<PAGE> File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION - DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
***
INDIANA MICHIGAN POWER COMPANY
One Summit Square, P. O. Box 60, Fort Wayne, Indiana 46801
(Names of companies filing this statement and
addresses of principal executive offices)
***
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
***
A. A. Pena, Treasurer
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
John F. Di Lorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
This Application-Declaration involves a proposal by
Indiana Michigan Power Company ("I&M"), to guaranty the payment of
a loan obligation of one of its industrial customers in connection
with the financing of certain utility and other assets or in the
alternative to make a direct loan to said customer for the
financing of those assets. In connection therewith, I&M may
acquire a promissory note. I&M is a subsidiary company of American
Electric Power Company, Inc. ("AEP"), a registered holding company
under the Public Utility Holding Company Act of 1935 (the "Act").
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
I&M requests authorization to guarantee loan payments,
including principal, interest, penalties, on a promissory note or
notes (the "Note(s)") from Iron Dynamics, Inc. ("IDI"), an Indiana
corporation, which is constructing a main mill substation, power
distribution facilities from station to mill, power distribution
facilities from main mill to coal preparation facilities, coal
preparation facilities and submerged arc furnace transformers and
vaults to be installed on IDI's property in DeKalb, Indiana in
I&M's service territory (the "Equipment"). The note(s) will
evidence a loan by GE Capital Corporation ("Lender" or "GE
Capital") or a similar lender to IDI in an amount up to $6,500,000
to acquire the Equipment. I&M will supply electric service to such
facility.
The loan will be made under a Loan Agreement, a copy of which
is filed as Exhibit B-1. The interest rate shall be the Index Rate
plus 1.75% or if converted pursuant to the Loan Agreement, a fixed
rate. On the date that the initial Loan is made, the "Index Rate"
means the interest rate equal to the per annum interest rate for
commercial paper issued for the period of time closest to 90 days
by GE Capital ("CPR") on such day, and thereafter the Index Rate
shall be adjusted every ninety days and shall be equal to the CPR
as in effect on the tenth day preceding the end of each such 90 day
period during the term of the Loans. If, for any reason
whatsoever, GE Capital does not issue such commercial paper on the
applicable date, the CPR shall be equal to the rate listed for "3-
Month" Commercial Paper under the column indicating an average rate
as stated in the Federal Reserve Statistical Release H.15(519) for
the calendar month preceding the calendar month in which such 90-
day period ends. If, for any reason, the Federal Reserve
Statistical Release H.15(519) is no longer published, the CPR shall
be equal to the latest Commercial Paper Rate for high grade
unsecured notes of 90 day maturity sold through dealers by major
corporations in multiples of $1,000, as indicated in the "Money
Rates" column of the Wall Street Journal, Eastern Edition,
published on the tenth day prior to the end of each 90-day period
or the first Business Day thereafter. The Note(s) will mature in
not more than 96 months and be secured by a first lien on the
Equipment. There will be no consideration paid by IDI for the
guaranty, a copy of which is attached as Exhibit B-3.
In the alternative, I&M requests authority to make a direct
loan to IDI and to acquire the Note(s) on substantially the same
terms as the loan from Lender to IDI.
Compliance with Rule 54
Rule 54 provides that in determining whether to approve
certain transactions other than those involving an exempt wholesale
generator ("EWG") or a foreign utility company ("FUCO"), as defined
in the Public Utility Holding Company Act of 1935, the Commission
will not consider the effect of the capitalization or earnings of
any subsidiary which is an EWG or FUCO if Rule 53(a), (b) and (c)
are satisfied. The requirements of Rule 53(a), (b) and (c) are
satisfied.
Rule 53(a)(1). As of March 31, 1998, AEP, through its
subsidiaries, had aggregate investment in FUCOs of $435,146,000.
This investment represents approximately 27.0% of $1,613,592,000,
the average of the consolidated retained earnings of AEP reported
on Form 10-K or Form 10-Q, as applicable, for the four consecutive
quarters ended March 31, 1998.
Rule 53(a)(2). Each FUCO in which AEP invests will maintain
books and records and make available the books and records required
by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the
operating company subsidiaries of AEP will, at any one time,
directly or indirectly, render services to any FUCO.
Rule 53(a)(4). AEP has submitted and will submit a copy of
Item 9 and Exhibits G and H of AEP's Form U5S to each of the public
service commissions having jurisdiction over the retail rates of
AEP's operating company subsidiaries.
Rule 53(b). (i) Neither AEP nor any subsidiary of AEP is the
subject of any pending bankruptcy or similar proceeding; (ii) AEP's
average consolidated retained earnings for the four most recent
quarterly periods ($1,613,592,000) represented an increase of
approximately $8,458,000 (or 0.5%) in the average consolidated
retained earnings from the previous four quarterly periods
($1,605,134,000); and (iii) for the fiscal year ended December 31,
1997, AEP did not report operating losses attributable to AEP's
direct or indirect investments in EWGs and FUCOs.
Rule 53(c). Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
All fees, commissions and expenses to be incurred by
Applicant-Declarant in connection with those aspects of the
proposed transactions which are subject to the jurisdiction of this
Commission, including this Commission's filing fee, are not
estimated to exceed $5,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The acquisition of the promissory notes by Blackhawk is
subject to Sections 6(a), 9(a) and 10 and Rule 52 under the Act.
No other aspects of the proposed transactions are subject to the
Act.
ITEM 4. REGULATORY APPROVALS
No state commission and no Federal commission, other than
this Commission, has jurisdiction over the proposed transactions
described in Item 1 above.
ITEM 5. PROCEDURE
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commission's Order per-
mitting this Application-Declaration to become effective be issued
on or before July 15, 1998. Applicants-Declarants waive any
recommended decision by a hearing officer or by any other respon-
sible officer of the Commission and waive the 30-day waiting period
between the issuance of the Commission's Order and the date it is
to become effective, since it is desired that the Commission's
Order, when issued, become effective forthwith. Applicants-
Declarants consent to the Office of Public utility Regulation
assisting in the preparation of the Commission's decision and/or
Order in this matter, unless the Office opposes the matters covered
by this Application-Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed
as part of this statement:
(a) Exhibits:
Exhibit A - None
Exhibit B-1 - Loan Agreement.
Exhibit B-2 - Form of Promissory Note
Exhibit B-3 - Form of Guaranty
Exhibit C - None
Exhibit D - None
Exhibit E - None
Exhibit F - Opinion of Counsel
(b) Financial Statements:
None required.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
It is believed that permitting this Application-Declara-
tion to become effective will not constitute a major Federal action
significantly affecting the quality of the human environment. No
other Federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transactions.
SIGNATURES
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned have duly caused this
statement to be signed on their behalf by the undersigned thereunto
duly authorized.
INDIANA MICHIGAN POWER COMPANY
By: /s/ A. A. Pena
Treasurer
Dated: June 15, 1998
EXHIBIT F
American Electric Power
Service Corporation
1 Riverside Plaza
Columbus, OH 43215-2373
(614) 223-1000
(614) 223-1687 (Telecopier)
Writer's Direct Dial No.
(614) 223-1649
June 15, 1998
Securities and Exchange Commission
Division of Corporate Regulation
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: American Electric Power Company, Inc.
Indiana Michigan Power Company
File No. 70-
Gentlemen:
In connection with the transactions proposed and described in the
Application-Declaration on Form U-1 filed with the Securities and
Exchange Commission by Indiana Michigan Power Company ("I&M") to
which this opinion is an exhibit, I have examined, among other
things, the Application-Declaration on Form U-1 and the exhibits
attached thereto.
In my opinion, if the Application-Declaration is permitted to
become effective; if all of the conditions precedent specified in
said exhibits are satisfied; and if the proposed transactions are
consummated in accordance with the aforesaid Application-Declara-
tion:
(a) all state laws applicable to the proposed
transactions will have been complied with;
(b) the Guaranty will be a valid and binding obligation
of I&M in accordance with its terms;
(c) I&M will have legally acquired promissory notes
from IDI, as described in the Application-Declaration;
and;
(c) the consummation of the proposed transactions
will not violate the legal rights of the holders of any
securities issued by I&M or any associate company.
I consent to the use of this opinion as part of the above-mentioned
Application-Declaration.
Very truly yours,
/s/ Ann B. Graf
Ann B. Graf
Counsel for
Indiana Michigan Power Company
<PAGE> Exhibit B-1
LOAN AGREEMENT
This Agreement, dated as of the ___ day of ____, 1998, by and
between ______________________________ ("Lender"), a_ _______
corporation, and IRON DYNAMICS, INC. ("IDI"), an Indiana
corporation.
W I T N E S S E T H:
WHEREAS, IDI has requested that Lender make loans to IDI to
finance the purchase of certain equipment more fully described on
Exhibit A hereto (the "Equipment");
WHEREAS, Lender is willing to make such loans on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the representations,
warranties and covenants contained herein, Lender and IDI hereby
agree as follows:
ARTICLE I
Loan Commitment
1.01 Commitment for Loan. Subject to Sections 1.03 and 2.01
hereof, Lender agrees, upon request of IDI, to make loans to IDI in
one or more transactions secured by the Equipment. Each initial
loan
hereunder and each subsequent loan is herein called a "Loan" and
collectively the "Loans"; provided that the total of the Loans will
not exceed the Commitment Limit. Any amounts borrowed hereunder and
repaid may not be re-borrowed notwithstanding the aggregate
outstanding amount of the loans at any time is less than the
Commitment Limit.
1.02 Method of Payment. Lender will transfer the Loans
directly to the appropriate manufacturer of Equipment or, in its
sole
discretion, to IDI upon IDI's request and upon receipt of evidence
satisfactory to Lender that (i) the Loans will be transferred to
such
manufacturer and (ii) IDI has paid such amount to the manufacturer.
1.03 Conditions Precedent to Initial Loan. Lender's
obligation to make the initial loan to IDI is subject to the
following conditions precedent:
(a) Lender shall have received the promissory note in
the
form of Exhibit B-2 hereto duly executed by IDI;
(b) Lender shall have received the Purchase Money
Security
Agreement in the form of Exhibit C hereto (the "Security
Agreement") duly executed by IDI, together with all financing
statements necessary to perfect the security interest of
Lender
in the Equipment duly executed by IDI;
(c) Lender shall have received an opinion of counsel for
IDI in form and substance reasonably satisfactory to Lender
generally addressing those matters covered in Section _.01(a),
(b), (c), (f) (as to generally applicable laws) and (g) (other
than matters of title and priority);
(d) Lender shall have received certificates of insurance
or other evidence reasonably acceptable to Lender certifying
that the insurance then carried or maintained on the Equipment
complies with Article VI hereof;
(e) Lender shall have received an agreement
subordinating
the lien of the Bank Mortgage to the lien of the Security
Agreement in the form of Exhibit _ hereto;
[(f) Lender shall have received the Guaranty of Indiana
Michigan Power Company ("I&M") in the form of Exhibit _
hereto;]
(f) Lender shall have received and approved copies of
the
environmental studies related to the Equipment and project
related to the Equipment; and
[(g) Lender shall have received authorization from the
SEC
under PUHCA to perform the transactions contemplated by this
Article I.]
ARTICLE II
Conditions Precedent of Lender; Commitment Limit
2.01 General Conditions Precedent of Lender. All of
Lender's
obligations under Article I of this Agreement are subject to the
following conditions precedent:
(a) All representations and warranties of IDI made in
this
Agreement are and remain true as of the date they were made
and
no Event of Default or Default under this Agreement shall have
occurred and be continuing;
(b) IDI shall furnish Lender with any additional or
updated documents, reports, certificates, affidavits and other
information, in form and substance reasonably satisfactory to
Lender, as Lender may reasonably require to evidence
compliance
by IDI with all provisions of this Agreement;
(c) Lender shall receive a payment request in the form
of Exhibit _ hereto, duly executed by IDI, together with a
copy
of the related invoice of the appropriate manufacturer, at
least
15 days prior to the date payment is due under the applicable
Purchase Agreement; and
(d) Lender shall make such inspection or inspections of
the equipment and under the applicable Purchase Agreement as
it deems reasonably necessary to determine that such amounts
are due under such Purchase Agreement; provided, that unless
Lender undertakes such inspection promptly following receipt
of the payment request, this condition shall be deemed to be
waived.
2.02 Commitment Limit. The total of (1) the amount of the
Loans, and (2) any other amounts owed by IDI to Lender under this
Agreement, the Note, the Security Agreement or any other document
entered into in connection with this Agreement, shall not exceed
$6,500,000 (the "Commitment Limit").
2.03 Commitment Termination Date. Lender's commitment to
make
the Loans shall expire on the earlier of (i) June 1, 1999 or (ii)
upon the occurrence of an Event of Default.
ARTICLE III
Repayment of Loan and Rate
3.01 Interest. The principal amount of the Loans will bear
interest at the Interest Rate from the date they are made until
they
are paid, payable as set forth herein; provided that during an
Event
of Default, the Loans shall bear interest at the higher of 10% per
annum or 4% over the base rate announced from time to time by
Citibank, N.A. in New York, New York (the "Default Rate"). For
purposes of this Agreement, the "Interest Rate" at any time shall
mean the Index Rate plus 1.75% or if converted pursuant to Section
3.05, the "Fixed Rate". [On the date that the initial Loan is
made,
the "Index Rate" means the interest rate equal to the per annum
interest rate for commercial paper issued for the period of time
closest to 90 days by [Lender] ("CPR") on such day, and thereafter
the Index Rate shall be adjusted every ninety days and shall be
equal
to the CPR as in effect on the tenth day preceding the end of each
such 90 day period during the term of the Loans. If, for any
reason
whatsoever, Lender does not issue such commercial paper on the
applicable date, the CPR shall be equal to the rate listed for "3-
Month" Commercial Paper under the column indicating an average rate
as stated in the Federal Reserve Statistical Release H.15(519) for
the calendar month preceding the calendar month in which such
90-day
period ends.] If, for any reason, the Federal Reserve Statistical
Release H.15(519) is no longer published, the CPR shall be equal to
the latest Commercial Paper Rate for high grade unsecured notes of
90 day maturity sold through dealers by major corporations in
multiples of $1,000, as indicated in the "Money Rates" column of
the
Wall Street Journal, Eastern Edition, published on the tenth day
prior to the end of each 90-day period or the first Business Day
thereafter. In no event shall charges constituting interest
payable
by IDI to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any part or
provision
of this Agreement is in contravention of any such law or
regulation,
such part or provision shall be deemed amended to conform thereto.
Any such excess which may have been collected shall be either
applied
as a credit against the unpaid principal balance or refunded, at
the
option of Lender.
3.02 Repayment of Principal and Interest.
(i) Subject to the terms and conditions hereof, principal and
interest payable on the Loans is payable in ninety-six (96)
consecutive monthly installments of _________________ ($_________)
each (the "Installments") on the last day of each month, beginning
the first such date after the Payment Commencement Date.
(ii) The amount and number of the Installments will not
change
with fluctuations in the Interest Rate. Any increase in the
Interest
Rate shall be reflected by a corresponding decrease in the portion
of the Installment credited to the remaining unpaid principal
balance. Any decrease in the Interest Rate shall be reflected by
a corresponding increase in the portion of the Installment credited
to the remaining unpaid principal balance. Notwithstanding the
foregoing, at the end of each 90-day period, IDI agrees to pay to
Lender forthwith an additional sum sufficient to amortize the
unpaid
principal over the balance of the original term at the Interest
Rate
for the first Installment.
(iii) All principal of the Loans is to be repaid no later
than
the date which is the earlier of (i) June 1, 2006 or (ii) the date
of any acceleration of the Loans as provided herein. Except as
provided herein, IDI may prepay the Loans in whole or in part at
any
time without penalty or premium upon thirty (30) days prior written
notice, which such notice shall include the date of prepayment
which
shall be the end of a 90-day period and the amount to be prepaid.
(iv) Prior to the Payment Commencement Date, IDI shall make
payments of interest on the outstanding principal amount of the
Loans, payable on the last day of each month, beginning on the
first
such date after a Loan is made at the Interest Rate on the date the
initial Loan is made (the "Interim Interest Rate"); provided that
on the Payment Commencement Date if (A) the Interest Rate with
respect to a Loan is less than the Interim Interest Rate the amount
of the difference between the amount of the payments calculated
using
the Interest Rate and the amount of the payments calculated using
the Interim Interest Rate (the "Difference") shall be credited to
the principal balance of such Loan or (B) the Interest Rate with
respect to a Loan is more than the Interim Interest Rate, IDI
agrees
to pay to Lender the amount of the Difference.
3.03 Payment and Computations. IDI will make each payment
hereunder and under the Note not later than 12:00 noon (New York,
New York time) on the day due in lawful money of the United States
of America and in same day funds to Lender at the address set forth
in the Note. All computations of interest under the Note shall be
made on the basis of a year of 360 days and 30 day months.
Whenever
any payment to be made hereunder or under the Note shall be stated
to be due on a Saturday, Sunday or a public or bank holiday for
banks
in New York, New York (any other day being a "Business Day"), such
payment may be made on the next succeeding Business Day. All
payments shall be applied first to Breakage Costs, if any, second,
to interest and then to principal. If any payment due under the
Loan
Agreement, Note or Security Agreement is not received within ten
(10)
days after the applicable payment date, IDI agrees to pay in
addition
to the amount of such installment a late payment charge of ten
percent (10%) of such payment amount, but not exceeding any lawful
maximum.
3.04 Payment Commencement Date. The "Payment Commencement
Date" shall be the earlier of the date on which IDI accepts the
final
shipment of Equipment and June 1, 1999.
3.05 Interest Rate Conversion; Prepayment Penalty. IDI may,
upon written notice to Lender at least thirty (30) days prior to
the
end of each 90-day period during the term of the Loans, elect to
convert the Interest Rate on all, but not less than all, of the
Loans
to a fixed percentage equal to 175 basis points over the average of
one, three and five year U. S. Treasuries as published in the Wall
Street journal on the date of such notice (the "Fixed Rate").
Notwithstanding anything herein to the contrary, upon any
prepayment
of the Loans made after the Interest Rate has been converted to the
Fixed Rate pursuant to this Section 3.05, IDI shall pay Lender an
amount required to compensate Lender for the losses, costs and
expenses which Lender may incur as a result of such prepayment
("Breakage Costs").
ARTICLE IV
Representations and Warranties
4.01 Representations and Warranties of IDI. IDI represents
and warrants to Lender that:
(a) IDI is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Indiana.
(b) The execution, delivery and performance by IDI of
this
Agreement and the transactions contemplated hereby are within
IDI's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (1) IDI's
charter or by-laws or (2) law or any contractual restriction
binding on or affecting IDI.
(c) This Agreement is, and the Note and Security
Agreement
and any other documents delivered in connection with this
Agreement when delivered will be, legal, valid and binding
obligations of IDI enforceable against IDI in accordance with
their respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, or other similar
laws
affecting the enforcement of creditors' rights in general, and
except as the availability of the remedy of specific
performance
is subject to general principles of equity (regardless of
whether such remedy is sought in proceeding in equity or at
law).
(d) Since __________________, there has been no material
adverse change in the financial condition of IDI.
(e) There is no pending or threatened action or
proceeding
affecting IDI before any court, governmental agency or
arbitrator (i) which questions the validity of this Agreement
or (ii) which could reasonably be expected to have a material
adverse effect on the ability of IDI to perform its
obligations
under this Agreement or on the financial condition, operations
or business of IDI.
(f) There are no consents, licenses, orders, authoriza-
tions, approvals, waivers, extensions or variances of, or
notices to or registrations or filings with any governmental
authority or regulatory body which are or will be required in
connection with the valid execution, delivery and performance
of this Agreement and the Purchase Agreements related to the
Agreement by IDI except as Equipment will be timely obtained.
(g) After the initial Loan, IDI will have good title to
the Equipment and the Security Agreement will be effective to
create in favor of Lender a legal, valid and enforceable first
lien on and security interest in the Equipment, subject to no
mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature ("Liens") except
for:
(A) the lien of the Bank Mortgage which will be subordinate to
the lien of the Security Agreement; (B) liens for taxes,
assessments and other governmental charges which are not yet
due or if due are contested in good faith; or (C)
materialmen's,
mechanics, workmen's and other statutory liens for amounts
which
are not yet due or if due are contested in good faith.
4.02 Representations and Warranties of Lender. Lender
represents and warrants to IDI that:
(a) Lender is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Indiana.
(b) The execution, delivery and performance by Lender of
this Agreement and the transactions contemplated hereby are
within Lender's corporate powers, have been duly authorized by
all necessary corporate action, and do not contravene (1)
Lender's charter or by-laws or (2) law or any contractual
restriction binding on or affecting Lender.
(c) This Agreement is a legal, valid and binding
obligation of Lender enforceable against Lender in accordance
with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights in general, and
except as the availability of the remedy of specific
performance
is subject to general principles of equity (regardless of
whether such remedy is sought in proceeding in equity or at
law).
(d) There is no pending or threatened action or
proceeding
affecting Lender before any court, governmental agency or
arbitrator, which questions the validity of this Agreement or
the ability of Lender to perform its obligations hereunder.
(e) There are no consents, licenses, orders, authoriza-
tions, approvals, waivers, extensions or variances of, or
notices to or registrations or filings with any governmental
authority or regulatory body which are or will be required in
connection with the valid execution, delivery and performance
of this Agreement by Lender [except for the authorization of
the SEC under PUHCA].
ARTICLE V
Covenants
5.01 Covenants of IDI.
(a) Financial Information. IDI covenants that it will
deliver (i) (A) as soon as available and in any event within
ninety (90) days after the end of each of the first three (3)
quarters of each fiscal year of IDI, the balance sheet of IDI
as of the end of each such quarter and the statement of income
and retained earnings of IDI for the period commencing at the
end of the previous fiscal year and ending with the end of
such
quarter, certified by the chief financial officer of IDI, and
(B) as soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of IDI,
the
balance sheet of IDI as of the end of the year and the
statement
of income and retained earnings of IDI for such year,
certified
by an independent public accountant of recognized standing;
and
(ii) it will allow Lender to review and inspect such other
information respecting the Equipment or the condition or
operations, financial or otherwise, of IDI as Lender may from
time to time reasonably request. Lender agrees not to
disclose
or permit to be disclosed any information provided to it in
accordance with Subsection 5.01(a)(i) that is clearly marked
as Confidential except as may be required by law. Review and
inspection of information under Subsection 5.01(a)(iii) other
than respecting the Equipment shall be conducted by an
independent certified public accounting firm retained by
Lender,
which accounting firm will enter into a reasonable
confidential-
ity agreement with IDI.
(b) Compliance with Laws. IDI covenants that it shall
comply in all material respects with all applicable laws,
rules,
regulations and orders, such compliance to include, without
limitation, laws, rules, regulations and orders relating to
the
construction, operation, use and physical condition of the
Equipment and paying before the same become delinquent, all
taxes, assessments and governmental charges imposed upon it or
any of its properties, except to the extent contested in good
faith.
(c) Notices. IDI covenants that forthwith upon
obtaining
knowledge of an Event of Default or Default, it will deliver
to Lender an officer's certificate specifying the nature and
period of existence thereof and what action IDI proposes to
take
with respect thereto.
(d) Limitations on Transfer of and Liens on Equipment.
IDI is and will remain the sole and lawful owner, and in
possession of the Equipment and has the right and authority to
grant the security interest described in the Security
Agreement.
IDI covenants that IDI will not sell, assign transfer or
otherwise dispose of any of the Equipment to any other person
and will not create, permit or suffer to exist, and will
defend
the Equipment against and take such other action as is
necessary
to remove, any Liens other than Permitted Liens.
(e) Inspection. Upon reasonable notice, IDI will give
Lender the right to visit and inspect, at its expense, the
Equipment and any other properties of IDI, to examine its
books
of account and to discuss the affairs, finances and accounts
of IDI with their officers and accountants, all at such
reasonable times and as often as Lender may reasonably
request.
(f) Maintenance. IDI will operate, service, maintain
and
repair the Equipment and replace all necessary components
thereof so that it will have the capacity and functional
ability
to perform, on a continuing basis in normal operations, the
functions for which it was designed and will maintain the
Equipment in accordance with the manufacturer's and industry
standards, normal wear and tear excepted.
5.02 [Reserved].
5.03 [Reserved].
5.04 UCC Statements. IDI shall sign and file such
continuation statements and other documents as are necessary to
maintain the first lien on and security interest in the Equipment.
Upon payment of all amounts owed to Lender under this Agreement,
Lender will file such termination statements and releases as are
necessary to release its security interest.
ARTICLE VI
Insurance
6.01 Required Insurance. Until the Note and all amounts due
under this Agreement are paid in full, IDI shall carry and
maintain,
or cause to be carried and maintained, at least the following
insurance coverage, in each case with insurers of recognized
responsibility.
(a) 'All risk' property insurance covering physical loss
with respect to the Equipment in such amounts and with such
other terms as are in accordance with property insurance
standards prevalent in the industry, but in no event in an
amount less than the amount of the principal remaining to be
paid on the Loans, endorsed to provide that (1) Lender is
included as a loss payee, as its interest may appear, but
shall
not be liable for the payment of premiums; (2) any payment
thereunder for loss or damage shall be made to Lender and IDI;
(3) the insurer thereunder waives all rights to subrogation
against Lender with respect to its interest in the Equipment;
and (4) such insurance shall be primary without right of
contribution of any other insurance carried by or on behalf of
Lender with respect to its interest in the Equipment; and
(b) Bodily injury and property damage liability
insurance
(including product liability, completed operations and
personal
injury insurance) covering claims arising out of the
ownership,
operation, maintenance, condition or use of the Equipment in
such amounts and with such other terms as are in accordance
with
prudent industry practice with single-limit coverage in an
amount not less than $10,000,000, endorsed to provide that (1)
Lender is included as an additional insured; (2) the insurer
thereunder waives all rights to subrogation against Lender;
and
(3) such insurance shall be primary without right of
contribution of any other insurance carried by or on behalf of
Lender with respect to its interest in the Equipment.
ARTICLE VII
Events of Default
7.01 Acceleration. If any of the following events (an
"Event
of Default"; a "Default" means any of such events whether any
requirement for notice or lapse of time shall have occurred) shall
occur and be continuing:
(a) (i) IDI shall fail to pay within 10 days after it
is due, any amount due on the Note or any other amounts
payable
under this Agreement or (ii) IDI shall fail to pay within 17
days after it is due any amount payable under the Contract for
Electric Service dated _________________ between IDI and
Lender
(the "Electric Service Contract"); or (iii) there shall have
occurred a default under, or a termination of the Off-Take
Agreement dated as of January 20, 1998 between IDI and Steel
Dynamics, Inc.;
(b) IDI shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the
Security Agreement on its part to be performed or observed and
any such failure shall remain unremedied for thirty (30) days
after written notice thereof shall have been given to IDI by
Lender;
(c) Any representation or warranty made herein or
contained in any certificate, document or financial or other
statement furnished to Lender pursuant to this Agreement shall
prove to have been incorrect in any material respect when
made;
(d) IDI shall fail to pay the principal of, or interest
on, any obligation of IDI for borrowed money in excess of
$15,000,000 when due, whether by acceleration, by required
prepayment or otherwise, for a period longer than any period
of grace provided in such obligation, or fail to perform any
other term, condition or covenant contained in any such
obligation, the effect of any of the foregoing of which is to
cause such obligation then to become due prior to its stated
maturity, unless such failure shall have been cured;
(e) IDI shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by
or against IDI seeking to adjudicate it a bankrupt or
insolvent,
or seeking liquidation, winding up, reorganization,
arrangement,
adjustment, protection, relief or composition of it or its
debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee
or other similar official for it or for any substantial part
of its property and if the proceeding is instituted against
IDI,
it is not dismissed within 60 days; or IDI shall take any
corporate action to authorize any of the actions set forth
above
in this clause (d);
(f) The Electric Service Contract shall terminate or be
terminated, or IDI shall abandon construction or operation of
the Plant;
(g) Funds have not been advanced to IDI pursuant to the
financing described in IDI's Information Memorandum dated
September, 1997 and Projected Financial Statements dated
October, 1997 within sixty (60) days of the date hereof;
then (i) if such event is an Event of Default specified in clause
(e) of this Section 9.01 with respect to IDI, the Note shall
automatically become immediately due and payable at par together
with
interest accrued thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by IDI, and (ii)
if such event is any other Event of Default, Lender may at its
option, by notice in writing to IDI, declare the Note to be, and
the
Note shall thereupon be and become, immediately due and payable at
par together with interest accrued thereon without presentment,
demand, protest or other notice of any kind, all of which are
hereby
waived by IDI.
7.02 Other Remedies. If any Event of Default or Default
shall
occur and be continuing, Lender may proceed to protect and enforce
its rights under this Agreement and the Note by exercising such
remedies as are available to it in respect thereof under the
Security
Agreement or applicable law, either by suit in equity or by action
at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy
conferred
in this Agreement upon Lender is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative
and
shall be in addition to every other remedy conferred herein or now
or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE VIII
Liability
8.01 Indemnification. IDI shall protect, indemnify, save
harmless, and defend Lender from and against any losses,
liabilities,
costs, expenses, suits, actions, claims, and all other obligations
and proceedings whatsoever, including, without limitation, all
judgments rendered against, and all fines and penalties imposed
upon
Lender, and any reasonable attorneys' fees and any other costs of
defense (collectively the "Liabilities") arising out of injuries to
persons, including death, or damage to property, to the extent
caused
by, or occurring in connection with any act or omission of IDI, its
employees, its agents, its contractors or subcontractors, or in any
way attributable to the ownership, or the construction, use or
operation of the Equipment (including, without limitation, latent
and other defects, whether or not discoverable by Lender or IDI and
any claim for patent, trademark or copyright infringement or
environmental damage), except that IDI's obligation to indemnify
Lender shall not apply to any Liabilities to the extent caused by
Lender's gross negligence or willful misconduct. IDI shall, upon
the
request of Lender, defend any action based on, or arising out of,
any of the foregoing.
10.02 Lender and IDI Responsibility. Lender assumes no
responsibility of any kind with respect to ownership, construction,
maintenance or operation of the Equipment and shall not be liable
for any loss, injury (including death), damage to or destruction of
property (including loss of use thereof) arising out of such
ownership, construction, maintenance or operation or out of any use
by IDI or others, of the Equipment, except to the extent such
damage
or injury shall be caused by Lender's gross negligence or wilful
misconduct.
8.03 Affiliates and Others. Any indemnification of Lender
or any limitation of Lender's liability which is made or granted
under this Article VIII shall to the same extent apply to Lender's
directors, officers, employees and agents, and to Lender's
affiliated
companies, including any directors, officers, employees and agents
thereof.
ARTICLE IX
Miscellaneous
9.01 Modification; Waiver. This Agreement may be modified,
amended or supplemented in any manner and at any time only by a
written instrument executed by IDI and Lender. The failure of
either
party to enforce or insist upon compliance with any of the terms or
conditions of this Agreement shall not constitute a general waiver
or relinquishment of any such terms or conditions, but the same
shall
be and remain at all times in full force and effect.
9.02 Entire Agreement. This Agreement supersedes any and all
other understandings, contracts or agreements, oral or written,
among
the parties hereto in respect of the subject matter of this
Agreement.
9.03 Costs and Expenses. IDI agrees to pay or reimburse
Lender
for the payment of (i) all reasonable out-of-pocket expenses,
including reasonable attorney's fees, arising in connection with
the
enforcement or preservation of any rights under this Agreement, the
Note and the Security Assignment, and (ii) any and all present and
future stamp and other taxes (including interest and penalties, if
any) which may be assessed or payable in respect of the Note, or
any
modification of the Note, or of the Security Agreement. At its
option Lender may discharge taxes, liens, security interests or
other
encumbrances at any time levied or placed on the Equipment and may
pay for the maintenance, insurance and preservation of the
Equipment
or to effect compliance with this Agreement and the Security
Agreement. IDI agrees to reimburse Lender on demand for any
payment
made or any expense incurred by Lender pursuant to the foregoing
authorization.
9.04 Rights and Remedies. The rights and remedies granted
under this Agreement shall not be exclusive rights and remedies but
shall be in addition to all other rights and remedies available at
law or in equity.
9.05 Further Actions. Each Party shall execute and deliver
such other certificates, agreements, conveyances, certificates of
title and other documents and take such other actions as may
reasonably be requested by the other Party in order to consummate
or implement the transactions contemplated by this Agreement.
9.06 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered or mailed, registered mail,
first-
class postage paid,
If to Lender:
_____________________________
_____________________________
_____________________________
_____________________________
If to IDI:
_____________________________
_____________________________
_____________________________
_____________________________
or to such other address or to such other person as any Party
hereto
shall have last designated by notice to the other Party.
9.07 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
Parties
hereto and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, by operation of law or
otherwise, by IDI without the prior written consent of Lender,
except
that IDI may collaterally assign this Agreement under the Bank
Assignment. Lender may assign this Agreement, the Security
Agreement
and the Note without notice to IDI, and IDI waives any defense,
counterclaim or cross-complaint by IDI against any assignee.
Except
as aforesaid, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto
and
their said successors and assigns, any rights, remedies or
obligations under or by reason of this Agreement.
9.08 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and
effect.
9.09 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall constitute one and the same
instrument.
9.10 Headings. The article and section headings in this
Agreement are for convenience of reference only and shall not be
deemed to alter or affect the meaning or interpretation of any
provisions hereof.
9.11 Governing Law. This Agreement shall be construed,
performed and enforced in accordance with the laws of the State of
Indiana.
9.12 Termination. This Agreement shall terminate upon the
IDI
payment to Lender of all Loans, interest thereon and other amounts
owed to Lender under this Agreement, the Note or the Security
Agreement, if any, and the performance by IDI of all of its other
obligations under this Agreement, the Note and the Security
Agreement; provided, however, that the provisions of Article VIII
and the confidentiality provisions of Section 5.01 shall survive
the
termination of this Agreement pursuant to this Section 9.12.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement
to be executed as of the date first above written.
[Lender] IRON DYNAMICS, INC.
By:_________________________
By:_____________________
<PAGE>
Exhibit B-2
Form of Promissory Note
PROMISSORY NOTE
$6,500,000 ________________, 1998
IRON DYNAMICS, INC., an Indiana corporation (the "Company"),
for value received, hereby promises to pay to the order of
_______________________ , a(n) _____________ corporation ("Lender")
the principal amount of SIX MILLION FIVE HUNDRED THOUSAND DOLLARS
($6,500,000) or, if less, the unpaid principal amount of Lender's
Loans under the Loan Agreement dated as of ______________________,
1998, between the Company and Lender (the "Loan Agreement").
Capitalized terms used herein but not otherwise defined shall have
the meanings given to them in the Loan Agreement. The principal of
the Loans must be paid to Lender in accordance with the Loan
Agreement. The Company also promises to pay interest to Lender on
the unpaid principal amount of the Loans at the Interest Rate set
forth in the Loan Agreement, as adjusted from time to time as set
forth therein. All such principal and interest shall be payable in
lawful money of the United States of America in same day or
immediate funds at __________________________________________.
Anything herein to the contrary notwithstanding, the
obligation of the Company to make payments of interest shall be
subject to the limitation that payments of interest shall not be
required to be made to Lender to the extent that Lender's receipt
thereof would not be permissible under the law or laws limiting
rates of interest which may be charged by Lender. Any amount in
excess of that which is legally permissible which may have been
collected shall be either applied as a credit against the unpaid
principal balance or refunded, at the option of Lender.
The date and amount of each Loan and each payment of principal
must be endorsed by Lender on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof,
provided that the failure to make any such endorsement on such
schedule shall not limit, extinguish or in any way modify the
obligation of the Company to repay the Loans to Lender.
This Note may be prepaid in whole or in part at any time and
is subject to acceleration upon the terms provided in the Loan
Agreement. This Note also is secured by a Purchase Money Security
Agreement, dated _____________________, 199_ between the Company
and Lender.
The Company hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF INDIANA.
IRON DYNAMICS, INC.
By:____________________________
Name:__________________________
Title:_________________________
SCHEDULE OF LOANS
Date Principal Payments of Balance Notation
Amount of Principal Outstanding Made By
Loan
Principal amounts are subject to adjustment as set forth in the
Loan Agreement.
Exhibit B-3
GUARANTY
To: General Electric Capital Corporation
Danbury Operating Center - VFS GROUP NAME
P.O. Box 3199
55 Federal Road
Danbury, CT 06810-3199 Date:______________________________
FOR VALUE RECEIVED and AS AN INDUCEMENT to you to enter
into a loan agreement, and otherwise extend financial credit and
accommodation, to Iron Dynamics, Inc., an Indiana corporation, with
its principal place of business at__________________________
(hereinafter, the "Customer") pursuant to the terms of (i) a Loan
Agreement dated __________________, 199_, (ii) Promissory Note
dated ____________________________, 199_ in the principal amount of
$6,500,000 (the "Note") and (iii) Purchase Money Security Agreement
dated _____________________, 199_, each made by Customer in favor
of you (together with any documents related thereto, individually
and collectively referred to as "Loan Agreements"), and in
consideration of your so doing, but without in any way binding you
to do so, the undersigned hereby guarantees to you, your successors
and assigns, the due, regular and punctual payment of any sum or
sums of money which Customer now owes you or which Customer shall
at any time or from time to time hereafter owe you under each Loan
Agreement, and whether it represents an original balance, an
accelerated balance, a balance reduced by part payment or a
deficiency after sale of collateral or otherwise, and the
undersigned does hereby undertake and guarantee to pay on demand
all loses, costs, attorney's fees and expenses which may be
suffered by you by reason of Customer's default under each Loan
Agreement or the default of the undersigned under this Guaranty.
In the event that the Customer shall fail to pay duly and
punctually to you any amounts guaranteed hereby, the undersigned
will, within ten (10) days after receipt of notice from you, duly
pay such amounts to you.
The undersigned agrees that nothing herein shall be
deemed to render this Guaranty in any way conditional, or to
require you first to seek or exhaust any remedy against Customer,
its successors or assigns, or any other person obligated or liable
under said Loan Agreement, this Guaranty or any other instrument;
and it is agreed that you may, upon default of Customer, or at any
time thereafter, make demand upon and receive payment or
performance by Customer, its successors or assigns, or any other
person.
Notice of acceptance of this Guaranty and of any default
by Customer or any other person is hereby waived. Presentment,
protest and demand, and notice of protest, demand and dishonor of
any and all Loan Agreements are hereby waived. The undersigned
waives any and all impairment of its rights, including without
limitation release of any obligor or collateral (with or without
substitution), failure to perfect or maintain perfection or to
obtain title to any collateral, howsoever arising. Notice of
adverse change in Customer's financial condition or of any other
fact which might materially increase the risk of the undersigned is
also waived, and the undersigned agrees that you shall not be
required first to foreclose, proceed against, or exhaust any
collateral or security for any indebtedness or obligation hereby
guaranteed, before requiring the undersigned to pay the full amount
of the liability hereby created. Suit may be brought and
maintained against the undersigned, at your election, without
joinder of Customer or any other person as parties thereto.
Extensions of the time of payment or renewals of the Loan
Agreements or extensions of the time of performance of agreements
or any other indulgence may be granted to Customer and/or any
secondary obligors on any of said Loan Agreements without notice to
the undersigned and all settlements, compromises, compositions,
accounts stated and agreed balances made in good faith between any
primary or secondary obligors on any Loan Agreement and Customer or
you shall be binding upon the undersigned. The undersigned hereby
waives exercise of possessory, collection, foreclosure or other
remedies by you against Customer, other obligors or collateral on
any and all Loan Agreements. In the event of default hereunder,
you may at any time inspect the undersigned's records, or at your
option, the undersigned shall furnish you with a current
independent audit report. Any failure by you to exercise your
rights hereunder shall not give rise to any estoppel against you or
excuse the undersigned from performing hereunder. Your waiver of
any right to demand performance hereunder shall not be a waiver of
any subsequent or other right to demand performance hereunder. IN
ANY ACTION, PROCEEDING OR LITIGATION BASED HEREON, IN CONNECTION
HEREWITH OR ARISING HEREFROM, THE UNDERSIGNED WAIVES ANY RIGHT TO
TRIAL BY JURY. All amounts payable hereunder shall be paid in
immediately available funds.
The obligations of the undersigned hereunder shall in no
way be affected or impaired by (i) Customer's voluntary or
involuntary bankruptcy, assignment for the benefit of creditors,
reorganization or similar proceedings affecting Customer or any of
its assets, or (ii) the release of Customer from any of its
agreements contained in any Loan Agreement by operation of law or
otherwise. The undersigned shall have no right of contribution,
subrogation, reimbursement, indemnity or any other form of recourse
to any assets or property of, or otherwise against, Customer or to
any collateral or security under the Loan Agreement. The
obligations of the undersigned hereunder shall be reinstated and
revived with respect to any amount which at any time is paid to you
and is thereafter required to be, and is restored or returned by
you to the undersigned or the undersigned's trustee or the Customer
or the Customer's trustee or receiver or similar official, upon the
bankruptcy, insolvency or reorganization of the undersigned or the
Customer or for any other reason, all as though such amount had not
been paid by the undersigned.
Each of the undersigned hereby represents and warrants,
as of the date hereof: that in connection with the loan to be made
by you to finance the purchase of equipment by the Customer from
you (which such loan would not be made without this Guaranty) and
the provision of electricity by the undersigned to power such
equipment pursuant to a Contract for Electric Service or otherwise,
the undersigned will derive financial and other benefits by
providing this Guaranty; that it is duly organized and validly
existing and has full corporate power to enter into this Guaranty
and to carry out the transactions contemplated hereby and that the
execution and delivery of this Guaranty has been duly authorized by
all necessary corporate action; that this Guaranty constitutes a
legal, valid and binding obligation enforceable in accordance with
its terms; that neither the execution of this Guaranty nor the
fulfillment of the obligations created hereunder will conflict with
or result in a breach of any other agreement or instrument to which
the undersigned is a party or by which it is bound or be in
violation or default of any statute, rule, or decree of any court,
administrative agency or governmental body to which it may be
subject; that all financial data of the undersigned previously
delivered to you present fairly the financial position of the
undersigned as of the date thereof and the results of operations of
the undersigned for the periods covered thereby, all in conformity
with generally accepted accounting principles, applied on a
consistent basis; that since the date of the latest such financial
data, there has been no material adverse change in the financial
condition of the undersigned that would materially impair the
undersigned's ability to perform its obligations hereunder; that
the undersigned is not in material default with respect to any
indenture, loan agreement, mortgage, lease, deed or other similar
agreement to which it is a party or by which it is bound; that
there are no suits or proceedings pending or, to the knowledge of
the undersigned, threatened in any court or before any regulatory
commission, board or other administrative or governmental agency
against or affecting the undersigned which will have a material
adverse effect on its financial condition or operations or that
would materially impair its ability to perform its obligations
hereunder; and that the undersigned has filed all federal, state
and local tax returns and other reports required by law and has
paid all charges that are due and payable, other than those being
contested in good faith.
Upon the occurrence of an Event of Default and payment
_______________ this Guaranty under any Loan Agreement, the
undersigned shall have the right to purchase all, but not less than
all, of your right and the Guaranty shall __________ title and
interest in and to the Loan Agreements upon at least 30 days prior
notice to you. The undersigned shall purchase such right, title
and interests for an amount equal to the aggregate of (i) the
aggregate unpaid principal amount of the Note, plus (ii) the amount
of accrued but unpaid interest on the Note plus (iii) all other
sums then owing hereunder and under the Loan Agreements, and
concurrently therewith, you shall sell, assign and transfer to the
undersigned all of your right, title and interest in the Loan
Agreements, including your obligations, which the undersigned
shall, upon any payment by the Customer be deemed to have made a
payment to you hereunder without the necessity of any notice or
actual transfer of funds. In addition, upon such purchase the
undersigned agrees to be bound by the terms and conditions of that
certain Consent and Agreement dated _____________, 1998 between you
and Mellon Bank, N. A., as your assignee.
As used in this Guaranty, the word "person" shall include
any individual, corporation or partnership, and refers to each of
the undersigned and to anyone absolutely, contingently, partly or
wholly liable for payment and/or performance of the Customer's
obligations being guaranteed hereunder. All of the undersigned's
rights and obligations hereunder are joint and several and shall
bind its or their heirs, representatives, successors or assigns.
The benefits hereof shall extend to and include your successors and
assigns. This Guaranty and each of its provisions may only be
waived, modified, varied, released, or be terminated by undersigned
serving written notice upon you, but as to all obligations of the
Customer, and unconditional until the same are fully paid,
performed and discharged. Your obligations hereunder shall remain
in full force and effect until termination (except with respect to
obligations accrued hereunder through such date of termination)
upon a determination by you, in your sole discretion, that the
Customer's financial condition warrants an investment grade credit
rating as established by you or a nationally recognized rating
agency.
If any provisions of this Guaranty are in conflict with
any applicable statute, rule or law, then such provisions shall be
deemed null and void to the extent that they may conflict
therewith, but without invalidating any other provision hereof.
This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard for the
choice of law provisions thereof.
Each signatory on behalf of a corporate guarantor
warrants that he or she had authority to sign on behalf of such
corporation and by so signing, to bind said guarantor corporation
hereunder.
IN WITNESS WHEREOF, this Guaranty is executed as of the day
and year above written.
INDIANA MICHIGAN POWER COMPANY
By:_________________________________
Name:_______________________________
Title:______________________________
Taxpayer ID Number:_________________
