Millett, Teets, and Shellabarger),
"Preussag," "Sumitomo" and members of the "Subdebt Group," the sale, assignment,
transfer, encumbrance, or other disposition of both shares owned by the
stockholder signatories (the "Stockholder Shares") are subject to certain prior
rights and obligations as between the parties, as are certain corporate actions
proposed to be taken by the Company.
Election of Directors. For a period of 10 years or until a "public float"
has been realized (defined as the date upon which 25% of the outstanding Common
Stock of the Company has been sold pursuant to effective registration statements
under the Securities Act), each holder of Stockholder Shares has agreed to vote
all of its Stockholder Shares to maintain the authorized number of directors on
the Company's Board of Directors at an agreed level (currently 10 persons) and,
further, to elect to the Board one representative designated by the holders of a
majority of the Bain Shares, one representative designated by the holders of a
majority of the GECC Shares, one representative designated by the holders of a
majority of the Heavy Metal Shares, one representative designated by the holders
of a majority of the Keylock Shares, one representative designated by the
holders of a majority of the Keith Busse Shares, one representative designated
by the holders of a majority of the Mark Millett Shares, one representative
designated by the holders of a majority of the Richard Teets Shares, one
representative designated by the holders of a majority of the Busse, Millett,
and Teets Shares, one representative designated by the holders of a majority of
the Whitney Shares, and one representative designated by the holders of a
majority of the Preussag Shares.
Transfers of Common Stock: Participation Rights. No holder of Stockholder
Shares nor any holder of Warrants is entitled to sell, transfer, assign, pledge,
or otherwise dispose of (a "Transfer") any interest in any Stockholder Shares,
except in an "exempt transfer," unless 20 days prior to making any Transfer, the
transferring holder delivers an "Offer Notice" to all other holders of
Stockholder Shares, disclosing the applicable number of securities intended to
be transferred, the price at which the Transfer is proposed to be made, and
other relevant terms and conditions. All other holders of Stockholder Shares
then have 20 days within which to purchase their respective pro rata shares of
the offered securities. These transfer restrictions are not applicable to any
Transfer to an affiliate, to any "Public Sale" (as defined), to a sale of the
Company, or a transfer between members of the same group.
Tag-Along Rights. In the event of an approved Transfer, each holder of
Stockholder Shares which did not elect to purchase its pro rata share pursuant
to someone else's Offer Notice, may, instead, elect to sell its pro rata portion
together with the holder that originated the Offer Notice, thereby cutting that
person back in the number of shares.
Sale of the Company. In the event that the Company's board of directors
approves a sale of the Company, not otherwise prohibited, each holder of
Stockholder Shares is required to consent. This undertaking, however, ceases to
apply upon the earlier to occur of a sale of the Company or the realization of a
"public float."
Other Restrictions. Unless the holders of 70% of the outstanding
Stockholder Shares consent the Company may not do such things as pay dividends,
make distributions, buy back any of its stock, issue additional debt or equity
securities, make loans or advances to anyone, make investments in excess of $5.0
million, merge or consolidate with another company, make any business
acquisition exceeding $2.0 million, make any capital expenditures exceeding $5.0
million, adopt any stock option plan, permit a sale of the
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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 First Chicago
Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales may
occur, could adversely the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities. See "Risk Factors -- Shares Eligible for Future Sale."
Upon completion of the offerings, the Company will have a total of
47,803,341 shares of Common Stock outstanding. Of these shares, the 9,843,750
shares of Common Stock sold in the offerings will be freely tradeable without
restriction under the Securities Act, except for any such shares which may be
acquired by an "affiliate" of the Company (an "Affiliate") as that term is
defined in Rule 144 under the Securities Act, which shares will be subject to
the resale limitations of Rule 144. The remaining 37,959,591 shares of Common
Stock outstanding will be "restricted securities" as the term is defined by Rule
144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed since
the later of the date the "restricted securities" were acquired from the Company
and the date they were acquired from an Affiliate, then the holder of such
restricted securities (including an Affiliate) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of the Common Stock (approximately 478,033 shares
immediately after the offerings) or the average weekly reported volume of
trading of the
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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, its directors and executive officers, the Selling
Stockholders, and certain other stockholders of the Company who in the aggregate
own substantially all of the outstanding shares of Common Stock immediately
prior to the offerings have entered into "lock-up" agreements with the
Underwriters, providing that they will not (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(provided that such shares or securities are either currently owned by such
person or are thereafter acquired from the Company) or (ii) enter into any swap
or other agreement that transfers to another, in whole or in part, any of the
economic consequences of ownership of such shares of Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, for a
period of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated, other than (i) the sale to the
Underwriters of the shares of Common Stock offered hereby or (ii) the issuance
by the Company of shares of Common Stock upon the exercise of an option sold or
granted pursuant to existing benefit plans of the Company and outstanding on the
date of this Prospectus.
The preceding description does not include shares of Common Stock issuable
upon the exercise of options granted under the Company's 1994 Plan or the 1996
Plan. Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of outstanding options may be resold by nonaffiliates
beginning 90 days after the date of this Prospectus, subject only to the
manner-of-sale provisions of Rule 144, and by affiliates beginning 90 days after
the date of this Prospectus, subject to all provisions of Rule 144 except the
two-year minimum holding period. As of October 28, 1996, the Company had
reserved an aggregate of 634,159 shares of Common Stock for issuance upon the
exercise of options granted pursuant to the 1994 Plan and no options outstanding
under the 1996 Plan. As soon as practicable after the offerings, the Company
intends to register on Form S-8 under the Securities Act approximately 2,955,764
shares of Common Stock issuable under options subject to the Company's 1994 Plan
and 1996 Plan thus permitting, subject to the lock-up agreements described
above, the resale of such shares by nonaffiliates upon issuance in the public
market without restriction under the Securities Act.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a Non-U.S. Holder. For this purpose, the term "Non-U.S. Holder" is
defined as any person who is, for United States federal income tax purposes, a
foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust, as such terms are defined in the Code. This discussion
does not address all aspects of United States federal income and estate taxes
and does not deal with foreign, state and local consequences that may be
relevant to such Non-U.S. Holders in light of their personal circumstances, or
to certain types of Non-U.S. Holders which may be subject to special treatment
under United States federal income tax laws (for example, insurance companies,
tax-exempt organizations, financial institutions and broker-dealers).
Furthermore, this discussion is based on provisions of the Code, existing and
proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly with retroactive effect. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND
NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING
OF SHARES OF COMMON STOCK.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a nonresident alien) by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). U.S. resident aliens are
subject to U.S. federal tax as if they were U.S. citizens.
DIVIDENDS
The Company does not anticipate paying cash dividends on its capital stock
in the foreseeable future. See "Dividend Policy." In the event, however, that
dividends are paid on shares of Common Stock, dividends paid to a Non-U.S.
Holder of Common Stock will be subject to withholding of United States federal
income tax at a 30% rate or such lower rate as may be provided by an applicable
income tax treaty between the United States and the country of which the
Non-U.S. Holder is a tax resident, unless (i) the dividends are effectively
connected with the conduct of a trade or business of the Non-U.S. Holder within
the United States and the Non-U.S. Holder provides the payor with proper
documentation or (ii) if a tax treaty applies, the dividends are attributable to
a U.S. permanent establishment maintained by the Non-U.S. Holder. In order to
claim the benefit of an applicable tax treaty rate, a Non-U.S. Holder may have
to file with the Company or its dividend paying agent an exemption or reduced
treaty rate certificate or letter in accordance with the terms of such treaty.
Dividends that are effectively connected with the conduct of a trade or business
within the United States or, if a tax treaty applies, are attributable to such a
United States permanent establishment, are subject to United States federal
income tax on a net income basis (that is, after allowance for applicable
deductions) at applicable graduated individual or corporate rates. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding discussed above (unless the payor has
knowledge to the contrary) and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. However, under proposed United States Treasury regulations, in
the case of dividends paid after December 31, 1997 (December 31, 1999 in the
case of dividends paid to accounts in existence on or before the date that is 60
days after the proposed United States Treasury regulations are published as
final regulations), a Non-U.S. Holder generally would be subject to United
States withholding tax at a 31% rate under the backup withholding rules
described below, rather
73
<PAGE> 76
than at a 30% rate or a reduced rate under an income tax treaty, unless certain
certification procedures (or, in the case of payments made outside the United
States with respect to an offshore account, certain documentary evidence
procedures) are complied with, directly or through an intermediary. Certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS"), provided that the required information is
furnished to the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) (a) the gain is effectively connected with a trade or
business conducted by the Non-U.S. Holder within the United States, or (b) if a
tax treaty applies, the gain is attributable to a United States permanent
establishment maintained by the Non-U.S. Holder, (ii) in the case of a Non-U.S.
Holder who is an individual and holds the Common Stock as a capital asset, such
holder is present in the United States for 183 or more days in the taxable year
of the sale or other disposition and certain other conditions are met, (iii) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to United States expatriates, or (iv) the Company is or has been a
"U.S. real property holding corporation" for United States federal income tax
purposes at any time within the shorter of the five-year period preceding such
disposition or the period such Non-U.S. Holder held the Common Stock. If the
Company were, or to become, a U.S. real property holding corporation, gains
realized upon a disposition of Common Stock by a Non-U.S. Holder which did not
directly or indirectly own more than 5% of the Common Stock during the shorter
of the periods described above generally would not be subject to United States
federal income tax so long as the Common Stock is "regularly traded" on an
established securities market. The Company believes that it has not been, is not
currently, and does not anticipate becoming, a "U.S. real property holding
corporation" for United States federal income tax purposes.
If a Non-U.S. Holder who is an individual falls under clause (i) above,
such individual generally will be taxed on the net gain derived from a sale
under regular graduated United States federal income tax rates. If an individual
Non-U.S. Holder falls under clause (ii) above, such individual generally will be
subject to a flat 30% tax on the gain derived from a sale, which may be offset
by certain United States capital losses (notwithstanding the fact that such
individual is not considered a resident alien of the United States). Thus,
individual Non-U.S. Holders who have spent (or expect to spend) more than a de
minimis period of time in the United States in the taxable year in which they
contemplate a sale of Common Stock are urged to consult their tax advisors prior
to the sale as to the U.S. tax consequences of such sale.
If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it generally will be taxed on its net gain under regular graduated United
States federal income tax rates and, in addition, will be subject to the branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual who is neither a
United States citizen nor a United States resident (as defined for United States
federal estate tax purposes) at the time of death will be included in the
individual's gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise and, therefore, may be
subject to United States federal estate tax.
74
<PAGE> 77
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under United States Treasury regulations, the Company must report annually
to the IRS and to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends. These information
reporting requirements apply even if withholding was not required because the
dividends were effectively connected with a trade or business in the United
States of the Non-U.S. Holder or withholding was reduced or eliminated by an
applicable income tax treaty. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-U.S. Holder is a resident under the provisions of
an applicable income tax treaty or agreement.
United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to (i) dividends paid to Non-U.S. Holders that are
subject to the 30% withholding discussed above (or that are not so subject
because a tax treaty applies that reduces or eliminates such 30% withholding) or
(ii) under current law, dividends paid to a Non-U.S. Holder at an address
outside of the United States. However, under proposed United States Treasury
regulations, in the case of dividends paid after December 31, 1997 (December 31,
1999 in the case of dividends paid to accounts in existence on or before the
date that is 60 days after the proposed United States Treasury regulations are
published as final regulations), a Non-U.S. Holder generally would be subject to
backup withholding at a 31% rate, unless certain certification procedures (or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures) are complied with,
directly or through an intermediary.
Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Common Stock
to beneficial owners that are not "exempt recipients" and that fail to provide
in the manner required certain identifying information.
In general, backup withholding and information reporting will not apply to
a payment of the gross proceeds of a sale of Common Stock effected at a foreign
office of a broker. If, however, such broker is, for United States federal
income tax purposes, a U.S. person, a controlled foreign corporation or a
foreign person, 50% or more of whose gross income for certain periods is derived
from activities that are effectively connected with the conduct of a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (i) such broker
has documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or (ii) the beneficial owner
otherwise establishes an exemption. Temporary United States Treasury regulations
provide that the Treasury is considering whether backup withholding should be
required in such circumstances. Under proposed United States Treasury
regulations not currently in effect, backup withholding will not apply to such
payments absent actual knowledge that the payee is a United States person. The
IRS recently proposed regulations addressing certain withholding, certification
and information reporting rules (some of which have been mentioned above) which
could affect treatment of the payment of the proceeds discussed above. Non-U.S.
Holders should consult their tax advisors regarding the application of these
rules to their particular situations, the availability of an exemption
therefrom, the procedure for obtaining such an exemption, if available, and the
possible application of the proposed United States Treasury regulations
addressing the withholding and the information reporting rules.
Payment by a United States office of a broker of the proceeds of a sale of
Common Stock is subject to both backup withholding and information reporting
unless the beneficial owner certifies under penalties of perjury that it is a
Non-U.S. Holder, or otherwise establishes an exemption. Backup withholding is
not an additional tax. Any amounts withheld under the backup withholding rules
will be allowed as a refund or a credit against such holder's U.S. federal
income tax liability provided the required information is furnished to the IRS.
75
<PAGE> 78
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date of this Prospectus (the "Underwriting Agreement"), the Company
and Selling Stockholders have agreed to sell 9,375,000 and 468,750 shares,
respectively, of the Company's Common Stock and the U.S. Underwriters named
below, for whom Morgan Stanley & Co. Incorporated, PaineWebber Incorporated,
McDonald & Company Securities, Inc. and Salomon Brothers Inc are serving as U.S.
Representatives, have severally agreed to purchase, and the International
Underwriters named below, for whom Morgan Stanley & Co. International Limited,
PaineWebber International (U.K.) Ltd., McDonald & Company Securities, Inc. and
Salomon Brothers International Limited are serving as International
Representatives, have severally agreed to purchase, the respective number of
shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated....................................
PaineWebber Incorporated.............................................
McDonald & Company Securities, Inc. .................................
Salomon Brothers Inc.................................................
---------
Subtotal............................................................. 7,875,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited...........................
PaineWebber International (U.K.) Ltd. ...............................
McDonald & Company Securities, Inc. .................................
Salomon Brothers International Limited...............................
---------
Subtotal............................................................. 1,968,750
---------
Total................................................................ 9,843,750
========
</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 any International Shares (as defined below)
for the account of any United States or Canadian Person and
76
<PAGE> 79
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any International Shares or distribute any prospectus relating to
the International Shares within the United States or Canada or to a United
States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
U.S. Underwriters and the International Underwriters under the Underwriting
Agreement are referred to herein as the U.S. Shares and the International
Shares, respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares sold shall be the Price to Public set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares of Common Stock, such dealer represents and agrees
that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such shares of Common Stock in Canada or to, or for the
benefit of, any resident of Canada in contravention of the securities laws of
Canada or any province or territory thereof and that any offer of shares of
Common Stock in Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province of Canada in which such offer
is made, and that such dealer will deliver to any other dealer to whom it sells
any of such shares of Common Stock a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (a) it has not offered
or sold and during the period of six months after the date hereof will not offer
or sell any shares of Common Stock in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations (1995) (the "Regulations"); (b) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 and the Regulations with respect to anything done by it in relation to the
shares of Common Stock offered hereby in, from or otherwise involving the United
Kingdom; and (c) it has only issued or passed on and will only issue or pass on
to any person in the United Kingdom any document received by it in connection
with the issue of the shares of Common Stock, other than any document which
consists of, or is a part of, listing particulars, supplementary listing
particulars or any other document required or permitted to be published by
listing rules under Article IV of the Financial Services Act 1986, if that
person is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996, or is a person to whom
such document may otherwise lawfully be issued or passed on.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the Price to Public set forth on the cover page
hereof and part to certain dealers at a price which represents a concession not
in excess of $ per share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Underwriters.
77
<PAGE> 80
The Underwriters have informed the Company and the Selling Stockholders
that they do not intend sales to discretionary accounts to exceed 5% of the
total number of shares of Common Stock offered by them.
Application has been made to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol STLD.
Pursuant to the Underwriting Agreement, Sumitomo Corporation of America,
Steel Dynamics, L.P., APT Holdings Corporation and the Bain Capital Entities
have granted to the U.S. Underwriters an option, exercisable for 30 days from
the date of this Prospectus, to purchase up to 1,476,562 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of shares of Common Stock offered by the U.S. Underwriters hereby.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to 492,187 shares offered hereby for
directors, officers, employees and their relatives. The number of shares of
Common Stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which are
not so purchased will be offered by the Underwriters to the general public on
the same basis as the other shares offered hereby. Reserved shares purchased by
such individuals will, except as restricted by applicable securities laws, be
available for resale following the offerings.
The Company, its executive officers and directors, the Selling
Stockholders, and certain other stockholders of the Company who in the aggregate
own substantially all of the outstanding shares of Common Stock immediately
prior to the offerings, have agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated, they will not, for a period of 180 days after
the date of this Prospectus, (a) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (provided that such shares
or securities are either currently owned by such person or are thereafter
acquired from the Company) or (b) enter into any swap or other agreement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of such shares of Common Stock, whether any such transaction described
in clause (a) or (b) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, other than (i) the sale to the
Underwriters of the shares of Common Stock offered hereby or (ii) the issuance
by the Company of shares of Common Stock upon the exercise of an option sold or
granted pursuant to existing benefit plans of the Company and outstanding on the
date of this Prospectus.
McDonald & Company Securities, Inc. ("McDonald & Company") has provided
investment banking, financial advisory and other services to the Company for
which it has received customary fees and reimbursement of its out-of-pocket
expenses. McDonald & Company and its affiliates are stockholders of the Company.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
PRICING OF OFFERINGS
Prior to the offerings, there has been no public market for the shares of
Common Stock. Consequently, the initial public offering price will be determined
by negotiation among the Company, the Selling Stockholders and the Underwriters.
Among the factors to be considered in determining the initial public offering
price will be the Company's record of operations, the Company's current
financial condition and future prospects, the experience of its management, the
economics of the industry in general, the general condition of the equity
securities market and the market prices of similar securities of companies
considered comparable to the Company and such other factors as may be deemed
relevant. There can be no assurance that a regular trading market for the shares
of Common Stock will develop after the offerings or, if developed,
78
<PAGE> 81
that a public trading market can be sustained. There can also be no assurance
that the prices at which the Common Stock will sell in the public market after
the offerings will not be lower than the price at which it is issued by the
Underwriters in the offerings.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Barrett & McNagny, Fort Wayne, Indiana. Robert S. Walters, a partner
at Barrett & McNagny, beneficially owns 2.9% of the equity units in Heavy Metal,
L.C., a stockholder of the Company. Mr. Walters disclaims beneficial ownership
of all but 1.6% of such units. Certain legal matters will be passed upon for the
Underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994 and 1995 and September 28, 1996 and for the period from September 7, 1993
(date of inception) through December 31, 1993, for each of the two years in the
period ended December 31, 1995 and for the nine-month period ended September 28,
1996, included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part and
which term shall encompass all amendments, exhibits and schedules thereto) on
Form S-1 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement certain parts of which are omitted from the
Prospectus in accordance with the rules and regulations of the Commission, and
to which reference is made. For further information about the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in its entirety by such reference.
Upon completion of the offerings, the Company will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and in accordance therewith, will be required to file reports, proxy
statements and other information with the Commission. The Registration
Statement, reports, proxy statements and other information filed by the Company
with the Commission, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.
79
<PAGE> 82
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 September 28, 1996... F-3
Consolidated Statements of Operations for the Period from September 7, 1993 (date of
inception) through December 31, 1993, for each of the two years in the period ended
December 31, 1995, for the nine-month period ended September 28, 1996 and for the
unaudited nine-month period ended September 30, 1995................................ F-4
Consolidated Statements of Stockholders' Equity for the Period from September 7, 1993
(date of inception) through December 31, 1993, for each of the two years in the
period ended December 31, 1995, and for the nine-month period ended September 28,
1996................................................................................ F-5
Consolidated Statements of Cash Flows for the Period from September 7, 1993 (date of
inception) through December 31, 1993, for each of the two years in the period ended
December 31, 1995, for the nine-month period ended September 28, 1996 and for the
unaudited nine-month period ended September 30, 1995................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 83
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Steel Dynamics, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Steel
Dynamics, Inc. and subsidiary (the "Company") as of December 31, 1994 and 1995
and September 28, 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period from September 7, 1993 (date
of inception) through December 31, 1993, for each of the two years in the period
ended December 31, 1995 and for the nine-month period ended September 28, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Steel Dynamics, Inc. and
subsidiary as of December 31, 1994 and 1995 and September 28, 1996, and the
results of their operations and their cash flows for the period from September
7, 1993 (date of inception) through December 31, 1993, for each of the two years
in the period ended December 31, 1995 and for the nine-month period ended
September 28, 1996 in conformity with generally accepted accounting principles.
Indianapolis, Indiana
October 28, 1996 (November ,1996 as to Note 11)
* * * * * *
------------------------
The accompanying consolidated financial statements reflect a 28.06 for one
stock split which is to be effected prior to the effective date of the
registration statement. The above report is in the form which will be furnished
by Deloitte & Touche LLP upon consummation of this event which is described in
Note 11 to the consolidated financial statements, and assuming that, from
October 28, 1996 to the date of such event, no events have occurred that would
affect the accompanying consolidated financial statements and notes thereto.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
October 28, 1996
F-2
<PAGE> 84
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 28,
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 28,108 $ 6,884 $ 30,564
Short-term investments.................................... 3,000
Accounts receivable, net of allowance for doubtful
accounts of $534 as of September 28, 1996.............. 125 20,225
Accounts receivable -- related parties.................... 14,842
Inventories............................................... 13,580 35,860
Other current assets...................................... 255 1,634 1,224
-------- -------- --------
Total current assets.............................. 28,363 22,223 105,715
PROPERTY, PLANT, AND EQUIPMENT, NET......................... 54,566 274,197 289,431
DEBT ISSUANCE COSTS, less accumulated amortization of $32
and $1,520 as of December 31, 1995 and September 28, 1996,
respectively.............................................. 11,140 12,211 14,265
RESTRICTED CASH............................................. 2,666 2,590
OTHER ASSETS................................................ 549 9,382 10,367
-------- -------- --------
TOTAL ASSETS...................................... $ 94,618 $ 320,679 $ 422,368
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 16,247 $ 24,478 $ 17,475
Accounts payable -- related parties....................... 3,424 14,389
Accrued interest.......................................... 29 2,660 1,929
Accrued foreign currency loss............................. 2,970 1,013 328
Other accrued expenses.................................... 887 3,078 6,906
Current maturities of long-term debt...................... 2,058 5,840
-------- -------- --------
Total current liabilities......................... 20,133 36,711 46,867
LONG-TERM DEBT, less current maturities..................... 11,949 220,996 251,865
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock voting, $.01 par value; 100,000,000
shares authorized; 28,060,145, 28,644,722 and
36,636,869 shares issued and outstanding as of December
31, 1994 and 1995 and September 28, 1996,
respectively........................................... 280 286 366
Class B common stock convertible non-voting, $.01 par
value; 500,000 shares authorized; no shares issued
Additional paid-in capital................................ 83,046 93,083 163,341
Amounts due from stockholders............................. (10,750) (469) (325)
Accumulated deficit....................................... (10,040) (29,928) (39,746)
-------- -------- --------
Total stockholders' equity........................ 62,536 62,972 123,636
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 94,618 $ 320,679 $ 422,368
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 85
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 7, 1993 ---------------------------------------
(DATE OF INCEPTION) YEAR ENDED SEPTEMBER 30, 1995
THROUGH DECEMBER 31, ------------------
DECEMBER 31, -------------------
1993 1994 1995 (UNAUDITED) SEPTEMBER 28, 1996
------------------- ------- --------- ------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Unrelated parties....... $ 137 $ 92,824
Related parties......... 81,795
--------- ---------
Total net sales...... 137 174,619
Cost of goods sold........ 3,169 158,257
------- ------- --------- --------- ---------
Gross profit (loss)....... (3,032) 16,362
Selling, general and
administrative
expenses................ $ 1,159 $ 4,192 13,580 $ 8,640 9,347
------- ------- --------- --------- ---------
Operating income (loss)... (1,159) (4,192) (16,612) (8,640) 7,015
Foreign currency gain
(loss).................. (4,952) (3,272) (2,658) 260
Interest expense.......... 2 43 564 139 18,050
Interest income........... 1 307 560 463 957
------- ------- --------- --------- ---------
Net loss.................. $(1,160) $(8,880) $ (19,888) $ (10,974) $ (9,818)
======= ======= ========= ========= =========
Net loss per share........ $ (.07) $ (.36) $ (.62) $ (.34) $ (.27)
======= ======= ========= ========= =========
Weighted average shares
outstanding............. 15,931 24,679 31,975 31,952 35,940
======= ======= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 86
STEEL DYNAMICS, INC. AND SUBSIDIARY
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........... 13,436 $134 $ 597 $ 731
Net loss..................... $ (1,160) (1,160)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1993....................... 13,436 134 597 (1,160) (429)
Issuance of shares........... 14,624 146 81,042 $(10,750) 70,438
Issuance of Class A common
stock warrants............. 1,407 1,407
Net loss..................... (8,880) (8,880)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1994....................... 28,060 280 83,046 (10,750) (10,040) 62,536
Issuance of shares........... 585 6 4,994 5,000
Issuance of Class A common
stock warrants............. 5,043 5,043
Collection of amounts due
from
Class A common
stockholders............... 10,000 10,000
Amortization of amount due
from officer............... 281 281
Net loss..................... (19,888) (19,888)
------ ------ ---------- ------------ ----------- -------------
Balances at December 31,
1995....................... 28,645 286 93,083 (469) (29,928) 62,972
Issuance of shares........... 7,992 80 70,258 70,338
Amortization of amount due
from officer............... 144 144
Net loss..................... (9,818) (9,818)
------ ------ ---------- ------------ ----------- -------------
Balances at September 28,
1996....................... 36,637 $366 $ 163,341 $ (325) $ (39,746) $ 123,636
====== ====== ======== ========= ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 87
STEEL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 7, 1993
(DATE OF INCEPTION) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER DECEMBER 31, ----------------------------
31, -------------------- SEPTEMBER 28,
1993 1994 1995 SEPTEMBER 30, 1996
------------------- -------- --------- 1995 -------------
-------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............................... $(1,160) $ (8,880) $ (19,888) $ (10,974) $ (9,818)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 13 876 450 14,208
Foreign currency loss (gain)........ 4,952 3,272 2,658 (260)
Changes in certain assets and
liabilities:
Accounts receivable............... (125) (34,942)
Inventories....................... (13,580) (1,659) (22,280)
Other assets...................... (5) (251) (788) (1,947) 410
Accounts payable.................. 29 691 6,441 (12,054) 3,962
Accrued expenses.................. 120 796 4,822 2,525 3,095
------- -------- --------- --------- ---------
Net cash used in operating
activities................... (1,016) (2,679) (18,970) (21,001) (45,625)
------- -------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment........................... (198) (43,709) (224,449) (168,054) (29,286)
Proceeds from government grants........ 2,878 21,188 14,688 1,558
Purchase of short-term investments..... (7,000)
Maturities of short-term investments... 4,000
Other.................................. (549) (1,602) (718) (985)
------- -------- --------- --------- ---------
Net cash used in investing
activities................... (198) (41,380) (204,863) (154,084) (31,713)
FINANCING ACTIVITIES:
Proceeds from vendor/customer
advances............................ 800
Repayment of vendor/customer
advances............................ (800)
Issuance of long-term debt............. 13,352 188,430 141,010 35,157
Repayments of long-term debt........... (1,079)
Issuance of common stock............... 681 70,488 15,281 10,287 70,482
Debt issuance costs.................... (150) (10,990) (1,102) (1,019) (3,542)
------- -------- --------- --------- ---------
Net cash provided by financing
activities................... 1,331 72,050 202,609 150,278 101,018
------- -------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................ 117 27,991 (21,224) (24,807) 23,680
Cash and cash equivalents at beginning of
period................................. 117 28,108 28,108 6,884
------- -------- --------- --------- ---------
Cash and cash equivalents at end of
period................................. $ 117 $ 28,108 $ 6,884 $ 3,301 $ 30,564
======= ======== ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest................. $ 2 $ 14 $ 8,000 $ 4,456 $ 18,900
======= ======== ========= ========= =========
Supplemental disclosure of noncash
information:
Electric utility transmission facility
loan and other equipment
obligation.......................... $ -- $ -- $ 24,349 $ -- $ --
======= ======== ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 88
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Interim financial information for the nine-month period ended September
30, 1995 is unaudited. The unaudited interim financial statements reflect all
adjustments, consisting of normal, recurring adjustments, which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period. Information for the interim period is not necessarily indicative
of results to be achieved for the full year.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The accompanying consolidated financial statements
include the accounts of the Company and Iron Dynamics, Inc., a wholly owned
subsidiary. All significant intercompany transactions have been eliminated. The
Company operates on a four week, four week, five week accounting cycle.
Accordingly, the Company's interim periods end on the last day of the fourth or
fifth week within the month.
Business -- The Company, formed on September 7, 1993, operates in one
industry segment and operates a thin-slab cast steel mini-mill in the Midwest,
with the capacity to produce 1.4 million tons annually of hot-rolled steel
coils. The Company's products are sold primarily to the automotive, tubing,
construction and commercial equipment industries.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Inventories -- Inventories consist of approximately 97% and 93% of raw
materials and supplies, and 3% and 7% of finished products as of December 31,
1995 and September 28, 1996, respectively. Inventories are stated at the lower
of cost (first-in, first-out method) or market.
Property, Plant, and Equipment -- Property, plant, and equipment are stated
at cost of acquisition which includes capitalized interest on
construction-in-progress of $.3 million, $10.1 million and $.1 million in 1994,
1995 and 1996, respectively. Depreciation is provided on the units-of-production
method for manufacturing plant and equipment and the straight-line method over
the estimated useful lives of the assets ranging from 12 years to 30 years for
office equipment. Repairs and maintenance are expensed as incurred. The Company
recorded the proceeds received from state government and other grants as a
reduction of the related capital cost.
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, among other things, requires entities to review long-lived assets for
impairment whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. Adoption of this standard had no effect
on the Company's financial position, results of operations or cash flows in
1996.
Stock Options -- Employee-based stock options are accounted for in
accordance with Accounting Principles Board Opinion No. 25 and related
Interpretations.
Debt Issuance Costs -- The costs related to the issuance of debt are
deferred and amortized to interest expense using a method that approximates the
effective interest method over the terms of the related debt.
Restricted Cash -- Restricted cash consists of cash held by a trustee in a
debt service fund for the repayment of principal and interest on the Company's
municipal bonds.
Revenue Recognition -- The Company records sales upon shipment and provides
an allowance for estimated costs associated with returns.
F-7
<PAGE> 89
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes -- Deferred tax assets and liabilities are computed based on
differences between the financial statement and income tax bases of assets and
liabilities using enacted income tax rates. Deferred income tax expense or
benefit is based on the change in deferred tax assets and liabilities from
period to period, subject to an ongoing assessment of realization of deferred
tax assets.
Concentrations of Credit Risk -- Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash, short-term investments and accounts receivable. The Company
places its cash with high quality financial institutions and limits the amount
of credit exposure from any one institution. Generally, the Company does not
require collateral or other security to support customer receivables.
Foreign Currency Transactions -- Transaction gains and losses incurred by
the Company for equipment purchases denominated in a foreign currency are
recorded in results of operations currently.
Net Loss Per Share -- Net loss per share is calculated by dividing net loss
by the weighted average number of shares of common stock outstanding including
the anti-dilutive effect of shares issued from September 23, 1995 through
September 23, 1996 using the treasury stock method. Common stock equivalents do
not have a dilutive effect on net loss per share.
Reclassifications -- Certain amounts in the 1994 and 1995 consolidated
financial statements have been reclassified to conform to the 1996 presentation.
2. PROPERTY, PLANT, AND EQUIPMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
-------------------- 28,
1994 1995 1996
------- -------- -----------
<S> <C> <C> <C>
Land and improvements.............................. $ 2,497 $ 5,309 $ 4,752
Buildings and improvements......................... 24,849 26,939
Plant, machinery and equipment..................... 77 242,690 244,045
Construction-in-progress........................... 52,001 1,499 25,916
------- -------- --------
54,575 274,347 301,652
Less accumulated depreciation...................... 9 150 12,221
------- -------- --------
Property, plant, and equipment, net................ $54,566 $274,197 $ 289,431
======= ======== ========
</TABLE>
F-8
<PAGE> 90
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 28,
-------------------- -------------
1994 1995 1996
------- -------- -------------
<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 8.6% and 8.0% as of December 31,
1995 and September 28, 1996, respectively)...... $115,000 $ 150,000
8.01% municipal bond, principal and interest due
monthly through 2015............................ 21,400 21,100
Electric utility, transmission facility and other
equipment obligation at interest rates ranging
from 7% to 8%, collateralized by on-site
substation and related equipment, principal and
interest due monthly or quarterly through
2015............................................ $ 1,352 37,397 36,700
11% senior subordinated promissory notes payable,
principal and interest due quarterly through
2002............................................ 10,597 49,257 49,905
------- -------- --------
Total debt........................................ 11,949 223,054 257,705
Less current maturities........................... 2,058 5,840
------- -------- --------
Long-term debt.................................... $11,949 $220,996 $ 251,865
======= ======== ========
</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 September 28, 1996 there were no amounts
outstanding under the revolving credit facility. The senior secured notes and
revolving credit facility are collateralized by substantially all assets of the
Company other than certain property, plant, and equipment securing the electric
utility loan. The Company is required to pay a commitment fee equal to a
percentage ranging from 0.125% to 0.50% annually depending upon the principal
amount of the unused borrowing capacity under the senior notes and the unused
revolving credit facility.
The credit agreement requires the Company to maintain tangible net worth of
at least $45 million plus 50% of cumulative net income, a minimum current ratio,
a maximum leverage ratio and a minimum fixed charge coverage ratio. The credit
agreement also limits indebtedness of the Company and the amount of capital
expenditures and prohibits the payment of dividends.
In 1995 the Company borrowed $21.4 million through a state government
municipal bond program, of which $2.7 million and $2.6 million as of December
31, 1995 and September 28, 1996, respectively, is held by a trustee in a debt
service reserve fund, and is recorded as restricted cash. At September 28, 1996,
a stand-by letter of credit amounting to $22.0 million relating to the municipal
bonds was outstanding.
The electric utility transmission facility loan of $7.8 million and $7.5
million at December 31, 1995 and September 28, 1996, respectively, represents
the Company's portion of the cost of the transmission facilities constructed by
the utility to service the Company's site. The amount of the debt would be
reduced if other customers of the utility access the transmission facilities.
The corresponding cost is included in other assets and is being amortized over
twenty years on the straight-line basis.
The electric utility loan of $13.0 million and $12.8 million at December
31, 1995 and September 28, 1996, respectively, represents the Company's portion
of the cost of the Company's substation constructed on-site. Interest and
principal payments are made equally on a monthly basis in an amount necessary to
repay the loan fifteen years from the date of commencement of operations.
F-9
<PAGE> 91
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The other equipment obligation represents deferred payments for the
purchase of certain equipment. The obligation is non-interest bearing and was
discounted at 7% over a term of five years.
The Company in June 1994 entered into an agreement with respect to senior
subordinated promissory notes ("Subordinated Notes") in the aggregate principal
amount of $55 million and warrants to purchase up to 1,641,827 shares of Class A
common stock (warrants for the purchase of 29,851 shares per $1 million of
Subordinated Notes) at an exercise price of $0.01 per share. In the event of
payment default on any senior secured notes or revolving credit facility, the
Company may not make any direct or indirect payment of or on account of the
principal of or interest on the Subordinated Notes until such payment default
shall have been remedied or waived or shall have ceased to exist. Subordinated
Notes in the principal amount of $55 million and warrants for the purchase of
1,641,827 shares of Class A common stock are outstanding at September 28, 1996.
The proceeds received from the issuance of the Subordinated Notes and warrants
are allocated to the Subordinated Notes and warrants based upon their estimated
fair values. The Subordinated Notes are recorded net of unamortized debt
discount of $1.4 million, $5.7 million and $5.0 million as of December 31, 1994
and 1995 and September 28, 1996, respectively. The debt discount is being
amortized as interest expense over the life of the Subordinated Notes, resulting
in an effective interest rate of 12.8%. A prepayment premium of up to 4% of the
Subordinated Notes outstanding is required in the event the Subordinated Notes
are redeemed prior to maturity. Stockholders of the Company held 71% of the
Subordinated Notes outstanding at December 31, 1994 and 1995 and September 28,
1996.
Maturities of outstanding debt as of September 28, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
--------------------------------------------------- -------
<S> <C>
1997............................................... $ 5,840
1998............................................... 47,228
1999............................................... 46,627
2000............................................... 57,863
2001............................................... 12,088
</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, for the years ended December 31, 1994 and 1995 and for the nine months
ended September 28, 1996 because of the valuation allowances recorded.
The components of deferred tax assets and liabilities are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 28,
------------------- --------------
1994 1995 1996
------- ------- --------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............. $ 69 $ 1,002 $ 16,802
Inventory, including tax over book
depreciation............................... 826 5,498
Other accrued expenses........................ 779 1,828 2,349
------- -------
Total deferred tax assets....................... 1,674 8,328 19,151
Less valuation allowance........................ (1,667) (8,009) (11,931)
------- -------
Net deferred tax assets......................... 7 319 7,220
Deferred tax liabilities:
Inventory, including tax over book
depreciation............................... (6,894)
Amortization of fees.......................... (102) (322)
Other......................................... (7) (217) (4)
------- -------
Total deferred tax liabilities.................. (7) (319) (7,220)
------- -------
Net deferred tax assets and liabilities......... $ -- $ -- $ --
======= =======
</TABLE>
F-10
<PAGE> 92
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 28, 1996, the Company has available net operating loss
carryforwards for federal income tax purposes of approximately $42.0 million.
The carryforwards expire $.2 million in 2009, $2.3 million in 2010 and $39.5
million in 2011. Because of the Company's limited operating history, a valuation
allowance for net deferred tax assets has been provided.
5. COMMON STOCK
The Company's articles of incorporation provide preemptive rights in
certain circumstances to holders of Class A common stock and warrants to
purchase common stock. The Company is currently prohibited from declaring cash
dividends on the Class A common stock under its senior credit agreement. Each
share of Class B common stock is convertible into one share of Class A common
stock at the holder's option or upon consummation of a public offering pursuant
to the Company's articles of incorporation.
Warrants to purchase 149,645 shares of Class B common stock at an exercise
price of $3 per share were issued to an affiliate of the agent bank to the
credit agreement (see Note 3) pursuant to a warrant purchase agreement in 1994.
These warrants expire on June 30, 2004. At December 31, 1994 and 1995 and
September 28, 1996, there were 149,645 Class B common stock warrants
outstanding.
An officer of the Company has an employment agreement through July 1998
which requires the officer to perform duties commensurate with his role as chief
financial officer, and provides for a $750,000 note receivable from the officer
to purchase 280,601 shares of Class A common stock. The note was recorded as a
reduction of stockholders' equity at December 31, 1994, bears interest at 10%
and will be forgiven on the earlier of the fourth anniversary of the employment
agreement or the effective date of the Company's initial public offering.
Compensation expense is being recorded ratably over the term of the note.
1994 Incentive Stock Option Plan. The Company has adopted the 1994
Incentive Stock Option Plan ("1994 Plan") for certain key employees who are
responsible for management of the Company. A total of 611,711 and 1,102,764
shares of Class A common stock have been reserved for issuance under the 1994
Plan as of December 31, 1995 and September 28, 1996, respectively. Eligible
individuals under the 1994 Plan may be granted options to purchase the Company's
Class A common stock at an exercise price per share of at least 100% of fair
market value at the date of grant. Options under the 1994 Plan vest 100% five
years after the date of grant and have a maximum term of ten years. The
following summarizes the transactions under the 1994 Plan:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
SHARES -------------------------------------
AVAILABLE NUMBER PRICE PER AGGREGATE
FOR GRANT OF SHARES SHARE PRICE
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN
THOUSANDS)
Authorized in December 1994....................... 611,711
Options granted................................... (241,317) 241,317 $ 3 $ 800
-------
---
------- ------
Balance, December 31, 1994........................ 370,394 241,317 800
Options granted................................... (272,183) 272,183 3 902
Options granted................................... (58,926) 58,927 5 290
-------
---
------- ------
Balance, December 31, 1995........................ 39,285 572,427 1,992
Options forfeited................................. 8,418 (8,418) 3 (28)
Additional shares authorized...................... 491,053
Options granted................................... (2,806) 2,806 8 24
Options granted................................... (67,344) 67,344 11 708
-------
---
------- ------
Balance, September 28, 1996....................... 468,606 634,159 $ 2,696
======= ====== ==========
</TABLE>
At September 28, 1996, no options were exercisable under the plan.
F-11
<PAGE> 93
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Incentive Stock Option Plan. The Company on October 28, 1996 adopted
the 1996 Incentive Stock Option Plan ("1996 Plan") for all employees of the
Company. A total of 1,403,000 shares of common stock has been reserved for
issuance under the 1996 Plan. Eligible employees under the 1996 Plan may be
granted options to purchase the Company's common stock at an exercise price per
share of at least 100% of fair market value at the grant of date. Options under
the 1996 Plan vest 100% six months after the date of grant and have a maximum
term of five years.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for the 1994 Plan. No
compensation cost has been recognized for the 1994 Plan because the stock option
price is equal to fair value at the grant date. Had compensation cost for the
1994 Plan been determined based on the fair value at the grant dates for awards
under the plan consistent with the method of SFAS No. 123, Accounting for
Stock-Based Compensation, the Company's net loss and net loss per share would
have increased to the pro forma amounts indicated below (in thousands, except
per share data):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Net loss
As reported............................. $(19,888) $(9,818)
Pro forma............................... (19,972) (9,872)
Net loss per share
As reported............................. $ (.62) $ (.27)
Pro forma............................... (.63) (.28)
</TABLE>
The fair value of the option grants are estimated on the date of grant
using an option pricing model with the following assumptions: no dividend yield,
risk-free interest rates of 5.7% to 7.1%, and expected lives of five to eight
years. The pro forma amounts are not representative of the effects on reported
net income (loss) for future years.
F-12
<PAGE> 94
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS
The Company has executed a raw material supply contract with OmniSource
Corporation ("OmniSource") for the purchase of steel scrap resources (see Note
8). Under the terms of the contract, OmniSource will locate and secure at the
lowest then-available market price steel scrap for the Company in grades and
quantities sufficient for the Company to meet substantially all of its
production requirements. The initial term of the contract is through October
2001. The Company retains the right to acquire scrap from other sources if
certain business conditions are present.
The Company has executed finished goods off-take contracts with Heidtman
Steel Products ("Heidtman") and Preussag Stahl, AG ("Preussag") (see Note 8).
Under the terms of the contracts, the Company retains the right to sell its
hot-rolled coils in the open market; however, the Company is required to sell
and Heidtman and Preussag are required to purchase a minimum of 30,000 and
12,000 tons, respectively, each month at the then-current market price the
Company is charging for similar products. The Company is required to provide
Heidtman and Preussag with a volume discount for all tons purchased each month
in which Heidtman and Preussag purchase the minimum tons from the Company. The
initial term of the contracts for Heidtman and Preussag are through December
2001.
The Company purchases its electricity pursuant to a contract which extends
through 2005. Under the contract the Company is subject to a monthly minimum
charge. At September 28, 1996, the Company's fixed and determinable purchase
obligations for electricity are $7.5 million annually from 1997 through 2001.
Purchases under the electricity contract were $.5 million in 1995 and $12.2
million in 1996.
The Company began construction of its cold mill in August 1996 and had
construction related commitments of $126.3 million as of September 28, 1996.
7. LEGAL PROCEEDINGS
The Company, from time to time, is subject to claims relating to the
conduct of its business. In the opinion of management any such matters presently
outstanding will not have a material adverse effect upon the Company's financial
position or future results of operations.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
The Company sells hot-rolled coils to Heidtman and affiliates of Preussag
and purchases steel scrap resources from OmniSource. Heidtman, Preussag and
OmniSource are stockholders of the Company. The Company had sales of $65.1
million and $18.5 million during the nine-months ended September 28, 1996 to
Heidtman and affiliates of Preussag, respectively. The Company as of September
28, 1996 had outstanding accounts receivable of $11.3 million and $3.5 million
from Heidtman and affiliates of Preussag, respectively. The Company had
purchases of $7.1 million and $91.1 million from OmniSource in 1995 and the
nine-months ended September 28, 1996, respectively. The Company as of December
31, 1995 and September 28, 1996 had accounts payable to OmniSource of $3.4
million and $14.4 million, respectively. During 1996, sales to Heidtman and
Preussag represented 37% and 10%, respectively, of the Company's total net
sales.
In 1995, the Company sold approximately 32 unimproved acres of its plant
site to Heidtman for $96,000, for the construction by Heidtman of a steel
processing and storage facility. In addition, the Company permits OmniSource to
maintain a scrap handling facility, with its own equipment and staff, on the
Company's plant site. OmniSource does not pay rent for this facility.
The on-site substation was purchased by the Company for approximately $12.8
million in 1995 from General Electric Corporation, the parent of General
Electric Capital Corporation, a stockholder of the Company, and has commitments
to purchase additional equipment for approximately $23 million.
F-13
<PAGE> 95
STEEL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, short-term investments, accounts receivable and accounts payable
approximated fair value as of December 31, 1994 and 1995 and September 28, 1996,
because of the relatively short maturity of these instruments. The carrying
value of long-term debt, including the current portion, approximated fair value
as of December 31, 1994 and 1995 and September 28, 1996, respectively. The fair
values of the Company's long-term debt are estimated using discounted cash flow
analyses, based on the Company's current incremental borrowing rates.
As required by the credit agreement, in August 1994 the Company entered
into an interest rate cap agreement with the agent bank whereby the maximum base
rate on fifty percent of the principal amount, up to $75 million, of the
Company's projected outstanding senior term loans during the period from June
30, 1995 through December 31, 1996 is 7.0%. The Company is exposed to credit
loss in the event of nonperformance by the counterparty to its interest rate cap
agreement. The Company anticipates that the counterparty will be able to fully
satisfy its obligation under the interest rate cap agreement. The fair value of
the interest rate cap agreement was $1.1 million at December 31, 1994 and the
interest rate cap agreement had nominal values at December 31, 1995 and
September 28, 1996. The fair value of the interest rate cap agreement was
estimated by obtaining a quote from a broker and represents the cash requirement
if the existing contract had been settled at period end. The premium paid for
the interest rate cap agreement is included in other current assets and is being
amortized to interest expense over the term of the interest rate cap agreement.
10. RETIREMENT PLANS
The Company sponsors a tax-deferred retirement savings plan for all
employees of the Company under which eligible employees may elect to contribute
on a pre-tax basis up to 8% of their eligible compensation. The Company provides
matching contributions equal to 5% of the participants' contributions to the
savings plan. Employer contributions are not significant for any periods
presented.
11. STOCK SPLIT
On October 28, 1996, the board of directors approved a 28.06 for one-stock
split which will be effected in November 1996. Per share data has been restated
to give effect to the stock split for all periods presented.
F-14
<PAGE> 96
[GRAPHIC DEPICTING PICTURES OF STEEL
DYNAMICS' STEEL MILL
[LOGO] SDI
STEEL DYNAMICS, INC.]
<PAGE> 97
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued October 31, 1996
9,843,750 Shares
Steel Dynamics, Inc.
COMMON STOCK
------------------------
OF THE 9,843,750 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 9,375,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 468,750 SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES OF COMMON STOCK
BY THE SELLING STOCKHOLDERS. OF THE 9,843,750 SHARES OF COMMON STOCK
BEING OFFERED, 1,968,750 SHARES ARE OFFERED INITIALLY OUTSIDE THE
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS AND
7,875,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES
AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." PRIOR
TO THE OFFERINGS, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT
THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $15 AND $17. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "STLD."
------------------------
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 $875,000.
(3) Certain stockholders have granted the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 1,476,562 additional Shares of Common Stock at the price to
public less underwriting discounts and commissions, for the purpose of
covering over-allotments, if any. If the U.S. Underwriters exercise such
option in full, the total price to public, underwriting discounts and
commissions, and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
------------------------
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>
<TABLE>
<S> <C>
McDONALD & COMPANY SALOMON BROTHERS INTERNATIONAL LIMITED
Inc. Securities,
</TABLE>
, 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> 98
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........................................ 50,000
Printing and engraving expenses........................................... 254,000
Blue Sky qualification fees and expenses.................................. 22,500
Legal fees and expenses................................................... 275,000
Accounting fees and expenses.............................................. 160,000
Transfer Agent and Registrar fees......................................... 25,000
Miscellaneous expenses and administrative costs........................... 6,409
--------
Total........................................................... $875,000
========
</TABLE>
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> 99
at the time parties to the proceeding). In the event that a person seeking
indemnification believes that it has not been properly provided may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. In such a proceeding, a court is empowered to grant
indemnification if it determines that the person is fairly and reasonably
entitled to indemnification in view of all of the relevant circumstances,
whether or not the person met the standard of conduct for indemnification.
The Company may purchase and maintain insurance on behalf of a director,
officer, employee, or agent of the Company, insuring that individual against
liability arising from his or her status as a director, officer, employee, or
agent, whether or not the Company would have the power to indemnify the
individual against the same liability under Article IX. Article IX does not
preclude the Company to provide indemnification in any other manner.
Reference is hereby made to Section 9 of the Underwriting Agreement between
the Company, the Selling Stockholders and the Underwriters, a form of which has
been filed as Exhibit 1.1 to this Registration Statement, for a description of
indemnification arrangements between the Company, the Selling Stockholders and
the Underwriters.
The indemnification provisions set forth in Article IX of the Amended and
Restated Articles of Incorporation, as well as the authority vested in the Board
of Directors by Chapter 37 of the BCL to grant indemnification beyond that which
is described in Article IX, may be sufficiently broad to provide indemnification
of the Registrant's directors and officers for liabilities arising under the
Securities Act.
ITEM 15 RECENT SALES OF UNREGISTERED SECURITIES
From the Registrant's inception in September 1993 through September 28,
1996, the Registrant has issued and sold the following securities (without
giving effect to the 28.06:1 stock split of the Registrant's Common Stock):
1. At the time of incorporation in September 1993, more than three
years ago, Registrant issued and sold an aggregate of 150,000 shares of
Common Stock to its founding stockholders Keith E. Busse, Mark D. Millett,
and Richard P. Teets, Jr., at a purchase price of $0.30 per share, for an
aggregate purchase price of $45,000, pursuant to restricted stock purchase
agreements.
2. In September 1993, more than three years ago, Registrant issued and
sold an aggregate of 20,000 shares of Common Stock to Steelink Co., of
which Peter Brickfield, Esq., a consultant and advisor to the Company, is a
partner, at a purchase price of $0.30 per share, for an aggregate purchase
price of $6,000, pursuant to a restricted stock purchase agreement.
3. In September 1993, more than three years ago, Registrant issued and
sold an aggregate of 308,820 shares of Common Stock to "seed money"
accredited investors, at a purchase price of $2.20 per share, for an
aggregate purchase price of $680,000. Heavy Metal, L.C. purchased $340,000,
Keylock Investments Limited purchased $170,850, and Mazelina Anstalt
purchased $169,150 (the latter two aggregating $340,000, the same as Heavy
Metal, L.C.). All three were sophisticated, accredited investors. There was
no formal stock purchase agreement for this initial transaction.
4. On June 30, 1994, Registrant issued and sold an aggregate of
511,180 shares of Common Stock to accredited financial investors, for a
total of $55,379,792. The purchasers consisted of Bain Capital Fund IV,
L.P., Bain Capital Fund IV-B, L.P., BCIP Associates (Bain), and BCIP Trust
Associates, L.P. (Bain), which together purchased 180,599 shares for
$19,906,948, for a per share purchase price of $110.22; General Electric
Capital Corporation, which purchased 180,610 shares for $19,906,948, for
the same per share purchase price of $110.22 as Bain; J.H. Whitney & Co.,
which purchased 7,258 shares for $800,000 and Whitney 1990 Equity Fund,
L.P., which purchased 29,033 shares for $3,200,000, for a per share
purchase price of $110.22; Low Cost Limited Partnership, which purchased
5,000 shares for which it paid $551,104, a per share purchase price of the
same $110.22; and Klans Associates, which purchased 907 shares for
$100,000, for a per share purchase price of $110.25. In addition, Heavy
Metal, L.C. purchased 61,170 shares for $6,742,157, for a per share
purchase price of $90.61 and Keylock
II-2
<PAGE> 100
Investments Limited and Mazelina Anstalt purchased 46,590 shares, for which
it paid $4,172,135, for a per share purchase price of $89.55. In total,
511,180 shares were purchased for $55,379,792, for a per share average
purchase price of $108.34.
5. On June 30, 1994, Registrant issued and sold $55,000,000 aggregate
principal amount of senior subordinated promissory notes and warrants to
purchase up to 58,511 shares of Common Stock at an exercise price of $.01
per share to Whitney Subordinated Debt Fund, General Electric Capital
Corporation, Sumitomo Corporation of America, Steel Dynamics, L.P., Lincoln
National Life Insurance Company, Lincoln National Income Fund, Inc. and
LDI, Ltd. for an aggregate purchase price of $55,000,000.
6. In connection with the Credit Agreement, on June 30, 1994.
Registrant issued warrants to purchase 5,333 shares of Common Stock at an
exercise price of $75 per share to APT Holdings Corporation.
7. On July 26, 1994, pursuant to an Employment Agreement of even date
entered into between the Company and Tracy L. Shellabarger, the Company
sold 10,000 of its shares of Common Stock to Mr. Shellabarger for a
purchase price of $75.01 per share, for an aggregate purchase price of
$750,100. Mr. Shellabarger paid cash of $100 and executed a promissory note
for $750,000, with interest only payable at 7% percent per annum. Pursuant
to the terms of the Employment Agreement, the principal amount of the
promissory note will be forgiven concurrently with the effectiveness of the
Registration Statement in connection with the offerings.
8. On December 14, 1995 and March 11 and April 22, 1996, Registrant
issued and sold an aggregate of 208,333 shares of Common Stock to Preussag
Stahl, AG, a German steelmaker, and an accredited investor, at a purchase
price of $240.00 per share, for an aggregate purchase price of $50 million,
pursuant to a restricted stock purchase agreement.
9. On September 10, 1996, pursuant to subscriptions made in December
1995 (and accepted by the Company in February 1996), the Company issued and
sold an aggregate of 51,558 shares of Common Stock to existing stockholders
or their affiliates, pursuant to exercise of their limited pre-emptive
rights under the Stockholders Agreement, at a purchase price of $230.00 per
share, for an aggregate purchase price of $11,858,400; and, as part of the
same equity financing, issued and sold to Sumitomo Corporation (Japan) and
Sumitomo Corporation of America, an accredited investor, pursuant to a
commitment entered into in April 1996, an aggregate of 45,763 shares of
Common Stock, at a purchase price of $295.00 per share, for an aggregate
purchase price of $13,500,085, pursuant to a stock purchase agreement.
10. On October 1996, all of the outstanding warrants were converted
into 63,844 shares of Common Stock for an aggregate price of $400,585.
The issuances described in this Item 15 were deemed exempt from
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance upon Section 4(2) of the Act as transactions by an issuer not involving
any public offering. In addition, the recipients of securities in each such
transaction were accredited investors, mostly institutional investors, and each
represented its intentions to acquire the securities for investment only and not
with a view to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the stock certificates issued in each such
transaction. All recipients had adequate access, through their relationships
with the Registrant, to information about the Registrant.
II-3
<PAGE> 101
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.
3.1 Amended and Restated Articles of Incorporation of Steel Dynamics, Inc.
3.2 Bylaws of Steel Dynamics, Inc.
5.1 Legal Opinion of Barrett & McNagny.
10.1a Amended and Restated Credit Agreement between Steel Dynamics, Inc. and Mellon
Bank, N.A., et al. (including Amendments Nos. 1 through 5 thereto).
10.1b* Amendment No. 5 to Credit Agreement.
10.1c* Amendment No. 6 to Credit Agreement.
10.1d* Amendment No. 7 to Credit Agreement.
10.2* Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc. re Taxable Economic Development Revenue Bonds. Trust Indenture
between Indiana Development Finance Authority and NBD Bank, N.A., as Trustee
re Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc.
10.3 Contract for Electric Service between Steel Dynamics, Inc. and Indiana
Michigan Power Company.
+10.4* Industrial Gases Supply Agreement between Steel Dynamics, Inc. and Air
Products and Chemicals, Inc. dated August 5, 1994.
10.5 Interruptible Gas Supply Contract between Steel Dynamics, Inc. and Northern
Indiana Trading Co. dated February 27, 1995.
10.6* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana Fuel
& Light Company, Inc. dated April 3, 1995.
10.7* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Trading Co. dated April 3, 1995.
10.8* Gas Services Agreement between Steel Dynamics, Inc. and Crossroads Pipeline
Company dated April 3, 1995.
10.9 Panhandle Eastern Pipeline Agreement dated July 22, 1996.
10.10 Natural Gas Purchase Agreement between Steel Dynamics, Inc. and PanEnergy
Trading and Market Services, Inc. dated August 8, 1996.
10.11 Agreement for Wastewater Services between the City of Butler, Indiana and
Steel Dynamics, Inc. dated September 5, 1995.
10.12 Slag Processing Agreement between Steel Dynamics, Inc. and Butler Mill Service
Company dated February 3, 1995.
+10.13* Agreement to Provide Scrap Purchasing Services between Steel Dynamics, Inc.
and OmniSource Corporation dated October 29, 1993.
10.14 Purchasing Agreement between Steel Dynamics, Inc. and Heidtman Steel Products,
Inc. dated October 29, 1993.
+10.15* Iron Carbide Off Take Agreement between Steel Dynamics, Inc. and Qualitech
Steel Corporation dated June 29, 1996.
10.16 Purchasing, Domestic Sales and Export Distribution Agreement between Steel
Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.
10.17 Reciprocal Patent and Technical Information Transfer and License Agreement
between Steel Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.
</TABLE>
II-4
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ ------------------------------------------------------------------------------
<C> <S>
10.18* 1994 Incentive Stock Option Agreement, as amended.
10.19** 1996 Incentive Stock Option Agreement.
10.20* Employment Agreement between Steel Dynamics, Inc. and Keith Busse.
10.21* Employment Agreement between Steel Dynamics, Inc. and Mark D. Millett.
10.22* Employment Agreement between Steel Dynamics, Inc. and Richard P. Teets, Jr.
10.23** 1996 Officer and Manager Cash and Stock Bonus Plan
10.24 Employment Agreement between Steel Dynamics, Inc. and Tracy L. Shellabarger.
Tracy L. Shellabarger Promissory Note and Stock Pledge Agreement.
10.25* "Second Look" Export Distribution Agreement between Steel Dynamics, Inc. and
Sumitomo Corporation of America.
10.26* Sale of Excess Product Agreement between Iron Dynamics, Inc. and Sumitomo
Corporation of America.
10.27 Stockholders Agreement dated June 30, 1994.
10.28 Amendment No. 1 to Stockholders Agreement.
10.29 Amendment No. 2 to Stockholders Agreement.
10.30 Amendment No. 3 to Stockholders Agreement.
10.31 Registration Agreement dated June 30, 1994.
10.32 Amendment No. 1 to Registration Agreement.
10.33 Amendment No. 2 to Registration Agreement.
10.34 Amendment No. 3 to Registration Agreement.
10.35* Stock Purchase Agreement with Preussag Stahl AG dated December 14, 1995.
10.36* Stock Purchase Agreement with Sumitomo Corporation of America and Sumitomo
Corporation dated September 10, 1995.
10.37* Stock Purchase Agreement with Bain Capital, General Electric Capital
Corporation, Heavy Metal, L.C., Keylock Investments Limited, Mesalina Anstalt,
et. al, dated June 30, 1994.
11.1* Computation of Net Loss Per Share.
21.1* List of the Registrant's Subsidiaries.
23.1 Consent of Barrett & McNagny (included in Exhibit 5.1).
23.2* Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included in signature pages).
27.1* Financial Data Schedule.
</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.
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules:
All schedules are omitted because they are either not applicable or the
required information is included in the consolidated financial statements or
notes thereto.
II-5
<PAGE> 103
ITEM 17 UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the BCL, the Registrant's Amended and Restated Articles of
Incorporation, or any other provision, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
such action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(b) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-6
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Butler,
Indiana, on this 31st day of October, 1996.
STEEL DYNAMICS, INC.
By: /s/ KEITH E. BUSSE
------------------------------------
KEITH E. BUSSE
President and Chief Executive
Officer
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>
* President & Chief Executive Officer October 31, 1996
- ----------------------------------- and Director
Keith E. Busse (Principal Executive Officer)
* Vice President & Chief Financial October 31, 1996
- ----------------------------------- Officer and Director
Tracy L. Shellabarger (Principal Financial and Accounting
Officer)
* Vice President of Melting and Casting October 31, 1996
- ----------------------------------- and Director
Mark D. Millett
* Vice President of Rolling and October 31, 1996
- ----------------------------------- Finishing and Director
Richard P. Teets, Jr.
* Director October 31, 1996
- -----------------------------------
Paul B. Edgerley
* Director October 31, 1996
- -----------------------------------
William D. Strittmatter
* Director October 31, 1996
- -----------------------------------
Leonard Rifkin
* Director October 31, 1996
- -----------------------------------
John C. Bates
* Director October 31, 1996
- -----------------------------------
William Laverack, Jr.
* Director October 31, 1996
- -----------------------------------
Jurgen Kolb
*By /s/ Tracy L. Shellabarger
- -----------------------------------
Tracy L. Shellabarger
Attorney-In-Fact
</TABLE>
II-7
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ------------ ------------------------------------------------------------------------- ----
<C> <S> <C>
1.1* Form of Underwriting Agreement...........................................
3.1 Amended and Restated Articles of Incorporation of Steel Dynamics, Inc....
3.2 Bylaws of Steel Dynamics, Inc............................................
5.1 Legal Opinion of Barrett & McNagny.......................................
10.1a Amended and Restated Credit Agreement between Steel Dynamics, Inc. and
Mellon Bank, N.A., et al. (including Amendments Nos. 1 through 5
thereto).................................................................
10.1b* Amendment No. 5 to Credit Agreement......................................
10.1c* Amendment No. 6 to Credit Agreement......................................
10.1d* Amendment No. 7 to Credit Agreement......................................
10.2* Loan Agreement between Indiana Development Finance Authority and Steel
Dynamics, Inc. re Taxable Economic Development Revenue Bonds. Trust
Indenture between Indiana Development Finance Authority and NBD Bank,
N.A., as Trustee re Loan Agreement between Indiana Development Finance
Authority and Steel Dynamics, Inc........................................
10.3 Contract for Electric Service between Steel Dynamics, Inc. and Indiana
Michigan Power Company...................................................
+10.4* Industrial Gases Supply Agreement between Steel Dynamics, Inc. and Air
Products and Chemicals, Inc. dated August 5, 1994........................
10.5 Interruptible Gas Supply Contract between Steel Dynamics, Inc. and
Northern Indiana Trading Co. dated February 27, 1995
10.6* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Fuel & Light Company, Inc. dated April 3, 1995...........................
10.7* Gas Services Agreement between Steel Dynamics, Inc. and Northern Indiana
Trading Co. dated April 3, 1995..........................................
10.8* Gas Services Agreement between Steel Dynamics, Inc. and Crossroads
Pipeline Company dated April 3, 1995.....................................
10.9 Panhandle Eastern Pipeline Agreement dated July 22, 1996.................
10.10 Natural Gas Purchase Agreement between Steel Dynamics, Inc. and PanEnergy
Trading and Market Services, Inc. dated August 8, 1996...................
10.11 Agreement for Wastewater Services between the City of Butler, Indiana and
Steel Dynamics, Inc. dated September 5, 1995.............................
10.12 Slag Processing Agreement between Steel Dynamics, Inc. and Butler Mill
Service Company dated February 3, 1995...................................
+10.13* Agreement to Provide Scrap Purchasing Services between Steel Dynamics,
Inc. and OmniSource Corporation dated October 29, 1993...................
10.14 Purchasing Agreement between Steel Dynamics, Inc. and Heidtman Steel
Products, Inc. dated October 29, 1993....................................
+10.15* Iron Carbide Off Take Agreement between Steel Dynamics, Inc. and
Qualitech Steel Corporation dated June 29, 1996..........................
10.16 Purchasing, Domestic Sales and Export Distribution Agreement between
Steel Dynamics, Inc. and Preussag Stahl AG dated December 14, 1995.......
10.17 Reciprocal Patent and Technical Information Transfer and License
Agreement between Steel Dynamics, Inc. and Preussag Stahl AG dated
December 14, 1995........................................................
</TABLE>
<PAGE> 106
<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 and Manager Cash and Stock Bonus Plan.......................
10.24 Employment Agreement between Steel Dynamics, Inc. and Tracy L.
Shellabarger. Tracy L. Shellabarger Promissory Note and Stock Pledge
Agreement................................................................
10.25* "Second Look" Export Distribution Agreement between Steel Dynamics, Inc.
and Sumitomo Corporation of America......................................
10.26* Sale of Excess Product Agreement between Iron Dynamics, Inc. and Sumitomo
Corporation of America...................................................
10.27 Stockholders Agreement dated June 30, 1994...............................
10.28 Amendment No. 1 to Stockholders Agreement................................
10.29 Amendment No. 2 to Stockholders Agreement................................
10.30 Amendment No. 3 to Stockholders Agreement................................
10.31 Registration Agreement dated June 30, 1994...............................
10.32 Amendment No. 1 to Registration Agreement................................
10.33 Amendment No. 2 to Registration Agreement................................
10.34 Amendment No. 3 to Registration Agreement................................
10.35* Stock Purchase Agreement with Preussag Stahl AG dated December 14,
1995.....................................................................
10.36* Stock Purchase Agreement with Sumitomo Corporation of America and
Sumitomo Corporation dated September 10, 1995............................
10.37* Stock Purchase Agreement with Bain Capital, General Electric Capital
Corporation, Heavy Metal, L.C., Keylock Investments Limited, Mesalina
Anstalt, et.al. dated June 30, 1994......................................
11.1* Computation of Net Loss Per Share........................................
21.1* List of the Registrant's Subsidiaries....................................
23.1 Consent of Barrett & McNagny (included in Exhibit 5.1)...................
23.2* Consent of Deloitte & Touche LLP.........................................
24.1 Power of Attorney (included in signature pages)..........................
27.1* Financial Data Schedule..................................................
</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.
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 1.1
S&S DRAFT; 10/28/96
[______________] Shares
STEEL DYNAMICS, INC.
Common Stock (par value $.01 per share)
UNDERWRITING AGREEMENT
___________, 1996
<PAGE> 2
_____________, 1996
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs:
Steel Dynamics, Inc., an Indiana corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedules I and
II hereto (the "Underwriters"), and certain shareholders of the Company (the
"Selling Shareholders") named in Schedule III hereto severally propose to sell
to the several Underwriters, an aggregate of [________] shares of the Common
Stock (par value $.01 per share) of the Company (the "Firm Shares") of which
[_________] shares are to be issued and sold by the Company (the "Company
Shares") and [_________] shares are to be sold by the Selling Shareholders, each
Selling Shareholder selling the amount set forth opposite such Selling
Shareholder's name in Schedule III hereto. The Company and the Selling
Shareholders are hereinafter collectively referred to as the "Sellers".
It is understood that, subject to the conditions hereinafter
stated, [___________] Firm Shares (the "U.S. Firm Shares") will be sold to the
several U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and [_________] Firm Shares (the
<PAGE> 3
2
"International Shares") will be sold to the several International Underwriters
named in Schedule II hereto (the "International Underwriters") in connection
with the offering and sale of such International Shares outside the United
States and Canada to persons other than United States and Canadian Persons.
Morgan Stanley & Co. Incorporated, PaineWebber Incorporated, McDonald & Company
Securities, Inc. and Salomon Brothers Inc shall act as representatives (the
"U.S. Representatives") of the several U.S. Underwriters, and Morgan Stanley &
Co. International Limited, PaineWebber International (U.K.) Ltd., McDonald &
Company Securities, Inc. and Salomon Brothers International Limited shall act as
representatives (the "International Representatives") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the "Underwriters".
The Company and the Selling Shareholders also severally
propose to issue and sell to the several U.S. Underwriters not more than an
additional aggregate of [_________] shares of its Common Stock (par value $.01
per share) (the "Additional Shares") if and to the extent that the U.S.
Representatives shall have determined to exercise, on behalf of the U.S.
Underwriters, the right to purchase such shares of Common Stock granted to the
U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "Shares". The shares of Common
Stock (par value $.01 per share) of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"Common Stock".
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement relating to the Shares.
The registration statement contains two prospectuses to be used in connection
with the offering and sale of the Shares: the U.S. prospectus, to be used in
connection with the offering and sale of Shares in the United States and Canada
to United States and Canadian Persons, and the international prospectus, to be
used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective, including the exhibits thereto and the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Securities Act of 1933, as amended (the
"Securities Act"), is hereinafter referred to as the "Original Registration
Statement"; any registration statement filed pursuant to Rule 462(b) under the
Securities Act is hereinafter referred to as the "Rule 462(b) Registration
Statement"; the Original Registration Statement and any Rule 462(b) Registration
Statement are hereinafter referred to collectively as the "Registration
Statement"; the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares are hereinafter
collectively referred to as the "Prospectus".
<PAGE> 4
3
The Underwriters agree to reserve a maximum of [________] Firm
Shares for the offering and sale to certain employees of the Company (and to
certain other persons designated by the Company) at the Purchase Price (as
defined below). Any such shares not purchased by such persons by the end of the
first business day after the date of this Agreement will be offered to the
public by the Underwriters as set forth in the Prospectus
1. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:
(a) The Original Registration Statement has become effective,
and if the Company has elected to rely upon Rule 462(b) under the
Securities Act, the Rule 462(b) Registration Statement shall have
become effective not later than the earlier of (i) 10:00 p.m. Eastern
time on the date hereof and (ii) the time confirmations are sent or
given, as specified by Rule 462(b) under the Securities Act; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) The Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (ii) each part of the
Registration Statement, when such part became effective, did not
contain and each such part, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (iii) the Prospectus
does not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this Section 1(b)
do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
<PAGE> 5
4
(d) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(e) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(f) The shares of Common Stock (including the Shares to be
sold by the Selling Shareholders) outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
(g) The Company Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance
of such Shares will not be subject to any preemptive or similar rights.
(h) This Agreement and each of the Irrevocable Power of
Attorney and Custody Agreements (collectively, the "Power of Attorney
and Custody Agreements"), each dated the date hereof, by each Selling
Shareholder and the Company as Custodian (the "Custodian"), appointing
certain individuals as the Selling Shareholders' attorneys-in-fact to
the extent set forth therein relating to the transactions contemplated
hereby and by the Registration Statement have been duly authorized,
executed and delivered by the Company.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement and
the Power of Attorney and Custody Agreements, and the issuance and
delivery of the Company Shares will not contravene any provision of
applicable law or the articles of incorporation or by-laws of the
Company or any agreement or other instrument binding upon the Company
or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company
or any subsidiary, and no consent, approval, authorization or order of
or qualification with any governmental body or agency is required for
the performance by the Company of its obligations under this Agreement,
except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the Shares.
<PAGE> 6
5
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(l) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct
its business in the manner described in the Prospectus, except to the
extent that the failure to obtain such consents, authorizations,
approvals, orders, certificates and permits or make such declarations
and filings would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such consent, authorization,
approval, order, certificate or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, except as described
in or contemplated by the Prospectus.
(m) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act or
incorporated by reference into or filed as part of the Rule 462(b)
Registration Statement, complied when so filed in all material respects
with the Securities Act and the rules and regulations of the Commission
thereunder.
(n) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
<PAGE> 7
6
(o) The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(p) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the
Company and its subsidiaries have not incurred any material liability
or obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (2) the Company has
not purchased any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on its
capital stock; and (3) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and its
consolidated subsidiaries, except in each case as described in or
contemplated by the Prospectus.
(r) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and
clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not
<PAGE> 8
7
interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries, in each case except
as described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business
now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(t) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in or
contemplated by the Prospectus, or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(u) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole,
except as described in or contemplated by the Prospectus.
(v) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (3) access to assets is permitted only
in accordance with management's
<PAGE> 9
8
general or specific authorization; and (4) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(w) There are no holders of securities (debt or equity) of the
Company or any of its subsidiaries, or holders of rights, options, or
warrants to obtain securities of the Company or any of its
subsidiaries, who have the right, during the 180 day period after the
date of this Agreement to require the Company to register securities
held by them under the Securities Act, other than holders who have
waived such right for the 180 day period after the date of the initial
public offering of the Shares and have waived their rights with respect
to the inclusion of their securities in the Registration Statement.
(x) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida), relating
to doing business with the Government of Cuba or with any person or
affiliate located in Cuba.
(y) The Company has obtained the necessary waivers from (i)
the holders of the Company's 11% Senior Subordinated Promissory Notes
due September 30, 2002 (the "Subordinated Notes") to prepay such
Subordinated Notes as described in the "Use of Proceeds" section of the
Prospectus and (ii) the lenders under the Company's Credit Agreement
dated as of June 30, 1994 and as amended as of March 4, 1996.
2. Representations and Warranties of the Selling Shareholders.
Each of the Selling Shareholders severally and not jointly represents and
warrants to and agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations
under, this Agreement and its Power of Attorney and Custody Agreement
will not contravene any provision of applicable law, or the certificate
of incorporation or by-laws of such Selling Shareholder (if such
Selling Shareholder is a corporation), or the trust agreement (if such
Selling Shareholder is a trust) or any agreement or other instrument
binding upon such Selling Shareholder or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement or the Power of Attorney and Custody Agreement of
<PAGE> 10
9
such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares.
(c) Such Selling Shareholder has, and on the Closing Date (as
defined below) will have, valid and marketable title to the Shares to
be sold by such Selling Shareholder and the legal right and power, and
all required authorizations and approvals to enter into this Agreement
and its Power of Attorney and Custody Agreement and to sell, transfer
and deliver the Shares to be sold by such Selling Shareholder.
(d) The Shares to be sold by such Selling Shareholder pursuant
to this Agreement have been duly authorized and are validly issued,
fully paid and non-assessable.
(e) The Power of Attorney and Custody Agreement of such
Selling Shareholder has been duly authorized, executed and delivered by
such Selling Shareholder and is a valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms, except
as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
the availability of equitable remedies may be limited by equitable
principles of general applicability.
(f) Delivery of the Shares to be sold by such Selling
Shareholder pursuant to this Agreement will pass valid and marketable
title to such Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(g) All information furnished to the Company by or on behalf
of such Selling Shareholder expressly for use in the Registration
Statement and Prospectus is, and on the Closing Date (as defined below)
will be, true, correct and complete, and does not, and on the Closing
Date will not, contain any untrue statement of material fact or omit to
state any material fact necessary to make such information not
misleading.
(h) (i) The Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (ii) each part of the
Registration Statement, when such part became effective, did not
contain and each such part, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (iii) the Prospectus
does not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a
material fact
<PAGE> 11
10
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2(h) do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(i) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Common Stock (provided that such
Selling Shareholder does not make any representation as to any actions
that may be taken by any Underwriter); and such Selling Shareholder has
not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the
Shares other than any preliminary prospectus filed with the Commission
or the Prospectus or other material permitted by the Securities Act.
(j) Such Selling Shareholder has no direct or indirect
association or affiliation with any National Association of Securities
Dealers, Inc. ("NASD") members and has had no arrangements, dealings or
affiliation with, and is not aware of any information relating to
underwriting compensation payable to or for the benefit of, any NASD
member, person associated with a member or any Underwriter, relating to
the offering of Shares that has not been disclosed in the Registration
Statement.
3. Agreements to Sell and Purchase. Each Seller, severally and
not jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at U.S.$[______] a share (the
"Purchase Price") the number of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the number of Firm Shares to be sold by such Seller as the number of Firm
Shares set forth in Schedules I and II hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Sellers,
severally and not jointly, agree to sell to the U.S. Underwriters the Additional
Shares, and the U.S. Underwriters shall have a one-time right to purchase,
severally and not jointly, up to [_________] Additional Shares at the Purchase
Price. If you, on behalf of the U.S. Underwriters, elect to exercise such
option, you shall so notify the Sellers in writing not later than 30 days after
the date of this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the U.S. Underwriters and the date on which such
shares are to be purchased. Such date
<PAGE> 12
11
may be the same as the Closing Date (as defined below) but not earlier than the
Closing Date nor later than ten business days after the date of such notice.
Additional Shares may be purchased as provided in Section 5 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each U.S.
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
the U.S. Representatives may determine) that bears the same proportion to the
total number of Additional Shares to be purchased as the number of U.S. Firm
Shares set forth in Schedule I hereto opposite the name of such U.S. Underwriter
bears to the total number of U.S. Firm Shares.
Each Seller hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated ("Morgan Stanley"), it will not,
for a period of 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (provided that such shares or securities are either now owned by
such Seller or are hereafter acquired from the Company), or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of such shares of Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, other
than (a) the sale of the Shares to the Underwriters pursuant to this Agreement
or (b) the issuance by the Company of shares of Common Stock upon the exercise
of an option or warrant or the conversion of a security outstanding on the date
hereof of which the Underwriters have been advised in writing.
In addition, each Selling Shareholder agrees that, without the
prior written consent of Morgan Stanley on behalf of the Underwriters, it will
not, for a period of 180 days after the date of the Prospectus, make any demand
for or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable for
Common Stock.
4. Terms of Public Offering. The Sellers are advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Original Registration Statement and
this Agreement have become effective as in your judgment is advisable. The
Sellers are further advised by you that the Shares are to be offered to the
public initially at U.S.$[____] a share (the "Public Offering Price") and to
certain dealers selected by you at a price that represents a concession not in
excess of U.S.$[____] a share under the Public Offering Price, and that any
Underwriter may allow, and such dealers may reallow, a concession, not in excess
of U.S.$[____] a share, to any Underwriter or to certain other dealers.
<PAGE> 13
12
Each U.S. Underwriter hereby makes to and with the Company and
each Selling Shareholder the representations and agreements of such U.S.
Underwriter contained in the fifth and sixth paragraphs of Article III of the
Agreement Between U.S. and International Underwriters of even date herewith.
Each International Underwriter hereby makes to and with the Company and each
Selling Shareholder the representations and agreements of such International
Underwriter contained in the seventh, eighth, ninth and tenth paragraphs of
Article III of such Agreement.
5. Payment and Delivery. Payment for the Firm Shares to be
sold by each Seller shall be made by wire transfers to the Company's and the
Custodian's accounts in federal funds or other funds immediately available in
New York City against delivery of such Firm Shares for the respective accounts
of the several Underwriters at the office of Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022 at 10:00 a.m., New York City time, on
[_________], 1996, or at such other time on the same or such other date, not
later than [_________], 1996, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made by wire
transfer payable to the Company's and the Custodian's accounts in federal funds
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several U.S. Underwriters
at the office of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022 at 10:00 a.m., New York City time, on the date specified in the notice
described in Section 3 or on such other date, in any event not later than
[_______], 1996, as shall be designated in writing by you. The time and date of
such payment are hereinafter referred to as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The
obligations of the Sellers and the several obligations of the Underwriters
hereunder are subject to the condition that the Registration Statement shall
have become effective not later than the date hereof.
The several obligations of the Underwriters hereunder are
subject to the following further conditions:
<PAGE> 14
13
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act, and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, of the Company and its subsidiaries, taken as a
whole, from that set forth in the Registration Statement,
that, in your judgment, is material and adverse and makes it,
in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus
(exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement).
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in clause (a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) No stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or, to the knowledge of the Company or
the Underwriters, threatened by the Commission.
(d) You shall have received on the Closing Date an opinion of
Barrett & McNagny, counsel for the Company, dated the Closing Date, in
the form attached hereto as Exhibit A.
The opinion of Barrett & McNagny shall be rendered to you at
the request of the Company and shall so state therein.
<PAGE> 15
14
(e) You shall have received on the Closing Date an opinion of
each of _______________________, [___________________ and
_________________,] counsel for the Selling Shareholders, dated the
Closing Date, in the form attached hereto as Exhibit[s] B[-1 through
B-__, respectively,].
The opinion[s] of _____________[, _____________ and
___________] shall be rendered to the Underwriters at the request of
the Selling Shareholders and shall so state therein.
(f) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Underwriters, dated the Closing
Date, with respect to the Registration Statement and the Prospectus and
such other related matters as you may reasonably request, and such
counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters.
(g) You shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof and the Closing Date,
as the case may be, in form and substance satisfactory to you, from
Deloitte & Touche LLP, independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(h) The "lock-up" agreements, each substantially in the form
of Exhibit C hereto between you, certain shareholders, officers and
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or any securities convertible
into or exercisable or exchangeable for such Common Stock, delivered to
you on or before the date hereof, shall be in full force and effect on
the Closing Date.
[(i) True and complete copies of the waivers by (a) the
holders of the Subordinated Notes and (b) the lenders under the
Company's Credit Agreement dated as of June 30, 1994 and as amended as
of March 4, 1996, shall be delivered to you on or before the date
hereof and shall be in full force and effect on the Closing Date.]
(j) You shall have received on the Closing Date certificates
dated the Closing Date and signed by the Selling Shareholders or by
attorneys-in-fact of the Selling Shareholders, to the effect that the
representations and warranties of each such Selling Shareholder
contained in this Agreement are true and correct as of the Closing Date
and that each such Selling Shareholder has complied with all of the
agreements
<PAGE> 16
15
and satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
(k) The Company shall have complied with the provisions of
Section 7(a) hereof with respect to the furnishing of Prospectuses on
the business day next succeeding the date of this Agreement, in such
quantities as you shall have reasonably requested.
(l) The Shares shall have been approved for quotation on the
Nasdaq National Market System by the NASD.
(m) You shall have received such other documents and
certificates as are reasonably requested by you or your counsel.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as you may
reasonably request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other matters related to
the issuance of the Additional Shares.
7. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and, during the period mentioned
in Section 7(c) below, as many copies of the Prospectus and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request. In the case of the Prospectus, to furnish
copies of the Prospectus in New York City, prior to 10:00 a.m., New
York City time, on the business day following the date of this
Agreement, in such quantities as you reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object; and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
<PAGE> 17
16
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of your counsel the Prospectus
is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of your counsel, it is necessary to
amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have
been sold by you on behalf of the Underwriters and to any other dealers
upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification and in
connection with any review of the offering of the Shares by the NASD.
(e) If the Company elects to rely on Rule 462(b) under the
Securities Act, the Company shall file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) under the
Securities Act no later than the earlier of (i) 10:00 p.m. Eastern time
on the date hereof and (ii) the time confirmations are sent or given,
as specified by Rule 462(b)(2) under the Securities Act, and shall pay
the applicable fees in accordance with Rule 111 under the Securities
Act.
(f) To make generally available to the Company's security
holders and to you as soon as practicable, but no later than 60 days
after the end of the twelve-month period beginning at the end of the
Company's fiscal quarter during which the effective date of the
Original Registration Statement occurs, an earnings statement of the
Company covering such twelve-month period that satisfies the provisions
of Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder.
(g) To use the net proceeds received by the Company from the
sale of the Shares hereunder in the manner specified in the Prospectus
under the caption "Use of Proceeds".
<PAGE> 18
17
(h) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any preliminary or supplementary Blue Sky memorandum in connection with
the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 7(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with any preliminary or supplementary Blue Sky
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Shares by the NASD, (v) all fees and expenses in
connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and
expenses incident to quoting the Shares on the Nasdaq National Market
System, (vi) the cost of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with
the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (ix) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 9 and the last paragraph of Section 11 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.
<PAGE> 19
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8. Covenants of the Selling Shareholders. In further
consideration of the agreements of the Underwriters herein contained, each of
the Selling Shareholders severally and not jointly covenants as follows:
(a) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, to pay or cause to be paid
(i) all taxes, if any, on the transfer and sale of the Shares being
sold by such Selling Shareholder and (ii) such Selling Shareholder's
pro rata share (determined by dividing the number of Shares sold by
such Selling Shareholder by the total number of Shares sold by all
Sellers) of all costs and expenses incident to the performance of the
obligations of such Selling Shareholder under this Agreement,
including, but not limited to, all expenses enumerated in Section 7(h)
above, all expenses incident to the delivery of the Shares and the fees
and expenses of counsel and accountants for such Selling Shareholder.
(b) Such Selling Shareholder has carefully reviewed the
Registration Statement and will carefully review, promptly upon
receipt, each amendment thereto provided to such Selling Shareholder.
At any time during the period from the date hereof through the Closing
Date, if there is any change in the information in the Registration
Statement, including the tables and notes thereto that specifically
relate to such Selling Shareholder, such Selling Shareholder will
immediately notify the Company of such change.
(c) Such Selling Shareholder shall cooperate fully with the
Company in supplying such information relating to such Selling
Shareholder and the Shares as the Company may reasonably request for
use in preparation of the Registration Statement and all other
documents reasonably necessary or desirable in connection with the
offering of Shares. In addition, such Selling Shareholder shall furnish
to the Company (or, at the Company's request, to the Underwriters or
other parties) such further certificates and documents confirming the
representations and warranties contained herein, or with respect to
related matters, as the Company may reasonably request.
9. Indemnity and Contribution. (a) The Sellers, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by any Underwriter or any such controlling
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or
<PAGE> 20
19
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(b) Each Selling Shareholder agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Selling Shareholder
furnished in writing by or on behalf of such Selling Shareholder expressly for
use therein.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, the Selling Shareholders and each person, if any,
who controls the Company or any Selling Shareholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Sellers to such Underwriter, but only
with reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to subsection (a), (b) or (c) of this Section
9, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the
<PAGE> 21
20
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for (i) all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, (ii) the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either such Section and (iii) all Selling Shareholders and all persons, if
any, who control any Selling Shareholder within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
control persons of Underwriters, such firm shall be designated in writing by
Morgan Stanley. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate firm for
the Selling Shareholders and such controlling persons of Selling Shareholders,
such firm shall be designated in writing by the persons named as
attorneys-in-fact for the Selling Shareholders under the Power of Attorney and
Custody Agreements. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this subsection,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid, request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(e) To the extent the indemnification provided for in
subsection (a), (b) or (c) of this Section 9 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such subsection, in lieu
of indemnifying such indemnified party thereunder, shall contribute
<PAGE> 22
21
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the indemnifying party or parties
on the one hand and the indemnified party or parties on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Sellers on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by each Seller and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Sellers on the one hand
and of the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Sellers or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 9 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in subsection (e) of this Section 9.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in subsection (e) of this Section 9
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
<PAGE> 23
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(g) The indemnity and contribution provisions contained in
this Section 9 and the representations and warranties of the Company and the
Selling Shareholders contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, any Selling Shareholder or any person controlling
any Selling Shareholder, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
(h) The liability of each Selling Shareholder under the
provisions of this Section 9 shall be limited to an amount equal to the Purchase
Price of the Shares to be sold by such Selling Shareholder to the Underwriters
hereunder.
10. Termination. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
NASD, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or
the Chicago Board of Trade, (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event singly or together with any other such event makes it,
in your judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement
shall become effective upon the later of (x) execution and delivery hereof by
the parties hereto and (y) release of notification of the effectiveness of the
Original Registration Statement by the Commission.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such nondefaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such
<PAGE> 24
23
date; provided that in no event shall the number of Shares that any Underwriter
has agreed to purchase pursuant to this Agreement be increased pursuant to this
Section 11 by an amount in excess of one-ninth of such number of Shares without
the written consent of such Underwriter. If, on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter or Underwriters shall fail or
refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to you and
the Company for the purchase of such Shares are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date or the Option
Closing Date, as the case may be, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by the
laws of the State of New York.
<PAGE> 25
24
14. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
Very truly yours,
STEEL DYNAMICS, INC.
By
---------------------------------
Name:
Title:
The Selling Shareholders named in
Schedule III hereto, acting severally
By
---------------------------------
Attorney-in-Fact
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
MCDONALD & COMPANY SECURITIES, INC.
SALOMON BROTHERS INC
Acting severally on behalf of themselves
and the several U.S. Underwriters
named in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By
----------------------------------------
Name:
Title:
<PAGE> 26
25
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
MCDONALD & COMPANY SECURITIES, INC.
SALOMON BROTHERS INTERNATIONAL LIMITED
Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.
By Morgan Stanley & Co.
International Limited
By
----------------------------------------
Name:
Title:
<PAGE> 27
SCHEDULE I
U.S. Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
--------------
Total U.S. Firm Shares.......................... ==============
<PAGE> 28
SCHEDULE II
International Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
------------------
Total International Firm Shares...........................
==================
<PAGE> 29
SCHEDULE III
Selling Shareholders
Number of
Firm Shares
Selling Shareholder To Be Sold
----------------
Total .......................................................
================
<PAGE> 30
EXHIBIT A
Pursuant to Section 6(d) of the Underwriting Agreement,
Barrett & McNagny, counsel for the Company, shall furnish an opinion to the
effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole;
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock (including the Shares to be
sold by the Selling Shareholders) outstanding prior to the issuance of
the Company Shares have been duly authorized and are validly issued,
fully paid and non-assessable;
(v) the Company Shares have been duly authorized and, when
issued and delivered in accordance with the terms of the Underwriting
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or
similar rights;
(vi) the Underwriting Agreement and each of the Irrevocable
Power of Attorney and Custody Agreements (collectively, the "Power of
Attorney and Custody Agreements"), each dated the date hereof, by each
Selling Shareholder and the Company as Custodian, appointing certain
individuals as the Selling Shareholders' attorneys-in-fact to the
extent set forth therein relating to the transactions contemplated
hereby and by the Registration Statement have been duly authorized,
executed and delivered by the Company;
<PAGE> 31
A-2
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Underwriting
Agreement, the Power of Attorney and Custody Agreements, and the
issuance and delivery of the Company Shares will not contravene any
provision of applicable law or the articles of incorporation or by-laws
of the Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries,
taken as a whole, or, to the best of such counsel's knowledge, any
judgment, or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by the
Company of its obligations under the Underwriting Agreement, except
such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares;
(viii) the statements (1) in the Prospectus under the captions
"________", "Certain Transactions", "Description of Certain
Indebtedness", "Description of Capital Stock," "Certain United States
Federal Tax Consequences For Non-United States Holders" and
"Underwriters" and (2) in the Registration Statement in Items 14 and
15, in each case insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to
therein;
(ix) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as required;
(x) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended;
(xi) such counsel (1) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules
included therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder,
<PAGE> 32
A-3
(2) has no reason to believe that (except for financial statements and
schedules as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time
the Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (3) has no reason to believe that (except
for financial statements and schedules as to which such counsel need
not express any belief) the Prospectus contains any untrue statement of
a material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
(xii) each of the Company and its subsidiaries has all
necessary certificates, orders, permits, licenses, authorizations,
consents and approvals of and from, and has made all declarations and
filings with, all federal, state and local governmental authorities,
all self-regulatory organizations and all courts and tribunals, to own,
lease, license and use its properties and assets and to conduct its
business in the manner described in the Prospectus, and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to revocation or modification of any such
certificates, orders, permits, licenses, authorizations, consents or
approvals, nor is the Company or any of its subsidiaries in violation
of, or in default under, any federal, state and local law, regulation,
rule, decree, order or judgment applicable to the Company or any of its
subsidiaries the effect of which, singly or in the aggregate, would
have a material adverse effect on the prospects, condition, financial
or otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, except as described in the
Prospectus.
With respect to subsection (xi) above, such counsel may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification, except as specified.
<PAGE> 33
EXHIBIT B
Pursuant to Section 6(e) of the Underwriting Agreement,
counsel for the Selling Shareholders shall furnish an opinion to the effect
that:
(i) the Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling
Shareholder[s];
(ii) the execution and delivery by [the] [each] Selling
Shareholder[s] of, and the performance by such Selling Shareholder of
its obligations under, the Underwriting Agreement and the Power of
Attorney and Custody Agreement of such Selling Shareholder will not
contravene any applicable law, or the certificate of incorporation or
by-laws of such Selling Shareholder (if such Selling Shareholder is a
corporation), or the trust agreement (if such Selling Shareholder is a
trust) or, to the best of such counsel's knowledge, any agreement or
other instrument binding upon such Selling Shareholder, or to the best
of such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of or qualification with any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement or Power of Attorney and Custody Agreement of such
Selling Shareholder, except such as may be required by the securities
or Blue Sky laws of the various states in connection with the offer and
sale of the Shares;
(iii) [each of] the Selling Shareholder[s] has valid and
marketable title to the Shares to be sold by such Selling Shareholder
and the legal right and power, and all authorization and approval
required by law, to enter into the Underwriting Agreement and Power of
Attorney and Custody Agreement of such Selling Shareholder and to sell,
transfer and deliver the Shares to be sold by such Selling Shareholder;
(iv) the Power of Attorney and Custody Agreement of [each of]
the Selling Shareholder[s] has been duly authorized, executed and
delivered by the Selling Shareholder[s] and is a valid and binding
agreement of [each of] of the Selling Shareholder[s], enforceable in
accordance with its terms, except as (a) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (b) the availability of equitable
remedies may be limited by equitable principles of general
applicability;
(v) delivery of the Shares to be sold by each Selling
Shareholder pursuant to the Underwriting Agreement will pass marketable
title to such Shares free and clear of any security interests, claims,
liens, equities and other encumbrances; and
<PAGE> 34
B-2
(vi) such counsel has no reason to believe that as to
information relating to the Selling Shareholder (except for financial
statements and schedules as to which such counsel need not express any
belief) the Registration Statement and the prospectus included therein
at the time the Registration Statement became effective contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and has no reason to believe that as to
information relating to the Selling Shareholder (except for financial
statements and schedules as to which such counsel need not express any
belief) the Prospectus contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
Such counsel may rely upon an opinion or opinions of counsel
for any Selling Shareholders and, with respect to factual matters and to the
extent such counsel deems appropriate, upon the representations of each Selling
Shareholder contained herein and in the Power of Attorney and Custody Agreement
of such Selling Shareholder and in other documents and instruments; provided
that (A) each such counsel for the Selling Shareholder is satisfactory to
counsel for the Underwriters, (B) a copy of each opinion so relied upon is
delivered to you and is in form and substance satisfactory to counsel for the
Underwriters, (C) copies of such Power of Attorney and Custody Agreement and of
any such other documents and instruments shall be delivered to you and shall be
in form and substance satisfactory to counsel for the Underwriters and (D) such
counsel shall state in their opinion that they are justified in relying on each
such other opinion.
<PAGE> 35
EXHIBIT C
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
McDonald & Company Securities, Inc.
Salomon Brothers Inc
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
McDonald & Company Securities, Inc.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
The undersigned understands that Steel Dynamics, Inc., an
Indiana corporation (the "Company"), and the shareholders (the "Selling
Shareholders") of the Company named in Schedule III of the Underwriting
Agreement (as defined below) propose to enter into an underwriting agreement
(the "Underwriting Agreement") with (a) Morgan Stanley & Co. Incorporated
("Morgan Stanley"), PaineWebber Incorporated, McDonald & Company Securities,
Inc. and Salomon Brothers Inc, as representatives of the several U.S.
underwriters (the "U.S. Underwriters") named in Schedule I thereto, and (b)
Morgan Stanley & Co. International Limited, PaineWebber International (U.K.)
Ltd., McDonald & Company Securities, Inc. and Salomon Brothers International
Limited, as representatives of the several international underwriters (the
several international underwriters and the U.S. Underwriters being hereinafter
collectively called the "Underwriters") named in Schedule II thereto, providing
for the public offering (the "Public Offering") of shares of the Company's
Common Stock (par value $.01 per share) (the "Common Stock").
To induce the Underwriters that may participate in the Public
Offering to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley, it will not, during the period commencing on the date hereof and ending
180 days after the date of the final prospectus relating to the Public Offering
(the "Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (provided that such shares
or securities are either now owned by the undersigned or are hereafter acquired
prior to or in connection with the Public Offering), or (2) enter into any swap
or other arrangement that transfers to another, in whole or in part,
<PAGE> 36
C-2
any of the economic consequences of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to the sale of any shares of
Common Stock to the Underwriters pursuant to the Underwriting Agreement. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will only
be made pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company, the Selling Shareholders and the Underwriters.
Very truly yours,
-----------------------------
(Name)
-----------------------------
(Print Name)
-----------------------------
(Address)
Accepted as of the date
first set forth above:
MORGAN STANLEY & CO. INCORPORATED
By:
-----------------------------------
<PAGE> 1
Exhibit 10.1b
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
as of March 4, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation
(the "Borrower"), the lenders listed on the signature pages hereof and MELLON
BANK, N.A., a national banking association, as agent for the Lenders under the
Credit Agreement referred to below (the "Agent") .
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders") , the Agent,
Mellon Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank
One, Indianapolis, National Association and NBD Bank, N.A., as Co-Agents,
entered into a Credit Agreement, dated as of June 30, 1994, as amended as of
January 6, 1995, May 22, 1995, June 15, 1995 and November 20, 1995 (as so
amended, the "Original Agreement"), pursuant to which the Lenders have extended
credit to the Borrower to fund the construction and operation of a 1.2 million
ton thin slab cast mini-mill in Butler, Indiana;
WHEREAS, the Borrower wishes to borrow, as term loans, an additional
$150,000,000 to be used to fund the construction and operation of a cold rolling
and coating steel processing facility to be constructed adjacent to the existing
project facilities of the Borrower;
WHEREAS, the Borrower and the Required Lenders (as defined in the
Original Agreement) desire to amend the Original Agreement to affect the changes
described above and to make certain other changes therein;
WHEREAS, Banque Nationale de Paris is to become a party to the
Original Agreement, as amended hereby, as a Senior Co-Agent and a Lender;
WHEREAS, upon the effectiveness of this Amendment, Kreditanstalt fur
Wiederaufbau, Banque Nationale de Paris and Comerica Bank shall be designated
Senior Co-Agents, and Bank One Indianapolis, National Association, NBD Bank,
N.A., The Industrial Bank of Japan, Limited, and Bank Austria Aktiengesellschaft
shall be designated Co-Agents (for purposes of the Original Agreement, as
amended hereby, the term "Co-Agents" shall refer to both the Senior Co-Agents
and the Co-Agents);
WHEREAS, immediately prior to the signing by the Lenders of this
Amendment, Dai-Ichi Kangyo Bank, Ltd., shall have assigned all its rights and
interests as a Lender to one or more other Lenders, and shall no longer be a
Lender party to the Original Agreement, as amended hereby;
<PAGE> 2
WHEREAS, in connection with the changes to be made pursuant to
this Amendment, the Borrower proposes to amend the Subordinated Debt Purchase
Agreement to make conforming changes in such document;
WHEREAS, the Borrower has advised the Agent and the Lenders, with
respect to the Stockholders Agreement among the stockholders of the Borrower's
parent, Steel Dynamics Holdings, Inc. ("Holdings") (which Stockholders Agreement
is referred to in Section 6.14 of the Original Agreement and is herein referred
to as the "Stockholders Agreement"), in connection with the sale by Holdings of
shares of its Class A Common Stock to Preussag Stahl AG ("Preussag"), the
Stockholders Agreement is proposed to be amended by a Stockholders Joinder
Agreement and Amendment No. 2 to Stockholders Agreement (the "Preussag
Amendment"), which will provide in substance that (i) Preussag will become a
party to the Stockholders Agreement and will be bound by and have the benefit of
all the terms thereof, (ii) the shares of Class A Common Stock of Holdings
issued to Preussag and any shares of equity securities issued with respect to
such shares of Class A Common Stock by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization (collectively the "Preussag Shares") shall
be "Stockholders Shares" under and as defined in the Stockholders Agreement, and
(iii) one representative designated by the holders of a majority of the Preussag
Shares shall be elected to the Board of Directors of Holdings and may be removed
only by such holders;
WHEREAS, the Borrower proposes to grant to its customer, Affiliated
Metals Company, a surface drainage easement over a portion of the Project Site
(the "Easement"), and has asked that the Lenders subordinate the lien of the
Mortgage to the Easement; and
WHEREAS, capitalized terms not otherwise defined herein shall have
the meanings assigned thereto in the Original Agreement .
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby agree as follows:
Section 1. Amendments to Original Agreement. The Original Agreement
is hereby amended as follows:
(a) Articles I, II, III, IV, V, VI, VII and IX of the Original
Agreement are hereby amended in their entirety to read as set forth on Annex 1
hereto.
-2-
<PAGE> 3
(b) The Original Agreement is hereby amended by adding the following
Schedules, which shall read as set forth on Annex 2 hereto:
Schedule Subject Matter
-------- --------------
1.01B-1996 Phase II Project Agreements
1.01C-1996 Phase II Project Budget
1.01D-1996 List of Specifications (Phase II)
3.15-1996 Ownership and Control as of Fifth
Amendment
3.31-1996 Phase II Project Compliance With Laws;
Permits
4.05(d)-1996 Certain Phase II Project Agreements
(c) The Original Agreement is hereby amended by adding the following
Exhibit, which shall read as set forth on Annex 3 hereto:
Exhibit Title
------- -----
B-4-1996 Form of Tranche D Note
Section 2. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original
Agreement are true and correct on and as of the date hereof as if made on and as
of the date hereof (except for any representation or warranty which was
expressly limited to an earlier date, in which case such representations and
warranties shall be true and correct on and as of such earlier date), and that
no Event of Default or Potential Default has occurred and is continuing or
exists on and as of the date hereof.
(b) The execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of the Borrower, has
been duly authorized by all necessary governmental approvals, if any, and does
not and will not contravene or conflict with any provision of law or of the
organizational instruments of the Borrower or of any agreement or instrument
binding on it.
(c) This Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
-3-
<PAGE> 4
Section 3. Inclusion of Banque National de Paris. By executing and
delivering this Amendment, Banque National de Paris agrees to become a Senior
Co-Agent and a Lender under, and to be bound by the terms and provisions of, the
Original Agreement, as amended by this Amendment.
Section 4. Consent to Amendment of Subordinated Debt Purchase
Agreement. Notwithstanding the restrictions of Section 6.14 of the Original
Agreement, by executing and delivering this Amendment, the Required Lenders
hereby consent to the Borrower's entering into Consent and Amendment No. 1 to
the Subordinated Debt Purchase Agreement in substantially the form provided by
the Borrower to the Lenders prior to the execution of this Amendment, with such
changes therein as shall be satisfactory to the Agent.
Section 5. Preussag Amendment. By executing and delivering this
Amendment, the Required Lenders hereby waive the application to the Preussag
Amendment of the covenant set forth in Section 6.14 of the Original Agreement
(which covenant limits certain modifications of the Stockholders Agreement) .
This waiver is being made solely for the purpose of permitting the Preussag
Amendment to be consummated. The waiver set forth herein shall be limited
precisely as provided for herein and shall not be deemed to be a waiver of,
amendment to, consent to or modification of any other term or provision of the
Original Agreement or any other Loan Document or instrument referred to therein.
Neither the fact that Borrower has requested this waiver nor the fact that the
Required Lenders and the Agent have agreed to this waiver shall entitle the
Borrower to expect the Required Lenders and/or the Agent to agree in the future
to enter into any similar waivers of any provision of the Original Agreement.
Section 6. Consent to Easement. By executing and delivering this
Amendment, the Required Lenders hereby consent to the granting of the Easement,
as the same is more fully described on Annex 4 hereto, and further direct the
Agent to execute and deliver a mortgage subordination instrument to effect
subordination of the Mortgage to the Easement.
Section 7. Miscellaneous. (a) This Amendment shall become effective
upon (i) execution and delivery hereof by all of the Lenders, the Borrower and
the Agent and (ii) the payment by the Borrower to the Agent for the respective
accounts of the Lenders of the amendment fees previously agreed to, provided
that Sections 5 and 6 hereof shall become effective upon execution and delivery
hereof by the Required Lenders, the Borrower and the Agent. The execution below
by the Lenders shall constitute a direction to the Agent to execute this
Amendment. The fees described in the first sentence of this Section 7(a) shall
be due and payable on the day after this Amendment is signed by the Lenders.
-4-
<PAGE> 5
(b) The Original Agreement, as amended by this Amendment, is in all
respects ratified, approved and confirmed and shall, as so amended, remain in
full force and effect. From and after the date hereof, all references to the
"Agreement" in the Original Agreement and in the other Loan Documents shall be
deemed to be references to the Original Agreement as amended by this Amendment .
(c) This Amendment shall be deemed to be a contract under the laws
of the State of New York and for all purposes shall be governed by and construed
and enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Amendment as of the date first
above written.
STEEL DYNAMICS INC.
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
MELLON BANK, N.A., as Lender and
as Agent
By /s/ ROGER N. STANIER
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: $10,000,000
Tranche D
Commitment
Percentage: 6.6666666666666666%
-5-
<PAGE> 6
KREDITANSTALT FUR WIEDERAUFBAU
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: $50,000,000
Tranche D
Commitment
Percentage: 33.3333333333333333%
BANQUE NATIONALE DE PARIS
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: $20,000,000
Tranche D
Commitment
Percentage: 13.3333333333333333%
COMERICA BANK
as Senior Co-Agent
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: $20,000,000
Tranche D
Commitment
Percentage: 13.3333333333333333%
-6-
<PAGE> 7
BANK ONE INDIANAPOLIS, NATIONAL
ASSOCIATION
as Co-Agent
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: $10,000,000
Tranche D
Commitment
Percentage: 6.6666666666666666%
NBD BANK
as Co-Agent
By /s/ [SIG ILLEGIBLE]
-------------------------------------
Title: Vice President
Tranche D
Committed Amount: -0-
Tranche D
Commitment
Percentage: -0-
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Co-Agent
By /s/ Yutaka Endo
-------------------------------------
Title: Senior Vice President
Tranche D
Committed Amount: $5,000,000
Tranche D
Commitment
Percentage: 3.3333333333333333%
-7-
<PAGE> 8
BANK AUSTRIA AKTIENGESELLSCHAFT
as Co-Agent
By /s/ J. Anthony Seay
------------------------------------
Title: Vice President
By /s/ Jeanine Ball
------------------------------------
Title: Assistant Vice President
Tranche D
Committed Amount: $15,000,000
Tranche D
Commitment
Percentage: 10%
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ S. Wallat
-----------------------------------
Title: Assistant Treasurer
By /s/ K. H. Schroter
-----------------------------------
Title: Vice President
Tranche D
Committed Amount: -0-
Tranche D
Commitment
Percentage: -0-
FORT WAYNE NATIONAL BANK
By /s/ Signature Illegible
------------------------------------
Title: Senior Vice President
Tranche D
Committed Amount: $5,000,000
Tranche D
Commitment
Percentage: 3.3333333333333333%
-8-
<PAGE> 9
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ Signature Illegible
------------------------------------
Title: Vice President
By /s/ Signature Illegible
------------------------------------
Title:
Tranche D
Committed Amount: $10,000,000
Tranche D
Commitment
Percentage: 6.6666666666666666%
DEUTSCHE BANK AG, CHIGAGO AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Haroon Imtiaz
------------------------------------
Title: Associate
By /s/ David Berger
------------------------------------
Title: Assistant Vice President
Tranche D
Committed Amount: -0-
Tranche D
Commitment
Percentage: -0-
-9-
<PAGE> 10
NATIONAL CITY BANK, INDIANA
By /s/ Reagan K. Rick
---------------------------------
Title: Vice President
Tranche D
Committed Amount: $5,000,000
Tranche D
Commitment
Percentage: 3.3333333333333333%
-10-
<PAGE> 11
SUMITOMO CORPORATION
By /s/ S. Ozawa
---------------------------------------
Title: S. Ozawa, Deputy General Manager
Energy, Chemical & Metal Project Dept.
Tranche D
Committed Amount: -0-
Tranche D
Commitment
Percentage: -0-
-11-
<PAGE> 1
Exhibit 10.1c
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
May 20, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation (the
"Borrower"), the lenders listed on the signature pages hereof and MELLON BANK,
N.A., a national banking association, as agent for the Lenders under the Credit
Agreement referred to below (the "Agent").
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders"), the Agent, Mellon
Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank One,
Indianapolis, National Association and NBD Bank, N.A., as Co-Agents, entered
into a Credit Agreement, dated as of June 30, 1994, as amended as of January 6,
1995, May 22, 1995, June 15, 1995, November 20, 1995 and March 4, 1996 (as so
amended, the "Original Agreement"), pursuant to which the Lenders have extended
credit to the Borrower to fund the construction and operation of a 1.2 million
ton thin slab cast mini-mill in Butler, Indiana;
WHEREAS, the Borrower and the Required Lenders (as defined in the Original
Agreement) desire to amend the Original Agreement to effect certain changes
therein; and
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings assigned thereto in the Original Agreement .
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby agree as follows:
Section 1. Amendment to Section 1.01. The definition of "Cash Equivalent
Investments" is hereby amended (i) by inserting after the word "America" in
clause (a) thereof the following phrase: ", or issued by an agency or
instrumentality thereof, in each case"; (ii) by deleting the word "and" before
clause (c) thereof; and (iii) by adding at the end thereof, as a new clause
(d), the following: "and, (d) investments in mutual funds which do not make any
material investments other than those described in clauses (a), (b) or (c) of
this definition. As a result of these amendments, the definition of "Cash
Equivalent Investments" will read as follows:
"Cash Equivalent Investments" shall mean any of the following, to
the extent acquired for investment and not with a view to achieving
trading profits: (a) obligations fully backed by the full faith and credit
of the United States of America, or issued by an agency or instrumentality
thereof, maturing not in excess of nine
<PAGE> 2
months from the date of acquisition, (b) commercial paper maturing not in
excess of nine months from the date of acquisition and rated "P-1" by
Moody's Investors Service or "A-1" by Standard & Poor's Corporation on the
date of acquisition, (c) the following obligations of any domestic
commercial bank having capital and surplus in excess of $500,000,000,
which has, or the holding company of which has, a commercial paper rating
meeting the requirements specified in clause (b) above: (i) time deposits,
certificates of deposit and acceptances maturing not in excess of nine
months from the date of acquisition, or (ii) repurchase obligations with a
term of not more than seven days for underlying securities of the type
referred to in clause (a) above, and (d) investments in mutual funds which
do not make any material investments other than those described in clauses
(a), (b) or (c) of this definition.
Section 2. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original Agreement
are true and correct on and as of the date hereof as if made on and as of the
date hereof (except for any representation or warranty which was expressly
limited to an earlier date, in which case such representations and warranties
shall be true and correct on and as of such earlier date), and that no Event of
Default or Potential Default has occurred and is continuing or exists on and as
of the date hereof.
(b) The execution, delivery and performance of this Amendment has been
duly authorized by all necessary action on the part of the Borrower, has been
duly authorized by all necessary governmental approvals, if any, and does not
and will not contravene or conflict with any provision of law or of the
organizational instruments of the Borrower or of any agreement or instrument
binding on it.
(c) This Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
Section 3. Authorization of Agent. To further the intent and purpose of
Section 9.03(e) of the Original Agreement, the Required Lenders hereby authorize
the Agent now and at any time during the term of the Original Agreement (as the
same may be
-2-
<PAGE> 3
amended) to release any Collateral, the disposition of which is expressly
permitted under Section 6.10 of the Original Agreement, upon such disposition.
Section 4. Miscellaneous. (a) This Amendment shall become effective upon
execution and delivery hereof by all of the Lenders, the Borrower and the Agent.
The execution below by the Lenders shall constitute a direction to the Agent to
execute this Amendment.
(b) The Original Agreement, as amended by this Amendment, is in all
respects ratified, approved and confirmed and shall, as so amended, remain in
full force and effect. From and after the date hereof, all references to the
"Agreement" in the Original Agreement and in the other Loan Documents shall be
deemed to be references to the Original Agreement as amended by this Amendment.
(c) This Amendment shall be deemed to be a contract under the laws of the
State of New York and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Amendment as of the date first
above written.
STEEL DYNAMICS, INC.
By /s/ SIG ILLEGIBLE
______________________________________
Title: Vice President
MELLON BANK, N.A., as Lender and
as Agent
By /s/ ROGER N. STANIER
______________________________________
Title: Vice President
-3-
<PAGE> 4
KREDITANSTALT FUR WIEDERAUFBAU
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE
______________________________________
Title: Vice President Senior Project
Manager
By______________________________________
Title:
BANQUE NATIONALE DE PARIS
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE
______________________________________
Title: Vice President
COMERICA BANK
as Lender and Senior Co-Agent
By /s/ SIG ILLEGIBLE
______________________________________
Title: Vice President
BANK ONE INDIANAPOLIS, NATIONAL ASSOCIATION
as Lender and Co-Agent
By /s/ SIG ILLEGIBLE
________________________________________
Title: Vice President
NBD BANK, N.A.
as Lender and Co-Agent
By /s/ SIG ILLEGIBLE
_______________________________________
Title: Vice President
-4-
<PAGE> 5
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Lender and Co-Agent
By__________________________________________
Title:
BANK AUSTRIA AKTIENGESELLSCHAFT
as Lender and Co-Agent
By /s/ J. Anthony Seay
__________________________________________
Title: Vice President
By /s/ Jeanine Ball
__________________________________________
Title: Assistant Vice president
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ SIG ILLEGIBLE
_________________________________________
Title: Schroter
(Vice President)
By /s/ L. Christmann
_________________________________________
Title: Christmann
(Assistant Vice President)
FORT WAYNE NATIONAL BANK
By /s/ SIG ILLEGIBLE
__________________________________________
Title: Senior Vice President
-5-
<PAGE> 6
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH
By /s/ SIG ILLEGIBLE
----------------------------------------
Title: Vice President
By /s/ Cordula Kraska-Hornemann
----------------------------------------
Title: Vice President
DEUTSCHE BANK AG, CHIGAGO AND/OR
CAYMAN ISLANDS BRANCHES
By
----------------------------------------
Title:
By
-----------------------------------------
Title:
NATIONAL CITY BANK, INDIANA
By /s/ SIG ILLEGIBLE
-----------------------------------------
Title: Vice President
SUMITOMO CORPORATION
By
-----------------------------------------
Title:
-6-
<PAGE> 1
Exhibit 10.1d
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
September 18, 1996, by and among STEEL DYNAMICS, INC., an Indiana corporation
(the "Borrower"), the lenders listed on the signature pages hereof and MELLON
BANK, N.A., a national banking association, as agent for the Lenders under the
Credit Agreement referred to below (the "Agent").
RECITALS:
WHEREAS the Borrower, certain lenders (the "Lenders"), the Agent, Mellon
Bank, N.A., as Issuing Bank, and Kreditanstalt fur Wiederaufbau, Bank One,
Indianapolis, National Association and NBD Bank, N.A., as Co-Agents, entered
into a Credit Agreement, dated as of June 30, 1994, as amended as of January 6,
1995, May 22, 1995, June 15, 1995, November 20, 1995, March 4, 1996 and May 20,
1996 (as so amended, the "Original Agreement"), pursuant to which the Lenders
have extended credit to the Borrower to fund the construction and operation of a
1.2 million ton thin slab cast mini-mill and a cold rolling and coating steel
processing facility in Butler, Indiana;
WHEREAS, Steel Dynamics Holdings, Inc. ("Holdings"), an Indiana
corporation and the indirect parent of the Borrower, and the Borrower currently
contemplate an initial public offering of equity securities of either Holdings
or the Borrower (in either case, the "IPO") , and desire to use a portion of the
Net Cash Proceeds from the IPO to prepay the Indebtedness incurred pursuant to
the Subordinated Notes;
WHEREAS, Holdings and the Borrower desire to merge Steel Dynamics Sales
Corp., Inc., an Indiana corporation and the direct parent of the Borrower, with
and into the Borrower (the "Salesco Merger");
WHEREAS, Holdings and the Borrower desire to merge Holdings with and into
the Borrower (the "Holdings Merger");
WHEREAS, as contemplated by Section 6.05(i) of the Original Agreement, the
Borrower intends to enter the business of manufacturing scrap substitute and to
construct one or more facilities for such purpose, such business to be conducted
by formation of Iron Dynamics, Inc., an Indiana corporation ("IDI"), as a
wholly-owned Subsidiary of the Borrower;
WHEREAS, the Borrower intends that the construction and start-up of such
scrap substitute business will be funded in part by proceeds of the private
placement sale (unrelated to the IPO)
<PAGE> 2
of up to $25,000,000 of its equity securities to one or more investors as
permitted under Section 6.05(i) of the Original Agreement as amended hereby;
WHEREAS, the Borrower and the Required Lenders (as defined in the Original
Agreement) desire to amend the Original Agreement to affect the changes
described above and to make certain other changes therein;
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings assigned thereto in the Original Agreement.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby agree as follows:
Section 1. Initial Amendments to Original Agreement. Upon the
effectiveness of the Salesco Merger, the following amendments (the "Initial
Amendments") to the Original Agreement shall be made:
(1) The Original Agreement is hereby amended by replacing each of the
phrases "the Borrower and Salesco", "Salesco, the Borrower", "the Borrower or
Salesco", "Salesco and the Borrower" and "the Borrower, Salesco", wherever any
of such phrases appears in the Original Agreement, with the words "the
Borrower".
(2) The Original Agreement is hereby amended by replacing the words
"Salesco and Holdings", "Holdings and Salesco", "Salesco/Holdings", "each of
Holdings and Salesco" and "either Holdings or Salesco" with the word "Holdings"
throughout the Original Agreement.
(3) The Original Agreement is hereby amended by replacing the phrase
"Borrower's and Salesco's", wherever it appears in the Original Agreement, with
the word "Borrower's".
(4) The Original Agreement is hereby amended by replacing the phrase
"Salesco's and Holdings'", wherever it appears in the Original Agreement, with
the word "Holdings'".
(5) Section 1.01 of the Original is hereby amended by adding, in the
appropriate alphabetical order, the following defined terms:
"IDI" shall mean Iron Dynamics, Inc., an Indiana corporation, all of
the capital stock of which will be owned by the Borrower if it is
organized.
"IDI Guaranty" shall mean that certain Guaranty and Suretyship
Agreement, substantially in the form of Exhibit R
-2-
<PAGE> 3
hereto, to be dated on or about the date of organization of IDI, to be
executed and delivered by IDI in favor of the Agent if IDI is organized.
"IDI Security Agreement" shall mean that certain Security Agreement,
substantially in form and substance satisfactory to the Agent and its
counsel, to be dated on or about the date of organization of IDI, to be
executed and delivered by IDI in favor of the Agent if IDI is organized.
"IPO" shall mean the underwritten initial public offering of
Holdings' equity securities.
"Salesco Merger" shall mean the merger of Salesco with and into the
Borrower.
"Seventh Amendment" shall mean the Seventh Amendment to Credit
Agreement, dated as of September 18, 1996, among the Borrower, the
Lenders, the Issuing Bank, the Agent and the Co-Agents.
(6) Section 1.01 of the Original Agreement is hereby amended by amending
and restating the defined terms "Change of Control", "Holdings", "Phase I
Project Acceptance", "Phase I Project Acceptance Date", "Salesco", "Security
Documents" and "Subordinated Guarantee" to read, respectively, as follows:
"Change of Control" shall mean that at any time (A) either Bain or
General Electric Capital Corporation, a New York corporation ("GECC"),
shall fail to retain voting securities which provide a minimum of 50% of
the voting power Bain or GECC, as the case may be, held pursuant to its
original equity investment in Holdings as described on Schedule 3.15
hereto, (B) the Control Group shall fail to satisfy the Control Tests for
any reason (voluntarily or involuntarily), (C) any Person or group of
Persons (as defined in the Securities Exchange Act of 1934, as amended)
not a member of the Control Group shall own more than 20% of the voting
capital stock of Holdings or more than 20% of the equity securities of
Holdings, or (D) Holdings shall fail to own all of the equity securities
of the Borrower.
As used herein, the term "Control Group" at any time shall mean the
following Persons: (a) Bain, (b) GECC, (c) Keith Busse and the Designated
Managers, (d) Heavy Metal, L.C., a Virginia limited liability company, (e)
Keylock Investments Limited, an Irish non-resident corporation, and
Mazelina Anstalt, a Liechenstein business trust and (f) Preussag. As used
herein, the "Control Tests" are deemed satisfied at a given time if and
only if at such time:
(x) The members of the Control Group in the aggregate own
(beneficially and of record) and have the
-3-
<PAGE> 4
right to vote at least 51% of the shares of voting capital stock of
Holdings; and
(y) The members of the Control Group in the aggregate own
(beneficially and of record) at least 51% of the equity securities
of all classes of Holdings.
"Holdings" shall mean Steel Dynamics Holdings, Inc., an Indiana
corporation which owns all of the capital stock of the Borrower.
"Phase I Project Acceptance" shall mean the issuance by Borrower to
the Agent of a certificate, in the form of Schedule I to the Seventh
Amendment, following the completion, in accordance with the SMS Documents,
of the Final Acceptance Test referred to in Section 14.3 of the SMS
Documents (assuming (contrary to fact) that the modifications set forth on
Schedule II to such Seventh Amendment had been made to the SMS Documents)
for all portions of the Phase I Project supplied by SMS, in which Test
such portion of the Phase I Project met the guaranteed performance
specified in the SMS Documents (assuming (contrary to fact) that the
modifications set forth on Schedule II to such Seventh Amendment had been
made to the SMS Documents).
"Phase I Project Acceptance Date" shall mean the earliest date which
(i) is not less than five days after the date on which the Borrower has
issued to the Agent, with a copy to the Phase I Project Monitor, the
certificate referred to in the definition of the phrase "Phase I Project
Acceptance" and (ii) is a date on which the Phase I Project Monitor shall
not have provided to the Agent written notice that it has received such
certificate and that it disagrees with one or more of the statements in
such certificate.
"Salesco" shall mean Steel Dynamics Sales Corp., Inc., an Indiana
corporation, which prior to the Salesco Merger owned all the capital stock
of Borrower, and was in turn a wholly-owned subsidiary of Holdings.
"Security Documents" shall mean the Security Agreement, the Holdings
Security Agreement, the IDI Guaranty, the IDI Security Agreement, the
Mortgage, the Holdings Guaranty, the Assignment of Contracts (and each
assignment of contract entered into pursuant to Section 5.15 hereof),
together with the Consents to Assignment of Contracts (and each consent to
assignment of contract delivered pursuant to Section 5.15 hereof) and any
other agreements or instruments from time to time to time granting or
purporting to grant the Agent a Lien in any property for the benefit of
the Lenders to secure the Obligations, or constituting a Guaranty
Equivalent for the Obligations.
-4-
<PAGE> 5
"Subordinated Guarantee" shall mean the Subordinated Guarantee,
dated as of June 30, 1994, as amended, issued by Holdings for the benefit
of the holders of the Subordinated Notes, it being understood that
references herein to the agreements governing the Subordinated Notes shall
include, without limitation, the Subordinated Guarantee.
(7) Section 1.01 of the Original Agreement is hereby amended by deleting,
in the definition of the term "Designated Initial Phase II Equity Proceeds", the
figure "$15,000,000" and inserting in lieu thereof the figure "$25,000,000".
(8) Section 1.01 of the Original Agreement is hereby amended by deleting
the following defined term: "Salesco Security Agreement".
(9) Section 2.03(c)(i) of the Original Agreement is hereby amended by
attending at the end thereof the following sentence:
If Tranche C Loans have not been made prior to consummation of the IPO,
upon receipt by the Borrower or Holdings of Net Cash Proceeds of the IPO
in excess of $100,000,000, the Tranche C Loan Commitments shall terminate
automatically.
(10) Section 2.10(e) of the Original Agreement is hereby amended by
replacing the phrase in parentheses with the following:
(other than the Designated Initial Phase II Equity Securities, the equity
securities described in Schedule 3.15 hereto, any equity securities issued
pursuant to the IPO and any equity securities issued in accordance with
all of the terms and conditions of Section 6.05(i) hereof)
(11) Section 3.13 of the Original Agreement is hereby amended in its
entirety to read as follows:
3.13. Subsidiaries. Except as otherwise specifically permitted by
this Agreement, the Borrower has no Subsidiaries other than, if IDI is
organized, IDI, and Holdings has no Subsidiaries except for the Borrower
and, if IDI is organized, IDI.
(12) Section 3.15 of the Original Agreement is hereby amended in its
entirety to read as follows:
3.15. Ownership and Control. Schedule 3.15 hereof states as of the
date hereof, Schedule 3.15-1996 hereto states as of the date of the Fifth
Amendment, and Schedule 3.15A-1996 hereto states as of the date of the
Seventh Amendment, the authorized capitalization of each Loan Party, the
number of shares of each class of capital stock issued and outstanding of
each Loan Party and the number and
-5-
<PAGE> 6
percentage of outstanding shares of each such class of capital stock and
the names of the record owners of such shares and, to the Borrower's
knowledge, the beneficial owners of such shares. The outstanding shares of
capital stock of each Loan Party have been duly authorized and validly
issued and are, except as designated on such Schedule 3.15, Schedule
3.15-1996, or Schedule 3.15A-1996, fully paid and nonassessable. There are
no options, warrants, calls, subscriptions, conversion rights, exchange
rights, preemptive rights or other rights, agreements or arrangements
(contingent or otherwise) which may in any circumstances now or hereafter
obligate any Loan Party to issue any shares of its capital stock or any
other securities, except for matters set forth in such Schedule 3.15,
Schedule 3.15-1996, or Schedule 3.15A-1996, and except for matters which
are permitted by the terms hereof and notice of which is provided by the
Borrower to the Agent. Schedule 3.15 hereof describes as of the date
hereof, Schedule 3.15-1996 hereto describes as of the date of the Fifth
Amendment, and Schedule 3.15A-1996 hereto states as of the date of the
Seventh Amendment, all options, rights, purchase agreements, buy-sell
agreements, restrictions on transfer, pledges, proxies, voting trusts,
powers of attorney, voting agreements and other agreements, instruments or
arrangements to which any Loan Party is a party or is subject or bound, or
to which any record or beneficial owner of capital stock of any Loan Party
is a party or is subject or bound, which pertain to any shares of capital
stock (now or hereafter outstanding) of any Loan Party, including any
matter which may affect beneficial or record ownership thereof or
transferability thereof or voting rights with respect thereto.
(13) Section 6.03(c) of the Original Agreement is hereby amended by
deleting the words "to Salesco as contemplated by Exhibit CC or to".
(14) Section 6.03(i) of the Original Agreement is hereby amended by
deleting "; and" from the end thereof and inserting in ".".
(15) Section 6.03(j) of the Original Agreement is hereby deleted.
(16) Section 6.05(f) of the Original Agreement is hereby amended in its
entirety to read as follows:
(f) Holdings' investment in the Borrower, as described on Schedule 6.05;
-6-
<PAGE> 7
(17) Section 6.05(h) of the Original Agreement is hereby amended in
its entirety to read as follows:
(h) Loans and advances of the Borrower to Holdings permitted by
Section 6.03(i); and
(18) Section 6.05(i) of the Original Agreement is hereby amended in
its entirety to read as follows:
(i) An investment in IDI and/or in equipment to be owned by the
Borrower which is related to processing product that is intended to be
manufactured by IDI in an aggregate amount not exceeding $25,000,000 and
funded solely with the Net Cash Proceeds of the issuance by Holdings after
September 1, 1996 (other than in the IPO) of equity securities, but only
upon execution and delivery by IDI to the Agent of the IDI Guaranty and
the IDI Security Agreement.
(19) Section 6.06(a) of the Original Agreement is hereby amended by
deleting the words "Salesco the full amount of which is (and may be) used by
Salesco to pay a dividend in cash to" from the fourth and fifth lines thereof.
(20) Section 6.10(d) of the Original Agreement is hereby amended in
its entirety to read as follows: "[Intentionally omitted]".
(21) Section 6.12(c) of the Original Agreement is hereby amended in
its entirety to read as follows:
(c) The transactions between the Borrower and IDI described on
Exhibit CC hereto;
(22) Section 6.13 of the Original Agreement is hereby amended by
adding thereto, immediate before the period at the end thereof, the following:
, and (z) the costs, not to exceed the Net Cash Proceeds of the issuance
of equity securities of Holdings after September 1, 1996 (other than in
the IPO) remaining after the prepayment, if any, required by Section
2.10(e) hereof, of the construction of one or more scrap substitute
manufacturing facilities owned by the Borrower or IDI (but not by both)
(23) Section 6.15 of the Original Agreement is hereby amended by
replacing the period at the end of subparagraph (b) thereof with the following:
"; and", and by adding the following subparagraph (c) thereto:
(c) The Borrower may, out of the Net Cash Proceeds of the IPO, (i)
prepay in full the principal amount of the Indebtedness of the Borrower
incurred pursuant to the
-7-
<PAGE> 8
Subordinated Notes, together with accrued interest thereon and premium
required to be paid thereon or (ii) prepay in part such Indebtedness
incurred pursuant to the Subordinated Notes, so long as an amount of such
Net Cash Proceeds equal to the principal amount of the Subordinated Notes
outstanding after such prepayment is used to prepay principal of Term
Loans.
(24) Section 6.18 of the Original Agreement is hereby amended in its
entirety to read as follows:
6.18. Maintenance of Business. The Borrower shall not change its
primary line of business from that of either constructing, owning and
operating a steel mini-mill or constructing, owning and operating a steel
mini-mill and one or more scrap substitute manufacturing facilities, shall
not permit Holdings to change it sole line of business from owning all the
capital stock of the Borrower and shall not permit IDI, if it is
organized, to change its primary line of business from that of
constructing, owning and operating one or more scrap substitute
manufacturing facilities.
(25) Section 6.19 of the Original Agreement is hereby amended in its
entirety to read as follows:
6.19. Subsidiaries. The Borrower shall not organize, incorporate,
acquire or otherwise suffer to exist any Subsidiaries, except IDI (if IDI
is organized), and Holdings shall not organize, incorporate, acquire or
otherwise suffer to exist any Subsidiaries except the Borrower and
Subsidiaries of the Borrower.
(26) Exhibit CC to the Original Agreement is hereby amended and
restated in its entirety to read as set forth on Annex 1 hereto.
(26) Exhibit DD to the Original Agreement is hereby deleted.
Section 2. Additional Amendments to the Original Agreement. Upon the
effectiveness of the Holdings Merger, the following amendments (the "Additional
Amendments") to the Original Agreement shall be made:
(1) The Original Agreement is hereby amended by replacing each of
the phrases "Holdings", "the Borrower, Holdings", "Holdings, the Borrower",
"Holdings and the Borrower", "the Borrower and Holdings", "Holdings or the
Borrower" and "the Borrower or Holdings", wherever any of such phrases appears
in the Original Agreement, with the words "the Borrower".
-8-
<PAGE> 9
(2) The Original Agreement is hereby amended by replacing the word
"Holdings'", wherever such word appears in the Original Agreement, with the
words "the Borrower's".
(3) Section 1.01 of the Original Agreement is hereby amended by
adding, in the appropriate alphabetical order, the following defined term:
"Holdings Merger" shall mean the merger of Holdings with and into
the Borrower.
(4) Section 1.01 of the Original Agreement is hereby amended by
amending and restating the defined terms "Additional Common Equity", "Borrower
Group", "Change of Control", "IPO", "Loan Documents" and "Security Documents" to
read, respectively, as follows:
"Additional Common Equity" shall mean common stock of Holdings (or
of the Borrower if the Holdings Merger is completed) issued for cash after
December 1, 1995.
"Borrower Group" shall mean the group consisting of the Borrower and
any of its consolidated Subsidiaries permitted hereunder.
"Change of Control" shall mean that at any time (A) either Bain or
General Electric Capital Corporation, a New York corporation ("GECC"),
shall fail to retain voting securities which provide a minimum of 50% of
the voting power Bain or GECC, as the case may be, held pursuant to its
original equity investment in the Borrower as described on Schedule
3.15A-1996 hereto, (B) the Control Group shall fail to satisfy the Control
Tests for any reason (voluntarily or involuntarily), or (C) any Person or
group of Persons (as defined in the Securities Exchange Act of 1934, as
amended) not a member of the Control Group shall own more than 20% of the
voting capital stock of the Borrower or more than 20% of the equity
securities of the Borrower.
As used herein, the term "Control Group" at any time shall mean the
following Persons: (a) Bain, (b) GECC, (c) Keith Busse and the Designated
Managers, (d) Heavy Metal, L.C., a Virginia limited liability company, (e)
Keylock Investments Limited, an Irish non-resident corporation, and
Mazelina Anstalt, a Liechenstein business trust and (f) Preussag. As used
herein, the "Control Tests" are deemed satisfied at a given time if and
only if at such time:
(x) The members of the Control Group in the aggregate own
(beneficially and of record) and have the right to vote at least 51%
of the shares of voting capital stock of the Borrower; and
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<PAGE> 10
(y) The members of the Control Group in the aggregate own
(beneficially and of record) at least 51% of the equity securities
of all classes of the Borrower.
"Holdings" shall mean Steel Dynamics Holdings, Inc., an Indiana
corporation which prior to the Salesco Merger owned all the capital stock
of Salesco and prior to the Holdings Merger owned all the capital stock of
the Borrower.
"IPO" shall mean the underwritten initial public offering of the
Borrower's equity securities.
"Loan Documents" shall mean this Agreement, the Notes, the Agreement
Among Secured Lenders, the Transfer Supplements, the Interest Rate
Protection Agreements, the Letters of Credit, the Continuing Letter of
Credit Agreement, the Letter of Credit Applications (and any other
agreements or documents pursuant to which any Letter of Credit may be
issued or amended), each Subsidiary Guaranty, the Security Documents, the
Currency Hedge Agreements, the Fifth Amendment Documents and all other
agreements and instruments extending, renewing, refinancing or refunding
any indebtedness, obligation or liability arising under any of the
foregoing, in each case as the same may be amended, modified or
supplemented from time to time hereafter.
"Security Documents" shall mean the Security Agreement, the IDI
Security Agreement, the IDI Guaranty, the Mortgage, the Assignment of
Contracts (and each assignment of contract entered into pursuant to
Section 5.15 hereof), together with the Consents to Assignment of
Contracts (and each consent to assignment of contract delivered pursuant
to Section 5.15 hereof) and any other agreements or instruments from time
to time to time granting or purporting to grant the Agent a Lien in any
property for the benefit of the Lenders to secure the Obligations, or
constituting a Guaranty Equivalent for the Obligations.
(5) Section 1.01 of the Original Agreement is hereby amended by
deleting the following defined term: "Holdings Security Agreement".
(6) Section 3.13 of the Original Agreement is hereby amended in its
entirety to read as follows:
3.13. Subsidiaries. Except as otherwise specifically permitted by
this Agreement, the Borrower has no Subsidiaries other than, if IDI is
organized, IDI.
(7) Section 4.05(s) of the Original Agreement is hereby amended in
its entirety to read as follows: " [Intentionally omitted] ".
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<PAGE> 11
(8) Section 5.01(i)(ii) of the Original Agreement is hereby amended
by deleting the phrase "their respective stockholders" and replacing it with the
phrase "its stockholders".
(9) Section 6.03(i) of the Original Agreement is hereby amended in
its entirety to read as follows: "[Intentionally omitted]".
(10) Section 6.04(e) of the Original Agreement is hereby amended in
its entirety to read as follows: "Any Subsidiary Guaranty".
(11) Section 6.04(f) of the Original Agreement is hereby amended in
its entirety to read as follows: "[Intentionally omitted]".
(12) Section 6.05(f) of the Original Agreement is hereby amended in
its entirety to read as follows: "[Intentionally omitted]".
(13) Section 6.05(h) of the Original Agreement is hereby amended in
its entirety to read as follows: "[Intentionally omitted]".
(14) Section 6.06(a) of the Original Agreement is hereby amended in
its entirety to read as follows:
(a) The Borrower may, if no Event of Default or Potential Default
exists or is continuing or would result from the making of the purchase
described hereinafter, pay up to $5,500,000 in cash to repurchase stock of
the Borrower from any of the individuals employed by the Borrower listed
on Schedule 6.06 hereof, provided that a minimum aggregate equity interest
in the Borrower of 7.5% shall be owned by the remaining members of the
Borrower's management;
(15) Section 6.14 of the Original Agreement is hereby amended in its
entirety to read as follows:
6.14. Limitations on Modification of Certain Agreements and
Instruments. The Borrower shall not amend, modify or supplement, or suffer
any amendment, modification or supplement to, the Subordinated Debt
Purchase Agreement or any of the agreements governing the Subordinated
Notes (except as specifically permitted by Section 6.15(b)), the
Stockholders' Agreement among the stockholders of Steel Dynamics Holdings,
Inc. or its certificate of incorporation or by-laws (or similar
constituent documents) except that the Borrower may, without the consent
of the Required Lenders, amend or modify the sections of its certificate
of incorporation or bylaws or Stockholders' Agreement listed on Schedule
6.14 hereto and may amend or modify the Stockholders' Agreement to permit
the addition of new
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<PAGE> 12
stockholders whose rights thereunder are not greater than the rights of
the original stockholders, and except that the Borrower may amend or
modify Section 10.5 of the Subordinated Debt Purchase Agreement in order
to permit the investment in Qualitech Steel Corporation which is permitted
by Section 6.05(a) of this Agreement and in order to make amendments to
the Subordinated Debt Purchase Agreement which correspond to the
amendments hereto made by the Fifth Amendment, and except that the
Stockholders Agreement may be amended to reflect the Holdings Merger and
the fact that following the Holdings Merger the parties to such
Stockholders Agreement shall no longer own equity securities of Steel
Dynamics Holdings, Inc., but rather shall own equity securities of the
Borrower.
(16) Section 6.18 of the Original Agreement is hereby amended in its
entirety to read as follows:
6.18. Maintenance of Business. The Borrower shall not change its
primary line of business from that of either constructing, owning and
operating a steel mini-mill or constructing, owning and operating a steel
mini-mill and one or more scrap substitute manufacturing facilities, shall
not permit IDI, if it is organized, to change its primary line of business
from that of constructing, owning and operating one or more scrap
substitute manufacturing facilities.
(17) Section 6.19 of the Original Agreement is hereby amended in its
entirety to read as follows:
6.19. Subsidiaries. The Borrower shall not organize, incorporate,
acquire or otherwise suffer to exist any Subsidiaries, except IDI (if IDI
is organized).
(18) The Original Agreement is hereby amended by adding a new
Schedule 3.15A-1996 thereto, in the form attached as Annex 2 hereto.
Section 3. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties set forth in the Original
Agreement are true and correct on and as of the date hereof as if made on and as
of the date hereof (except for any representation or warranty which was
expressly limited to an earlier date, in which case such representations and
warranties shall be true and correct on and as of such earlier date), and that
no Event of Default or Potential Default has occurred and is continuing or
exists on and as of the date hereof.
(b) The execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of the Borrower, has
been duly authorized by all necessary
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<PAGE> 13
governmental approvals, if any, and does not and will not contravene or conflict
with any provision of law or of the organizational instruments of the Borrower
or of any agreement or instrument binding on it.
(c) This Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
Section 4. Instructions to Agent. If the Salesco Merger and the
Holdings Merger are completed simultaneously, the Required Lenders hereby
instruct the Agent to release, upon such completion, the shares of Salesco and
of Borrower (the "Pledged Shares") held as collateral pursuant to the Pledge and
Security Agreements of each of Holdings and Salesco, each dated as of June 30,
1994. If the Holdings Merger is not completed, the Required Lenders hereby
instruct the Agent to release, upon completion of the Salesco Merger, the
Pledged Shares in return for replacement certificates representing the shares of
the Borrower held by Holdings.
Section 5. Consent to Amendment of Subordinated Debt Purchase
Agreement. Notwithstanding the restrictions of Section 6.14 of the Original
Agreement, by executing and delivering this Amendment, the Required Lenders
hereby consent to the Borrower's entering into a Consent and Amendment to the
Subordinated Debt Purchase Agreement, in form satisfactory to the Agent, the
only substance of which is to amend provisions of such Purchase Agreement which
correspond to provisions of the Original Agreement amended hereby in a manner
corresponding to the amendments made herein.
Section 6. Miscellaneous. (a) The Initial Amendments shall become
effective upon (i) execution and delivery hereof by the Required Lenders, the
Borrower and the Agent and (ii) the consummation of the Salesco Merger. The
Additional Amendments shall become effective upon (i) execution and delivery
hereof by all of the Lenders, the Borrower and the Agent and (ii) the
consummation of the Holdings Merger. The execution below by the Required Lenders
shall constitute a direction to the Agent to execute this Amendment and shall
constitute consent of the Required Lenders to the Salesco Merger. The execution
below by all of the Lenders shall constitute consent of the Lenders to the
Holdings Merger.
(b) The Original Agreement, as amended by this Amendment, is in all
respects ratified, approved and confirmed and shall, as so amended, remain in
full force and effect. From and
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<PAGE> 14
after the date hereof, all references to the "Agreement" in the Original
Agreement and in the other Loan Documents shall be deemed to be references to
the Original Agreement as amended by this Amendment.
(c) This Amendment shall be deemed to be a contract under the laws
of the State of New York and for all purposes shall be governed by and construed
and enforced in accordance with the laws of said State.
(d) This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Amendment as of the date first
above written.
STEEL DYNAMICS, INC.
By /s/ [Signature Illegible]
-------------------------------------
Title: Vice President
MELLON BANK, N.A., as Lender and
as Agent
By /s/ Roger N. Stanier
-------------------------------------
Title: Vice President
KREDITANSTALT FUR WIEDERAUFBAU
as Senior Co-Agent
By /s/ [Signature Illegible]
-------------------------------------
Title: Vice President
By /s/ [Signature Illegible]
-------------------------------------
Title: Senior Project Manager
BANQUE NATIONALE DE PARIS
as Senior Co-Agent
By /s/ Richard Cushing
-------------------------------------
Title: Vice President
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<PAGE> 15
COMERICA BANK
as Senior Co-Agent
By /s/ Phillip A. Coosaia
---------------------------------------
Title: Vice President
Name: Phillip A. Coosaia
BANK ONE INDIANAPOLIS, NATIONAL ASSOCIATION
as Co-Agent
By /s/ Dale C. Arfman
---------------------------------------
Title: Vice President
NBD BANK, N.A.
as Co-Agent
By /s/ [Signature Illegible]
---------------------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
as Co-Agent
By /s/ Jun Wantanabe
---------------------------------------
Title : Senior Vice President
-15-
<PAGE> 16
BANK AUSTRIA AKTIENGESELLSCHAFT
as Co-Agent
By /s/ J. Anthony Seay
-------------------------------------------
Title: Vice President, BANK AUSTRIA
By /s/ George M. Williams, III
-------------------------------------------
Title: Asst. Vice President, BANK AUSTRIA
COMMERZBANK AKTIENGELSELLSCHAFT
By /s/ Karl-Heinz Schroter
-------------------------------------------
Title : Vice President
By /s/ Hermann J. Schutterle
-------------------------------------------
Title: Assistant Vice President
FORT WAYNE NATIONAL BANK
By /s/ Gerald Witte
-------------------------------------------
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH
By /s/ [Siganture Illegible]
-------------------------------------------
Title: Vice President
By /s/ [Signature Illegible]
-------------------------------------------
Title: Vice President
-16-
<PAGE> 17
DEUTSCHE BANK AG, CHICAGO AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ David S. Berger
-------------------------------------------
Title: Vice President
By /s/ Hans Roderich
-------------------------------------------
Title: Associate
NATIONAL CITY BANK, INDIANA
By /s/ [Signature Illegible]
-------------------------------------------
Title: Vice President
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<PAGE> 18
ANNEX 1
EXHIBIT CC
Holdings Line of Business
The business of Steel Dynamics Holdings, Inc. is to be the ownership of
all of the issued and outstanding capital stock of the Borrower.
IDI Line of Business
The business of Iron Dynamics, Inc., if it is organized, is to construct,
own and operate one or more scrap substitute manufacturing facilities.
Transactions between IDI and the Borrower
Until such time as IDI incurs Indebtedness (as to which incurrence the
Credit Agreement requires the approval of the Required Lenders), the Borrower
may provide overhead, accounting services and management services to IDI without
cash compensation therefor.
<PAGE> 19
ANNEX 2
SCHEDULE 3.15A-1996
[information regarding equity security ownership of the Borrower
by Control Group to be provided]
<PAGE> 20
SCHEDULE I
STEEL DYNAMICS, INC.
Final Acceptance Certificate
The undersigned, who is __________ of Steel Dynamics, Inc. (the
"Borrower"), hereby certifies as follows:
1. The Final Acceptance Test referred to in Section 14.3 of the SMS
Documents (assuming (contrary to fact) that the modifications set forth on
Schedule II to such Seventh Amendment had been made to the SMS Documents) has
been completed for all portions of the Phase I Project supplied by SMS, in which
Test such portion of the Phase I Project met the guaranteed performance
specified in the SMS Documents (assuming (contrary to fact) that the
modifications set forth on Schedule II to such Seventh Amendment had been made
to the SMS Documents).
2. Capitalized undefined terms used herein shall have the meanings
assigned them in that certain Credit Agreement dated as of June 30,1994, between
the Borrower, Mellon Bank, N.A., as Agent and the lenders parties thereto from
time to time, as the same may be amended or modified.
WITNESS THE DUE execution hereof as of the _____ day of ____________,
1996.
___________________________________
Name:
Title:
<PAGE> 21
SCHEDULE II
The modifications referred to in the definition of the term "Phase I Project
Acceptance" are the modifications set forth under the heading "SDI Request" in
each of items 1 through 7 of the Memo, dated September 10, 1996, from W. P.
Burns of R. T. Patterson Co., Inc. to A. R. Pilz of The Lathrop Company, a copy
of which Memo is attached to and forms a part of this Schedule II.
<PAGE> 1
Exhibit 10.2
LOAN AGREEMENT
between
INDIANA DEVELOPMENT FINANCE AUTHORITY
and
STEEL DYNAMICS, INC.
$21,400,000
Indiana Development Finance Authority
Taxable Economic Development Revenue Bonds, Series 1995
(Steel Dynamics, Inc. Project)
Dated
as of
May 1, 1995
<PAGE> 2
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only)
Preambles Page
ARTICLE I DEFINITIONS............................................ 2
Section 1.1. Use of Defined Terms................................... 2
Section 1.2. Definitions............................................ 2
Section 1.3. Interpretation......................................... 4
Section 1.4. Captions and Headings.................................. 5
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 6
Section 2.1. Representations, Warranties and Covenants of the Issuer 6
Section 2.2. Representations, Warranties and Covenants of the
Borrower............................................... 7
ARTICLE III ACQUISITION AND EQUIPPING OF THE PROJECT;
ISSUANCE OF THE BONDS.................................. 10
Section 3.1. Acquisition and Equipping of the Manufacturing
Facility; Title........................................ 10
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. 10
Section 3.3. Disbursements from the Project Fund.................... 10
Section 3.4. Establishment of Completion Date; Obligation of
Borrower to Complete................................... 11
Section 3.5. Investment of Fund Moneys.............................. 12
ARTICLE IV LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS.................. 14
Section 4.1. Loan Repayment; Delivery of Note and Letter of Credit.. 14
Section 4.2. Additional Payments.................................... 15
Section 4.3. Place of Payments...................................... 15
Section 4.4. Obligations Unconditional.............................. 15
Section 4.5. Assignment of Agreement and Revenues................... 16
Section 4.6. Letter of Credit....................................... 16
ARTICLE V ADDITIONAL AGREEMENTS AND COVENANTS.................... 17
Section 5.1. Right of Inspection.................................... 17
Section 5.2. Sale, Lease or Grant of Use by Borrower................ 17
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<PAGE> 3
Section 5.3. Indemnification........................................ 17
Section 5.4. Assignment by Issuer................................... 18
Section 5.5. Borrower's Performance Under Indenture................. 18
Section 5.6. Maintenance of Project................................. 19
Section 5.7. Balance in the Debt Service Reserve Fund............... 19
Section 5.8. Reimbursement of Issuer for Deposits to
Debt Service Reserve Fund.............................. 19
Section 5.9 Acknowledgement of Prior Lien.......................... 19
ARTICLE VI REDEMPTION OF BONDS.................................... 20
Section 6.1. Optional Redemption.................................... 20
Section 6.2. Extraordinary Optional Redemption...................... 20
Section 6.3. Actions by Issuer...................................... 22
Section 6.4. Required Deposits for Optional Redemption.............. 22
Section 6.5. Mandatory Redemption of Bonds.......................... 22
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES......................... 23
Section 7.1. Events of Default...................................... 23
Section 7.2. Remedies on Default.................................... 24
Section 7.3. No Remedy Exclusive.................................... 25
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses.......... 25
Section 7.5. No Waiver.............................................. 26
Section 7.6. Remedies Subject to Bank's Direction................... 26
Section 7.7. Retained Rights of Issuer.............................. 26
ARTICLE VIII MISCELLANEOUS.......................................... 27
Section 8.1. Term of Agreement...................................... 27
Section 8.2. Notices................................................ 27
Section 8.3. Extent of Covenants of the Issuer; No Personal
Liability.............................................. 27
Section 8.4. Binding Effect......................................... 27
Section 8.5. Amendments and Supplements............................. 27
Section 8.6. Execution Counterparts................................. 28
Section 8.7. Severability........................................... 28
Section 8.8. Governing Law.......................................... 28
Exhibit A - NOTE.................................................... A-1
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<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of May 1, 1995 between the
INDIANA DEVELOPMENT FINANCE AUTHORITY, a body corporate and politic, duly
organized and validly existing under the laws of the State of Indiana (the
"Issuer"), and STEEL DYNAMICS, INC., an Indiana corporation (the "Borrower"),
under the circumstances summarized in the following recitals (the capitalized
terms not defined above or in the recitals being used therein as defined in or
pursuant to Article I hereof):
A. Pursuant to the provisions of the laws of the State, including the Act,
the Issuer plans to undertake the financing of certain economic development
facilities as more fully described in the Indenture (the "Project"), by issuing
its $21,400,000 Taxable Economic Development Revenue Bonds. Series 1995 (Steel
Dynamics, Inc. Project) (the "Bonds").
B. The Issuer intends to lend the proceeds of the sale of the Bonds to the
Borrower to reimburse the Borrower for qualifying costs it incurred to acquire,
construct and equip the Project.
C. The Bonds will be issued under the terms of a Trust Indenture (the
"Indenture") of even date herewith between the Issuer and NBD Bank, N.A.,
Indianapolis, Indiana, as trustee (the "Trustee"); and
D. The Borrower's obligations to repay the loan are evidenced by this
Agreement and the Borrower's execution and delivery to the Issuer of its
promissory note (the "Note") concurrently herewith and are secured by certain
Revenues described in the Indenture.
E. The Borrower and the Issuer have full right and lawful authority to
enter into this Agreement and to perform and observe the provisions hereof on
their respective parts to be performed and observed.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto covenant, agree and bind themselves as
follows (provided that any obligation of the Issuer created by or arising out of
this Agreement shall not be a general debt on its part but shall be payable
solely out of the Revenues):
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. Words and terms defined in the
Indenture shall have the same meanings when used herein, unless the context or
use clearly indicates another meaning or intent. In addition, the words and
terms set forth in Section 1.2 hereof shall have the meanings set forth therein
unless the context or use clearly indicates another meaning or intent.
Section 1.2. Definitions. As used herein:
"Additional Payments" means the amounts required to be paid by the
Borrower pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.
"Bonds" means the Indiana Development Finance Authority Taxable Economic
Development Revenue Bonds, Series 1995 (Steel Dynamics, Inc. Project) authorized
in the Indenture, in the original principal amount of $21,400,000.
"Completion Date" means the date of completion of the Project as certified
pursuant to Section 3.4 hereof.
"Cost of the Project" means the sum of the items authorized to be paid
from the Project Fund pursuant to the provisions of (a) through (h) of Section
3.3 hereof.
"Engineer" means an individual or firm selected by the Borrower and
qualified to practice the profession of engineering or architecture under the
laws of the State.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events described
as constituting Force Majeure in Section 7.1 hereof.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to
time.
"Loan" means the loan by the Issuer to the Borrower of the proceeds
received from the sale of the Bonds.
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<PAGE> 6
"Loan Payment Date" means any date on which any of the Loan Payments are
due and payable, whether at maturity, upon acceleration, call for redemption or
prepayment, or otherwise.
"Loan Payments" means the amounts required to be paid by the Borrower in
repayment of the Loan pursuant to the provisions of the Note and of Section 4.1
hereof and any additional amounts necessary to keep the Debt Service Reserve
Fund Fully Funded or to reimburse the Issuer for any deposits made to keep the
Debt Service Reserve Fund Fully Funded.
"Manufacturing Facility" means the Borrower's scrap steel recycling mill
and related facilities, including the Project, located near the City of Butler,
in DeKalb County, Indiana.
"Note" means the promissory note of the Borrower, dated as of even date
with the Bonds, in the form attached hereto as Exhibit A and in the principal
amount of $21,400,000 evidencing the obligation of the Borrower to make Loan
Payments.
"Notice Address" means:
(a) As to the Issuer: Indiana Development Finance Authority
One North Capitol, Suite 320
Indianapolis, Indiana 46204
Attention: Executive Director
(b) As to the Borrower: Steel Dynamics, Inc.
4500 County Road 59
Butler, Indiana 46721
Attention: Tracy Shellabarger
Chief Financial Officer
(c) As to the Trustee: NBD Bank, N.A.
One Indiana Square, Suite 836
Indianapolis, Indiana 46266
Attention: Corporate Trust Department
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<PAGE> 7
(d) As to the Bank: National City Bank, Indiana
101 West Washington, Suite 200 E
Indianapolis, Indiana 46255
Attention: Reagan Rick
(e) As to the Underwriter: McDonald & Company Securities, Inc.
800 Superior Avenue, Suite 2100
Cleveland, Ohio 44114-2603
Attention: David Stickler
or such additional or different address, notice of which is given under Section
8.2 hereof.
"Trustee" means the Trustee at the time acting as such under the
Indenture, originally NBD Bank, N.A. as Trustee, and any successor Trustee as
determined or designated under or pursuant to the Indenture.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to be held harmless and
indemnified under Section 5.3 hereof, to be reimbursed for attorney's fees and
expenses under Section 7.4 hereof, to sue for and collect payments due the
Issuer under the Note or the Loan Agreement under Section 5.8 in the manner
provided under Section 7.2(a) and to give or withhold consent to amendments,
changes, modifications, alterations and termination of this Agreement under
Section 8.5 hereof.
"Underwriter" means McDonald & Company Securities, Inc., as the original
purchaser of the Bonds.
Section 1.3. Interpretation. Any reference herein to the Issuer or to any
member or officer of the Issuer includes entities or officials succeeding to
their respective functions, duties or responsibilities pursuant to or by
operation of law or lawfully performing their respective functions.
Any reference to a section or provision of the Constitution of the State
or the Act, or to a section, provision or chapter of the Indiana Code or to any
statute of the United States of America, includes that section, provision,
chapter or statute as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision, chapter or statute shall be
applicable solely by reason of this provision if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Holders, the Trustee,
the Bank or the Borrower under this Agreement.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder"
-4-
<PAGE> 8
and similar terms refer to this Agreement; and the term "hereafter" means after,
and the term "heretofore" means before, the date of delivery of the Bonds. Words
of any gender include the correlative words of the other genders, unless the
sense indicates otherwise.
Section 1.4. Captions and Headings. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections,
paragraphs, subparagraphs or clauses hereof.
(End of Article I)
-5-
<PAGE> 9
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Representations, Warranties and Covenants of the Issuer. The
Issuer represents and warrants that:
(a) It is a duly organized and validly existing body corporate and
politic under the laws of the State:
(b) It has full legal right, power and authority pursuant to the Act
to finance the Project through the issuance of the Bonds; has made the
necessary findings of public purpose, has given any necessary notices and
has taken all other steps and followed all procedures required by the
Constitution and laws of the State (including the Act) in connection
therewith; and has full legal right, power and authority to (i) enter into
this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement,
the Letter of Representations and the Indenture, (ii) execute the Official
Statement, (iii) issue, sell and deliver the Bonds, and (iv) carry out and
consummate all other transactions contemplated by this Agreement, the
Reimbursement Agreement, the Bond Purchase Agreement, the Letter of
Representations and the Indenture.
(c) It has duly authorized (i) the execution, delivery and
performance of its obligations under this Agreement, the Bonds, the
Reimbursement Agreement, the Bond Purchase Agreement, the Letter of
Representations and the Indenture, and (ii) the execution of the Official
Statement, and (iii) the taking of any and all such actions as may be
required on the part of the Issuer to carry out, give effect to and
consummate the transactions contemplated by such instruments.
(d) This Agreement, the Reimbursement Agreement, the Bond Purchase
Agreement, the Letter of Representations and the Indenture constitute
legal, valid and binding obligations of the Issuer, enforceable in
accordance with their respective terms: this Agreement, the Reimbursement
Agreement, the Bond Purchase Agreement, the Letter of Representations, the
Official Statement and the Indenture have been duly authorized and
executed by the Issuer; and. when authenticated by the Trustee in
accordance with the provisions of the Indenture, the Bonds will have been
duly authorized, executed, issued and delivered and will constitute legal,
valid and binding special obligations of the Issuer in conformity with the
provisions of the Act and the Constitution of the State.
(e) There is no action, suit, proceeding, inquiry, or investigation
at law or in equity or before or by any court, public board or body,
pending or, to the best of the knowledge of the Issuer, threatened against
the Issuer, nor to the best of the knowledge of the Issuer is there any
basis therefor, which in any manner questions the validity of the Act, the
powers of the Issuer referred to in paragraph (b) above or the validity of
any proceedings taken by the Issuer in connection with the issuance of the
Bonds or wherein
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<PAGE> 10
any unfavorable decision, ruling or finding could materially adversely
affect the transactions contemplated by this Agreement or which, in any
way, would adversely affect the validity or enforceability of the Bonds,
this Agreement, the Reimbursement Agreement, the Bond Purchase Agreement,
the Letter of Representations or the Indenture (or of any other instrument
required or contemplated for use in consummating the transactions
contemplated thereby and hereby).
(f) The execution and delivery by the Issuer of this Agreement, the
Reimbursement Agreement, the Bonds, the Bond Purchase Agreement, the
Letter of Representations, the Official Statement and the Indenture in
compliance with the provisions of each of such instruments will not
conflict with or constitute a breach of, or default under, any material
commitment, agreement or other instrument to which the Issuer is a party
or by which it is bound, or under any provision of the Act, the
Constitution of the State or any existing law, rule, regulation,
ordinance, judgment, order or decree to which the Issuer is subject.
(g) The Issuer will do or cause to be done all things necessary, so
far as lawful, to preserve and keep in full force and effect its existence
or to assure the assumption of its obligations under this Agreement, the
Reimbursement Agreement, the Bond Purchase Agreement, the Indenture, the
Letter of Representations and the Bonds by any successor public body.
Section 2.2. Representations, Warranties and Covenants of the Borrower.
The Borrower represents, warrants and covenants that:
(a) The Borrower is a corporation duly organized and validly
existing under the laws of the State of Indiana, is duly qualified to
conduct business in the State and has full corporate power and authority
to execute, deliver and perform this Agreement, the Bond Purchase
Agreement, the Reimbursement Agreement, the Letter of Representations and
the Note and to enter into and carry out the transactions contemplated by
those documents: that execution, delivery and performance do not, and will
not, violate any provision of law applicable to the Borrower or its
Articles of Incorporation or By-laws and do not, and will not, conflict
with or result in a default under any agreement or instrument to which the
Borrower is a party or by which the Borrower is bound. This Agreement, the
Bond Purchase Agreement, the Reimbursement Agreement, the Letter of
Representations and the Note, by proper corporate action, have been duly
authorized, executed and delivered by the Borrower and are valid and
binding obligations of the Borrower.
(b) The financing of the Project by the Issuer for the Borrower has
constituted an inducement to the Borrower to locate the Manufacturing
Facility in the State. The Manufacturing Facility will increase employment
opportunities within the State of Indiana. The Manufacturing Facility will
be operated and maintained in such manner as to conform in all material
respects with all applicable zoning, planning, building, health,
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<PAGE> 11
environmental and other applicable governmental rules and regulations and
as to be consistent with the Act.
(c) Except as previously disclosed in the Official Statement, no
litigation at law or in equity nor any proceeding before any governmental
agency or other tribunal involving the Borrower is pending or, to the
knowledge of the Borrower, threatened, in which any liability of the
Borrower is not adequately covered by insurance or in which any judgment
or order would have a material and adverse effect upon the business or
assets of the Borrower or would materially and adversely affect the
operation of the Project, the validity of this Agreement, the Bond
Purchase Agreement, the Reimbursement Agreement, the Letter of
Representations and the Note or the performance of the Borrower's
obligations thereunder or the transactions contemplated hereby.
(d) The Borrower has not made and will not make any changes to the
Project or to the operation thereof which would affect the qualification
of the Project under the Act.
(e) The Borrower has obtained or will obtain at the proper times all
consents, approvals, authorizations and orders, of any governmental or
regulatory authority that are required to be obtained by the Borrower as a
condition precedent to the issuance of the Bonds, the execution and
delivery of the Reimbursement Agreement, this Agreement or the Note and
the performance by the Borrower of its obligations thereunder, and that
are required for the operation of the Project.
(f) The Borrower has taken all necessary action required to make the
Reimbursement Agreement, this Agreement and the Note the valid obligations
of the Borrower which they purport to be; when executed and delivered by
the parties thereto, the Reimbursement Agreement, this Agreement and the
Note will constitute valid and binding agreements of the Borrower and will
be enforceable against the Borrower in accordance with their respective
terms subject to the provisions of bankruptcy and similar laws and to
equitable principles.
(g) The Borrower is not in default in the payment of principal of,
or interest on, any of the Borrower's indebtedness for borrowed money, or
in default under any instrument under which, or subject to which, any
indebtedness has been incurred, and no event has occurred and is
continuing under the provisions of any agreement involving the Borrower
that, with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder, which default would
individually or in the aggregate have a material and adverse effect upon
the business or assets of the Borrower or would materially and adversely
affect the operation of the Project, the validity of this Agreement, the
Bond Purchase Agreement, the Reimbursement Agreement, the Letter
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<PAGE> 12
of Representations and the Note or the performance of the Borrower's
obligations thereunder or the transactions contemplated hereby.
(End of Article II)
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<PAGE> 13
ARTICLE III
ACQUISITION AND EQUIPPING OF THE PROJECT:
ISSUANCE OF THE BONDS
Section 3.1. Acquisition and Equipping of the Manufacturing Facility;
Title. The Borrower agrees that it will acquire, construct and equip the
Manufacturing Facility. To the extent applicable and available, any plans and
specifications for any construction of the Project, including any and all
supplements, amendments and additions (or deletions) thereto (or therefrom),
shall be made available to the Issuer, the Trustee and the Bank on written
request.
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. In
order to provide funds to finance a portion of the cost of the Project, as
provided in Section 4.1 hereof, the Issuer agrees that it will simultaneously
with the execution hereof issue, sell and cause to be delivered to the
purchasers thereof, the Bonds in the aggregate principal amount of $21,400,000
bearing interest, maturing and subject to prior redemption as set forth in the
Indenture. The Issuer will thereupon lend the proceeds of the Bonds to the
Borrower by causing the deposit of the proceeds of the Bonds as provided by the
Indenture.
Section 3.3. Disbursements from the Project Fund. The Issuer authorizes
and directs the Trustee, upon compliance with the Indenture, to disburse the
moneys in the Project Fund to or on behalf of the Borrower for all advances and
payments made with respect to any preliminary expenditures, subject to the
provisions of Section 3.4 hereof, for the purposes set forth below, and for no
other purposes:
(a) Payment or reimbursement to the Borrower of such amounts, if any, as
shall be necessary to reimburse the Borrower in full for expenditures in
connection with the preparation of plans and specifications for the Project
(including any preliminary study or planning of the Project or any aspect
thereof) and the acquisition, construction and equipping of the Project.
(b) Payment or reimbursement of any legal, financial and accounting fees
and expenses, the established administrative fees and expenses of the Issuer,
costs of the execution and filing of any instruments and the preparation of all
other documents in connection therewith, and payment or reimbursement of all
fees, costs and expenses for the preparation of this Agreement, the
Reimbursement Agreement, the Letter of Credit, the Indenture, the Bond Purchase
Agreement, the Official Statement and the Bonds, including, without limitation,
any costs of issuing the Bonds.
(c) Payment or reimbursement for labor, services, materials and supplies
used or furnished in the acquisition, construction and equipping of the Project,
all as provided in the plans, specifications and work orders therefor, payment
or reimbursement for the cost of the acquisition, construction and equipping of
utility services or other facilities and the acquisition
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<PAGE> 14
and installation of all real and personal property deemed necessary in
connection with the Project and payment or reimbursement for the miscellaneous
capitalized expenditures incidental to any of the foregoing items.
(d) Payment or reimbursement of the fees, if any, for architectural,
engineering, legal, investment banking and supervisory services with respect to
the Project.
(e) To the extent not paid by a contractor for construction or
installation with respect to any part of the Project, payment or reimbursement
of the premiums on all insurance required to be taken out and maintained prior
to the Completion Date, if any.
(f) Payment of interest on the Bonds, the taxes, assessments, and other
charges, if any, that may become payable prior to the Completion Date with
respect to the Project, or reimbursement thereof if paid by the Borrower.
(g) Payment or reimbursement of expenses incurred in seeking to enforce
any remedy against any supplier, conveyor, grantor, contractor or subcontractor
in respect of any default under a contract relating to the Project.
(h) Payment or reimbursement of any other costs permitted by the Act.
All moneys remaining in the Project Fund after the Completion Date and
after payment or provision for payment of all other items provided for in the
preceding subsections (a) to (h), inclusive, of this Section 3.3, shall at the
direction of the Borrower be used in accordance with Section 3.4 hereof.
Each of the payments referred to in this Section 3.3 shall be made upon
receipt by the Trustee of a written requisition (substantially in the form set
forth in Exhibit B to the Indenture) signed by the Authorized Borrower
Representative stating with respect to each payment to be made: (i) the
requisition number, (ii) the name, address and taxpayer identification number of
the person, firm or corporation to whom payment is due, (iii) the amount to be
paid, (iv) that each obligation mentioned therein has been properly incurred, is
a proper charge against the Project Fund and has not been the basis of any
previous withdrawal, (v) that the amount remaining in the Project Fund after the
withdrawal in question is made, the reasonable estimate of investment income
thereon, plus funds of the Borrower available for such purpose will, after
payment of the amounts then requested, be sufficient to pay the cost of
completing the Project, and (vi) in the case of subsection (h), stating that
such costs are costs permitted to be paid under the Act.
Section 3.4. Establishment of Completion Date; Obligation of Borrower to
Complete. The Completion Date shall be evidenced to the Trustee, the Issuer and
the Bank by a certificate signed by the Authorized Borrower Representative,
stating the Cost of the Project and stating that the acquisition and equipping
of the Project has been completed substantially in accordance with the plans,
specifications and work orders therefor and all labor, services, materials and
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<PAGE> 15
supplies used in such acquisition, renovation, expansion and equipping have been
paid for, and all costs and expenses incurred in connection therewith (other
than costs and expenses for which the Borrower has withheld payment) have been
paid. If the Borrower withholds the payment of any such cost or expense of the
Project, the certificate shall state the amount of such withholding and the
reason therefor. Notwithstanding the foregoing, such certificate may state that
it is given without prejudice to any rights against third parties which exist at
the date of such certificate or which may subsequently come into being.
Within ten (10) days after the delivery by the Authorized Borrower
Representative of the certificate evidencing the Completion Date, the Trustee
shall retain in the Project Fund a sum equal to the amounts necessary for
payment of Costs of the Project not then due and payable or the liability for
which the Borrower is contesting as set forth in said certificate. Any amount
not so retained in the Project Fund for such costs, and all amounts so retained
but not subsequently used and for which notice of such failure of use has been
given by the Borrower to the Trustee, shall be segregated by the Trustee and
used by the Trustee, at the direction of the Authorized Borrower Representative,
(a) to redeem Bonds on the earliest redemption date permitted by the Indenture
for which no prepayment premium or penalty pertains, or, at the option of the
Borrower, at an earlier redemption date (provided that, in neither event shall
such amounts be used to pay interest or premium on the Bonds in connection with
such redemption), (b) to purchase Bonds on the open market prior to such
redemption date (provided that, if Bonds are purchased at an amount in excess of
the principal amount thereof, the Borrower shall pay such excess out of other
funds) for the purpose of cancellation, or (c) for any other purpose, provided
that the Trustee is furnished with an opinion of Bond Counsel to the effect that
such use is lawful under the Act. The Issuer agrees to cooperate with the
Trustee and take all required action necessary to redeem the Bonds or to
accomplish any other purpose contemplated by this Section 3.4.
In the event the moneys in the Project Fund available for payment of the
Cost of the Project should not be sufficient to pay the costs thereof in full,
the Borrower agrees to pay directly the costs of completing the Project as may
be in excess of the moneys available therefor in the Project Fund. The Issuer
does not make any warranty, either express or implied, that the moneys which
will be paid into the Project Fund and which, under the provisions of this
Agreement, will be available for payment of a portion of the Cost of the
Project, will be sufficient to pay all the costs which will be incurred in that
connection. The Borrower agrees that if after exhaustion of the moneys in the
Project Fund the Borrower should pay any portion of the Cost of the Project
pursuant to the provisions of this Section 3.4, they shall not be entitled to
any reimbursement therefor from the Issuer, from the Trustee or from the Bank,
nor shall they be entitled to any diminution of the amounts payable under
Section 4.2 hereof or under the Note.
Section 3.5. Investment of Fund Moneys. At the written or oral direction
(promptly confirmed in writing) of the Authorized Borrower Representative and
subject to Section 5.08 of the Indenture, any moneys held as part of the Bond
Fund (except moneys held for purposes of
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<PAGE> 16
defeasing the Bonds pursuant to Article IX of the Indenture), the Project Fund
and the Debt Service Reserve Fund shall be invested or reinvested by the Trustee
in Eligible Investments.
(End of Article III)
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<PAGE> 17
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. Loan Repayment; Delivery of Note and Letter of Credit. Upon
the terms and conditions of this Agreement, the Issuer will make the Loan to the
Borrower. In consideration of and in repayment of the Loan, the Borrower shall
make, as Loan Payments, payments sufficient in time and amount to pay when due
all Bond Service Charges and any other payments described in the Note, all as
more particularly provided in the Note. The Note shall be executed and delivered
by the Borrower concurrently with the execution and delivery of this Agreement.
All Loan Payments shall be paid to the Trustee in accordance with the terms of
the Note for the account of the Issuer and shall be held and applied in
accordance with the provisions of the Indenture and this Agreement. To the
extent payments have been made with respect to Bond Service Charges pursuant to
draws upon the Letter of Credit and the Borrower has reimbursed the Bank for
such draws or has reimbursed the Issuer for payments made by the Issuer to the
Bank under the Reimbursement Agreement, the Borrower shall receive a credit
against its obligation to make Loan Payments under this Agreement and the Note.
On June 15, 1995, the Borrower shall deposit with the Trustee for deposit
into the Bond Fund an amount equal to one-ninth (1/9) of the interest on the
Bonds due on the first Interest Payment Date (February 15, 1996), and an amount
equal to one-fifteenth (1/15) of the principal amount due on August 15, 1996.
From July 15, 1995 to February 15, 1996, the Borrower shall deposit with the
Trustee for deposit into the Bond Fund on the fifteenth day of each month an
amount equal to one-ninth (1/9) of the interest due on the Bonds on February 15,
1996, and from July 15, 1995 to August 15, 1996, the Borrower shall deposit with
the Trustee for deposit into the Bond Fund on the fifteenth day of each month an
amount equal to one-fifteenth (1/15) of the principal due on the Bonds on August
15, 1996. After February 15, 1996, the Borrower shall deposit with the Trustee
for deposit into the Bond Fund on the fifteenth day of each month an amount
equal to one-sixth (1/6) of the interest on all Outstanding Bonds on the next
succeeding Interest Payment Date. After August 15, 1996, the Borrower shall
deposit with the Trustee for deposit into the Bond Fund on the fifteenth day of
each month an amount equal to one-twelfth (1/12) of the principal amount due on
the Bonds, whether at maturity or due to mandatory sinking fund redemption, on
the next succeeding August 15. All such payments are subject to the credits
against such payments as hereinafter described. In calculating the amount of the
deposit to be made by the Borrower immediately preceding an Interest Payment
Date, the Trustee shall take into account the then existing balance in the Bond
Fund and any investment earnings anticipated to be released from the Debt
Service Reserve Fund for deposit into the Bond Fund before or on such Interest
Payment Date. The Borrower shall notify the Issuer and the Bank in writing prior
to the date such deposits are due if the Borrower believes for any reason that
it will not be able to make the monthly deposits when due.
Upon payment in full, in accordance with the Indenture, of the Bond
Service Charges on the Bonds, whether at maturity or by redemption or otherwise,
or upon provision for the
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<PAGE> 18
payment thereof having been made in accordance with the provisions of the
Indenture, and upon payment in full of amounts owed by the Borrower to the
Issuer or the Trustee under the Loan Agreement and the Note, (i) the Note shall
be deemed fully paid, the obligations of the Borrower thereunder shall be
terminated and the Note shall be surrendered by the Trustee to the Borrower, and
shall be canceled by the Borrower, or (ii) an appropriate notation shall be
endorsed thereon evidencing the date and amount of the principal payment or
prepayment equal to the Bonds so paid, or with respect to which provision for
payment has been made, and the Note shall be surrendered by the Trustee to the
Borrower for cancellation if all Bonds shall have been paid (or provision made
therefor) and canceled as aforesaid. Unless the Borrower is entitled to a credit
under express terms of this Agreement or the Note, all payments on the Note
shall be in the full amount required thereunder.
Except for such interest of the Borrower and the Bank as may hereafter
arise pursuant to Section 5.10 or 5.11 of the Indenture, the Borrower and the
Issuer each acknowledge that neither the Borrower nor the Issuer has any
interest in the Bond Fund and any moneys deposited therein shall be in the
custody of and held by the Trustee in trust for the benefit of the Holders and,
to the extent of amounts due under the Reimbursement Agreement, the Bank.
Section 4.2. Additional Payments. The Borrower shall pay to the Issuer, as
Additional Payments hereunder, any and all reasonable costs and expenses
incurred or to be paid by the Issuer in connection with the issuance and
delivery of the Bonds or otherwise related to actions taken by the Issuer under
this Agreement, the Bond Purchase Agreement or the Indenture.
The Borrower shall pay to the Trustee its Ordinary and Extraordinary Fees
and Expenses, reasonable fees, charges and expenses (including payment of
reasonable fees, charges and expenses of its counsel or agents) for acting as
such under the Indenture.
Any payments under this Section not paid to reimburse the Issuer when due
shall bear interest at the Prime Rate plus two and one-half percent (2.5%) per
annum commencing 15 days after the Trustee or the Issuer has notified the
Borrower that such amount is due.
Section 4.3. Place of Payments. The Borrower shall make all Loan Payments
directly to the Trustee at its principal corporate trust office. Additional
Payments shall be made directly to the person or entity to whom or to which they
are due.
Section 4.4. Obligations Unconditional. The obligations of the Borrower to
make Loan Payments, Additional Payments and any payments required of the
Borrower under Section 6.03 of the Indenture shall be absolute and
unconditional, and the Borrower shall make such payments without abatement,
diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or counterclaim
which the Borrower may have or assert against the Issuer, the Trustee, any
Paying Agent or Authenticating Agent, the Bank or any other Person; provided
that the Borrower may contest or dispute the amount of any such obligation
(other than Loan Payments) so long as such contest or dispute does not result in
an Event of Default under the Indenture.
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<PAGE> 19
Section 4.5. Assignment of Agreement and Revenues. To secure the payment
of Bond Service Charges, the Issuer shall assign to the Trustee, by the
Indenture, all its right, title and interest in and to the Revenues, the
Agreement and the Note (except for Unassigned Issuer's Rights). The Borrower
hereby agrees and consents to that assignment.
Section 4.6. Letter of Credit. Simultaneously with the initial delivery of
the Bonds pursuant to the Indenture and the Bond Purchase Agreement, the
Borrower shall cause the Bank to issue and deliver the Letter of Credit to the
Trustee. The Letter of Credit may be replaced by an Alternate Letter of Credit
complying with the provisions of Section 5.12 of the Indenture. The Borrower
shall take whatever action may be necessary to maintain the Letter of Credit or
an Alternate Letter of Credit in full force and effect during the period
required by the Indenture, including the payment to the Bank of all amounts due
and payable under the Reimbursement Agreement.
(End of Article IV)
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<PAGE> 20
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. Right of Inspection. Subject to reasonable security and
safety regulations and upon seven days' written notice, the Issuer, the Bank and
the Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project.
Section 5.2. Sale, Lease or Grant of Use by Borrower. Subject to the
provisions of the Reimbursement Agreement, the other Loan Instruments, as
defined therein, and any lease or other agreement to which the Borrower is a
party or by which it is bound and with the written consent of the Issuer, which
consent shall not be unreasonably withheld, the Borrower may sell, lease or
grant the right to occupy and use the Project, in whole or in part, to others,
provided that;
(a) No such sale, lease or grant shall impair materially the
purposes of the Act to be accomplished by operation of the Project as
herein provided.
(b) There shall be delivered to the Trustee and the Bank an opinion
of Bond Counsel addressed to the Trustee and the Bank, in form and
substance reasonably acceptable to the Trustee, to the effect that such
sale, assignment or leasing shall not adversely affect the validity of the
Bonds under the Act;
(c) The purchaser, assignee, lessee or transferee shall assume in
writing all obligations of the Borrower under this Agreement, the Note and
the Reimbursement Agreement or the Borrower maintains its ability to
satisfy its obligations under this Agreement, the Note and the
Reimbursement Agreement to the satisfaction of the Issuer; and
(d) There shall be delivered to the Trustee a copy of such document
containing the prior written approval of the Bank.
Section 5.3. Indemnification. The Borrower releases the Issuer from,
agrees that the Issuer shall not be liable for, and shall indemnify the Issuer
against, all liabilities, claims, costs and expenses, including attorneys fees
and expenses, imposed upon, incurred or asserted against the Issuer on account
of; (a) any loss or damage to property or injury to or death of or loss by any
person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project; (b) any breach or
default on the part of the Borrower in the performance of any covenant or
agreement of the Borrower under this Agreement, the Reimbursement Agreement, the
Note or any related document, or arising from any act or failure to act by the
Borrower, or any of the Borrower's agents, contractors, servants, employees or
licensees; (c) the authorization, issuance, sale, trading, redemption or
servicing of the Bonds, and the provision of any information or certification
furnished in connection therewith concerning the Bonds, the Project or the
Borrower including, without limitation, the
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<PAGE> 21
Official Statement (other than information excluded in Section 11 (c)(i) of the
Bond Purchase Agreement) and information furnished by the Borrower for, and
included in, or used as a basis for preparation of, any certifications,
information statements or reports furnished by the Issuer; and (d) any claim,
action or proceeding brought with respect to the matters set forth in (a), (b),
or (c) above.
The Borrower agrees to indemnify the Trustee for, and to hold it harmless
against, all liabilities, claims, costs and expenses incurred without negligence
or willful misconduct on the part of the Trustee on account of any action taken
or omitted to be taken by the Trustee in accordance with the terms of this
Agreement, the Bonds, the Letter of Credit, the Note or the Indenture, or any
action taken at the request of or with the consent of the Borrower, including
the costs and expenses of the Trustee in defending itself against any such
claim, action or proceeding brought in connection with the exercise or
performance of any of its powers or duties under this Agreement, the Bonds, the
Indenture, the Reimbursement Agreement, the Letter of Credit or the Note.
In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the
Borrower, and the Borrower upon receipt of that notice shall have the obligation
and the right to assume the defense of the action or proceeding; provided, that
failure of a party to give that notice shall not relieve the Borrower from any
of the Borrower's obligations under this Section unless that failure materially
prejudices the defense of the action or proceeding by the Borrower. At the
Borrower's expense, an indemnified party may employ separate counsel and
participate in the defense. The Borrower shall not be liable for any settlement
made without the Borrower's consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers, agents and
employees of the Issuer and the Trustee, respectively. That indemnification is
intended to and shall be enforceable by the Issuer and the Trustee,
respectively, to the full extent permitted by law.
Section 5.4. Assignment by Issuer. Except for the assignment of this
Agreement to the Trustee, the Issuer shall not attempt to further assign,
transfer or convey its interest in the Revenues, the Note or this Agreement or
create any pledge or lien of any form or nature with respect to the Revenues or
the payments hereunder.
Section 5.5. Borrower's Performance Under Indenture. The Borrower has
examined the Indenture and approves the form and substance of, and agrees to be
bound by, its terms. The Borrower, for the benefit of the Issuer and each
Bondholder, shall do and perform all acts and things required or contemplated in
the Indenture to be done or performed by the Borrower. The Borrower is a third
party beneficiary of certain provisions of the Indenture, and Section 8.05 of
the Indenture is hereby incorporated herein by reference.
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<PAGE> 22
Section 5.6. Maintenance of Project. The Borrower shall keep and maintain
or make arrangements with others to maintain the Project in good order and
condition and in rentable and tenantable state of repair, and will make or make
arrangements with others to make, as and when necessary, all repairs, renewals
and replacements, structural and nonstructural, exterior and interior, ordinary
and extraordinary, foreseen and unforeseen.
Section 5.7. Balance in the Debt Service Reserve Fund. At any time that
the Debt Service Reserve Fund is less than Fully Funded and the Borrower has
received notice of such deficiency from the Trustee pursuant to Section 5.06 of
the Indenture, the Borrower shall deposit moneys into the Debt Service Reserve
Fund as required under the Indenture so that it is Fully Funded.
Section 5.8. Reimbursement of Issuer for Deposits to Debt Service Reserve
Fund or Payments Made Under the Reimbursement Agreement. The Borrower shall
promptly reimburse the Issuer for any deposits made to the Debt Service Reserve
Fund by the Issuer or the State in order to maintain the Debt Service Reserve
Fund as Fully Funded or for any payments made by the Issuer or the State to the
Bank under the Reimbursement Agreement. In addition, the Borrower shall pay the
Issuer, interest on such deposit or payment from the date of the deposit or
payment to the date of reimbursement at a rate equal to the highest interest
rate on the Note plus two percent (2%).
Section 5.9. Acknowledgement of Prior Lien. The Issuer, and, by its
acceptance of the assignment by the Issuer of this Agreement, the Trustee
acknowledge that the Project and substantially all of the Manufacturing Facility
are and will be subject to a prior lien in favor of certain lenders of the
Borrower and that such lien, and the rights of such lenders with respect to the
Project and the Manufacturing Facility in connection with such lien (both before
and after any foreclosure or deed in lieu of foreclosure), shall not be subject
to or affected by the terms and provisions of this Loan Agreement, the Indenture
or any of the other documents delivered in connection herewith or therewith.
Section 5.10. Extension of Letter of Credit. Prior to the time that the
Bonds are subject to optional redemption at 100% of the principal amount thereof
pursuant to Section 4.01(c) of the Indenture, the Borrower agrees to request an
extension of the Letter of Credit pursuant to Paragraph 8 thereof.
(End of Article V)
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<PAGE> 23
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Optional Redemption. Provided no Event of Default shall have
occurred and be continuing, at any time and from time to time, the Borrower may
deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made and direct the Trustee to use the moneys so
delivered for the purpose of purchasing Bonds or of reimbursing the Bank for
drawings on the Letter of Credit used to redeem Bonds called for optional
redemption in accordance with and subject to the limitations set forth in the
applicable provisions of the Indenture.
Section 6.2. Extraordinary Optional Redemption. (a) The Borrower shall
have, subject to the conditions hereinafter imposed, the option to direct the
redemption of the entire unpaid principal balance of the Bonds in accordance
with the applicable provisions of the Indenture upon the occurrence of any of
the following events:
(i) The Manufacturing Facility shall have been damaged or destroyed
to such an extent that (A) it cannot reasonably be expected to be
restored, within a period of six months, to the condition thereof
immediately preceding such damage or destruction or (B) its normal use and
operation is reasonably expected to be prevented for a period of six
consecutive months;
(ii) Title to, or the temporary use of, all or a significant part of
the Manufacturing Facility shall have been taken under the exercise of the
power of eminent domain (A) to such extent that the Manufacturing Facility
cannot reasonably be expected to be restored within a period of six months
to a condition of usefulness comparable to that existing prior to the
taking or (B) as a result of the taking, normal use and operation of the
Manufacturing Facility is reasonably expected to be prevented for a period
of six consecutive months;
(iii) As a result of any changes in the Constitution of the State,
the constitution of the United States of America, or state or federal
laws, or as a result of legislative or administrative action (whether
state or federal) or by final decree, judgment or order of any court or
administrative body (whether state or federal) entered after the contest
thereof by the Issuer, the Trustee or the Borrower in good faith, this
Agreement shall have become void or unenforceable or impossible of
performance in accordance with the intent and purpose of the parties as
expressed in this Agreement, or if unreasonable burdens or excessive
liabilities shall have been imposed with respect to the Manufacturing
Facility or the operation thereof, including, without limitation, federal,
state or other ad valorem, property, income or other taxes not being
imposed on the date of this Agreement other than ad valorem taxes
presently levied upon privately owned property used for the same general
purpose as the Manufacturing Facility; or
- 20 -
<PAGE> 24
(iv) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies, or facilities (including,
but not limited to, facilities in connection with the disposal of
industrial wastes) necessary for the operation of the Manufacturing
Facility shall have occurred or technological or other changes shall have
occurred which the Borrower cannot reasonably overcome or control and
which in the Borrower's reasonable judgment render the operation of the
Project uneconomic.
The Borrower also shall have the option, in the event that title to or the
temporary use of a portion of the Manufacturing Facility shall be taken under
the exercise of the power of eminent domain, even if the taking is not of such
nature as to permit the exercise of the redemption option upon an event
specified in clause (ii) above, to direct the redemption, at a redemption price
of 100% of the principal amount thereof prepaid, plus accrued interest to the
redemption date, of that part of the principal balance of the Outstanding Bonds
as may be payable from the proceeds received by the Borrower (after the payment
of costs and expenses incurred in the collection thereof) in the eminent domain
proceeding, provided that any such optional redemption shall be in a principal
amount of $100,000 or any integral multiple thereof, and provided further that
the Borrower shall furnish to the Issuer, the Bank and the Trustee a certificate
of an Engineer stating that (A) the property comprising the part of the
Manufacturing Facility taken is not essential to continued operations of the
Project in the manner existing prior to that taking, (B) the Project has been
restored to a condition substantially equivalent to that existing prior to the
taking, or (C) other improvements have been acquired or made which are suitable
for the continued operation of the Manufacturing Facility. Any proceeds
remaining after redemption of the Bonds under this paragraph shall be deposited
by the Trustee to the Bond Fund and applied to the then current mandatory
staking fund requirement or to reimburse the Bank for draws on the Letter of
Credit to satisfy such reimbursement.
To exercise any option under this Section, the Borrower within 90 days
following the event authorizing the exercise of that option, or at any time
during the continuation of the condition referred to in clause (iv) of the first
paragraph of this Section, shall give notice to the Issuer and to the Trustee
specifying the date of redemption, which date shall be not more than ninety days
from the date that notice is mailed, and shall make arrangements satisfactory to
the Trustee for the giving of the required notice of redemption.
The rights and options granted to the Borrower in this Section may be
exercised whether or not the Borrower is in default hereunder; provided, that
such default will not relieve the Borrower from performing those actions which
are necessary to exercise any such right or option granted hereunder.
(b) At any time that the Borrower (i) is three months delinquent on
payments under the Note, (ii) fails to maintain the Debt Service Reserve Fund
under the Indenture as Fully Funded, after receipt of notice of such deficiency
from the Trustee pursuant to Section 5.06 of the Indenture, (iii) is delinquent
on payments under the Note on any Interest Payment Date; or (iv) fails to
promptly reimburse the Issuer for any deposits to the Debt Service Reserve Fund,
- 21 -
<PAGE> 25
the Issuer shall have the option, on or after August 15, 2005, to direct the
redemption of the entire unpaid principal balance of the Bonds (in accordance
with the applicable terms of the Indenture), after giving notice to the Borrower
and to the Trustee specifying the date of redemption, which date shall be not
more than ninety days from the date the notice is mailed and shall make
arrangements with the Trustee for the giving of the required notice of
redemption.
Section 6.3. Actions by Issuer. At the request of the Borrower or the
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article VI.
Section 6.4. Required Deposits for Optional Redemption. Except with the
prior written consent of the Bank, the Trustee shall not give notice of call to
the Holders pursuant to the optional redemption provisions of Section 4.01 of
the Indenture and Sections 6.1 and 6.2(a) hereof unless prior to the date by
which the call notice is to be given there shall be on deposit with the Trustee
Eligible Funds sufficient to redeem at the redemption price thereof, including
interest accrued to the redemption date, all Bonds for which notice of
redemption is to be given.
All amounts paid by the Borrower pursuant to this Article which are used
to pay principal of, premium, if any, or interest on the Bonds, or to reimburse
the Bank or the Issuer for payments made to the Bank as reimbursements for
moneys drawn under the Letter of Credit and used for such purposes, shall
constitute prepaid Loan Payments. No moneys drawn under the Letter of Credit
shall be used to pay any portion of the premium on the Bonds.
Section 6.5. Mandatory Redemption of Bonds. If, as provided in the Bonds
and the Indenture, the Bonds become subject to mandatory redemption for any
reason the Borrower shall deliver or cause to be delivered to the Trustee, upon
the date requested by the Trustee, moneys sufficient to pay in full the Bonds in
accordance with the mandatory redemption provisions relating thereto set forth
in the Indenture.
(End of Article VI)
- 22 -
<PAGE> 26
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall be an Event of
Default:
(a) The Borrower shall fail to observe and perform any agreement,
term or condition contained in this Agreement other than as described in
subparagraph (c) or (d) below, and the continuation of such failure for a
period of 30 days after notice thereof shall have been given to the
Borrower by the Issuer or the Trustee, or for such longer period as the
Issuer and the Trustee may agree to in writing; provided, that if the
failure is other than the payment of money and is of such nature that it
can be corrected but not within the applicable period, that failure shall
not constitute an Event of Default so long as the Borrower institutes
curative action within the applicable period and diligently pursues that
action to completion;
(b) The Borrower shall: (i) admit in writing its inability to pay
its debts generally as they become due; (ii) have an order for relief
entered in any case commenced by or against it under the federal
bankruptcy laws, as now or hereafter in effect; (iii) commence a
proceeding under any other federal or state bankruptcy, insolvency,
reorganization or similar law, or have such a proceeding commenced against
it and either have an order of insolvency or reorganization entered
against it or have the proceeding remain undismissed and unstayed for 90
days; (iv) make an assignment for the benefit of creditors; or (v) have a
receiver or trustee appointed for it or for the whole or any substantial
part of its property;
(c) The Borrower shall be three months delinquent in the required
payment under the Note; and
(d) The Borrower shall be delinquent in payments under the Note on
any Interest Payment Date.
Notwithstanding the foregoing, if, by reason of Force Majeure, the
Borrower is unable to perform or observe any agreement, term or condition hereof
which would give rise to an Event of Default under subsection (a) hereof, the
Borrower shall not be deemed in default during the continuance of such
inability. However, the Borrower shall promptly give notice to the Trustee and
the Issuer of the existence of an event of Force Majeure and shall use its best
efforts to remove the effects thereof; provided that the settlement of strikes
or other industrial disturbances shall be entirely within the Borrower's
discretion.
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes; lockouts or other industrial disturbances;
acts of public enemies; orders or restraints of any kind of the government
of the
-23-
<PAGE> 27
United States of America or of the State or any of their departments,
agencies, political subdivisions or officials, or any civil or military
authority; insurrections; civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; tornados; storms;
droughts; floods; arrests; restraint of government and people; explosions;
breakage, malfunction or accident to facilities, machinery, transmission
pipes or canals; partial or entire failure of utilities; shortages of
labor, materials, supplies or transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Borrower.
The declaration of an Event of Default under subsection (b) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2. Remedies on Default. (a) The Issuer may pursue the following
remedies whenever there exists an Event of Default:
(i) The Issuer may declare all Loan Payments and the Note to be
immediately due and payable;
(ii) The Issuer may have access to, inspect, examine and make copies
of the books, records, accounts and financial data of the Borrower
pertaining to the Project; and
(iii) The Issuer may pursue all remedies now or hereafter existing
at law or in equity to collect all amounts then due and thereafter to
become due under this Agreement or the Note or to enforce the performance
and observance of any other obligation or agreement of the Borrower under
those instruments.
Amounts collected by the Issuer pursuant to this paragraph shall be applied
first to redeem the Bonds pursuant to Section 6.2(b) hereof or, if payment of
the Bonds has been accelerated, pursuant to Section 7.03 of the Indenture. Any
amounts collected in excess of the amount necessary to either redeem or
accelerate the payment of the Bonds shall be retained by the Issuer.
(b) The Trustee may pursue the following remedies:
(i) If there is an Event of Default pursuant to Section 7.01(a) or
(b) of the Indenture, or an acceleration in the payment of the Bonds
pursuant to an Event of Default under Section 7.01(c) of the Indenture,
the Trustee shall declare all Loan Payments and the Note to be immediately
due and payable, and may pursue all remedies now or hereafter existing at
law or in equity to collect such amounts then due and payable under this
Agreement and the Note;
- 24-
<PAGE> 28
(ii) If the Borrower commits an Event of Default under Section
7.1(a) hereof, the Trustee may pursue all remedies now or hereafter
existing at law or in equity to collect all amounts then due and
thereafter to become due under this Agreement or the Note and to enforce
the performance and observance of any other obligation or agreement of the
Borrower under those instruments; or
(iii) If the Borrower commits an Event of Default under Section
7.1(a) hereof, the Trustee will be granted access to, inspect, examine and
make copies of the books, records, accounts and financial data of the
Borrower pertaining to the Project.
Subject to the rights of the Trustee to receive the payment of its costs and
expenses incurred in connection with an acceleration in the payment of the
Bonds, any amounts collected by the Trustee pursuant to this paragraph shall be
applied first to the payment of the Bonds. Any amounts collected by the Trustee
in excess of the amount necessary to pay the Bonds shall be paid to the Issuer.
(c) Notwithstanding the foregoing, the Issuer and the Trustee shall not be
obligated to take any step which in their opinion will or might cause them to
expend time or money or otherwise incur liability unless and until a
satisfactory indemnity bond has been furnished to the Issuer and the Trustee at
no cost or expense to the Issuer or the Trustee.
The provisions of this section are subject to the further limitation that
the rescission by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made relating to the Loan Payments and the Note and a
waiver and rescission of the consequences of that declaration and of the Event
of Default with respect to which that declaration has been made, provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved to
the Issuer or the Trustee by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement, the Letter of Credit or the Note, or now or hereafter existing at
law, in equity or by statute. No delay or omission to exercise any right or
power accruing upon any default shall impair that right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Issuer or the Trustee to exercise any remedy reserved to it in this Article,
it shall not be necessary to give any notice, other than any notice required by
law or for which express provision is made herein.
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. If an Event of
Default should occur and the Issuer or the Trustee should incur Ordinary and
Extraordinary Fees and Expenses, including attorneys' fees, in connection with
the enforcement of this Agreement, the Letter of Credit or the Note or the
collection of sums due thereunder, the Borrower shall
- 25 -
<PAGE> 29
reimburse the Issuer and the Trustee, as applicable, for the Ordinary and
Extraordinary Fees and Expenses so incurred upon demand.
Section 7.5. No Waiver. No failure by the Issuer or the Trustee to insist
upon the strict performance by the Borrower of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Borrower to observe or comply with any provision hereof.
Section 7.6. Remedies Subject to Bank's Direction. Except in the case of
an Event of Default pursuant to Section 7.01(a), (b), (e) (f) or (g) of the
Indenture, the Bank shall have the right to direct the remedies to be exercised
by the Trustee, whether under Article VII of this Agreement or under Article VII
of the Indenture. Whenever in the Indenture any action or omission to act by the
Trustee or Holders is subject to the consent of the Bank or is to be directed by
the Bank, the Bank agrees for the benefit of the Holders that it will act in
good faith and will not unreasonably withhold its consent.
Section 7.7. Retained Rights of Issuer. Notwithstanding the provisions of
the Indenture, this Agreement and the Note, the Issuer does hereby retain the
non-exclusive right to enforce the payment of Loan Payments by the Borrower,
which includes the right to enforce the obligation of the Borrower to maintain
the Debt Service Reserve Fund as Fully Funded and the reimbursement obligations
therefor, as set forth in the Indenture.
(End of Article VII)
- 26 -
<PAGE> 30
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement. This Agreement shall be and remain in full
force and effect from the date of initial delivery of the Bonds until such time
as all of the Bonds shall have been fully paid (or provision made for such
payment) pursuant to the Indenture and all other sums payable by the Borrower
under this Agreement and the Note shall have been paid, except for obligations
of the Borrower under Sections 3.4, 4.2 and 5.3 hereof, which shall survive any
termination of this Agreement.
Section 8.2. Notices. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by first class mail, postage prepaid, and
addressed to the appropriate Notice Address. A duplicate copy of each notice,
certificate, request or other communication given hereunder to the Issuer, the
Borrower, the Bank, or the Trustee shall also he given to the others. The
Borrower, the Issuer, the Bank and the Trustee, by notice given hereunder, may
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 8.3. Extent of Covenants of the Issuer: No Personal Liability. All
covenants, obligations and agreements of the Issuer contained in this Agreement
or the Indenture shall be effective to the extent authorized and permitted by
applicable law. No such covenant, obligation or agreement shall be deemed to be
a covenant, obligation or agreement of any present or future member, officer,
agent or employee of the Issuer in other than his official capacity, and neither
the members of the Board of Directors of the Issuer nor any official executing
the Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof or by reason of
the covenants, obligations or agreements of the Issuer contained in this
Agreement or in the Indenture.
Section 8.4. Binding Effect. This Agreement shall inure to the benefit of
and shall be binding in accordance with its terms upon the Issuer, the Borrower
and their respective successors and assigns; provided that this Agreement may
not be assigned by the Borrower (except in connection with a sale, lease or
grant of use pursuant to Section 5.2 hereof) and may not be assigned by the
Issuer except to the Trustee pursuant to the Indenture or as otherwise may be
necessary to enforce or secure payment of Bond Service Charges. This Agreement
may be enforced only by the parties, their assignees and others who may, by law,
stand in their respective places.
Section 8.5. Amendments and Supplements. Except as otherwise expressly
provided in this Agreement, the Note or the Indenture, subsequent to the
issuance of the Bonds and prior to all conditions provided for in the Indenture
for release of the Indenture having been met, this Agreement or the Note may not
be effectively amended, changed, modified, altered or terminated except in
accordance with the applicable provisions of Article XI of the Indenture.
- 27-
<PAGE> 31
Section 8.6. Execution Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be regarded as an original and all
of which shall constitute but one and the same instrument.
Section 8.7. Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein, is determined by a court of
competent jurisdiction to be invalid or unenforceable, that determination shall
not affect any other provision, covenant, obligation or agreement, each of which
shall be construed and enforced as if the invalid or unenforceable portion were
not contained herein. That invalidity or unenforceability shall not affect any
valid and enforceable application thereof, and each such provision, covenant,
obligation or agreement shall be deemed to be effective, operative, made,
entered into or taken in the manner and to the full extent permitted by law.
Section 8.8. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.
(End of Article VIII)
- 28 -
<PAGE> 32
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Agreement
to be duly executed in their respective names, all as of the date first above
written.
INDIANA DEVELOPMENT FINANCE
AUTHORITY
By: /s/ William H. King
-----------------------------------
William H. King, Vice Chairman
(SEAL)
Attest:
/s/ Thomas L. New
- --------------------------------
Thomas L. New, Secretary-Manager
- 29 -
<PAGE> 33
STEEL DYNAMICS, INC.
By: /s/ Tracy Shellabarger
--------------------------------
Vice President
<PAGE> 1
Exhibit 10.4
INDUSTRIAL GASES SUPPLY AGREEMENT
AGREEMENT, made as of 5 August 1994, between Air Products and Chemicals, Inc., a
corporation organized and existing under the laws of the State of Delaware,
("Seller") and Steel Dynamics Incorporated, a corporation organized and existing
under the laws of the State of Indiana, ("Buyer").
1. SALE AND PURCHASE
Seller hereby agrees to sell and Buyer hereby agrees to purchase
Buyer's entire requirements (excluding cylinder gases) of oxygen,
nitrogen, and argon ("Products"), for use at Buyer's facility in
Butler, Indiana ("Designated Location").
2. TERM
(a) This Agreement shall be effective as of the date hereof. The
Initial Term of this Agreement shall be thirteen (13) years
from the first day of the month following the date the
Equipment is installed and ready for operation ("Commencement
Date"), not later than 1 December 1995, unless delayed by
Force Majeure or failure of Buyer to fulfill its obligations
listed in Paragraph 4, and this Agreement shall remain in
force from year to year after the expiration of the Initial
Term unless terminated as provided below. Said Initial Term
together with any extension shall be referred to as the
"Supply Period." Written notice of the Commencement Date shall
be furnished to Buyer by Seller.
(b) Either party may terminate this Agreement as of the expiration
of the Initial Term or the expiration of any anniversary date
thereafter by giving not less than eighteen (16) months' prior
written notice to the other party. Either party may terminate
the portion of this Agreement dealing with the supply/purchase
of argon five (5) years from the Commencement Date by giving
not less than eighteen (16) months' prior written notice to
the other party.
(c) If Buyer's oxygen volumes total less than 70,000,000 SCF in a
month during years 2-13 of the Initial Term; then, at Seller's
option, the Initial Term may be extended two (2) months for
each occurrence. Seller shall provide Buyer with written
notice of Seller's option to extend not later than sixty (60)
days after the occurrence. In any event, the Initial Term plus
any extensions thereof for reasons of low oxygen volumes shall
not exceed fifteen (15) years in aggregate.
3. EQUIPMENT
(a) Seller will proceed with and perform, with reasonable
promptness and diligence, all work necessary to fabricate and
install production, backup storage, and vaporization equipment
(the "Equipment") on a site ("Equipment Site") to be purchased
by Seller from Buyer as provided in this Agreement. The
Equipment Site shall be shown on a drawing to be prepared by
Buyer promptly upon execution of this Agreement, and which
shall be attached to and made a part of this Agreement as
Exhibit A.
(b) Seller may, at Seller's expense, without affecting its
obligations under this Agreement, remove any Equipment and
replace it with other Equipment of a different size or type,
or supply Products hereunder by pipeline from another
producing source at a different location, and Buyer shall
cooperate (said cooperation shall not be reasonably withheld)
with Seller to effect any such change. Buyer's total cost
pursuant to Paragraphs 4, 7, 8, 9, and 10 for the supply of
Products after such a change shall in no event be greater than
such costs would have been had the change not been made.
(c) It is understood and contemplated by the parties that the
Equipment is designed to use air and water free of corrosive
components and containing only normal contaminants, as more
fully described in Exhibit B, and, therefore, if contaminants
in the air (not beyond the reasonable control of Buyer) or
water, or changes in the construction or operation of
facilities in or about the Designated Location, justify the
relocation, modification, or removal of any Equipment or the
installation of additional Equipment. in the reasonable
judgment of Seller. Seller shall at Buyer's expense (i) make
such relocation, modification, or removal, and (ii) install
such additional Equipment
* Material has been redacted pursuant to request for Confidential Treatment.
<PAGE> 2
(d) Seller shall own, and shall operate, maintain and repair, the
Equipment in accordance with Seller's standard practice at its
expense except for damage to the Equipment directly caused by
Buyer or third parties under the control of Buyer, which
damage will be paid for by Buyer. The cost of any
government-imposed modification in or addition to the
Equipment, its operation, or maintenance shall be paid
directly by Seller and a pro rata share of 8/27ths (0.296) of
said costs shall be invoiced to Buyer as a separate item and
paid by Buyer to Seller.
4 BUYER'S OBLIGATIONS
Buyer shall, without cost to Seller (except as noted below for the Equipment
Site):
(a) As a condition precedent to Seller's obligations hereunder,
sell to Seller the Equipment Site as shown on Exhibit A under
terms and conditions, at a price (such price not to exceed
$3,000/acre) to be agreed upon.
(b) Furnish the Equipment Site cleared, leveled, and well drained,
and shall be free of subsurface and aboveground obstructions,
with a soil bearing capacity of 3000 PSF minimum. Maximum
settlement range at 2.5 feet below the finished grade shall be
1/2 inch for major foundations under full load conditions.
(c) Furnish the required, hydrant house, access road, lines and
service for drainage, sewer, water, or gas including
installation and connection to Equipment, in accordance with
Exhibit A, and assistance in obtaining permits for the
installation, protection, and operation of the Equipment.
(d) Install necessary facilities to transport Products from the
Equipment to Buyer's points of use ("Distribution Lines").
5. SPECIFICATIONS
All Products delivered by Seller shall conform to the following
specifications
<TABLE>
<CAPTION>
Oxygen Nitrogen Argon
------ -------- -----
<S> <C> <C> <C>
Nitrogen: (less than) 200 ppm 99.9% (less than) 0.1%
Oxygen (greater than) 99.5% (less than) 20 ppm (less than) 200 ppm
Argon: (less than) 0.5% (less than)0.1% (greater than)99.9%
Pressure (+/- 10 psi) 165 psig 25 psig 150 psig
</TABLE>
6. DELIVERY
(a) Products shall be delivered by Seller at the point of
connection between the Equipment and the Distribution Line, as
such point is depicted in Exhibit A.
(b) Title and risk of loss of Products shall pass to Buyer upon
delivery to the point of connection.
7. PRODUCING FACILITIES AND QUANTITY LIMITATIONS
(a) Seller's specification, price, and supply obligations are
predicated on furnishing Buyer's requirements of Products from
the generating portion of Seller's Equipment.
(b) Seller shall supply and Buyer shall purchase Buyer's
instantaneous requirements for oxygen up to 200,000 SCF per
hour ("Oxygen Contract Rate"), and nitrogen up to 20,000 SCF
per hour ("Nitrogen Contract Rate"), and argon. If Buyer has
intermittent additional requirements in excess of said Oxygen
or Nitrogen Contract Rates (collectively "Contract Rates") or
continues to have requirements during Force Majeure Equipment
outages (said additional or continual requirements referred to
as "Supplemental Product"), Buyer will purchase from Seller
and Seller will sell to Buyer such Supplemental Product or
part thereof. when and if available for sale, from the
Equipment or other facilities of Seller, in accordance with
all relevant terms and conditions of this Agreement at the
Supplemental Product Charge of ? per hundred SCF.
- 2 -
<PAGE> 3
(c) The backup portion of the Equipment will contain nominal
liquid oxygen and nitrogen storage capacity of 60,000 and
6,000 gallons respectively, and instantaneous vaporization
capacity of 350,000 and 20,000 SCF per hour respectively for
use with Supplemental Product. during normal operation.
(d) In the event Buyer has a long-term requirement in excess of
the Contract Rates. Buyer and Seller shall negotiate, in good
faith, the prices, terms, and conditions for an increase in
the Contract Rates. Should Buyer and Seller be unable to reach
agreement. Buyer must purchase the full Contract Rates
hereunder prior to receiving any Products from another
supplier or from Buyer's own facilities.
8. PRICE
Buyer shall pay Seller, during the Supply Period, a charge of *
per hundred SCF of oxygen and nitrogen (Oxygen-Nitrogen Product
Charge). Buyer shall pay Seller. during the Supply Period, a charge of
* per hundred SCF of argon (Argon Product Charge).
9. PRICE ADJUSTMENT
70% of the Oxygen-Nitrogen Product Charge in Paragraph 8 and 85% of the
Supplemental Product Charge in Paragraph 7 and the Argon Product Charge in
Paragraph 8 will be adjusted on the Commencement Date and annually thereafter by
Seller according to the formulae shown below:
<TABLE>
<S> <C>
Adjusted Oxygen-Nitrogen Product Charge = *
Adjusted Supplemental Product Charge = *
Adjusted Argon Product Charge = *
</TABLE>
Where:
L1 = 119.2 (April 1994)
L2 = Value for the Employment Cost Index - Total Compensation as
published by the Bureau of Labor Statistics at the time of
adjustment.
E1 = 2.449 +ct per Kwh (April 1994)
E2 = Average price of electric power paid by Seller for the facility
serving Buyer at the time of adjustment as documented by Seller to
Buyer.
The most current indices (whether preliminary or final) available at the time of
adjustment will be used. If any of these indices ceases to be available as
presently constituted, the parties agree to substitute a suitable and reasonably
comparable index.
- 3 -
<PAGE> 4
10. TAXES
(a) Seller shall bear and pay all federal, state, and local taxes
based upon or measured by its net income, and all franchise
taxes based upon its corporate existence or its general
corporate right to transact business.
(b) The prices as stated in Paragraphs 7, 8 and 9 do not include
any taxes. charges, or fees other than as stated in 10(a)
above. If any other taxes, charges, or fees howsoever
denominated and howsoever measured (including but not limited
to sales and use taxes and ad valorem taxes), are imposed on
the Equipment, the Equipment Site, the inventory, or upon the
construction, installation, operation. or maintenance of the
Equipment, said taxes, charges, or fees shall be paid directly
by Seller and a pro rata share of 8/27ths (0.296) of said
taxes, charges or fees shall be invoiced to Buyer as a
separate item and paid by Buyer to Seller. If Seller adds
additional Equipment at the Equipment Site after the
Commencement Date, then Buyer's pro rata share shall be
adjusted accordingly and written notice of such an adjustment
will be provided by Seller to Buyer.
(c) The prices as stated in Paragraphs 7, 8 and 9 do not include
any taxes, charges, or fees other than as stated in 10(a)
above. If any other taxes, charges, or fees howsoever
denominated and howsoever measured (including but not limited
to sales and use taxes and ad valorem taxes), are imposed upon
or measured by the production, manufacture, storage, sale,
transportation, delivery, use, or consumption of Products,
said taxes, charges, or fees shall be paid directly by Seller
and shall be invoiced to Buyer as a separate item and paid by
Buyer to Seller.
(d) Seller has entered into an Incentive Agreement (Exhibit C)
with DeKalb County (the "County") in order to induce the
County to grant certain tax incentives to Seller. The County
has agreed to provide tax incentives to Seller contingent on
certain representations made by Seller regarding minimum
capital investment, new jobs, and payroll associated with the
Equipment. Whereas Buyer and the County are parties to a
Memorandum of Understanding and Buyer receives direct benefit
from the incentives granted to Seller by the County, Buyer
agrees to indemnify Seller for any breach by Seller of the
incentive Agreement and pay to the County, or other designated
parties, any amounts which may be due as a result of such a
breach if the breach occurs in the period 1 January 2011
through 31 December 2015.
11. INVOICING AND PAYMENT
(a) Seller may invoice Buyer at the beginning of each month for
Products delivered in the previous month. Seller may, without
affecting the Supply Period or any other provisions hereunder,
invoice Buyer on the Commencement Date for the period the
Equipment operated in the prior month. Invoices for other sums
due hereunder shall be submitted monthly. All payments due
Seller hereunder shall be made to Seller at the location
indicated on the invoice, payable within twenty (20) days from
date of invoice. In case of failure by Buyer to pay any
invoice within said time period. a late payment charge shall
be assessed against the unpaid portion of such invoice amount,
at a rate equal to two points plus the prime rate charged for
commercial loans to most preferred customers by the Chase
Manhattan Bank, N.A. which is in effect on the date of
issuance of the invoice.
(b) It is agreed the timely payment by Buyer of all amounts due
and owing to Seller hereunder is an express condition to the
continued performance by Seller of its obligations hereunder.
12. MEASUREMENT
(a) The unit of measurement for all purposes hereunder shall be
one cubic foot of gas measured at a temperature of 70 degrees
F, at a pressure of 14.7 psia and dry, herein referred to as
"SCF" (standard cubic foot).
(b) Seller shall make readings, calibrations, and adjustments of
Seller's Product meters as it deems necessary. Buyer may
challenge the accuracy of said meters. For inaccuracies
greater than 2%, billings shall be corrected at the rate of
such inaccuracy for the period of inaccuracy known or agreed
upon, or if the period of inaccuracy is unknown or not agreed
upon, then for the month preceding initial determination of
the inaccuracy. For inaccuracies of 2% or less, Buyer will pay
for tests caused by Buyer's challenges. For inaccuracies
greater than 2%, Seller will pay for tests caused by Buyer's
challenges.
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<PAGE> 5
13. SELLER'S WARRANTY
(a) Seller warrants that Products delivered to Buyer shall conform
to the specifications set forth in Paragraph 5 and that at the
time of delivery Seller shall have good title and right to
transfer the same and that the same shall be delivered free of
encumbrances.
(b) THE WARRANTIES SET FORTH IN PARAGRAPH 13(a) ARE IN LIEU OF ALL
OTHER WARRANTIES. EXPRESS OR IMPLIED, IN FACT OR BY LAW,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
14. LIMITATION OF LIABILITY
(a) Determination of the suitability of Products furnished
hereunder for the use contemplated by Buyer is the sole
responsibility of Buyer, and Seller shall have no
responsibility in connection therewith.
(b) Buyer acknowledges that there are hazards associated with the
use of Products, that it understands such hazards, and that it
is the responsibility of Buyer to warn and protect its
employees and others exposed to such hazards through Buyer's
use of Products. Seller shall provide Buyer with copies of
Material Safety Data Sheets ("MSDS") relating to Products for
Buyer to make such warnings, and Buyer shall hold harmless,
indemnify, and defend Seller from and against any liability
incurred by Seller because such warnings were not made. Buyer
assumes all risk and liability for loss, damages, or injury to
persons or to property of Buyer or others arising out of the
presence or use of Products or from the failure to make such
warnings. Buyer shall have no obligations for inaccuracies or
omissions in the MSDS.
(c) Buyer acknowledges that it can obtain and install devices to
sample Products delivered to determine its compliance with
specifications prior to use.
(d) Seller's sole liability and Buyer's sole and exclusive remedy
for the non-delivery of Products or for the delivery of
Products not conforming to specifications shall be limited to
the purchase price of the quantity of Products not delivered
or the purchase price of the non-specification Products
delivered.
(e) Except in the case of a willful and wrongful act or omissi ion
of Seller, Seller shall not be liable in contract or tort for
any direct, indirect, special, incidental, or consequential
damages, including by way of illustration and not of
limitation, loss of use, loss of work in process, down time or
loss of profits.
(f) Claims for non-delivery of Products or delivery of
non-specification Products shall be void unless notification
is given to Seller's operating personnel promptly upon
discovery and confirmed in writing by Buyer within two (2)
business days thereafter
15. FORCE MAJEURE
(a) Neither party hereto shall be considered in default in the
performance of its obligations hereunder or be liable in
damages or otherwise for any failure or delay in performance
which is due to strike, lockout, concerted act of workers or
other industrial disturbance; fire, explosion, flood, or other
natural catastrophe; civil disturbance, riot, or armed
conflict whether declared or undeclared; impairment or outage
of equipment; curtailment, shortage, rationing, allocation, or
failure of normal sources of supply of labor, materials,
transportation, energy, or utilities; accident or Act of God;
delay of subcontractor or vendor; sufferance of or voluntary
compliance with act of government and government regulation
(whether or not valid); embargo; or due to any other cause,
whether or not foreseeable and whether similar or dissimilar
to any of the causes or categories of causes described above
and which is beyond the reasonable control of the party
affected.
(b) Neither party hereto shall be required to make any concession
or grant any demand or request to bring to an end any strike
or other concerted act of workers.
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<PAGE> 6
(c) The party affected by an event described in Paragraph 15(a)
shall, promptly upon learning of such event and ascertaining
that it has affected or will affect such party's performance
hereunder, give notice to the other party, stating the nature
of the event, its anticipated duration and any action being
taken to avoid or minimize its effect.
(d) Nothing contained in Paragraph 15(a) above shall relieve Buyer
of its obligation to pay the amounts due under this Agreement.
16. GENERAL PROVISIONS
(a) No modification or waiver of this Agreement shall bind Seller
unless in writing and signed and accepted by an executive
officer of Seller. This instrument constitutes the entire
agreement between the parties concerning the subject matter
hereof. No terms and conditions in any purchase order or other
document of Buyer issued or purported to be issued with
respect to the sale of Products shall supplement or vary the
terms hereof and all of such provisions are hereby objected to
be Seller.
(b) Upon notice to the other party, any or all of Seller's or
Buyer's rights, title, and interest under this Agreement
(including without limitation any payments by Buyer hereunder)
may be assigned to any bank, trust company, insurance company,
financial institution, or other entity or groups thereof under
the terms of financing arrangements (but any such assignment
shall not relieve the assigning party of any its obligations
hereunder). This Agreement shall not otherwise be assignable
or transferable by either Buyer or Seller without the prior
written consent of the other. which consent will not be
unreasonably withheld, any attempted assignment or transfer
without such consent shall be void. All covenants and
provisions of this Agreement by and for the benefit of the
parties hereto shall bind and inure to the benefit of their
respective successors and assigns as permitted by the
provisions of this paragraph.
(c) Any notice or request given under this Agreement shall. if
given to Seller. be addressed to:
Air Products and Chemicals. Inc.
7201 Hamilton Boulevard
Allentown, PA 18195
Attention: Corporate Secretary
and if given to Buyer, be addressed to:
Steel Dynamics, Inc.
4500 Block - County Rd 59
Butler, IN 46214
Attention: Chief Financial Officer
(d) This Agreement shall be governed and construed in accordance
with laws of the State of Indiana.
STEEL DYNAMICS INCORPORATED AIR PRODUCTS AND CHEMICALS, INC.
By: /s/ By: /s/ J. F. Strecansky
----------------------- ------------------------
J. F. Strecansky
Title: Vice President Title: Vice President
----------------------- ------------------------
Date: 8 - 29 - 94 Date: 6 September 1994
----------------------- ------------------------
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<PAGE> 7
Exhibit A
[COUNTY RECORDER'S MAP]
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<PAGE> 8
Exhibit B
AIR AND WATER STANDARDS
ALLOWABLE AIR FEED IMPURITIES
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<PAGE> 9
Exhibit C
INCENTIVE AGREEMENT
(Oxygen Plant)
WHEREAS, SDI and the Governments have entered into a Memorandum of
Understanding dated as of June 20, 1994 (the "MOU"), pursuant to which SDI has
agreed to construct the Project and the Governments have agreed to offer certain
incentives to SDI;
WHEREAS, certain processes integral to SDI's operation of the Project
may be owned and operated by entities other than SDI;
WHEREAS, Air Products and Chemicals, Inc. or an
affiliate thereof (the "Company") desires to construct the Oxygen
Plant in connection with the Project within the Area created by
the commission;
WHEREAS, in order to induce the County to provide the incentives set
forth herein, the Company has made the representations and warranties regarding
capital investment, employment, and payroll set forth herein;
NOW, THEREFORE, the County and the Company hereby agree and represent as
follows:
1. Capitalized terms used herein, including those used in the recitals
above, shall have the meaning ascribed to such terms in the MOU, unless
otherwise defined herein.
2. At the earliest opportunity legally permissible and upon timely
receipt of the appropriate documentation, the County will grant to the Company,
to the extent properly requested by the Company on the proper forms and within
the required times provided by Indiana law, the maximum depreciable personal and
real property tax abatement permitted by law on the investment in new personal
property and real property to be undertaken by the Company within the Area.
3. The Company agrees that the (a) Oxygen Plant will be completed and
operational with a minimum capital investment of $25,000,000 by the.earlier of
(i) January 1, 1997, or (ii) the date of completion of the mini-mill portion of
the Project by SDI, and (b) by December 31, 1997, the Oxygen Plant will create
15 to 25 new jobs with an annual payroll of at least $500,000.
4. Subject to unforeseen economic conditions, the Company agrees that it
will operate the Oxygen Plant in accordance with the minimum requirements set
forth in paragraph 3 above for so long as the TIF Bonds issued by the Local
Governments pursuant to the MOU remain outstanding and unredeemed.
<PAGE> 10
5. In any year the Company fails to pay property taxes when first due,
the Company agrees, upon the request of the County, and, if such property taxes
remain unpaid within 60 days after first due, to make a payment in lieu of taxes
to the County in the amount equal to the total real and depreciable personal
property taxes abated in such year.
6. The foregoing representations and agreements are subject to the
negotiation and delivery of the industrial gases supply agreement to be executed
by the Company and SDI.
IN WITNESS HEREOF, the parties hereto have caused this agreement to be
executed by the duly authorized officers as of the date shown below.
AIR PRODUCTS AND CHEMICALS, INC. COUNTY OF DEKALB, INDIANA
By: /s/ James F. Strecansky By: Board of Commissioners
---------------------------- of DeKalb County, Indiana
Printed: James F. Strecansky
------------------------
Title: Vice President /s/
------------------------- --------------------------------
President
Date: 29 June 1994
-------------------------- --------------------------------
--------------------------------
By: County Council of DeKalb
County, Indiana
Name: /s/
-------------------------
Title: President of County
Council
Date: June 28, 1994
-------------------------
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<PAGE> 1
Exhibit 10.6
GAS SERVICES AGREEMENT (NIFL)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and
between Northern Indiana Fuel & Light Company, Inc. ("NIFL") and Steel Dynamics,
Inc. ("SDI"), both Indiana corporations, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near
Butler, Indiana ("SDI Facility") and needs natural gas service in connection
with that facility, which NIFL is able to provide; and
WHEREAS, the parties desire to expand industry and create additional
jobs in NIFL's service territory, and the SDI Facility represents an opportunity
to do so;
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the parties agree that;
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month
following the month in which the Indiana Utility Regulatory Commission ("IURC")
approves the NIFL economic development interruptible gas transportation rate
schedule attached hereto as Exhibit A ("NIFL Rate") and shall terminate on
December 31, 2000 ("Term"). NIFL shall be ready to serve SDI's Facility by
mid-March, 1995. At the end of the Term, it shall be extended unless a party
hereto gives written notice to the other party that the Agreement will not be
renewed, which notice must be provided at least six (6) months prior to the end
of the Term
<PAGE> 2
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> 3
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> 4
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> 5
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> 6
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.
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<PAGE> 7
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
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<PAGE> 8
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
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<PAGE> 9
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.
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<PAGE> 10
ARTICLE XI
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless NIFL from all loss,
damage or expense arising out of or in any way connected with the claims of any
person, except claims for injuries and/or death of employees of NIFL arising
out of and in the course of their employment, for injuries to person or property
or for injury to or death of any person or persons due to the sole negligence of
NIFL in the event that such lose, damage, injury or death shall be proximately
caused by any act or omission, or any breach of any statutory duty of SDI, or
its employees or agents, occurring in the performance of this Agreement.
NIFL agrees to indemnify, defend and hold harmless SDI from all loss,
damage or expense arising out of or in any way connected with the claims of any
person, except claims for injuries and/or death of employees of SDI arising out
of and in the course of their employment with SDI, for injuries to person or
property occasioned by the provision of Natural Gas Service, except for any
liability for loss or damage to property or for injury or death of any person or
persons due to SDI's sole negligence, in the event that such loss, damage,
injury or death shall be proximately caused by any act or omission, or any
breach of any statutory duty of NIFL, or its employees or agents, occurring in
the performance of this Agreement.
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<PAGE> 11
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
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<PAGE> 12
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
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<PAGE> 13
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.
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<PAGE> 14
ARTICLE XVIII
AUTHORITY
Each party has full power and authority to enter into and perform this
Agreement, and the person signing this Agreement on behalf of each has been
properly authorized and empowered to enter into this Agreement. Each party
further acknowledges that it has read this Agreement, understands it and agrees
to be bound by it.
This Agreement has been executed in duplicate by the duly authorized
representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/
----------------------- ---------------------------
NORTHERN INDIANA FUEL AND LIGHT
COMPANY
Date: 4/5/95 By: /s/ H.P. Conrad
----------------------- ---------------------------
H.P. Conrad
President
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<PAGE> 15
Exhibit A
NORTHERN INDIANA FUEL & LIGHT CO., INC. Sheet No. __________
ECONOMIC DEVELOPMENT INTERRUPTIBLE GAS TRANSPORTATION RATE
AVAILABILITY Rate No._ 9T
Available to all customers who contract with the Company for gas transportation
service for a minimum of five (5) years and, together with any other customers
located on the site described below, for a minimum average aggregate volume of
not less than 15,000 therm's per day. Customers on this rate must
1. have an alternate capability;
2. be located on the Company's transmission main connecting to, and running
south from, the main east-west pipeline of Crossroads Pipeline Company
("Crossroads Pipeline") to a tract bordered on the north by County Road 42,
on the east by County Road 59, on the west by County Road 55 and on the
south by the Sol Shank Ditch;
3. have made arrangements by which volumes of gas owned by it can be delivered
into the Company's transmission system or the Crossroads Pipeline; and
4. require no additional facilities from the Company for the Company to
provide the transportation service to the customer.
CHARACTER OF SERVICE
Gas service purchased hereunder shall be interruptible and shall be subject to
complete or partial curtailment, at the option of the Company and upon the
giving of notice to the customer.
RATE
Facilities charge $200.00 per meter
Usage charge $0.0425 Dth
MINIMUM CHARGE
The minimum monthly charge shall be the facilities charge.
TERMS OF PAYMENT
All bills on this rate schedule shall be rendered and due monthly.
<PAGE> 16
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC
Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service Supplied under this rate schedule shall be governed by the Rules and
Regulations of the Company, as approved by the Indiana Utility Regulatory
Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
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<PAGE> 1
Exhibit 10.7
GAS SERVICES AGREEMENT (NITCO)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and
between Northern Indiana Trading Co. ("NITCO"), an Indiana corporation, and
Steel Dynamics, Inc. ("SDI"), an Indiana corporation, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near
Butler, Indiana ("SDI Facility") and needs natural gas service in connection
with that facility, which Northern Indiana Fuel & Light Company, Inc. ("NIFL") ,
Crossroads Pipeline Company ("Crossroads") and NITCO, all affiliates of NIPSCO
Industries, Inc., an Indiana corporation, collectively are able to provide; and
WHEREAS, the parties desire to expand industry and create additional
jobs in NIFL's service territory, and the SDI Facility represents an opportunity
to do so;
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the parties agree that:
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month
following the month in which the Indiana Utility Regulatory Commission ("IURC")
approves the NIFL economic development interruptible gas transportation rate
schedule attached hereto as Exhibit A ("NIFL Rate") and shall terminate on
December 31, 2000 ("Term"). At the end of the Term, it shall be extended unless
a party hereto gives written notice to the other
<PAGE> 2
party that the Agreement will not be renewed, which notice must be provided at
least six (6) months prior to the end of the Term and any extension thereof. If
such notice is not provided at least six (6) months prior to the end of the
Term, the Term shall be extended until the last day of the month which is at
least six (6) months after the provision of written notice by either party to
the other parties that this Agreement will be terminated.
If the IURC does not approve the NIFL Rate, as submitted. this
Agreement, shall be terminable by either SDI or NITCO, upon thirty (30) days
written notice to the other party. A failure to timely terminate this Agreement
by either party shall result in this Agreement remaining in full force and
effect.
ARTICLE II
NATURAL GAS SERVICE
NITCO will provide services ancillary to interruptible gas
transportation service to be provided by Crossroads and NIFL, under separate
agreements with SDI ("Crossroads and NIFL Agreements") for the SDI Facility, on
the terms and conditions hereinafter described (all such services herein
referred to collectively as "Natural Gas Service"). Such transportation service
provided by Crossroads will be interruptible transportation of SDI's gas from
the point at which it is delivered to the Crossroads system to the Crossroads
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<PAGE> 3
interconnection with the NIFL system near Butler, Indiana ("NIFL Connection").
The transportation service provided by NIFL will be from the NIFL Connection to
SDI's on-site regulating station. Such transportation service shall be in
accordance with the nominating procedures described in Exhibit B hereto. NITCO
shall also make arrangements for balancing service in connection with SDI gas,
as described in Exhibit B. On and after January 1, 1996, SDI's minimum average
volume of Natural Gas Service at the SDI Facility shall be one thousand five
hundred dekatherms per day (1,500 Dkt/d). Prior to that date SDI shall endeavor
to meet such minimum, but shall not be required to do so, because of start-up
conditions. At SDI's request, NITCO will act as SDI's agent for the purchase of
natural gas to be owned by SDI and transported to the SDI Facility.
ARTICLE III
RATES AND CHARGES FOR GAS SERVICE
1. For the Natural Gas Service rendered during the first five (5) years
of the Term, SDI shall pay to NITCO a monthly service fee of twenty cents per
dekatherm ($.20/Dth) less any amounts paid directly by SDI under the Crossroads
and NIFL Agreements for the billing month, on a per dekatherm basis, for all
quantities of SDI's gas delivered by NIFL to the SDI Facility. Such fee shall be
in full payment for all service rendered by NITCO except for the charges set
forth in Exhibit B hereto.
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<PAGE> 4
2. Penalties and Charges Relating to Interstate Pipeline and Other
Suppliers. To the extent that SDI actions or inaction cause NITCO to be assessed
any penalties and/or charges by or related to interstate pipeline suppliers or
other suppliers of gas or services, SDI shall reimburse NITCO for such penalties
and charges upon being provided written documentation summarizing the actions
causing the penalties or charges. To the extent that actions or inaction of
NITCO cause SDI to be assessed any penalties and/or charges by or related to
interstate pipeline suppliers or other suppliers of gas or services, NITCO shall
reimburse SDI for such penalties and charges upon being provided written
documentation summarizing the actions causing the penalties or charges.
ARTICLE IV
BILLING
NITCO will provide to SDI, on or before the seventh (7th) day of every
calendar month, by facsimile transmission, followed by the mailing of a copy, a
detailed invoice for all services rendered under this Agreement. Each month SDI
shall issue and send to NITCO payment of these invoices on SDI's "25th of the
month check run" for the prior month's service. In the absence of written notice
otherwise, these invoices and payments shall be sent to:
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<PAGE> 5
INVOICES PAYMENTS
SDI NITCO
C/O Accounts Payable C/O H.P. Conrad
4500 County Road 59 P.O. Box 526
Butler, Indiana 46721 Auburn, Indiana 46706
Interest on delinquent and unpaid amounts shall accrue at the published
prime commercial lending rate established from time to time by National City
Bank, Indiana, or its successor ("Prime Rate"), and is payable from the date due
until the date upon which payment is made. Interest on any overpaid amounts
shall accrue at the Prime Rate and is payable from the date paid by SDI until
the date repaid by NITCO.
In the event SDI fails to make timely and full payment of any invoice
rendered by NITCO, and except as provided in the next paragraph, NITCO may
terminate or suspend the provision of further Natural Gas Service. Such
suspension or termination shall be without prejudice to any other rights any
party may have with respect to its provision of Natural Gas Service to SDI. Such
termination or suspension may be undertaken only if SDI has been given ten (10)
days written notice, via telefax or hand delivery, of the intent by NITCO to
terminate or suspend the provision of Natural Gas Service.
Notwithstanding the foregoing paragraph, in the event SDI wishes to
contest a portion of a billed amount, SDI shall pay the portion not contested
and interest shall accrue at the rate specified in this ARTICLE on the unpaid
portion while resolution of contested amounts is pending. However, the
provisions of the
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<PAGE> 6
preceding sentence shall not be applicable where SDI has failed to make timely
payment of an invoice and has failed to provide adequate assurances, including
advance payments if requested, of SDI's continued solvency.
Upon providing NITCO with reasonable prior notification, during regular
business hours and on regular business days, SDI, or its agent, shall have the
right to examine relevant books, records, contracts and charts of NITCO to the
extent reasonably necessary to verify the accuracy of any invoice, statement,
test, chart, billing or computation made under or pursuant to any of the
provisions of this Agreement.
ARTICLE V
NOTICES
Except for matters pertaining to billings provided for in ARTICLE V
of this Agreement, all notices and other communications shall be provided to the
following:
SDI NITCO
Tracy Shellabarger H.P. Conrad
Vice President P.O. Box 526
4500 County Road 59 Auburn, IN 46706
Butler, Indiana 46721
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.
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<PAGE> 7
ARTICLE VI
FORCE MAJEURE
No party hereto shall be liable to the other for any act, omission or
circumstance resulting from events beyond their reasonable control. Each party
will use reasonable efforts and diligence to remove the cause of a force majeure
condition and resume delivery or utilization of Natural Gas Service previously
suspended. Natural Gas Service withheld from SDI during a force majeure
condition will recommence upon the availability of such service and the end of
such circumstances. No force majeure condition will relieve SDI from paying any
invoice relating to Natural Gas Service previously rendered.
The term force majeure as used herein shall mean any act, omission or
circumstance occasioned by or as a consequence of any acts of God, acts of the
public enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, washouts, vandalism, arrests and
restraints of rulers and peoples, any strike or work stoppage, civil
disturbances, explosions, breakage or accident to machinery or lines of pipe,
telecommunications failures or malfunctions, or computer failures or
malfunctions, which frustrates the intent of the parties hereto and which has
been resisted in good faith by all reasonable legal means, and any other cause,
whether of the kind enumerated or otherwise, not reasonably within the control
of the party claiming suspension
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<PAGE> 8
and which by the exercise of due diligence such party is unable to prevent or
overcome. It is understood and agreed that the settlement of strikes or lockouts
shall be entirely within the discretion of the party having the difficulty, and
that the above requirement that any event of force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
lockouts by acceding to the demands of the opposing party when such course is
deemed to be inadvisable or inappropriate in the discretion of the party having
the difficulty.
ARTICLE VII
ASSIGNMENT
The benefits and obligations of this Agreement shall inure to and be
binding upon successors and assigns, as the cause may be, of the original
parties hereto, respectively, for the full term thereof; provided that no
assignment thereof shall be made by either party without first obtaining the
other party's prior written consent, which consent will not be unreasonably
withheld. Unless expressly agreed to, no partial assignment of the Agreement can
be made.
ARTICLE VIII
APPLICABLE LAW AND REGULATION
This Agreement shall be governed by the laws of the State of Indiana.
Natural Gas Service under this Agreement shall be subject to the applicable
rules, regulations, orders and
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<PAGE> 9
standards of service for gas public utilities of the IURC and the Federal Energy
Regulatory Commission, as the same may be in effect from time to time, and all
applicable state and federal laws, administrative orders, and regulations,
including 170 IAC 5-1-22, as the same may be in effect from time.
ARTICLE IX
LIMITATION OF REMEDIES AND ACTIONS
Any claim pertaining to this Agreement must be commenced and litigated
or otherwise resolved in Indiana. An action for breach of this Agreement must be
commenced within one (1) year after the cause of action has accrued. The
exclusive remedy for wrongful nondelivery of gas by NITCO, in the absence of
NITCO's wilful misconduct or gross negligence, is, at NITCO's election, (a)
actual damages caused by the nondelivery which are economic and incidental and
subject to establishment by clear and convincing evidence, or (b) the price
value of the gas which was not delivered, or (c) the cost for NITCO to deliver a
replacement quantity of such gas. No consequential damages arising from a breach
of this Agreement shall be recoverable, in the absence of NITCO's wilful
misconduct or gross negligence. The parties agree this exclusion of
consequential damages is not unconscionable.
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<PAGE> 10
ARTICLE X
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless NITCO from all loss,
damage or expense arising out of or in any way connected with the claims of any
person, except claims for injuries and/or death of employees of NITCO arising
out of and in the course of their employment, for injuries to person or property
or for injury to or death of any person or persons due to the sole negligence of
NITCO, in the event that such loss, damage, injury or death shall be proximately
caused by any act or omission, or any breach of any statutory duty of SDI, or
its employees or agents, occurring in the performance of this Agreement.
NITCO agrees to indemnify, defend and hold harmless SDI from all loss,
damage or expense arising out of or in any way connected with the claims of any
person, except claims for injuries and/or death of employees of SDI arising out
of and in the course of their employment with SDI, for injuries to person or
property occasioned by the provision of Natural Gas Service, except for any
liability for loss or damage to property or for injury or death of any person or
persons due to SDI's sole negligence, in the event that such loss, damage,
injury or death shall be proximately caused by any act or omission, or any
breach of any statutory duty of NITCO, or its employees or agents, occurring in
the performance of this Agreement.
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<PAGE> 11
In the event any loss, damage, expense, or claim occurs for which SDI
and NITCO are ultimately each found to have been at fault in proximately causing
the loss, damage, expense, or claim, NITCO and SDI shall both bear their own
separate costs of defense and the proportionate share of such liability.
This ARTICLE is severable from the other portions of this Agreement. A
breach of this ARTICLE is not a breach of the entire Agreement. If this ARTICLE
is found to be unenforceable, the remaining portions of this Agreement shall
remain in force and effect.
ARTICLE XI
FAILURE TO PERFORM
Except as otherwise provided for herein, if any party fails to perform
any of the covenants or obligations imposed upon it under this Agreement
(except where such failure is excused under other provisions hereof), then in
such event a party not in default may, at its option (without waiving any other
remedy for breach thereof), notify in writing the party in default, stating
specifically the nature of the default and declaring it to be the intention of
the party giving such notice to cancel the Agreement if the default is not cured
as hereinafter provided. Cancellation under this ARTICLE shall require a
substantial and material default. The party in default will have thirty (30)
days after receipt of the aforesaid notice is which to remedy such default as
stated in the notice, and if within said
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<PAGE> 12
thirty (30) days the party in default does so remove said cause or causes and
fully indemnifies the party not in default for any and all consequences
resulting from that default, then this Agreement shall remain in force and
effect.
ARTICLE XII
WARRANTY OF TITLE
Each party warrants to the other party that it will, at the time and
place of delivery of gas asserted to be owned by it under this Agreement, have
good title or good right to all volumes delivered on its behalf and further
warrants for itself, its successors and assigns that such gas shall be free and
clear of all liens, encumbrances, and claims of those not parties hereto; and
that it will indemnify and save the other party harmless for all suits, actions,
debts, accounts, damages, costs, losses or expenses (including reasonable
attorney's fees) arising from or out of the adverse claims arising from or out
of the same. This paragraph shall not apply to gas redelivered by NIFL to SDI,
where NITCO or an affiliate took title as agent for or otherwise on behalf of
SDI.
ARTICLE XIII
DISCLAIMER OF WARRANTIES
Except as provided in ARTICLE XII, NIPL disclaims and excludes all
warranties implied and express, including all warranties of fitness for a
particular purpose and all warranties
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<PAGE> 13
of merchantability. SDI agrees its attention has been drawn to this exclusion of
warranties.
ARTICLE XIV
SEVERABILITY
If any provision hereof shall be found to be inoperative or in
violation of any law or regulation, only that provision shall be deleted from
the Agreement, and the remainder of the Agreement shall not be affected.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of NIFL, Crossroads
and NITCO and SDI with respect to the subject matter hereof and supersedes any
and all prior oral and written agreements. No modification or amendment of this
Agreement is binding on the parties unless in writing and executed by duly
authorized representatives of the parties.
ARTICLE XVI
WAIVER
No provision of this Agreement is waived and no breach consented to,
unless the waiver or consent is in writing and signed by the waiving or
consenting party. A waiver of or consent to a provision of breach is not a
waiver of, consent to or excuse for a different or subsequent breach. Failure to
enforce an obligation hereunder is not a waiver.
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<PAGE> 14
ARTICLE XVII
AUTHORITY
Each party has full power and authority to enter into and perform this
Agreement, and the person signing this Agreement on behalf of each has been
properly authorized and empowered to enter into this Agreement. Each party
further acknowledges that it has read this Agreement, understands it and agrees
to be bound by it.
This Agreement has been executed in duplicate by the duly authorized
representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/ Tracy Shellabarger
------------------------- ------------------------------------
NORTHERN INDIANA TRADING COMPANY, INC.
Date: 4/5/95 By: /s/ H.P. Conrad, Jr.
------------------------- ------------------------------------
H.P. Conrad
President
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<PAGE> 15
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> 16
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC
Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service supplied under this rate schedule shall be governed by the Rules and
Regulations of the Company, as approved by the Indiana Utility Regulatory
Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
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<PAGE> 17
Exhibit B
INTERRUPTIBLE GAS TRANSPORTATION NOMINATION
AND BALANCING PROCEDURES
The following nomination and balancing procedures shall apply to service under
the foregoing agreement for service between Northern Indiana Trading Co.
("NITCO") and Steel Dynamics, Inc.
("Customer") .
I. NOMINATION PROCEDURES
A. At least seven business days prior to the end of each month
NITCO will quote SDI a price for any gas which it agrees to make available for
sale to SDI in the next following month. The Customer shall nominate to NITCO
for each month, at least six (6) business days prior to the end of the previous
month, the daily quantity of
1. the Customer's nomination to Crossroads Pipeline Co.
("Crossroads") through NITCO of Customer-owned gas to
be delivered on an interruptible basis that month to
Crossroads and Northern Indiana Fuel & Light Company,
Inc. ("NIFL") for delivery to the Customer ("Daily
Pipeline Nomination"), and
2. any interruptible NITCO-supplied gas service
requested by the Customer ("Daily Supply
Deliveries").
B. The Customer shall thereafter notify NITCO, in writing, of any
change in the Customer's Daily Pipeline Nomination or Daily Supply Deliveries by
submitting to the Company a new nomination no later than noon of
1. the workday next preceding the starting day of the
new Daily Pipeline Nomination, or
2. the second workday next preceding the starting day of
the new Daily Supply Deliveries.
Nominations submitted after the deadlines specified above may, but are not
required to, be accepted by NITCO
C. Each nomination to NITCO shall include the
1. start and end dates of nomination ("Nomination
Period");
2. daily quantity, in dekatherms (Dkt), of the
Customer's Daily Pipeline Nomination along with
a. the identity of the supplier(s) and the
transporting pipeline(s) to Crossroads; and
<PAGE> 18
b. any other information reasonably requested
by NITCO; and
3. daily quantity, in Dkt, of any interruptible
NITCO-supplied gas requested by the Customer.
D. NITCO reserves the right, in its reasonable discretion, to
reject the Customer's nominations for Daily Supply Deliveries if (1) economical
interruptible gas supplies are not available for sale to the Customer, (2) the
Customer's nominations fail to include Carryover Gas, or (3) the Customer's
nominations fail to equal the total of its Carryover Gas, Daily Pipeline
Nominations and Daily Supply Deliveries.
E. Until the Customer submits the required nominations, the
Customer's nominations of daily quantities shall be zero.
F. Because it is important that the quantities of gas to be
transported for SDI's account and the notice given thereof to interstate
pipelines and Crossroads be identical, the Customer shall cause its gas supplier
on a transporting pipeline to Crossroads to provide NITCO a written statement of
the Customer's daily nominations to that pipeline during each Nomination Period,
within five (5) business days following the end of the billing month. The
Customer shall pay the NITCO a NOMINATION CHARGE of $0.50 per Dkt on any
quantity difference between Customer's Daily Pipeline Nomination and the daily
amounts disclosed in the written statement from the transporting pipeline to
Crossroads.
II. BALANCING PROCEDURES
A. The Customer shall balance its usage with actual deliveries of
Customer-owned gas to Crossroads for delivery to NIFL (including Carryover Gas
made available to Customer on an average daily basis) and NITCO-supplied gas
requested by the Customer (collectively, "Total Deliveries").
B. An "Imbalance Quantity" will exist when the Customer's usage
is greater or less than Customer's Total Deliveries on a daily basis or during
the Nomination Period.
C. The Customer shall pay a DAILY IMBALANCE CHARGE of $0.50 per
Dkt on the portion of the daily Imbalance Quantity that is greater than 1,000
Dkt or one hundred percent (100%) of the Customer's Total Deliveries on a daily
basis, whichever is less.
D. If the quantity of Total Deliveries for the Customer's account
at the end of the billing month exceeds the Customer's monthly usage, the unused
gas shall be considered Carryover Gas to be carried over and consumed by the
Customer, for billing purposes, as the first gas through the Customer's meter
the next month.
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<PAGE> 19
E. The Customer shall pay a CARRYOVER CHARGE of $0.25 per Dkt on
any quantity of Carryover Gas in excess of twenty-five percent (25%) of the
Customer's usage during the billing month.
F. If the quantity of Total Deliveries for the Customer's account
at the end of the billing month is less than the Customer's monthly usage, the
difference shall be considered Interruptible Commodity Overrun Gas.
G. The Customer shall pay an INTERRUPTIBLE COMMODITY OVERRUN
CHARGE of $0.25 per Dkt on any quantity of Interruptible Commodity Overrun Gas
in excess of twenty-five percent of Total Deliveries for the Customer's account
during the billing month.
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<PAGE> 1
Exhibit 10.8
GAS SERVICES AGREEMENT (Crossroads)
THIS AGREEMENT, entered into this 3rd day of April, 1995, by and
between Crossroads Pipeline Company ("Crossroads"), an Indiana corporation, and
Steel Dynamics, Inc. ("SDI"), an Indiana corporation, WITNESSES that:
WHEREAS, SDI intends to construct a steel manufacturing facility near
Butler, Indiana ("SDI Facility") and needs natural gas transportation service in
connection with that facility; and
WHEREAS, Crossroads is able to provide such service;
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the parties agree that:
ARTICLE I
TERM OF CONTRACT
This Agreement shall be effective on the first day of the month
following the month in which the Indiana Utility Regulatory Commission ("IURC")
approves the NIFL Economic Development Interruptible Gas Transportation Rate No.
9T, attached hereto as Exhibit A ("NIFL Rate") and shall terminate on December
31, 2000 ("Term"). At the end of the Term, it shall be extended unless a party
hereto gives written notice to the other parties that the Agreement will not be
renewed, which notice must be provided at least six (6) months prior to the end
of the Term and any extension thereof. If such notice is not provided at least
six (6) months prior to the end of the Term, the Term shall be extended until
the last day of the month which is at least six (6) months after the provision
of written notice by either
<PAGE> 2
party to the other parties that this Agreement will be terminated.
If the IURC does not approve the NIFL Rate, as submitted, this
Agreement, shall be terminable by either SDI or Crossroads, upon thirty (30)
days written notice to the other party. A failure to timely terminate this
Agreement by either party shall result in this Agreement remaining in full force
and effect.
ARTICLE II
NATURAL GAS SERVICE
Crossroads shall furnish, and SDI shall purchase, interruptible gas
transportation service through the NIFL transmission system for the SDI Facility
on the terms and conditions hereinafter described (all such services herein
referred to collectively as "Natural Gas Service") . Such transportation service
provided by Crossroads will be interruptible transportation of SDI's gas from
the point at which it is delivered to the Crossroads system to the Crossroads
interconnection with the NIFL system near Butler, Indiana ("NIFL Connection").
On and after January 1, 1996, SDI's minimum average volume of Natural Gas
Service at the SDI Facility shall be one thousand five hundred dekatherms per
day (1,500 Dkt/d). Prior to that date SDI shall endeavor to meet such minimum,
but shall not be required to do so, because of start-up conditions.
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<PAGE> 3
ARTICLE III
RATES AND CHARGES FOR GAS SERVICE
1. For the Natural Gas Service rendered during the first five (5) years
of the Term, SDI shall pay to Crossroads or its designated representative
(hereinafter "Crossroads") a monthly service fee equal to the maximum tariff
rate for transportation service by Crossroads approved by the Federal Energy
Regulatory Commission ("FERC"), not to exceed 11.57 cents per dekatherm
($.1157/Dth) for all quantities of SDI's gas delivered to the NIFL Connection.
2. Penalties and Charges Relating to Interstate Pipeline and Other
Suppliers. To the extent that SDI actions or inaction cause Crossroads to be
assessed any penalties and/or charges by or related to interstate pipeline
suppliers or other suppliers of gas or services, SDI or its designated
representatives ("SDI") shall reimburse Crossroads for such penalties and
charges upon being provided written documentation summarizing the actions
causing the penalties or charges. To the extent that actions or inaction of
Crossroads cause SDI to be assessed any penalties and/or charges by or related
to interstate pipeline suppliers or other suppliers of gas or services,
Crossroads shall reimburse SDI for such penalties and charges upon being
provided written documentation summarizing the actions causing the penalties or
charges.
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<PAGE> 4
ARTICLE IV
CURTAILMENT
In the event of a gas supply or operational curtailment on the
Crossroads system which affects Crossroad's ability to provide Natural Gas
Service, SDI's receipt of such service shall be subject to curtailment at the
same time and rate as the curtailment of other Crossroads interruptible gas
transportation customers .
ARTICLE V
BILLING
Crossroads will cause to be provided to SDI, on or before the seventh
(7th) day of every calendar month, by facsimile transmission, followed by the
mailing of a copy, a detailed invoice for all services rendered under this
Agreement. Each month SDI shall issue and send to Crossroads payment of these
invoices on SDI's "25th of the month check run" for the prior month's service.
In the absence of written notice otherwise, these invoices and payments shall be
sent to:
INVOICES PAYMENTS
SDI Crossroads
CIO Accounts Payable Richard S. Kalmas
4500 County Road 59 801 E. 86th Street
Butler, Indiana 46721 Merrillville, Indiana 46410
Interest on delinquent and unpaid amounts shall accrue at the published
prime commercial lending rate established from time to time by National City
Bank, Indiana, or its successor ("Prime Rate"), and is payable from the date due
until the date
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upon which payment is made. Interest on any overpaid amounts shall accrue at the
Prime Rate and is payable from the date paid by SDI until the date repaid by
Crossroads.
In the event SDI fails to make timely and full payment of any invoice
rendered by Crossroads, and except as provided in the next paragraph, Crossroads
may terminate or suspend the provision of further Natural Gas Service. Such
suspension or termination shall be without prejudice to any other rights any
party may have with respect to its provision of Natural Gas Service to SDI. Such
termination or suspension may be undertaken only if SDI has been given ten (10)
days written notice, via telefax or hand delivery, of the intent by Crossroads
to terminate or suspend the provision of Natural Gas Service.
Notwithstanding the foregoing paragraph, in the event SDI wishes to
contest a portion of a billed amount, SDI shall pay the portion not contested
and interest shall accrue at the rate specified in this ARTICLE on the unpaid
portion while resolution of contested amounts is pending. However, the
provisions of the preceding sentence shall not be applicable where SDI has
failed to make timely payment of an invoice and has failed to provide adequate
assurances, including advance payments if requested, of SDI's continued
solvency.
Upon providing Crossroads with reasonable prior notification, during
regular business hours and on regular business days, SDI, or its agent, shall
have the right to examine
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relevant books, records, contracts and charts of Crossroads to the extent
reasonably necessary to verify the accuracy of any invoice, statement, test,
chart, billing or computation made under or pursuant to any of the provisions of
this Agreement.
ARTICLE VI
NOTICES
Except for matters pertaining to billings provided for in ARTICLE V of
this Agreement, all notices and other communications shall be provided to the
following:
SDI Crossroads
Tracy Shellabarger Richard S. Kalmas
Vice President 801 E. 86th St.
4500 County Road 59 Merrillville, Indiana 46410
Butler, Indiana 46721
A party may change the addresses stated above, as well as the recipient
of notices, by providing written notification of that change to the other party.
ARTICLE VII
FORCE MAJEURE
No party hereto shall be liable to the other for any act, omission or
circumstance resulting from events beyond their reasonable control. Each party
will use reasonable efforts and diligence to remove the cause of a force majeure
condition and resume delivery or utilization of Natural Gas Service previously
suspended. Natural Gas Service withheld from SDI during a force majeure
condition will recommence upon the availability of such service and the end of
such circumstances. No force majeure
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condition will relieve SDI from paying any invoice relating to Natural Gas
Service previously rendered.
The term force majeure as used herein shall mean any act, omission or
circumstance occasioned by or as a consequence of any acts of God, acts of the
public enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, floods, washouts, vandalism, arrests and
restraints of rulers and peoples, any strike or work stoppage, civil
disturbances, explosions, breakage or accident to machinery or lines of pipe,
telecommunications failures or malfunctions, or computer failures or
malfunctions, which frustrates the intent of the parties hereto and which has
been resisted in good faith by all reasonable legal means, and any other cause,
whether of the kind enumerated or otherwise, not reasonably within the control
of the party claiming suspension and which by the exercise of due diligence such
party is unable to prevent or overcome. It is understood and agreed that the
settlement of strikes or lockouts shall be entirely within the discretion of the
party having the difficulty, and that the above requirement that any event of
force majeure shall be remedied with all reasonable dispatch shall not require
the settlement of strikes or lockouts by acceding to the demands of the opposing
party when such course is deemed to be inadvisable or inappropriate in the
discretion of the party having the difficulty.
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ARTICLE VIII
ASSIGNMENT
The benefits and obligations of this Agreement shall inure to and be
binding upon successors and assigns, as the cause may be, of the original
parties hereto, respectively, for the full term thereof; provided that no
assignment thereof shall be made by either party without first obtaining the
other party's prior written consent, which consent will not be unreasonably
withheld. Unless expressly agreed to, no partial assignment of the Agreement can
be made.
ARTICLE IX
APPLICABLE LAW AND REGULATION
This Agreement shall be governed by the laws of the State of Indiana.
Natural Gas Service under this Agreement shall be subject to the applicable
rules, regulations, orders and standards of service for gas public utilities of
the IURC and FERC, as the same may be in effect from time to time, and all
applicable state and federal laws, administrative orders, and regulations,
including 170 IAC 5-1-22, as the same may be in effect from time.
ARTICLE X
LIMITATION OF REMEDIES AND ACTIONS
Any claim pertaining to this Agreement must be commenced and litigated
or otherwise resolved in Indiana. An action for breach of this Agreement must be
commenced within
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one (1) year after the cause of action has accrued. The exclusive remedy for
wrongful nondelivery of gas by Crossroads, in the absence of Crossroads' wilful
misconduct or gross negligence, is, at Crossroads' election, (a) actual damages
caused by the nondelivery which are economic and incidental and subject to
establishment by clear and convincing evidence, or (b) the price value of the
gas which was not delivered, or (c) the cost for Crossroads to deliver a
replacement quantity of such gas. No consequential damages arising from a breach
of this Agreement shall be recoverable, in the absence of Crossroads' wilful
misconduct or gross negligence. The parties agree this exclusion of
consequential damages is not unconscionable.
ARTICLE XI
INDEMNIFICATION
SDI agrees to indemnify, defend and hold harmless Crossroads from all
loss, damage or expense arising out of or in any way connected with the claims
of any person, except claims for injuries and/or death of employees of
Crossroads arising out of and in the course of their employment, for injuries to
person or property or for injury to or death of any person or persons due to the
sole negligence of Crossroads in the event that such loss, damage, injury or
death shall be proximately caused by any act or omission, or any breach of any
statutory duty of SDI, or its employees or agents, occurring in the performance
of this Agreement .
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<PAGE> 10
Crossroads agrees to indemnify, defend and hold harmless SDI from all
loss, damage or expense arising out of or in any way connected with the claims
of any person, except claims for injuries and/or death of employees of SDI
arising out of and in the course of their employment with SDI, for injuries to
person or property occasioned by the provision of Natural Gas Service, except
for any liability for loss or damage to property or for injury or death of any
person or persons due to SDI's sole negligence, in the event that such loss,
damage, injury or death shall be proximately caused by any act or omission, or
any breach of any statutory duty of Crossroads, or its employees or agents,
occurring in the performance of this Agreement.
In the event any loss, damage, expense, or claim occurs for which SDI
and Crossroads are ultimately each found to have been at fault in proximately
causing the loss, damage, expense, or claim, Crossroads and SDI shall both bear
their own separate costs of defense and the proportionate share of such
liability.
This ARTICLE is severable from the other portions of this Agreement. A
breach of this ARTICLE is not a breach of the entire Agreement. If this ARTICLE
is found to be unenforceable, the remaining portions of this Agreement shall
remain in force and effect.
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ARTICLE XII
FAILURE TO PERFORM
Except as otherwise provided for herein, if any party fails to perform
any of the covenants or obligations imposed upon it under this Agreement (except
where such failure is excused under other provisions hereof), then in such event
a party not in default may, at its option (without waiving any other remedy for
breach thereof), notify in writing the party in default, stating specifically
the nature of the default and declaring it to be the intention of the party
giving such notice to cancel the Agreement if the default is not cured as
hereinafter provided. Cancellation under this ARTICLE shall require a
substantial and material default. The party in default will have thirty (30)
days after receipt of the aforesaid notice is which to remedy such default as
stated in the notice, and if within said thirty (30) days the party in default
does so remove said cause or causes and fully indemnifies the party not in
default for any and all consequences resulting from that default, then this
Agreement shall remain in force and effect.
ARTICLE XIII
WARRANTY OF TITLE
Each party warrants to the other party that it will, at the time and
place of delivery of gas asserted to be owned by it under this Agreement, have
good title or good right to all volumes delivered on its behalf and further
warrants for itself,
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its successors and assigns that such gas shall be free and clear of all liens,
encumbrances, and claims of those not parties hereto; and that it will indemnify
and save the other party harmless for all suits, actions, debts, accounts,
damages, costs, losses or expenses (including reasonable attorney's fees)
arising from or out of the adverse claims arising from or out of the same. This
paragraph shall not apply to gas redelivered by Crossroads, where Crossroads or
an affiliate took title as agent for or otherwise on behalf of SDI.
ARTICLE XIV
DISCLAIMER OF WARRANTIES
Except as provided in ARTICLE XIII, Crossroads disclaims and excludes
all warranties implied and express, including all warranties of fitness for a
particular purpose and all warranties of merchantability. SDI agrees its
attention has been drawn to this exclusion of warranties.
ARTICLE XV
SEVERABILITY
If any provision hereof shall be found to be inoperative or in
violation of any law or regulation, only that provision shall be deleted from
the Agreement, and the remainder of the Agreement shall not be affected.
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ARTICLE XVI
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of Crossroads and
SDI with respect to the subject matter hereof and supersedes any and all prior
oral and written agreements. No modification or amendment of this Agreement is
binding on the parties unless in writing and executed by duly authorized
representatives of the parties.
ARTICLE XVII
WAIVER
No provision of this Agreement is waived and no breach consented to,
unless the waiver or consent is in writing and signed by the waiving or
consenting party. A waiver of or consent to a provision of breach is not a
waiver of, consent to or excuse for a different or subsequent breach. Failure to
enforce an obligation hereunder is not a waiver.
ARTICLE XVIII
AUTHORITY
Each party has full power and authority to enter into and perform this
Agreement, and the person signing this Agreement on behalf of each has been
properly authorized and empowered to enter into this Agreement. Each party
further acknowledges that it has read this Agreement, understands it and agrees
to be bound by it.
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This Agreement has been executed in duplicate by the duly authorized
representatives of the Parties.
STEEL DYNAMICS, INC.
Date: 04/03/95 By: /s/ Tracy Shellabarger
------------------------- ------------------------------------
CROSSROADS PIPELINE COMPANY
Date: 4/18/95 By: /s/ Richard S. Kalmas
------------------------- ------------------------------------
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<PAGE> 15
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> 16
RATE ADJUSTMENT
This rate shall be subject to any adjustment occasioned by "take-or-pay" or FERC
Order 636 transition costs passed through to the Company by other pipelines.
RULES AND REGULATIONS
Service supplied under this rate schedule shall be governed by the Rules and
Regulations of the Company, as approved by the Indiana Utility Regulatory
Commission and in force from time to time.
Issued Dated: Effective:
Issued by: H.P. Conrad, Jr.
President
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Exhibit 10.13
AGREEMENT TO PROVIDE
SCRAP PURCHASING SERVICES*
This Agreement to provide scrap purchasing services and certain priority
purchase rights (the "Agreement") is entered into on this 29th day of October,
1993, by and between OmniSource Corporation, an Indiana corporation with its
principal office and place of business in Fort Wayne, Indiana ("OmniSource") and
Steel Dynamics, Inc., an Indiana corporation with its principal office and place
of business in Indianapolis, Indiana ("SDI").
WHEREAS, SDI intends to design, construct and operate a new steel production
facility in the Midwest, at a site yet to be selected, using thin slab casting
technology to produce hot rolled sheet steel of varying sizes, grades, and
specifications (hereinafter, from time to time, the "Mini- Mill");
WHEREAS, the Mini-Mill will require a continuous and dependable supply of
steel scrap ("Scrap") as its primary raw material ingredient, and desires to
secure the services of a major Scrap processor and broker with regional,
national, and international access to substantial sources of Scrap supply, to
act as SDI Scrap procurement agency for its periodic, regular, and ongoing
needs; and
WHEREAS, OmniSource considers itself properly qualified to and provide the
foregoing services to SDI, and desires to provide the Scrap purchasing services*
described in this Agreement, all subject to the terms and conditions set forth
herein,
NOW, THEREFORE, in consideration of the mutual covenants and undertakings of
the parties set forth herein, the parties agree as follows:
I.
Appointment of OmniSource as
Scrap Purchasing Agency
SDI hereby appoints and engages the services of OmniSource, and OmniSource
hereby accepts the appointment and agrees to render services to SDI as SDI's
exclusive Scrap purchasing agency, to carry out its functions hereunder either
for and on behalf of SDI, as agent, or in direct seller/purchaser transactions
with SDI, or both. OmniSource agrees to provide SDI with the following services
and rights:
A. General Agreement. OmniSource agrees that, subject to the procedures and
undertakings described in Paragraphs I.B., I.C., and I.D. herein, it
will use its best
* Material has been redacted pursuant to request for Confidential Treatment.
<PAGE> 2
efforts to locate and secure for SDI's Mini-Mill operations, such Scrap
supplies as SDI may from time to time wish to purchase, at the lowest
then available market prices for material of like grade, quantity, and
delivery dates. OmniSource and SDI shall regularly consult with each
other regarding the Mini-Mill's anticipated needs and requirements of
Scrap, by grade, quantity, and approximate delivery date(s).
B. *. OmniSource represents and warrants to SDI that at the present time it
regularly owns, controls, or otherwise has direct purchase rights with
respect to approximately One Hundred Thousand (100,000) gross tons of
mill grades of scrap of varying kinds and grades, on a monthly basis
("OmniSource's Scrap").
*
1. Communication. On a regular basis, OmniSource will notify SDI by
means of voice, fax, or electronic communication, or in such other
manner (i.e., as described in Paragraph I.D.) as the parties may
mutually agree, of the grade, quantity, location and the prevailing
OmniSource "Market Price" thereof (F.O.B. the Mini-Mill) of
OmniSource Scrap that is available for immediate purchase for the
Mini-Mill (an "OmniSource Available Lot").
2. Response. After its receipt of the foregoing notification, SDI shall
have the * right, for a period of time as agreed to
in connection with each offering, to secure such OmniSource Available
Lot, by communicating its assent (using similar means) that it will
take such OmniSource Available Lot upon the terms presented. If
timely communicated to OmniSource, that will constitute a binding
commitment by SDI to purchase and by OmniSource to sell (an
"OmniSource Scrap Contract") the OmniSource Scrap constituting the
particular OmniSource Available Lot. If a timely assent is not
communicated, OmniSource shall thereafter b free to hold, use, or
dispose of that OmniSource Available Lot in any manner, and upon such
term (including price and other differences reflecting market
conditions), as it deems appropriate.
3. Determination of Market Price. For purposes of determining
"OmniSource's Market Price," with respect to any OmniSource Available
Lot, the price at which OmniSource can actually sell material of like
grade and quantity, F.O.B. the OmniSource Available Lot, shall
constitute OmniSource's Market Price; and that, plus the actual cost
of freight into SDI's Mini-Mill, shall be used to determine SDI's
F.O.B. Mini-Mill price for that OmniSource Available Lot.
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<PAGE> 3
Subject to suitable safeguards to preserve confidentiality,
OmniSource agrees to make available to SDI, for verification
purposes,, OmniSource's Market Price information.
It is agreed, however, that in the event that OmniSource is able to
purchase and bring into one or more of its operating plants
additional tonnages of Scrap, over and above its normal flow, and the
cost of such additional Scrap exceeds the "OmniSource Market Price,"
as defined herein, but is nonetheless lower than additional tonnages
of Scrap that may be available F.O.B. the Mini-Mill pursuant to
brokered General Market Scrap purchases pursuant to Paragraph I.C.,
such higher price shall be deemed the "OmniSource Market Price" for
purposes of only of such additional tonnages.
4. Payment. Payment to OmniSource for all OmniSource Scrap purchased by
SDI pursuant to this Paragraph I.B. shall be by SDI check and shall
be due and made on net thirty (30) day terms after delivery of Scrap
to the Mini-Mill, and OmniSource shall not be required hereunder to
provide extended credit terms to SDI.
5. Other Terms and Conditions of Sale. In addition to grade, quantity,
location, and price terms, as contemplated by OmniSource Scrap
Contracts agreed to in the manner contemplated by Paragraph I.B.2.,
the OmniSource Scrap Contracts between OmniSource and SDI shall be
governed by the Terms and Conditions of Sale for all OmniSource Scrap
Contracts between the parties hereto, as identified to this Agreement
from time to time.
C. * to General Market Scrap. OmniSource agrees to provide SDI, on a
regular basis, with grade, quantity, location, availability, and General
Market Price information, as defined in Paragraph I.C.3., F.O.B. the
Mini-Mill, reflecting the lowest cost Scrap of like grade and quantity,
other than OmniSource Scrap, that is available in the general
marketplace ("General Market Scrap") to meet the Mini-Mill's monthly or
other periodic requirements.
The * Rights to General Market Scrap that constitute the subject of this
Paragraph I.C. will operate as follows:
1. Communication. On a regular basis, OmniSource will notify SDI, by
means of voice, fax, or electronic communication, or in such other
manner (i.e., as described in Paragraph I.D.) as the parties may
mutually agree, of the grade, quantity, location and the "General
Market Price" thereof (F.O.B. the Mini-Mill) of General Market Scrap
that is available for immediate purchase for the Mini-Mill (a
"General Market Available Lot").
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<PAGE> 4
2. Response. After its receipt of the foregoing notification, SDI shall
have the * right, for a period of time, as agreed to in
connection with each offering, to secure such General Market
Available Lot by communicating its assent (using similar means), that
it will take such General Market Available Lot upon the terms
presented. If timely communicated to OmniSource, that will constitute
a binding commitment by SDI to purchase the particular General Market
Available Lot (a "General Market Scrap Contract"). If a timely assent
is not communicated, OmniSource shall thereafter be free to forego,
purchase, or otherwise dispose of that General Market Available Lot
in any manner, and upon such terms (including price and other
differences reflecting market conditions), as it deems appropriate.
3. Determination of General Market Price. For purposes of determining
the "General Market Price" with respect to any General Market
Available Lot, the price at which OmniSource can actually purchase
that General Market Available Lot, F.O.B. the General Market
Available Lot, shall constitute the General Market Price for such
General Market Available Lot and that, plus the actual cost of
freight into SDI's Mini-Mill, shall be used to determine SDI's F.O.B.
Mini-Mill price for that particular General Market Available Lot.
Subject to suitable safeguards to preserve confidentiality,
OmniSource agrees to make available to SDI, for verification
purposes, all General Market Price data in connection with each and
every transaction.
4. Payment. Payment to OmniSource for all General Market Scrap purchased
by OmniSource and resold to SDI pursuant to this Paragraph I.C. shall
be by SDI check and shall be due and made on net thirty (30) day
terms after delivery of the Scrap to the Mini-Mill, and OmniSource
shall not be required hereunder to provide extended credit terms to
SDI.
5. Other Terms and Conditions of Sale. In addition to grade, quantity,
location, and price terms, as contemplated by General Market Scrap
Contracts agreed to in the manner contemplated by Paragraph I.C.2.,
the General Market Scrap Contracts between OmniSource and SDI shall
be governed by the Terms and Conditions of Sale for all OmniSource
General Market Scrap Contracts between the parties hereto, as
identified to this Agreement from time to time.
D. Working Agreements Regarding Scrap Purchasing Procedures. The parties
mutually agree that from time to time their representatives will develop
daily, weekly, or other periodic procedures and forms pursuant to which
OmniSource and SDI will carry out their respective obligations and
rights hereunder. The parties further recognize that the specific rights
granted to-SDI by OmniSource pursuant to Paragraphs I.B. and I.C. are
primarily for SDI's protection during possible conditions of market
undersupply, and for the further purpose of securing for SDI
OmniSource's commitment to use its best efforts
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<PAGE> 5
in good faith to assist SDI in meeting its Scrap requirements on
a-continuous basis at the lowest available market prices for goods of
like quality and amount.
The parties agree, however, that in view of the foregoing, their
respective representatives may from time to time devise operating
procedures that may ignore the formalities contemplated by Paragraphs
I.B. and I.C. hereunder; but such informal procedures shall not be
deemed to constitute a modification or waiver of any of the rights and
obligations described in Paragraphs I.B. and I.C.
E. Compensation to OmniSource. For OmniSource's services rendered to SDI as
its exclusive Scrap purchasing agency and advisor, as well as for the
purchase rights * granted to SDI by OmniSource pursuant to * and
I.C. hereunder, SDI agrees to pay to OmniSource a fee ("OmniSource's
Feel') equal to Two Dollars ($2.00) for every gross ton of Scrap
received by SDI at its Mini-Mill, until such time as SDI's pre-tax
earnings from operations reach the first Thirty Million Dollars
($30,000,000), without regard to prior accumulated losses, if any, at
which time SDI agrees that OmniSource's Fee shall go to Three Dollars
($3.00) per gross ton thereafter. OmniSource's Fees shall be payable in
any and all events based upon the Mini-Mill's receipt of Scrap and
regardless of whether such Scrap derived from OmniSource Scrap Contracts
pursuant to Paragraph I.B. or General Market Scrap Contracts pursuant to
Paragraph I.C., but shall not be payable on SDI's direct purchase from
other sources pursuant to its rights described in Paragraph I.F.
OmniSource's Fees will be billed to SDI periodically by OmniSource, with
reference to specific OmniSource Scrap Contracts or General Market Scrap
Contracts, either separately or accompanying OmniSource invoices for
OmniSource Scrap or General Market Scrap, and shall be payable on net
thirty (30) day terms the same as payments due pursuant to Paragraphs
I.B. and I.C.
OmniSource agrees no other additional charge or mark-up, over and above
the OmniSource Market Price (in the case of OmniSource Scrap Contracts)
or the general Market Price (in the case of General Market Scrap
Contracts) is to be levied by OmniSource, except as otherwise
specifically contemplated by this Agreement.
F. SDI's Purchase Rights. All final decisions regarding purchases of Scrap
hereunder shall belong to SDI, except insofar as the parties may
otherwise agree pursuant to the procedures contemplated by Paragraph
I.D.
SDI shall have the sole and unfettered discretion to determine its
periodic Scrap needs hereunder, including the extent to which it may
employ so-called Scrap substitutes, in lieu of metallic Scrap, in its
manufacturing process.
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<PAGE> 6
SDI shall also retain the right, in the exercise of its own prudent
discretion, if after reasonable notice to OmniSource, OmniSource is not
able, for whatever reason, to supply sufficient Scrap of a particular
quality and amount at a particular price and at a particular time, or
if, by mutual agreement, there are independent business justifications
for SDI to deal directly with a supplier, to purchase Scrap for its own
account; and such action, unless in connection with a claim of breach,
shall not be deemed to constitute a renunciation by SDI or a waiver by
OmniSource of the exclusivity of OmniSource's Scrap agency rights
hereunder; and OmniSource shall not be entitled to its Fees on such
special transactions as otherwise determined under Paragraph I.E;
provided, however, that such exception shall not be used as a device to
evade OmniSource's compensation hereunder.
G. Additional OmniSource Services. In addition to the services previously
described herein, OmniSource will regularly consult with and advise SDI
with respect to such matters as the nature and extent of its purchasing
services, scheduling of Scrap shipments, quality control, supplier
supervision and control, and any other necessary services to enhance and
facilitate the Mini-Mill's receipt of an orderly supply of quality,
conforming Scrap.
SDI agrees to communicate regularly with OmniSource concerning any
problems of supply, quality, or other operating concerns., so that SDI
and OmniSource can work together to solve any supply issues before they
become problems, and to enable OmniSource to take up any supplier-side
quality or other problems with suppliers.
II.
Additional OmniSource Rights
A. Scrap Processing Facility. SDI represents to OmniSource that it has no
present plans for the establishment of a Scrap processing facility on
site at the Mini-Mill,,and that its current plans provide only for a
Scrap Receiving and Holding Facility. SDI agrees, however, that if it
decides to invite proposals for, install or construct a Scrap.
processing facility in, on, adjacent to or to serve the Mini-Mill or on
near premises OmniSource will be given a first right of refusal, for a
period of not less than one hundred eighty (180) days, to construct
and/or operate such a Scrap processing facility, on terms and conditions
substantially similar to those proposed to or by SDI and set forth and
described in reasonable detail in SDI's written notice to OmniSource.
B. Sale of Scrap by SDI. SDI agrees that OmniSource shall have a first
right of refusal to purchase from SDI any scrap metal or comparable
product that the Mini-Mill may sell from time to time.
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<PAGE> 7
C. Trash Removal or Waste Hauling Agreements. SDI agrees that OmniSource
shall have a first right of refusal to provide any trash removal or
waste hauling' services which SDI may require and not provide for its
own account.
III.
Effective Date and Term of Agreement
The Effective Date of this Agreement shall be the date appearing at the
outset hereof, but the initial term of OmniSource's exclusive Scrap agency
relationship with SDI, as described in this Agreement, shall commence on the
date upon which OmniSource enters into its first OmniSource Scrap Contract
or General Market Scrap Contract pursuant to Paragraphs I.B. or I.C., and
shall thereafter extend for a period of six (6) years, or, alternatively,
shall extend for eight (8) years from the Effective Date, whichever is the
greater period. At the expiration of the initial term, and unless the
parties hereto have specifically extended this Agreement by a specific
renewal term, by written instruction signed by both parties, or replaced
this Agreement with a different agreement by a duly executed instrument
signed by both parties, this Agreement shall be deemed to continue on a year
to year basis, subject to termination by either party, with or without
cause, upon one (1) year's advance written notice.
IV.
Default and Early Termination
A. Breach of Performance by OmniSource. In the event that SDI alleges
OmniSource's failure to perform in accordance with the terms and
conditions of this Agreement, and in the further event that such failure
continues unabated for a period in excess of thirty (30) days after
notification to OmniSource in writing with a particularized statement of
the alleged failure to perform, then SDI, at its option, shall have the
right to terminate this Agreement for cause, based upon OmniSource's
default; provided, however, that in the event that prior to the lapse of
the thirty (30) day "cure" period set forth herein OmniSource has taken
reasonable steps to correct the default and failure of performance and,
if diligent, can reasonably correct and cure the problem within an
additional thirty (30) day period, OmniSource shall be entitled to the
additional period of thirty (30) days before SDI shall be entitled to
declare a default hereunder.
While the parties acknowledge and agree that this Agreement does not
constitute a requirements contract, nor does it constitute an
undertaking by OmniSource to provide SDI with its Mini-Mill's Scrap
needs in accordance with any specific terms or conditions, or at all
costs, or in any event, and while the parties further recognize that
market conditions may be such that adequate Scrap supplies are from time
to time not
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<PAGE> 8
available or, if available, may be unavailable at acceptable price
levels, .OmniSource agrees that SDI (i) has the right hereunder to
priority treatment of Scrap supply, and (ii) has entered into this
Agreement with the expectation that OmniSource, through its regular
acquisition and production of OmniSource Scrap and its access to General
Market Scrap, can provide SDI with adequate sources of Scrap for its
Mini-Mill operation. Subject to any periods of market aberration,
therefore, OmniSource agrees that if, for a continuous period of three
(3) months, it has failed to provide SDI with Scrap purchase contracts
sufficient to cover seventy percent (70%) of its operating needs during
such period, then such condition shall constitute grounds for a
declaration of default.
If OmniSource becomes insolvent, commits any act of bankruptcy, makes a
general assignment for the benefit of creditors, or in the event of the
institution of any voluntary or involuntary proceedings by or against
OmniSource under bankruptcy, insolvency, or similar laws for the relief
of debtors or the protection of creditors, or in the event of the
appointment of a receiver, trustee or assignee for the benefit of
creditors of OmniSource, then, at SDI's election, this Agreement may be
immediately terminated.
B. Breach of Performance by SDI. In the event that OmniSource alleges SDI's
failure to perform in accordance with the terms and conditions of this
Agreement, and in the further event that such failure continues unabated
for a period in excess of thirty (30) days after notification to SDI in
writing with a particularized statement of the alleged failure to
perform, and, in addition to any other remedies to which OmniSource may
be entitled at law or in equity, OmniSource shall be entitled to
terminate this Agreement; provided, however, that in the event that
prior to the lapse of the thirty (30) day "cure" period set forth herein
SDI has taken reasonable steps to correct the default and failure of
performance and, if diligent, can reasonably correct and cure any
non-payment problem within an additional thirty (30) day period, SDI
shall be entitled to the additional period of thirty (30) days before
OmniSource shall be entitled to declare a default hereunder. Any
termination of this Agreement shall not relieve SDI from any liability
which may have arisen hereunder prior to such termination, nor shall any
such termination relieve SDI of any claim for damages or other
liabilities arising as a consequence of its default hereunder.
If SDI becomes insolvent, commits any act of bankruptcy, makes a general
assignment for the benefit of creditors, or in the event of the
institution of any voluntary or involuntary proceedings by or against
SDI under bankruptcy, insolvency, or similar laws for the relief of
debtors or the protection of creditors, or in the event of the
appointment of a receiver, trustee or assignee for the benefit of
creditors of SDI, then, at OmniSource's election, this Agreement may be
immediately terminated.
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V.
Miscellaneous Provisions
A. Confidentiality. Each party hereto agrees to receive and hold any
information acquired by it pursuant to this Agreement or through the
relationships created hereunder and relating to the other party in
confidence and to not use or disclose such information to any other
person unless first authorized by the other party in writing, required
by law, or unless such information is otherwise publicly available.
B. Force Majeure or Extraordinary Circumstances. In the event that
OmniSource or SDI may be delayed or prevented from performing under this
Agreement by reason of strikes, casualties, acts of God, labor troubles,
power failures, inability to obtain replacement parts or other
unanticipated breakdown of equipment, riots, insurrection, acts or
events of local, regional, or national emergency, extraordinary market
conditions beyond the control of a party to this Agreement, or the like,
and which prevents such party from performing its obligations under this
Agreement, such party shall not be deemed to be in default hereunder due
to such non-performance during the pendency of such event or occurrence;
provided, however, that if such condition continues to exist for a
period in excess of three (3) months, the party suffering the
non-performance shall be entitled to terminate this Agreement; and
provided, further, that both parties agree to use their best efforts in
good faith to work around and minimize the effect of any such act,
condition, or circumstance, if it can be done without a materially
adverse effect.
Should an event, act, or circumstance occur hereunder which justifies
OmniSource's non-performance of its Scrap agency functions hereunder,
then, during the course of any such interruption, SDI shall be entitled
to obtain its Scrap from or through sources other than OmniSource
without the obligation to pay OmniSource its Fees and without SDI being
in default under this Agreement. During any such period of interruption,
OmniSource agrees to take all reasonable measures to assist SDI in the
procurement of such alternative sources of supply.
C. Notices. Any notice or other communication required to be given
hereunder, or otherwise appropriate, shall be in writing and deemed
given when delivered personally or sent by certified or-registered mail
addressed to a party at the address set forth below, or at such other
addresses as either party may from time to time designate:
If to OmniSource: OmniSource Corporation
Attention: Leonard Rifkin, President
1610 N. Calhoun Street
Fort Wayne, IN 46808
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<PAGE> 10
with a copy to: Robert S. Walters, Esq.
Barrett & McNagny
215 E. Berry Street
Fort Wayne, IN 46802
If to SDI: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
with a copy to: Mark C. Chambers, Esq.
Haller & Colvin
444 East Main Street
Fort Wayne, IN 46802
D. Governing Law. This Agreement shall be governed in all respects in
accordance with the provisions of the laws of the state of Indiana.
E. Independent Contractor Relationship. OmniSource shall act as an
independent contractor to SDI hereunder, and the parties acknowledge and
agree that there is no intention hereunder to act as joint venturers or
partners, and nothing herein shall be so Construed.
F. Litigation Venue. In the event of any dispute hereunder, including (but
not limited to) any dispute relating to a breach of this Agreement, such
dispute shall be heard in any state or federal court, with jurisdiction,
in or serving the county in which SDI's Mini- Mill is located.
G. Entire Agreement. This Agreement constitutes and contains the entire
agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings and agreements between the parties
respecting its subject matter. No changes or modifications to this
Agreement shall be binding on either party unless in writing and
executed by each party hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
OMNISOURCE CORPORATION
/s/ Leonard Rifkin
By: ____________________________________
Leonard Rifkin, President
STEEL DYNAMICS, INC.
/s/ Keith Busse
By: ____________________________________
Keith Busse, President
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<PAGE> 1
Exhibit 10.15
IRON CARBIDE OFF-TAKE AGREEMENT
THIS AGREEMENT dated June 29, 1996 (this "Agreement"), is made by and
between QUALITECH STEEL CORPORATION, a Delaware corporation ("Qualitech"), and
STEEL DYNAMICS, INC., an Indiana corporation ("Steel Dynamics").
PRELIMINARY STATEMENT:
Steel Dynamics and Qualitech entered into a certain Seed Money Commitment
Agreement dated January 5, 1995 which, among other things, provides for Steel
Dynamics and Qualitech to negotiate a more detailed agreement relating to the
purchase by Steel Dynamics and the sale by Qualitech of iron carbide to be
manufactured at a new production facility to be constructed by Qualitech in
Corpus Christi, Texas (the "Iron Carbide Plant") planned to have an estimated
aggregate annual production capacity of 660,000 metric tonnes (each such tonne
consisting of 2,204.62 pounds and hereafter called a "Tonne"). As a result of
negotiations pursuant to that provision, the parties are entering into this
Agreement.
AGREEMENTS:
1. Purchase and Sale Commitments.
(a)Subject to the terms and conditions of this Agreement, during the
period (the "Ramp-up Period") commencing on the Commencement Date (as defined in
Section 4) and ending on the later to occur of the last day before the date of
Final Acceptance (as defined in the Contract for Supply of Iron Carbide
Production Equipment, Processes and Services, dated the date hereof, between
Qualitech and Mitsubishi International Corporation, a New York corporation
("Mitsubishi")), or the Sustained Production Date (as defined in Subsection
1(c)), but in no event later than 38 months from the date of this Agreement,
Qualitech shall sell to Steel Dynamics, and Steel Dynamics shall purchase from
Qualitech, under the terms and conditions set forth in Section 3, 60% of any and
all quantities of Product (as defined in Subsection 1(d)) produced by the Iron
Carbide Plant.
(b)Subject to the terms and conditions of this Agreement, during the
Ramp-up Period, Steel Dynamics, together with Mitsubishi and OmniSource
Corporation, an Indiana corporation ("OmniSource"), pursuant to the Iron Carbide
Off-Take Agreements of even date herewith between Qualitech and Mitsubishi and
OmniSource, respectively, shall have the option to purchase pro rata from
Qualitech up to 45.5%, 12.1% and 18.2%, respectively (the "Option Quantities"),
of any and all Product produced by the Iron Carbide Plant during any period of
one calendar month or greater in the Ramp-up Period in which Product is produced
during that particular period at an annualized rate of 330,000 Tonnes or more,
up to 660,000 Tonnes. Qualitech shall be entitled to use the remaining 24.2% of
such production for that particular period for its own consumption or other
disposition. Qualitech shall notify Steel Dynamics at
* Material has been redacted pursuant to request for Confidential Treatment.
<PAGE> 2
least 30 days in advance of each such applicable period during the Ramp-Up
Period during which such production rate is reasonably estimated to occur. Steel
Dynamic's Option Quantity option shall be exercisable by written notice to
Qualitech within 30 days after Steel Dynamic's receipt of Qualitech's notice. If
Steel Dynamics exercises such option, such purchase shall be made at the price
and pursuant to the terms and conditions set forth in Sections 2 and 3. To the
extent that any of Steel Dynamics, Mitsubishi and/or OmniSource does not elect
to purchase its respective Option Quantity in its entirety, Qualitech and each
of such other parties which has elected to purchase its respective Option
Quantity in its entirety shall have the option (exercisable upon reasonable
written notice) to purchase from Qualitech and/or use, as the case may be, and
Qualitech shall sell to the foregoing parties who exercise such option (the
"Electing Parties") quantities of such Product which Steel Dynamics, Mitsubishi
and/or OmniSource do not elect to purchase, pro rata in accordance with the
respective shares of the Electing Parties. If during the period described
herein, production (on an annualized basis) drops below 330,000 Tonnes, the
options described herein shall not apply, and Qualitech's disposition of its
iron carbide shall revert to that which is otherwise required during the Ramp-Up
Period.
(c)Subject to the terms and conditions of this Agreement, including but
not limited to Subsections 1(e), 1(f) and 1(g), commencing on the later to occur
of the date of Final Acceptance or the date, after Final Acceptance, on which
Qualitech has successfully produced Product for a sustained period of 90 days at
the average rate of 41,250 Tonnes per month (the "Sustained Production Date"),
but in no event later than 38 months from the date of this Agreement, and
continuing during the term of this Agreement, Qualitech shall annually sell to
Steel Dynamics, and Steel Dynamics shall annually purchase from Qualitech,
quantities of Product produced by the Iron Carbide Plant's initial module, under
the terms and conditions contemplated by Section 3, in each Product Year (as
defined in subsection 1(d)), determined as annualized rate as follows (prorated
for any Product Year that is not a full calendar year) ("Steel Dynamics'
Allocable Amount"):
(1) 55.6% of the first 270,000 Tonnes of Estimated Production (as
defined in Subsection 1(e)) for such Product Year, pro rata with Mitsubishi and
OmniSource each at the rate of 22.2% pursuant to their respective Iron Carbide
Off-Take Agreements of even date herewith; and
(2) 48.4% of Estimated Production for such Product Year which is
greater than 350,000 Tonnes but not in excess of 660,000 Tonnes, pro rata with
Qualitech at its rate of 25.8% and with Mitsubishi and OmniSource at their rates
of 6.4% and 19.4% pursuant to their respective Iron Carbide Off-Take Agreements
of even date herewith.
Steel Dynamics acknowledges and agrees that Qualitech shall have sole
rights to all annualized Estimated Production for each Product Year which is
greater than 270,000 Tonnes but not exceeding 350,000 Tonnes.
(d)As used in this Agreement, the following terms shall have the
following meanings:
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<PAGE> 3
(1) "Product" means iron carbide manufactured by Qualitech at the
Iron Carbide Plant that (i) meets or exceeds the Product Specifications as
defined in Exhibit A attached to and made part hereof, all as determined by
testing methods prescribed for the Mossbauer analyzer (or any other commercially
accepted substantially equivalent analyzer which may be available from time to
time) and (ii) is capable of being used or consumed effectively in electric arc
furnaces as a scrap substitute product;
(2) "Product Year" means, initially, the calendar year (or portion
thereof) during which the Commencement Date occurs and, thereafter, each
calendar year (or portion thereof) during the term of this Agreement;
(3) "Product Month" means each calendar month (or portion thereof) in
any Product Year; and
(4) "Product Quarter" means a calendar quarter (or portion thereof)
in any Product Year.
(e)Qualitech shall notify Steel Dynamics in writing no less than 90 days
in advance of the Commencement Date and no less than .90 days in advance of the
beginning of each Product Year of the amount of Product reasonably estimated to
be manufactured by Qualitech for the applicable Product Year at the Iron Carbide
Plant (including monthly estimates) (the "Estimated Production"). Upon written
notice to Steel Dynamics, such estimates may be reasonably revised by Qualitech
from time to time during the applicable Product Year, but in no event less than
Steel Dynamic's Minimum Allocable Amount (as defined in Subsection 1(g)), as
additional relevant production information becomes available, with notice of any
such adjustment being given not less than 90 days in advance of the relevant
Product Year and 45 days :in advance of any quarterly adjustments. Thereafter,
if Qualitech in fact exceeds such revised Estimated Production, Steel Dynamics
shall have an option, together with Mitsubishi, OmniSource and Qualitech,
exercisable within 30 days after such written notice from Qualitech, to purchase
its pro rata portion of such excess, up to Steel Dynamics' Allocable Amount, but
shall not be required to do so. For purposes of satisfying Steel Dynamics'
purchase obligation described in Subsection 1(c), but not Qualitech's sales
obligation, Steel Dynamics shall be deemed to have purchased its full Allocable
Amount during any Product Month in which less than the entire Steel Dynamics'
Allocable Amount for that Product Month was offered to Steel Dynamics by
Qualitech.
(f)If, after the fifth business day following the close of any Product
Month, Steel Dynamics has failed to purchase at least Steel Dynamics' Allocable
Amount for such Product Month (to the extent such amount was offered to Steel
Dynamics for purchase in accordance with the terms and conditions of this
Agreement), then, upon 21 days written notice of its intent to do so, and unless
Steel Dynamics effects such purchases within such notice period or its
performance is otherwise excused hereunder, Qualitech's sole remedy, exercisable
by written notice delivered to Steel Dynamics within 15 days thereafter, shall
be to terminate this
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<PAGE> 4
Agreement (it being understood that such failure by Steel Dynamics shall not be
further subject to the cure provisions of Section 6). The failure by Qualitech
to terminate this Agreement within such 15 day period shall not constitute a
waiver of Qualitech's right to terminate for any such future failure by Steel
Dynamics. Such notice shall specify the effective date of any such termination
(not to be less than 60 days from the date of notice), and upon the effective
date thereof this Agreement shall terminate and neither party shall have any
further obligations hereunder, except for the performance of prior purchase
orders and payment thereunder, and except to the extent any provisions of this
Agreement expressly survive termination. Such termination right shall not extend
or otherwise affect any other agreement or contract then existing between the
parties, except as expressly provided in any such other agreement or contract.
If Qualitech fails for any reason to give such termination notice within such
15-day period, this Agreement shall remain in full force and effect.
(g)Qualitech shall only be entitled to offer less than Steel Dynamics
full Allocable Amount and to reduce Steel Dynamic's Product to not less than
37,500 Tonnes of Product per Product Quarter ("Steel Dynamics' Minimum Allocable
Amount"), if and as long as such deficiency is not as a result of sales to third
parties (other than quantities of Product offered to OmniSource and Mitsubishi)
or taken by Qualitech for its own consumption, all as contemplated by this
Agreement or as a result of any circumstance described in Section 7(a). If, in
any Product Year, Qualitech has not offered to Steel Dynamics for purchase in
accordance with the terms and conditions of this Agreement at least (i) 37,500
Tonnes of Product in any Product Quarter of such Product Year (or a prorated
amount thereof for any Product Quarter that is not three full calendar months)
(the "Quarterly Guarantee"), or (ii) 11,250 Tonnes of Product in any Product
Month in such Product Year (or a pro rated part thereof that is not a full
month) (the "Monthly Guarantee"), then, upon 21 days advance written notice of
its intention to do so, and unless Qualitech provides such product to Steel
Dynamics within the notice period or its performance is otherwise excused
hereunder, Steel Dynamics' sole remedy, exercisable by written notice delivered
to Qualitech within 15 days thereafter, shall be to terminate this Agreement (it
being understood that such failure by Qualitech to offer Steel Dynamics the
Quarterly Guarantee or the Monthly Guarantee shall not be further subject to the
cure provisions of Section 6). The failure by Steel Dynamics to terminate this
Agreement within such 15 day period as a result of a failure by Qualitech to
offer the Quarterly Guarantee or the Monthly Guarantee shall not constitute a
waiver of Steel Dynamics' right to terminate for a future failure by Qualitech
to offer to Steel Dynamics the Quarterly Guarantee or the Monthly Guarantee.
Such notice shall specify the effective date of any such termination (not to be
less than 60 days from the date of notice), and upon the effective date thereof
this Agreement shall terminate and neither party shall have any further
obligations hereunder, except for the performance of prior purchase orders and
payments thereunder, and except to the extent any provisions of this Agreement
expressly survive termination. Such termination right shall not extend or
otherwise affect any other agreement or contract then existing between the
parties, except as expressly provided in any such other agreement or contract.
If Steel Dynamics fails for any reason to give such termination notice within
such 15-day period, this Agreement shall remain in full force and effect.
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<PAGE> 5
(h)In the event that Qualitech proposes to increase the Iron Carbide
Plant's production capacity beyond 660,000 Tonnes of Product per Product Year by
installing an additional module in addition to the first module, Qualitech shall
notify Steel Dynamics at least twelve (12) months prior to the date on which
Qualitech is scheduled to commence construction of any such additional module.
Thereafter, Steel Dynamics shall have sixty (60) days after the applicable
purchase price for such additional Product has been determined as set forth
herein and, subject to Section 2, within which to provide Qualitech with written
notice of exercise of its option to purchase its pro rata share of such
additional Product, not to exceed an additional 300,000 Tonnes per Product Year
for the additional module, pursuant to the terms and conditions set forth in
this Agreement. If the parties, in good faith, do not agree on such purchase
price for any reason on or before the 180th day immediately prior to the date
that Qualitech is scheduled to commence construction of the additional module,
the establishment of such purchase price shall be resolved by arbitration
pursuant to Section 17. The fees and expenses of the arbitration shall be shared
by both parties. In no event shall Qualitech be required to construct an
additional module regardless of any decision or award by any arbitrator, and no
arbitrator shall have any authority to obligate Qualitech to construct an
additional module. So long as this Agreement is in effect, either during the
initial term or any extension thereof, if Qualitech again at any time or from
time to time proposes to increase the Iron Carbide Plant's production capacity
by installing a module in addition to the first module as aforesaid, Qualitech
and OmniSource shall again pursue the same notification, negotiation, and
arbitration procedures set forth and as limited herein.
2. Purchase Price.
(a)The purchase price of Product shall be calculated on a per Tonne
basis, f.o.b. the Iron Carbide Plant. Such purchase price shall be determined
and fixed in advance for each Product Quarter in which such Product is to be
manufactured, subject to adjustments as provided herein; provided that as of the
date of this Agreement, and until the later to occur of Final Acceptance or
Qualitech's Sustained Production Date, the purchase price shall be $*** per
Tonne. After the later to occur of Final Acceptance or Qualitech's Sustained
Production Date, such purchase price shall be adjusted and readjusted, upwards
or downwards as the case may be, from time to time pursuant to the Adjusted Cost
formula, as described in Exhibit B, with a "Floor Price" pursuant to this
formula equal to the lesser of (i) $*** per Tonne or (ii) the greater of ***% of
the published prior three month rolling average price of "No. 1 Bundles" f.o.b.
point of origin or $*** per Tonne, and a "Ceiling Price" pursuant to this
formula of $*** per Tonne (regardless of what this formula might otherwise
require). If the price of No. 1 Bundles cannot be readily determined despite
good faith efforts, the parties agree that Steel Dynamics' purchase prices
(excluding freight) for No. 1 Bundles purchased from OmniSource for use at Steel
Dynamics' Butler, Indiana mill site shall be used for purposes of determining
the Floor Price. Steel Dynamics shall have reasonable rights to audit
Qualitech's books and records for the purpose of verifying Qualitech's
compliance with the provisions of Exhibit B and the calculations required
thereby, and Qualitech shall have reasonable rights to audit Steel Dynamics'
purchase records for the purpose of verifying such prices. The Adjusted Cost per
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Tonne for any Product Quarter shall be effective commencing with the second
Product Month within such Product Quarter and shall continue through the last
day of the first month of the following Product Quarter and shall be based upon
the Adjusted Cost per Tonne, determined in accordance with Exhibit B, for the
prior Product Quarter. The effects of any year-end adjustments made for purposes
of preparing Qualitech's annual audited financial statements shall be reflected
in the second Product Quarter of each Product Year following the Product Year to
which such adjustments apply.
(b)Notwithstanding any purchase price determination made pursuant to
Subsection 2(a), and subject always to the Floor Price and Ceiling Price
limitations described in Subsection 2(a), Steel Dynamics shall always receive a
purchase price per Tonne of Product that is five percent (5%) lower than the
lowest purchase price per Tonne of Product, FOB the Iron Carbide Plant,
negotiated with any other similarly situated customer of Qualitech (excluding
Qualitech and its affiliates, Mitsubishi and OmniSource) purchasing Product of
similar quantity, quality and characteristics which is purchased in the same
Product Quarter.
(c)If Steel Dynamics disagrees with any price determination made by
Qualitech, Steel Dynamics shall notify Qualitech of such disagreement within 15
days after Qualitech's delivery of the applicable price determination to Steel
Dynamics by delivering to Qualitech a written statement setting forth in
reasonable detail the particulars of its disagreement. Qualitech and Steel
Dynamics shall make reasonable, good faith efforts promptly to resolve any such
disagreement(s). Any disagreement(s) with respect to such price determination
which cannot be resolved between the parties within 120 days shall be finally
resolved, if necessary, by arbitration pursuant to Section 17. The fees and
out-of-pocket expenses of such arbitrator shall be shared by both parties.
3. Terms of Purchase.
(a)Steel Dynamics will place orders with Qualitech using Steel Dynamics'
standard purchase order form, a copy of which is attached to and made part
hereof an Exhibit C, as the same may be reasonably modified from time to time by
mutual agreement of the parties, excluding such terms as are inconsistent with
this Agreement. Unless otherwise agreed, such orders shall provide for delivery
schedules in level amounts during each Product month, plus or minus twenty
percent (20%) based upon Steel Dynamics' Allocable Amount. Each purchase and
sale of Product shall be completed pursuant to the applicable price determined
pursuant to Subsection 1(h) and Section 2, as the case may be, and payment terms
shall be net 30 days. Risk of loss with respect to Product shall pass to Steel
Dynamics upon delivery by Qualitech to Steel Dynamics or Steel Dynamics'
designated carrier at the Iron Carbide Plant, with all necessary shipping and
consignment documents properly prepared and delivered, subject, however, to
final settlement adjustments based upon Steel Dynamics' delivered weights. If
the parties are in dispute over the price determination, the most recently
undisputed price shall apply for initial settlement, subject to adjustment after
resolution of such dispute.
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(b)Intentionally omitted.
(c)Intentionally omitted.
(d)Each delivery made pursuant to this Agreement shall be deemed a
separate sale. Default in any such delivery shall not void or terminate this
Agreement with respect to any other delivery made or to be made, nor shall any
such default in any delivery entitle Steel Dynamics to reject other deliveries,
whether made previously or subsequent thereto.
(e)In the event that any Product received by Steel Dynamics hereunder
does not meet the standards set forth in Exhibit A, or as otherwise required
hereunder, Steel Dynamics shall promptly notify Qualitech of such
deficiency(ies) (in any event within 90 days after receipt of such Product). if
Steel Dynamics does not give Qualitech notice of such deficiency as provided
herein, the Product shall be deemed accepted by Steel Dynamics. Irrespective of
any prior payment, any such defective Product may be rejected (within such
90-day notice period) and returned by Steel Dynamics, at Qualitech's reasonable
expense and risk, which action will not, however, invalidate this Agreement. Any
such rejected Product also may be held, at Qualitech's reasonable risk and
expense, subject to resolution of such deficiency by any mutual agreement of the
parties to an appropriate price reduction or to Qualitech's instruction as to
disposition, but shall be subject to replacement only at the option of Steel
Dynamics (exercisable in its reasonable discretion). If any such rejected
Product has not been paid for and is not replaced, Steel Dynamics shall not pay
for such Product. If any such defective Product is replaced, Steel Dynamics
shall pay only for the replacement Product. It any such defective Product has
been paid for, Qualitech shall refund to Steel Dynamics the purchase price paid
therefor within 30 days of Steel Dynamics' notice of such defect(s), except that
such payment shall be applied to the extent of the purchase price for any
replacement Product. If Steel Dynamics rejects any Product pursuant to this
Subsection 3(e) and does not elect replacement thereof, such quantity of Product
so rejected without replacement shall be deemed, at Steel Dynamics' election, as
having satisfied Steel Dynamics' obligation to place orders and purchase its
Allocable Amount or Option Quantity, as the case may be, to the extent of such
rejected quantity of Product.
4. Term of Purchase and Sale Obligations. The purchase and sale obligations
under this Agreement shall take effect upon the date on which the Iron Carbide
Plant commences production of Product and Steel Dynamics begins to receive
Product pursuant to Subsection 1(a) (the "Commencement Date") and shall
terminate on the fifth anniversary of the later to occur of the date of Final
Acceptance or the Sustained Production Date; provided that Steel Dynamics shall
have an option, exercisable by written notice on the later to occur of 120 days
prior to the expiration of the initial term or 30 days after the applicable
purchase price has been determined pursuant to this Section 4, and subject to
Section 2 (but in no event later than 60 days after the expiration of the
initial term), to extend the Agreement for five (5) additional years pursuant to
the terms and conditions set forth in this Agreement. If the parties, in good
faith, cannot within the period described in this Section 4 agree an such
purchase price the establishment of such price shall be resolved by arbitration
pursuant to Section 17. The applicable purchase price per
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Tonne of Product in effect from time to time for each Product Quarter during the
extended term shall equal the Adjusted Cost per Tonne of Product determined in
accordance with Exhibit B as further modified in accordance with this Section 4.
In determining the Adjusted Cost per Tonne of Product for each Product Quarter
during such extended term, whether through good faith negotiations or by
arbitration, the Price Adjustment factors set forth in Sections 1(A) through
1(E) of Exhibit B shall be binding upon the parties and upon any arbitrator,
except that the costs per Tonne of Product shown on Annex 1 to Exhibit B
regarding f actors 1(B) (depreciation), 1(D) (interest), and 1(E) (return on
equity) shall remain constant and shall not be subject to further adjustment by
the parties or by any arbitrator, absent mutual agreement by the parties to the
contrary. The fees and out-of-pocket expenses of such arbitration shall be
shared by both parties.
5. Notices. All notices required hereunder shall be personally delivered or
sent by overnight courier for next business day delivery, certified or
registered United States mail, return receipt requested, postage prepaid, or
telecopier facsimile. If a notice is personally delivered, it will be
conclusively deemed to have been received by a party when so delivered; if sent
by overnight courier for next day delivery, on the next business day after
deposit thereof with such courier; if sent by certified or registered mail, when
delivered or refused for delivery; and if sent by telecopier facsimile, the
first business day after receipt. Notices to Qualitech shall be addressed as
follows:
Qualitech Steel Corporation
Baker Building, Suite 700
1940 East 6th Street
Cleveland, OK 44114
Attention:Gordon H. Geiger
Facsimile:(216) 344-7506
or to such other person and place as Qualitech may hereafter designate in
writing, and notices to Steel Dynamics shall be addressed to it as follows:
Steel Dynamics, Inc.
4500 County Road 59
Butler, Indiana 46721
Attention:Mr. Keith E. Busse
Facsimile:(219) 868-8005
or to each other person or place as Steel Dynamics may hereafter designate in
writing.
6. Events of Default and Remedies.
(a)Events of Default. Each of the following events shall constitute an
"Event of Default" by a party hereunder:
8
<PAGE> 9
(1) Except for a failure to purchase described in Subsection 1(f)
(where the sole remedy by Qualitech is termination) the failure of Steel
Dynamics to make the payment of any undisputed amount becoming due and payable
to Qualitech under this Agreement an the date which such amount becomes due and
payable hereunder (after giving effect to all applicable dispute resolution
procedures provided under this Agreement with respect to disputed amounts, if
any) if such payment is not made within 15 days after the date on which
Qualitech gives written notice to Steel Dynamics of its intention to declare a
default in respect thereof; or, except for the failure to offer Product for
purchase by Steel Dynamics described in Subsection 1(g) (where the sole remedy
by Steel Dynamics is termination), the failure by Qualitech to offer to Steel
Dynamics any material quantity of Product on the date on which such performance
becomes due under Section 3 of this Agreement, if such failure continues 15 days
subsequent to written notice to Qualitech by Steel Dynamics of its intention to
declare a default in respect thereof;
(2) The failure of a party to perform or comply in any material
respect with any of the terms of this Agreement to be performed or complied with
by such party (in addition and supplemental to those referred to in Subsection
6(a)(1) and except as excused pursuant to Section 7) if such failure is not
remedied (A) within 30 days after the non-defaulting party shall have given to
the other party written notice of such failure, or (B) in the case of any such
default which cannot with due diligence be cured within 30 days, but is
susceptible to cure without unreasonable effort, within such additional period
as may be reasonably required to cure such default (not to exceed 90 days) if
such curative action is diligently pursued;
(3) The making by a party of an assignment for the benefit of its
creditors or an admission by a party of its insolvency;
(4) The filing by or against a party of any petition seeking relief
under Title 11 of the United States Code, or the commencement by or against a
party of any proceeding with respect to relief under the provisions of any other
applicable bankruptcy, insolvency or other similar law of the United States or
any State providing for reorganization, wind-up or liquidation or arrangement,
composition, extension or adjustment with creditors; provided that no such event
shall constitute an Event of Default if it is an involuntary proceeding and is
discharged within 60 days of its filing or commencement;
(5) The appointment of a receiver or trustee for a party or for any
substantial part of a party's assets if such receiver or trustee is not
discharged within 60 days of appointment; or
(6) The institution of any proceedings for a dissolution and full or
partial liquidation of the party if such proceedings are not dismissed or
discharged within 60 days of their commencement.
(b)Performance Suspension. Upon the occurrence of an Event of Default by
Steel Dynamics, Qualitech shall have the right, so long as such Event of Default
remains uncured, at any time to suspend its performance under this Agreement by
giving written notice of such
9
<PAGE> 10
suspension to Steel Dynamics. Such notice shall specify the effective date of
any such suspension. Such suspension right shall not extend or otherwise affect
any other agreement or contract then existing between the parties, except as
expressly provided in any such other agreement or contract.
Upon the occurrence of an Event of Default by Qualitech, Steel Dynamics
shall have the right, so long as such Event of Default remains uncured. at any
time to suspend its performance under this Agreement by giving written notice of
such suspension to Qualitech. Such notice shall specify the effective date of
any such suspension. Such suspension right shall not extend or otherwise affect
any other agreement or contract then existing between the parties, except as
expressly provided in any such other agreement or contract.
(c)Reimbursement. Upon the occurrence of an Event of Default, the
nondefaulting party shall have, in addition to its other rights and remedies
hereunder and under law and at equity (but subject to the limitations set forth
in this Agreement), the right to recover from the party in default all
reasonable costs and expenses incurred by the nondefaulting party in enforcing
its rights and remedies hereunder, including reasonable attorneys' fees. The
termination of this Agreement by either party by reason of default by the other
party, as aforesaid, shall not relieve either party of any of its obligations
accrued under this Agreement before the effective date of such termination.
7. Force Majeure.
(a)Any other provision of this Agreement to the contrary
notwithstanding, neither party shall be liable to the other party for any loss
or damage incurred by such other party, nor shall such other party have any
right to terminate this Agreement, by reason of any default or delay at any time
in such party's performance of this Agreement caused by reason of any occurrence
or cause beyond the reasonable control of such party, including, but not limited
to, any: (i) labor dispute, work stoppage, slowdown or strike, widespread
material shortage, blockade or embargo; (ii) flood, fire, earthquake, explosion,
casualty, act of God, accident, war, revolution, civil commotion, act of a
public enemy; (iii) injunction, law, order, proclamation, regulation, ordinance,
demand or requirement of any government or subdivision, authority or
representative of any such government; (iv) electricity, gas or other utilities
outages; (v) unforeseen equipment failure; or (vi) unforeseen emergency
shutdown. Such events shall be equally applicable to Steel Dynamics as purchaser
hereunder, wherein its ability to consume the Product has been materially
adversely affected by the force majeure, as to Qualitech as seller hereunder,
wherein its ability to manufacture the Product has been materially adversely
affected by the force majeure. If any such event shall occur, or if
circumstances create a reasonable probability that such an event will occur, the
party wishing to invoke this provision shall promptly notify the other party of
the same, providing such information as is reasonably available relative to the
event, and use all reasonable efforts to resume its performance hereunder as
quickly as reasonably practicable if such performance is so delayed or
interrupted.
10
<PAGE> 11
(b)In the event that Qualitech is excused from performing pursuant to
Subsection 7(a), Steel Dynamics shall be entitled to make other arrangements to
satisfy its requirements for Product during the reasonably anticipated period of
Qualitech's inability to perform. In the event that Steel Dynamics is excused
from performing pursuant to Subsection 7(a), Qualitech shall be entitled to make
other arrangements to dispose of Product ordered by Steel Dynamics for
production and/or delivery during the reasonably anticipated period of Steel
Dynamics' inability to perform. Product purchased by Steel Dynamics from other
suppliers, and Product sold to other purchasers by Qualitech, pursuant to
reasonable arrangements made during, or in anticipation of, the other party's
inability to perform shall be counted in determining satisfaction of the
purchase and sale obligations of the parties pursuant to this Agreement. The
term of this Agreement shall be extended for a period equivalent to the
aggregate of all periods during which performance is excused by virtue of this
Section 7.
8. Construction of Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, and the parties
consent to the jurisdiction of the State of Indiana, any and all objections to
venue being waived. This Agreement (including the exhibits hereto) embodies the
entire agreement and understanding between Qualitech and Steel Dynamics with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, oral or written, relative to the
subject matter of this Agreement.
9. Waivers; Modifications, No waiver or modification of any provision of
this Agreement shall be effective against either party hereto unless it is set
forth in a writing signed by both parties. No waiver of any breach of any
provision hereof shall be deemed a waiver of any other breach of the same
provision or of any other provision hereof, unless expressly so stated in the
writing setting forth such waiver.
10. Assignment. Except as specifically provided in this Section 10, neither
party may assign any of its rights or delegate any of its duties under this
Agreement without first obtaining the prior written consent of the other party,
which consent will not be reasonably conditioned, delayed or withheld.
Notwithstanding the foregoing and provided that the assigning or transferring
party notifies the other party at least 60 days prior to the effective date of
the assignment or transfer, (a) Steel Dynamics shall have the right, without
Qualitech's consent, to assign or transfer this Agreement or all the benefits
and obligations hereof to any entity directly or indirectly controlling,
controlled by or under common control with Steel Dynamics (a "Steel Dynamics
Affiliate"), provided that Steel Dynamics will remain fully liable hereunder
unless there is no genuine question of the ability of such Steel Dynamics
Affiliate to perform Steel Dynamics' obligations under this Agreement, and (b)
Qualitech shall have the right, without Steel Dynamics' consent, to assign or
transfer this Agreement or all of the benefits and obligations hereof (i) as
collateral security for its obligations to its lenders (without, in the case of
this clause (b)(i), notifying Steel Dynamics prior to the effective date of the
assignment), (ii) to any entity directly or indirectly controlling, controlled
by or under common control with Qualitech, provided that the net worth of such
entity is not materially less than the net worth of
11
<PAGE> 12
Qualitech on the date of this Agreement or there is no genuine question of the
ability of such transferee to perform Qualitech's obligations under this
Agreement, or (iii) to an entity that acquires all or substantially all of the
stock or assets of Qualitech. regardless of the form or structure of the
transaction (including but not limited to any merger), provided that the net
worth of such transferee is not materially less than the net worth of Qualitech
on the date of this Agreement or there is no genuine question of the ability of
such transferee to perform its obligations under this Agreement; provided, that
any transferee permitted pursuant to clauses b(ii) and b(iii) above shall
execute a written instrument agreeing to be bound by all of the future
obligations (and past obligations unless the transferor remains fully liable for
such past obligations and is able to satisfy such obligations out of its
remaining assets and or proceeds of the transfer.
11. Interpretation. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement. Whenever the context
requires, words used in the singular shall be construed to include the plural
and vice versa, and pronouns of any gender shall be deemed to include and
designate the masculine, feminine or neuter gender.
12. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
13. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
14. Assistance. Qualitech does hereby agree to render reasonable assistance
to Steel Dynamics in connection with its training and/or use of the Product.
15. WAIVER OF JURY TRIAL. THE PARTIES HEREBY AGREE THAT ANY SUIT, ACTION OR
PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY EITHER PARTY
OR ANY SUCCESSOR OR ASSIGN OF SUCH PARTY WITH RESPECT TO THIS AGREEMENT OR WHICH
IN ANY WAY RELATES, DIRECTLY OR INDIRECTLY, TO THE OBLIGATIONS UNDER THIS
AGREEMENT, OR THE DEALINGS OF THE PARTIES WITH RESPECT THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES
ACKNOWLEDGE AND AGREE THAT THIS PROVISION IS A SPECIFIC AND MATERIAL ASPECT OF
THE AGREEMENT ]BETWEEN THE PARTIES AND THAT THEY WOULD NOT HAVE ENTERED INTO
THIS TRANSACTION IF THIS PROVISION WERE NOT PART OF THEIR AGREEMENT.
12
<PAGE> 13
16. Computing Time Periods. All time periods provided for in this Agreement
shall be based on calendar days; provided that if any such time period ends on a
day other than a business day, the time period shall be extended to the next
business day, or if any payment becomes due on a day that in not a business day,
such payment may be made on the next succeeding business day. For purposes of
this Agreement, the term "business day" means any day excluding Saturday, Sunday
and any other full day on which banks are required or authorized to close in the
State of Texas.
17. Arbitration. Provided that there is no other legal or other proceeding
then pending under or with respect to this Agreement in which the same could be
resolved, all disputes with respect to the determination of any purchase price
of Product pursuant to Section 1(h), 2 and 4 which cannot be resolved by the
parties pursuant to the provisions of Subsection 2(c) shall be finally settled
by arbitration as provided in this Section 17, subject to requirements and
limitations set forth in such Section 1(h), 2 and 4, as the case may be. Either
party may initiate arbitration hereunder upon written notice of the other party.
If the parties are unable within 15 days of such notice to agree on a single,
independent arbitrator experienced in arbitrating matters similar to those which
may be at issue, the parties shall seek appointment of such arbitrator, or, if
any party so prefers, a panel of three (3) arbitrators, one each to be selected
by each of the parties, and the third, if not selected by agreement of the other
two, to be appointed by the American Arbitration Association in accordance with
its expedited rules. Such arbitration shall be held in alternating locations of
Qualitech's home offices, and Steel Dynamics' home offices commencing with
Qualitech's home office, unless another place shall be mutually agreed upon by
the parties. The controlling rules shall be the Commercial Arbitration Rules of
the American Arbitration Association. Neither party shall suspend performance of
this Agreement solely by reason of reference of a dispute to arbitration. The
award rendered by the arbitrator shall be final, subject to the limitations set
forth in Sections 1(h) and 4, and judgment may be entered upon in accordance
with applicable law in any court having jurisdiction thereof. The award shall
also indicate how to distribute arbitrator's fees and arbitration expenses
between the parties based on the provisions of Subsection 2(c).
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above given.
QUALITECH STEEL CORPORATION
/s/ Gordon H. Geiger
By: ____________________________________
Gordon H. Geiger, Chairman
and Chief Executive Officer
STEEL DYNAMICS, INC.
/s/ Tracy Shellabarger
By: ____________________________________
Tracy Shellabarger
Vice President
14
<PAGE> 15
EXHIBIT A
PRODUCT STANDARDS
Product will be granular, free-flowing material with particle size under 2
mm and not more than 10% less than .10 mm and shall conform to the following
chemical composition by weight:
Constituent % By Weight
-----------
Total Fe Min 88.7
Carbon (as Fe(3)C) min 5.7
Gangue max 3.3
Fe(3)C min 85.0
FeO max 8.0
<PAGE> 16
EXHIBIT B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Exhibit B, "Adjusted Costs" per Tonne
for Product (all subject to audit by Steel Dynamics) manufactured during any
Product Quarter shall be the sum of the following:
(A) Qualitech's inventoriable costs (including iron ore, iron ore
transportation, iron ore agent feet, natural gas, hydrogen, electricity,
maintenance, water, operating labor and benefits, supervision payroll and
benefits, chemical and laboratory supplies, training, property taxes,
insurance, iron carbide technology license royalty, materials handling,
rent, operating lease expense, and general and administrative expense
directly related to the Iron Carbide Plant) divided by the Iron Carbide
Plant Tonneage (as defined below) to yield the applicable cost per Tonne of
such Product for the Product Quarter in which such Product is manufactured
at the Iron Carbide Plant, determined according to Qualitech GAAP (as
defined below) in all respects, except that (i) the first-in, first-out
method shall be used, (ii) depreciation of property, plant and equipment
shall be excluded and (iii) amortization of capitalized financing costs and
capitalized start-up costs shall be excluded;
(B) A depreciation charge for each Product Quarter equal to (i) the Iron
Carbide Plant PP&E Costs (as defined below) depreciated over an average life
of ** years on the straight line basis divided by (ii) the Iron Carbide
Plant Tonneage (as defined below) for such Product Quarter;
(C) An amortization charge for each Product Quarter equal to (i) the Iron
Carbide Plant Capitalization Start-Up and Financing Costs (as defined below)
amortized over an average life of ** years on the straight line basis
divided by (ii) the Iron Carbide Plant Tonneage for such Product Quarter;
(D) An interest charge for each Product Quarter equal to (i) the Iron
Carbide Plant Interest Expense (as defined below) divided by (ii) the Iron
Carbide Plant Tonneage for such Product Quarter;
(E) An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Exhibit B have the
following meanings:
(A) "Iron Carbide Plant Tonneage" means, with respect to the applicable
Product Quarter during which any Product is manufactured the greater of
165,000 Tonnes of Product of actual Tonnes of Product manufactured at the
Iron Carbide Plant for such Product Quarter.
<PAGE> 17
(B) "Iron Carbide Plant PP&E Costs" means the total of all costs of
property, plant and equipment (before depreciation) determined in accordance
with Qualitech GAAP attributable to the Iron Carbide Plant. The Iron Carbide
Plant PP&E costs will be calculated as of the Commencement Date.
(C) "Qualitech GAAP" means generally accepted accounting principles applied
on a basis consistent with prior periods without regard to materiality as
used by Qualitech in preparing financial statements to its shareholders.
(D) "Iron Carbide Plant Capitalized Start-Up and Financing Costs" means the
amount of $12,115.00.
(E) "Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement Date by
multiplying $8,110,055 by a fraction, the numerator of which is (x)
Qualitech's Iron Carbide Plant PP&E Costs and the denominator of which is
(y) $111,817,000.
A-2
<PAGE> 18
EXHIBIT C
FORM OF PURCHASE ORDER
<PAGE> 19
Annex 1 to Exhibit B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Annex 1 to Exhibit B, the
following costs per Tonne of Product (all subject to audit by Steel Dynamics)
manufactured during any Product Quarter shall remain constant during the initial
and extended terms of this Agreement:
(A)Intentionally omitted.
(B)A depreciation charge of each Product Quarter equal to (i) the Iron
Carbide Plant PP&E Costs (as defined below) depreciated over an average
life of 25 years on the straight line basis divided by (ii) the Iron
Carbide Plant Tonneage (as defined below (for such Product Quarter;
(C)Intentionally omitted.
(D)An interest charge for each Product Quarter equal to (i) the Iron
Carbide Plant Interest Expense (as defined below) divided by (ii) the
Iron Carbide Plant Tonneage for such Product Quarter;
(E)An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Annex 1 to Exhibit
B have the following meanings:
(A)"Iron Carbide Plant Tonneage" means, with respect to the applicable
Product Quarter during which any Product is manufactured, the greater of
165,000 Tonnes of Product or actual Tonnes of Product manufactured at
the Iron Carbide Plant for such Product Quarter.
(B)"Iron Carbide Plant PP&E Costs" means the total of all costs of
property, plant and equipment (before depreciation) determined in
accordance with Qualitech GAAP attributable to the Iron Carbide Plant.
The Iron Carbide Plant PP&E Costs will be calculated as of the
Commencement Date.
(C)"Qualitech GAAP" means generally accepted accounting principles
applied on a basis consistent with prior periods without regard to
materiality as used by Qualitech in preparing financial statements to
its shareholders.
Page 1 of Annex 1
<PAGE> 20
(D)"Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement
Date by multiplying $8,110,055 by a fraction, the numerator of which is
(x) Qualitech's Iron Carbide Plant PP&E Costs and the denominator of
which is (y) $111,817,000.
Page 2 of Annex 1
<PAGE> 1
Exhibit 10.18
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
<PAGE> 2
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
Table of Contents
Article I. Purpose and Legal Status................... 1
1.1 Purpose.................................... 1
1.2 Legal Status............................... 1
Article II. Definitions and Construction............... 1
2.1 Definitions................................ 1
2.2 Construction............................... 1
Article III. Eligibility............................... 2
Article IV. Administration of the Plan................. 2
4.1 The Committee.............................. 2
4.2 Authority.................................. 3
Article V. Stock Subject to the Plan.................. 3
5.1 Stock Available............................ 3
5.2 Changes to Stock........................... 4
Article VI. Qualification of the Plan; Terms and
Conditions................................. 4
6.1 Qualification of the Plan.................. 4
6.2 Terms and Conditions....................... 4
Article VII. Amendments and Termination............... 6
7.1 Plan Amendment............................. 6
7.2 Incentive Stock Option Amendment........... 6
Article VIII. Unfunded Status of Plan................. 7
Article IX. General Provisions......................... 7
9.1 Stock Restrictions......................... 7
9.2 Additional Compensation Arrangements....... 7
9.3 Nonguarantee of Employment................. 8
9.4 Withholding of Taxes....................... 8
9.5 Compliance with Law........................ 8
9.6 Effective Date and Term of Plan............ 8
<PAGE> 3
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
ARTICLE I. PURPOSE AND LEGAL STATUS
1.1 Purpose. The purpose of the Steel Dynamics Holdings, Inc. 1994
Incentive Stock Option Plan (the "Plan") is to enable key employees of Steel
Dynamics Holdings, Inc. or its subsidiaries (the "Company") to (i) own shares of
stock in the Company, (ii) participate in the shareholder value which will be
created, (iii) have a mutuality of interest with other shareholders and (iv)
enable the Company to attract, retain and motivate key employees of particular
merit.
1.2 Legal Status. The Plan is intended to be an Incentive Stock Option
Plan pursuant to Section 422 of the Code.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. For the purposes of the Plan, the following terms shall
be defined as set forth below:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
" COMMITTEE" means the Committee designated by the Board to administer the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
"COMPANY" means Steel Dynamics Holdings, Inc., an Indiana corporation, and
its subsidiaries or any successor organization.
"DISABILITY" means permanent and total disability within the meaning of
Section 22(e)(3) of the Code.
"DISINTERESTED PERSON" shall have the meaning set forth in the Rules.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means the fair market value of the Stock as determined
by the Committee in good faith based on the best available facts and
circumstances at the time;
<PAGE> 4
provided, however, that where there is a public market for the Stock and the
Stock is registered under the Exchange Act, Fair Market Value shall mean the per
share or aggregate value of the Stock as of any given date, as determined by
reference to the price of the last traded share of Stock on the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System for such date or the next preceding date
that Stock was traded on such market, or, in the event the Stock is listed on a
stock exchange, the closing price per share of Stock as reported on such
exchange for such date.
"INCENTIVE STOCK OPTION" or "OPTION" means any stock option granted
pursuant to the Plan.
"IPO" means an Initial Public Offering pursuant to the Securities Act.
"OPTIONEE" means a key employee to whom an Option is granted pursuant to
the Plan.
"PLAN" means the Steel Dynamics Holdings, Inc. 1994 Incentive Stock Option
Plan.
"RULES" means the regulations promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK" means the Class A Common Stock of the Company, par value $.01 per
share.
2.2 Construction. The masculine gender includes the feminine and the
singular may include the plural, unless the context clearly indicates otherwise.
ARTICLE III. ELIGIBILITY
Key employees who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company are eligible to be
granted Options under the Plan.
ARTICLE IV. ADMINISTRATION OF THE PLAN
4.1 The Committee. The Plan shall be administered by the Board or by a
Committee designated by the Board; provided, however, that if the Company
registers the Stock or any class of equity securities of the Company pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of all such registrations, grants of
Options shall only be made by a Committee of not less than two Disinterested
Persons who shall be appointed by the Board and who shall serve at the pleasure
of the Board.
2
<PAGE> 5
4.2 Authority. The Committee shall have the authority to grant Incentive
Stock Options pursuant to the terms of the Plan. In particular, the Committee
shall, subject to the limitations and terms of the Plan, have the authority:
(a) to select the key employees of the Company to whom Options may from
time to time be granted hereunder;
(b) to determine whether and to what extent Options are to be granted
hereunder;
(c) to determine the number of shares to be covered by each such Option
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Option granted hereunder, including, but not limited
to, the option or exercise price and any restriction or limitation, based
upon such factors as the Committee shall determine, in its sole
discretion;
(e) to determine whether and under what circumstances an Option may be
exercised and settled in cash or Stock or without a payment of cash; and
(f) to amend the terms of any outstanding Option (with the consent of the
Optionee) to reflect terms not otherwise inconsistent with the Plan,
including amendments concerning vesting acceleration or forfeiture waiver
regarding any Option or the extension of an Optionee's right with respect
to Options granted under the Plan, as a result of termination of
employment or service or otherwise, based on such factors as the Committee
shall determine, in its sole discretion.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
Optionees.
ARTICLE V: STOCK SUBJECT TO THE PLAN
5.1 Stock Available. The aggregate number of shares of Stock that may be
issued or transferred under the Plan is 21,800, subject to adjustment pursuant
to Section 5.2 below. Such shares may be authorized but unissued shares or
reacquired shares. In the event the number of
3
<PAGE> 6
shares of Stock issued under the Plan and the number of shares of Stock subject
to outstanding Options equals the maximum number of shares of Stock authorized
under the Plan, no further Options shall be made unless the Plan is properly
amended or additional shares of Stock become available for further Options under
the Plan. If and to the extent that Options granted under the Plan terminate,
expire or are canceled without having been exercised, such shares shall again be
available for subsequent Options under the Plan.
5.2 Changes to Stock. If any change is made to the Stock (whether by
reason of merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination of shares, or exchange of shares or any other
change in capital structure made without receipt of consideration), then unless
such event or change results in the termination of all outstanding Options under
the Plan, the Board or the Committee shall preserve the value of the
outstanding Options by adjusting the maximum number and class of shares issuable
under the Plan to reflect the effect of such event or change in the Company's
capital structure, and by making appropriate adjustments to the number and class
of shares subject to an outstanding Option and/or the option price of each
outstanding Option, except that any fractional shares resulting from such
adjustments shall be eliminated by rounding any portion of a share equal to .500
or greater up, and any portion of a share equal to less than .500 down, in each
case to the nearest whole number.
ARTICLE VI. QUALIFICATION OF THE PLAN; TERMS AND CONDITIONS
6.1 Qualification of the Plan. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the Plan
be so exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Optionee(s) affected, to disqualify any Incentive
Stock Option under Section 422 of the Code.
6.2 Terms and Conditions. Options granted under the Plan shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem appropriate:
(a) Option Price. The option price per share of Stock purchasable under an
Option shall be determined by the Committee at the time of grant but shall
be not less than 100% of the Fair Market Value of the Stock at the time of
grant.
Any Option granted to any Optionee who, at the time the Option is granted,
owns more than 10% of the voting power of all classes of stock of the
Company or of a Parent or Subsidiary corporation (within the meaning of
Section 424 of the Code), shall have an exercise price no less than 110%
of Fair Market Value per share on date of the grant.
4
<PAGE> 7
(b) Option Term. The term of each Option shall be fixed by the Committee,
but no Option shall be exercisable more than ten years after the date the
Option is granted. However, any Option granted to any Optionee who, at the
time the Option is granted, owns more than 10% of the voting power of all
classes of stock of the Company or of a Parent or Subsidiary corporation
may not have a term of more than five years. No Option may be exercised by
any person after expiration of the term of the Option.
(c) Exercisability. Options shall be exercisable on the fifth anniversary
of the date of grant or at such time or times and subject to such terms
and conditions as shall be determined by the Committee at or after grant;
provided, however, that, except as provided in Sections 6.2(f) through
6.2(h), unless otherwise determined by the Committee at or after grant, no
Option shall be exercisable during the six months following the date of
the granting of such Option. If the Committee provides, in its discretion,
that any Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after grant
in whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
The aggregate Fair Market Value (determined as of the time of grant) of
the Stock with respect to which Options are exercisable for the first time
by the Optionee during any calendar year under the Plan and/or any other
stock option plan of the Company shall not exceed $100,000.
(d) Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 6.2(c), Options may be exercised in whole
or in part at any time and from time to time during the Option period, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in
full of the purchase price, either by certified or bank check, or such
other instrument as the Committee may accept.
No shares of Stock shall be issued until full payment therefor has been
made. An Optionee shall not have any rights to dividends or other rights
of a shareholder with respect to shares subject to the Option until such
time as Stock is issued in the name of the Optionee following exercise of
the Option in accordance with the Plan.
(e) Non-transferability of Options. No Option shall be transferable by the
Optionee otherwise than by will, by the laws of descent and distribution,
pursuant to a qualified domestic relations order or as permitted under the
Rules, and all Options shall be exercisable, during the Optionee's
lifetime, only by the Optionee.
(f) Termination by Reason of Death. Unless otherwise determined by the
Committee at or after grant, if an Optionee's employment by the Company
terminates by reason of death, any Option held by such Optionee may
thereafter be exercised, to the extent then exercisable or on such
accelerated basis as the Committee may determine at or after grant,
5
<PAGE> 8
by the legal representative of the estate or by the legatee of the
Optionee under the will of the Optionee, for a period of one hundred
eighty (180) days (or such shorter period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated
term of such Option, whichever period is shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by
the Committee at or after grant, if an Optionee's employment by the
Company terminates by reason of Disability, any Option held by such
Optionee may thereafter be exercised by the Optionee, to the extent it was
exercisable at the time of termination, or on such accelerated basis as
the Committee may determine at or after grant, for a period of ninety (90)
days (or such shorter period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Option, whichever period is shorter; provided,
however, that, if the Optionee dies within such ninety-day period (or such
shorter period as the Committee shall specify at grant), any unexercised
Option held by such Optionee shall thereafter be exercisable to the extent
to which it was exercisable at the time of death for a period of one
hundred eighty (180) days from the date of such death or until the
expiration of the stated term of such Option, whichever period is shorter.
(h) Voluntary Termination. Unless otherwise determined by the Committee at
or after grant, if an Optionee voluntary terminates his employment with
the Company, any Option held by such Optionee may thereafter be exercised
by the Optionee, to the extent it was exercisable at the time of such
termination or on such accelerated basis as the Committee may determine at
or after grant, for a period of three months (or such shorter period as
Committee may specify at grant) from the date of such termination of
employment or the expiration of the stated term of such Option, whichever
period is shorter; provided, however, that, if the Optionee dies within
such three-month period, any unexercised Option held by such Optionee
shall thereafter be exercisable, to the extent to which it was exercisable
at the time of death, for a period of one hundred eighty (180) days from
the date of such death or until the expiration of the stated term of such
Option, whichever period is shorter.
(i) Other Termination. Unless otherwise determined by the Committee at or
after grant, if an Optionee's employment by the Company terminates for any
reason other than death, Disability or voluntary termination, the Option
shall thereupon terminate.
ARTICLE VII. AMENDMENTS AND TERMINATION
7.1 Plan Amendment. The Board may amend, alter or discontinue the Plan at
any time and from time to time, but no amendment, alteration, or discontinuation
shall be made (i) which would impair the rights of an Optionee under an Option
award previously granted, without the
6
<PAGE> 9
Optionee's consent, or (ii) which, if such approval is not obtained, would
require shareholder approval under the Rules.
7.2 Incentive Stock Option Amendment. The Committee may amend the terms of
any Option granted, prospectively or retroactively, but no such amendment shall
impair the rights of any Optionee without the Optionee's consent. The Committee
may also substitute new Options for previously granted Options, including
previously granted Options having higher option prices. Subject to the above
provisions, the Board shall have broad authority to amend the Plan to take into
account changes in applicable tax laws, securities laws and accounting rules, as
well as other developments.
ARTICLE VIII. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to an Optionee by the
Company, nothing contained herein shall give any such Optionee any rights that
are greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Stock;
provided, however, that, unless the Committee otherwise determines with the
consent of the affected Optionee, the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
ARTICLE IX. GENERAL PROVISIONS
9.1 Stock Restrictions. The Committee may require each person purchasing
shares pursuant to an Option to represent to and agree with the Company in
writing that the Optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer under the
Securities Act or any state securities law.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities Act, the Exchange Act, any stock exchange upon which the Stock is
then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
At the time of exercise the Committee may require that an Optionee execute
a shareholders' agreement, which may include such restrictions on shares of
stock received as a result of such grant as the Committee deems advisable,
including but not limited to, making such
7
<PAGE> 10
Stock subject to a right of first refusal or call option on behalf of the
Company and/or its shareholders, subject to such terms and conditions as the
Committee may specify at the time of grant.
9.2 Additional Compensation Arrangements. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
9.3 Nonguarantee of Employment. The adoption of the Plan shall not
confer upon any Optionee any right to continued employment with the Company nor
shall it interfere in any way with the right of the Company to terminate its
relationship with any of its employees at any time.
9.4 Withholding of Taxes. No later than the date as of which an
amount first becomes includible in the gross income of the Optionee for federal
income tax purposes with respect to any Option under the Plan, the Optionee
shall pay to the Company or make arrangements satisfactory to the Committee
regarding the payment of any federal state or local taxes of any kind required
by law to be withheld with respect to such amount. The obligations of the
Company under the Plan shall be conditioned on such payment or arrangements and
the Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Optionee.
9.5 Compliance with Law. The Plan shall be governed by and subject
to all applicable laws and to the approvals by any governmental or regulatory
agency as may be required.
9.6 Effective Date and Term of Plan. The Plan shall be effective as
of December 23, 1994, or, if later, the date the Plan is adopted by the Board,
subject to the consent or approval of the Company's shareholders. No Option
shall be granted pursuant to the Plan on or after ten years from the date this
Plan is adopted by the Board, but Options granted prior to such tenth
anniversary may extend beyond that date.
STEEL DYNAMICS HOLDINGS, INC.
Attest By /s/ Signature Illegible
-------------------------------- -------------------------------
Vice President
-------------------------------
8
<PAGE> 11
STEEL DYNAMICS HOLDINGS, INC.
1994 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION
GRANT LETTER
Steel Dynamics Holdings, Inc. (the "Company") has adopted the Steel
Dynamics Holdings, Inc. 1994 Incentive Stock Option Plan (the "Plan"), subject
to the approval of the holders of a majority of the Company's outstanding common
stock. This Incentive Stock Option is granted to Michael J. Cedoz (the
"Optionee") on February 27, 1995 (the "Date of Grant") in accordance with the
terms of the Plan. Capitalized terms used and not otherwise defined in this
Grant Letter are used herein as defined in the Plan.
1. Option Grant and Acceptance.
(a) The Company hereby grants to the Optionee, effective as of the
Date of Grant, the right and option (the "Option") to purchase 300 shares of
Class A Common Stock (the "Stock").
(b) The Optionee shall signify his acceptance of the Option by
executing this Grant Letter.
(c) The Option designated hereunder shall be an incentive stock
option intended to meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Board shall interpret and construe
the Option in accordance with this designation and pursuant to the terms of the
Plan, and its decisions shall be conclusive as to any question arising
hereunder.
2. Option Price.
The price of each share covered by this Option shall be $93.00 (the
"Option Price"), which is the fair market value of the Stock on the Date of
Grant.
3. Option Expiration.
The Option, to the extent that it has not theretofore been
exercised, shall automatically expire on the earliest to occur of the following
events:
(a) the close of business on February 27, 2005
(b) in the event of the Optionee's voluntary termination, the Option
may be thereafter exercised by the Optionee, to the extent then exercisable, for
a period of three months from the date of such termination or until the
occurrence of the date specified in Section
<PAGE> 12
3(a), whichever period is shorter; provided, however, that if the Optionee dies
within such three-month period, the Option shall thereafter be exercisable, to
the extent to which it was exercisable at the time of death, for a period of one
hundred eighty (180) days from the date of such death or until the occurrence of
the date specified in Section 3(a), whichever period is shorter.
(c) in the event of the Optionee's death, the Option may be
thereafter exercised, to the extent then exercisable, by the legal
representative of the estate or by the legatee of the Optionee under the will of
the Optionee, for a period of one hundred eighty (180) days from the date of
death or until the occurrence of the date specified in Section 3(a), whichever
period is shorter.
(d) in the event of the Optionee's "Disability" (as defined in
Section 2.1 of the Plan), the Option may thereafter be exercised by the
Optionee, to the extent it was then exercisable at the time of such Disability,
for a period of ninety (90) days from the date of such Disability or until the
occurrence of the date specified in Section 3(a), whichever period is shorter;
provided, however, that if the Optionee dies within such ninety-day period, the
Option may thereafter be exercisable, to the extent to which it was exercisable
at the time of death, for a period of one hundred eighty from the date of such
death or until the occurrence of the date specified in Section 3(a), whichever
period is shorter.
(e) in the event the Optionee ceases to be an employee of Company
for any reason other than his voluntary termination, death or Disability, the
Option shall thereupon expire.
4. Vesting.
Subject to the terms, conditions and limitations expressed herein,
the Option shall become exercisable upon the fifth anniversary of the Date of
Grant, provided, however, that such Option may become exercisable earlier as
determined by the Committee, in its sole discretion. Prior to an IPO, the Option
shall only be exercisable on March 1 and September 1 of the calendar year. Upon
or after an IPO, the Option may be exercised at any time during the calendar
year.
5. Exercise Procedures.
The Optionee may exercise the Option with respect to all or any part
of the shares then subject to such exercise, in multiples of 100 shares, by
giving written notice of his intent to exercise in the manner provided in
Section 15 hereof. Such notice shall specify the number of shares desired at the
option price and the date of delivery thereof, which date shall be at least 15
days after the giving of such notice, unless an earlier date shall have been
mutually agreed upon. On such delivery date, the Company shall deliver to the
Optionee at the executive office of the Company, 4500 County Road 59, Butler,
Indiana 46721, or such other place as may be mutually acceptable to the Company
and the Optionee, a certificate or certificates for such shares out of
theretofore unissued shares or reacquired shares, as the Company may elect,
against
2
<PAGE> 13
payment by the Optionee of the applicable exercise price in cash, or in any
other manner approved by the Board. The obligation of the Company to deliver
shares upon such exercise of the Option shall be subject to all applicable laws,
rules, regulations and such approvals by governmental agencies as may be deemed
appropriate by the Board, including, among other things, such steps as Company
counsel shall deem necessary or appropriate to comply with relevant securities
laws and regulations. All obligations of the Company hereunder shall be subject
to the rights of the Company as set forth in the Plan to withhold amounts
required to be withheld for any taxes. If the Optionee fails to accept delivery
of, or to pay for, any of the shares specified in such notice upon tender of
delivery thereof, the Optionee's rights to purchase such undelivered shares may
be terminated, at the sole discretion of the Board.
6. Nonassignability of Option Rights:
The Option shall not be assigned or transferred by the Optionee,
except, in the event of the death of the Optionee, by will or by the laws of
descent or distribution. During the life of the Optionee, the Option shall be
exercisable only by the Optionee. Upon a transfer by will or by the laws of
descent or distribution, the person to whom the Option is transferred shall
have the right to exercise the Option in accordance with the Plan and this Grant
Letter. Any attempt to assign, transfer, pledge or dispose of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
7. Grant Subject to Plan Provisions.
This grant is made pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and shall in all respects be
interpreted in accordance therewith. The granting and exercise of the Option and
the payment of dividends or other distributions with respect to the shares are
subject to the provisions of the Plan and to interpretations, regulations and
determinations concerning the Plan established from time to time by the Board in
accordance with the provisions of the Plan, including, but not limited to,
provisions pertaining to (i) rights and obligations with respect to withholding
taxes, (ii) the registration, qualification or listing of the shares, (iii)
capital or other changes of the Company and (iv) other requirements of
applicable law. A copy of the Plan will be furnished to the Optionee upon
request.
8. Adjustments.
If any change is made to the Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all outstanding grants under the Plan, the
Board shall preserve the value of the Option by making appropriate adjustments
to the number and class of shares, the Option Price or otherwise, except that
any fractional shares resulting from such adjustment shall be eliminated by
rounding any portion of a
3
<PAGE> 14
share equal to .500 or greater up, and any portion of a share equal to or less
than .500 down, in each case to the nearest whole number.
9. Stock Restrictions.
If an Optionee exercises an Option prior to the IPO, the Optionee
must execute a shareholders' agreement prior to receipt of such Stock. The Stock
will be subject to such restrictions as indicated by the shareholders'
agreement, including but not limited to the following:
(a) If, prior to the IPO, the Optionee (while still an employee of
the Company) wishes to dispose of any shares acquired pursuant to the exercise
of the Option, such shares shall be subject to a right of first refusal, at the
then fair market value, in favor of the Company and its then existing
shareholders.
(b) In the event of the Optionee's termination of employment with
the Company prior to the IPO, the Company and its then existing shareholders
shall have the option to purchase the shares held by the Optionee as a result of
the exercise of the Option at the then fair market value. If the disposition of
the shares would be characterized as a "disqualifying disposition" for purposes
of the Code, then the Optionee may elect to delay such disposition until such
time as the disposition would not constitute a disqualifying disposition of the
shares.
10. Withholding.
The Company shall have the right to deduct from any payment
hereunder any federal, state, local or employment taxes which it deems are
required by law to be withheld.
11. Administration.
The Option has been granted pursuant to the terms, conditions and
other provisions of the Plan, as in effect on the Date of Grant, and as the Plan
may be amended from time to time. All questions of interpretation and
application of the Plan and of any grant under the Plan (including this grant)
shall be determined by the Committee in its sole discretion, and such
determination shall be final and binding upon all persons. The validity,
construction and effect of this Option shall be determined in accordance with
the laws of the State of Indiana, without giving effect to the principles of
conflicts of law thereof.
12. No Employment Rights.
Neither the granting of the Option nor any other action taken with
respect to the Option or the Plan shall confer upon the Optionee any right to
continue in the employ of the Company or shall interfere in any way with the
right of the Company to terminate the Optionee's employment at any time. Except
as may be otherwise limited by another written
4
<PAGE> 15
agreement, the right of the Company to terminate at will the Optionee's
employment with it at any time (whether by dismissal, discharge, retirement or
otherwise) is specifically reserved.
13. No Stockholder Rights.
Neither the Optionee, nor any person entitled to exercise the
Optionee's rights in the event of the Optionee's death, shall have any of the
rights and privileges of a stockholder with respect to the shares subject to the
Option, except to the extent that certificates for such shares shall have been
issued upon exercise of the Option as provided herein.
14. Cancellation or Amendment.
This Option may be cancelled or amended by the Board, in whole or in
part, at any time that the Board determines, in its sole discretion, that the
cancellation or amendment is necessary or advisable in light of any change after
the Date of Grant in (a) the Code or the regulations issued thereunder or (b)
any federal or state securities law or other law or regulation, which change by
its terms effective retroactively to a date on or before the Date of Grant;
provided, however, that no such cancellation or amendment shall, without the
Optionee's consent, apply to or affect installments that matured on or before
the date on which the Board makes such determination.
15. Notice.
Any notice to the Company provided for in this Grant Letter shall be
addressed to it in care of the Secretary of the Company, 4500 County Road 59,
Butler, Indiana 46721, and any notice to the Optionee shall be addressed to the
Optionee at the current address shown on the payroll of the Company, or to such
other address the Optionee may designate to the Company in writing. Any notice
provided for hereunder shall be delivered by hand, sent by telecopy or telex or
enclosed in a properly sealed envelope addressed as stated above, registered and
deposited, postage and registry being prepaid, in a post office or branch post
office regularly maintained by the United States Postal Service.
16. Optionee's Securities Law Representations.
If the Committee shall deem it appropriate by reason of any
securities law, it may require that the Optionee upon exercise in whole or in
part of the Option, represent to the Company and agree in writing that the
purchase of the shares is for investment only and not with a view to
distribution. The Committee may require that the share certificates be inscribed
with a legend restricting transfer in accordance with applicable securities law
requirements.
17. Applicable Law.
The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the laws of
the State of Indiana.
5
<PAGE> 16
STEEL DYNAMICS HOLDINGS, INC.
Attest: By: /s/ Signature Illegible
--------------------------- -----------------------------------
Accepted By:
Witness: /s/ Signature Illegible /s/ Signature Illegible
--------------------------- ---------------------------------------
Optionee
6
<PAGE> 1
Exhibit 10.20
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June,
1994, by and between STEEL DYNAMICS, INC. ("Employer"), an Indiana
corporation, and KEITH BUSSE ("Employee").
In consideration of the mutual covenants and agreements set forth below,
the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts
employment with the Employer for a period of five (5) years, commencing with the
first date for which the Employee receives compensation hereunder, subject,
however, to prior termination of this Agreement in the event of disability
(Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original
term, employment hereunder shall be on a month-to-month basis. In the event,
however, that employment is thereafter terminated or not renewed by the
Employer, without cause within the meaning of Section 8.1, the Employee shall be
entitled to receive six (6) months of severance compensation at the base salary
rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall
not be limited to) assisting in the design and layout, specification and
selection of machinery and equipment, contract negotiations, construction
monitoring, and overall supervision of a thin slab casting steel mill, to be
located in the Midwest (the "Mill"); shall include employee staffing, training,
and supervision; shall include troubleshooting in connection with start-up
operations; and shall include the performance of such duties as President and
Chief Executive Officer of Steel Dynamics, Inc. as may be prescribed from time
to time by the Employer's Board of Directors. The Employee shall devote his full
business time, skill, energies, business judgment, knowledge and best efforts to
the advancement of the best interests of the Employer and the performance of his
executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the
mutual consent of the Employer and Employee without affecting the other terms or
conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term
of this Agreement, the Employee shall perform his
<PAGE> 2
duties at such place or places as the Employee and the Employer may agree,
including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in
addition to the additional Employee Benefits to which the Employee is entitled
pursuant to Article IV, the Employer shall pay to the Employee the following
amounts:
3.1 A one-time payment, paid previously, in the amount of One Hundred
Ninety-Five Thousand Dollars ($195,000), together with four annual payments of
Thirty Thousand Dollars ($30,000) each, commencing October 1, 1994.
3.2 A base salary of Two Hundred Fifty Thousand Dollars ($250,000) per
year, payable in periodic installments as shall be mutually agreeable between
the parties but not less than monthly payments of Twenty Thousand Eight Hundred
Thirty-Three Dollars and 33/100 ($20,833.33).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash
and the balance of one-third (1/3) of which shall be payable in cash or deferred
compensation pursuant to such terms and conditions as the parties may mutually
agree in advance (and which may include rights to apply all or a portion thereof
toward the purchase of Employer stock on the occurrence of certain future
events). The annual bonus shall not exceed in the aggregate two hundred percent
(200%) of the base salary described in Section 3.2. In order to calculate the
amount of such bonus, an annual bonus pool of funds equal to three percent (3%)
of the Employer's pre-tax earnings, as determined under generally accepted
accounting principles for financial accounting purposes, less an amount equal to
ten percent (10%) of the amount determined to constitute the equity investment
in the company, shall be placed into such bonus pool. Such bonus pool to be
allocated among specifically designated key executive employees, which shall
include the Employee in proportion to his respective base salaries. The
designation of key executive employees for bonus pool purposes, in addition to
the Employee, shall be made by the Management Committee of the Employer's Board
of Directors, with input from the Employee. Any funds not allocated or otherwise
in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee
shall be entitled in any and all events to a bonus of the greater of sixty
percent (60%) of his base salary or the amount determined as a result of the
foregoing pre-tax earnings formula, regardless of the Employer's profitability.
-2-
<PAGE> 3
For purposes of this Section 3.3, the amount of the "equity investment" in
the company shall be determined in accordance with generally accepted accounting
principles, for financial accounting purposes, and shall be calculated on the
basis of the total common and preferred stockholders' equity as of the beginning
of the company's fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year
following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month
following the commencement of actual compensation to the Employee hereunder, the
Employer has not received funding commitments to enable the proposed thin slab
casting steel mill to be constructed in the manner envisioned in a business plan
to be developed for presentation to prospective investors, or if the Employer
should determine that the proposed venture will not proceed (for that or any
other reason), then, in addition to and not in lieu of the remaining
compensation to which he is entitled hereunder, the Employee shall additionally
receive, in cash, an amount equal to two (2) years of his base salary, as
described in Section 3.2. This payment shall be deemed to be in exchange for the
common shares of the Employer owned by or through the Employee at such time, and
shall be conditioned upon the Employer's entitlement to a reconveyance of such
shares concurrently therewith. This payment shall likewise be in lieu of and not
in addition to any payments that may become due by reason of the operation of
Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major
medical health insurance and with long term disability insurance, with terms and
in amounts comparable to or better than Employee's coverages from his previous
employer, and Employer agrees to provide the Employee with term life insurance
in an amount equal to twice the Employee's base salary with double indemnity in
the case of death by accident.
4.2 The Employee shall be entitled to four (4) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the
reasonable relocation expenses of the Employee and his family, which
reimbursement shall include (but not necessarily be limited to) payment for
house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of
sale of the Employee's home (including title insurance, survey, real estate
Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
(12)
-3-
<PAGE> 4
months interest, insurance and taxes on the Employee's existing home mortgage
(or until such earlier time as the Employee shall have sold that home). In
addition, the Employer will reimburse and make the Employee whole on any loss on
the sale of the Employee's current residence, based on current value; and to
determine "current value" the Employee, at the Employer's expense, shall
promptly secure a current MAI appraisal of the fair market value of his present
home, based upon a proposed sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable
to perform substantially all of his duties for a continuous period of six (6)
months, either the Employee or the Employer may by notice terminate the
Employee's employment under this Agreement, effective as of sixty (60) days
after the date such notice is given. In the event of termination, however, the
Employer agrees to continue paying the Employee an amount equal to and in the
same periodic installments as his base salary, as provided in Section 3.2, less
any amounts payable to the Employee under any benefits paid by Workmen's
Compensation, or under any other state disability benefits program, or any other
Employer provided disability benefits, including the Employer's long-term
disability policy called for by Section 4.1, but only during the remaining
period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under
this Agreement shall be deemed automatically terminated, effective as of the
date of death; provided, however, that the Employer shall thereafter continue
paying the Employee's estate or designated beneficiary an amount equal to and in
the same periodic installments as his base salary, as provided in Section 3.2,
but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business
expenses related to the business of the Employer, including expenditures for
entertainment, business promotion, and travel, according to policies and
guidelines to be prescribed from time to time by the Board of Directors. The
Employee shall be required to furnish to the Employer documentary evidence, as
required for tax purposes, containing sufficient information to establish the
amount, date, place, and the essential character of the expenditure.
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<PAGE> 5
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but
ending, if sooner, on the date the common shares of Steel Dynamics Holdings,
Inc. ("Holdings") are sold in an initial public offering and Holdings' common
shares are listed on any national securities exchange or quoted on the NASD
automated quotation system, should the Employee's employment terminate
hereunder, then:
(a) If termination shall have occurred prior to one year after the
date of Mill Completion (the "First Anniversary"), for cause, as defined
in Section 8.1, Holdings shall automatically become entitled to a
reconveyance of the Employee's common shares, without the payment of any
consideration by Holdings other than the price paid by the Employee for
such shares (which shall be paid in cash); and Holdings shall be entitled
to petition any court with jurisdiction herein for the appointment of a
special master to effect such conveyance, such grant of authority herein
being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer
induced harassment or hostile work environment, because the Employee
voluntarily resigns prior to the Mill Completion, Holdings shall
automatically become entitled to the same reconveyance of the Employee's
shares, for the same consideration, and with the same power to compel the
reconveyance as set forth in Section 6.1(a). If termination shall have
occurred because of the Employee's disability (Section 4.4) or death
(Section 4.5) prior to the First Anniversary, or Employee's voluntary
resignation, after the date of Mill Completion and prior to the First
Anniversary, the Employee (or his estate) shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his Common Shares to Holdings, for cash, for an amount, determined as of
the date of termination, equal to two (2) years of his base salary, as
described in Section 3.2, and with the same power to compel the
reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's
termination of Employee's employment, without cause, prior to the First
Anniversary, or because of termination by the Employer or the Employee
after the First Anniversary, or because of the Employee's disability or
death after the First Anniversary, the Employee shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his common shares to Holdings (if, as, and when permitted under applicable
state corporate law), for cash, in quarterly installment over a period of
two (2) years,
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<PAGE> 6
with interest at the Employer's prime of "reference" rate for short-term
commercial borrowing, for an amount, determined as of the date of
termination, equal to the greater of (i) two times Employee's annual base
salary or (ii) the fair market value of such shares. In the event,
however, that Holdings is precluded by applicable corporate law or
Holdings is in default or would be in default under a loan or other
covenant from making any payment hereunder, otherwise required by this
Section 6.1(c), or if any such payment is required to be deferred, then,
Holdings shall not be required to purchase the Shares until such
restrictions lapse and of such time interests will also be paid to
Employee on such amount for the period Holdings was restricted from making
the required payment. Holdings shall use reasonable efforts to effectuate
Employee's exercise of the "put" herein, including good faith efforts to
obtain the consent of any lender or other party if a covenant or agreement
prohibits same or requires such consent. Fair market value of the shares
shall be agreed upon by Holdings' board of directors and the Employee. If
such parties are unable to agree upon such fair market value within 30
days of notice of any put or call, fair market value shall be determined
by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the
substantial completion of the steel mill and commencement of marketable
steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the
right to "put" to Holdings an amount of common shares with a fair market
value of up to a cap of $2.45 million.
6.2 In the event that Employee is no longer employed by Employer and
becomes employed by a competitor of Employer, Holdings shall have the right to
"call" or purchase the Employee's shares, at the same valuation and subject to
the same terms and limitations described in Section 6.1(c) and the same rights
to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the
best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this
Agreement and to perform his duties and obligations hereunder without breaching
or in any manner being in conflict with or in violation of any other agreements,
whether employment agreements or otherwise, to which he is a party or by which
he is bound.
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<PAGE> 7
7.2 He is not now subject to any covenant against competition or similar
covenant which would affect his right to perform the duties contemplated
hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate
any trade secrets, or confidential information belonging to his former or
current employer, whether in the form of papers, plans, drawings,
specifications, electronic media, magnetic tape, or other documents, or
information contained therein.
7.4 During the period of his anticipated employment, he will develop and
have access to information related to the business, operations, future plans,
processes, specifications, procedures, and research and development that the
Employer will want to maintain as proprietary and not disclose publicly. The
Employee covenants that during the term of his employment and thereafter he will
keep confidential all such information and documents produced by or under his
direction, furnished or available to him through any other means in connection
with his employment, or to which he may otherwise have access in connection with
his employment, and which was not otherwise known to him, and that he will not
use such information to the Employer's disadvantage or disclose it to any other
person, except to the extent that such information or documents are or
thereafter become lawfully obtainable from other sources, are in the public
domain through no fault on his part, or are consented to in writing by the
Employer. Upon termination of his employment, the Employee shall return to the
Employer all documents, records, lists, plans, drawings, layouts,
specifications, and other documents which are in his possession, which relate to
the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under
applicable state or federal law, Employer, at its option, may terminate this
Agreement for cause by giving written notice of such termination to the
Employee, without prejudice to any other remedy to which the Employer may be
entitled at law or in equity including Section 6.1(a); and in such event, all
further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
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8.3 Should employment be terminated without cause by the Employer, or,
even if the Employee voluntarily terminates but the reason therefor is related
to the Employer's creation or maintenance of a work environment that is hostile
to the Employee, the Employee shall be entitled to all of his compensation set
forth herein, subject only to the Employee's reasonable duty to mitigate his
damages, and provided that compensation payable to Employee by the Employer will
be reduced on a dollar for dollar basis to the extent of pre-tax compensation
received by Employee from any competitor of the Employer. If employment is
terminated by the Employee for any other reason, the Employee shall not be
entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the
other shall be in writing and may be effected either by personal delivery or by
mail, registered or certified, postage prepaid, with return receipt requested.
All notices and communications required or permitted to be given hereunder shall
be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
or to such other address as either party shall have furnished to the other by
like notice. Notices shall be effective as of the third business day subsequent
to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements
between the parties with regard to the Employer's employment of the Employee,
including that certain Employment Agreement dated September 7, 1993 between
Employer and Employee, and this Agreement contains all of the covenants and
agreements between the parties with regard to employment hereunder. There are
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<PAGE> 9
no promises, representations, conditions, provisions, or terms relating thereto
other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and
warranties to the Employer as set forth in Section 7.3, the Employer hereby
agrees that in the event of any claims made against the Employee by his prior
employer, including any litigation that may occur as a result thereof, or
against the Employer and the Employee, and in which the claim is made that the
Employee and/or the Employer has violated or is violating any agreement,
undertaking, or covenant to which the Employee is or was a party and by which
the Employee is bound, the Employer will provide the Employee with a defense
against any such claim or litigation, including attorney fees, expenses, and
other costs of defense; and the Employer will indemnify and hold the Employee
harmless from and against any damages, costs, and attorney fees, or amounts paid
in settlement of any such claims; provided, however, that this indemnity and
hold harmless agreement shall not apply to any award for punitive damages nor to
the extent that the Employee is found to have willfully or intentionally
misappropriated any trade secrets, willfully or intentionally violated any such
agreement, or misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be
deemed a waiver by such party of such provision in any other instance or a
waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the
party to be charged.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
------------------------------------
KEITH BUSSE, President
Date: June 24, 1994
EMPLOYEE:
/s/ Keith E. Busse
----------------------------------------
KEITH BUSSE
Date: June 24, 1994
HOLDINGS:
STEEL DYNAMICS HOLDINGS, INC.
BY: /s/ Keith E. Busse
------------------------------------
KEITH BUSSE, President
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<PAGE> 1
Exhibit 10.21
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June, 1994, by and
between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, and MARK
MILLETT ("Employee").
In consideration of the mutual covenants and agreements set forth below,
the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts
employment with the Employer for a period of five (5) years, commencing with the
first date for which the Employee receives compensation hereunder, subject,
however, to prior termination of this Agreement in the event of disability
(Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original
term, employment hereunder shall be on a month-to-month basis. In the event,
however, that employment is thereafter terminated or not renewed by the
Employer, without cause within the meaning of Section 8.1, the Employee shall be
entitled to receive six (6) months of severance compensation at the base salary
rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall
not be limited to) assisting in the design and layout, specification and
selection of machinery and equipment, contract negotiations, construction
monitoring, and overall supervision of a thin slab casting steel mill, to be
located in the Midwest (the "Mill"); shall include employee staffing, training,
and supervision; shall include troubleshooting in connection with start-up
operations; and shall include the performance of such duties as Vice President
of Melting and Casting of Steel Dynamics, Inc. as may be prescribed from time to
time by the Employer's Board of Directors. The Employee shall devote his full
business time, skill, energies, business judgment, knowledge and best efforts to
the advancement of the best interests of the Employer and the performance of his
executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the
mutual consent of the Employer and Employee without affecting the other terms or
conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term
of this Agreement, the Employee shall perform his
<PAGE> 2
duties at such place or places as the Employee and the Employer may agree,
including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in
addition to the additional Employee Benefits to which the Employee is entitled
pursuant to Article IV, the Employer shall pay to the Employee the following
amounts:
3.1 A one-time payment, paid previously, in the amount of Sixty-Five
Thousand Dollars ($65,000).
3.2 A base salary of One Hundred Fifty Thousand Dollars ($150,000) per
year, payable in periodic installments as shall be mutually agreeable between
the parties but not less than monthly payments of Twelve Thousand Five Hundred
Dollars ($12,500.00).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash
and the balance of one-third (1/3) of which shall be payable in cash or deferred
compensation pursuant to such terms and conditions as the parties may mutually
agree in advance (and which may include rights to apply all or a portion thereof
toward the purchase of Employer stock on the occurrence of certain future
events). The annual bonus shall not exceed in the aggregate two hundred percent
(200%) of the base salary described in Section 3.2. In order to calculate the
amount of such bonus, an annual bonus pool of funds equal to three percent (3%)
of the Employer's pre-tax earnings, as determined under generally accepted
accounting principles for financial accounting purposes, less an amount equal to
ten percent (10%) of the amount determined to constitute the equity investment
in the company, shall be placed into such bonus pool. Such bonus pool to be
allocated among specifically designated key executive employees, which shall
include the Employee in proportion to his respective base salaries. The
designation of key executive employees for bonus pool purposes, in addition to
the Employee, shall be made by the Management Committee of the Employer's Board
of Directors, with input from the Employee. Any funds not allocated or otherwise
in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee
shall be entitled in any and all events to a bonus of the greater of sixty
percent (60%) of his base salary or the amount determined as a result of the
foregoing pre-tax earnings formula, regardless of the Employer's profitability.
For purposes of this Section 3.3, the amount of the "equity investment" in
the company shall be determined in accordance with generally accepted accounting
principles, for
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<PAGE> 3
financial accounting purposes, and shall be calculated on the basis of the total
common and preferred stockholders' equity as of the beginning of the company's
fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year
following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month
following the commencement of actual compensation to the Employee hereunder, the
Employer has not received funding commitments to enable the proposed thin slab
casting steel mill to be constructed in the manner envisioned in a business plan
to be developed for presentation to prospective investors, or if the Employer
should determine that the proposed venture will not proceed (for that or any
other reason), then, in addition to and not in lieu of the remaining
compensation to which he is entitled hereunder, the Employee shall additionally
receive, in cash, an amount equal to two (2) years of his base salary, as
described in Section 3.2. This payment shall be deemed to be in exchange for the
common shares of the Employer owned by or through the Employee at such time, and
shall be conditioned upon the Employer's entitlement to a reconveyance of such
shares concurrently therewith. This payment shall likewise be in lieu of and not
in addition to any payments that may become due by reason of the operation of
Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major
medical health insurance and with long term disability insurance, with terms and
in amounts comparable to or better than Employee's coverages from his previous
employer, and Employer agrees to provide the Employee with term life insurance
in an amount equal to twice the Employee's base salary with double indemnity in
the case of death by accident.
4.2 The Employee shall be entitled to three (3) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the
reasonable relocation expenses of the Employee and his family, which
reimbursement shall include (but not necessarily be limited to) payment for
house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of
sale of the Employee's home (including title insurance, survey, real estate
Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
(12) months interest, insurance and taxes on the Employee's existing home
mortgage (or until such earlier time as the Employee shall have sold that home).
In addition, the Employer will reimburse and
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<PAGE> 4
make the Employee whole on any loss on the sale of the Employee's current
residence, based on current value; and to determine "current value" the
Employee, at the Employer's expense, shall promptly secure a current MAI
appraisal of the fair market value of his present home, based upon a proposed
sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable
to perform substantially all of his duties for a continuous period of six (6)
months, either the Employee or the Employer may by notice terminate the
Employee's employment under this Agreement, effective as of sixty (60) days
after the date such notice is given. In the event of termination, however, the
Employer agrees to continue paying the Employee an amount equal to and in the
same periodic installments as his base salary, as provided in Section 3.2, less
any amounts payable to the Employee under any benefits paid by Workmen's
Compensation, or under any other state disability benefits program, or any other
Employer provided disability benefits, including the Employer's long-term
disability policy called for by Section 4.1, but only during the remaining
period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under
this Agreement shall be deemed automatically terminated, effective as of the
date of death; provided, however, that the Employer shall thereafter continue
paying the Employee's estate or designated beneficiary an amount equal to and in
the same periodic installments as his base salary, as provided in Section 3.2,
but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business
expenses related to the business of the Employer, including expenditures for
entertainment, business promotion, and travel, according to policies and
guidelines to be prescribed from time to time by the Board of Directors. The
Employee shall be required to furnish to the Employer documentary evidence, as
required for tax purposes, containing sufficient information to establish the
amount, date, place, and the essential character of the expenditure.
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but
ending, if sooner, on the date the Employer's common shares of Steel Dynamics
Holdings, Inc. ("Holdings") are sold in an initial public offering and the
Holdings' common shares are listed
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<PAGE> 5
on any national securities exchange or quoted on the NASD automated quotation
system, should the Employee's employment terminate hereunder, then:
(a) If termination shall have occurred prior to one year after the
date of Mill Completion (the "First Anniversary"), for cause, as defined
in Section 8.1, Holdings shall automatically become entitled to a
reconveyance of the Employee's common shares, without the payment of any
consideration by Holdings other than the price paid by the Employee for
such shares (which shall be paid in cash); and Holdings shall be entitled
to petition any court with jurisdiction herein for the appointment of a
special master to effect such conveyance, such grant of authority herein
being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer
induced harassment or hostile work environment, because the Employee
voluntarily resigns prior to the Mill Completion, Holdings shall
automatically become entitled to the same reconveyance of the Employee's
shares, for the same consideration, and with the same power to compel the
reconveyance as set forth in Section 6.1(a). If termination shall have
occurred because of the Employee's disability (Section 4.4) or death
(Section 4.5) prior to the First Anniversary, or Employee's voluntary
resignation, after the date of Mill Completion and prior to the First
Anniversary, the Employee (or his estate) shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his Common Shares to Holdings, for cash, for an amount, determined as of
the date of termination, equal to two (2) years of his base salary, as
described in Section 3.2, and with the same power to compel the
reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's
termination of Employee's employment, without cause, prior to the First
Anniversary, or because of termination by the Employer or the Employee
after the First Anniversary, or because of the Employee's disability or
death after the First Anniversary, the Employee shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his common shares to Holdings (if, as, and when permitted under applicable
state corporate law), for cash, in quarterly installment over a period of
two (2) years, with interest at the Employer's prime of "reference" rate
for short-term commercial borrowing, for an amount, determined as of the
date of termination, equal to the greater of (i) two times Employee's
annual base salary or (ii) the fair market value of such shares. In the
event, however, that Holdings is precluded by applicable corporate law or
Holdings is in default or would be in default under a loan or other
covenant from making any payment hereunder, otherwise required by this
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<PAGE> 6
Section 6.1(c), or if any such payment is required to be deferred, then,
Holdings shall not be required to purchase the Shares until such
restrictions lapse and at such time interests will also be paid to
Employee on such amount for the period Holdings was restricted from making
the required payment. Holdings shall use reasonable efforts to effectuate
Employee's exercise of the "put" herein, including good faith efforts to
obtain the consent of any lender or other party if a covenant or agreement
prohibits same or requires such consent. Fair market value of the shares
shall be agreed upon by Holdings' board of directors and the Employee. If
such parties are unable to agree upon such fair market value within 30
days of notice of any put or call, fair market value shall be determined
by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the
substantial completion of the steel mill and commencement of marketable
steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the
right to "put" to Employer an amount of common shares with a fair market
value of up to a cap of $1.4 million.
6.2 In the event that Employee is no longer employed by Employer and
becomes employed by a competitor of Employer, Holdings shall have the right to
"call" or purchase the Employee's shares, at the same valuation and subject to
the same terms and limitations described in Section 6.1(c) and the same rights
to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the
best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this
Agreement and to perform his duties and obligations hereunder without breaching
or in any manner being in conflict with or in violation of any other agreements,
whether employment agreements or otherwise, to which he is a party or by which
he is bound.
7.2 He is not now subject to any covenant against competition or similar
covenant which would affect his right to perform the duties contemplated
hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate
any trade secrets, or confidential information belonging to his former or
current employer, whether in
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<PAGE> 7
the form of papers, plans, drawings, specifications, electronic media, magnetic
tape, or other documents, or information contained therein.
7.4 During the period of his anticipated employment, he will develop and
have access to information related to the business, operations, future plans,
processes, specifications, procedures, and research and development that the
Employer will want to maintain as proprietary and not disclose publicly. The
Employee covenants that during the term of his employment and thereafter he will
keep confidential all such information and documents produced by or under his
direction, furnished or available to him through any other means in connection
with his employment, or to which he may otherwise have access in connection with
his employment, and which was not otherwise known to him, and that he will not
use such information to the Employer's disadvantage or disclose it to any other
person, except to the extent that such information or documents are or
thereafter become lawfully obtainable from other sources, are in the public
domain through no fault on his part, or are consented to in writing by the
Employer. Upon termination of his employment, the Employee shall return to the
Employer all documents, records, lists, plans, drawings, layouts,
specifications, and other documents which are in his possession, which relate to
the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under
applicable state or federal law, Employer, at its option, may terminate this
Agreement for cause by giving written notice of such termination to the
Employee, without prejudice to any other remedy to which the Employer may be
entitled at law or in equity including Section 6.1(a); and in such event, all
further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
8.3 Should employment be terminated without cause by the Employer, or,
even if the Employee voluntarily terminates but the reason therefor is related
to the Employer's creation or maintenance of a work environment that is hostile
to the Employee, the Employee shall be entitled to all of his compensation set
forth herein, subject only to the Employee's reasonable duty to mitigate his
damages, and provided that compensation payable to Employee by
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<PAGE> 8
the Employer will be reduced on a dollar for dollar basis to the extent of
pre-tax compensation received by Employee from any competitor of the Employer.
If employment is terminated by the Employee for any other reason, the Employee
shall not be entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the
other shall be in writing and may be effected either by personal delivery or by
mail, registered or certified, postage prepaid, with return receipt requested.
All notices and communications required or permitted to be given hereunder shall
be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Mark Millett
Imperial Blvd.
Crawfordsville, IN 47933
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
or to such other address as either party shall have furnished to the other by
like notice. Notices shall be effective as of the third business day subsequent
to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements
between the parties with regard to the Employer's employment of the Employee,
including that certain Employment Agreement dated September 7, 1993 between
Employer and Employee, and this Agreement contains all of the covenants and
agreements between the parties with regard to employment hereunder. There are no
promises, representations, conditions, provisions, or terms relating thereto
other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and
warranties to the Employer as set forth in Section 7.3, the Employer hereby
agrees that in the event of any claims made against the Employee by his prior
employer, including any litigation that may occur as a result thereof, or
against the
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<PAGE> 9
Employer and the Employee, and in which the claim is made that the Employee
and/or the Employer has violated or is violating any agreement, undertaking, or
covenant to which the Employee is or was a party and by which the Employee is
bound, the Employer will provide the Employee with a defense against any such
claim or litigation, including attorney fees, expenses, and other costs of
defense; and the Employer will indemnify and hold the Employee harmless from and
against any damages, costs, and attorney fees, or amounts paid in settlement of
any such claims; provided, however, that this indemnity and hold harmless
agreement shall not apply to any award for punitive damages nor to the extent
that the Employee is found to have willfully or intentionally misappropriated
any trade secrets, willfully or intentionally violated any such agreement, or
misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be
deemed a waiver by such party of such provision in any other instance or a
waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the
party to be charged.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
----------------------------------
KEITH BUSSE, President
Date: June 24, 1994
EMPLOYEE:
/s/ Mark Millett
--------------------------------------
MARK MILLETT
Date: June 24, 1994
HOLDINGS:
STEEL DYNAMICS HOLDINGS, INC.
BY: /s/ Keith E. Busse
----------------------------------
KEITH BUSSE, President
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<PAGE> 1
Exhibit 10.22
EMPLOYMENT AGREEMENT
This Agreement is entered into on the 24th day of June, 1994, by and
between STEEL DYNAMICS, INC. ("Employer"), an Indiana corporation, and RICHARD
P. TEETS, JR. ("Employee").
In consideration of the mutual covenants and agreements set forth below,
the parties agree as follows:
ARTICLE I
Term of Employment
1.1 The Employer hereby hires the Employee and the Employee hereby accepts
employment with the Employer for a period of five (5) years, commencing with the
first date for which the Employee receives compensation hereunder, subject,
however, to prior termination of this Agreement in the event of disability
(Section 4.4), death (Section 4.5), or breach (Section 8.1). After the original
term, employment hereunder shall be on a month-to-month basis. In the event,
however, that employment is thereafter terminated or not renewed by the
Employer, without cause within the meaning of Section 8.1, the Employee shall be
entitled to receive six (6) months of severance compensation at the base salary
rate set forth in Section 3.2.
ARTICLE II
Duties of Employee
2.1 The duties to be performed by the Employee shall include (but shall
not be limited to) assisting in the design and layout, specification and
selection of machinery and equipment, contract negotiations, construction
monitoring, and overall supervision of a thin slab casting steel mill, to be
located in the Midwest (the "Mill"); shall include employee staffing, training,
and supervision; shall include troubleshooting in connection with start-up
operations; and shall include the performance of such duties as Vice President
of Rolling and Finishing of Steel Dynamics, Inc. as may be prescribed from time
to time by the Employer's Board of Directors. The Employee shall devote his full
business time, skill, energies, business judgment, knowledge and best efforts to
the advancement of the best interests of the Employer and the performance of his
executive, administrative and operational duties on behalf of the Employer.
2.2 The duties of the Employee may be changed from time to time by the
mutual consent of the Employer and Employee without affecting the other terms or
conditions of this Agreement.
2.3 At the commencement of his employment and thereafter during the term
of this Agreement, the Employee shall perform his
<PAGE> 2
duties at such place or places as the Employee and the Employer may agree,
including such necessary travel as shall be required.
ARTICLE III
Compensation
As compensation for services rendered under this Agreement, and in
addition to the additional Employee Benefits to which the Employee is entitled
pursuant to Article IV, the Employer shall pay to the Employee the following
amounts:
3.1 A one-time payment, paid previously, in the amount of Sixty-Five
Thousand Dollars ($65,000).
3.2 A base salary of One Hundred Fifty Thousand Dollars ($150,000) per
year, payable in periodic installments as shall be mutually agreeable between
the parties but not less than monthly payments of Twelve Thousand Five Hundred
Dollars ($12,500.00).
3.3 An annual bonus, two-thirds (2/3) of which shall be payable in cash
and the balance of one-third (1/3) of which shall be payable in cash or deferred
compensation pursuant to such terms and conditions as the parties may mutually
agree in advance (and which may include rights to apply all or a portion thereof
toward the purchase of Employer stock on the occurrence of certain future
events). The annual bonus shall not exceed in the aggregate two hundred percent
(200%) of the base salary described in Section 3.2. In order to calculate the
amount of such bonus, an annual bonus pool of funds equal to three percent (3%)
of the Employer's pre-tax earnings, as determined under generally accepted
accounting principles for financial accounting purposes, less an amount equal to
ten percent (10%) of the amount determined to constitute the equity investment
in the company, shall be placed into such bonus pool. Such bonus pool to be
allocated among specifically designated key executive employees, which shall
include the Employee in proportion to his respective base salaries. The
designation of key executive employees for bonus pool purposes, in addition to
the Employee, shall be made by the Management Committee of the Employer's Board
of Directors, with input from the Employee. Any funds not allocated or otherwise
in excess of the bonus cap described herein shall revert to unrestricted status.
During the original five (5) year term of this Agreement, the Employee
shall be entitled in any and all events to a bonus of the greater of sixty
percent (60%) of his base salary or the amount determined as a result of the
foregoing pre-tax earnings formula, regardless of the Employer's profitability.
For purposes of this Section 3.3, the amount of the "equity investment" in
the company shall be determined in accordance with generally accepted accounting
principles, for
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<PAGE> 3
financial accounting purposes, and shall be calculated on the basis of the total
common and preferred stockholders' equity as of the beginning of the company's
fiscal (calendar) year for which the bonus is being determined.
All cash bonus payments shall be paid on or before April 1 of the year
following the Employer's fiscal (calendar) year for which the award is made.
3.4 In the event that after the expiration of the thirtieth (30th) month
following the commencement of actual compensation to the Employee hereunder, the
Employer has not received funding commitments to enable the proposed thin slab
casting steel mill to be constructed in the manner envisioned in a business plan
to be developed for presentation to prospective investors, or if the Employer
should determine that the proposed venture will not proceed (for that or any
other reason), then, in addition to and not in lieu of the remaining
compensation to which he is entitled hereunder, the Employee shall additionally
receive, in cash, an amount equal to two (2) years of his base salary, as
described in Section 3.2. This payment shall be deemed to be in exchange for the
common shares of the Employer owned by or through the Employee at such time, and
shall be conditioned upon the Employer's entitlement to a reconveyance of such
shares concurrently therewith. This payment shall likewise be in lieu of and not
in addition to any payments that may become due by reason of the operation of
Sections 6.1 or 6.2.
ARTICLE IV
Employee Benefits
4.1 The Employer agrees to provide the Employee and his family with major
medical health insurance and with long term disability insurance, with terms and
in amounts comparable to or better than Employee's coverages from his previous
employer, and Employer agrees to provide the Employee with term life insurance
in an amount equal to twice the Employee's base salary with double indemnity in
the case of death by accident.
4.2 The Employee shall be entitled to three (3) weeks vacation each year.
4.3 The Employer shall reimburse and make the Employee whole for the
reasonable relocation expenses of the Employee and his family, which
reimbursement shall include (but not necessarily be limited to) payment for
house sale fix-up expenses not to exceed $1,000, reimbursement for expenses of
sale of the Employee's home (including title insurance, survey, real estate
Commissions, out-of-pocket expenses relating to house hunting, and up to twelve
(12) months interest, insurance and taxes on the Employee's existing home
mortgage (or until such earlier time as the Employee shall have sold that home).
In addition, the Employer will reimburse and
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<PAGE> 4
make the Employee whole on any loss on the sale of the Employee's current
residence, based on current value; and to determine "current value" the
Employee, at the Employer's expense, shall promptly secure a current MAI
appraisal of the fair market value of his present home, based upon a proposed
sale for cash within a period of twelve (12) months.
4.4 If, due to physical or mental disability, the Employee shall be unable
to perform substantially all of his duties for a continuous period of six (6)
months, either the Employee or the Employer may by notice terminate the
Employee's employment under this Agreement, effective as of sixty (60) days
after the date such notice is given. In the event of termination, however, the
Employer agrees to continue paying the Employee an amount equal to and in the
same periodic installments as his base salary, as provided in Section 3.2, less
any amounts payable to the Employee under any benefits paid by Workmen's
Compensation, or under any other state disability benefits program, or any other
Employer provided disability benefits, including the Employer's long-term
disability policy called for by Section 4.1, but only during the remaining
period of the original five (5) year term hereof.
4.5 In the event of the Employee's death, the Employee's employment under
this Agreement shall be deemed automatically terminated, effective as of the
date of death; provided, however, that the Employer shall thereafter continue
paying the Employee's estate or designated beneficiary an amount equal to and in
the same periodic installments as his base salary, as provided in Section 3.2,
but only during the remaining portion of the original five (5) year term hereof.
ARTICLE V
Reimbursement of Employee Expenses
5.1 The Employer will reimburse the Employee for reasonable business
expenses related to the business of the Employer, including expenditures for
entertainment, business promotion, and travel, according to policies and
guidelines to be prescribed from time to time by the Board of Directors. The
Employee shall be required to furnish to the Employer documentary evidence, as
required for tax purposes, containing sufficient information to establish the
amount, date, place, and the essential character of the expenditure.
ARTICLE VI
Post-Employment Ownership of Stock
6.1 Limited only to the original seven (7) year term hereunder, but
ending, if sooner, on the date the Employer's common shares of Steel Dynamics
Holdings, Inc. ("Holdings") are sold in an initial public offering and Holdings'
common shares are listed on
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<PAGE> 5
any national securities exchange or quoted on the NASD automated quotation
system, should the Employee's employment terminate hereunder, then:
(a) If termination shall have occurred prior to one year after the
date of Mill Completion (the "First Anniversary"), for cause, as defined
in Section 8.1, Holdings shall automatically become entitled to a
reconveyance of the Employee's common shares, without the payment of any
consideration by Holdings other than the price paid by the Employee for
such shares (which shall be paid in cash); and Holdings shall be entitled
to petition any court with jurisdiction herein for the appointment of a
special master to effect such conveyance, such grant of authority herein
being deemed to constitute a proxy coupled with an interest.
(b) If termination shall have occurred, unrelated to any Employer
induced harassment or hostile work environment, because the Employee
voluntarily resigns prior to the Mill Completion, Holdings shall
automatically become entitled to the same reconveyance of the Employee's
shares, for the same consideration, and with the same power to compel the
reconveyance as set forth in Section 6.1(a). If termination shall have
occurred because of the Employee's disability (Section 4.4) or death
(Section 4.5) prior to the First Anniversary, or Employee's voluntary
resignation, after the date of Mill Completion and prior to the First
Anniversary, the Employee (or his estate) shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his Common Shares to Holdings, for cash, for an amount, determined as of
the date of termination, equal to two (2) years of his base salary, as
described in Section 3.2, and with the same power to compel the
reconveyance as set forth in Section 6.1(a).
(c) If termination shall have occurred because of the Employer's
termination of Employee's employment, without cause, prior to the First
Anniversary, or because of termination by the Employer or the Employee
after the First Anniversary, or because of the Employee's disability or
death after the First Anniversary, the Employee shall have the option,
exercisable within one (1) year following termination, to sell or "put"
his common shares to Holdings (if, as, and when permitted under applicable
state corporate law), for cash, in quarterly installment over a period of
two (2) years, with interest at the Employer's prime of "reference" rate
for short-term commercial borrowing, for an amount, determined as of the
date of termination, equal to the greater of (i) two times Employee's
annual base salary or (ii) the fair market value of such shares. In the
event, however, that Holdings is precluded by applicable corporate law or
Holdings is in default or would be in default under a loan or other
covenant from making any payment hereunder, otherwise required by this
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<PAGE> 6
Section 6.1(c), or if any such payment is required to be deferred, then,
Holdings shall not be required to purchase the Shares until such
restrictions lapse and at such time interests will also be paid to
Employee on such amount for the period Holdings was restricted from making
the required payment. Holdings shall use reasonable efforts to effectuate
Employee's exercise of the "put" herein, including good faith efforts to
obtain the consent of any lender or other party if a covenant or agreement
prohibits same or requires such consent. Fair market value of the shares
shall be agreed upon by Holdings' board of directors and the Employee. If
such parties are unable to agree upon such fair market value within 30
days of notice of any put or call, fair market value shall be determined
by a mutually agreeable appraiser.
For purposes of this Section 6.1 the term "Mill Completion" shall mean the
substantial completion of the steel mill and commencement of marketable
steel (prime or seconds) production therein.
(d) Notwithstanding the foregoing, the Employee shall only have the
right to "put" to Employer an amount of common shares with a fair market
value of up to a cap of $1.4 million.
6.2 In the event that Employee is no longer employed by Employer and
becomes employed by a competitor of Employer, Holdings shall have the right to
"call" or purchase the Employee's shares, at the same valuation and subject to
the same terms and limitations described in Section 6.1(c) and the same rights
to compel the reconveyance described in Section 6.1(a).
ARTICLE VII
Employee's Representations, Warranties and Covenants
The Employee hereby represents, warrants, covenants and agrees, to the
best of his knowledge and belief, that:
7.1 He has the full right, power, and authority to enter into this
Agreement and to perform his duties and obligations hereunder without breaching
or in any manner being in conflict with or in violation of any other agreements,
whether employment agreements or otherwise, to which he is a party or by which
he is bound.
7.2 He is not now subject to any covenant against competition or similar
covenant which would affect his right to perform the duties contemplated
hereunder.
7.3 He has not knowingly appropriated nor will he knowingly appropriate
any trade secrets, or confidential information belonging to his former or
current employer, whether in
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<PAGE> 7
the form of papers, plans, drawings, specifications, electronic media, magnetic
tape, or other documents, or information contained therein.
7.4 During the period of his anticipated employment, he will develop and
have access to information related to the business, operations, future plans,
processes, specifications, procedures, and research and development that the
Employer will want to maintain as proprietary and not disclose publicly. The
Employee covenants that during the term of his employment and thereafter he will
keep confidential all such information and documents produced by or under his
direction, furnished or available to him through any other means in connection
with his employment, or to which he may otherwise have access in connection with
his employment, and which was not otherwise known to him, and that he will not
use such information to the Employer's disadvantage or disclose it to any other
person, except to the extent that such information or documents are or
thereafter become lawfully obtainable from other sources, are in the public
domain through no fault on his part, or are consented to in writing by the
Employer. Upon termination of his employment, the Employee shall return to the
Employer all documents, records, lists, plans, drawings, layouts,
specifications, and other documents which are in his possession, which relate to
the Employer, and which are covered hereby.
ARTICLE VIII
Termination
8.1 If the Employee willfully and knowingly commits a criminal act under
applicable state or federal law, Employer, at its option, may terminate this
Agreement for cause by giving written notice of such termination to the
Employee, without prejudice to any other remedy to which the Employer may be
entitled at law or in equity including Section 6.1(a); and in such event, all
further obligations of the Employer hereunder shall cease and terminate.
8.2 If this Agreement is terminated prior to the completion of the
original term of employment hereunder, for cause in the manner described in
Section 8.1, the Employee shall be entitled to the compensation earned prior to
the date of termination, as provided herein, computed pro rata up to and
including the date of termination.
8.3 Should employment be terminated without cause by the Employer, or,
even if the Employee voluntarily terminates but the reason therefor is related
to the Employer's creation or maintenance of a work environment that is hostile
to the Employee, the Employee shall be entitled to all of his compensation set
forth herein, subject only to the Employee's reasonable duty to mitigate his
damages, and provided that compensation payable to Employee by
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<PAGE> 8
the Employer will be reduced on a dollar for dollar basis to the extent of
pre-tax compensation received by Employee from any competitor of the Employer.
If employment is terminated by the Employee for any other reason, the Employee
shall not be entitled to further compensation hereunder.
ARTICLE IX
Miscellaneous Provisions
9.1 Any notices to be given under this Agreement by either party to the
other shall be in writing and may be effected either by personal delivery or by
mail, registered or certified, postage prepaid, with return receipt requested.
All notices and communications required or permitted to be given hereunder shall
be given as follows:
If to the Employer, to: Steel Dynamics, Inc.
Attention: Keith Busse
12953 Brighton Avenue
Carmel, IN 46032
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
If to the Employee, to: Richard P. Teets, Jr.
4933 Wellington Blvd.
Crawfordsville, IN 47933
With a copy to: Mark Chambers, Esq.
444 E. Main Street
Fort Wayne, IN 46802
or to such other address as either party shall have furnished to the other by
like notice. Notices shall be effective as of the third business day subsequent
to posting or, if earlier, at the time of actual personal service.
9.2 This Agreement supersedes all other oral and written agreements
between the parties with regard to the Employer's employment of the Employee,
including that certain Employment Agreement dated September 7, 1993 between
Employer and Employee, and this Agreement contains all of the covenants and
agreements between the parties with regard to employment hereunder. There are no
promises, representations, conditions, provisions, or terms relating thereto
other than those set forth in this Agreement.
9.3 Based upon and subject to the Employee's representations and
warranties to the Employer as set forth in Section 7.3, the Employer hereby
agrees that in the event of any claims made against the Employee by his prior
employer, including any litigation that may occur as a result thereof, or
against the
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<PAGE> 9
Employer and the Employee, and in which the claim is made that the Employee
and/or the Employer has violated or is violating any agreement, undertaking, or
covenant to which the Employee is or was a party and by which the Employee is
bound, the Employer will provide the Employee with a defense against any such
claim or litigation, including attorney fees, expenses, and other costs of
defense; and the Employer will indemnify and hold the Employee harmless from and
against any damages, costs, and attorney fees, or amounts paid in settlement of
any such claims; provided, however, that this indemnity and hold harmless
agreement shall not apply to any award for punitive damages nor to the extent
that the Employee is found to have willfully or intentionally misappropriated
any trade secrets, willfully or intentionally violated any such agreement, or
misappropriated proprietary documents.
9.4 This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana.
9.5 No waiver by any party of any provision of this Agreement shall be
deemed a waiver by such party of such provision in any other instance or a
waiver of any other provision hereunder.
9.6 This Agreement cannot be modified except in writing, signed by the
party to be charged.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER:
STEEL DYNAMICS, INC.
BY: /s/ Keith E. Busse
--------------------------------
KEITH BUSSE, President
Date: June 24, 1994
EMPLOYEE:
/s/ Richard P. Teets, Jr.
-------------------------------------
RICHARD P. TEETS, JR.
Date: June 24, 1994
STEEL DYNAMICS HOLDINGS INC.
BY: /s/ Keith E. Busse
---------------------------------
KEITH BUSSE, President
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<PAGE> 1
Exhibit 10.25
"SECOND LOOK" EXPORT DISTRIBUTION AGREEMENT
This Agreement, dated this 10th day of September, 1996, (the "Agreement"),
is entered into by and between STEEL DYNAMICS, INC., an Indiana corporation
("SDI") and SUMITOMO CORPORATION OF AMERICA, a corporation incorporated under
the laws of the State of New York ("Sumitomo").
WHEREAS, SDI has entered into a Purchasing, Domestic Sales and Export
Distribution Agreement, dated December 12, 1995, with Preussag Stahl AG, a
corporation organized under the laws of the Federal Republic of Germany, a true
and correct copy of which has been made available to Sumitomo, pursuant to which
SDI, inter alia, appointed Preussag as its preferred distributor for all sales
of SDI's flat-rolled steel products to customers outside of North America and
Mexico (the "Export Territory"), for a term extending through December 31, 2002;
WHEREAS, pursuant to the foregoing Preussag Agreement, SDI is not
permitted to authorize any other distributor, agent, broker or sales
representative, other than Preussag, to solicit sales within the Export
Territory, nor is SDI permitted itself to solicit any such orders;
WHEREAS, pursuant to the Preussag Agreement, if SDI receives an
unsolicited purchase order from or for export to the Export Territory, it is
required to accord Preussag a right of first refusal for a period of five (5)
business days after notice;
WHEREAS, Sumitomo has requested, and SDI has agreed, that in the event
that Preussag declines or is unable to provide SDI with purchase orders for all
or any portion of SDI's products that SDI wishes to provide for sale into the
Export Territory, Sumitomo should have the opportunity to market and sell such
product.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
of the parties as set forth herein, the parties agree as follows:
1. Notification To Sumitomo Of Available Product For Sale Into Export
Territory. From time to time, as and when SDI determines that it has
flat-rolled steel products ("Product") that it wishes to consider
for sale into the Export Territory, with respect to which Preussag
has either declined or has been unable to provide SDI with
acceptable export purchase orders in accordance with Preussag's
rights and SDI's obligations under the Preussag Agreement, SDI shall
notify Sumitomo of such available Product, specifying the particular
grade, quality, chemistry, gauge and width thereof, the available
dates and quantities that may be available for shipment (which dates
shall not be sooner than ninety (90) days from the date of such
notice), together with SDI's price in United States dollars below
which it would not be willing to consider purchase orders. All
prices shall be deemed "FOB" SDI's mini-mill in Butler, Indiana.
<PAGE> 2
2. Proposals For Purchase Orders. Within twenty (20) days after
receiving SDI's notice of availability of specific Product for
export sale into the Export Territory, Sumitomo shall submit
purchase orders to SDI, in writing, specifying the Product ordered,
the quantity thereof, delivery dates, and other proposed terms and
conditions. Thereafter, SDI shall respond to Sumitomo within two (2)
days that it either accepts or rejects each such purchase order. SDI
shall not be required to accept any orders at prices or on terms
that it does not consider beneficial. All purchase orders submitted
by Sumitomo hereunder shall be subject to acceptance or rejection by
SDI, and no such order or offer shall be binding upon SDI until so
accepted. All SDI sales to Sumitomo to or through Sumitomo hereunder
will be pursuant to SDI's sales order acknowledgments and its
standard terms and conditions of sale, unless otherwise agreed.
3. Purchase And/Or Resale By Sumitomo. All sales to or through Sumitomo
into the Export Territory shall be for Sumitomo's own account,
regardless of whether it is purchasing Product for its own use in
the Export Territory or for resale to customers therein. It is
understood by SDI that the price and terms and conditions of resale
by Sumitomo in the Export Territory shall be determined by Sumitomo
in its sole discretion, and any and all payments made by Sumitomo's
customers in the Export Territory for Products sold hereunder shall
be retained by Sumitomo for its own account. All prices shall be
stated in terms of and shall be payable in United States dollars,
and Sumitomo shall be solely responsible for any bad debts or
currency exchange losses arising from such sales.
4. Unsolicited Offers By Sumitomo. If from time to time, and not on any
regular basis, Sumitomo has what it considers to be attractive
export sales possibilities within the Export Territory that it
wishes to bring to SDI's attention, notwithstanding the fact that
SDI provided it with no offer of availability of Product for sale
into such Export Territory, and if Sumitomo presents SDI with any
such proposed purchase orders stating the type of Product, the
quantities, delivery dates, FOB mini-mill price, and other pertinent
terms and conditions, SDI shall first be required to present such
unsolicited offer to Preussag, pursuant to Section III. B. 8 of the
Preussag Agreement, and Preussag shall have five (5) business days
thereafter to exercise its right of first refusal. If Preussag
declines the offer or is unwilling or unable to provide SDI with the
same or substantially similar price and terms, SDI shall be entitled
to either accept or reject such Sumitomo offer. If SDI rejects such
offer, any subsequent proposal from Sumitomo shall be deemed a new
unsolicited offer with respect to which SDI is required to present
such offer for Preussag's first refusal consideration.
5. Fulfillment Of Orders. All purchase orders accepted by SDI hereunder
shall be subject to a variance, within the quantities ordered, of
plus or minus ten percent (10%). Subject to such adjustment, as well
as to raw materials supply availability or
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<PAGE> 3
interruption in production due to force majeure, as described
herein, SDI shall produce sufficient quantities of its Product to
complete all accepted Sumitomo orders for sale into the Export
Market, as herein provided, and shall use its best efforts to meet
the delivery dates proposed in each such accepted order. To the
extent possible, Sumitomo will use its best efforts to accommodate
any SDI request for modification of quantities or delivery dates for
accepted orders, if deemed necessary by SDI. Unless otherwise
specified in its acceptance, orders shall be "FOB" SDI's mini-mill
in Butler, Indiana, and title shall pass to Sumitomo, as well as
risk of loss in respect of the Product, at the FOB shipping point.
6. Compensation To Sumitomo. In addition to any single run discounts,
volume rebates, or any other discounts that may be applicable to the
particular sale, Sumitomo shall be entitled to a sales commission of
$1.00 per ton of Product purchased from SDI for sale in the Export
Territory. Payment of commissions to Sumitomo shall be made on or
before the twenty-fifth (25th) day of the month following the month
in which the particular Product was sold, invoiced, and paid. SDI
shall pay commissions by check or wire transfer in accordance with
instructions timely received from Sumitomo. All costs and expenses
incurred by Sumitomo for its sales and marketing efforts for such
"second look" sales into the Export Territory shall be born entirely
by Sumitomo. Likewise, all taxes or other charges which may be due
to any governmental agency of any country or subdivision thereof in
respect of any such sales shall be the responsibility of Sumitomo.
7. Licenses And Permits. Sumitomo shall be responsible for obtaining
all required governmental licensing permits and for satisfying
whatever formalities may be required with respect to any sales into
the Export Territory effected to or through Sumitomo.
8. General Obligations Of SDI. In addition to any sales commitments
arising hereunder, SDI shall either confirm or reject all Sumitomo
purchase orders, including any requests for modification or
cancellation transmitted to it by Sumitomo, within seven (7) days,
and shall cooperate with Sumitomo in dealing promptly and fairly
with any complaints concerning the quality of the Product, including
taking such action to resolve justified complaints as may be
reasonably requested by Sumitomo.
9. Term Of Agreement. This Agreement shall commence on the date of its
execution and shall continue until December 31, 2002. At the
expiration of this term, the Agreement shall terminate, although it
may continue on a month-to-month basis thereafter if the parties so
desire; provided, however, that no such month-to-month extension
shall be deemed to imply any obligation on the part of SDI or
Sumitomo to extend this term for any period beyond thirty (30) days.
10. Default And Early Termination.
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<PAGE> 4
A. Breach Of Performance By Sumitomo. In the event that SDI
notifies Sumitomo of its failure to properly perform its
marketing and sales duties in accordance herewith, and in the
further event that such failure continues unabated for a
period in excess of thirty (30) days after such notification
to Sumitomo, in writing, with a particularized statement of
the failure to perform that is claimed by SDI, then SDI, at
its sole option, shall have the right to terminate this
Agreement, for cause, based upon Sumitomo's default. In the
event, however, that prior to the lapse of the thirty (30) day
cure period Sumitomo has taken reasonable steps to correct the
default, and if Sumitomo can reasonably correct such default
and cure the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional period
before SDI is entitled to terminate the Agreement. Any such
termination shall not relieve Sumitomo from any liability
which may have arisen hereunder prior to such termination, nor
shall any such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence of its
default hereunder.
In the event that Sumitomo becomes insolvent, commits an act
of bankruptcy, makes a general assignment for the benefit of
creditors, or in the event of the institution of any voluntary
or involuntary proceeding by or against Sumitomo under
bankruptcy, insolvency, or similar laws for the relief of
debtors or the protection of creditors, or in the event of the
appointment of a receiver, trustee, or assignee for the
benefit of creditors of Sumitomo, then, at SDI's election,
this Agreement may be immediately terminated.
B. Breach Of Performance By SDI. Apart from any particular
dispute that may from time to time involve individual
shipments by SDI of allegedly non-conforming Products that
are subject to the "Claims Handling" procedures described in
Section 11, in the event that Sumitomo believes that SDI has
failed to perform in its obligations in accordance with this
Agreement, and in the further event that such alleged failure
continues unabated for a period in excess of thirty (30) days
after notification to SDI in writing with a particularized
statement of the alleged failure to perform, then Sumitomo, at
its option, shall have the right to terminate this Agreement
based upon such SDI default. In the event, however, that prior
to the lapse of the thirty (30) day cure period, SDI has taken
reasonable steps to correct the default and if SDI can
reasonably correct and cure the problem within an additional
thirty (30) day period, SDI shall be entitled to the
additional period before Sumitomo shall be entitled to declare
a default. Any termination of this Agreement shall not relieve
SDI from any liability which may have arisen hereunder prior
to such termination, nor shall any such termination relieve
SDI of any claim for damages or other liabilities that may
arise as a
- 4 -
<PAGE> 5
consequence of its default hereunder.
If SDI becomes insolvent, commits an act of bankruptcy, makes
a general assignment for the benefit of creditors, or in the
event of the institution of any voluntary or involuntary
proceedings by or against SDI under bankruptcy, insolvency, or
similar laws for the relief of debtors or the protection of
creditors, or in the event of the appointment of a receiver,
trustee or assignee for the benefit of creditors of SDI, then,
at Sumitomo's election, this Agreement may be immediately
terminated.
11. Claims Handling. If any Product purchased by a customer of Sumitomo,
or directly by Sumitomo, fails to meet the proper specifications
represented by SDI, then, prior to any party's invoking any other
remedy to which it might be entitled, at law or in equity, Sumitomo,
if aware of the defect or of the non-conformity, shall notify SDI of
the non-conformity, provide SDI an opportunity to inspect the
allegedly non-conforming Product, and either propose a reduced
price therefor or make some other gesture of accommodation. If the
parties cannot successfully negotiate an appropriate resolution of
the problem within thirty (30) days, then the party alleging the
non-conformity may resort to any other remedy. It is understood
that, although this informal claims handling procedure may not be
formally binding upon a Sumitomo customer, which is not a party to
this Agreement, Sumitomo will use its best efforts to encourage its
customer, in the first instance, to resort to this informal claims
handling procedure.
12. Force Majeure. In the event that performance of obligations
hereunder by either party is legally excusable by reason of a force
majeure, either party which believes that its performance is excused
thereby shall give written notice to the other, as soon as possible
and with sufficient detail to permit the other to minimize
inconvenience and expense. A force majeure shall include (but shall
not be limited to) natural disasters, wars, acts of government
(including refusal to grant authorizations required to effectuate
performance), power failures or interruptions, unanticipated
breakdowns of equipment, extraordinary market or supply conditions
beyond the party's control, labor strife, raw material shortages,
transportation difficulties, legal restrictions on performance, and
the like. If any force majeure continues for a period of greater
than 360 days, either party shall have the right to terminate this
Agreement.
13. Notices. All communications required by this Agreement to be given
by one party to the other shall be in writing and delivered by hand,
or by certified or registered mail, with postage pre-paid and return
receipt requested, or by any other overnight express delivery or
facsimile transmission which provide evidence of receipt, addressed
or dispatched to the appropriate party at the address set forth
below (unless a party has previously advised the other to use a
different address or facsimile number):
- 5 -
<PAGE> 6
If to Sumitomo:
Sumitomo Corporation of America
Attention: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to SDI:
Keith E. Busse, President
Steel Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when
received.
14. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the matter of Sumitomo's export
distribution rights for SDI's flat-rolled steel that forms the
subject matter hereof, and it supersedes any concurrent or prior
understandings or agreements between the parties. Except as noted
herein, no changes to this Agreement shall be binding unless in
writing and signed by each party.
15. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance
with the laws of the state of Indiana.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original version of
the Agreement.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers or representatives as of the date first above
written.
SUMITOMO CORPORATION OF AMERICA
By__________________________________________
Title_______________________________________
STEEL DYNAMICS, INC.
By__________________________________________
Title_______________________________________
- 7 -
<PAGE> 8
Exhibit 10.26
SALE OF EXCESS PRODUCT AGREEMENT
This Agreement, dated this 28th day of October, 1996 (the
"Agreement"), is entered into by and between IRON DYNAMICS, INC., an Indiana
corporation ("IDI") and the wholly-owned subsidiary of STEEL DYNAMICS, INC., an
Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a New York
corporation ("Sumitomo").
WHEREAS, IDI intends to design, build, and operate a new manufacturing
facility for the production of a direct reduced iron ("DRI") product, using iron
ore fines with coal as a reductant;
WHEREAS, IDI intends to provide all or substantially all of the DRI
that it produces to SDI for SDI's use as a feed stock by SDI either directly in
its steel making melting furnace or for further processing through a submerged
arch electric furnace;
WHEREAS, IDI may from time to time produce DRI in quantities not
required by SDI, either for immediate use or for inventory, and may desire,
instead, to sell such excess DRI into the marketplace; and
WHEREAS, if and to the extent that IDI produces Excess DRI, Sumitomo
wishes to market and sell, on behalf of IDI, some of such Excess DRI, for a fee,
and under terms and conditions satisfactory to IDI,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties set forth herein, the parties agree as follows:
1. Designation of Excess DRI: In the exercise of IDI's sole
discretion, after consulting with SDI to determine SDI's DRI
needs for each calendar quarter (which needs shall in all
events have priority over IDI's use or disposition of its DRI
for the benefit of anyone other than SDI), IDI shall decide,
not later than forty-five (45) days in advance of each such
calendar quarter, whether it plans to produce DRI that is not
required by SDI for SDI's own use and consumption in its
Butler, Indiana mini-mill, or elsewhere, or for use and
consumption by any of SDI's affiliates, ("Excess DRI"). If IDI
determines that there will be Excess DRI for the following
calendar quarter that it wishes to sell, it shall determine
the amount thereof and, not later than thirty (30) days prior
to the commencement of such calendar quarter, will provide
Sumitomo with a "Notice Of Availability" not less than fifty
percent (50%) of such Excess DRI. The Notice Of Availability
shall set forth, for each calendar quarter to which it may
apply, the amount of Excess DRI being offered to Sumitomo, the
estimated weekly or monthly amounts thereof, the description,
iron, gangue, and sulfur content thereof, and any other
necessary product information, together with the minimum price
per metric tonne, below which it will not consider a sale,
"FOB" IDI's plant facility in Butler, Indiana. If IDI wishes
and is entitled to make available
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
<PAGE> 9
for sale through Sumitomo more than fifty percent (50%) of its
Excess DRI, it may elect but shall not be required to do so.
2. Response By Sumitomo. From the time of its receipt of IDI's
Notice Of Availability, Sumitomo shall have fifteen (15) days
within which to provide IDI with proposed purchase orders for
all or a part of the Excess DRI, specifying the amount of DRI
including weekly or monthly quantities, delivery date, price,
and other proposed terms and conditions. Sumitomo will use its
best efforts to market the excess DRI on the best available
terms for IDI, for the type and quantities of DRI that are
made available. If Sumitomo has not provided purchase orders
on a timely basis, as set forth herein, IDI shall be free to
sell or otherwise dispose of its excess DRI in any other
manner it deems appropriate, free of any further obligation,
for that period, to Sumitomo.
3. Acceptance Of Orders. All purchase orders submitted by
Sumitomo in connection herewith shall be subject to acceptance
or rejection by IDI, and no purchase order submitted by
Sumitomo to IDI shall be binding upon IDI absent IDI's express
acceptance. All IDI sales through Sumitomo, to the extent
accepted, shall be pursuant to IDI's sales order
acknowledgments and its standard terms and conditions of sale,
unless specifically otherwise agreed. All sales to third
parties shall be further subject to IDI's credit
determination, and nothing herein shall require IDI to extend
credit to any purchaser that does not meet IDI's credit
criteria for sale on open account.
4. Fulfillment Of Orders. All orders accepted by IDI hereunder
shall be subject to a variance, within the quantities ordered,
of plus or minus ten percent (10%). Subject to such
adjustment, as well as to raw materials supply availability or
interruption in DRI production due to force majeure, as
described herein, IDI shall produce sufficient quantities of
its DRI to complete all accepted Sumitomo orders, and shall
use its best efforts to meet the delivery dates proposed in
such accepted orders. To the extent possible, Sumitomo will
use its best efforts to accommodate any IDI request for
modification of quantities or delivery dates for accepted
orders, if deemed necessary by IDI. Unless otherwise specified
in its acceptance, orders shall be "FOB" IDI's plant facility
in Butler, Indiana, and Sumitomo's customer (or Sumitomo, if
it is the customer) shall accept title to, and risk of loss of
the DRI at that point. The minimum price designated by IDI,
and any purchase orders offered to IDI by Sumitomo, shall be
stated in net dollars per tonne to IDI, and any taxes or
charges that may be imposed by any governmental agency,
whether foreign or domestic, upon the DRI or upon the sale
transaction, other than regular federal and state income taxes
that may be payable by SDI on its net taxable income derived
from IDI's activities, shall be and remain the responsibility
of the purchaser. In the event that IDI accepts a purchase
order for DRI on an accumulation basis, the terms
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 2 -
<PAGE> 10
thereof and any period of "free" storage pending shipment,
shall be specified in IDI's acceptance.
5. Sumitomo's Compensation. For its sales and marketing efforts,
in respect of DRI purchase orders that have been accepted, and
in which DRI has been shipped and payment received therefor,
Sumitomo shall be entitled to a sales commission of $2.00 per
tonne. If Sumitomo is the purchaser, its sales commission set
forth herein shall be treated as an additional discount and
shall be deducted from the agreed sales price. Payment of
commissions to Sumitomo shall be made on or before the
twenty-fifth (25th) day of the month following the month in
which the applicable sales invoices were invoiced and paid,
and such commissions shall be paid either by check or wire
transfer in accordance with instructions timely received from
Sumitomo. All costs and expenses of Sumitomo in connection
with its marketing and sales efforts shall be born by
Sumitomo, without reimbursement from IDI. All payments made,
both for DRI and for commissions shall be payable in United
States dollars, unless the parties shall otherwise agree in
writing.
6. General Obligations of IDI. In addition to any sales
commitments arising hereunder, t IDI shall either confirm or
reject all Sumitomo purchase orders, including any requests
for modification or cancellation transmitted to it by
Sumitomo, within two (2) days, and shall cooperate with
Sumitomo in dealing promptly and fairly with any customer
complaints concerning the quality of the DRI, including taking
such action to resolve justified complaints as may be
reasonably requested by Sumitomo. IDI agrees that, during
normal business hours, within reason, it will accommodate
Sumitomo's reasonable requests on behalf of its customers for
product consultation concerning the proper use and
applications of IDI's DRI.
7. General Obligations Of Sumitomo. Sumitomo shall be responsible
for obtaining or insuring that its customers have obtained all
necessary governmental permits and licenses that may be
necessary in effecting IDI's sale of DRI pursuant to
Sumitomo's accepted purchase orders, including any such
permits and licenses, as well as any other formalities, in
connection with any export sales beyond the territory of the
United States.
8. Term Of Agreement. This Agreement shall commence on the date
of its execution and shall continue until the earlier of five
(5) years from the date upon which IDI makes its first Excess
DRI available to Sumitomo for sale hereunder, or December 31,
2004. At the expiration of this term, this Agreement shall
terminate, although it may continue on a month to month basis
thereafter if the parties desire that this be done; provided,
however, that no such month-to-month extension shall be deemed
to imply any obligation on the part of IDI or Sumitomo to
extend the term for any period beyond thirty (30) days.
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 3 -
<PAGE> 11
9. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that
IDI notifies Sumitomo of its failure to properly
perform its marketing and sales duties in accordance
herewith, and in the further event that such failure
continues unabated for a period in excess of thirty
(30) days after such notification to Sumitomo, in
writing, with a particularized statement of the
failure to perform that is claimed by IDI, then IDI,
at its sole option, shall have the right to terminate
this Agreement, for cause, based upon Sumitomo's
default. In the event, however, that prior to the
lapse of the thirty (30) day cure period Sumitomo has
taken reasonable steps to correct the default, and if
Sumitomo can reasonably correct such default and cure
the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional
period before IDI is entitled to terminate the
Agreement. Any such termination shall not relieve
Sumitomo from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence
of its default hereunder.
In the event that Sumitomo becomes insolvent, commits
an act of bankruptcy, makes a general assignment for
the benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceeding by or against Sumitomo under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee, or assignee
for the benefit of creditors of Sumitomo, then, at
IDI's election, this Agreement may be immediately
terminated.
B. Breach Of Performance By IDI. Apart from any
particular dispute that may from time to time involve
individual shipments by IDI of allegedly non-
conforming DRI that is subject to the "Claims
Handling" procedures described in Section 10, in the
event that Sumitomo believes that IDI has failed to
perform in its obligations in accordance with this
Agreement, and in the further event that such alleged
failure continues unabated for a period in excess of
thirty (30) days after notification to IDI in writing
with a particularized statement of the alleged
failure to perform, then Sumitomo, at its option,
shall have the right to terminate this Agreement
based upon such IDI default. In the event, however,
that prior to the lapse of the thirty (30) day cure
period, IDI has taken reasonable steps to correct the
default and if IDI can reasonably correct and cure
the problem within an additional thirty (30) day
period, IDI shall be entitled to the additional
period before Sumitomo shall be entitled to declare a
default. Any termination of this Agreement shall not
relieve IDI from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 4 -
<PAGE> 12
IDI of any claim for damages or other liabilities
that may arise as a consequence of its default
hereunder.
If IDI becomes insolvent, commits an act of
bankruptcy, makes a general assignment for the
benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceedings by or against IDI under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee or assignee
for the benefit of creditors of IDI, then, at
Sumitomo's election, this Agreement may be
immediately terminated.
10. Claims Handling. If any DRI purchased by a customer of
Sumitomo, or directly by Sumitomo, fails to meet the proper
specifications represented by IDI, then, prior to any party's
invoking any other remedy to which it might be entitled, at
law or in equity, Sumitomo, if aware of the defect or of the
non-conformity, shall notify IDI of the non-conformity,
provide IDI an opportunity to inspect the allegedly non-
conforming DRI, and either propose a reduced price therefor or
make some other gesture of accommodation. If the parties
cannot successfully negotiate an appropriate resolution of the
problem within thirty (30) days, then the party alleging the
non- conformity may resort to any other remedy. It is
understood that, although this informal claims handling
procedure may not be formally binding upon a Sumitomo
customer, which is not a party to this Agreement, Sumitomo
will use its best efforts to encourage its customer, in the
first instance, to resort to this informal claims handling
procedure.
11. Force Majeure. In the event that performance of obligations
hereunder by either party is legally excusable by reason of a
force majeure, either party which believes that its
performance is excused thereby shall give written notice to
the other, as soon as possible and with sufficient detail to
permit the other to minimize inconvenience and expense. A
force majeure shall include (but shall not be limited to)
natural disasters, wars, acts of government (including refusal
to grant authorizations required to effectuate performance),
power failures or interruptions, unanticipated breakdowns of
equipment, extraordinary market or supply conditions beyond
the party's control, labor strife, raw material shortages,
transportation difficulties, legal restrictions on
performance, and the like. If any force majeure continues for
a period of greater than 360 days, either party shall have the
right to terminate this Agreement.
12. Notices. All communications required by this Agreement to be
given by one party to the other shall be in writing and
delivered by hand, or by certified or registered mail, with
postage pre-paid and return receipt requested, or by any other
overnight express delivery or facsimile transmission which
provide evidence of receipt, addressed or dispatched to the
appropriate party at the address set forth below (unless a
party has previously advised the other to use a different
address or facsimile number):
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 5 -
<PAGE> 13
If to Sumitomo:
Sumitomo Corporation of America
ATTN: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to IDI:
Keith E. Busse
Iron Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when received.
13. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the sale of Excess
DRI that forms the subject matter hereof, and it supersedes
any concurrent or prior understandings or agreements between
the parties. Except as noted herein, no changes to this
Agreement shall be binding unless in writing and signed by
each party.
14. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed in
accordance with the laws of the state of Indiana.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original
version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers or representatives as of the date
first above written.
SUMITOMO CORPORATION OF AMERICA
By
---------------------------------
Title
-----------------------------
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 6 -
<PAGE> 14
IRON DYNAMICS, INC.
By
----------------------------------
Title
-------------------------------
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 7 -
<PAGE> 1
Exhibit 10.26
SALE OF EXCESS PRODUCT AGREEMENT
This Agreement, dated this 28th day of October, 1996 (the
"Agreement"), is entered into by and between IRON DYNAMICS, INC., an Indiana
corporation ("IDI") and the wholly-owned subsidiary of STEEL DYNAMICS, INC., an
Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a New York
corporation ("Sumitomo").
WHEREAS, IDI intends to design, build, and operate a new manufacturing
facility for the production of a direct reduced iron ("DRI") product, using iron
ore fines with coal as a reductant;
WHEREAS, IDI intends to provide all or substantially all of the DRI
that it produces to SDI for SDI's use as a feed stock by SDI either directly in
its steel making melting furnace or for further processing through a submerged
arch electric furnace;
WHEREAS, IDI may from time to time produce DRI in quantities not
required by SDI, either for immediate use or for inventory, and may desire,
instead, to sell such excess DRI into the marketplace; and
WHEREAS, if and to the extent that IDI produces Excess DRI, Sumitomo
wishes to market and sell, on behalf of IDI, some of such Excess DRI, for a fee,
and under terms and conditions satisfactory to IDI,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties set forth herein, the parties agree as follows:
1. Designation of Excess DRI: In the exercise of IDI's sole
discretion, after consulting with SDI to determine SDI's DRI
needs for each calendar quarter (which needs shall in all
events have priority over IDI's use or disposition of its DRI
for the benefit of anyone other than SDI), IDI shall decide,
not later than forty-five (45) days in advance of each such
calendar quarter, whether it plans to produce DRI that is not
required by SDI for SDI's own use and consumption in its
Butler, Indiana mini-mill, or elsewhere, or for use and
consumption by any of SDI's affiliates, ("Excess DRI"). If IDI
determines that there will be Excess DRI for the following
calendar quarter that it wishes to sell, it shall determine
the amount thereof and, not later than thirty (30) days prior
to the commencement of such calendar quarter, will provide
Sumitomo with a "Notice Of Availability" not less than fifty
percent (50%) of such Excess DRI. The Notice Of Availability
shall set forth, for each calendar quarter to which it may
apply, the amount of Excess DRI being offered to Sumitomo, the
estimated weekly or monthly amounts thereof, the description,
iron, gangue, and sulfur content thereof, and any other
necessary product information, together with the minimum price
per metric tonne, below which it will not consider a sale,
"FOB" IDI's plant facility in Butler, Indiana. If IDI wishes
and is entitled to make available
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
<PAGE> 2
for sale through Sumitomo more than fifty percent (50%) of its
Excess DRI, it may elect but shall not be required to do so.
2. Response By Sumitomo. From the time of its receipt of IDI's
Notice Of Availability, Sumitomo shall have fifteen (15) days
within which to provide IDI with proposed purchase orders for
all or a part of the Excess DRI, specifying the amount of DRI
including weekly or monthly quantities, delivery date, price,
and other proposed terms and conditions. Sumitomo will use its
best efforts to market the excess DRI on the best available
terms for IDI, for the type and quantities of DRI that are
made available. If Sumitomo has not provided purchase orders
on a timely basis, as set forth herein, IDI shall be free to
sell or otherwise dispose of its excess DRI in any other
manner it deems appropriate, free of any further obligation,
for that period, to Sumitomo.
3. Acceptance Of Orders. All purchase orders submitted by
Sumitomo in connection herewith shall be subject to acceptance
or rejection by IDI, and no purchase order submitted by
Sumitomo to IDI shall be binding upon IDI absent IDI's express
acceptance. All IDI sales through Sumitomo, to the extent
accepted, shall be pursuant to IDI's sales order
acknowledgments and its standard terms and conditions of sale,
unless specifically otherwise agreed. All sales to third
parties shall be further subject to IDI's credit
determination, and nothing herein shall require IDI to extend
credit to any purchaser that does not meet IDI's credit
criteria for sale on open account.
4. Fulfillment Of Orders. All orders accepted by IDI hereunder
shall be subject to a variance, within the quantities ordered,
of plus or minus ten percent (10%). Subject to such
adjustment, as well as to raw materials supply availability or
interruption in DRI production due to force majeure, as
described herein, IDI shall produce sufficient quantities of
its DRI to complete all accepted Sumitomo orders, and shall
use its best efforts to meet the delivery dates proposed in
such accepted orders. To the extent possible, Sumitomo will
use its best efforts to accommodate any IDI request for
modification of quantities or delivery dates for accepted
orders, if deemed necessary by IDI. Unless otherwise specified
in its acceptance, orders shall be "FOB" IDI's plant facility
in Butler, Indiana, and Sumitomo's customer (or Sumitomo, if
it is the customer) shall accept title to, and risk of loss of
the DRI at that point. The minimum price designated by IDI,
and any purchase orders offered to IDI by Sumitomo, shall be
stated in net dollars per tonne to IDI, and any taxes or
charges that may be imposed by any governmental agency,
whether foreign or domestic, upon the DRI or upon the sale
transaction, other than regular federal and state income taxes
that may be payable by SDI on its net taxable income derived
from IDI's activities, shall be and remain the responsibility
of the purchaser. In the event that IDI accepts a purchase
order for DRI on an accumulation basis, the terms
F:\DATA\PUBL\RSW\AGMT\VAB\81006.2 (8/30/96)
- 2 -
<PAGE> 3
thereof and any period of "free" storage pending shipment,
shall be specified in IDI's acceptance.
5. Sumitomo's Compensation. For its sales and marketing efforts,
in respect of DRI purchase orders that have been accepted, and
in which DRI has been shipped and payment received therefor,
Sumitomo shall be entitled to a sales commission of $2.00 per
tonne. If Sumitomo is the purchaser, its sales commission set
forth herein shall be treated as an additional discount and
shall be deducted from the agreed sales price. Payment of
commissions to Sumitomo shall be made on or before the
twenty-fifth (25th) day of the month following the month in
which the applicable sales invoices were invoiced and paid,
and such commissions shall be paid either by check or wire
transfer in accordance with instructions timely received from
Sumitomo. All costs and expenses of Sumitomo in connection
with its marketing and sales efforts shall be born by
Sumitomo, without reimbursement from IDI. All payments made,
both for DRI and for commissions shall be payable in United
States dollars, unless the parties shall otherwise agree in
writing.
6. General Obligations of IDI. In addition to any sales
commitments arising hereunder, t IDI shall either confirm or
reject all Sumitomo purchase orders, including any requests
for modification or cancellation transmitted to it by
Sumitomo, within two (2) days, and shall cooperate with
Sumitomo in dealing promptly and fairly with any customer
complaints concerning the quality of the DRI, including taking
such action to resolve justified complaints as may be
reasonably requested by Sumitomo. IDI agrees that, during
normal business hours, within reason, it will accommodate
Sumitomo's reasonable requests on behalf of its customers for
product consultation concerning the proper use and
applications of IDI's DRI.
7. General Obligations Of Sumitomo. Sumitomo shall be responsible
for obtaining or insuring that its customers have obtained all
necessary governmental permits and licenses that may be
necessary in effecting IDI's sale of DRI pursuant to
Sumitomo's accepted purchase orders, including any such
permits and licenses, as well as any other formalities, in
connection with any export sales beyond the territory of the
United States.
8. Term Of Agreement. This Agreement shall commence on the date
of its execution and shall continue until the earlier of five
(5) years from the date upon which IDI makes its first Excess
DRI available to Sumitomo for sale hereunder, or December 31,
2004. At the expiration of this term, this Agreement shall
terminate, although it may continue on a month to month basis
thereafter if the parties desire that this be done; provided,
however, that no such month-to-month extension shall be deemed
to imply any obligation on the part of IDI or Sumitomo to
extend the term for any period beyond thirty (30) days.
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<PAGE> 4
9. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that
IDI notifies Sumitomo of its failure to properly
perform its marketing and sales duties in accordance
herewith, and in the further event that such failure
continues unabated for a period in excess of thirty
(30) days after such notification to Sumitomo, in
writing, with a particularized statement of the
failure to perform that is claimed by IDI, then IDI,
at its sole option, shall have the right to terminate
this Agreement, for cause, based upon Sumitomo's
default. In the event, however, that prior to the
lapse of the thirty (30) day cure period Sumitomo has
taken reasonable steps to correct the default, and if
Sumitomo can reasonably correct such default and cure
the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional
period before IDI is entitled to terminate the
Agreement. Any such termination shall not relieve
Sumitomo from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence
of its default hereunder.
In the event that Sumitomo becomes insolvent, commits
an act of bankruptcy, makes a general assignment for
the benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceeding by or against Sumitomo under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee, or assignee
for the benefit of creditors of Sumitomo, then, at
IDI's election, this Agreement may be immediately
terminated.
B. Breach Of Performance By IDI. Apart from any
particular dispute that may from time to time involve
individual shipments by IDI of allegedly non-
conforming DRI that is subject to the "Claims
Handling" procedures described in Section 10, in the
event that Sumitomo believes that IDI has failed to
perform in its obligations in accordance with this
Agreement, and in the further event that such alleged
failure continues unabated for a period in excess of
thirty (30) days after notification to IDI in writing
with a particularized statement of the alleged
failure to perform, then Sumitomo, at its option,
shall have the right to terminate this Agreement
based upon such IDI default. In the event, however,
that prior to the lapse of the thirty (30) day cure
period, IDI has taken reasonable steps to correct the
default and if IDI can reasonably correct and cure
the problem within an additional thirty (30) day
period, IDI shall be entitled to the additional
period before Sumitomo shall be entitled to declare a
default. Any termination of this Agreement shall not
relieve IDI from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve
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<PAGE> 5
IDI of any claim for damages or other liabilities
that may arise as a consequence of its default
hereunder.
If IDI becomes insolvent, commits an act of
bankruptcy, makes a general assignment for the
benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceedings by or against IDI under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee or assignee
for the benefit of creditors of IDI, then, at
Sumitomo's election, this Agreement may be
immediately terminated.
10. Claims Handling. If any DRI purchased by a customer of
Sumitomo, or directly by Sumitomo, fails to meet the proper
specifications represented by IDI, then, prior to any party's
invoking any other remedy to which it might be entitled, at
law or in equity, Sumitomo, if aware of the defect or of the
non-conformity, shall notify IDI of the non-conformity,
provide IDI an opportunity to inspect the allegedly non-
conforming DRI, and either propose a reduced price therefor or
make some other gesture of accommodation. If the parties
cannot successfully negotiate an appropriate resolution of the
problem within thirty (30) days, then the party alleging the
non- conformity may resort to any other remedy. It is
understood that, although this informal claims handling
procedure may not be formally binding upon a Sumitomo
customer, which is not a party to this Agreement, Sumitomo
will use its best efforts to encourage its customer, in the
first instance, to resort to this informal claims handling
procedure.
11. Force Majeure. In the event that performance of obligations
hereunder by either party is legally excusable by reason of a
force majeure, either party which believes that its
performance is excused thereby shall give written notice to
the other, as soon as possible and with sufficient detail to
permit the other to minimize inconvenience and expense. A
force majeure shall include (but shall not be limited to)
natural disasters, wars, acts of government (including refusal
to grant authorizations required to effectuate performance),
power failures or interruptions, unanticipated breakdowns of
equipment, extraordinary market or supply conditions beyond
the party's control, labor strife, raw material shortages,
transportation difficulties, legal restrictions on
performance, and the like. If any force majeure continues for
a period of greater than 360 days, either party shall have the
right to terminate this Agreement.
12. Notices. All communications required by this Agreement to be
given by one party to the other shall be in writing and
delivered by hand, or by certified or registered mail, with
postage pre-paid and return receipt requested, or by any other
overnight express delivery or facsimile transmission which
provide evidence of receipt, addressed or dispatched to the
appropriate party at the address set forth below (unless a
party has previously advised the other to use a different
address or facsimile number):
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<PAGE> 6
If to Sumitomo:
Sumitomo Corporation of America
ATTN: Kei Kato
2750 USX Tower, 600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
If to IDI:
Keith E. Busse
Iron Dynamics, Inc.
4500 County Road 59
Butler, IN 46721
Any such notice shall be deemed to have been delivered when received.
13. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the sale of Excess
DRI that forms the subject matter hereof, and it supersedes
any concurrent or prior understandings or agreements between
the parties. Except as noted herein, no changes to this
Agreement shall be binding unless in writing and signed by
each party.
14. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed in
accordance with the laws of the state of Indiana.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original
version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers or representatives as of the date
first above written.
SUMITOMO CORPORATION OF AMERICA
By
---------------------------------
Title
-----------------------------
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<PAGE> 7
IRON DYNAMICS, INC.
By
----------------------------------
Title
-------------------------------
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<PAGE> 1
Exhibit 10.35
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 14, 1995 (this
"Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana
corporation (the "Company"), and Preussag Stahl AG, a company incorporated under
the laws of the Federal Republic of Germany (the "Purchaser").
Except as otherwise indicated, capitalized terms used herein are defined
in Section 11 hereof. All referenced or attached Schedules and Exhibits are
deemed incorporated herein by reference.
The parties hereby agree as follows:
1. Purchase and Sale of Stock
1.1 First Sale and Issuance of Class A Common Stock: First Closing.
Subject to the terms of this Agreement and to the conditions set forth in
Section 2 hereof, the Company will sell and issue to Purchaser, and
Purchaser will purchase from the Company, for cash at the First Closing
(the "First Purchase"), Twenty Thousand Eight Hundred Thirty-three
(20,833) shares of the Company's authorized but unissued Class A Common
Stock, at a price of Two Hundred Forty U.S. Dollars (U.S. $240.00) per
share (the "Per Share Purchase Price"), for a total consideration of Five
Million U.S. Dollars (U.S. $5,000,000.00). For purposes of this Section
1.1 and elsewhere in the agreement, the Company's Class A Common Stock
shall be referred to as the "SDI Stock." This First Purchase of SDI Stock
will constitute a separate sale and purchase from those contemplated by
Sections 1.2 and 1.3.
1.2 Second Sale and Issuance of SDI Stock: Second Closing. Subject
to the terms of this Agreement and to the conditions set forth in Section
3 hereof, including Purchaser's determination described in Section 3.2,
the Company will sell and issue to Purchaser and Purchaser will purchase
from the Company, for cash at the Second Closing (the "Second Purchase"),
an additional Twenty Thousand Eight Hundred Thirty-three (20,833) shares
of the Company's authorized but unissued SDI Stock, at the same Per Share
Purchase Price, for a total additional consideration of Five Million U.S.
Dollars (U.S. $5,000,000.00). This Second Purchase of SDI Stock will
constitute a separate sale and purchase from those contemplated in
Sections 1.1 and 1.3.
1.3 Third Sale and Issuance of SDI Stock: Third Closing. Subject to
the terms of this Agreement and to the conditions set forth in Section 4
hereof, the Company, at its sole option and election exercisable by
written notice to Purchaser no later than ten (10) days prior to the Third
Closing, will sell and issue to Purchaser, and Purchaser will purchase
from the Company, for cash at the Third Closing (the "Third Purchase), not
less than an additional Sixty-Two Thousand Five Hundred (62,500) shares
nor more than One Hundred Sixty-Six Thousand Six Hundred Sixty-seven
(166,667) shares of the Company's authorized but unissued SDI Stock, in
the event that the Second Closing was consummated as contemplated
<PAGE> 2
by Section 1.2, or not less than an additional Eighty-three Thousand Three
Hundred Thirty-three (83,333) shares nor more than One Hundred
Eighty-seven Thousand Five Hundred (187,500) shares in the event that the
Second Closing was not consummated, at the same Per Share Purchase Price,
for a total additional consideration of not less than Fifteen Million U.S.
Dollars (U.S. $15,000,000.00) nor more than Forty Million U.S. Dollars
(U.S. $40,000,000.00) in the event that the Second Closing was
consummated, or not less than Twenty Million U.S. Dollars (U.S.
$20,000,000.00) nor more than Forty-five Million U.S. Dollars (U.S.
$45,000,000.00) in the event that the Second Closing was not consummated.
This Third Purchase of SDI Stock will constitute a separate sale and
purchase from those contemplated in Sections 1.1 and 1.2, and if and when
closed, and when aggregated with the purchase effected pursuant to Section
1.1 and with the purchase, if any, made pursuant to Section 1.2, will
entitle Purchaser to acquire or maintain the benefits described in
Sections 2.3, 2.4, 2.8, 2.15(a), 2.15(b), and 4.9.
1.4 Third Sale and Issuance of SDI Stock: Alternate Third Closing.
In the event that one or more of the conditions described in Sections 3 or
4 fail to materialize, such that Purchaser would not otherwise be required
to purchase additional stock under Sections 1.2 and/or 1.3, Purchaser,
pursuant to its rights under Sections 3.7 and/or 4.17, may elect to waive
such condition(s) and proceed, nonetheless, to effect the additional
purchase contemplated in this Section 1.4. Under such circumstances, and
notwithstanding anything to the contrary expressed or implied in Section
1.3 or elsewhere herein, Purchaser will purchase from the Company, and the
Company will sell to the Purchaser, for cash at the Alternate Third
Closing, if it occurs (the "Alternate Third Purchase") such number of
additional shares of the Company's authorized but unissued SDI Stock, at
the same Per Share Purchase Price, such that, when aggregated with the SDI
Stock sold to Purchaser pursuant to Section 1.1 and/or 1.2, will
constitute Purchaser the owner of a total of Twenty-five Million U.S.
Dollars (U.S. $25,000,000.00) of SDI Stock. If and when closed, in lieu of
the Third Purchase, and when aggregated with the purchase effected
pursuant to Section 1.1 and with the purchase, if any, made pursuant to
Section 1.2, such Alternate Third Purchase will entitle Purchaser to
acquire or maintain the benefits described in Sections 2.3, 2.4, 2.8, 4.5,
4.6, and 4.9.
1.5 Aggregate Shares to be Issued to Purchaser. In the event that
the Company elects to sell Purchaser only the minimum additional shares
required to be sold to Purchaser pursuant to Section 1.3, such that, in
addition thereto, Purchaser will have purchased the SDI Stock that was the
subject of the First Purchase (described in Section 1.1), and the Second
Purchase (described in Section 1.2), Purchaser would own, in the
aggregate, One Hundred Four Thousand One Hundred Sixty-seven (104,167)
shares of SDI Stock at and after the Third Closing. In the event that the
Company elects to sell Purchaser the maximum additional shares pursuant to
Section 1.3, Purchaser would own, in the aggregate, Two Hundred Eight
Thousand Three Hundred Thirty-three (208,333) shares of SDI Stock at and
after the Third Closing. In the event that the Company elects to sell more
than the minimum but less than the maximum additional shares pursuant to
Section 1.3, the aggregate number
2
<PAGE> 3
of shares of SDI Stock that the Company will issue and deliver to
Purchaser will be determined by dividing the actual U.S. dollar amount of
Purchaser's actual aggregate purchases pursuant to Sections 1.1, 1.2, and
1.3 by Two Hundred Forty U.S. Dollars (U.S. $240.00) per share. For
purposes of this Agreement, the number of shares of SDI Stock to be issued
to Purchaser will be adjusted, as necessary, to reflect any stock splits
or stock dividends.
1.6 Discretionary Additional Shares Issuable by the Company.
Notwithstanding anything to the contrary set forth in this Agreement, and
so long as the Company sells at least an aggregate of Twenty Five Million
U.S. Dollars (U.S. $25,000,000.00) of SDI Stock to Purchaser pursuant to
Sections 1.1, 1.2, and 1.3, the Company shall be entitled to sell SDI
Stock to other persons ("Other Persons"), including existing Stockholders,
Lenders or others who are qualified as Accredited Investors and whose
participation as additional purchasers will not render unavailable to the
Company any exemption from registration under the Securities Act of 1933
or comparable state Blue Sky Law otherwise available to the Company in
connection with this transaction, in an amount equal to the difference
between the amount of SDI Stock sold to Purchaser and at SDI's election
(the "Final Equity Amount"), either (a) Fifty Million U.S. Dollars (U.S.
$50,000,000.00), or (b) Sixty Million U.S. Dollars (U.S. $60,000,000.00).
In the event that the Company elects to do so, it shall notify the
Purchaser not less than ten (10) days prior to the Third Closing,
including in such notice, the aggregate amount of SDI Stock to be sold by
the Company, a list of the Other Persons, the number of shares intended to
be sold and issued to each such Other Person, and subject to the
provisions of Section 1.7, the per share purchase price with respect to
each such proposed sale.
1.7 Purchase Price: Other Persons. The purchase price per share of
the SDI Stock that may be sold, at the Company's election, to Other
Persons pursuant to the provisions of Section 1.6, shall be (a), up to and
not exceeding a maximum of Ten Million U.S. Dollars (U.S. $10,000,000.00)
thereof, not less than Two Hundred Thirty U.S. Dollars (U.S. $230.00), and
(b) for all other shares sold to Other Persons, not less than Two Hundred
Forty U.S. Dollars (U.S. $240.00). The Company agrees that, except as
permitted by this Section 1.7, at least during the period of ninety (90)
days subsequent to the Third Closing or Alternate Third Closing, it will
not issue or sell any SDI Stock to any person at less than Two Hundred
Forty U.S. Dollars (U.S. $240.00) per share.
2. Conditions of Purchaser's Obligation at the First Closing.
Purchaser's obligations at the First Closing to deliver to the Company the
$5,000,000.00 consideration for the SDI Stock to be purchased at such time shall
be subject, as of the First Closing, to the satisfaction of the following
conditions:
2.1 Stockholder Approvals and Consents. All requisite Stockholder
votes, approvals, and consents prescribed by the Stockholders Agreement,
including but not limited
3
<PAGE> 4
to the approval of not less than Seventy percent (70%) of the Company's
existing Stockholders, excluding Purchaser or any Other Person, and
including necessary waivers by existing Stockholders and Warrant Holders
of their limited preemptive rights thereunder, shall have been secured.
2.2 Lender Approvals. All requisite approvals, waivers, or consents,
if any, from the Company's senior and/or subordinated Lenders, permitting
the transactions contemplated by this Agreement shall have been secured.
2.3 Stockholders Agreement. Subject to Lender approval, with respect
to its effectiveness, the Company, the Purchaser, the Bain Group, GECC,
the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost, the Subdebt
Group, and the Management Group, as those persons are identified and
described in that certain Stockholders Agreement dated June 30, 1994 (the
"Stockholders Agreement") attached hereto as Exhibit 2.3A, shall have
entered into an agreement, in substantially the form and substance set
forth in Exhibit 2.3B attached hereto (the "Stockholders Joinder
Agreement"), with a delayed Effective Date, notwithstanding anything to
the contrary set forth therein, that is the later to occur of Lender
approval or of Purchaser's satisfaction of an aggregate of $25,000,000
minimum purchase amount of SDI Stock pursuant to Sections 1.1, 1.2, 1.3,
and 1.4, and the Stockholders Joinder Agreement shall not have been
rescinded or materially amended or modified. If Lender approval has not
been secured prior to the First Closing, this condition shall become a
condition of the Second and any Third or Alternate Third Closings.
In the interim between the First Closing and the date of the Third
Closing or Alternate Third Closing contemplated by Section 5, or until
such earlier or later time as it is determined that no Third Closing or
Alternate Third Closing will take place (the "Interim Period"), and from
and after any necessary Lender approval of the amendment of the
Stockholders Agreement, the provisions of Sections 2, 3, and 5-19,
inclusive, of the Stockholders Agreement shall be deemed effective as
between the parties hereto and thereto, and Purchaser, during such Interim
Period, shall be entitled to the benefits and shall be subject to the
burdens described in those sections, notwithstanding the delayed Effective
Date of the Stockholders Joinder Agreement. If a Third Closing or
Alternate Third Closing does not occur within the time set forth in
Section 5, then, unless extended by mutual agreement of the parties hereto
and thereto, the temporary rights conferred and burdens imposed hereby
during the Interim Period upon Purchaser shall automatically terminate.
2.4 Registration Agreement. The Company, the Purchaser, the Bain
Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney
Stockholders, the Management Stockholders, and the Warrant Holders, as
those persons are identified and described in that certain Registration
Agreement dated June 30, 1994 (the "Registration Agreement") attached
hereto as Exhibit 2.4A, shall have entered into an agreement, in
substantially the form and substance set forth in Exhibit 2.4B attached
hereto (the "Registration Joinder Agreement"); provided, however, that the
provisions of Section 1 of
4
<PAGE> 5
the Registration Agreement ("Demand Registrations"), as amended by the
Registration Joinder Agreement, together with the proviso of Section 11(a)
thereof, and the provisions of Sections 3(b) and (c) of the Registration
Joinder Agreement, shall not be deemed effective, notwithstanding anything
to the contrary expressed herein or therein, unless and until Purchaser
has completed the purchase of an aggregate of at least Twenty-five Million
U.S. Dollars (U.S. $25,000,000.00) of SDI Stock pursuant to Sections 1.1,
1.2, 1.3, and 1.4.
2.5 [Section 2.5 is intentionally left blank.]
2.6 Representations and Warranties; Covenants. The representations
and warranties of the Company contained in Section 7 hereof shall continue
to be true and correct in all material respects at and as of the First
Closing, as though then made again, except to the extent of changes caused
by the transactions expressly contemplated herein.
2.7 The Company's Articles of Incorporation. The Company's current
Articles of Incorporation shall continue to be in full force and effect,
under the laws of Indiana, and shall not have been amended or modified in
any material respect.
2.8 The Company's By-Laws. The Company's By-Laws shall continue to
be in full force and effect as they presently exist, and shall not have
been amended or modified in any material respect, except that Article III,
Section 3.2 of the By-Laws shall have been amended to provide that the
authorized number of directors is ten (10) rather than nine (9); provided,
however, that the vacancy so created shall not be filled by a Purchaser
representative, in the manner contemplated by Section 1(a)(ii)(J) of the
Stockholders Agreement, as it is contemplated to be amended by Exhibit
2.3B hereof, until the Stockholders Joinder Agreement shall have become
effective.
2.9 Securities Law Compliance. The Company shall have made all
filings under all applicable federal and state securities laws necessary
to consummate the issuance and sale of the SDI Stock at the First Closing
and required to be made prior to or concurrently with such issuance and
sale.
2.10 No Litigation, Proceedings. There shall be no action, suit, or
proceeding threatened, instituted or pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction (other than those set forth on the Litigation
Schedule attached hereto as Schedule 7.10) wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (a)
prevent or enjoin the consummation of any of the transactions contemplated
by this Agreement (including, without limitation, the Government Financing
Package, and the purchase of the SDI Stock by the Purchaser), (b) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (c) affect adversely the right of the Company
to own, operate, or control its business or assets (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect).
5
<PAGE> 6
2.11 Governmental Filings, Consents and Approvals. All federal,
state and local governmental filings, consents and approvals necessary for
the consummation of the First Closing (other than those required for the
physical construction, permitting and operation of the Project) shall have
been made or obtained.
2.12. Opinion of the Company's Counsel. The Purchaser shall have
received from counsel for the Company an opinion substantially in the form
set forth on Exhibit 2.12 attached hereto, which shall be addressed to the
Purchaser and dated the date of the First Closing.
2.13 Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(a) an Officer's Certificate, dated the date of the First
Closing, stating that the conditions specified in Sections 2.1
through 2.11, inclusive (except to the extent of matters required to
be satisfactory to the Purchaser), have been fully satisfied;
(b) certified copies of (i) the resolutions duly adopted by
the board of directors of the Company, authorizing the execution,
delivery and performance of this Agreement, the Registration Joinder
Agreement, and the Stockholders Joinder Agreement, and each of the
other agreements contemplated hereby at or prior to the First
Closing, and the issuance and sale of the SDI Stock contemplated by
Section 1.1;
(c) certified copies of the Articles of Incorporation and the
By-Laws, each as in effect at the First Closing;
(d) certified copy of the Government Financing Package
commitment, as issued or in effect at the First Closing;
(e) a certificate as to the incumbency of the officers of the
Company executing this Agreement and the other agreements
contemplated hereby on behalf of the Company;
(f) copies of all third party and governmental consents,
approvals, waivers, and filings required in connection with the
consummation of the transactions hereunder to the extent required to
be obtained or filed prior to the First Closing (other than those
required in connection with the physical construction, permitting
and operation of the Project); and
(g) such other documents relating to the transactions
contemplated by this Agreement as Purchaser may reasonably request.
6
<PAGE> 7
2.14 Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the First Closing,
and all documents incident thereto, shall be reasonably satisfactory in
form and substance to the Purchaser.
2.15 Additional Agreements. Subject to the Company's right to
terminate the following agreements and Purchaser's prospective rights
thereunder in the event that Purchaser does not purchase an aggregate of
$25,000,000 of SDI Stock pursuant to Sections 1.1, 1.2, 1.3, and 1.4:
(a) Reciprocal Patent and Technical Information Transfer and
License Agreement. The Company shall have entered into the
Reciprocal Patent and Technical Information Transfer and License
Agreement (the "Technology Agreement"), in substantially the form
and substance set forth in Exhibit 2.15(a) attached hereto, and the
Technology Agreement shall be in full force and effect. In the
event, however, that a Third Closing or Alternate Third Closing does
not occur within the time set forth in Section 5, then, unless
extended by mutual agreement of the parties hereto, the rights
conferred and burdens imposed upon Purchaser and the Company, at the
unilateral election of the Company, shall terminate; provided,
however, that both Purchaser and the Company shall be entitled to
retain and use in their own steel production operations in Europe,
and in the United States, respectively, the proprietary information
acquired during any period of effectiveness of the Technology
Agreement.
(b) Purchasing, Domestic Sales and Export Distribution
Agreement. The Company shall have entered into a Purchasing,
Domestic Sales and Export Distribution Agreement (the "Commercial
Agreement"), in substantially the form and substance set forth in
Exhibit 2.15(b) attached hereto, and the Commercial Agreement shall
be in full force and effect. In the event, however, that a Third
Closing or Alternate Closing does not occur within the time set
forth in Section 5, then, unless extended by mutual agreement of the
parties hereto, the rights conferred and burdens imposed upon
Purchaser and the Company, at the unilateral election of the
Company, shall terminate, subject only to the completion of orders
that were placed prior to termination.
2.16 State, County, and Municipal Financing. The Company and certain
State of Indiana, DeKalb County and/or City of Butler governmental
authorities ("Public Authorities") shall have agreed upon the principal
terms and conditions pursuant to which such Public Authorities will
provide certain state, county, and municipal grants and loans to the
Company, in the aggregate amount of not less than $3,000,000.00,
(collectively, the "Government Financing Package") and a commitment
therefor shall have been issued and delivered to the Company, in form and
substance reasonably satisfactory to Purchaser; and such Government
Financing Package shall be in full force and effect and shall not have
been rescinded or materially amended or modified.
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<PAGE> 8
2.17 Waiver. Any condition specified in this Section 2 may be waived
if consented to in writing by Purchaser.
3. Conditions of Purchaser's Obligations at the Second Closing.
In addition to the conditions described in Section 2.1 through 2.11,
relative to Purchaser's obligations at the First Closing, all of which shall be
deemed continuing conditions and updated to the time and for purposes of the
Second Closing, Purchaser's obligations at the Second Closing to deliver to the
Company the $5,000,000.00 consideration for the SDI Stock to be purchased at
such time shall be subject, as of the Second Closing, to the satisfaction of the
following additional conditions:
3.1 Debt Financing Commitment. One or more lenders, or a syndicate
of lenders (the "Lenders") shall have issued a firm commitment, (the
"Debt-Financing Commitment"), on or before January 15, 1996, in form and
substance reasonably satisfactory to Purchaser, for all necessary debt
financing, including senior and subordinated components thereof, in the
amount of One Hundred Forty Million U.S. Dollars (U.S. $140,000,000.00),
without recourse, however, to Purchaser or to any other Company
Stockholder.
3.2 Purchaser's Determination With Respect to Debt Financing
Commitment. Purchaser shall have determined that the Debt Financing
Commitment issued by the Lenders as contemplated by Section 3.1, is
without material conditions to closing which, in the judgment of
Purchaser, cannot reasonably be met or satisfied in connection therewith.
3.3 Lender Approvals. All remaining Lender approvals, waivers, or
consents not previously obtained shall have been received, including (but
not limited to) Lender approval of the Stockholders Joinder Agreement and
Amendment No. 2 to Stockholders Agreement described in Section 2.3.
3.4 Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Second Closing,
and all documents incident thereto, shall be reasonably satisfactory in
form and substance to the Purchaser.
3.5 Opinion of the Company's Counsel. The Purchaser shall have
received from counsel for the Company an opinion substantially in the form
set forth on Exhibit 3.4 attached hereto, which shall be addressed to the
Purchaser and dated the date of the Second Closing.
3.6 Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
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(a) an Officer's Certificate, dated the date of the Second
Closing, stating that the conditions specified in Sections 2.1
through 2.11, inclusive, and Sections 3.1 through 3.3, inclusive
(except to the extent of matters required to be satisfactory to the
Purchaser), have been fully satisfied and that the representations
and warranties set forth in Section 7 are true and correct as of the
date of the Second Closing;
(b) certified copies of the Articles of Incorporation and the
By-Laws, each as in effect at the Second Closing;
(c) certificate as to the incumbency of the officers of the
Company executing this Agreement and the other agreements
contemplated hereby on behalf of the Company;
(d) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation
of the transactions hereunder to the extent required to be obtained
or filed prior to the Second Closing (other than those required in
connection with the physical construction, permitting and operation
of the Project); and
(e) such other documents relating to the transactions
contemplated by this Agreement as Purchaser or their special counsel
may reasonably request.
3.6 Representations and Warranties; Covenants. The representations
and warranties of the Company contained in Section 7 hereof shall continue
to be true and correct in all material respects at and as of the Second
Closing, as though then made again, except to the extent of changes caused
by the transactions expressly contemplated herein.
3.7 Waiver. Any conditions specified in this Section 3 may be waived
if consented to in writing by Purchaser.
4. Conditions of Purchaser's Obligations at the Third Closing.
In addition to the conditions described in Sections 2.1 through 2.9,
relative to Purchaser's Obligations at the First Closing, all of which shall be
deemed continuing conditions and updated to the time and for purposes of the
Third Closing, Purchaser's obligations at the Third Closing to deliver to the
Company (a) consideration of not less than $15,000,000.00 nor more than
$40,000,000.00 (in the event that Purchaser has already purchased the SDI Stock
contemplated by Section 1.2), or (b) consideration of not less than Twenty
Million U.S. Dollars (U.S. $20,000,000.00) nor more than Forty-five Million U.S.
Dollars (U.S. $45,000,000.00) (in the event that Purchaser did not purchase the
SDI Stock contemplated by Section 1.2), required to be delivered pursuant to
Section 1.3 for the SDI Stock to be purchased at such time, shall be subject, as
of the Third Closing, to the satisfaction of the following additional
conditions:
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4.1 Status of Phase II Project. The Company's Board of Directors
shall have reconfirmed that the planning, construction and operation of
the hot dip galvanizing and cold rolling plant that constitutes "Phase II"
of the Company's Development Plans (the "Phase II Project") will proceed
forward, subject only to the availability of funds.
4.2 Debt Financing Commitment. The Debt Financing Commitment issued
by the Lenders, referred to at Section 3.1, shall continue to be in full
force and effect and shall not have been withdrawn, modified, or amended
in any material respect.
4.3 Closing of Debt Financing. The Lenders in connection with the
Debt Financing Commitment shall have entered into definitive agreements
and related documentation (the "Bank Agreement") with the Company,
providing for debt financing to the Company to finance the Phase II
Project and the Company's working capital needs in connection therewith,
in form and substance reasonably satisfactory to the Purchaser.
4.4 Construction and Equipment Contracts. The Company shall have
entered into each of the preliminary contracts listed on Schedule 4.4
attached hereto (the "Construction Contracts") in connection with the
construction of the Phase II Project and the acquisition of equipment to
be used therein, each in form and substance reasonably satisfactory to the
Purchaser, and each of the Construction Contracts shall be in full force
and effect as of the Third Closing.
4.5 Technology Agreement. The Technology Agreement shall continue to
be in full force and effect.
4.6 Commercial Agreement. The Commercial Agreement shall continue to
be in full force and effect.
4.7 Other Equity Purchase Commitments; Closing. In the event that
the Company has determined to sell less than the aggregate of
$50,000,000.00 of SDI Stock to Purchaser within the limits described in
Section 1.3, and has so notified Purchaser in the manner contemplated by
Section 1.6, then, regardless of the Final Equity Amount selected by the
Company, the Company shall have obtained binding commitments from persons
other than Purchaser ("Other Purchasers"), who may but need not be
existing Stockholders and/or Lenders, for the full amount of the
difference between the Final Equity Amount and the aggregate amount of SDI
Stock to be sold to Purchaser pursuant to Section 1.1., 1.2, and either
1.3 or 1.4; and the Company shall have entered into definitive agreements
and related documentation with such Other Purchasers covering the
aggregate amount thereof.
4.8 Effectiveness of Stockholders Joinder Agreement and Registration
Joinder Agreement; Amendment of By-Laws. All conditions to the
effectiveness of the Stockholders Joinder Agreement, described in Section
2.3, and the Registration Joinder Agreement, described in Section 2.4,
shall have been satisfied; the Company shall have delivered to
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Purchaser an Officer's Certificate, dated as of the Third Closing, stating
that all such conditions to the effectiveness of the Stockholders Joinder
Agreement and the Registration Joinder Agreement have been satisfied, and
that Purchaser shall thenceforth be entitled to all of the rights and
benefits, and be subject to all of the burdens and obligations, set forth
in the Stockholders Agreement (including, but not limited to, the
amendment to Sections 1(a)(i) thereof, providing for a board of directors
of ten (10) persons, and Section 1(a)(ii) thereof adding a new
subparagraph (J) thereto providing for the election of one (1) Purchaser
representative to the Company's Board of Directors) and set forth in the
Registration Agreement; and the Company's By-Laws shall have been amended
to increase the number of authorized members of the Board of Directors to
ten (10), from the present number of nine (9).
4.9 Steel - Related Business Focus. Effective, if at all, at and
after the Third Closing or the Alternate Third Closing, as the case may
be, and until the Company effects an initial public offering (or its
shares are otherwise required to be registered under the Securities
Exchange Act of 1934, as amended), the Company agrees that it will
concentrate its efforts upon steel-related businesses, broadly defined to
include (but not be limited to) vertical integration, processing and
distribution, and that Purchaser, absent its agreement to the contrary,
will have the right to prohibit the Company's incursion into any
prospective non-related businesses of a material nature, unless having a
strategic fit with the Company's steel-related business.
4.10 Commencement of Actual Construction. Actual construction of the
Phase II Project shall have commenced. For purposes of this Section 4.10,
"actual construction" shall include (but shall not be limited to)
engineering work, contracting for equipment and machinery, infrastructure
work, and site preparation work, as well as actual plant building
activities.
4.11 Hart-Scott-Rodino Clearance. All necessary notifications and
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, by
the Company and by Purchaser, shall have been made, all necessary
submissions shall have been determined complete, and an actual clearance
shall have been issued or a sufficient period shall have elapsed since the
filing to signify that no action will be taken to block the SDI Stock
purchases, contemplated hereunder.
4.12 No Litigation, Proceedings. There shall be no action, suit, or
proceeding threatened, instituted or pending before any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction, wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would prevent or enjoin the
consummation of the purchase of the SDI Stock by Purchaser at or following
the Third Closing, or the consummation of the debt financing contemplated
by the Bank Agreement, or the subordinated debt financing contemplated by
the Subordinated Loan Agreement.
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4.13 Opinion of the Company's Counsel. The Purchaser shall have
received from counsel for the company an opinion substantially in the form
set forth on Exhibit 4.13 attached hereto, which shall be addressed to the
Purchaser and dated the date of the Third Closing.
4.14 Closing Documents. In addition to the Closing Documents
described in Section 2.13(a) - (g), all of which, including an officer
certificate stating that the Company's representations and warranties set
forth in Section 7 are true and correct as of the date of the Third
Closing, shall be updated to the time and date of the Third Closing, the
Company shall have delivered to the Purchaser all of the following
additional documents:
(a) Certified copies of resolutions duly adopted by the
Company's Board of Directors authorizing the execution, delivery and
performance of the Bank Agreement, the Subordinated Loan Agreement,
and the Construction Contracts, and the issuance and sale of the SDI
Stock at and subsequent to the Third Closing;
(b) Certified copies of the Bank Agreement, the Subordinated
Loan Agreement, and the Construction Contracts, as in effect at the
Third Closing; and
(c) Such other documents relating to the transactions
contemplated by the Third Closing as Purchaser may reasonably
request.
4.15 Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Third Closing,
and all documents incident thereto, shall be reasonably satisfactory in
form and substance to the Purchaser.
4.16 Representations and Warranties; Covenants. The representations
and warranties of the Company contained in Section 7 hereof shall continue
to be true and correct in all material respects at and as of the Third
Closing, as though then made again, except to the extent of changes caused
by the transactions expressly contemplated herein.
4.17 Lender Approvals. All remaining Lender approvals, waivers, or
consents not previously obtained shall have been received, including (but
not limited to) Lender approval of the Stockholders Joinder Agreement and
Amendment No. 2 to Stockholders Agreement described in Section 2.3.
4.18 Waiver. Any condition specified in this Section 4 may be waived
if consented to in writing by Purchaser.
5. The Closings and Payments. The First Closing, contemplated by Section
1.1, will occur, on not less than five (5) days notice, on or before December
15, 1995. The Second Closing contemplated by Section 1.2, will occur, if at all,
on not less than five (5) days notice, on or before
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January 15, 1996, and the Third Closing, contemplated by Section 1.3, or a
closing in lieu of the Third Closing (the "Alternate Third Closing") will occur,
on not less than five (5) days notice, on or before February 29, 1996. The First
Closing, the Second Closing, The Third Closing, and the Alternate Third Closing,
if it occurs, will take place at 10:00 A.M., E.S.T. on each date, at the offices
of Barrett & McNagny, 215 East Berry Street, Fort Wayne, Indiana, or at such
other place or time or on such other date as may be mutually agreeable to the
Company and the Purchaser.
6. Restrictions on Transfers.
6.1 Restrictions. Purchaser agrees that Restricted Securities are
only transferable pursuant to (a) public offerings registered under the
Securities Act, (b) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rules then in force) if such rules are
available, (c) Regulation S of the Securities and Exchange Commission (or
any similar rules then in force), and (d) subject to the conditions
specified in Section 6.2 below, any other legally available means of
transfer pursuant to the Securities Act.
6.2 Procedure for Transfer. Subject to such other restrictions on
transfer set forth in the Stockholders Agreement, in connection with the
transfer of any Restricted Securities (other than a transfer referred to
in clauses (a), (b), or (c) of Section 6.1 above), Purchaser will deliver
written notice to the Company describing in reasonable detail the transfer
or proposed transfer, together with an opinion of counsel, which (to the
Company's reasonable satisfaction) is knowledgeable in securities law
matters, to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the
Securities Act. In addition, if Purchaser delivers to the Company an
opinion of such counsel reasonably satisfactory to the Company that no
subsequent transfer of such Restricted Securities by Purchaser will
require registration under the Securities Act, the Company will promptly
upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act Legend set
forth in Section 6(b) of the Stockholders Agreement. If the Company is not
required to deliver new certificates for such Restricted Securities not
bearing such legend, the Purchaser will not transfer the same until the
prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this Section 6 and
Section 8.4.
6.3 Transferees. Upon request of Purchaser, the Company shall
promptly supply to Purchaser or its prospective transferees all
information required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
6.4 Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company will promptly upon the request
of Purchaser deliver new certificates for such Restricted Securities which
do not bear the Securities Act Legend set forth in Section 5(b) of the
Stockholders Agreement.
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7. Representations, Warranties, and Covenants of the Company.
The Company hereby represents and warrants to the Purchaser that, as of
the First Closing, and, except as otherwise stated herein, continuing to and as
of the Second Closing and Third Closing as well:
7.1 Organization, etc. Each of the Company, Steel Dynamics Sales
Corp. and Steel Dynamics, Inc. (the "Companies") is a corporation duly
organized and validly existing under the laws of the State of Indiana and,
at each of the First, Second, and Third Closing (collectively, the
"Closings"), will be qualified to do business as a foreign corporation in
each jurisdiction in which the failure to so qualify would reasonably be
expected to have a material adverse effect on the financial condition,
operating results, assets, operations, business or prospects of the
Companies, as applicable. At the Closings, each of the Companies will
possess all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its respective businesses as now conducted and
presently proposed to be conducted (other than licenses, permits and
authorizations required for the physical construction, permitting and
operation of the Project) and to carry out the transactions contemplated
by this Agreement.
7.2 Capital Stock and Related Matters.
(a) As of the First Closing, but prior to the Sale to
Purchaser contemplated by Section 1.1, (i) the authorized capital
stock of the Company will consist of 10,000,000 shares of SDI Stock,
par value $0.01 per share, and 500,000 shares of Class B Common, par
value $0.01 per share, (ii) the Company will have issued, and there
will be outstanding, 1,000,000 shares of SDI Stock and no shares of
its Class B Common, (iii) purchasers of the Company's senior
subordinated promissory notes will hold warrants for the purchase of
up to Fifty-eight Thousand Five Hundred Eleven (58,511) shares of
SDI's Stock, (iv) APT Holdings Corporation, an affiliate of Mellon
Bank, N.A., will hold a warrant for the purchase of Five Thousand
Three Hundred Thirty-three (5,333) shares of SDI's Class B Common
Stock, convertible share for share into SDI Stock, and (v) a total
of up to Twenty-one Thousand Eight Hundred (21,800) shares of SDI's
Stock will be purchasable upon exercise of stock options granted to
the Company's employees pursuant to its 1994 Incentive Stock Option
Plan, aggregating, on a fully diluted basis (without regard to any
purchase of SDI Stock by Purchaser or by any other Stockholders or
Warrant Holders pursuant to the exercise of any of their limited
preemptive rights under the existing Stockholders Agreement), One
Million Eighty-five Thousand Six Hundred Forty-four (1,085,644)
shares of SDI Stock.
(b) As of the Second Closing, unless Purchaser has determined
not to proceed with the Second Closing, in accordance with Section
3.2, prior to the purchase by Purchaser of SDI Stock at the Second
Closing, but including the 20,833
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shares of SDI Stock that Purchaser will have purchased in connection
with the First Closing, there will be outstanding 1,020,833 shares
of SDI Stock, and the aggregate of all SDI Stock, on a fully diluted
basis, as aforesaid, will total One Million One Hundred Six Thousand
Four Hundred Sixty-three (1,106,463) shares of SDI Stock, all other
share information remaining unchanged from that set forth in Section
7.2(a).
(c) As of the Third Closing, including the 20,833 shares of
SDI Stock that Purchaser will purchase in connection with the First
Closing and the Twenty Thousand Eight Hundred Thirty-three (20,833)
shares of SDI Stock that Purchaser will have purchased in connection
with the Second Closing, unless the Second Closing shall not have
taken place, there will be outstanding 1,041,666 shares of SDI
Stock, and the aggregate of all SDI Stock, on a fully diluted basis,
as aforesaid, will total One Million One Hundred Twenty-seven
Thousand Two Hundred Ninety-six (1,127,296) shares of SDI Stock, all
other share information remaining unchanged from that set forth in
Section 7.2(a).
(d) As of the Alternate Third Closing, if one occurs, and
including all of the shares of SDI Stock sold to Purchaser pursuant
to Sections 1.1 and 1.2, and under the Option Agreement described in
Section 2.4, there will be outstanding One Million One Hundred four
Thousand One Hundred Sixty-seven (1,104,167) shares of SDI Stock at
and after the Closing, and the aggregate of all SDI Stock, on a
fully diluted basis, as aforesaid, will total One Million One
Hundred Eighty-nine Thousand Seven Hundred Ninety-seven (1,189,797)
shares of SDI Stock, all other share information remaining unchanged
from that set forth in Section 7.2(a).
(e) As of the Closings, (i) the authorized capital stock of
Steel Dynamics Sales Corp. will consist of 10,000 shares of Class A
Common Stock, par value $.01 per share, and (ii) Sales Dynamics
Sales Corp. will have issued and there will be outstanding 100 such
shares, owned entirely by the Company.
(f) As of the Closings, (i) the authorized capital stock of
Steel Dynamics, Inc. will consist of 10,000 shares of Class A Common
Stock, par value $.01 per share, and (ii) Steel Dynamics, Inc. will
have issued and there will be outstanding 100 such shares, all of
which will be owned by Steel Dynamics Sales Corp.
(g) Except as set forth on the "Capitalization Schedule"
attached hereto as Schedule 7.2(g), as of the Closings, none of the
Companies will have outstanding any stock or securities convertible
or exchangeable for any shares of its capital stock, or have
outstanding any rights or options to subscribe for or to purchase
any capital stock or any stock securities convertible into or
exchangeable for any capital stock. The Capitalization Schedule
accurately sets forth the following information as of each of the
Closings with respect to all outstanding options and rights to
acquire the capital stock of the Companies: the holder, the number
of shares covered, the
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exercise price and the expiration date. As of each of the Closings,
except as contemplated by this Agreement, none of the Companies will
be subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or
any warrants, options or other rights to acquire its capital stock
or to make any payment in respect of any of the foregoing, except
pursuant hereto, pursuant to the Stockholders Agreement or as set
forth on the Capitalization Schedule or in the Articles of
Incorporation.
(h) As of the Closings, (i) the outstanding SDI Stock of the
Company will be held exclusively by the persons and in the amounts
set forth on the Capitalization Schedule, the outstanding common
stock of Sales Dynamics Sales Corp. will be held exclusively by the
Company and the outstanding common stock of Steel Dynamics, Inc.
will be held exclusively by Steel Dynamics Sales Corp., and (ii)
other than the matters disclosed on the Capitalization Schedule,
none of the Companies will have any commitment to issue shares of
its capital stock, or any rights or options to subscribe for or
purchase any capital stock. As of each of the Closings, all of the
outstanding shares of the Companies capital stock will have been
duly authorized, validly issued, fully paid, and nonassessable.
(i) There are no statutory and no unwaived contractual
shareholder preemptive rights or rights of refusal with respect to
the issuance of the SDI Stock to Purchaser hereunder, except as
described in Schedule 7.2 (i) attached hereto. The Company has not
violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital
stock, and the offer, sale and issuance of the SDI Stock hereunder
do not require registration under the Securities Act or any
applicable state securities laws. To the best of the Company's
knowledge, there are no agreements between the Company's
shareholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's
affairs, except as set forth in the Stockholders Agreement and the
Registration Agreement, as amended by each of the joinder
agreements.
7.3 Subsidiaries; Investments. The Company does not have any
Subsidiaries other than Steel Dynamics Sales Corp. and Steel Dynamics,
Inc., and the Company does not own or hold the right to acquire any shares
of stock or any other security or interest in any other Person.
7.4 Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Option Agreement, the Registration
Joinder Agreement, the Stockholders Joinder Agreement, the Commercial
Agreement, the Technology Agreement, and all other agreements and
transactions contemplated hereby and thereby to which the Company is a
party, have been duly authorized by the Company. This Agreement, the
Registration Joinder Agreement, the Stockholders Joinder Agreement, the
Option Agreement, the Commercial
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Agreement, the Technology Agreement, and all of the other agreements
contemplated hereby and thereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as any of them
may be affected by laws relating generally to the enforcement of
creditors' rights and general principles of equity. The execution and
delivery by the Company of this Agreement, the Registration Joinder
Agreement, the Stockholders Joinder Agreement, and all other agreements
and instruments contemplated hereby to be executed by the Company, the
offering, sale and issuance of the SDI Stock, and the fulfillment of and
compliance with the respective terms hereby and thereof by the Company, do
not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of (b) constitute a default under, (c) result in
the creation of any Lien upon the Company's capital stock or assets
pursuant to, (d) give any third party the right to accelerate any
obligation under, (e) result in a violation of, or other action by or
notice to any court or administrative or governmental body (other than in
connection with certain state and federal securities laws) pursuant to,
the Articles of Incorporation or By-Laws, or any law, statute, rule,
regulation, instrument, order, judgment or decree to which the Company is
subject or any agreement or instrument to which the Company is a party.
7.5 Conduct of Business; Liabilities. Attached hereto as Exhibit 7.5
is an unaudited consolidated balance sheet of the Companies as at
September 30, 1995 (the "Balance Sheet). The Balance Sheet is accurate and
complete in all material respects, is consistent with the books and
records of the Companies, (which, in turn, are accurate and complete in
all material respects) and has been prepared in accordance with generally
accepted accounting principles ("GAAP"), consistently applied. Except as
set forth on the "Liabilities Schedule attached hereto as Schedule 7.5,
none of the Companies have any obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not
known to the Companies, whether due or to become due and regardless of
when asserted) arising out of transactions entered into at or prior to any
of the Closings, or any action or inaction at or prior to any of the
Closings other than: (a) liabilities set forth on the Balance Sheet
(including any notes thereto), (b) liabilities and obligations which have
arisen after the date of the Balance Sheet in the ordinary course of
business (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, claim or lawsuit), (c) other
liabilities and obligations expressly disclosed in the other Schedules to
this Agreement and (d) matters that, individually or in the aggregate,
would not be reasonably likely to have a material adverse effect on the
condition of the Companies taken as a whole.
7.6 No Material Adverse Change. Since September 30, 1995, there has
been no material adverse change in the business or prospects of the
Companies.
7.7 Absence of Certain Developments. Except as expressly
contemplated or disclosed by this Agreement; by the Stock Purchase
Agreement of June 30, 1994, and the Exhibits and Schedules thereto, by the
Credit Agreement of June 30, 1994, and the Exhibits
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and Schedules thereto; by the Subordinated Loan and Warrant Purchase
Agreement of June 30, 1994, and the Exhibits and Schedules thereto; by the
Company's 1994 Incentive Stock Option Plan; by the Memorandum of
Understanding, dated June 10, 1994, by and among the State of Indiana, the
County of DeKalb, Indiana, the DeKalb County Redevelopment Authority, the
DeKalb County Redevelopment Commission, the City of Butler, Indiana, and
Steel Dynamics, Inc., and various agreements contemplated thereby; by the
Indiana Michigan Power Substation Facilities Agreement dated June 1, 1994;
by the Seed Money Commitment Agreement, dated as of January 5, 1995, and
related agreements in connection therewith, by and between SDHI and other
seed money investors or loan providers and Qualitech Steel Corporation, a
Delaware corporation; by SDHI's incorporation of Iron Dynamics, Inc., an
Indiana corporation, and certain preliminary work done and costs
associated with the capitalization and financing of this scrap substitute
manufacturing facility; by the Facilities Agreement by and among Steel
Dynamics, Inc., Consolidated Rail Corporation, Norfolk and Western Railway
Company, and CSX Transportation, Inc.; by anything reflected in the
Balance Sheet or notes thereto, or by anything set forth on the
"Developments Schedule," attached hereto as Schedule 7.7, since their
respective dates of formation, none of the companies have:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities;
(c) mortgaged or pledged any of its properties or assets or
subjected them to any material Lien, except Liens for current
property taxes not yet due and payable and Liens under the Bank
Agreement;
(d) sold, assigned or transferred any of its tangible assets;
(e) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate
names, copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any material proprietary
confidential information to any Person;
(f) made any loans or advances to, guarantees for the benefit
of, or any investments in, any Person; or
(g) made any Investment in or taken steps to incorporate any
Subsidiary.
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7.8 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement, by the
instruments disclosed in Section 7.7, or as set forth on the Phase
II Project contracts schedule (the "Contracts Schedule") attached
hereto as Schedule 7.8(A) -1, or the "Employee Benefits Schedule"
attached hereto as Schedule 7.8(A)-2, none of the Companies are a
party to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for
deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor
union, or severance agreements, programs, policies or
arrangement;
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time ,
part-time, consulting or the basis providing annual
compensation in excess of $75,000 or contract relating to
loans to officers, directors of Affiliates;
(iii) contract under which the Companies have advanced
or loaned any other Person amounts in the aggregate exceeding
$25,000;
(iv) agreement or indenture relating to borrowed money
or other indebtedness or the mortgaging, pledging or otherwise
placing a Lien on any material asset or material group of
assets of the Companies;
(v) guarantee of any obligation in excess of $25,000;
(vi) lease or agreement under which any of the Companies
is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of
real or personal property under which the aggregate annual
rental payments do not exceed $50,000;
(vii) lease or agreement under which any of the
Companies is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by
the Companies;
(viii)contract or group of related contracts with the
same party or group of affiliated parties the performance of
which involves consideration in excess of $100,000;
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(ix) assignment, license, indemnification or agreement
with respect to any intangible property (including, without
limitation, any Intellectual Property);
(x) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights) with respect to any securities
of the Companies;
(xi) sales or distribution agreement;
(xii) agreement with a term of more than six months
which is not terminable by the Companies upon less than thirty
(30) days notice without material penalty;
(xiii)contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world;
or
(xiv) any other agreement which is material to its
operations and business prospects or involves a consideration
in excess of $200,000 annually.
(b) All of the contracts, agreements and instruments set forth
on the Contracts Schedule are valid, binding and enforceable against
the Companies, as the case may be, in accordance with their
respective terms, except as any of them may be affected by laws
relating generally to the enforcement of creditors' rights and
general principles of equity. The Companies have performed all
material obligations required to be performed by them heretofore
under the contracts, agreements and instruments listed on the
Contracts Schedule to which each is a party and are not in material
default under or in material breach of nor in receipt of any claim
of material default or material breach under any contract, agreement
or instrument listed on the Contracts Schedule; no event has
occurred which with the passage of time or the giving of notice or
both would result in a material default, breach or event of
noncompliance by the Companies, as the case may be, under any
contract, agreement or instrument listed on the Contracts Schedule;
none of the Companies, has nay present expectation or intention of
not performing all such obligations; none of the Companies has any
knowledge of any breach or anticipated material breach by the other
parties to any contract, agreement, instrument or commitment to
which it is a party listed on the Contracts Schedule.
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7.9 Intellectual Property Rights.
(a) The "Intellectual Property Schedule" attached hereto as Schedule
7.9, contains a complete and accurate list of all (i) all patented or
registered Intellectual property Rights owned or proposed to be used by
the Companies, (ii) pending patent applications and applications for
registrations of other Intellectual Property Rights filed by the
Companies, (iii) unregistered trade names and corporate names owned or
proposed to be used by the Companies, and (iv) unregistered trademarks,
service marks, copyrights and computer software owned or proposed to be
used by the Companies. The Intellectual Property Schedule also contains a
complete and accurate list of all licenses and other rights granted by the
Companies to any third party with respect to any Intellectual Property
Rights and all licenses and other rights granted by any third party to the
Companies with respect to any Intellectual property Rights, in each case
identifying the subject Intellectual Property Rights. Except as set forth
on the Intellectual Property Schedule, the Companies own all right, title
and interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the business
of the Companies, as presently proposed to be conducted, free and clear of
all Liens. Except as set forth on the Intellectual Property Schedule, the
loss or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or proposed to be used by the Companies
would not reasonably be expected to have a material adverse effect on the
conduct of the business of the Companies, and no such loss or expiration
is, to the best of the Company's knowledge, threatened or pending.
(b) Except as set forth on the Intellectual Property Schedule, (i)
the Companies own all right, title and interest in and to or has the
legal, valid and enforceable right to use all of the Intellectual Property
Rights listed on such schedule, free and clear of all Liens, (ii) the
Companies have not received any claims or demands asserting the
invalidity, misuse or unenforceability of any of such Intellectual
Property Rights, and, to the best of the Company's knowledge, there are no
valid grounds for the same (iii) none of the Companies have received any
notices of, and neither is aware of any facts which indicate a likelihood
of, any infringement or misappropriation by, or conflict with, any third
party with respect to such Intellectual Property Rights (including,
without limitation, any demand or request that the Companies license any
rights from a third party), (iv) to the best of the Company's knowledge,
the conduct of the business of the Companies currently proposed to be
conducted, will not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (v) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed
to the Companies or currently proposed to be used by the Companies, have
not been infringed, misappropriated or conflicted by other Persons.
7.10 Litigation. Except as set forth on the Litigation Schedule
attached hereto as Schedule 7.10, there are no claims, actions or
proceedings instituted, pending or, to the best of the Company's
knowledge, threatened against or affecting the Companies (or to the best
of the Company's knowledge, instituted, pending or threatened against or
affecting any of
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the officers, directors or employees of the Company with respect to their
businesses or proposed business activities), at law or in equity, or
before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any of the
foregoing with respect to the transactions contemplated by this
Agreement); to the best of the Company's knowledge, none of the Companies
are subject to any governmental investigations or inquiries (including,
without limitation, inquiries as to the qualification to hold or receive
any license or permit); and, to the best of the Company's knowledge, there
is no valid basis for any of the foregoing. None of the Companies is
subject to any judgment, order or decree of any court or other
governmental agency, and none of the Companies has received any opinion or
memorandum or legal advise from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business.
7.11 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
binding upon the Companies.
7.12 Governmental Consent. Except as set forth on the "Consents
Schedule" attached hereto as Schedule 7.12, no permit, consent, approval
or authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and
performance by the Company of this Agreement or by the Companies of the
other agreements contemplated hereby, or the consummation by the Companies
of any other transactions contemplated hereby or thereby, except for any
of the foregoing required for the physical construction, permitting or
operation of the Projects and except as expressly contemplated herein or
in the exhibits or schedules hereto.
7.13 Insurance. The "Insurance Schedule" attached hereto as Schedule
7.13, contains a description of each insurance policy maintained by the
Companies with respect to its properties, assets and business, and each
such policy is in full force and effect as of the Closing. None of the
Companies are in material default with respect to its obligations under
any insurance policy maintained by it. Except as set forth on the
Insurance Schedule, none of the Companies has any self-insurance programs.
7.14 Employees. The Company is not aware that any executive or key
employee of the Companies or any group of employees of the Companies has
any plans to terminate employment with the Company. The Companies have
complied in all material respects with all laws relating to the employment
of labor (including, without limitation, provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes). Except as set forth on the "Employees
Schedule" attached hereto as Schedule 7.14, none of the Companies, or, to
the best of the Companies' knowledge, any of their employees, is subject
to any noncompete, nondisclosure, confidentiality, employment, consulting
or similar agreements relating to, affecting or in conflict with the
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<PAGE> 23
present or proposed business activities of the Companies, except for
agreements between the Companies and its present and former employees.
7.15 Compliance with Law. None of the Companies has violated any law
or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations, business or
prospects of the Companies, and the Company has not received notice of any
such violation. None of the Companies is subject to any clean up
liability, or has reason to believe it may become subject to any clean up
liability, under any federal, state or local environmental law, rule or
regulation.
7.16 Affiliated Transactions. Except for the Stockholders Agreement,
the Registration Agreement, and the Employment Agreements, and except as
set forth on the Affiliated Transactions Schedule" attached hereto as
Schedule 7.16, no officer, director, employee, shareholder or Affiliate of
the Companies, or (to the knowledge of the Companies) any individual
related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial
interest, is a party to any agreement, contract, commitment or transaction
with the Companies or has any interest in any property used by the
Companies.
7.17 Real Property Holding Corporation Status. Since their
respective dates of incorporation, none of the Companies has been, and as
of the dates of any of the Closings shall not be, a "United States real
property holding corporation", as defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and in Section 1.897-2(b) of
the Treasury Regulations issued thereunder. None of the Companies has any
current plans or intentions which would cause the Companies, as the case
may be, to become a "United States real property holding company," and the
Companies have filed with the United States Internal Revenue Service all
statements, if any, with its United States income tax returns which are
required under Section 1.897-2(h) of the Treasury Regulations.
7.18 Disclosure. To the best of the Companies' knowledge, neither
this Agreement nor any of the exhibits, schedules or attachments hereto,
nor any written statements, documents, certificates or other items
delivered at any of the Closings to the Purchaser by or on behalf of the
Company with respect to the transactions contemplated hereby, contain any
untrue statement of a material fact; provided that with respect to the
financial projections furnished to the Purchaser by the Companies, the
Companies represent and warrant only that such projections were prepared
in good faith based upon assumptions reasonably believed by the Companies
to be reasonable and fair as of the date the projections were prepared in
the context of the Companies' history and current and reasonably
foreseeable business conditions. There is no fact which the Companies have
not disclosed to the Purchasers in writing and of which the Companies are
aware (other than general economic conditions) and which has had or would
reasonably be expected to have a material adverse effect upon the
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<PAGE> 24
financial condition, operating results, assets, customer or supplier
relations, employee relations, business or prospects of the Companies.
7.19 Knowledge. As used in this Section 7, the terms "best of
knowledge" or "aware" with reference to the Company shall mean and be
limited to the actual knowledge or awareness of Keith E. Busse, Richard P.
Teets, Jr., Mark D. Millett, and Tracy L. Shellabarger, or, in the case of
an Officer's Certificate, the individual signing such Officer's
Certificate.
7.20 No Registration. Assuming the truth and accuracy of the
representations set forth in Section 8 hereof and in the investment letter
to be delivered to the Company in connection herewith, the offers and
sales of the SDI Stock pursuant to the terms hereof are not required to be
registered under the Securities Act or any state securities laws.
8. Purchasers' Representations and Warranties. Purchaser hereby represents
and warrants to the Companies that:
8.1 Organization, etc. Purchaser is a corporation, duly formed or
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or formation. Purchaser possesses all
requisite power and authority to own such capital stock and to carry out
the transactions contemplated by this Agreement.
8.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Joinder Agreement, the
Stockholders Joinder Agreement, the Commercial Agreement, the Technology
Agreement, and all other agreements and transactions contemplated hereby
and thereby to which purchaser is a party, have been duly authorized by
Purchaser. This Agreement, the Registration Joinder Agreement, the
Stockholders Joinder Agreement, the Commercial Agreement, the Technology
Agreement, and all other agreements and transactions contemplated hereby
and thereby, to which agreements Purchaser is a party, each constitute a
valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms, except as any of them may be affected by
laws relating generally to the enforcement of creditors' rights and
general principles of equity. The execution and delivery by Purchaser of
the agreements to be performed hereunder, and the fulfillment of and
compliance with the respective terms hereof and thereof by Purchaser, do
not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, or (c) result
in a violation of, Purchaser's organizational documents or any law,
statute, rule, regulation, instrument, order, judgment or decree to which
Purchaser is subject or any agreement or instrument to which Purchaser is
a party.
8.3 Hart-Scott-Rodino. Either (a) no filing is or was required to be
made by Purchaser with the Federal Trade Commission or the Antitrust
Division of the United States Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvement Act of 1976,
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<PAGE> 25
as amended, with respect to the transactions contemplated hereby or (b) if
such filing was required, the waiting period with respect thereto has
expired or approval has been received.
8.4 Investment Letters. This Agreement is made in reliance upon
Purchaser's representations to the Company, which by Purchaser's execution
hereof Purchaser hereby confirms, that the SDI Stock issuable to Purchaser
hereunder is being acquired solely for investment for Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Purchaser has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Purchaser further
represents that Purchaser does not have any contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant
participations to such person or to any third person with respect to any
of the SDI Stock that is the subject of this Agreement. Purchaser has
executed and delivered to the Companies a separate letter containing
additional representations, warranties and covenants, upon which the
Companies are relying in entering into and performing its obligations
under this Agreement. Purchaser, after conducting its due diligence
investigation and analysis of the Company, believes that it has received
all of the information it considers necessary or appropriate for deciding
whether to purchase the SDI Stock described herein, and Purchaser
acknowledges that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the
offering in connection herewith and regarding the Companies; provided,
however, that nothing herein shall limit, negate, or modify the Company's
representations and warranties to Purchaser in connection with this
Agreement or the Purchaser's right to rely thereon.
8.5 Compliance with the Laws of Germany. Purchaser is in compliance
with all laws, rules, and regulations of the Federal Republic of Germany
applicable to its purchase of the SDI Stock, to its status as a
prospective Stockholder of the Company, and to the contemplated commercial
relationships described throughout this Agreement; that the Company's
offering to sell SDI Stock to Purchaser has been made entirely within the
jurisdiction of the United States of America and does not constitute an
offering requiring governmental approval, authorization, or consents by
the Federal Republic of Germany; that it is and will be in compliance with
any foreign exchange restrictions applicable to this transaction; and that
it will obtain any other required governmental consents or approvals made
necessary by its involvement in connection herewith either by the Federal
Republic of Germany or in any other foreign jurisdiction where it plans to
operate hereunder.
9. Use of Proceeds. The Company hereby agrees that the Companies will
invest the additional equity from the sale of the SDI Stock to Purchaser
primarily to finance the construction of the Phase II Project and for the
working capital of the Companies relating to the operation of the Phase II
Project itself. Notwithstanding anything herein to the contrary, however,
expressed or implied, all final decisions concerning the design, configuration,
equipment or technology to be employed in the cold rolling facility, or
concerning Company investments and/or capital commitments in connection with
other technologies, such as (but not limited to) the development
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<PAGE> 26
of scrap substitutes, shall remain the exclusive province of the Company Board
of Directors; provided, however, that Company would seek and duly consider
Purchaser's input concerning such matters, either through Purchasers Board of
Directors representation (as contemplated by Section 4.7), or otherwise.
10. Conditions of the Company's Obligations at the Closings. The
obligation of the Company to perform at any of the Closings its obligations to
be then performed is subject to the satisfaction as of each of the Closings of
the following conditions:
10.1 Representations and Warranties; Covenants. The representations
and warranties of the Purchaser contained in Section 8 hereof shall be
true and correct in all material respects at and as of the particular
Closing as though then made.
10.2 Opinion of Counsel. The Company shall have received an opinion
of counsel to Purchaser substantially in the form and substance set forth
in Exhibit 10.2 attached hereto and reasonably satisfactory to the
Company.
10.3 Investment Letters. The Company shall have received from
Purchaser the investment letter referenced in Section 8.4 hereof.
10.4 Agreements. The parties thereto shall have entered into all of
the Agreements to be Performed Hereunder.
11. Definitions.
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise.
"Common Stock" means the Class A Common.
"Companies" shall mean Steel Dynamics Holdings, Inc., Steel Dynamics Sales
Corp., and Steel Dynamics, Inc.
"Intellectual Property Rights" means all (a) patents, patent applications,
patent disclosures and inventions, (b) trademarks, service marks, trade names,
logos and corporate names and registrations and applications for registration
thereof, together with all of the goodwill associated therewith, (c) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof, (d) compute software, data, data bases
and documentation thereof, (e) trade secrets and other confidential information
(including, without limitations, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
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development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (f) other intellectual property rights and
(g) copies and tangible embodiments thereof (in whatever form or medium,
including, without limitation, negatives, plates and video and film masters).
"Liens" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against any of the Companies or any Affiliate thereof,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any of the Companies under a lease which
is not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of business).
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer, stating that (a) the officer signing
such certificate has made or has caused to be made such investigations as are
reasonably necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (b) to the best of such officer's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"Permitted Transferee" means any transferee of Class A Common in a
transfer permitted by clause (i) and clauses (iv) through (xiii) of Section 2(f)
of the Stockholders Agreement.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Phase II Project" means the Company's proposed hot dip galvanizing and
cold rolling plant intended for construction at its Butler, Indiana site.
"Project" means the Company's thin slab cast mini-mill in Butler, Indiana.
"Restricted Securities" means the Class A Common issued hereunder and any
securities issued with respect to such Class A Common by way of any stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities will cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) become eligible for sale pursuant to Rule 144 or Rule 144A of the Securities
and Exchange Commission (or any similar rules then in force) or (c) been
otherwise transferred and new securities for them not bearing the securities Act
Legend set forth in Section 6 of the Stockholders Agreement have been delivered
by the Company in accordance with Section 4B or 4D. Whenever any particular
securities cease to be Restricted
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Securities, the holder thereof will be entitled to receive from the company,
without expense, new securities of like tenor not bearing a Securities Act
Legend of the character set forth in Section 6 of the Stockholders Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended rom time to
time, or any similar rule then in force.
"Securities Act " means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes the United States government
agency of that name and any governmental body or agency succeeding to the
functions thereof.
"Warrant Holders" means the holders of warrants to purchase shares of
Class A Common issued pursuant to the Subordinated Loan Agreement.
12. Miscellaneous.
12.1 Remedies. The holders of the SDI Stock acquired hereunder
(directly or indirectly) will have all of the rights and remedies set
forth in this Agreement and the Articles of Incorporation, and all of the
rights and remedies which such holders have been granted at any time under
any other agreement or contract, and all of the rights and remedies which
such holders have under any law. Any Person having any rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision
of this Agreement, and to exercise all other rights granted by law.
12.2 Amendments and Waivers. Except as otherwise provided herein, no
modification, amendment or waiver of any provisions hereof shall be
effective against the Company or the Purchaser unless such modification,
amendment or waiver is approved in writing by the person against which
such modification, amendment or waiver is intended to be enforced. The
failure of any party to enforce any provision of this Agreement or under
any agreement contemplated hereby or under the Articles of Incorporation
or the By-Laws shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each
and every provision of this Agreement, any agreement referred to herein,
the Articles of Incorporation, or the By-Laws in accordance with their
terms.
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12.3 Confidentiality. Purchaser will treat and hold as such all of
the Confidential Information, as that term was defined in the
Confidentiality Agreement between Purchaser and the Company, dated May 25,
1995, and will refrain from using any of such Confidential Information
except in connection with this Agreement; and Purchaser will deliver
promptly to the Company or, at the request and option of the Company, will
destroy all tangible embodiments and all copies of Confidential
Information which are in its possession as a result of its examination of
financial statements, reports, and other materials submitted or made
available by the Company during the course of Purchaser's examinations,
inspections, or due diligence work, unless such information loses its
status as Confidential Information as provided in the Confidentiality
Agreement. Purchaser may, however, disclose such Confidential Information
to its attorneys, accountants, consultants, and other professionals to the
extent necessary to obtain their services in connection with this
transaction, all as set forth in the Confidentiality Agreement, as well as
to any prospective Affiliate, shareholder, partner, or subsidiary of
Purchaser, so long as that person agrees in writing to be bound by the
provisions thereof. In the event that Purchaser is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Purchaser will
notify the Company promptly of the request or requirement, so that the
Company may seek an appropriate protective order or waive compliance with
the provisions of this Section 12.3 and of the Confidentiality Agreement.
If, in the absence of a protective order or the receipt of a waiver
hereunder, Purchaser, on the advice of counsel, is compelled to disclose
any Confidential Information to any tribunal or risk liability for
contempt, Purchaser may disclose the Confidential Information to the
tribunal, provided that it use its reasonable best efforts to obtain an
order or other assurance, at the Company's request, that confidential
treatment be accorded to such portion of the Confidential Information
required to be disclosed as the Company shall designate. The foregoing
provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of
disclosure.
12.4 Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in
connection herewith will survive the execution and delivery of this
Agreement, regardless of any investigation made by the Companies or by
Purchaser or on their behalf.
12.5 Successors and Assigns.
(a) Except as otherwise expressly provided herein, all
agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of such parties whether
so expressed or not, so long as such successors and assigns
execute a counterpart hereof. In addition, the provisions of
this Agreement which are for any Purchaser's benefit as the
purchaser or holder of SDI Stock,
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<PAGE> 30
are also for the benefit of and enforceable by any subsequent
Permitted Transferee of such Purchaser's SDI Stock.
(b) If a sale, transfer, assignment or other disposition
of any shares of SDI Stock is made in accordance with the
provisions of this Agreement to any Person and such shares
remain Restricted Securities immediately after such
disposition, such Person shall, at or prior to the time such
shares are acquired, execute a counterpart of this Agreement
with such modifications thereto as may be necessary to reflect
such acquisition, and such other documents as are necessary to
confirm such Person's agreement to become a party to, and to
be bound by, all covenants, terms and conditions of this
Agreement, the Stockholders Agreement, The Stockholders
Joinder Agreement, the Registration Agreement, and the
Registration joinder Agreement, as theretofore amended.
(c) PSAG may assign its rights under this Agreement to
any PSAG Affiliate, and may delegate its obligations hereunder
to any such Affiliate, so long as PSAG remains liable to SDI
for the performance of all such obligations as a direct
obligor and not as a guarantor or accommodation maker.
12.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision will be ineffective only to the extent of
such invalidity, illegality or unenforceability in such jurisdiction,
without invalidating the remainder of this Agreement in such jurisdiction
or any provision hereof in any other jurisdiction.
12.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together will
constitute one and the same Agreement.
12.8 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
12.9 Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of Indiana, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Indiana or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of Indiana.
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12.10 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when personally
delivered or received by certified mail, postage prepaid and return
receipt requested, or sent by guaranteed overnight courier service,
charges prepaid. Notices, demand and communications will be sent to
Purchaser at the address indicated below:
Notices to Purchaser:
Preussag Stahl AG
Eisenhuttenstrasse 99 D-38223
38239 Salzgitter, Germany
Attention: Jens Schneider
Telephone: 05341/213603 (4)
Fax: 05341/212045
With Copy To:
Mr. John D. Hushon
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Ave., NW
Washington, DC 20036-5339
Telephone: (202) 857-6290
Fax: (202) 857-6395
or to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
4500 County Road 59
Butler, IN 46721
Telephone: (219) 868-8000
Fax: (219) 868-8055
Attention: Keith E. Busse
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With a Copy to:
Mr. Robert S. Walters
Barrett & McNagny
215 East Berry Street
P.O. Box 2263
Fort Wayne, IN 46801-2263
Telephone: (219) 423-9551
Fax: (219) 423-8924
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending
party.
12.11 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement shall bear its own expenses in
connection with the negotiation, execution, delivery and enforcement
hereof.
12.12 Entire Agreement. Except as otherwise expressly set forth
herein, and except for the provisions of the Confidentiality Agreement
between the Company and Purchaser, dated May 25, 1995, which shall
continue to apply in all events, this Agreement and any other agreement or
instrument executed in connection herewith or expressly referred to herein
embodies the complete agreement and understanding among the parties hereto
with respect to the subject matter hereof and supersede and preempt any
prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter
hereof in any way.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: /s/ Keith E. Busse
----------------------------------------
Title: President
-------------------------------------
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PREUSSAG STAHL, AG
By: /s/ Jens Schneider & John Hushon
----------------------------------------
Title: _____________________________________
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Exhibit 10.36
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of September 10, 1996 (this
"Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana
corporation (the "Company"), Sumitomo Corporation of America, a corporation
incorporated under the laws of the State of New York ("SCOA"), and Sumitomo
Corporation, a corporation incorporated under the laws of Japan ("SC," and
together with SCOA, the "Purchasers").
Except as otherwise indicated, capitalized terms used herein are defined
in Section 10 hereof. All referenced or attached Schedules and Exhibits are
deemed incorporated herein by reference.
The parties hereby agree as follows:
1. Purchase and Sale of Stock. Subject to the terms of this Agreement,
and, to the conditions set forth in Section 2, the Company will sell and issue
to (i) SC twenty-seven thousand four hundred and fifty-seven (27,457) shares of
the Company's authorized but unissued voting Common Stock, at a price of Two
Hundred Ninety-five and no/100 Dollars ($295.00) per share (the "Per Share
Purchase Price"), for a total consideration of Eight Million One Hundred
Thousand and no/100 Dollars ($8,100,000.00) and (ii) SCOA eighteen thousand
three hundred and six (18,306) shares of the Company's authorized but unissued
voting Common Stock, at the Per Share Purchase Price for a total consideration
of Five Million Four Hundred Thousand and no/100 Dollars ($5,400,000.00). The
voting Common Stock that Purchasers are to purchase hereunder is the same class
currently described as "Class A Common Stock," but such designation may be
eliminated in favor of a single class of voting Common Stock. For purposes of
this Section 1 and elsewhere in the Agreement, the Company's Class A Common
Stock to be purchased hereunder shall be referred to as the "SDI Stock."
2. Conditions of Purchasers' Obligations at Closing. Purchasers'
obligations at the Closing to deliver to the Company the consideration for the
SDI Stock to be sold to Purchasers at such time shall be subject, as of the
Closing, to the satisfaction of the following conditions:
2.1 Stockholder Approvals and Consents. All requisite Stockholder
votes, approvals, and consents prescribed by the Stockholders Agreement,
including but not limited to the approval of not less than seventy percent
(70%) of the Company's existing stockholders, excluding Purchasers, and
including waivers by existing stockholders and Warrant Holders, with
respect to such SDI Stock, of their limited preemptive rights thereunder,
shall have been secured.
2.2 Lender Approvals. All requisite approvals, waivers, or consents
with respect to Purchasers' purchase of the SDI Stock, including (but not
limited to) waiver of any mandatory prepayment requirements, shall have
been secured from the Company's senior and/or subordinated Lenders.
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2.3 Stockholders Agreement. The Company, the Purchasers, the Bain
Group, GECC, the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost,
Preussag, the Subdebt Group, and the Management Group, as those persons
are identified and described in that certain Stockholders Agreement dated
June 30, 1994, as previously amended (the "Stockholders Agreement") and
attached hereto as Exhibit 2.3A, Exhibit 2.3B and Exhibit 2.3C, shall have
entered into an agreement, in substantially the form and substance set
forth in Exhibit 2.3D attached hereto (the "S/H Amendment No. 3"), adding
Purchasers as parties thereto, but without giving Purchasers the right to
designate a representative to the Company's Board of Directors, and the
S/H Amendment No. 3 shall not have been rescinded or materially amended or
modified.
2.4 Registration Agreement. The Company, the Purchasers, the Bain
Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney
Stockholders, Preussag, the Management Stockholders, and the Warrant
Holders, as those persons are identified and described in that certain
Registration Agreement dated June 30, 1994, as previously amended (the
"Registration Agreement") and attached hereto as Exhibit 2.4A, Exhibit
2.4B, and Exhibit 2.4C, shall have entered into an agreement, in
substantially the form and substance set forth in Exhibit 2.4D attached
hereto (the "Registration Amendment No. 3"), adding Purchasers as parties
thereto, and, inter alia, with respect to the SDI Stock sold to Purchasers
hereunder, certain rights, as limited therein, which shall not become
effective until six (6) months after the Closing.
2.5 Representations and Warranties; Covenants. The representations
and warranties of the Company contained in Section 5 hereof shall continue
to be true and correct in all material respects at and as of the Closing,
as though then made again, except to the extent of changes caused by the
transactions expressly contemplated herein.
2.6 Securities Law Compliance. The Company shall have made any
necessary filings and/or given all necessary notices under applicable
federal and state securities laws, if required in connection with the
particular exemptions from the registration requirements upon which the
Company is relying, in order to consummate the issuance and sale of the
SDI Stock at the Closing as an exempt private placement.
2.7 No Litigation, Proceedings. There shall be no action, suit, or
proceeding threatened, instituted or pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction (other than those set forth on the Litigation
Schedule attached hereto as Schedule 5.8) wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (a) prevent or
enjoin the consummation of purchase of SDI Stock contemplated by this
Agreement, (b) cause the purchase of the SDI Stock to be rescinded
following consummation, or (c) affect adversely the right of the Company
to own, operate, or control its business or assets (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect).
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2.8 Governmental Filings, Consents and Approvals. All federal, state
and local governmental filings, consents and approvals, if any, necessary
for the consummation of the Closing shall have been made or obtained.
2.9 Opinion of the Company's Counsel. The Purchasers shall have
received from counsel for the Company an opinion substantially in the form
set forth on Exhibit 2.9 attached hereto, which shall be addressed to the
Purchasers and dated the date of the Closing.
2.10 Closing Documents. The Company shall have delivered to the
Purchasers all of the following documents:
(a) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Sections 2.1 through 2.8,
inclusive, have been fully satisfied;
(b) certified copies of (i) the resolutions duly adopted by
the board of directors of the Company, authorizing the execution,
delivery and performance of this Agreement, the Registration
Amendment No. 3, and the S/H Amendment No. 3, and each of the other
agreements contemplated hereby at or prior to the Closing, and the
issuance and sale of the SDI Stock contemplated by Section 1.1;
(c) certified copies of the Articles of Incorporation and the
By-Laws of the Company and a copy of the Articles of Incorporation
of IDI;
(d) a certificate as to the incumbency of the officers of the
Company executing this Agreement and the other agreements
contemplated hereby on behalf of the Company;
(e) copies of all third party and/or governmental consents,
approvals, waivers, and filings, if any, required in connection with
the consummation of the transactions hereunder to the extent
required to be obtained or filed prior to the Closing; and
(f) one or more stock certificates duly issued to Purchasers
for the number of shares of SDI Stock.
2.11 Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Purchasers.
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2.12 Additional Agreements.
(a) If and when legally constituted as a subsidiary of the
Company (and if prior to Closing), subject to the understanding of
the parties described in Section 7, IDI and SCOA shall have entered
into the Sale of Excess Product Agreement, to be effective only if
and when the project known as "Iron Dynamics" ("IDI") is fully
funded, built, and commences operations, in substantially the form
and substance set forth in Exhibit 2.12(a) attached hereto. If, on
or prior to the Closing (unless extended by mutual agreement of the
parties), IDI has not been legally constituted as a subsidiary of
the Company, with all necessary Lender approvals as to the form,
nature, and substance of the proposed IDI Project, the Sale of
Excess Product Agreement shall no longer be deemed a condition of
the Closing, nor the basis for any claim by Purchasers for recision
of their purchase of stock hereunder, for specific performance, or
for damages. The parties in their discretion, however, may still
wish to enter into such Agreement after the closing.
(b) The Company and SCOA shall have entered into the "Second
Look" Export Distribution Agreement, in substantially the form and
substance set forth in Exhibit 2.12(b) attached hereto.
(c) If and when legally constituted as a subsidiary of the
Company (and if prior to Closing), subject to the understanding of
the parties described in Section 7, IDI, SDI and Purchasers shall
have entered into separate License Agreements, to be effective only
if and when IDI is fully funded, built, and commences operations,
substantially covering the terms and conditions described in
Paragraph 7(c) of the Letter of Intent dated July 19-22, 1996,
between the Company and Purchasers, which terms, for reference
purposes, are deemed incorporated herein and are binding and
enforceable; provided, however, that with respect to the License
Agreement described in Paragraph 7(c) of such Letter of Intent, the
parties agree that (i) the definitions of Product and Process set
forth in Section 10 of this Agreement shall control, (ii) IDI and
Purchasers shall enter into a separate License Agreement with
respect to that part of the Process involving the production of DRI,
and (iii) SDI and Purchasers shall enter into a separate License
Agreement with respect to that part of the Process involving the
melting and processing of DRI into liquid pig iron. If, on or prior
to the Closing (unless extended by mutual agreement of the parties),
IDI has not been legally constituted as a subsidiary of the Company,
with all necessary Lender approvals as to the form, nature, and
substance of the proposed IDI Project, the License Agreements shall
no longer be deemed a condition of the Closing, nor the basis for
any claim by Purchasers for recission of their purchase of stock
hereunder, for specific performance, or for damages. The parties in
their sole discretion, however, may still wish to enter into such
Agreement after the closing.
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(d) If and when legally constituted as a subsidiary of the
Company (and if prior to Closing), subject to the understanding of
the parties described in Section 7, IDI and SCOA shall have executed
a Stipulation and Agreement Regarding Raw Materials and Supplies and
Equipment and Machinery, in substantially the form and substance set
forth in Exhibit 2.12(d) attached hereto. If, on or prior to the
Closing (unless extended by mutual agreement of the parties), IDI
has not been legally constituted as a subsidiary of the Company,
with all necessary Lender approvals as to the form, nature, and
substance of the proposed IDI Project, the Stipulation and Agreement
described herein shall no longer be deemed a condition of the
Closing, nor the basis for any claim by Purchasers for recission of
their purchase of stock hereunder, for specific performance, or for
damages. The parties in their sole discretion, however, may still
wish to enter into such Agreement after the closing.
2.13 Waiver. Any condition specified in this Section 2 may be waived
if consented to in writing by Purchasers.
3. The Closing and Payment. The Closing, contemplated by Section 1.1, will
occur, on or before September 10, 1996. The Closing will take place at 10:00
A.M., E.S.T. on such date, at the offices of Barrett & McNagny, 215 East Berry
Street, Fort Wayne, Indiana, or at such other place or time or on such other
date as may be mutually agreeable to the Company and the Purchasers.
4. Restrictions on Transfers; Stockholders Agreement.
4.1 Restrictions. The SDI Stock constitutes Restricted Securities,
and transfer thereof is restricted because of restrictions on transfer
imposed by the securities laws. Purchasers agree that the SDI Stock, as
Restricted Securities, is only transferable pursuant to (a) public
offerings registered under the Securities Act, (b) Rule 144, or Rule 144A
or any similar rules then in effect) if such rules are available, (c)
Regulation S of the Securities Act or any similar regulations then in
effect if Regulation S or such regulations are available, (d) subject to
the conditions specified in Section 4.2 below, any other legally available
means of transfer pursuant to the Securities Act and any applicable
provisions of state securities laws that are consistent, and (e) in any
and all events, subject to the transfer restrictions in the Stockholders
Agreement, as well as the terms of any "Lock-Up Agreement" entered into
between the Company, certain of its stockholders, and the Company's
underwriters in connection with any forthcoming registered public
offerings of the Company's securities. If requested by the Company,
Purchasers agree to execute such a Lock-Up Agreement that will provide
that Purchasers shall not sell any of their SDI Stock for one hundred
eighty (180) days after the effective date of the Registration Statement
for the initial public offering of the Common Stock of the Company and
shall contain such other reasonable terms and conditions customarily
requested by the underwriters on similar transactions.
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4.2 Procedure for Transfer. Subject to such other restrictions on
transfer as are set forth in the Stockholders Agreement or in any Lock-Up
Agreement, in connection with any transfer of any Restricted Securities
Purchasers will deliver written notice to the Company, describing in
reasonable detail the proposed transfer, together with an opinion of
counsel knowledgeable in securities law matters, and in form and content
satisfactory to counsel for the Company, to the effect that such transfer
of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act or under applicable state
securities laws. In addition, if Purchasers deliver to the Company an
opinion of such counsel, in form and substance reasonably satisfactory to
the Company, that subsequent transfer of such Restricted Securities by
Purchasers may be freely made without restriction under the Securities
Act, the Company will promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the
Securities Act legend set forth in Section 4.3; provided, however, if any
securities laws holding periods are applicable, such holding periods shall
have passed.
4.3 Restrictive Transfer Legend. Purchasers agree that the
certificates evidencing the SDI Stock will bear the following legend
disclosing the transfer restrictions set forth herein:
NOTICE OF RESTRICTIONS ON TRANSFER
THESE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933 OR UNDER
APPLICABLE STATE SECURITIES LAWS, HAVING BEEN OFFERED AND SOLD
PURSUANT TO ONE OR MORE EXEMPTIONS THEREUNDER THAT LIMIT FURTHER
TRANSFER OR DISPOSITION. ACCORDINGLY, THESE SHARES MAY NOT BE
FURTHER TRANSFERRED WITHOUT REGISTRATION, UNLESS, IN THE OPINION OF
THE COMPANY'S COUNSEL, SUCH TRANSFER MAY BE EFFECTED IN A
TRANSACTION CONSISTENT WITH SUCH EXEMPTIONS.
TRANSFER OF THESE SHARES IS FURTHER RESTRICTED BY THE TERMS OF A
STOCKHOLDERS AGREEMENT AND A REGISTRATION AGREEMENT, BOTH DATED AS
OF JUNE 30, 1994, AND BOTH AS AMENDED, COPIES OF EACH OF WHICH ARE
ON FILE AT THE OFFICES OF THE COMPANY IN BUTLER, INDIANA.
4.4 Transferee. Upon request of the Purchasers, the Company shall
promptly supply to the Purchasers or their prospective transferee all
information required to be delivered in connection with a transfer
pursuant to Rule 144A.
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4.5 Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k) promulgated under the Securities Act, the
Company will promptly upon the request of the Purchasers deliver new
certificates for such Restricted Securities which do not bear the
Securities Act legend set forth in Section 4.3 of this Agreement.
5. Representations, Warranties, and Covenants of the Company.
The Company hereby represents and warrants to the Purchasers that, as of
the Closing, and, except as otherwise stated herein:
5.1 Organization, etc. Each of the Company, Steel Dynamics Sales
Corp., Inc. ("SDSCI"), Steel Dynamics, Inc. ("SDI") (SDI, together with
the Company and SDSCI are referred to collectively as the "Companies") is
a corporation duly organized and validly existing under the laws of the
State of Indiana and, at the Closing (the "Closing"), will be qualified to
do business as a foreign corporation in each jurisdiction in which the
failure to so qualify would reasonably be expected to have a material
adverse effect on the financial condition, operating results, assets,
operations, business or prospects of the Companies, as applicable. At the
Closing, the Companies will possess all requisite corporate power and
authority and all material licenses, permits and authorizations necessary
to own and operate its properties, to carry on their respective businesses
as now conducted and presently proposed to be conducted (other than
licenses, permits and authorizations required for the physical
construction, permitting and operation of any of the Company's physical
plant, facilities, project, or equipment) and to carry out the
transactions contemplated by this Agreement.
5.2 Capital Stock and Related Matters.
(a) As of the date hereof, the authorized capital stock of the
Company will consist of 10,000,000 shares of Class A or plain (without a
class reference) voting Common Stock ("Common Stock"), par value $0.01 per
share, and may still consist of 500,000 shares of Class B non-voting
Common Stock, par value $0.01 per share.
(b) Except as set forth on the "Capitalization Schedule" attached
hereto as Schedule 5.2(b), as of the Closing, the Company will have no
outstanding stock or securities convertible or exchangeable for any shares
of its capital stock, nor will it have outstanding any rights or options
to subscribe for or to purchase any capital stock or any stock securities
convertible into or exchangeable for any capital stock. The Capitalization
Schedule accurately sets forth the following information as of the Closing
with respect to all outstanding options and rights to acquire the capital
stock of the Companies: the holder, the number of shares covered, the
exercise price and the expiration date, if applicable. As of the Closing,
except as contemplated by this Agreement, the Company will not be subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options
or other rights to acquire its capital stock or to
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make any payment in respect of any of the foregoing, except pursuant
hereto, pursuant to the Stockholders Agreement or as set forth on the
Capitalization Schedule or in the Articles of Incorporation, as amended.
(c) As of the date of this Agreement (i) the authorized capital
stock of SDSCI will consist of 10,000 shares of Class A Common Stock, par
value $.01 per share, and (ii) SDSCI will have issued and there will be
outstanding 100 such shares, owned entirely by the Company.
(d) As of the date of this Agreement (i) the authorized capital
stock of SDI will consist of 10,000 shares of Class A Common Stock, par
value $.01 per share, and (ii) SDI will have issued and there will be
outstanding 100 such shares, all of which will be owned by SDSCI.
(e) As of the Closing, (i) the outstanding Common Stock of the
Company, or rights to acquire the same, will be held exclusively by the
persons and in the amounts set forth on the Capitalization Schedule, the
outstanding common stock of Sales Dynamics Sales Corp., Inc., if it
continues to exist, will be held exclusively by the Company, the
outstanding common stock of Steel Dynamics, Inc. will be held exclusively
by Steel Dynamics Sales Corp., if it continues to exist, or by the
Company, and (ii) other than the matters disclosed on the Capitalization
Schedule, none of the Companies will have any commitment to issue shares
of its capital stock, or any rights or options to subscribe for or
purchase any capital stock. As of the Closing, all of the outstanding
shares of the Companies' capital stock will have been duly authorized,
validly issued, fully paid, and nonassessable.
(f) As of the Closing, there will be no statutory and no unwaived
contractual shareholder preemptive rights or rights of refusal with
respect to the issuance of the SDI Stock to Purchasers hereunder, except
as described in Schedule 5.2(f) attached hereto. The Company has not
violated any applicable federal or state securities laws in connection
with the offer, sale or issuance of any of its capital stock, and the
offer, sale and issuance of the SDI Stock hereunder do not require
registration under the Securities Act or any applicable state securities
laws. To the best of the Company's knowledge, there are no agreements
between the Company's shareholders with respect to the voting or transfer
of the Company's capital stock or with respect to any other aspect of the
Company's affairs, except as set forth in the Stockholders Agreement and
the Registration Agreement, each as amended.
(g) As of the Closing, upon the issuance of the SDI Stock to the
Purchasers, the receipt of the stock certificate(s) for the SDI Stock and
the payment of the purchase price for the SDI Stock, the Purchasers shall
receive good and marketable title to the SDI Stock, free and clear of all
Liens.
5.3 Subsidiaries; Investments. Other than Steel Dynamics Sales
Corp., Inc., which may or may not continue to exist at Closing, and other
than Steel Dynamics, Inc.,
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which may prior or subsequent to Closing merge with and into the Company
or may be the survivor of a merger of the Company into it, the Company
does not currently have any Subsidiaries. IDI may become a wholly-owned
subsidiary of Steel Dynamics, Inc. or the Company after closing. Save for
its $1,000,000 investment in Qualitech Steel Corporation, the Company does
not own or hold the right to acquire any shares of stock or any other
security or interest in any other Person.
5.4 Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Amendment No. 3, and the
S/H Amendment No. 3, and all other agreements and transactions
contemplated hereby and thereby to which the Company is a party, have been
duly authorized by the Company. This Agreement, the Registration Amendment
No. 3, and the S/H Amendment No. 3, and all of the other agreements
contemplated hereby and thereby to which the Company is a party, each
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as any of them
may be affected by laws relating generally to the enforcement of
creditors' rights and general principles of equity. The execution and
delivery by the Company of this Agreement, the Registration Amendment No.
3, and, subject to Lender approval, the S/H Amendment No. 3, and all other
agreements and instruments contemplated hereby to be executed by the
Company, the offering, sale and issuance of the SDI Stock, and the
fulfillment of and compliance with the respective terms hereby and thereof
by the Company, do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of (b) constitute a default
under, (c) result in the creation of any Lien upon the Company's capital
stock or assets pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of, or other
action by or notice to any court or administrative or governmental body
(other than in connection with certain state and federal securities laws)
pursuant to, the Articles of Incorporation, as amended, or By-Laws, as
amended, or any law, statute, rule, regulation, instrument, order,
judgment or decree to which the Company is subject or any agreement or
instrument to which the Company is a party.
5.5 Conduct of Business; Liabilities. Attached hereto as Exhibit 5.5
is an audited consolidated balance sheet of the Companies as at December
31, 1995 (the "Balance Sheet") and an unaudited Balance Sheet as at July
27, 1996 (the "Unaudited Balance Sheet"). Both the Balance Sheet and
Unaudited Balance Sheet are accurate and complete in all material
respects, are consistent with the books and records of the Companies
(which, in turn, are accurate and complete in all material respects), and
have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP"), consistently applied. Except as set forth on the
"Liabilities Schedule" attached hereto as Schedule 5.5, none of the
Companies, as of the date hereof, have any material obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Companies, whether due or to become
due and regardless of when asserted) arising out of transactions entered
into at or prior to the date hereof, or any action or inaction at or prior
to the date hereof, other than: (a) liabilities set forth on the Balance
Sheet (including any
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notes thereto), (b) liabilities and obligations which have arisen after
the date of the Balance Sheet in the ordinary course of business (none of
which is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit), (c) other liabilities,
obligations, or claims expressly disclosed in the other Schedules to this
Agreement and (d) matters that, individually or in the aggregate, would
not be reasonably likely to have a material adverse effect on the
condition of the Companies taken as a whole.
5.6 Financial Statements and Absence of Material Adverse Changes.
The Companies' consolidated financial statements dated as of December 31,
1995 attached hereto, fairly present the assets and liabilities of the
Companies as of December 31, 1995, and the results of operations of the
Companies for the period ending December 31, 1995, in accordance with U.S.
generally accepted accounting principles applied on a basis consistent
with prior periods. Since December 31, 1995, there has been no material
adverse change in the business or prospects of the Companies.
5.7 Intellectual Property Rights.
(a) The Company neither owns nor has applied for any patents, and
has applied for a trademark registration for the symbol "SDI." The
Companies have the right to use pursuant to a valid license all
Intellectual Property Rights necessary for the operation of the business
of the Companies, as presently proposed to be conducted, free and clear of
all Liens, and the loss or expiration of any such Intellectual Property
Right or related group of Intellectual Property Rights used by the Company
would not reasonably be expected to have a material adverse effect on the
conduct of the business of the Company, and no such loss or expiration is,
to the best of the Company's knowledge, threatened or pending.
(b) (i) The Companies own all right, title and interest in and to or
have the legal, valid and enforceable right to use the Intellectual
Property Rights they are using or plan to use, free and clear of all
Liens, (ii) the Companies have not received any claims or demands
asserting the invalidity, misuse or unenforceability of any of such
Intellectual Property Rights, and, to the best of the Company's knowledge,
there are no valid grounds for the same (iii) except noted in Section 5.8,
none of the Companies have received any notices of, and neither is aware
of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to
such Intellectual Property Rights (including, without limitation, any
demand or request that the Companies license any rights from a third
party), (iv) to the best of the Company's knowledge, the conduct of the
business of the Companies currently proposed to be conducted, will not
infringe, misappropriate or conflict with any Intellectual Property Rights
of other Persons and (v) to the best of the Company's knowledge, the
Intellectual Property Rights owned by or licensed to the Companies or
currently proposed to be used by the Companies, have not been infringed,
misappropriated or conflicted by other Persons.
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5.8 Litigation. Except as set forth on the Litigation Schedule
attached hereto as Schedule 5.8, there are no claims, actions or
proceedings instituted, pending or, to the best of the Company's
knowledge, threatened against or affecting the Companies (or to the best
of the Company's knowledge, instituted, pending or threatened against or
affecting any of the officers, directors or employees of the Company with
respect to their businesses or proposed business activities), at law or in
equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, any of
the foregoing with respect to the transactions contemplated by this
Agreement); to the best of the Company's knowledge, none of the Companies
are subject to any governmental investigations or inquiries (including,
without limitation, inquiries as to the qualification to hold or receive
any license or permit); and, to the best of the Company's knowledge, there
is no valid basis for any of the foregoing. None of the Companies is
subject to any judgment, order or decree of any court or other
governmental agency, and none of the Companies has received any opinion or
memorandum or legal advise from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business.
5.9 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
binding upon the Companies.
5.10 Governmental Consent. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and
performance by the Company of this Agreement or by the Companies of the
other agreements contemplated hereby, or the consummation by the Companies
of any other transactions contemplated hereby or thereby.
5.11 Hart-Scott Rodino. Either (a) no filing is or was required to
be made by the Company with the Federal Trade Commission (the "FTC") or
the Antitrust Division of the United States Department of Justice (the
"DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, with respect to the transactions contemplated hereby or
(b) if such filing was required to be made by the Company, such filing has
been made and all required waiting periods with respect thereto have
expired or been terminated without comment or notice from the FTC or the
DOJ.
5.12 Insurance. The "Insurance Schedule" attached hereto as Schedule
5.12, contains a description of each insurance policy maintained by the
Companies with respect to its properties, assets and business, and each
such policy is in full force and effect as of the Closing. None of the
Companies are in material default with respect to its obligations under
any insurance policy maintained by it. Except as set forth on the
Insurance Schedule, none of the Companies has any self-insurance programs.
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5.13 Employees. The Company is not aware that any executive or key
employee of the Companies or any group of employees of the Companies has
any plans to terminate employment with the Company. The Companies have
complied in all material respects with all laws relating to the employment
of labor (including, without limitation, provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes). Except as set forth on the "Employees
Schedule" attached hereto as Schedule 5.13, none of the Companies, or, to
the best of the Companies' knowledge, any of their employees, is subject
to any noncompete, nondisclosure, confidentiality, employment, consulting
or similar agreements relating to, affecting or in conflict with the
present or proposed business activities of the Companies, except for
agreements between the Companies and its present and former employees.
5.14 Compliance with Law. None of the Companies has violated any law
or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations, business or
prospects of the Companies, and the Company has not received notice of any
such violation. None of the Companies is subject to any clean up
liability, or has reason to believe it may become subject to any clean up
liability, under any federal, state or local environmental law, rule or
regulation.
5.15 This section has intentionally been left blank.
5.16 This section has intentionally been left blank.
5.17 Disclosure. To the best of the Companies' knowledge, neither
this Agreement nor any of the exhibits, schedules or attachments hereto,
nor any written statements, documents, certificates or other items
delivered at the Closing to the Purchasers by or on behalf of the Company
with respect to the transaction contemplated hereby, contain any untrue
statement of a material fact; provided that with respect to the financial
projections furnished to the Purchasers by the Companies, the Companies
represent and warrant only that such projections were prepared in good
faith based upon assumptions reasonably believed by the Companies to be
reasonable and fair as of the date the projections were prepared in the
context of the Companies' history and current and reasonably foreseeable
business conditions. There is no fact which the Companies have not
disclosed to the Purchasers in writing and of which the Companies are
aware (other than general economic conditions) and which has had or would
reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, customer or supplier
relations, employee relations, business or prospects of the Companies.
5.18 No Registration. Assuming the truth and accuracy of the
representations set forth in Section 6 and in the Investment Letter
attached hereto as Exhibit 5.18, to be delivered to the Company in
connection herewith, the offer and sale of the SDI Stock
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<PAGE> 13
pursuant to the terms hereof are not required to be registered under the
Securities Act or any state securities laws.
6. Purchasers' Representations and Warranties. Purchasers hereby represent
and warrant to the Companies that:
6.1 Organization, etc. Purchasers are corporations, duly formed or
organized, validly existing and in good standing under the laws of the
jurisdiction of their organization or formation, with full authority to
engage in this transaction. Purchasers possess all requisite power and
authority to own the SDI Stock and to carry out the transaction
contemplated by this Agreement.
6.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Amendment No. 3 and the
S/H Amendment No. 3, and all other agreements and transaction contemplated
hereby and thereby to which Purchasers are a party, have been duly
authorized by Purchasers. This Agreement, the Registration Amendment No.
3, and the S/H Amendment No. 3, and all other agreements and transactions
contemplated hereby and thereby, to which agreements Purchasers are a
party, each constitute a valid and binding obligation of Purchasers,
enforceable against Purchasers in accordance with its terms, except as any
of them may be affected by laws relating generally to the enforcement of
creditors' rights and general principles of equity. The execution and
delivery by Purchasers of the agreements to be performed hereunder, and
the fulfillment of and compliance with the respective terms hereof and
thereof by Purchasers, do not and will not (a) conflict with or result in
a breach of the terms, conditions or provisions of, (b) constitute a
default under, or (c) result in a violation of, Purchasers' organizational
documents or any law, statute, rule, regulation, instrument, order,
judgment or decree to which Purchasers are subject or any agreement or
instrument to which Purchasers are a party.
6.3 Hart-Scott-Rodino. Either (a) no filing is or was required to be
made by Purchasers with the FTC or the DOJ pursuant to the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, with
respect to the transactions contemplated hereby or (b) if such filing was
required to be made by the Company, such filing has been made and all
required waiting periods with respect thereto have expired or been
terminated without comment or notice from the FTC or the DOJ.
6.4 Investment Letters. This Agreement is made in reliance upon
Purchasers' representations to the Company, which by Purchasers' execution
hereof Purchasers hereby confirms, that the SDI Stock issuable to
Purchasers hereunder is being acquired solely for investment, for
Purchasers' own accounts, not as nominees or agents, and not with a view
to the resale or distribution of any part thereof, and that Purchasers
have no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, Purchasers
further represent that Purchasers do not have any contract,
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<PAGE> 14
undertaking, agreement, or arrangement with any person to sell, transfer,
or grant participations to such person or to any third person with respect
to any of the SDI Stock that is the subject of this Agreement. Purchasers
have executed and delivered to the Companies separate Investment Letters
containing additional representations, warranties and covenants, in the
form attached as Exhibit 5.18 attached hereto, upon which the Companies
are relying in entering into and performing its obligations under this
Agreement. Purchasers, after conducting its due diligence investigation
and analysis of the Company, believe that it has received all of the
information it considers necessary or appropriate for in arriving at its
decision whether to purchase the SDI Stock described herein, and
Purchasers acknowledge that they have had an opportunity to ask questions
and receive answers from the Company regarding the Companies; provided,
however, that nothing herein shall limit, negate, or modify the Company's
representations and warranties to Purchasers referenced in this Agreement
or the Purchasers' right to rely thereon.
7. Relationship of IDI and IDI Project to Sale of Stock; Use of Proceeds.
While the Company presently intends to use all or part of the proceeds of this
sale of SDI Stock to Purchasers in connection with an aggregate equity
investment of approximately $20,000,000-$25,000,000 in the IDI Project,
Purchasers acknowledge and agree that, if IDI is not legally constituted as a
wholly-owned subsidiary of the Company, or if the IDI Project is not
consummated, for whatever reason, including (but not limited to) a lack of
adequate debt financing, or if there is a failure to consummate any of the
proposed agreements described in Section 2.12(a), 2.12(c), or 2.12(d) or if the
IDI Project does not require the amount of the proposed equity investments by
the Purchasers set forth in Section 1, the Company has the complete right,
power, and authority to use these proceeds, for any business purpose it deems
necessary or appropriate, including working capital, and there are no
restrictions placed upon the use of these proceeds by Purchasers. All decisions
concerning the deployment of these resources, including the design,
configuration, equipment or technology to be employed in its operations, or
concerning Company investments and/or capital commitments in connection with
other technologies, shall remain the exclusive province of the Company's and/or,
if IDI becomes a wholly-owned subsidiary, the IDI's Board of Directors.
Purchasers specifically acknowledge and agree that their purchase of SDI Stock
hereunder is not conditioned or dependent upon the ultimate realization or
successful operation of the IDI Project, the organization of an IDI subsidiary,
the performance or realization of any of the agreements described in Sections
2.12(a), 2.12(c), 2.12(d), or any other aspect of the IDI Project, nor shall
Purchasers have any claim for rescission or for damages in the event that the
IDI Project does not go forward, is abandoned, or is not successful, or that any
of the foregoing agreements are not consummated.
8. Conditions of the Company's Obligations at the Closing. The obligation
of the Company to perform its obligations at the Closing is subject to the
satisfaction as of the Closing of the following conditions:
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<PAGE> 15
8.1 Representations and Warranties; Covenants. The representations
and warranties of the Purchasers contained in Section 6 hereof shall be
true and correct in all material respects at and as of the Closing as
though then made.
8.2 Opinion of Counsel. The Company shall have received an opinion
of counsel to Purchasers substantially in the form and substance set forth
in Exhibit 8.2 attached hereto and reasonably satisfactory to the Company.
8.3 Investment Letters. The Company shall have received from
Purchasers the Investment Letters referenced in Section 6.4 hereof.
8.4 Stockholder Approvals and Consents. All requisite Stockholder
votes, approvals, and consents prescribed by the Stockholders Agreement,
including but not limited to the approval of not less than seventy percent
(70%) of the Company's existing stockholders, excluding Purchasers, and
including waivers by existing stockholders and Warrant Holders, with
respect to the SDI Stock, of their limited preemptive rights thereunder,
shall have been secured.
8.5 Stockholders Agreement. The Company, the Purchasers, the Bain
Group, GECC, the Whitney Group, Heavy Metal, Keylock, Mazelina, Low Cost,
Preussag, the Subdebt Group, and the Management Group, as those persons
are identified and described in the Stockholders Agreement; shall have
entered into the S/H Amendment No. 3, in substantially the form and
substance set forth in Exhibit 2.3D attached hereto, adding Purchasers as
a party thereto but without giving Purchasers the right to designate a
representative to the Company's Board of Directors, and the S/H Amendment
No. 3 shall not have been rescinded or materially amended or modified.
8.7 Registration Agreement. The Company, the Purchasers, the Bain
Stockholders, GECC, Heavy Metal, the Keylock Stockholders, the Whitney
Stockholders, Preussag, the Management Stockholders, and the Warrant
Holders, as those persons are identified and described in the Registration
Agreement, shall have entered into the Registration Amendment No. 3, in
substantially the form and substance set forth in Exhibit 2.4D attached
hereto, adding Purchasers as a party thereto, and, inter alia, with
respect to the SDI Stock sold to Purchasers hereunder, granting Purchasers
certain limited rights which shall not become effective until six (6)
months after the Closing.
9. Covenants of the Company
(a) From and after the date hereof and until the provisions of this
Section 9 cease to be effective, if and when the Company constitutes IDI
as a wholly-owned subsidiary, and subject to the provisions of Section 7,
the Company shall vote its shares of stock in IDI and shall take all other
necessary action within its control so that:
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(i) The authorized number of directors on the Board of
Directors of IDI shall be established at five (5) directors;
(ii) Two (2) representatives designated by the Purchasers
shall be elected to IDI's Board of Directors and the remaining three
(3) members of the Board of Directors shall be designated by the
Company;
(iii) In the event any representative designated by the
Purchasers for any reason ceases to serve as a member of the Board
during his or her term office, the resulting vacancy on the Board
shall be filled by a representative designated by the Purchasers;
and
(iv) The Company and the Purchasers shall each be entitled to
designate an alternate to serve and function as a director in place
of a primary director with full voting and other rights of the
primary director in the event the primary director is unavailable.
(b) The Board of Directors of IDI shall act in all matters by simple
majority vote, including the hiring or retention or supervision of all
senior management.
(c) IDI shall reimburse each director of IDI for travel, food and
lodging expenses or other out-of-pocket costs incident to their attendance
at meetings of the Board of Directors of IDI or otherwise in connection
with their service as members of the Board.
(d) IDI's Board of Directors will appoint IDI's officers, who may
include one or more persons who is (and may concurrently remain) an
executive officer and/or employee of the Company or one of its affiliates.
(e) The provisions of this Section 9 shall terminate automatically
and be of no further force and effect upon the earlier of (i) the fifth
anniversary of the date of the start-up or the commencement of the
operation of the facility contiguous to the Company's mini-mill in Butler,
Indiana in connection with the IDI Project, or (ii) the liquidation or
dissolution of IDI.
10. Definitions.
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise.
"Common Stock" means the Class A Common.
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"Companies" shall mean Steel Dynamics Holdings, Inc., SDSCI, if it
continues to exist, and SDI.
"IDI" means, if it is constituted as a subsidiary corporation, an Indiana
corporation and a wholly-owned subsidiary of either the Company or SDI.
"IDI Project" means the design, and development, and construction of a
facility, partly or entirely contiguous to the Company's mini-mill in Butler,
Indiana, at which IDI will produce, use, and/or sell a coal-based direct reduced
iron product suitable for subsequent conversion by the Company into liquid pig
iron intended to be used as an alternative iron scrap substitute.
"Product" means the final or any of the intermediate products produced in
the Process, including DRI and liquid pig iron produced from DRI.
"Process" means the technology involved in all or any portion of a process
for producing the Product for use in steelmaking, with the raw materials of iron
ore fines and the reductant of coal, including (1) milling and pelletizing the
iron ore and coal with binder, (2) utilizing a rotary hearth furnace for
production of DRI from the pellets, (3) utilizing a submerged arc furnace or
electric arc furnace for producing liquid pig iron from the DRI, and (4)
utilizing a desulfurizing facility and related equipment to charge the liquid
iron into an electric arc furnace.
"DRI" means direct reduced iron.
"Intellectual Property Rights" means all (a) patents, patent applications,
patent disclosures and inventions, (b) trademarks, service marks, trade names,
logos and corporate names and registrations and applications for registration
thereof, together with all of the goodwill associated therewith, (c) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof, (d) computer software, data, data bases
and documentation thereof, (e) trade secrets and other confidential information
(including, without limitations, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (f) other intellectual property rights and
(g) copies and tangible embodiments thereof (in whatever form or medium,
including, without limitation, negatives, plates and video and film masters).
"Liens" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against any of the Companies or any Affiliate thereof,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any of the Companies under a lease which
is not in the nature of a conditional sale or title
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retention agreement, or any subordination arrangement in favor of another Person
(other than any subordination arising in the ordinary course of business).
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer, stating that (a) the officer signing
such certificate has made or has caused to be made such investigations as are
reasonably necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (b) to the best of such officer's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Restricted Securities" means the Common Stock issued hereunder and any
securities issued with respect to such Common Stock by way of any stock dividend
or stock split, or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Restricted
Securities, such securities will cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144 or Rule 144A (or any similar rules then in
effect), or (c) been otherwise transferred and new securities for them not
bearing the Securities Act legend set forth in Section 4.3 of this Agreement
have been delivered by the Company. Whenever any particular securities cease to
be Restricted Securities, the holder thereof will be entitled to receive from
the Company, without expense, new securities of like tenor not bearing the
Securities Act legend of the character set forth in Section 4.3 of this
Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act, as such rule may be amended from time to
time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act, as such rule may be amended from time to
time, or any similar rule then in force.
"Securities Act " means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes the United States government
agency of that name and any governmental body or agency succeeding to the
functions thereof.
"Warrant Holders" means the holders of warrants to purchase shares of
Common Stock issued pursuant to the Subordinated Loan Agreement.
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11. Miscellaneous.
11.1 Remedies. The holders of the SDI Stock acquired hereunder
(directly or indirectly) will have all of the rights and remedies set
forth in this Agreement and the Articles of Incorporation, as amended, and
all of the rights and remedies which such holders have been granted at any
time under any other agreement or contract, and all of the rights and
remedies which such holders have under any law. A party to this Agreement
will be entitled to enforce its rights under any provision of this
Agreement, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law or equity.
11.2 Amendments and Waivers. Except as otherwise provided herein, no
modification, amendment or waiver of any provisions hereof shall be
effective against the Company or the Purchasers unless such modification,
amendment or waiver is approved in writing by the person against which
such modification, amendment or waiver is intended to be enforced. The
failure of any party to enforce any provision of this Agreement or under
any agreement contemplated hereby or under the Articles of Incorporation,
as amended, or the By-Laws, as amended, shall in no way be construed as a
waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement, any
agreement referred to herein, the Articles of Incorporation, or the
By-Laws, in accordance with their terms.
11.3 Confidentiality. Purchasers will treat and hold as such all of
the Confidential Information, as that term is defined in Paragraph 10 of
the Letter of Intent between Purchasers and the Company, dated July 19-22,
1996, which terms are deemed incorporated herein by reference, and will
refrain from using any of such Confidential Information except in
connection with this Agreement. The term Confidential Information does not
include information that (i) at the time of disclosure to the Purchasers,
is generally available to the public, (ii) was available to the Purchasers
on a non-confidential basis prior to its disclosure to the Purchasers or
(iii) becomes available to the Purchasers on a non-confidential basis from
a third party, provided that such third party is not breaching an
obligation of confidentiality to the Company. If for any reason the
Closing does not take place on or before the date set forth in Section 3,
Purchasers will deliver promptly to the Company or, at the request and
option of the Company, will destroy all tangible embodiments and all
copies of Confidential Information which are in its possession as a result
of its examination of financial statements, reports, and other materials
submitted or made available by the Company during the course of
Purchasers' examinations, inspections, or due diligence work, unless such
information loses its status as Confidential Information as provided in
this Section 11.3. Purchasers may, however, disclose such Confidential
Information to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in
connection with this transaction, as well as to any prospective Affiliate,
shareholder, partner, or subsidiary of Purchasers, so long as that person
agrees in writing to be bound by the provisions thereof. In the event that
Purchasers are requested or required
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<PAGE> 20
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Purchasers will
notify the Company promptly of the request or requirement, so that the
Company may seek an appropriate protective order or, waive compliance with
the provisions of this Section 11.3. If, in the absence of a protective
order or the receipt of a waiver hereunder, Purchasers, on the advice of
counsel, are compelled to disclose any Confidential Information to any
tribunal or risk liability for contempt, Purchasers may disclose the
Confidential Information to the tribunal, provided that it use its
reasonable best efforts to obtain an order or other assurance, at the
Company's request, that confidential treatment be accorded to such portion
of the Confidential Information required to be disclosed as the Company
shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
11.4 Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in
connection herewith will survive the execution and delivery of this
Agreement, regardless of any investigation made by the Companies or by
Purchasers or on their behalf.
11.5 Successors and Assigns.
(a) Except as otherwise expressly provided herein, all agreements
contained in this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not, so long as such
successors and assigns execute a counterpart hereof. In addition, the
provisions of this Agreement which are for Purchasers' benefit as the
purchaser or holder of SDI Stock, are also for the benefit of and
enforceable by any subsequent Permitted Transferee of such Purchasers' SDI
Stock.
(b) If a sale, transfer, assignment or other disposition of any
shares of SDI Stock is made in accordance with the provisions of this
Agreement to any Person and such shares remain Restricted Securities
immediately after such disposition, such Person shall, at or prior to the
time such shares are acquired, execute a counterpart of this Agreement
with such modifications thereto as may be necessary to reflect such
acquisition, and such other documents as are necessary to confirm such
Person's agreement to become a party to, and to be bound by, all
covenants, terms and conditions of this Agreement, the S/H Amendment No. 3
and the Registration Amendment No. 3.
11.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision will be ineffective only to the extent of
such invalidity, illegality or unenforceability in such jurisdiction,
without
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invalidating the remainder of this Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
11.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together will
constitute one and the same Agreement.
11.8 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
11.9 Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of Indiana, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Indiana or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of Indiana.
11.10 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when personally
delivered or received by certified mail, postage prepaid and return
receipt requested, or sent by guaranteed overnight courier service,
charges prepaid. Notices, demand and communications will be sent to
Purchasers at the address indicated below:
Notices to Purchasers:
Sumitomo Corporation of America
Attention: Kei Kato
2750 USX Tower
600 Grant Street
Pittsburgh, PA 15219-2751
Telephone: (412) 391-9672
Fax: (412) 391-9756
Sumitomo Corporation
Attention: Tsunehiro Ichiki
Josuika Building
2-1-1 Hitotsubashi
Chiyodo-ku
Tokyo, 101, Japan
Telephone: 011-03-3237-3180
Fax: 011-03-3237-3179
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With Copy To:
Paul K. Risko
Sidley & Austin
875 Third Avenue
New York, NY 10022
Telephone: (212) 906-2000
Fax: (212) 906-2021
or to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
4500 County Road 59
Butler, IN 46721
Telephone: (219) 868-8000
Fax: (219) 868-8055
Attention: Keith E. Busse
With a Copy to:
Mr. Robert S. Walters
Barrett & McNagny
215 East Berry Street
P.O. Box 2263
Fort Wayne, IN 46801-2263
Telephone: (219) 423-9551
Fax: (219) 423-8924
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending
party.
11.11 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement shall bear its own expenses in
connection with the negotiation, execution, delivery and enforcement
hereof.
11.12 Entire Agreement. Except as otherwise expressly set forth
herein, and except as provided for in Paragraphs 7(c) and 10 of the Letter
of Intent between the Company and Purchasers, dated July 19-22, 1996, to
the extent previously incorporated herein, which shall continue to apply
in all events, this Agreement and any other agreement or instrument
executed in connection herewith or expressly referred to herein embodies
the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in
any way.
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: /s/ Keith E. Busse
--------------------------------------
Title:
-----------------------------------
SUMITOMO CORPORATION OF AMERICA
PITTSBURGH OFFICE
By: /s/ Masahiko Nakagawa
---------------------------------------
Title: Senior Vice President
------------------------------------
& General Manager
------------------------------------
SUMITOMO CORPORATION
By: /s/ Tsunehiro Ichiki
---------------------------------------
Title: Director, Iron & Steel Raw Materials
------------------------------------
Iron & Steel Division No. 1
------------------------------------
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<PAGE> 1
Exhibit 10.37
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of June 30, 1994 (this
"Agreement"), is made by and among Steel Dynamics Holdings, Inc., an Indiana
corporation (the "Company"), and the Persons set forth on the "Schedule of
Purchasers" attached hereto (hereinafter referred to collectively as the
"Purchasers" and individually as a "Purchaser"). The Purchasers will purchase,
severally and not jointly, the number of shares listed on the Schedule of
Purchasers attached hereto. Except as otherwise indicated, capitalized terms
used herein are defined in Section 9 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of Common Stock. The Company will authorize the
issuance and sale to the Purchasers at the Closing of an aggregate of 820,000
shares of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common").
1B. Purchase and Sale of Class A Common. At the Closing, the Company
will sell to each Purchaser and, subject to the terms and conditions set forth
herein, each Purchaser will purchase from the Company, the number of shares of
Class A Common set forth opposite such Purchaser's name on the Schedule of
Purchasers under the caption "Shares to be Purchased" at the purchase price per
share set forth opposite such Purchaser's name on the Schedule of Purchasers
under the caption "Share Purchase Price." Each Purchaser will pay the portion
of the aggregate purchase price for the shares to be purchased by such
Purchaser met forth opposite such Purchaser's name on the Schedule of
Purchasers under the caption "Purchase Price to be Paid at Closing," and the
remainder of the purchase price for such shares in the amounts set forth
opposite such Purchaser's name on the Schedule of Purchasers under the caption
"Remaining Purchase Price" shall be paid pursuant to Section 2 hereof. The
sale to and purchase by each Purchaser of the Class A Common hereunder will
constitute a separate sale and purchase.
1C. Capital Contributions of Certain Purchasers. At the Closing,
certain of the Purchasers shall make contributions to the capital of the
Company in the aggregate amounts set forth opposite such Purchasers' names on
the Schedule of Purchasers under the caption "Capital Contributions to be Made
at Closing," and shall make additional capital contributions in the aggregate
amounts set forth opposite such Purchasers' names on the Schedule of Purchasers
under the caption "Capital Contributions to be Made Following Closing" pursuant
to Section 2 hereof.
1D. The Closing and Payments. The closing of the separate sales and
purchases of the Class A Common and the payments therefor and the other
contributions required to be made (the "Closing") pursuant to the foregoing
provisions of this Section 1 will take place at the offices of Reed, Smith,
Shaw &
<PAGE> 2
McClay, Pittsburgh, Pennsylvania, at 10:00 a.m. on June 30, 1994, (or
as soon thereafter as all conditions contained in Section 3 hereof have been
satisfied) or at such other place or on such other date as may be mutually
agreeable to the Company and the Purchasers. At the Closing, the Company will
deliver to each Purchaser, subject to the provisions of the Escrow Agreement
(as hereinafter defined), a certificate or certificates evidencing the number
of shares of Class A Common to be purchased by such Purchaser, registered in
the name of such Purchaser, against the payments and/or contributions to be
made at Closing, by wire transfer of immediately available funds to a bank
account designated by the Company.
1E. Failure To Make Payments at Closing. In the event that Heavy
Metal, Keylock or Mazelina fails to make the payments or contributions to be
made by such Purchaser at Closing (a "Forfeiting Purchaser"), (i) the Company
shall redeem all of the then outstanding shares of common Stock of the Company
owned immediately prior to the scheduled date of the Closing by such Forfeiting
Purchaser and all Affiliates of such Forfeiting Purchaser for an aggregate
price of $1.00, by the payment to such Forfeiting Purchaser and Affiliates, as
applicable, of an aggregate of $1.00, (ii) all indebtedness owing as of such
time by the Company to such Forfeiting Purchaser or any Affiliate thereof shall
be automatically forgiven and cancelled, all promissory notes or other
evidences thereof shall be delivered to the Company marked "Cancelled" and the
holder thereof shall have no further claim with respect to such indebtedness
and (iii) upon such redemption, (A) if the Forfeiting Purchaser is Keylock, any
agreement with an Affiliate of Keylock shall be terminated, and (B) if the
Forfeiting Purchaser is Heavy Metal, the OmniSource Agreement shall be
terminated. Holders of shares of Class A Common to be redeemed pursuant to
such redemption shall cease to be shareholders with respect to such shares upon
tender of payment therefor, and shall have, from and after such time, no
interest in or claim against the Company with respect to such shares, except
only to receive payment, without interest, from the Company of the aggregate
redemption price. Nothing in this paragraph shall be deemed to release Heavy
Metal, Mazelina, Keylock or any of their respective Affiliates from any
obligation or liability with respect to their guaranties of certain obligations
under the Employment Agreements.
Section 2. Additional Payments and Contributions After Closing.
2A. Remaining Purchase Price; Additional Capital Contributions.
Each Purchaser hereby severally, absolutely and unconditionally agrees to pay
to the Company the remainder of the purchase price for the shares purchased by
such Purchaser (in the amount set forth opposite such Purchaser's name on the
Schedule of Purchasers under the caption "Remaining Purchase Price") and to
make the additional capital contributions described in Section
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<PAGE> 3
1 hereof to be made after Closing (in the amount set forth opposite such
Purchaser's name under the caption "Capital Contribution to be Made Following
Closing") (such remaining purchase price and additional capital contributions,
in the aggregate with respect to each Purchaser, such Purchaser's "Additional
Commitment") pursuant to this Section 2A; provided, that with respect to any
Purchaser the Additional Commitment of which includes additional capital
contributions, all payments in respect of such Additional Commitment made by
such Purchaser shall be deemed to be payments of such additional capital
contributions until such Purchaser shall have made or be deemed to have made
capital contributions to the Company in the aggregate amount required to be
made pursuant to Sections 1 and 2 hereof. Each Purchaser shall make payments
to the Company in respect of such Purchaser's Additional Commitment within
twenty days of the delivery of written notice by the Company to such Purchaser
specifying the portion of such Purchaser's Additional Commitment to be paid to
the Company (each such notice, a "Capital Call Notice"), by wire transfer of
immediately available funds to a bank account designated by the Company. The
Company may deliver, from time to time, one or more Capital Call Notices to
each Purchaser; provided, however, that (i) Capital Call Notices shall be
issued by the Company pro rata to all Purchasers, and (ii) the initial Capital
Call Notice shall not be delivered prior to July 1, 1994.
2B. Failure to Make Payments on Additional Commitment. In the
event a Purchaser fails to make a payment in respect of such Purchaser's
Additional Commitment pursuant to and in accordance with Section 2A (a
"Defaulting Purchaser"), there shall be automatically cancelled the number of
shares of Class A Common owned by such Defaulting Purchaser which is equal to
such Defaulting Purchaser's then applicable Default Number (the "Default
Shares"), upon delivery by the Company of written notice to such Defaulting
Purchaser specifying the number of Default Shares, within five days following
the expiration of the twenty-day period referred to in Section 2A (such
notice, the "Cancellation Notice"). Upon delivery of the Cancellation Notice,
the Default Shares shall no longer be deemed to be issued or outstanding, and
holders of Default Shares cancelled pursuant to this Section 2B shall cease to
be shareholders with respect to such Default Shares upon delivery of the
Cancellation Notice and shall have, from and after such time, no interest in or
claim against the Company with respect to such shares. Notwithstanding the
foregoing provisions of this Section 2B, this Section 2B shall not apply (i)
with respect to Keylock, to the extent that Keylock has made aggregate payments
in respect of its Additional Commitment of at least $3,015,000 (the "Keylock
Threshold Commitment") and (ii) with respect to Mazelina, to the extent that
Mazelina has made aggregate payments in respect of its Additional Commitment of
at least $2,985,000 (the "Mazelina Threshold Commitment").
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<PAGE> 4
Following the cancellation of Default Shares pursuant to this Section 2B, the
Company shall deliver written notice (the "Default Notice") to each Purchaser
who has not so failed to make the required payment pursuant to a Capital Call
Notice (each, a "Non-defaulting Purchaser") specifying the number of Default
Shares and the Default Share Purchase Price. Such Default Notice shall
constitute an offer by the Company to sell to such Non-defaulting Purchaser a
number of shares of Class A Common (the "New Shares") up to such Non-defaulting
Purchaser's Pro Rata Share (as defined below) of such New Shares for a purchase
price equal to the Default Share Purchase Price. If any Non-defaulting
Purchaser elects to accept such offer, such Non-defaulting Purchaser shall
deliver written notice of such acceptance to the Company as soon as practicable
but in any event within five days after delivery by the Company of the Default
Notice. Any New Shares not elected to be purchased by the Non-defaulting
Purchasers by the end of such five-day period shall be reoffered for an
additional ten-day period on a pro rata basis to the Non-defaulting Purchasers
who have elected to purchase their Pro Rata Share of the New Shares. Each
Non-defaulting Purchaser's "Pro Rata Share" shall be equal to the product of
(A) the number of New Shares remaining to be purchased and (B) a fraction, (1)
the numerator of which is the number of shares of Class A Common held by the
Non-defaulting Purchaser and (2) the denominator of which is the aggregate
number of shares of Class A Common held by all Non-defaulting Keylock
Purchasers.
2C. Cancellation of Certain Keylock Shares. In the event and to
the extent that Keylock fails to make payments pursuant to Section 2A in
respect of its Additional Commitment in excess of the Keylock Threshold
Commitment, there shall be automatically cancelled the number of shares of
Class A Common owned by Keylock which is equal to a fraction, (i) the numerator
of which is the amount of such Additional Commitment which Keylock fails to
pay, and (ii) the denominator of which is $89.55 (the "Keylock Default
Shares"), by delivery by the Company of written notice to Keylock specifying
the number of Keylock Default Shares, within five days following the expiration
of the twenty-day period referred to in Section 2A (such notice, the "Keylock
Cancellation Notice"). Upon delivery of the Keylock Cancellation Notice, the
Keylock Default Shares shall no longer be deemed to be issued or outstanding,
and Keylock shall cease to be a shareholder with respect to such Keylock
Default Shares upon delivery of the Keylock Cancellation Notice and shall have,
from and after such time, no interest in or claim against the Company with
respect to such shares.
The Company shall deliver to Heavy Metal a copy of the Keylock Cancellation
Notice. Heavy Metal shall purchase from the Company the number of Class A
Common equal to the number of the Keylock Default Shares, for a purchase price
of $89.55 per share, within 15 days following delivery to Heavy Metal of such
notice. In the event Heavy Metal fails to purchase the Keylock Default Shares,
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<PAGE> 5
there shall be automatically cancelled the number of shares of Class A Common
owned by Heavy Metal equal to the number of shares of Class A Common which
Heavy Metal failed to purchase pursuant to the foregoing sentence (the "Heavy
Metal Keylock Default Shares"), by delivery by the Company of written notice to
Heavy Metal specifying the number of Heavy Metal Keylock Default Shares, within
five days following the expiration of the seven-day period referred to in the
preceding paragraph (such notice, the "Heavy Metal Keylock Cancellation
Notice"). Heavy Metal shall cease to be a shareholder with respect to such
Heavy Metal Keylock Default Shares upon delivery of the Heavy Metal Keylock
Cancellation Notice and shall have, from and after such time, no interest in or
claim against the Company with respect to such shares.
Following the cancellation of Heavy Metal Keylock Default Shares by the Company
pursuant to this Section 2C, the Company shall deliver written notice (the
"Keylock Default Notice") to all Purchasers other than Keylock and Heavy Metal
(each, a "Non-defaulting Keylock Purchaser") specifying the number of Class A
Common equal to the sum of the number of Keylock Default Shares and the number
of Heavy Metal Keylock Default Shares (collectively, the "Aggregate Keylock
Default Shares"). Such Keylock Default Notice shall constitute an offer by the
Company to sell to such Non-Defaulting Keylock Purchaser a number of Aggregate
Keylock Default Shares up to such Non-defaulting Keylock Purchaser's
Proportionate Share (as defined below) of such Aggregate Keylock Default Shares
for a purchase price of $44.78 per share. If any Non-defaulting Keylock
Purchaser elects to accept such offer, such Non-defaulting Purchaser shall
deliver written notice of such election to the Company as soon as practicable
but in any event within five days after delivery by the Company of the Keylock
Default Notice. Any Aggregate Keylock Default Shares not elected to be
purchased by the Non-defaulting Keylock Purchasers by the end of such five-day
period shall be reoffered for an additional ten-day period on a pro rata basis
to the Non-defaulting Keylock Purchasers who have elected to purchase their
Proportionate Share of the Aggregate Keylock Default Shares. Each
Non-defaulting Keylock Purchaser's "Proportionate Share" shall be equal to the
product of (A) the number of Aggregate Keylock Default Shares and (B) a
fraction, (1) the numerator of which is the number of shares of Class A Common
held by the Non-defaulting Keylock Purchaser and (2) the denominator of which
is the aggregate number of shares of Class A Common held by all Non-defaulting
Keylock Purchasers.
2D. Cancellation of Certain Mazelina Shares. In the event and to
the extent that Mazelina fails to make payments pursuant to Section 2A in
respect of its Additional Commitment in excess of the Mazelina Threshold
Commitment, there shall be automatically cancelled the number of shares of
Class A Common owned by Mazelina which is equal to a fraction, (i) the
numerator of which is the amount of such Additional Commitment which
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<PAGE> 6
Mazelina fails to pay, and (ii) the denominator of which is $89.55 (the
"Mazelina Default Shares"), by delivery by the Company of written notice to
Mazelina specifying the number of Mazelina Default Shares, within five days
following the expiration of the twenty-day period referred to in Section 2A
(such notice, the "Mazelina Cancellation Notice"). Upon delivery of the
Mazelina Cancellation Notice, the Mazelina Default Shares shall no longer be
deemed to be issued or outstanding, and Mazelina shall cease to be a
shareholder with respect to such Mazelina Default Shares upon delivery of the
Mazelina Cancellation Notice and shall have, from and after such time, no
interest in or claim against the Company with respect to such shares.
The Company shall deliver to Heavy Metal a copy of the Mazelina Cancellation
Notice. Heavy Metal shall purchase from the Company the number of Class A
Common equal to the number of the Mazelina Default Shares, for a purchase price
of $89.55 per share, within 15 day. following delivery to Heavy Metal of such
notice. In the event Heavy Metal fails to purchase the Mazelina Default
Shares, there shall be automatically cancelled the number of shares of Class A
Common owned by Heavy Metal equal to the number of shares of Class A Common
which Heavy Metal failed to purchase pursuant to the foregoing sentence (the
"Heavy Metal Mazelina Default "Shares"), by delivery by the Company of written
notice to Heavy Metal specifying the number of Heavy Metal Mazelina Default
Shares, within five days following the expiration of the seven-day period
referred to in the preceding paragraph (such notice, the "Heavy Metal Mazelina
Cancellation Notice"). Heavy Metal shall cease to be a shareholder with
respect to such Heavy Metal Mazelina Default Shares upon delivery of the Heavy
Metal Mazelina Cancellation Notice and shall have, from and after such time, no
interest in or claim against the Company with respect to such shares.
Following the cancellation of Heavy Metal Mazelina Default Shares by the
Company pursuant to this Section 2D, the Company shall deliver written notice
(the "Mazelina Default Notice") to all Purchasers other than Mazelina and Heavy
Metal (each, a "Non-defaulting Mazelina Purchaser") specifying the number of
Class A Common equal to the sum of the number of Mazelina Default Shares and
the number of Heavy Metal Mazelina Default Shares (collectively, the "Aggregate
Mazelina Default Shares"). Such Mazelina Default Notice shall constitute an
offer by the Company to sell to such Non-Defaulting Mazelina Purchaser a number
of Aggregate Mazelina Default Shares up to such Non-defaulting Mazelina
Purchaser's Proportionate Share (as defined below) of such Aggregate Mazelina
Default Shares for a purchase price of $44.78 per share. If any Non-defaulting
Mazelina Purchaser elects to accept such offer, such Non-defaulting Purchaser
shall deliver written notice of such election to the Company as soon as
practicable but in any event within five days after delivery by the Company of
the Mazelina Default Notice. Any Aggregate
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<PAGE> 7
Mazelina Default Shares not elected to be purchased by the Non-defaulting
Mazelina Purchasers by the end of such five-day period shall be reoffered for
an additional ten-day period on a pro rata basis to the Non-defaulting Mazelina
Purchasers who have elected to purchase their Proportionate Share of the
Aggregate Mazelina Default Shares. Each Non-defaulting Mazelina Purchaser's
"Proportionate Share" shall be equal to the product of (A) the number of
Aggregate Mazelina Default Shares and (B) a fraction, (1) the numerator of
which is the number of shares of Class A Common held by the Non-defaulting
Mazelina Purchaser and (2) the denominator of which is the aggregate number of
shares of Class A Common held by all Non-defaulting Mazelina Purchasers.
2E. Escrow Arrangements. Pursuant to the terms of the Escrow
Agreement, the certificates representing all Class A Common purchased by the
Purchasers pursuant hereto or otherwise owned by the parties hereto have been
deposited with the escrow agent thereunder to be held pursuant to the terms
thereof. Each such certificate shall be held in escrow by such escrow agent
until such time as the shares represented by such certificate have been
cancelled (at which time such certificates shall be delivered to the Company)
or are no longer subject to being cancelled by the Company pursuant to Sections
2B or 2C hereof (at which time such certificates shall be delivered to the
Purchaser which deposited such certificates into escrow). At such time as any
party hereto determines that any such shares are no longer so subject, such
party may deliver to the Company a certificate setting forth the justification
for such party's position. If, and only if, the Company concurs with such
party's position as outlined in such certificate, the Company shall instruct
the escrow agent to release such certificates to the party entitled thereto.
Section 3. Conditions of Each Purchaser's Obligations at the Closing.
The obligation of each Purchaser at the Closing (i) to deliver the
consideration required to be delivered at the Closing for the Class A Common to
be purchased by such Purchaser and/or (ii) to make capital contributions
required to be made at the Closing is subject to the satisfaction as of the
Closing of the following conditions:
3A. Representations and Warranties; Covenants. The representations
and warranties contained in Section 5 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein, and
the Company shall have performed in all material respects all of the covenants
required to be performed by it hereunder prior to the Closing.
3B. Amendment of Certificate of Incorporation. The Company's
Articles of Incorporation shall have been amended and restated so that they are
in the form set forth in Exhibit C
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<PAGE> 8
hereto (as so amended, the "Articles of Incorporation"), shall be in full force
and effect under the laws of Indiana as of the Closing as so amended and shall
not have been further amended or modified.
3C. Amendment of the Company's By-Laws. The Company's By-Laws
shall have been duly amended and restated in form and substance as set forth in
Exhibit D hereto (as so amended, the "By-Laws"), the By-Laws shall be in full
force and effect as of the Closing as so amended and shall not have been
further amended or modified.
3D. Registration Agreement. The Company, the Purchasers, the
Management Stockholders and the Warrant Holders shall have entered into a
registration agreement in substantially the form and in substance as set forth
in Exhibit E attached hereto (the "Registration Agreement"), and the
Registration Agreement shall be in full force and effect as of the Closing.
3E. Stockholders Agreement. The Company, the Purchasers, the
Management Stockholders and the Warrant Holders shall have entered into an
agreement in substantially the form and in substance set forth in Exhibit F
attached hereto (the "Stockholders Agreement"), and the Stockholders Agreement
shall be in full force and effect as of the Closing.
3F. Bank Agreement. The Operating Company and a syndicate of
lenders (the "Lenders") shall have entered into definitive agreements and
related documentation (collectively, the "Bank Agreement") providing for loans
to the Company of not less than $215 million in order to finance the Project
and the Operating Company's working capital needs in form and substance
reasonably satisfactory to such Purchaser, and the Bank Agreement shall be in
full force and effect as of the Closing and shall not have been amended or
modified.
3G. Subordinated Loan Agreement. The Company, the Operating
Company, the Sales Subsidiary and certain investors (the "Subordinated
Lenders") shall have entered into a definitive subordinated note and warrant
purchase agreement and related documentation (collectively, the "Subordinated
Loan Agreement") providing for subordinated loans to the Company or the
Operating Company of not less than $50 million in form and substance reasonably
satisfactory to such Purchaser, and the Subordinated Loan Agreement shall be in
full force and effect as of the Closing and shall not have been amended or
modified.
3H. Real Estate Closing. Except as described in Item 2 on Schedule
3.28 to the Bank Agreement, the purchase of the Butler, Indiana real estate
will have closed and the Operating Company will own a fee simple interest in
such real estate, subject to no claims, charges or encumbrances other than
Permitted Liens (as defined in the Bank Agreement).
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<PAGE> 9
3I. State and Municipal Financing. The Operating Company and
certain governmental authorities and public utilities shall have entered into
one or more memoranda of understanding (collectively, the "Government Financing
Package") providing for the provision of certain state and municipal utility
grants and loans to the Company or the Operating Company in the aggregate
amount of not less than $35 million in form and substance reasonably
satisfactory to such Purchaser, and the Government Financing Package shall be
in full force and effect as of the Closing and shall not have been amended or
modified.
3J. Construction and Equipment Contracts. The Company or the
Operating Company shall have entered into each of the contracts listed on
Schedule 3J attached hereto (collectively, the "Construction Contracts"),
providing for the construction of the Project and the acquisition of equipment
to be used therein, each in form and substance reasonably satisfactory to such
Purchaser, and each of the Construction Contracts shall be in full force and
effect as of the Closing and shall not have been amended or modified.
3K. Purchase and Sale of Class A Common. On or prior to the date
of this Agreement, the Company, the Operating Company or one of their
respective predecessors shall have received at least $51,000 in cash or other
proceeds from the issuance and sale to the Management Stockholders of common
stock.
3L. Employment Agreements. The Company shall have entered into
employment agreements with each of Keith E. Busse, Mark D. Millett and Richard
P. Teets, Jr., in form and substance set forth in Exhibits H-1, H-2 and H-3
attached hereto (the "Employment Agreements"), and the Employment Agreements
shall be in full force and effect as of the Closing.
3M. Steel Purchasing Agreement. The Company or the Operating
Company and Heidtman Steel Products, Inc. ("Heidtman") shall have entered into
a Purchasing Agreement in form and substance set forth in Exhibit I attached
hereto (the "Heidtman Agreement"), the Heidtman Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.
3N. Scrap Supply Agreement. The Company or the Operating Company
and OmniSource Corporation shall have entered into an Agreement to Provide
Scrap Purchasing Services and Certain Priority Purchase Rights in form and
substance set forth in Exhibit J attached hereto (the "OmniSource Agreement"),
the OmniSource Agreement shall be in full force and effect as of the Closing
and shall not have been amended or modified.
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<PAGE> 10
3O. Sale of Class A Common to Each Purchaser. The Company shall
have sold to each other Purchaser the Class A Common to be purchased by such
other Purchaser hereunder at Closing and shall have received therefor in full
the amounts required to be paid at Closing as set forth in Section 1B and the
capital contribution required to be made at Closing as set forth in Section 1C.
3P. Securities Law Compliance. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance and sale of the Class A Common at the Closing and
required to be made prior to or concurrently with such issuance and sale,
pursuant to this Agreement and otherwise, in each case in compliance with such
laws.
3Q. No Litigation, Proceedings. There shall be no action, suit, or
proceeding threatened, instituted or pending before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction
(other than those set forth on the attached Litigation Schedule) wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent or enjoin the consummation of any or the transactions contemplated
by this Agreement (including, without limitation, the purchase or Class A
Common by the Purchasers and the consummation of the debt financing
contemplated by the Bank Agreement, the Subordinated Loan Agreement, the SMS
Contingency Facility and the Government Financing Package), (B) cause any of
the transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Company to own,
operate, or control the Project (and on such judgment, order, decree,
stipulation, injunction, or charge shall be in effect).
3R. Governmental Filings, Consents and Approvals. All federal,
state and local governmental filings, consents and approvals necessary for the
consummation of the transactions contemplated by this Agreement (other than
those required for the physical construction, permitting and operation of the
Project) shall have been made or obtained.
3S. Opinion of the Company's Counsel. The Purchasers shall have
received from counsel for the Company an opinion substantially in the form set
forth on Exhibit K attached hereto, which shall be addressed to the Purchasers,
dated the date of the Closing.
3T. Closing Documents. The Company shall have delivered to the
Purchasers all of the following documents:
(i) an Officer's Certificate, dated the date of the
Closing, stating that the conditions specified in Sections 3A through 3S,
inclusive (except to the extent of
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<PAGE> 11
matters required to be satisfactory to the Purchasers), have been fully
satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the
board of directors of the Company or the Operating Company, as
appropriate, authorizing the execution, delivery and performance of this
Agreement, the Registration Agreement, the Stockholders Agreement, the
Employment Agreements, the Bank Agreement, the Subordinated Loan
Agreement, the Heidtman Agreement, the omnisource Agreement, the SMS
Contingency Facility, the Government Financing Package, the Construction
Contracts and each of the other agreements contemplated hereby to which
each of the Company and the Operating Company is a party, the filing of
the amendment to the Articles of Incorporation referred to in Section 3B,
the amendment to the Company's By-Laws referred to in Section 3C, the
issuance and sale of the Class A Common and the consummation of all other
transactions contemplated by this Agreement, and (b) the resolutions duly
adopted by the Company's shareholders adopting the amendment to the
Articles of Incorporation referred to in Section 3B;
(iii) certified copies of the Certificate of Incorporation and
the By-Laws, each as in effect at the Closing;
(iv) certified copies of the Bank Agreement, the Subordinated
Loan Agreement, the Government Financing Package and the Construction
Contracts, each as in effect at the Closing;
(v) a certificate as to the incumbency of the officers of the
Company executing this Agreement and the other agreements contemplated
hereby on behalf of the Company;
(vi) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder to the extent required to be obtained or filed
prior to Closing (other than those required in connection with the
physical construction, permitting and operation of the Project); and
(vii) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or their special counsel
may reasonably request.
3U. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers.
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<PAGE> 12
3V. Guarantys. The Company shall have received the duly executed
Keylock Guaranty, the duly executed Mazelina Guaranty and the duly executed
Heavy Metal Guaranty in form and substance satisfactory to the Purchasers.
3W. Escrow Agreement. The Purchasers and the Company shall have
entered into the Escrow Agreement in form and substance as set forth in Exhibit
L hereto.
3X. Fee Letter. The Company and certain of the Purchasers shall
have entered into a letter agreement, in form and substance satisfactory to
such Purchasers, pursuant to which the Company shall agree to pay to such
Purchasers a fee in connection with structuring the debt financing for the
Company and the Operating Company.
3Y. Waiver. Any condition specified in this Section 3 may be
waived if consented to in writing by each Purchaser.
Section 4. Restrictions on Transfers.
4A. Restrictions. Each of the Purchasers severally agrees that
Restricted Securities are only transferable pursuant to (i) public offerings
registered under the Securities Act, (ii) Rule 144 or Rule 144A of the
Securities and Exchange Commission (or any similar rules then in force) if such
rules are available, and (iii) subject to the conditions specified in Section
4B below, any other legally available means of transfer pursuant to the
Securities Act.
4B. Procedure for Transfer. In connection with the transfer of any
Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of Section 4A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of counsel which (to the Company's reasonable
satisfaction} is knowledgeable in securities law matters to the effect that
such transfer of Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act. In addition, if the
holder of such Restricted Securities delivers to the Company an opinion of such
counsel reasonably satisfactory to the Company that no subsequent transfer of
such Restricted Securities by such holder will require registration under the
Securities Act, the Company will promptly upon such contemplated transfer
deliver new certificates for such Restricted Securities which do not bear the
Securities Act Legend set forth in Section 6(b) of the Stockholders Agreement.
If the Company is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof will not transfer the
same until the prospective transferee has confirmed to the Company in writing
its agreement to be bound by the conditions contained in this Section 4 and
Section 6A.
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<PAGE> 13
4C. Transferees. Upon request of any Purchaser, the Company shall
promptly supply to such Purchaser or its prospective transferees all
information required to be delivered in connection with a transfer pursuant to
Rule 144A of the Securities and Exchange Commission.
4D. Legend Removal. If any Restricted Securities become eligible
for sale pursuant to Rule 144 (k), the Company will promptly upon the request
of the holder of such Restricted Securities deliver new certificates for such
Restricted Securities which do not bear the Securities Act Legend set forth in
Section 5(b) of the Stockholders Agreement.
Section 5. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers that as of the Closing:
5A. Organization, etc. Each of the Company, the Sales Subsidiary
and the Operating Company is a corporation duly organized and validly existing
under the laws of the State of Indiana and, at the Closing, will be qualified
to do business as a foreign corporation in each jurisdiction in which the
failure to so qualify would reasonably be expected to have a material adverse
effect on the financial condition, operating results, assets, operations,
business or prospects of the Company, the Sales Subsidiary and the Operating
Company, as applicable. At the Closing, each of the Company, the Sales
Subsidiary and the Operating Company will possess all requisite corporate power
and authority and all material licenses, permits and authorizations necessary
to own and operate its properties, to carry on its respective businesses as now
conducted and presently proposed to be conducted (other than licenses, permits
and authorizations required for the physical construction, permitting and
operation of the Project) and to carry out the transactions contemplated by
this Agreement required to be carried out by it.
5B. Capital Stock and Related Matters.
(i) As of the Closing, (a) the authorized capital stock of the
Company will consist of 10,000,000 shares of Class A Common and 500,000 shares
of Class B Common, and (b) the Company will have issued, and there will be
outstanding, 990,000 shares of Class A Common. As of the Closing, (k) the
authorized capital stock of the Sales Subsidiary will consist of 10,000 shares
of Class A Common Stock, par value $.01 per share, and (1) the Sales Subsidiary
will have issued, and there will be outstanding, 100 such shares. As of the
Closing, (x) the authorized capital stock of the Operating Company will consist
of 10,000 shares of Class A Common Stock, par value $.01 per share, and (y) the
Operating Company will have issued, and there will be outstanding, 100 such
shares.
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(ii) Except as set forth on the "Capitalization Schedule" attached
hereto, as of the Closing, none of the Company, the Sales Subsidiary and the
Operating Company will have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock, or have outstanding any
rights or options to subscribe for or to purchase any capital stock or any
stock or securities convertible into or exchangeable for any capital stock.
The Capitalization Schedule accurately sets forth the following information as
of the Closing with respect to all outstanding options and rights to acquire
the capital stock of the Company, the Sales Subsidiary and the Operating
Company: the holder, the number of shares covered, the exercise price and the
expiration date. As of the Closing, except as contemplated by this Agreement,
none of the Company, the Sales Subsidiary and the Operating Company will be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock or to make any payment in respect of
any of the foregoing, except pursuant hereto, pursuant to the Stockholders
Agreement or as set forth on the Capitalization Schedule or in the Articles of
Incorporation.
(iii) As of the Closing, (A) the outstanding Class A Common of the
Company will be held exclusively by the Purchasers and by the Management
Stockholders in the amounts set forth on the Capitalization Schedule, the
outstanding common stock of the Sales Subsidiary will be held exclusively by
the Company and the outstanding common stock of the Operating Company will be
held exclusively by the Sales Subsidiary, and (B) other than the matters
disclosed on the Capitalization Schedule, none of the Company, the Sales
Subsidiary and the Operating Company will have any commitment to issue shares
of its capital stock, or any rights or Options to subscribe for or purchase any
capital stock. As of the Closing, all of the outstanding shares of the
Company's, the Sales Subsidiary's and the Operating Company's capital stock
will have been duly authorized, and upon payment of the purchase price therefor
will be validly issued, fully paid and nonassessable.
(iv) There are no statutory or contractual shareholder preemptive
rights or rights of refusal with respect to the issuance of the Class A Common
hereunder. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Class A Common hereunder
do not require registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no
agreements between the Company's shareholders with respect to the voting or
transfer of the Company's capital stock or with respect to any other aspect of
the Company's affairs, except for the Stockholders Agreement and the
Registration Agreement.
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<PAGE> 15
5C. Subsidiaries; Investments. The Company does not have any
Subsidiaries other than the Sales Subsidiary and the Operating Company and the
Company does not Own or hold the right to acquire any shares of stock or any
other security or interest in any other Person.
5D. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Agreement, the Stockholders
Agreement, the Escrow Agreement and all other agreements and transactions
contemplated hereby and thereby to which the Company is a party, and the
amendment to the Company's Articles of Incorporation and By-Laws have been duly
authorized by the Company. This Agreement, the Registration Agreement, the
Stockholders Agreement, the Escrow Agreement and all of the other agreements
contemplated hereby and thereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as any of them may be affected
by laws relating generally to the enforcement of creditors' rights and general
principles of equity. The execution and delivery by the Company of this
Agreement, the Registration Agreement, the Stockholders Agreement, the Escrow
Agreement and all other agreements and instruments contemplated hereby to be
executed by the Company, the filing of the Articles of Incorporation with the
Secretary of State of Indiana, the amendment to the Company's By-Laws and the
offering, sale and issuance of the Class A Common hereunder, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company, do not and will not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon the Company's capital stock or assets
pursuant to, (iv) give any third party the right to accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization,
consent, approval, exemption or other action by or notice to any court or
administrative or governmental body (other than in connection with certain
state and federal securities laws) pursuant to, the Articles of Incorporation
or By-Laws, or any law, statute, rule, regulation, instrument, order, judgment
or decree to which the Company is subject or any agreement or instrument to
which the Company is a party.
5E. Conduct of Business; Liabilities. Attached hereto as Exhibit M
is an unaudited consolidated balance sheet of the Company, the Sales Subsidiary
and the Operating Company as of May 31, 1994 (the "Balance Sheet"). The
Balance Sheet is accurate and complete in all material respects, is consistent
with the books and records of the Company, the Sales Subsidiary and the
Operating Company (which, in turn, are accurate and complete in all material
respects) and has been prepared in accordance with generally accepted
accounting principles ("GAAP"), consistently applied. Except as set forth on
the attached "Liabilities Schedule," none of the Company, the Sales
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<PAGE> 16
subsidiary and the Operating Company has any obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known
to the Company, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing
at or prior to the Closing other than: (i) liabilities set forth on the Balance
Sheet (including any notes thereto), (ii) liabilities and obligations which
have arisen after the date of the Balance Sheet in the ordinary course of
business (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, claim or lawsuit), (iii) other
liabilities and obligations expressly disclosed in the other Schedules to this
Agreement and (iv) matters that, individually or in the aggregate, would not be
reasonably likely to have a material adverse effect on the condition of the
Company, the Operating Company and the Sales Subsidiary taken as a whole.
5F. No Material Adverse Change. Since January 31, 1994, there has
been no material adverse change in the business or prospects of the Company,
the Sales Subsidiary or the Operating Company.
5G. Absence of Certain Developments. Except as expressly
contemplated by this Agreement, reflected in the Balance Sheet or set forth on
the attached "Developments Schedule," since their respective dates of
formation, none of the Company, the Sales Subsidiary and the Operating Company
has:
(i) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(ii) borrowed any amount or incurred or become subject to
any material liabilities;
(iii) mortgaged or pledged any of its properties or assets or
subjected them to any material Lien, except Liens for current property
taxes not yet due and payable and Liens under the Bank Agreement;
(iv) sold, assigned or transferred any of its tangible
assets;
(v) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other intangible
assets, or disclosed any material proprietary confidential information to
any Person;
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<PAGE> 17
(vi) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Person; or
(vii) made any Investment in or taken steps to incorporate
any Subsidiary.
5H. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule" or the attached "Employee Benefits
Schedule," none of the Company, the Sales Subsidiary and the Operating Company
is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $75,000 or contract
relating to loans to officers, directors or Affiliates;
(c) contract under which the Company, theSales Subsidiary
or the Operating Company has advanced or loaned any other Person
amounts in the aggregate exceeding $25,000;
(d) agreement or indenture relating to borrowed money or
other indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company,
the Sales subsidiary or the Operating Company;
(e) guarantee of any obligation in excess of $25,000;
(f) lease or agreement under which the Company, the Sales
Subsidiary or the Operating Company is lessee of or holds or operates
any property, real or personal, owned by any other party, except for
any lease of real or personal property under which the aggregate annual
rental payments do not exceed $50,000;
(g) lease or agreement under which the Company, the Sales
Subsidiary or the Operating Company is lessor of or permits any third
party to hold or operate any
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<PAGE> 18
property, real or personal, owned or controlled by the Company, the
Sales Subsidiary or the Operating Company;
(h) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
consideration in excess of $100,000;
(i) assignment, license, indemnification or agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property);
(j) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights) with respect to any securities of the
Company, the Sales Subsidiary or the Operating Company;
(k) sales or distribution agreement;
(l) agreement with a term of more than six months which is
not terminable by the Company, the Sales Subsidiary or the Operating
Company upon less than 30 days notice without material penalty;
(m) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
(n) any other agreement which is material to its
operations and business prospects or involves a consideration in excess
of $200,000 annually.
(ii) All of the contracts, agreements and instruments set forth on
the Contracts Schedule are valid, binding and enforceable against the Company,
the Sales Subsidiary or the Operating Company, as the case may be, in
accordance with their respective terms, except as any of them may be affected
by laws relating generally to the enforcement of creditors' rights and general
principles of equity. The Company, the Sales Subsidiary and the Operating
Company have performed all material obligations required to be performed by
them heretofore under the contracts, agreements and instruments listed on the
Contracts Schedule to which each is a party and are not in material default
under or in material breach of nor in receipt of any claim of material default
or material breach under any contract, agreement or instrument listed on the
Contracts Schedule; no event has occurred which with the passage of time or the
giving of notice or both would result in a material default, breach or event of
noncompliance by the Company, the Sales Subsidiary or the Operating Company, as
the case may be, under any contract, agreement or instrument listed on the
Contracts Schedule; none of
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<PAGE> 19
the Company, the Sales Subsidiary and the Operating Company has any present
expectation or intention of not performing all such obligations; none of the
Company, the Sales Subsidiary and the Operating Company has any knowledge of
any breach or anticipated material breach by the other parties to any contract,
agreement, instrument or commitment to which it is a party listed on the
Contracts Schedule.
5I. Intellectual Property Rights.
(i) The attached "Intellectual Property Schedule" contains a
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or proposed to be used by the Company, the Sales
Subsidiary or the Operating Company, (b) pending patent applications and
applications for registrations of other Intellectual Property Rights filed by
the Company, the Sales Subsidiary or the Operating Company, (c) unregistered
trade names and corporate names owned or proposed to be used by the Company,
the Sales Subsidiary or the Operating Company and (d) unregistered trademarks,
service marks, copyrights and computer software owned or proposed to be used by
the Company, the Sales Subsidiary or the Operating Company. The Intellectual
Property Schedule also contains a complete and accurate list of all licenses
and other rights granted by the Company, the Sales Subsidiary or the Operating
Company to any third party with respect to any Intellectual Property Rights and
all licenses and other rights granted by any third party to the Company, the
Sales Subsidiary or the Operating Company with respect to any Intellectual
Property Rights, in each case identifying the subject Intellectual Property
Rights. Except as set forth on the Intellectual Property Schedule, the
Company, the Sales Subsidiary or the Operating Company owns all right, title
and interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the business of the
Company, the Sales Subsidiary and the Operating Company as presently proposed
to be conducted, free and clear of all Liens. Except as set forth on the
Intellectual Property Schedule, the loss or expiration of any Intellectual
Property Right or related group of Intellectual Property Rights owned or
proposed to be used by the Company, the Sales Subsidiary or the Operating
Company would not reasonably be expected to have a material adverse effect on
the conduct of the business of the Company, the Sales Subsidiary or the
Operating Company, and no such loss or expiration is, to the best of the
Company's knowledge, threatened or pending.
(ii) Except as set forth on the Intellectual Property Schedule, (a)
the Company, the Sales Subsidiary or the Operating Company owns all
right, title and interest in and to or has the legal, valid and enforceable
right to use all of the Intellectual Property Rights listed on such schedule,
free and clear of all Liens, (b) none of the Company, the Sales Subsidiary and
the Operating Company has received any claims or demands asserting
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<PAGE> 20
the invalidity, misuse or unenforceability of any of such Intellectual Property
Rights, and, to the best of the Company's knowledge, there are no valid grounds
for the same, (c) none of the Company, the Sales Subsidiary and the Operating
Company has received any notices of, and neither is aware of any facts which
indicate a likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, without limitation, any demand or request that the Company, the
Sales Subsidiary or the Operating Company license any rights from a third
party), (d) to the best of the Company's knowledge, the conduct of the business
of the Company, the Sales Subsidiary and the Operating Company as currently
proposed to be conducted will not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (e) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed to
the Company, the Sales Subsidiary or the Operating Company or currently
proposed to be used by the Company, the Sales Subsidiary or the Operating
Company have not been infringed, misappropriated or conflicted by other
Persons.
5J. Litigation, etc. Except as set forth on the attached
Litigation Schedule, there are no claims, actions or proceedings instituted,
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company, the Sales Subsidiary or the Operating Company (or to the
best of the Company's knowledge, instituted pending or threatened against or
affecting any of the officers, directors or employees of the Company with
respect to their businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any of the foregoing
with respect to the transactions contemplated by this Agreement); to the best
of the Company's knowledge, none of the Company, the Sales Subsidiary and the
Operating Company is subject to any governmental investigations or inquiries
(including, without limitation, inquiries as to the qualification to hold or
receive any license or permit); and, to the best of the Company's knowledge,
there is no valid basis for any of the foregoing. None of the Company, the
Sales Subsidiary and the Operating Company is subject to any judgment, order or
decree of any court or other governmental agency, and none of the Company, the
Sales Subsidiary and the Operating Company has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed,
from a legal standpoint, to any liability or disadvantage which may be material
to its business.
5K. Brokerage. Except as set forth on the attached "Brokerage
Schedule," there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company, the
Sales Subsidiary or the Operating Company. The Company shall pay, and
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<PAGE> 21
hold each Purchaser harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
5L. Governmental Consent, etc. Except as set forth on the attached
"Consents Schedule," no permit, consent, approval or authorization of, or
declaration to or filing with, any governmental authority is required in
connection with the execution, delivery and performance by the Company of
this Agreement or by the Company, the Sales Subsidiary or the Operating Company
of the other agreements contemplated hereby, or the consummation by the
Company, the Sales Subsidiary and the Operating Company of any other
transactions contemplated hereby or thereby, except for any of the foregoing
required for the physical construction, permitting or operation of the Project
and except as expressly contemplated herein or in the exhibits or schedules
hereto.
5M. Insurance. The attached "Insurance Schedule" contains a
description of each insurance policy maintained by the Company, the Sales
Subsidiary and the Operating Company with respect to its properties, assets and
business, and each such policy is in full force and effect as of the Closing.
None of the Company, the Sales Subsidiary and the Operating Company is in
material default with respect to its obligations under any insurance policy
maintained by it. Except as set forth on the Insurance Schedule, none the
Company, the Sales Subsidiary and the Operating Company has any self-insurance
programs,,
5N. Employees. The Company is not aware that any executive or key
employee of the Company, the Sales Subsidiary or the Operating Company or any
group of employees of the Company, the Sales Subsidiary and the Operating
Company has any plans to terminate employment with the Company. The Company,
the Sales Subsidiary and the Operating Company have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes).
Except as set forth on the attached "Employees Schedule," none of the Company,
the Sales Subsidiary and the Operating Company, or, to the best of the
Company's knowledge, any of their employees is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar agreements
relating to, affecting or in conflict with the present or proposed business
activities of the Company, the Sales Subsidiary or the Operating Company,
except for agreements between the Company, the Sales Subsidiary or the
Operating Company and its present and former employees.
5O. Compliance with Law. None of the Company, the Sales Subsidiary
and the Operating Company has violated any law or any governmental regulation
or requirement which violation has had or would reasonably be expected to have
a material adverse
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<PAGE> 22
effect upon the financial condition, operating results, assets, operations,
business or prospects of the Company, the Sales Subsidiary or the Operating
Company, and the Company has not received notice of any such violation. None
of the Company, the Sales Subsidiary and the Operating Company is subject to
any clean up liability, or has reason to believe it may become subject to any
clean up liability, under any federal, state or local environmental law, rule
or regulation.
5P. Affiliated Transactions. Except for the Stockholders
Agreement, the Registration Agreement, the Escrow Agreement and the Employment
Agreements and except as set forth on the attached "Affiliated Transactions
Schedule," no officer, director, employee, shareholder or Affiliate of the
Company, the Sales Subsidiary or the Operating Company, or (to the knowledge of
the Company) any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company, the Sales Subsidiary or the Operating Company or
has any interest in any property used by the Company, the Sales Subsidiary or
the Operating Company.
5Q. Real Property Holding Corporation Status. Since their
respective dates of incorporation, none of the Company, the Sales Subsidiary
and the Operating Company has been, and as of the date of the Closing shall not
be, a "United States real property holding corporation", as defined in Section
897(c) (2) of the Internal Revenue Code of 1986, as amended, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder. None of the Company,
the Sales Subsidiary and the Operating Company has any current plans or
intentions which would cause the Company, the Sales Subsidiary or the Operating
Company, as the case may be, to become a "United States real property holding
company," and the Company and the Operating Company have filed with the United
States Internal Revenue Service all statements, it any, with its United States
income tax returns which are required under Section 1.897-2(h) of the Treasury
Regulations.
5R. Disclosure. To the best of the Company's knowledge, neither
this Agreement nor any of the exhibits, schedules or attachments hereto, nor
any written statements, documents, certificates or other items delivered at the
Closing to the Purchasers by or on behalf of the Company with respect to the
transactions contemplated hereby, contain any untrue statement of a material
fact; provided that with respect to the financial projections furnished to the
Purchasers by the Company, the Company represents and warrants only that such
projections were prepared in good faith based upon assumptions reasonably
believed by the Company to be reasonable and fair as of the date the
projections were prepared in the context of the Company's history and current
and reasonably foreseeable business conditions. There is no fact which the
Company has not disclosed
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<PAGE> 23
to the Purchasers in writing and of which the Company is aware (other than
general economic conditions) and which has had or would reasonably be expected
to have a material adverse effect upon the financial condition, operating
results, assets, customer or supplier relations, employee relations, business
or prospects of the Company, the Sales Subsidiary or the Operating Company.
5S. Knowledge. As used in this Section 5, the terms "best of
knowledge" or "aware" with reference to the Company shall mean and be limited
to the actual knowledge or awareness of Keith E. Busse, Richard P. Teets, Jr.
and Mark D. Millett or, in the cage of an Officer's Certificate, the individual
signing such Officer's certificate.
5T. No Registration. Assuming the truth and accuracy of the
representations set forth in Section 6 hereof and in separate investment
letters to be delivered to the Company in connection herewith, the offers and
sales of the Class A Common pursuant to the terms hereof are not required to be
registered under the Securities Act or any state securities laws.
Section 6. Purchasers' Representations and Warranties. Each Purchaser
hereby represents and warrants, severally and not jointly, to the Company that:
6A. Organization, etc. Such Purchaser is a corporation,
partnership, limited liability company or business trust, as the case may be,
duly formed or organized, validly existing and in good standing under the laws
of the jurisdiction of its organization or formation. Such Purchaser Possesses
all requisite power and authority to own such capital stock and to carry out
the transactions contemplated by this Agreement.
6B. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Registration Agreement, the Stockholders
Agreement, the Escrow Agreement and all other agreements and transactions
contemplated hereby and thereby to which such Purchaser is a party have been
duly authorized by such Purchaser. This Agreement, the Registration Agreement,
the Stockholders Agreement, the Escrow Agreement, and all of the other
agreements contemplated hereby and thereby to which such Purchaser is a party
each constitutes a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms, except as any of them may
be affected by laws relating generally to the enforcement of creditors' rights
and general principles of equity. The execution and delivery by such Purchaser
of this Agreement, the Registration Agreement, the Stockholders Agreement and
all other agreements and instruments contemplated hereby to be executed by such
Purchaser, and the fulfillment of and compliance with the respective terms
hereof and thereof by such Purchaser, do not and will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, or
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<PAGE> 24
(iii) result in a violation of, the organizational documents of such Purchaser
or any law, statute, rule, regulation, instrument, order, judgment or decree to
which such Purchaser is subject or any agreement or instrument to which such
Purchaser is a party.
6C. Hart-Scott-Rodino. Either (i) no filing is or was required to
be made by such Purchaser with the Federal Trade Commission or the Antitrust
Division of the United States Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, with respect
to the transactions contemplated hereby or, (ii) if such filing was required,
the waiting period with respect thereto has expired or approval has been
received.
6D. Investment Letters. Such Purchaser has executed and delivered
to the Company a separate letter containing additional representations,
warranties and covenants, upon which the Company is relying in entering into
and performing its obligations under this Agreement.
Section 7. Covenants.
7A. Use of Proceeds. The Company hereby agrees that the Company,
the Sales Subsidiary and the Operating Company will apply the proceeds of the
sale of Class A Common hereunder to finance the construction of the Project and
for the working capital and other corporate needs of the Company, the Sales
Subsidiary and the Operating Company.
7B. Hostile Acquisition. The Company covenants to and in favor of
GECC that, so long as GECC owns at least five percent of the then outstanding
Class A Common, the Company shall not, nor shall it permit any of its
Subsidiaries to, without GECC's prior written consent, engage in any hostile
transaction for the control of another company, whether by open market
purchases of the capital stock of such company, by offer for the capital stock
of such company or by solicitation of proxies or consents of the shareholders
of such company.
Section 8. Conditions of the Company's Obligations at the Closing.
The obligation of the Company to perform at the Closing its obligations to be
then performed is subject to the satisfaction as of the Closing of the
following conditions:
8A. Representations and Warranties; Covenants. The representations
and warranties of the Purchasers contained in Section 7 hereof shall be true
and correct in all material respects at and as of the Closing as though then
made.
8B. Opinion of Counsel. The Company shall have received Opinions
of counsel to Keylock, Mazelina, and Heavy Metal, in form and substance
reasonably satisfactory to the Company, as to (i) the status of Keylock,
Mazelina and Heavy
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<PAGE> 25
Metal, respectively, as "accredited investors" as defined in Regulation D
promulgated pursuant to the Securities Act, (ii) the due authorization,
execution, delivery and performance by Keylock, Mazelina, and Heavy Metal of
this Agreement, the Stockholders Agreement, the Escrow Agreement and the
Registration Agreement and (iii) certain other matters.
8C. Investment Letters. The Company shall have received from each
Purchaser the investment letter referenced in Section 6C hereof.
8D. Guarantys. The Company shall have received the duly executed
Keylock Guaranty, the duly executed Mazelina Guaranty and the duly executed
Heavy Metal Guaranty in form and substance acceptable to the Company.
8E. Agreements. The parties thereto shall have entered into the
Escrow Agreement, the Stockholders Agreement and the Registration Agreement.
Section 9. Definitions.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the Ownership of
voting securities, contract or otherwise.
"Aggregate Actual Investment" means, for a Purchaser, the aggregate
amount paid by such Purchaser, whether as capital contribution or as a payment
of purchase price, required to be paid by such Purchaser pursuant to Sections
1B, 1C and 2A hereof.
"Common Stock" means the Class A Common.
"Default Number" means, for a Purchaser, the number of Total Shares of
such Purchaser less (i) with respect to Purchasers other than Keylock, Mazelina
and Heavy Metal, the Penalty Shares Retained of such Purchaser, and (ii) with
respect to Keylock, Mazelina and Heavy Metal, the sum of (A) the Penalty Shares
Retained by Keylock, Heavy Metal or Mazelina, as the case may be, and (B) with
respect to Heavy Metal, 30,000; with respect to Keylock, 15,075; and with
respect to Mazelina, 14,925.
"Default Share Purchase Price" means, with respect to any transaction,
a fraction (i) the numerator of which is the applicable Defaulted Contribution
Amount and (ii) the denominator of which is the applicable Default Number.
"Defaulted Contribution Amount" means the amount of the Additional
Commitment of a Defaulting Purchaser which the Defaulting Purchaser fails to
pay pursuant to Section 2A hereof.
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<PAGE> 26
"Escrow Agreement" means the agreement by and among the Company and the
Purchasers dated the date hereof with respect to the Class A Common purchased
by the Purchasers or otherwise held by the other parties thereto.
"Heavy Metal" means Heavy Metal, L.C., a Virginia limited liability
company.
"Heavy Metal Guaranty" means the guaranty or guarantys of the
performance of Heavy Metal under Section 2 hereof.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade names, logos and corporate names and registrations and
applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration
thereof, (iv) computer software, data, data bases and documentation thereof,
(v) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information), (vi) other intellectual property rights and (vii)
copies and tangible embodiments thereof (in whatever form or medium, including,
without limitation, negatives, plates and video and film masters).
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Keylock" means Keylock Investments Limited, an Irish non-resident
corporation.
"Keylock Guaranty" means the guaranty or guarantys of the performance
of Keylock under Section 2 hereof.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other
-26-
<PAGE> 27
than to reflect ownership by a third party of property leased to the Company
under a lease which is not in the nature of a conditional sale or title
retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the ordinary course of
business).
"Management Stockholders" means Keith E. Busse, Richard P. Teets, Jr.,
Mark D. Millett and the Steel Ink Company and their respective Permitted
Transferees.
"Mazelina" means Mazelina Anstalt c/o Lic. Iur. Gertrude Beck,
Liechtenstein, a Liechtenstein business trust.
"Mazelina Guaranty" means the guaranty or guarantys of the performance
of Mazelina under Section 2 hereof.
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
reasonably necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"Operating Company" means Steel Dynamics, Inc., an Indiana corporation.
"Penalty Shares" means, with respect to a Purchaser, the number set
forth opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 75,374
Bain Capital Fund IV-B, L.P. 86,258
BCIP Associates 14,163
BCIP Trust Associates, L.P. 4,814
GECC 180,610
Heavy Metal 185,583
Keylock 85,930
Mazelina 85,070
J.H. Whitney & Co. 7,258
Whitney 1990 Equity Fund, L.P. 29,033
Low Cost Limited Partnership 5,000
KLANS Associates 907
"Penalty Shares Retained" means, for a Purchaser, the product of (i)
the Penalty Shares Retained Percentage for such Purchaser and (ii) the number
of Penalty Shares of such Purchaser.
"Penalty Shares Retained Percentage" means, for a Purchaser, the
difference between (i) two times the Percentage Investment Made of such
Purchaser and (ii) 100%.
-27-
<PAGE> 28
"Percentage Investment Made" means, for a Purchaser, the percentage
determined by multiplying 100 by a fraction (i) the numerator of which is the
Aggregate Actual Investment of such Purchaser and (ii) the denominator of which
is the Total Required Investment of such Purchaser.
"Permitted Transferee" means any transferee of Class A Common in a
transfer permitted by clause (i) and clauses (iv) through (xiii) of Section
2(f) of the Stockholders Agreement.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Project" means the Company's 1.1 million ton thin slab cast mini-mill
in Butler, Indiana.
"Restricted Securities" means the Class A Common issued hereunder and
any securities issued with respect to such Class A Common by way of any stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities will cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them, (b) become eligible for sale pursuant to Rule 144 or Rule 144A of the
Securities and Exchange Commission (or any similar rules then in force) or (c)
been otherwise transferred and new securities for them not bearing the
Securities Act Legend set forth in Section 6 of the Stockholders Agreement have
been delivered by the Company in accordance with Section 4B or 4D. Whenever
any particular securities cease to be Restricted Securities, the holder thereof
will be entitled to receive from the Company, without expense, new securities
of like tenor not bearing a Securities Act Legend of the character set forth in
Section 6 of the Stockholder. Agreement.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Sales Subsidiary" means Steel Dynamics Sales Corp., Inc., an Indiana
corporation.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
-28-
<PAGE> 29
"Securities and Exchange Commission" includes the United States
government agency of that name and any governmental body or agency succeeding
to the functions thereof.
"Subsidiary" means the Sales Subsidiary, the Operating Company and any
other corporation of which the securities having a majority of the ordinary
voting power in electing the Board of Directors are, at the time as of which
any determination is being made, owned by the Company either directly or
through one or more Subsidiaries.
"Total Required Investment" means, with respect to a Purchaser, the
amount set forth opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 8,307,784
Bain Capital Fund IV-B, L.P. 9,507,464
BCIP Associates 1,561,100
BCIP Trust Associates, L.P. 530,600
GECC 19,906,949
Heavy Metal 19,535,000
Keylock 9,045,000
Mazelina 8,955,000
J.H. Whitney & Co. 800,000
Whitney 1990 Equity Fund, L.P. 3,200,000
Low Cost Limited Partnership 551,104
KLANS Associates 100,000
"Total Shares" means, with respect to a Purchaser, the number set forth
opposite such Purchaser's name as follows:
Bain Capital Fund IV, L.P. 75,374
Bain Capital Fund IV-B, L.P. 86,258
BCIP Associates 14,163
BCIP Trust Associates, L.P. 4,814
GECC 180,610
Heavy Metal 215,583
Keylock 101,002
Mazelina 99,998
J.H. Whitney & Co. 7,258
Whitney 1990 Equity Fund, L.P. 29,033
Low Coat Limited Partnership 5,000
KLANS Associates 907
"Warrant Holders" means the holders of warrants to purchase shares of
Class A Common issued pursuant to the Subordinated Loan Agreement.
-29-
<PAGE> 30
Section 10. Miscellaneous.
10A. Remedies. The holders of Class A Common acquired hereunder
(directly or indirectly) will have all of the rights and remedies set forth in
this Agreement and the Articles of Incorporation, and all of the rights and
remedies which such holders have been granted at any time under any other
agreement or contract, and all of the rights and remedies which such holders
have under any law. Any Person having any rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement, and to
exercise all other rights granted by law.
10B. Amendments and Waivers. Except as otherwise provided herein, no
modification, amendment or waiver of any provision hereof shall be effective
against the Company or the Purchasers unless such modification, amendment or
waiver is approved in writing by Bain Capital Partners IV, L.P., GECC, Heavy
Metal, Keylock, J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P.; provided,
however, that no such modification, amendment or waiver shall be effective
against the Company without the approval of a majority of the Management
Directors (as defined in the Stockholders Agreement). The failure of any party
to enforce any provision of this Agreement or under any agreement contemplated
hereby or under the Certificate of Incorporation or the By-Laws shall in no way
be construed as a waiver of such provisions and shall not affect the right of
such party thereafter to enforce each and every provision of this Agreement,
any agreement referred to herein, the Certificate of Incorporation, or the
By-Law. in accordance with their terms.
10C. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement, regardless
of any investigation made by the Company or any Purchaser or on its behalf.
10D. Successors and Assigns.
(i) Except as otherwise expressly provided herein, all agreements
contained in this Agreement by or on behalf of any of the parties hereto will
bind and inure to the benefit of the respective successors and assigns of such
parties whether so expressed or not, so long as such successors and assigns
execute a counterpart hereof. In addition, the provisions of this Agreement
which are for any Purchaser's benefit as the purchaser or holder of Class A
Common, are also for the benefit of and enforceable by any subsequent Permitted
Transferee of such Purchaser's Class A Common.
-30-
<PAGE> 31
(ii) If a sale, transfer, assignment or other disposition of any shares
of Class A Common is made in accordance with the provisions of this Agreement
to any Person and such shares remain Restricted Securities immediately after
such disposition, such Person shall, at or prior to the time such shares are
acquired, execute a counterpart of this Agreement with such modifications
thereto as may be necessary to reflect such acquisition, and such other
documents as are necessary to confirm such Person's agreement to become a party
to, and to be bound by, all covenants, terms and conditions of this Agreement,
the Stockholders Agreement and the Registration Agreement as theretofore
amended.
10E. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable under any applicable law or rule in any jurisdiction,
such provision will be ineffective only to the extent of such invalidity,
illegality or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction.
10F. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
10G. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
10H. Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Indiana, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Indiana or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Indiana.
10I. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
received by certified mail, postage prepaid and return receipt requested, or
sent by guaranteed overnight courier Service, charges prepaid. Notices,
demands and communications will be sent to each Purchaser at such Purchaser's
address as indicated in the
-31-
<PAGE> 32
Company's books and records of the Company's transfer agent and registrar and
to the Company at the address indicated below:
Notices to the Company:
Steel Dynamics Holdings, Inc.
c/o Steel Dynamics, Inc.
2780 Waterfront Parkway East Drive,
Suite 325
Indianapolis, IN 46214
Attention: Keith E. Busse
With a copy to:
Albert T. Adams, Esq.
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
or to such other address or to the attention of such other Person
as the recipient party has specified by prior written notice to
the sending party.
10K. Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement shall bear its own expenses in
connection with the negotiation, execution, delivery and enforcement hereof.
10L. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement and any other agreement or instrument executed in
connection herewith or expressly referred to herein embodies the complete
agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
*****
-32-
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
STEEL DYNAMICS HOLDINGS, INC.
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
BCIP ASSOCIATES
By: [SIG]
---------------------------------
______________, A General Partner
BCIP TRUST ASSOCIATES, L.P.
By: [SIG]
---------------------------------
______________, A General Partner
<PAGE> 34
GENERAL ELECTRIC CAPITAL
CORPORATION
By: [SIG]
---------------------------------
Name:
----------------------------
Title:
--------------------------
KEYLOCK INVESTMENTS LIMITED
By: [SIG]
---------------------------------
MAZELINA ANSTALT c/o LIC. IUR.
GERTRUDE BECK, LIECHTENSTEIN
By: [SIG]
---------------------------------
J.H. WHITNEY & CO.
By: [SIG]
---------------------------------
______________, A General Partner
WHITNEY 1990 EQUITY FUND, L.P.
By: [SIG]
---------------------------------
______________, A General Partner
HEAVY METAL, L.C.
By: /s/ ROBIN K. KANNER
---------------------------------
Name: ROBIN K. KANNER
----------------------------
Title: MEMBER
--------------------------
LOW COST LIMITED PARTNERSHIP
By: SMS Investors, Inc., general
partner
By: [SIG]
---------------------------------
KLANS ASSOCIATES
By: [SIG]
---------------------------------
General Partner
<PAGE> 1
EXHIBIT 11.1
STEEL DYNAMICS, INC. AND SUBSIDIARY
COMPUTATION OF NET LOSS PER SHARE FOR THE
PERIOD FROM SEPTEMBER 7, 1993 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1993, FOR EACH OF THE TWO
YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 AND
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1994 1995 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
Weighted average shares outstanding.......... 12,039 20,787 28,083 32,048
Adjustment for Staff Accounting Bulletin No.
83......................................... 3,892 3,892 3,892 3,892
Dilutive effect for options and warrants..... N/A(a) N/A(a) N/A(a) N/A(a)
------- -------- -------
Adjusted weighted average shares
outstanding................................ 15,931 24,679 31,975 35,940
======= ======== =======
Net loss..................................... $(1,160) $(8,880) $(19,888) $(9,818)
======= ======== =======
Net loss per share........................... $ (0.07)(b) $ (0.36)(b) $ (0.62)(b) $ (0.27)(b)
======= ======== =======
</TABLE>
- ---------------
(a) The effect of options and warrants in the computation of primary earnings
per share for the period from September 7, 1993 (date of inception) through
December 31, 1993, for each of the two years in the period ended December
31, 1995 and for the nine-month period ended September 28, 1996 was anti-
dilutive.
(b) Fully diluted earnings per share is the same as primary earnings per share.
<PAGE> 1
EXHIBIT 21.1
LIST OF ALL SUBSIDIARIES OF THE REGISTRANT
IRON DYNAMICS, INC.
4500 County Road 59
Butler, IN 46721
State of Incorporation: Indiana
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to registration statement No.
333-12521 of Steel Dynamics, Inc. of our report dated October 28, 1996 (November
, 1996 as to Note 11), appearing in the prospectus, which is a part of such
registration statement, and to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such prospectus.
Indianapolis, Indiana
October 28, 1996
******
The consolidated financial statements included elsewhere in this
registration statement of Steel Dynamics, Inc. reflect a 28.06 for one stock
split which is to be effected prior to the effective date of the registration
statement. The above consent is in the form which will be furnished by Deloitte
& Touche LLP upon consummation of this event, which is described in Note 11 to
the consolidated financial statements, and that from October 28, 1996 to the
date of such event, no other events have occurred which would affect the
accompanying consolidated financial statements and notes thereto.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
October 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet of Steel Dynamics, Inc. and subsidiary at September
28, 1996 and the Consolidated Statement of Operations for the nine-month period
ended September 28, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 30,564
<SECURITIES> 3,000
<RECEIVABLES> 35,067
<ALLOWANCES> 534
<INVENTORY> 35,860
<CURRENT-ASSETS> 105,715
<PP&E> 289,431
<DEPRECIATION> 12,071
<TOTAL-ASSETS> 422,368
<CURRENT-LIABILITIES> 46,867
<BONDS> 0
0
0
<COMMON> 366
<OTHER-SE> 123,270
<TOTAL-LIABILITY-AND-EQUITY> 422,368
<SALES> 174,619
<TOTAL-REVENUES> 174,619
<CGS> 158,257
<TOTAL-COSTS> 167,604
<OTHER-EXPENSES> (697)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,050
<INCOME-PRETAX> (9,818)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,818)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,818)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> 0
</TABLE>
