AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
STEEL DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 3312 35-19299476
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
6714 POINTE INVERNESS WAY, SUITE 200
FORT WAYNE, INDIANA 46804
(260) 459-3553
(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.
6714 POINTE INVERNESS WAY, SUITE 200
FORT WAYNE, INDIANA 46804
(260) 459-3553
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
ROBERT S. WALTERS, ESQ.
BARRETT & MCNAGNY LLP
215 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
(260) 423-9551
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE REGISTRATION FEE
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9 1/2% Senior Notes due 2009......... $200,000,000 $1,000 $200,000,000 $18,400(1)
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Guaranties by certain SDI
Subsidiaries(2).................... -- -- -- --
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Totals(3).......................... $200,000,000 $1,000 $200,000,000 $18,400
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933. Pursuant to
Rule 457(n), no separate fee is payable with respect to the guaranty.
(2) The subsidiary guarantors are SDI Investment Company, STLD Holdings, Inc.,
Ferrous Resources, LLC and Dynamic Bar Products, LLC. We neither paid nor
received any consideration for any of the guaranties.
(3) Such amount represents the principal amount of the Notes to be exchanged
hereunder.
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.
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SUBJECT TO COMPLETION, DATED SEPTEMBER --, 2002
PRELIMINARY PROSPECTUS
[STEEL DYNAMICS, INC. LOGO]
OFFER TO EXCHANGE
$200,000,000 OF OUR 9 1/2% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
FOR
$200,000,000 OF OUR OUTSTANDING 9 1/2% SENIOR NOTES DUE 2009
CUSIP No. ____________
The Exchange Offer will Expire at 5:00 p.m.
New York City Time, on October [--], 2002, Unless Extended.
We are offering to exchange $200,000,000 aggregate principal amount of our
9 1/2% Senior Notes due 2009, registered under the Securities Act of 1933, for a
like principal amount of our outstanding 9 1/2% Senior Notes due 2009, which we
issued previously without registration under the Securities Act. In this
document we refer to the outstanding notes as the "old notes" and to our new
notes as the "Exchange Notes." We sometimes refer to the old notes and the
Exchange Notes collectively as the "notes."
The terms of the exchange are subject to the conditions described in this
prospectus.
Consider carefully the risk factors beginning on page 6 of this prospectus.
There is no active public trading market for the Outstanding Notes. We do
not intend to apply for listing of the Exchange Notes on any domestic securities
exchange or seek approval for quotation through any automated quotation system.
We will issue the Exchange Notes in denominations of $1,000. We will pay
interest on the Exchange Notes each March 15 and September 15. The first
interest payment will be due on September 15, 2002 with interest payable from
the March 15, 2002 payment of interest on the old notes. We may redeem any of
the notes beginning on March 15, 2006 at a redemption price of 104.750% of their
principal amount, plus accrued interest. The redemption price will decline to
102.375%, plus accrued interest, after March 15, 2007 and will be 100% of their
principal amount, plus accrued interest, beginning on March 15, 2008. We may
also redeem up to 35% of the aggregate principal amount of the outstanding notes
before March 15, 2005 with net proceeds of one or more sales of our capital
stock that at a redemption price equal to 109.500% of the principal amount of
the Exchange Notes being redeemed, plus accrued interest.
The terms of the Exchange Notes that we will issue in the exchange offer
are substantially the same as those of the outstanding old notes except that the
transfer restrictions and registration rights relating to the outstanding old
notes will no longer apply.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for old notes where such old
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period of 180
days after the expiration of this exchange offer (as defined herein), it will
make this prospectus available to any broker-dealer for use in connection with
any such resale. A broker-dealer may not participate in the exchange offer with
respect to old notes acquired other than as a result of market-making activities
or trading activities. See "Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS SEPTEMBER [--], 2002
TABLE OF CONTENTS
Where You Can Find More Information..... 1
Forward Looking Statements.............. 2
Summary................................. 4
Risk Factors............................ 6
Summary of the Terms of the Exchange
Offer................................. 17
Summary of the Terms of the Exchange
Notes................................. 21
Use of Proceeds......................... 24
Ratio of Earnings to Fixed Charges...... 24
Selected Financial and Operating Data... 25
Capitalization.......................... 28
Terms of the Exchange Offer............. 29
Description of the Exchange Notes....... 37
United States Federal Income Tax
Considerations........................ 71
Plan of Distribution.................... 75
Legal Matters........................... 75
Experts................................. 75
We have not authorized anyone to provide you with information that is
different from the information contained in this prospectus or to which we have
referred you.
This prospectus incorporates important business and financial information
about us from documents we publicly file with the Securities and Exchange
Commission. See the following section entitled "Where You Can Find More
Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Our SEC filings are also accessible
through the Internet at the SEC's website at http://www.sec.gov and on our
website at http://www.steeldynamics.com.
The SEC allows us to "incorporate by reference" into this prospectus the
information in documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus, and later information that we file with the SEC will update and
supersede this information. Pursuant to General Instruction B.1(a) to Form S-4,
we have elected to provide the information regarding us and our business by
reference to reports we regularly file with the SEC. We incorporate by reference
the following documents and any future filings we make with the SEC under
Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
the termination of the offering:
- SDI Annual Report on Form 10-K for the year ended December 31, 2001;
- SDI Proxy Statement on Schedule 14A dated April 26, 2002;
- SDI Quarterly Report on Form 10-Q dated May 15, 2002;
- SDI Quarterly Report on Form 10-Q dated August 14, 2002; and
- SDI Current Reports on Form 8-K, two dated February 5, 2002 and one each
dated February 26, 2002, February 27, 2002, March 14, 2002 and May 10,
2002.
Any statement contained in a document incorporated by reference into this
prospectus will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed to constitute a part of this prospectus except as so modified or
superseded.
The documents incorporated by reference into this prospectus are also
available from us upon request. We will provide a copy of any and all of the
information that is incorporated by reference into this prospectus to any person
by first-class mail, without charge, upon written or oral request. Any request
for documents
1
should be made by October [--], 2002 to ensure timely delivery of the documents
prior to the expiration of the exchange offer.
Requests for documents should be directed to:
Steel Dynamics, Inc., Investor Relations Department (Senior Notes Exchange)
6714 Pointe Inverness Way, Suite 200
Fort Wayne, Indiana 46804
(260) 459-3553
(260) 969-3590 (fax)
FORWARD LOOKING STATEMENTS
Throughout this prospectus, we may make statements that express our
opinions, expectations, or projections regarding future events or future
results, in contrast with statements that reflect historical facts. These
expressions, which we generally precede or accompany by such typical conditional
words as "anticipate," "intend," "believe," "estimate," "plan," "seek,"
"project" or "expect," or by the words "may," "will," or "should," are intended
to operate as "forward looking statements" of the kind permitted by the Private
Securities Litigation Reform Act of 1995, incorporated in Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. That legislation protects such predictive statements by creating a
"safe harbor" from liability in the event that a particular prediction does not
turn out as anticipated.
While we always intend to express our best judgment when we make statements
about what we believe will occur in the future, and although we base these
statements on assumptions that we believe to be reasonable when made, these
forward looking statements are not a guarantee of performance, and you should
not place undue reliance on such statements. Forward looking statements are
subject to many uncertainties and other variable circumstances, many of which
are outside of our control, that could cause our actual results and experience
to differ materially from those we thought would occur.
The following listing represents some, but not necessarily all, of the
factors that may cause actual results to differ from those anticipated or
predicted:
- cyclical changes in market supply and demand for steel; general economic
conditions; U.S. or foreign trade policy affecting steel imports or
exports; and governmental monetary or fiscal policy in the U.S. and other
major international economies;
- risks and uncertainties involving new products or new technologies, such
as our Iron Dynamics ironmaking process, in which the product or process
or certain critical elements thereof may not work at all, may not work as
well as expected, or may turn out to be uneconomic even if they do work;
- changes in the availability or cost of steel scrap, steel scrap
substitute materials or other raw materials or supplies which we use in
our production processes, as well as periodic fluctuations in the
availability and cost of electricity, natural gas or other utilities;
- the occurrence of unanticipated equipment failures and plant outages or
incurrence of extraordinary operating expenses;
- actions by our domestic and foreign competitors, including the addition
or reduction of production capacity, or loss of business from one or more
of our major customers or end-users;
- labor unrest, work stoppages and/or strikes involving our own workforce,
those of our important suppliers or customers, or those affecting the
steel industry in general;
- the effect of the elements upon our production or upon the production or
needs of our important suppliers or customers;
- the impact of, or changes in, environmental laws or in the application of
other legal or regulatory requirements upon our production processes or
costs of production or upon those of our suppliers or customers,
including actions by government agencies, such as the U.S. Environmental
Protection Agency or the Indiana Department of Environmental Management,
on pending or future environmentally related construction or operating
permits, such as the one affecting our Columbia City, Indiana structural
steel and rail mini-mill;
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- pending, anticipated or unanticipated private or governmental liability
claims or litigation, or the impact of any adverse outcome of any
currently pending or future litigation on the adequacy of our reserves,
the availability or adequacy of our insurance coverage, our financial
well-being or our business and assets;
- changes in interest rates or other borrowing costs, or the effect of
existing loan covenants or restrictions upon the cost or availability of
credit to fund operations or take advantage of other business
opportunities;
- changes in our business strategies or development plans which we may
adopt or which may be brought about in response to actions by our
suppliers or customers, and any difficulty or inability to successfully
consummate or implement as planned any of our projects, acquisitions,
joint ventures or strategic alliances; and
- the impact of governmental approvals, litigation, construction delays,
cost overruns or technology risk upon our ability to complete, start-up
or continue to profitably operate a project, or to operate it as
anticipated.
We also believe that you should read the many factors described in "Risk
Factors" immediately following the "Prospectus Summary" to better understand the
risks and uncertainties inherent in our business and underlying any forward
looking statements.
Any forward looking statements which we make in this prospectus speak only
as of the date of such statement. Comparisons of results for current and any
prior periods are not intended to express any future trends or indications of
future performance, unless expressed as such, and should only be viewed as
historical data.
3
SUMMARY
The following is a summary of material information about our business, our
company and this exchange offer. More detailed information concerning these
matters appears elsewhere in this prospectus and the information in documents
which we incorporate by reference in this prospectus. We also refer you to the
section of this prospectus entitled "Risk Factors" for a discussion of certain
issues that should be considered in evaluating an investment in the notes.
STEEL DYNAMICS
We are one of the most profitable mini-mill steel producers in the United
States in terms of operating profit per ton. We primarily own and operate a
state-of-the-art, low-cost flat-rolled mini-mill located in Butler, Indiana. Our
Butler mini-mill began commercial production in January 1996 and was constructed
in only 14 months, representing what we believe is the shortest construction
period ever for a facility of this kind. The mini-mill currently has an annual
production capacity of 2.2 million tons. The total capital cost of our Butler
mini-mill was $630 million, which we believe is significantly less than the cost
of comparable mini-mills currently operating. Our Butler mini-mill produces a
broad range of high quality hot-rolled, cold-rolled and coated steel products,
including a large variety of high value-added and high margin specialty products
such as thinner gauge rolled products and galvanized products. We sell our
products directly to end-users, intermediate steel processors and service
centers primarily in the Midwestern United States. Our products are used in
numerous industry sectors, including the automotive, construction and commercial
industries.
In May 2002, we announced plans to construct a low-cost, coil coating
facility at our Butler mini-mill that will further increase our range of
value-added capabilities. Subject to our receipt of applicable permits, we
anticipate starting construction of the facility within the next several months
and expect to commence coating operations in the middle of 2003. The coating
facility is currently expected to have an annual production capacity of 240,000
tons and is estimated to cost $25-$30 million.
In May 2001, we began construction of a new state-of-the-art structural
steel and rail mini-mill in Columbia City, Indiana. Our Columbia City mini-mill
is designed to have an annual production capacity of 1.3 million tons and
produce structural steel and rails at a higher quality and lower cost than
comparable mini-mills. We expect to spend approximately $315 million to
construct this mini-mill, of which $280 million has been spent as of June 30,
2002. We believe that the initial capital construction costs of our Columbia
City mini-mill will be among the lowest in the industry for such a facility. We
commenced commercial structural steel operations in late June 2002 and have
shipped our first structural products to initial customers. We expect to ramp us
these operations through regular product introductions and be fully operational
by the end of 2002. In addition, we expect to commence commercial production of
rails during the first quarter of 2003. We constructed our structural steel
facility in less than 12 months, which we believe is the shortest construction
period ever for a facility of this kind. Our structural steel operation is
designed to produce steel products for the construction, transportation and
industrial machinery markets. Our rail manufacturing operation is designed to
produce a variety of rail products for the railroad industry.
Through our joint venture, New Millennium Building Systems, LLC, we also
produce and sell a broad range of steel joists, girders and trusses, as well as
roof and floor decking materials for use in the construction of commercial,
industrial and institutional buildings.
Steel Dynamics, Inc. is an Indiana corporation. Our principal executive
offices are located at 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana
46804, and our telephone number at that address is (260) 459-3553.
SDI Investment Company, Ferrous Resources, LLC, STLD Holdings, Inc and
Dynamic Bar Products, LLC, each a 100% owned subsidiary, have agreed to guaranty
payment of the principal of, premium, if any, and interest on the notes, jointly
and severally with Steel Dynamics, Inc., on an unsecured unsubordinated basis.
In this prospectus "Steel Dynamics," "the Company," "SDI," "we," "us" and
"our" refer to Steel Dynamics, Inc. and its subsidiaries, including the
guarantor, unless the context requires otherwise.
4
RECENT DEVELOPMENTS
PURCHASE OF QUALITECH STEEL ASSETS IN PITTSBORO, INDIANA
On July 29, 2002, we announced that we entered into a definitive agreement
with Qualitech Steel SBQ LLC to purchase Qualitech's special bar quality
mini-mill assets located in Pittsboro, Indiana. We agreed to pay $45 million for
the assets and announced plans to invest between $60 and $70 million of
additional capital to convert the Qualitech mini-mill to the production of
between 500,000 and 600,000 annual tons of merchant and reinforcing bar
products. We agreed to close the transaction within 25 days, subject to certain
conditions and approvals. In addition, we also announced our plans to complete
construction and start-up of this mini-mill within 12 months after the closing
of the transaction and to begin shipping our first products during the second
half of 2003. However, on August 2, 2002, Nucor Corporation filed suit against
Qualitech Steel SBQ LLC in Hendricks County, Indiana Superior Court, seeking to
enjoin Qualitech from selling its assets to us by reason of rights they allege
under a prior purchase agreement. On August 6, 2002, the court entered a
temporary restraining order prohibiting Qualitech from closing under our
purchase agreement pending a preliminary injunction hearing scheduled for August
19, 2002. On August 7, 2002, we intervened in this lawsuit to assert our rights
under our purchase agreement with Qualitech. On August 19, 2002, after the
conclusion of evidence at the preliminary injunction hearing, the Hendricks
County, Indiana Superior Court ruled that Nucor "has little, if any, chance of
prevailing at a trial based upon the evidence presented" and denied Nucor's
injunction request. On August 20, 2000, Nucor filed a notice of appeal with the
Indiana Court of Appeals. On September 6, 2002, we closed on and completed the
purchase.
The continued pendency of this litigation, notwithstanding the completion
of our purchase, creates uncertainties with respect to our ability to maintain
our ownership of these assets or to implement our conversion and start-up plans
as previously announced. We may also be limited or delayed in achieving our
objectives based upon other unforeseen circumstances or events beyond our
control. We refer you to "Risk Factors -- We may be unable to maintain our
ownership of the Qualitech assets, or we may be delayed in the construction and
start-up of this mini-mill" for risks associated with this potential
acquisition.
5
RISK FACTORS
You should carefully consider the following risk factors and the other
information contained elsewhere or incorporated by reference in this prospectus
before making an investment decision.
RISKS RELATED TO OUR INDUSTRY
IN RECENT YEARS, IMPORTS OF STEEL INTO THE UNITED STATES HAVE ADVERSELY
AFFECTED, AND MAY AGAIN ADVERSELY AFFECT, U.S. STEEL PRICES, WHICH WOULD IMPACT
OUR SALES, MARGINS AND PROFITABILITY
Excessive imports of steel into the United States have in recent years, and
may again in the future, exert downward pressure on U.S. steel prices and
significantly reduce our sales, margins and profitability. U.S. steel producers
compete with many foreign producers. Competition from foreign producers is
typically strong, but it has greatly increased as a result of an excess of
foreign steelmaking capacity and a weakening of certain foreign economies,
particularly in Eastern Europe, Asia and Latin America. The economic
difficulties in these countries have resulted in lower local demand for steel
products and have tended to encourage greater steel exports to the United States
at depressed prices.
In addition, we believe the downward pressure on, and depressed levels of,
U.S. steel prices in recent years have been further exacerbated by imports of
steel involving dumping and subsidy abuses by foreign steel producers. Some
foreign steel producers are owned, controlled or subsidized by foreign
governments. As a result, decisions by these producers with respect to their
production, sales and pricing are often influenced to a greater degree by
political and economic policy considerations than by prevailing market
conditions, realities of the marketplace or consideration of profit or loss. For
example, between 1998 and 2001, when imports of hot-rolled and cold-rolled
products increased dramatically, domestic steel producers, including us, were
adversely affected by unfairly priced or "dumped" imported steel. Even though
various protective actions taken by the U.S. government during 2001, including
the enactment of various steel import quotas and tariffs, have resulted in an
abatement of some steel imports during 2002, these protective measures are only
temporary, and, in fact, some have already been reversed or weakened by
exemptions. When these measures expire or if they are further relaxed, or if
increasingly higher U.S. steel prices enable foreign steelmakers to export their
steel products into the United States even with the presence of tariffs, the
resurgence of substantial imports of foreign steel could again create downward
pressure on U.S. steel prices.
INTENSE COMPETITION AND EXCESS GLOBAL CAPACITY IN THE STEEL INDUSTRY MAY
CONTINUE TO EXERT DOWNWARD PRESSURE ON OUR PRICING
We may not be able to compete effectively in the future as a result of
intense competition. Competition within the steel industry, both domestically
and worldwide, is intense and it is expected to remain so. We compete primarily
on the basis of (1) price, (2) quality and (3) the ability to meet our
customers' product needs and delivery schedules. Our primary competitors are
other mini-mills, which may have cost structures and management cultures more
similar to ours than integrated mills. We also compete with many integrated
producers of hot-rolled, cold-rolled and coated products, many of which are
larger and have substantially greater capital resources. The highly competitive
nature of the industry, in part, exerts downward pressure on prices for some of
our products. Further, over the past few years, approximately 30 domestic steel
producers have entered bankruptcy proceedings. In some cases, these previously
marginal producers have been able to emerge from bankruptcy reorganization with
lower and more competitive cost structures. In other cases, steelmaking assets
have been sold through bankruptcy proceedings to other steelmakers or to new
companies, at greatly depressed prices. The reemergence of these producers or
their successors may further increase the competitive environment in the steel
industry and contribute to price declines. In the case of certain product
applications, steel competes with other materials, including plastic, aluminum,
graphite composites, ceramics, glass, wood and concrete.
In addition, global overcapacity in steel manufacturing and its negative
impact on U.S. steel pricing are likely to continue to persist and could have a
negative impact on our sales, margins and profitability. The U.S. steel industry
continues to be adversely impacted by excess global steel manufacturing
capacity. Over the last decade, the construction of new mini-mills, expansion
and improved production efficiencies of some integrated mills and substantial
expansion of foreign steel capacity have all led to the excess of manufacturing
6
capacity. Increasingly, this overcapacity, combined with the high levels of
steel imports into the United States, has exerted downward pressure on domestic
steel prices, including the prices of our products, and has resulted in, at
times, a dramatic narrowing, or with many companies the elimination, of gross
margins.
THE POSITIVE EFFECTS OF PRESIDENT BUSH'S MARCH 5, 2002 ORDER IN
CONTRIBUTING TO THE REDUCTION OF EXCESSIVE IMPORTS OF STEEL INTO THE UNITED
STATES HAVE BEEN AND MAY BE FURTHER LESSENED IF THERE ARE SUCCESSFUL APPEALS TO
THE WORLD TRADE ORGANIZATION BY THE EXPORTING COUNTRIES OR IF DOMESTIC OR
INTERNATIONAL POLITICAL PRESSURE CONTINUES TO RESULT IN A RELAXATION OF, OR
SUBSTANTIAL ADDITIONAL EXEMPTIONS FROM, THE TARIFFS CONTAINED IN THE ORDER
If the amount, scope or duration of the Section 201 orders continue to be
eroded by exemptions or otherwise are lessened or adversely changed, it could
lead to a resurgence of flat-rolled steel imports, an increase of steel slab
imports and/or an increase in welded pipe and tube imports. Any of these results
would again put downward pressure on U.S. flat-rolled prices which would
negatively impact our sales, margins and profitability. On June 22, 2001, the
Bush Administration requested that the International Trade Commission, or ITC,
initiate an investigation under Section 201 of the Trade Act of 1974 to
determine whether steel is being imported into the United States in such
quantities as to be a substantial cause of serious injury to the U.S. steel
industry. In October 2001, the ITC found "serious injury" due to imports of
steel products, including the products we manufacture, and in December 2001, the
ITC recommended that the President impose tariffs of approximately 20%-40%, as
well as tariff quotas in connection with certain products such as steel slabs.
On March 5, 2002, President Bush, among other actions, imposed a three year
tariff of 30% for the first year, 24% for the second year and 18% for the third
year on imports of hot-rolled, cold-rolled and coated sheet, as well as on
imports of steel slabs in excess of a specified annual quota.
Imports of flat-rolled steel have declined, in part, due to the imposition
of dumping duties that have been imposed on certain imports of foreign steel,
and, in part, due to the imposition of significant tariffs as a result of this
Section 201 action. These events have, in part, allowed us to begin restoring
prices on flat-rolled products. While the President's decision to implement a
Section 201 remedy is not appealable to U.S. courts, foreign governments may
appeal, and some have appealed, to the World Trade Organization, or WTO. The
European Union, Japan and other countries are currently prosecuting such
appeals. These dispute settlement proceedings at the WTO and further appeals to
the Appellate Body of the WTO generally take 15-24 months. Moreover, a number of
affected countries have imposed or threatened to impose various retaliatory
tariffs on U.S. steel or other products or have sought various product
exemptions from the imposition of the tariffs. As of the end of August 2002, the
U.S. government has granted more than 725 product exemptions pursuant to these
requests and more are likely to be requested and granted during 2003.
Accordingly, there is a risk that additional rulings adverse to the United
States or substantial additional political pressures could result in the
President changing the remedy, granting substantial further exemptions from the
remedy, or terminating the remedy entirely prior to the full three years,
although any such modification would apply only prospectively.
OUR LEVEL OF PRODUCTION AND OUR SALES AND EARNINGS ARE SUBJECT TO
SIGNIFICANT FLUCTUATIONS AS A RESULT OF THE CYCLICAL NATURE OF THE STEEL
INDUSTRY AND THE INDUSTRIES WE SERVE
The price of steel and steel products may fluctuate significantly due to
many factors beyond our control. This fluctuation directly affects the levels of
our production and our sales and earnings. The steel industry is highly
cyclical, sensitive to general economic conditions and dependent on the
condition of certain other industries. The demand for steel products is
generally affected by macroeconomic fluctuations in the United States and global
economies in which steel companies sell their products. For example, future
economic downturns, stagnant economies or currency fluctuations in the United
States or globally could decrease the demand for our products or increase the
amount of imports of steel into the United States either event of which would
decrease our sales, margins and profitability.
In addition, a disruption or downturn in the automotive, oil and gas, gas
transmission, construction, commercial equipment, rail transportation,
appliance, agricultural and durable goods industries could negatively impact our
financial condition, production, sales, margins and earnings. We are also
particularly sensitive to trends and events, including strikes and labor unrest,
that may impact these industries. These industries are significant markets for
our products and are themselves highly cyclical.
7
RISKS RELATED TO OUR BUSINESS
TECHNOLOGY, OPERATING AND START-UP RISKS ASSOCIATED WITH OUR IRON DYNAMICS
SCRAP SUBSTITUTE PROJECT MAY PREVENT US FROM REALIZING THE ANTICIPATED BENEFITS
FROM THIS PROJECT AND COULD RESULT IN A LOSS OF OUR INVESTMENT
If we abandon our Iron Dynamics project, or if its process does not
succeed, we will not be able to realize the expected benefits of this project
and will suffer the loss of our entire investment. As of June 30, 2002, our
equity investment in the Iron Dynamics project was $158 million. Since 1997, our
wholly-owned subsidiary, Iron Dynamics, has tried to develop and commercialize a
pioneering process of producing a virgin form of iron that might serve as a
lower cost substitute for a portion of the metallic raw material mix that goes
into our electric arc furnaces to be melted into new steel. This scrap
substitute project is the first of its kind. It involves processes that are
based on various technical assumptions and new applications of technologies that
have yet to be commercially proven. Since our initial start-up in August 1999,
we have encountered a number of difficulties associated with major pieces of
equipment and with operating processes and systems. Throughout the latter part
of 1999 and 2000, our Iron Dynamics facility was shut down. During these shut
downs, we engaged in time consuming and expensive redesign, re-engineering,
reconstruction and retrofitting of major pieces of equipment, systems and
processes. As a result, the Iron Dynamics project has taken considerably longer
and has required us to expend considerably greater resources than originally
anticipated. While we made significant progress during these shut downs in
correcting various technical and other deficiencies, we have not yet been
successful in achieving the results necessary to bring production output up and
product costs down to the point of being commercially competitive. In February
2001, we re-started operations at our Iron Dynamics facility. However, in July
2001, we suspended these operations again, with no specific date set for
resumption of operations. This shut down was a result of:
(1) higher than expected start-up and process refinement costs;
(2) exceptionally high energy costs;
(3) low production quantities achieved at the Iron Dynamics facility; and
(4) historically low steel scrap pricing.
These factors made the cost of producing and using Iron Dynamics scrap
substitute at our flat-rolled mini-mill higher than our cost of purchasing and
using steel scrap. Furthermore, we believe that, even with additional
development and refinement to the equipment, technology systems and processes,
the Iron Dynamics facility may only be able to achieve monthly output levels
between 75%-85% of our original estimates, resulting in higher unit costs than
originally planned. We currently estimate that these additional developments and
refinements would, if implemented, cost approximately $15 million. However, we
are entitled to a $6 million refund from one of our equipment manufacturers in
connection with these improvements, which we would expect to apply toward this
cost. On July 10, 2002, we announced that we expect to begin experimental
production trials in the fourth quarter of 2002. If these trials prove
successful, we could begin commercial production in 2003. However, Iron Dynamics
may never become commercially operational.
In addition, while we remain optimistic that the remaining start-up
difficulties with the equipment, technology, systems and processes can be
resolved, our Iron Dynamics facility may not be able to consistently operate or
be able to produce steel scrap substitute material in the quantities that will
enable it to be cost competitive. Moreover, in connection with any restart of
operations, our Iron Dynamics facility may experience additional shutdowns or
equipment failures and such shutdowns or failures may have a material adverse
impact on our liquidity cost structure and earnings.
OUR SENIOR SECURED CREDIT AGREEMENT AND THE INDENTURE RELATING TO THE
9 1/2% SENIOR NOTES DUE 2009 CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT OUR
FLEXIBILITY
Restrictions and covenants in our existing debt agreements, as well as our
senior secured credit agreement and the indenture relating to the senior notes,
and any future financing agreements, may impair our ability to
8
finance future operations or capital needs or to engage in other business
activities. Specifically, these agreements will restrict our ability to:
- incur additional indebtedness;
- pay dividends or make distributions with respect to our capital stock;
- repurchase or redeem capital stock;
- make investments;
- create liens and enter into sale and leaseback transactions;
- make capital expenditures;
- enter into transactions with affiliates or related persons;
- issue or sell stock of certain subsidiaries;
- sell or transfer assets; and
- participate in certain joint ventures, acquisitions or mergers.
In addition, a breach of any of the restrictions in our debt agreements
could cause our indebtedness to become immediately due and payable and we may
not be able to obtain sufficient funds to make these accelerated payments. If
any debt is accelerated, our assets may also not be sufficient to repay in full
such indebtedness. The senior secured credit agreement also contains financial
covenants, such as a leverage ratio and an interest coverage ratio. A breach of
any of these covenants may also accelerate our debt.
A SUBSTANTIAL PORTION OF OUR FLAT-ROLLED PRODUCTS ARE SOLD ON THE SPOT
MARKET, AND THEREFORE, OUR SALES, MARGINS AND EARNINGS ARE NEGATIVELY IMPACTED
BY DECREASES IN DOMESTIC FLAT-ROLLED STEEL PRICES
Our sales, margins and earnings are negatively impacted by decreases in
domestic flat-rolled steel prices since a significant portion of our flat-rolled
products are sold on the spot market. As a result, we are vulnerable to
downturns in the domestic flat-rolled steel market. For the three year period
ended December 31, 2001, approximately 80% of our flat-roll products were sold
on the spot market under contracts with terms of twelve months or less.
WEAKNESS IN THE AUTOMOTIVE INDUSTRY WOULD RESULT IN A SUBSTANTIAL REDUCTION
IN DEMAND FOR OUR PRODUCTS
A prolonged weakness in the automotive industry would reduce the demand for
our products and decrease our sales. In addition, if automobile manufacturers
choose to incorporate more plastics, aluminum and other steel substitutes in
their automobiles, it could reduce demand for our products. Our sales and
earnings fluctuate due to the cyclical nature of the automotive industry. The
cyclical nature of the automotive industry is affected by such things as the
level of consumer spending, the strength or weakness of the U.S. dollar and the
impact of international trade and various factors, such as labor unrest and the
availability of raw materials, which affect the ability of the automotive
industry to actually build cars. While we do not presently sell a material
portion of our steel production directly to the automotive market, a substantial
portion of our sales to the intermediate steel processor and service center
market is resold to various companies in the automotive industry.
WE MAY BE UNABLE TO PASS ON INCREASES IN THE COST OF SCRAP AND OTHER RAW
MATERIALS TO OUR CUSTOMERS WHICH WOULD REDUCE OUR EARNINGS
If we are unable to pass on higher scrap and other raw material costs to
our customers we will be less profitable. We may not be able to adjust our
product prices, especially in the short-term, to recover the costs of increases
in scrap and other raw material prices. Our principal raw material is scrap
metal derived primarily from junked automobiles, industrial scrap, railroad
cars, 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 our control, including demand by U.S. and
international steel producers, freight costs and speculation. The prices for
scrap have varied significantly, may vary significantly in the future and do not
9
necessarily fluctuate in tandem with the price of steel. In addition, our
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.
WE HAVE PRIMARILY RELIED UPON ONE SUPPLIER TO MEET OUR STEEL SCRAP
REQUIREMENTS
Since our inception, we have had an exclusive contract with OmniSource, one
of the largest scrap processors and brokers in the Midwest, to purchase steel
scrap. Our current agreement with OmniSource expires on December 31, 2004.
However, OmniSource may terminate the agreement at anytime on or after July 1,
2003. If the contract terminates for any reason, we would have to find another
supplier for steel scrap or develop our own scrap purchasing capability. We may
be unable to secure substitute arrangements for steel scrap on the same or
better terms as those in our contract with OmniSource. In addition, if our
contract is adversely changed for any reason, we may experience an increase in
our cost of goods sold.
For 2001 and the six months ended June 30, 2002, we purchased 1.5 million
tons and 910,000 tons of steel scrap and scrap substitutes from OmniSource,
respectively, which represent approximately 87% and 83% of our total scrap tons
purchased during those periods.
THERE MAY BE POTENTIAL CONFLICTS OF INTEREST WITH REGARD TO OUR
RELATIONSHIP WITH OMNISOURCE
With respect to any dispute between us and OmniSource involving our
existing contract, including its remaining term, any future contract, or in
connection with the terms of any commercial transaction, OmniSource may be
viewed as having a conflict of interest between what it perceives as being best
for itself as a seller of scrap and what is best for us as a buyer of scrap. We
may not be able to resolve potential conflicts and if we do resolve them, we may
receive a less favorable resolution since we are dealing with OmniSource rather
than an unaffiliated person. The chairman of the board and chief executive
officer of OmniSource is also a member of our board of directors and is a
substantial stockholder of Steel Dynamics. This person has obligations to us as
well as to OmniSource and may have conflicts of interest with respect to matters
potentially or actually involving or affecting us and OmniSource. OmniSource
also supplies scrap to many other customers, including other steel mills.
WE RELY UPON A SMALL NUMBER OF MAJOR CUSTOMERS FOR A SUBSTANTIAL PERCENTAGE
OF OUR SALES
A loss of any large customer or group of customers could materially reduce
our sales and earnings. We have substantial business relationships with a few
large customers. In 2001 and for the six months ended June 30, 2002, our Butler
mini-mill's top ten customers accounted for approximately 48% and 54% of our
total net sales, respectively. During those periods, our largest customer,
Heidtman, accounted for approximately 18% and 16% of our total net sales. We
expect to continue to depend upon a small number of customers for a significant
percentage of our total net sales, and cannot assure you that any of them will
continue to purchase steel from us.
THERE MAY BE POTENTIAL CONFLICTS OF INTEREST WITH REGARD TO OUR
RELATIONSHIP WITH HEIDTMAN STEEL PRODUCTS, INC.
If a dispute arises between us and Heidtman, we may be viewed as having a
conflict of interest. What is best for Heidtman as a buyer and what is best for
us as a product seller may be at odds. We may be unable to resolve potential
conflicts. If we do resolve them, we may receive a less favorable resolution
since we are dealing with Heidtman rather than an unaffiliated person. Heidtman
is an affiliate of one of our large stockholders and its president and chief
executive officer serves as one of our directors. This person has obligations to
us as well as to Heidtman and may have conflicts of interest with respect to
matters potentially or actually involving or affecting us and Heidtman.
START-UP AND OPERATING RISKS ASSOCIATED WITH THE CONSTRUCTION OF OUR
COLUMBIA CITY STRUCTURAL STEEL AND RAIL MINI-MILL COULD RESULT IN MATERIALLY
GREATER OPERATING COSTS THAN THOSE WE HAVE ANTICIPATED
Start-up and operating risks associated with the construction of our
Columbia City mini-mill may result in materially greater operating costs than we
initially expected. At our Columbia City mini-mill, we are subject to all of the
general risks associated with the construction and start-up of a new mini-mill.
These risks
10
involve construction delays, cost overruns and start-up difficulties. We could
also experience operational difficulties after start-up that could result in our
inability to operate our Columbia City mini-mill at full or near full capacity
or at all.
UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR
SHUTDOWNS
Interruptions in our production capabilities will inevitably increase our
production costs, and reduce our sales and earnings for the affected period. In
addition to equipment failures, our facilities are also subject to the risk of
catastrophic loss due to unanticipated events such as fires, explosions or
violent weather conditions. Our manufacturing processes are dependent upon
critical pieces of steelmaking equipment, such as our furnaces, continuous
casters and rolling equipment, as well as electrical equipment, such as
transformers, and this equipment may, on occasion, be out of service as a result
of unanticipated failures. We have experienced and may in the future experience
material plant shutdowns or periods of reduced production as a result of such
equipment failures.
WE DEPEND HEAVILY ON OUR SENIOR MANAGEMENT AND WE MAY BE UNABLE TO REPLACE
KEY EXECUTIVES IF THEY LEAVE
The loss of the services of one or more members of our senior management
team or our inability to attract, retain and maintain additional senior
management personnel could harm our business, financial condition, results of
operations and future prospects. Our senior management founded our company,
pioneered the development of thin-slab, flat-rolled technology and directed the
construction of our Butler mini-mill and Columbia City structural mini-mill. Our
operations and prospects depend in large part on the performance of our senior
management team, including Keith E. Busse, president and chief executive
officer, Mark D. Millett, vice president and general manager of our flat-roll
division, Richard P. Teets, Jr., vice president and general manager of our
structural division, Tracy L. Shellabarger, vice president and chief financial
officer and John W. Nolan, vice president, sales and marketing. Although these
senior managers have each been employees and stockholders of Steel Dynamics for
more than seven years, these individuals may not remain with us as employees. In
addition, we may not be able to find qualified replacements for any of these
individuals if their services are no longer available. We do not have key man
insurance on any of these individuals.
WE MAY FACE RISKS ASSOCIATED WITH THE IMPLEMENTATION OF OUR GROWTH STRATEGY
Our growth strategy subjects us to various risks. As part of our growth
strategy, we may expand our existing facilities, build additional plants,
acquire other businesses and steel assets, enter into joint ventures, or form
strategic alliances that we believe will complement our existing business. These
transactions will likely involve some or all of the following risks:
- the difficulty of competing for acquisitions and other growth
opportunities with companies having materially greater financial
resources than ours;
- the difficulty of integrating the acquired operations and personnel into
our existing business;
- the potential disruption of our ongoing business;
- the diversion of resources;
- the inability of management to maintain uniform standards, controls,
procedures and polices;
- the difficulty of managing the growth of a larger company;
- the risk of entering markets in which we have little experience;
- the risk of becoming involved in labor, commercial, or regulatory
disputes or litigation related to the new enterprise;
- the risk of contractual or operational liability to our venture
participants or to third parties as a result of our participation;
- the inability to work efficiently with joint venture or strategic
alliance partners; and
11
- the difficulties of terminating joint ventures or strategic alliances.
These transactions might be required for us to remain competitive, but we
may not be able to complete any such transactions on favorable terms or obtain
financing, if necessary, for such transactions on favorable terms. Future
transactions may not improve our competitive position and business prospects as
anticipated, and if they do not, our sales and earnings may be significantly
reduced.
WE MAY BE UNABLE TO MAINTAIN OUR OWNERSHIP OF THE QUALITECH ASSETS, OR WE
MAY BE DELAYED IN THE CONSTRUCTION AND START-UP OF THIS MINI-MILL
We may not be able to maintain our ownership of the assets of Qualitech
Steel SBQ LLC, which we purchased on September 6, 2002, as a result of
litigation initiated on August 2, 2002 by Nucor Corporation in Hendricks County,
Indiana Superior Court, challenging Qualitech's right to sell the assets to us,
or we may be delayed in the construction and start-up of this mini-mill as a
result of the litigation or other events outside our control. Nucor originally
sought to preliminarily and permanently enjoin Qualitech from selling its assets
to us pursuant to a July 26, 2002 asset purchase agreement, claiming a right to
those assets by reason of a prior purchase agreement. On August 6, 2002, the
court entered a temporary restraining order prohibiting Qualitech from closing
under our purchase agreement and scheduled a preliminary injunction hearing on
August 19, 2002. On August 7, 2002, we intervened as a party in that litigation
to assert our rights under the Qualitech Agreement. At the conclusion of the
evidence on August 19, 2002, the Hendricks County Superior Court denied Nucor's
motion for an injunction, but on August 20, 2002, Nucor appealed that decision
to the Indiana Court of Appeals. Notwithstanding the continued pendency of this
litigation, we closed on and consummated the purchase of the Qualitech assets on
September 6, 2002. If Nucor prevails in its claim of priority purchase rights to
the Qualitech assets, we could be precluded from maintaining ownership of those
assets, might be required to convey the Qualitech assets back to Qualitech or to
Nucor, and might be liable to Nucor for damages. On the other hand, having now
purchased the Qualitech assets, even if Qualitech's right to sell us the
Qualitech assets is upheld on appeal, we may exceed our current estimates of
investing between $60 and $70 million of additional capital to convert the
Qualitech mini-mill into a mini-mill for the production of merchant and
reinforcing bar. We are also subject to regulatory approval and to construction
and start-up delays and operational risks associated with the conversion of the
Qualitech mini-mill. We may also be delayed either as a result of the litigation
or as a result of other unforeseen circumstances or events beyond our control.
ENVIRONMENTAL REGULATION IMPOSES SUBSTANTIAL COSTS AND LIMITATIONS ON OUR
OPERATIONS
We are subject to the risk of substantial environmental liability and
limitations on our operations brought about by the requirements of environmental
laws and regulations. We are subject to various federal, state and local
environmental, health and safety laws and regulations concerning such issues as
air emissions, wastewater discharges, solid and hazardous waste handling and
disposal, and the investigation and remediation of contamination. These laws and
regulations are increasingly stringent. While we believe that our facilities are
and will continue to be in material compliance with all applicable environmental
laws and regulations, the risks of substantial costs and liabilities related to
compliance with such laws and regulations are an inherent part of our business.
Although we are not currently involved in any compliance or remediation
activities, it is possible that future conditions may develop, arise or be
discovered that create substantial environmental compliance or remediation
liabilities and costs. For example, our steelmaking operations produce certain
waste products, such as electric arc furnace dust, which are classified as
hazardous waste and must be properly disposed of under applicable environmental
laws. These laws can impose clean up liability on generators of hazardous waste
and other substances that are shipped off-site for disposal, regardless of fault
or the legality of the disposal activities. Other laws may require us to
investigate and remediate contamination at our properties, including
contamination that was caused in whole or in part by third parties. While we
believe that we can comply with environmental legislation and regulatory
requirements and that the costs of doing so have been included within our
budgeted cost estimates, it is possible that such compliance will prove to be
more limiting and costly than anticipated.
In addition to potential clean up liability, in the past we have been, and
in the future we may become, subject to substantial monetary fines and penalties
for violation of applicable laws, regulations or administra-
12
tive conditions. We may also be subject from time to time to legal proceedings
brought by private parties or governmental agencies with respect to
environmental matters, including matters involving alleged property damage or
personal injury.
RISKS RELATED TO THE NOTES
WE HAVE SUBSTANTIAL INDEBTEDNESS AND DEBT SERVICE REQUIREMENTS WHICH LIMITS
OUR FINANCIAL AND OPERATING FLEXIBILITY
Our substantial indebtedness limits our financial and operating
flexibility. For example, it could:
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, reducing our ability to use these
funds for other purposes;
- limit our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes;
- limit our ability to adjust rapidly to changing market conditions; and
- increase our vulnerability to downturns in general economic conditions or
in our business.
Our ability to satisfy our debt obligations will depend upon our future
operating performance, which in turn will depend upon the successful
implementation of our strategy and upon financial, competitive, regulatory,
technical and other factors, many of which are beyond our control. If we are not
able to generate sufficient cash from operations to make payments under our
credit agreements or to meet our other debt service obligations, we will need to
refinance our indebtedness. Our ability to obtain such financing will depend
upon our financial condition at the time, the restrictions in the agreements
governing our indebtedness and other factors, including general market and
economic conditions. If such refinancing were not possible, we could be forced
to dispose of assets at unfavorable prices. Even if we could obtain such
financing, we cannot be sure that it would be on terms that are favorable to us.
In addition, we could default on our debt obligations.
As of June 30, 2002, we had $552 million of indebtedness. This indebtedness
represented approximately 53% of our total consolidated capitalization,
including current maturities of long-term debt.
DESPITE OUR SUBSTANTIAL INDEBTEDNESS, WE MAY STILL INCUR SIGNIFICANTLY MORE
DEBT, WHICH COULD FURTHER INCREASE THE RISK DESCRIBED ABOVE
Any additional debt could be more senior to the notes and could increase
the risk described above. The terms of the new senior secured credit agreement
and the indenture related to the notes do not prohibit us from incurring
significant additional indebtedness in the future.
WE MAY NOT HAVE SUFFICIENT CASH FLOW TO MAKE PAYMENTS ON YOUR NOTES AND OUR
OTHER DEBT
If our cash flow and capital resources are insufficient to allow us to make
scheduled payments on your notes or our other debt, we may have to sell assets,
seek additional capital or restructure or refinance our debt. We cannot assure
you that the terms of our debt will allow for these alternative measures or that
such measures would satisfy our scheduled debt service obligations.
If we cannot make scheduled payments on our debt:
- our debtholders could declare all outstanding principal and interest to
be due and payable;
- the lenders under our new senior secured credit agreement could terminate
their commitments and commence foreclosure proceedings against our
assets;
- we could be forced into bankruptcy or liquidation; and
- you could lose all or part of your investment in the notes.
Our ability to pay principal and interest on your notes and our other debt
and to fund our planned capital expenditures depends on our future operating
performance. Our future operating performance is subject to a number of risks
and uncertainties that are often beyond our control, including general economic
conditions
13
and financial, competitive, regulatory and environmental factors. For a
discussion of some of these risks and uncertainties, please see "Risk
Factors -- Risks Related to Our Business" and "-- Risks Related to Our
Industry." Consequently, we cannot assure you that we will have sufficient cash
flow to meet our liquidity needs, including making payments on our indebtedness.
BECAUSE THE NOTES ARE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT, IF WE
ARE IN DEFAULT ON OUR SECURED DEBT YOU MAY NOT RECEIVE FULL PAYMENT ON YOUR
NOTES
If we are in default on our secured obligations, you may not receive
principal and interest payment on your notes. Our obligations under the new
senior secured credit agreement will be secured by a significant portion of our
assets. In contrast, our obligations under the notes are unsecured. As a result,
the notes are subordinated to our obligations under the new senior secured
credit agreement as well as any other secured debt. As of December 31, 2001,
after giving effect to the Iron Dynamics credit agreement settlement transaction
and the refinancing, including this offering, we would have had $275.0 million
of secured indebtedness outstanding (excluding indebtedness of our
subsidiaries), and the ability to borrow $75.0 million more under our credit
facility.
THE NOTES ARE EFFECTIVELY SUBORDINATED TO ALL OF THE LIABILITIES OF OUR
NON-GUARANTOR SUBSIDIARIES
Upon consummation of this offering, SDI Investment Company was the only
subsidiary that guaranteed the notes. Thus far during 2002, Ferrous Resources,
LLC, STLD Holdings, Inc. and Dynamic Bar Products, LLC also became guarantors.
All of our other subsidiaries, including Iron Dynamics and New Millennium, are
not guarantors of the notes. As a result, the notes are effectively subordinated
to all of the liabilities of our subsidiaries that are not guarantors. As of
June 30, 2002, the non-guarantor subsidiaries had $28.1 million of liabilities
outstanding, including $23.3 million of indebtedness, but excluding intercompany
liabilities and guarantees of our new senior secured credit agreement.
OUR SENIOR SECURED CREDIT AGREEMENT AND THE INDENTURE RELATING TO THE NOTES
CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT OUR FLEXIBILITY
Restrictions and covenants in our senior secured credit agreement and the
indenture relating to the notes, and any future financing agreements, may
substantially limit our ability to finance future operations or capital needs or
to engage in other business activities. Specifically, these agreements restrict
our ability to:
- incur additional indebtedness;
- pay dividends or make distributions with respect to our capital stock;
- repurchase or redeem capital stock;
- make investments;
- create liens and enter into sale and leaseback transactions;
- make capital expenditures;
- enter into transactions with affiliates or related persons;
- issue or sell stock of certain subsidiaries;
- sell or transfer assets; and
- participate in certain joint ventures, acquisitions or mergers.
A breach of any of the restrictions or covenants in our debt agreements
could cause a default under our new senior secured credit agreement, other debt
or the notes. A significant portion of our indebtedness then may become
immediately due and payable. We are not certain whether we would have, or be
able to obtain, sufficient funds to make these accelerated payments, including
payments on the notes. If any senior debt is accelerated, our assets may not be
sufficient to repay in full such indebtedness and our other indebtedness,
including the notes, in which event the interests of the senior debt lenders may
conflict with the interests of the holders of the notes.
14
All of our subsidiaries, other than SDI Investment Company, Ferrous
Resources, LLC and STLD Holdings, Inc., are unrestricted subsidiaries. The
unrestricted subsidiaries accounted for 14.7% of total assets as of June 30,
2002 and for 11.4% of total net sales for the six months ended June 30, 2002 and
had a net loss of $3.1 million for the six months ended June 30, 2002.
FEDERAL AND STATE LAWS PERMIT A COURT TO VOID THE SUBSIDIARY GUARANTEES
UNDER CERTAIN CIRCUMSTANCES
We cannot be sure as to whether a court would determine that immediately
after the issuance of the notes and the subsidiary guarantees, each of the
subsidiary guarantors would be solvent, would have sufficient capital to carry
on its business and would be able to pay its debts as they mature or what
standard a court would apply in making these determinations.
The guarantee of the notes by SDI Investment may be subject to review under
federal or state fraudulent transfer laws. As of June 30, 2002, SDI Investment
had total assets of $29.9 million. While the relevant laws may vary from state
to state, under such laws, a subsidiary guarantee will be a fraudulent
conveyance if (1) any of our subsidiaries made guarantees with the intent of
hindering, delaying or defrauding creditors, or (2) any of the subsidiary
guarantors received less than reasonably equivalent value or fair consideration
in return for its guarantee, and in the case of (2) only, one of the following
is also true:
- any of the subsidiary guarantors was insolvent, or became insolvent, at
the time of the guarantee;
- the guarantee left the applicable subsidiary guarantor with an
unreasonably small amount of capital; or
- the applicable subsidiary guarantor intended to, or believed that it
would, be unable to pay its debts as they matured.
If any guarantee were to be deemed a fraudulent conveyance, a court could,
among other things, void any of the subsidiary guarantors' obligations under its
guarantee and require the repayment of any amounts paid thereunder. Generally,
an entity will be considered insolvent if:
- the sum of its debts is greater than the value of its property;
- the present fair value of its assets is less than the amount that it will
be required to pay on its existing debts as they become due; or
- it cannot pay its debts as they become due.
WE ARE PROHIBITED FROM, AND MAY BE UNABLE TO, REPURCHASE THE NOTES UPON A
CHANGE OF CONTROL, WHICH WOULD CAUSE DEFAULTS UNDER THE INDENTURE FOR THE NOTES
AND OUR NEW SENIOR SECURED CREDIT AGREEMENT AND POSSIBLY OTHER INDEBTEDNESS WE
MAY INCUR IN THE FUTURE
Upon the occurrence of a change of control as defined in the indenture for
the notes, we will be required to offer to purchase the notes at 101% of the
principal amount of the notes, together with accrued and unpaid interest, if
any, to the date of purchase. We are prohibited under the new senior secured
credit facility, and may be prohibited under indebtedness we may incur in the
future, from purchasing any notes prior to their stated maturity. In such
circumstances, we will be required to repay all or a portion of the outstanding
principal of, and pay any accrued and unpaid interest on, indebtedness under the
new senior secured credit agreement and any such other future indebtedness or
obtain the requisite consent from the lenders under the new senior secured
credit agreement and the holders of any such other future indebtedness to permit
the repurchase of the notes. If we are unable to repay all of such indebtedness
or are unable to obtain the necessary consents, we will be unable to offer to
repurchase the notes, which would constitute an event of default under the
indenture for the notes, which itself would also constitute a default under our
new senior secured credit agreement and could constitute a default under the
terms of any future indebtedness we may incur.
In addition, the events that constitute a change of control under the
indenture for the notes may also be events of default under the new senior
secured credit agreement or other indebtedness we may incur in the future.
IF YOU FAIL TO EXCHANGE YOUR OLD NOTES, YOU MAY BE UNABLE TO SELL THEM
15
If you are a holder of old notes after the exchange offer, you may be
unable to sell your old notes. Because we did not register the old notes under
the Securities Act or any state securities laws and we do not intend to do so
after the exchange offer, the old notes may only be transferred in limited
circumstances under applicable securities laws. If you do not exchange your old
notes in the exchange offer, you will lose your right to have your old notes
registered under the Securities Act.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE EXCHANGE NOTES
An active trading market may not develop for your notes, you may not be
able to sell your Exchange Notes, or, even if you can sell your Exchange Notes,
you may not be able to sell them at a price equal to or above the price you
paid. There is no active public trading market for the old notes. We do not
intend to apply for listing of the Exchange Notes on any domestic securities
exchange or Nasdaq. The liquidity of the trading market in the Exchange Notes,
and the market prices quoted for the Exchange Notes, may be adversely affected
by changes in the overall market for these types of securities and by changes in
our financial performance or prospects or in the prospects for companies in our
industry generally.
16
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The following brief summary contains the material terms of this exchange
offer. You should read the full text and more specific details contained
elsewhere in this prospectus. For a more detailed description of the Exchange
Notes, see "Description of the Exchange Notes."
Exchange...................... Up to $200 million aggregate principal amount
of our 9 1/2% senior notes due March 15, 2009
that have been registered under the Securities
Act of 1933, as amended, in exchange for an
equal face amount of our outstanding
unregistered 9 1/2% senior notes due March 15,
2009.
We entered into a registration rights agreement
with the initial purchasers of the old notes in
which we agreed to register this exchange
offer, to deliver this prospectus and to
complete the exchange offer. You are entitled
to exchange in this exchange offer your old
notes for Exchange Notes that have terms
identical in all material respects to the old
notes, except that:
- the Exchange Notes have been registered
under the Securities Act;
- the Exchange Notes are not entitled to
the registration rights that are
applicable to the old notes; and
- the additional cash interest provisions
that apply to the old notes in the event
of a failure to timely register and
consummate the exchange offer will no
longer apply. See "Description of the
Notes -- Registration Rights."
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on October [--], 2002,
unless extended. We do not currently plan to
extend the expiration date. Any outstanding old
notes not accepted for exchange for any reason
will be returned without expense to the
tendering holder promptly after the expiration
or termination of the exchange offer.
Withdrawal Rights............. A tender of outstanding old notes may be
withdrawn at any time prior to the expiration
date.
Resales of the Exchange
Notes......................... We believe that Exchange Notes to be issued in
the exchange offer may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act if
you meet the following conditions:
(1) the Exchange Notes are acquired by you
in the ordinary course of your
business;
(2) you are not participating, do not
intend to participate and have no
arrangement or understanding with any
person to participate in a
distribution of the Exchange Notes;
and
(3) you are not our affiliate, as that
term is defined in Rule 405 under the
Securities Act.
Our belief is based on interpretations by the
staff of the Commission, as set forth in
no-action letters issued to third parties
unrelated to us.
17
Each broker-dealer that receives Exchange Notes
in the exchange offer for its own account in
exchange for old notes pursuant to the exchange
offer, that were acquired by that broker-dealer
as a result of market-making activities or
other trading activities must agree to deliver
a prospectus meeting the requirements of the
Securities Act in connection with any resales
of the Exchange Notes. See "Plan of
Distribution."
If you are a holder of old notes and you are an
affiliate of Steel Dynamics, did not acquire
the Exchange Notes in the ordinary course of
your business, or you wish to tender your old
notes in the exchange offer with the intention
of participating, or for the purpose of
participating in a distribution of the Exchange
Notes, you cannot rely on the position of the
staff of the SEC enunciated in Exxon Capital
Holdings Corporation, Morgan Stanley & Co.
Incorporated or similar no-action letters and,
absent an available exemption, must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with the resale of the Exchange
Notes.
Certain Conditions to the
Exchange Offer................ The exchange offer is subject to customary
conditions, which we may waive. Please read the
section captioned "Terms of the
Exchange -- Certain Conditions to the Exchange
Offer" for more information regarding the
conditions to the exchange offer.
Effects on Holders of
Outstanding Old Notes......... As a result of the making of, and upon
acceptance for exchange of all validly tendered
outstanding old notes pursuant to the terms of,
the exchange offer, we will have fulfilled a
covenant in the registration rights agreement
at the time of the issuance of the old notes
and, accordingly, there will thereafter be no
increase in the interest rate on the old notes
as described in the registration rights
agreement. If you are a holder of old notes and
you do not tender your old notes in the
exchange offer, you will continue to hold the
old notes and will be entitled to all the
rights and limitations applicable to the old
notes in the indenture relating to the notes,
except for any rights under the registration
rights agreement that by their terms terminate
upon the consummation of the exchange offer.
To the extent that old notes are tendered and
accepted in this exchange offer, the trading
market for the old notes could be adversely
affected.
Consequences of Failure to
Exchange...................... If you do not exchange your old notes for
Exchange Notes, you will continue to hold your
outstanding old notes and will be entitled to
all the rights and subject to all the
limitations applicable to the old notes in the
Indenture relating to the old notes, except
that you will no longer be able to obligate us
to register your old notes under the Securities
Act. In that event, you will not be able to
resell, offer to resell or otherwise transfer
your old notes unless they are registered under
the Securities Act or unless you resell, offer
to resell or otherwise transfer them under an
exemption from the registration requirements
of, or in a transaction not subject to, the
Securities
18
Act and applicable state securities laws. Other
than in connection with this exchange offer, we
do not currently anticipate that we will
register the old notes under the Securities
Act.
Certain Tax Considerations.... The exchange of old notes for Exchange Notes in
the exchange offer will not be a taxable event
for U.S. federal income tax purposes. See
"Certain Tax Considerations."
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of Exchange Notes pursuant to the
exchange offer.
Exchange Agent................ Fifth Third Bank, Indiana is the exchange agent
for the exchange offer. The address and
telephone number of the exchange agent are:
Fifth Third Bank, Indiana
Attn: George L. Bawcum, Corporate Trust
Services
251 North Illinois Street, Suite 310
Indianapolis, Indiana 46204
(317) 383-2710 (phone)
(317) 383-2992 (fax)
e-mail: george.bawcum@53.com
or, in The Borough of Manhattan, The City of
New York, New York:
Fifth Third Bank, Indiana
Corporate Trust Services
Attn: Computershare Trust Company of New
York
Wall Street Plaza
88 Pine Street
New York, New York 10005
Procedure for Exchange........ If you would like to receive Exchange Notes for
your old notes, complete the letter of
transmittal accompanying this prospectus and
deliver the completed letter to the Exchange
Agent.
Delivery...................... You must also deliver the old notes and any
other required documents to the Exchange Agent
at the address set forth above. If you hold old
notes through The Depository Trust Company
("DTC") and wish to participate in the exchange
offer, you must comply with the Automated
Tender Offer Program procedures of DTC, by
which you will agree to be bound by the letter
of transmittal. By signing or agreeing to be
bound by the letter of transmittal, you will
represent to us that, among other things:
- any Exchange Notes you receive will be
acquired in the ordinary course of your
business;
- you have no arrangement or understanding
with any person or entity to participate
in a distribution of the Exchange Notes;
- if you are a broker-dealer that will
receive Exchange Notes for your own
account in exchange for old notes that
were acquired as a result of
market-making activities or other
trading activities, that you will
deliver a prospectus, as
19
required by law, in connection with any
resale of those Exchange Notes; and
- you are not our "affiliate," as defined
in Rule 405 of the Securities Act.
Special Procedures for
Beneficial Owners............. If you are the beneficial owner of old notes
and they are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee, and you wish to tender your
old notes, you should promptly contact the
person in whose name your old notes are
registered and instruct that person to tender
on your behalf. If you wish to tender on your
own behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your old notes, either make
appropriate arrangements to register ownership
of the old notes in your name or obtain a
properly completed bond power from the person
in whose name your old notes are registered.
The transfer of registered ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering -- Procedures
Applicable to All Holders."
Guaranteed Delivery
Procedures.................... If you wish to tender your old notes and your
old notes are not immediately available or you
cannot deliver your old notes, the accompanying
letter of transmittal or any other documents
required by the accompanying letter of
transmittal or comply with the applicable
procedures under DTC's Automated Tender Offer
Program before the Expiration Date, you must
tender your old notes according to the
guaranteed delivery procedures set forth in
this prospectus under "Terms of the
Exchange -- Guaranteed Delivery Procedures."
Please see "Terms of the Exchange" for detailed instructions on how to
obtain Exchange Notes for your old Notes.
20
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
Issuer........................ Steel Dynamics, Inc.
Notes Offered................. $200,000,000 aggregate principal amount of
9 1/2% Senior Notes Due 2009.
Maturity...................... March 15, 2009.
Interest...................... 9 1/2% per annum, payable in cash on March 15
and September 15 of each year, beginning on
September 15, 2002 with interest payable from
March 15, 2002.
Guarantees.................... The Exchange Notes are guaranteed on a senior
unsecured and subordinated basis by SDI
Investment Company, our direct 100% owned
subsidiary.
Optional Redemption........... We may redeem any of the notes beginning on
March 15, 2006. The initial redemption price is
104.750% of their principal amount, plus
accrued interest. The redemption price will
decline to 102.375% after March 15, 2007 and
will be 100% of their principal amount, plus
accrued interest, beginning on March 15, 2008.
In addition, before March 15, 2005, we may
redeem up to 35% of the aggregate principal
amount of outstanding notes with the net
proceeds from sales of certain kinds of one or
more sales of our capital stock at a redemption
price equal to 109.500% of their principal
amount, plus accrued interest to the redemption
date. We may make such redemption only if,
after any such redemption, at least 65% of the
aggregate principal amount of notes originally
issued under the indenture remains outstanding.
Change of Control............. Upon a change of control (as defined under
"Description of the Notes") we will be required
to make an offer to purchase the notes. The
purchase price will equal 101% of the principal
amount of the notes on the date of purchase,
plus accrued interest. We may not have
sufficient funds available at the time of a
change of control to make any required debt
payment (including repurchases of the notes).
Ranking....................... The notes will be senior unsecured obligations.
The notes will be equal in right of payment
with all existing and future senior unsecured
indebtedness of our company and will rank
senior to any subordinated indebtedness created
in the future. The notes will be effectively
subordinated to our secured indebtedness, to
the extent of the assets securing that
indebtedness, including indebtedness under our
new senior secured credit agreement.
As of June 30, 2002, we had $573.7 million of
indebtedness and long-term contingent
obligations outstanding, $275 million of which
was secured indebtedness under our new senior
secured credit agreement. The notes will also
be effectively subordinated to all of the
liabilities of our subsidiaries. As of June 30,
2002, our subsidiaries had approximately $28.1
million of liabilities outstanding, including
$23.3 million of indebtedness, but excluding
intercompany liabilities.
21
Certain Covenants............. The indenture governing the notes contains
covenants limiting our ability and the ability
of our restricted subsidiaries to:
- incur additional debt;
- pay dividends;
- make investments or certain other
restricted payments;
- engage in sale-leaseback transactions;
- enter into transactions with
stockholders or affiliates;
- guarantee debts;
- sell assets;
- create liens;
- issue or sell stock of subsidiaries; and
- engage in a merger, sale or
consolidation.
These covenants are subject to important
exceptions and qualifications, which are
described under the heading "Description of the
Notes -- Certain Covenants" in this prospectus.
All of our subsidiaries, other than SDI
Investment Company, Ferrous Resources, LLC,
STLD Holdings, Inc. and Dynamic Bar Products,
LLC, will be unrestricted subsidiaries. The
unrestricted subsidiaries accounted for 15% of
total assets as of June 30, 2002 and for 11% of
total net sales for the six months ended June
30, 2002 and had a net loss of $3.1 million for
the six months ended June 30, 2002.
Use of Proceeds............... We will not receive any cash proceeds upon the
completion of the exchange offer.
Further Issuances............. We may from time to time, without notice to or
the consent of the holders of Exchange Notes,
create and issue additional notes ranking
equally and ratably with the Exchange Notes.
Such further notes may be issued under the
indenture relating to the notes offered hereby,
and may vote with the notes offered hereby on
matters affecting all noteholders.
Form of Exchange Notes........ The Exchange Notes to be issued in the exchange
offer will be represented by one or more global
securities deposited with the Trustee for the
benefit of DTC. You will not receive Exchange
Notes in certificated form unless one of the
events sets forth under the heading
"Description of the Exchange Notes -- Form of
Exchange Notes' occurs. Instead, beneficial
interests in the Exchange Notes to be issued in
the exchange offer will be shown on, and a
transfer of these interests will be effected
only through, records maintained in book entry
form by DTC with respect to its participants.
Amendments and Waivers........ Except for specified amendments, the indenture
may be amended with the consent of the holders
of a majority of the principal amount of the
notes then outstanding.
22
Absence of a Public Market for
the Exchange Notes............ The Exchange Notes generally will be freely
transferable but will also be new securities
for which there will not initially be a market.
It is not certain whether a market for the
Exchange Notes will develop or whether any such
market would provide a significant degree of
liquidity. We do not intend to apply for a
listing of the Exchange Notes on any domestic
securities exchange or seek approval for
quotation through any automated quotation
system.
23
USE OF PROCEEDS
We will receive no proceeds from the exchange of the old notes in this
exchange offer. In consideration for issuing the Exchange Notes as contemplated
by this prospectus, we will receive in exchange a like principal amount of old
notes, the terms of which are identical in all material respects to the Exchange
Notes. The old notes surrendered in exchange for the Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any change in our capitalization.
The net proceeds from the issuance and sale of the old notes were
approximately $195 million after deduction of the expenses related to the
offerings.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated.
YEARS ENDED DECEMBER 31
------------------------------------------------
1997 1998 1999 2000 2001 6/30/2002
----- ----- ----- ----- ----- ---------
4.01x 3.10x 2.48x 2.78x 0.79x* 2.24x
---------------
* Note: In 2001, our earnings were insufficient to cover our fixed charges by
$7.3 million.
24
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated financial and
operating data of Steel Dynamics. The selected consolidated financial and
operating data as of and for each of the years in the five-year period ended
December 31, 2001 were derived from our audited consolidated financial
statements. The selected consolidated financial and operating data as of and for
the six months ended June 30, 2001 and 2002 were derived from our unaudited
consolidated financial statements. These unaudited consolidated financial
statements include, in our opinion, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the data for such periods.
Operating results for interim periods are not necessarily indicative of a full
year's operations. You should read the following data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes incorporated by
reference in this prospectus.
You should also read the following information in conjunction with the data
in the table on the following page:
- Commercial grade production began January 2, 1996.
- Our 1997 extraordinary loss of $7.6 million (net of tax benefit of $5.1
million) consisted of prepayment penalties and the write-off of
capitalized financing costs associated with the amendment of our credit
facility, effective June 30, 1997.
- Our first quarter 2002 extraordinary loss of $2.0 million (net of tax
benefit of $1.2 million) consisted of prepayment penalties and the
write-off of capitalized financing costs associated with the refinancing
of our credit facilities, effective March 26, 2002.
- "Operating profit per net ton shipped" represents operating income before
start-up costs divided by net ton shipments. Beginning July 1, 2000, net
shipments included shipments from our steel fabrication subsidiary, New
Millennium. Beginning March 1, 2001, net shipments also included
shipments from our secondary-steel brokering subsidiary, Paragon Steel.
- "Hot band production" refers to our flat-roll mini-mill's total
production of finished coiled product. "Prime tons" refer to hot bands
produced, which meet or exceed quality standards for surface, shape and
metallurgical properties.
- "Yield percentage" refers to our flat-roll mini-mill's tons of finished
product divided by tons of raw materials.
- "Effective capacity utilization" is the flat-roll mini-mill's ratio of
tons produced for the operational month to the operational month's
capacity. For the data disclosed in the periods ended December 31, 1996
and 1997, we used an annual capacity of 1.4 million tons for this
calculation. For the data disclosed in the periods ended December 31,
1999 and 2000, and September 30, 2000 and 2001, we used an annual
capacity of 2.2 million tons. For the data disclosed in the period ended
December 31, 1998, we used an annual capacity of 1.8 million tons.
25
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1997 1998 1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER TON DATA)
OPERATING DATA:
Net sales....................... $ 420,132 $ 514,786 $ 618,821 $ 692,623 $ 606,984 $ 311,725 $ 380,642
Cost of goods sold.............. 330,529 428,978 487,629 533,914 522,927 260,663 300,225
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit.................. 89,603 85,808 131,192 158,709 84,057 51,062 80,417
Selling, general and
administrative expenses....... 24,449 20,637 42,441 53,306 58,132 31,978 32,867
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations........ 65,154 65,171 88,751 105,403 25,925 19,084 47,550
Interest expense................ 7,697 17,538 22,178 20,199 18,480 9,008 9,295
Other (income) expense.......... (1,914) (4,993) 1,294 719 2,333 (226) 4,022
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary loss.......... 59,371 52,626 65,279 84,485 5,112 10,302 34,233
Income tax expense.............. 7,813 20,942 25,849 30,690 1,968 3,966 12,837
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary
loss........................ 51,558 31,684 39,430 53,795 3,144 6,336 21,396
Extraordinary loss, net of
tax........................... 7,624 -- -- -- -- -- 2,028
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.................... $ 43,934 $ 31,684 $ 39,430 $ 53,795 $ 3,144 $ 6,336 $ 19,368
========== ========== ========== ========== ========== ========== ==========
Basic earnings per share........ $ .91 $ .65 $ .82 $ 1.15 $ .07 $ .14 $ .41
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding................... 48,343 48,462 47,914 46,822 45,655 45,578 46,734
========== ========== ========== ========== ========== ========== ==========
Diluted earnings per share...... $ .90 $ .65 $ .82 $ 1.15 $ .07 $ .14 $ .41
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
and share equivalents
outstanding................... 48,843 48,868 48,153 46,974 45,853 45,799 47,103
========== ========== ========== ========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(1)....................... $ 89,465 $ 100,544 $ 125,804 $ 149,348 $ 71,269 $ 44,289 $ 71,208
EBITDA to interest(2)........... 5.67x 4.29x 3.55x 3.95x 2.09x 2.42x 3.66x
Ratio of earnings to fixed
charges(3).................... 4.01 3.10 2.48 2.78 0.79 1.18 2.24
Operating profit per net ton
shipped....................... $ 61 $ 50 $ 58 $ 65 $ 23 $ 33 $ 51
Capital expenditures............ 175,193 194,131 126,673 110,379 90,714 24,810 59,197
Cash provided (used) by:
Operating activities.......... 85,654 (51,060) 114,779 102,792 67,373 23,471 65,629
Investing activities.......... (175,157) (196,967) (126,299) (109,399) (90,710) (24,810) (59,197)
Financing activities.......... 40,661 244,652 22,892 176 91,394 9,325 (35,926)
OTHER DATA:
Shipments (net tons)............ 1,205,247 1,416,950 1,869,714 1,919,368 1,963,602 998,089 1,189,850
Hot band production (net
tons)......................... 1,181,983 1,425,699 1,938,234 2,031,025 2,015,991 1,027,007 1,179,601
Prime ton percentage -- hot
band.......................... 95.3% 95.3% 94.2% 93.9% 95.9% 96.3% 94.4%
Yield percentage -- hot band.... 89.0 87.7 87.8 87.7 87.5 87.7 89.1
Effective capacity
utilization -- hot band....... 84.4 79.2 88.1 92.3 91.6 93.4 107.2
Man-hours per hot band net ton
produced...................... .56 .55 .41 .37 .37 .37 .31
Number of employees............. 425 591 650 651 676 676 784
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents....... $ 8,618 $ 5,243 $ 16,615 $ 10,184 $ 78,241 $ 18,170 $ 48,747
Working capital................. 58,774 162,117 155,226 165,915 194,093 177,970 182,064
Total assets.................... 640,882 907,470 991,556 1,067,074 1,180,098 1,092,807 1,199,908
Long-term debt (including
current maturities)........... 219,541 483,946 505,963 532,520 599,924 540,402 551,675
Stockholders' equity............ 337,595 351,065 391,370 418,784 418,575 423,121 463,569
---------------
(1) EBITDA represents income before extraordinary items, income taxes, interest
expense (net of interest income), depreciation and amortization. EBITDA is
not a measure of operating income, operating performance or liquidity under
generally accepted accounting principles, or GAAP. We have presented EBITDA
because certain investors may find it to be a useful tool for analyzing and
comparing operating performance and for determining a company's ability to
service and/or incur debt. We believe that EBITDA,
26
as presented, represents a useful measure of assessing the performance of
our ongoing operating activities, as it reflects our earnings trends without
the impact of a number of non-cash charges. We use targets and positive
trends in EBITDA to measure performance, and some of our creditors use
EBITDA to assess our debt covenant compliance. Nevertheless, EBITDA should
not be considered in isolation or as a substitute for operating income (as
determined in accordance with GAAP) as an indicator of our operating
performance, or cash flow from operating activities (as determined in
accordance with GAAP) as a measure of our liquidity. In addition, companies
calculate EBITDA differently and therefore, EBITDA, as presented for us may
not be comparable to EBITDA reported by other companies.
(2) Interest includes capitalized interest.
(3) For purposes of calculating our ratio of earnings to fixed charges, earnings
consist of earnings from continuing operations before income taxes, adjusted
for the portion of fixed charges deducted from these earnings, plus
amortization of capitalized interest. Fixed charges consist of interest on
all indebtedness, including capitalized interest, and amortization of debt
issuance costs. In 2001, our earnings were insufficient to cover our fixed
charges by $7.3 million.
27
CAPITALIZATION
The following table sets forth our consolidated capitalization as of June
30, 2002:
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and notes included in this memorandum.
AS OF JUNE 30, 2002
ACTUAL
-------------------
Cash and cash equivalents................................... $ 48,747
==========
Current portion of long-term debt........................... $ 5,888
==========
Long-term debt, excluding current maturities:
Steel Dynamics senior secured credit facilities
Revolving credit facility.............................. $ --
Term loan A............................................ 70,000
Term loan B............................................ 205,000
Other long-term debt, excluding current maturities.......... 70,787
9 1/2% senior notes due 2009................................ 200,000
----------
Total long-term debt, excluding current maturities..... 545,787
----------
Other long-term contingent obligation....................... 21,987
Stockholders' equity:
Common stock, $.01 par value per share; 100,000,000 shares
authorized; 49,901,810 shares issued and shares
outstanding............................................ 499
Treasury stock, at cost; 2,385,914 shares................... (28,889)
Additional paid-in capital.................................. 346,300
Retained earnings........................................... 151,597
Other accumulated comprehensive loss........................ (5,938)
----------
Total stockholders' equity............................. 463,569
----------
Total capitalization................................... $1,031,343
==========
28
TERMS OF THE EXCHANGE OFFER
We are offering to exchange our 9 1/2% Senior Notes Due March 15, 2009 that
have been registered under the Securities Act of 1933, as amended, in exchange
for an equal face amount of our outstanding unregistered 9 1/2% Senior Notes Due
March 15, 2008 that were issued on March 26, 2002.
We will accept up to a maximum face amount of $200 million of validly
unregistered old notes.
Except for the requirements of applicable U.S. federal and state securities
laws, there are no federal or state regulatory requirements to be complied with
or approvals to be obtained by Steel Dynamics in connection with the exchange
offers which, if not complied with or obtained, would have a material adverse
effect on Steel Dynamics.
We issued the old notes on March 26, 2002 in a private placement to certain
initial purchasers pursuant to a Purchase Agreement, and the initial purchasers
resold the old notes to a limited number of qualified institutional buyers as
defined in Rule 144A under the Securities Act in reliance on that rule, and to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. In connection with this issuance, we also entered into the
indenture and the registration rights agreement. These agreements require that
we file a registration statement under the Securities Act with respect to the
Exchange Notes to be issued in the exchange offer and, upon the effectiveness of
the registration statement, offer to you the opportunity to exchange your old
notes for a like principal amount of Exchange Notes. These Exchange Notes will
be issued without a restrictive legend and, except as set forth below, may be
reoffered and resold by you without registration under the Securities Act. After
we complete the exchange offer, our obligations with respect to the registration
of the notes will terminate, except as provided in the last paragraph of this
section. A copy of the indenture relating to the notes and the registration
rights agreement have been filed as exhibits to the registration statement of
which this prospectus is a part.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, if you are not our "affiliate" within
the meaning of Rule 405 under the Securities Act or a broker-dealer referred to
in the next paragraph, we believe that Exchange Notes to be issued to you in the
exchange offer may be offered for resale, resold and otherwise transferred by
you, without compliance with the registration and prospectus delivery provisions
of the Securities Act. This interpretation, however, is based on your
representation to us that:
- the Exchange Notes to be issued to you in the exchange offer are acquired
in the ordinary course of your business;
- you are not engaging in and do not intend to engage in a distribution of
the Exchange Notes to be issued to you in the exchange offer; and
- you have no arrangement or understanding with any person to participate
in the distribution of the Exchange Notes to be issued to you in the
exchange offer.
If you tender your old notes in the exchange offer for the purpose of
participating in a distribution of the Exchange Notes to be issued to you in the
exchange offer, you cannot rely on this interpretation by the staff of the
Commission. Under those circumstances, you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives Exchange Notes in
the exchange offer for its own account in exchange for old notes that were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of those
Exchange Notes. See "Plan of Distribution."
In the event that applicable interpretations of the staff of the Securities
and Exchange Commission do not permit Steel Dynamics to effect the Exchange
Offer, or under other specified circumstances, we will use our best efforts, at
our cost, to cause to become effective a shelf registration statement with
respect to resale of the notes. We will use our best efforts to keep such shelf
registration statement effective until the expiration of the time period
referred to in Rule 144(k) under the Securities Act after the Closing Date, or
such shorter period that will terminate when all notes covered by a shelf
registration statement have been sold pursuant to a
29
shelf registration statement. In the event of such a shelf registration, we will
provide to each holder copies of the prospectus, notify each holder when the
shelf registration statement for the notes has become effective and take certain
other actions as are required to permit resale of the notes. A holder that sells
its notes pursuant to the shelf registration statement (1) generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, (2) will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and (3) will be bound by the provisions of the registration rights
agreement that are applicable to such a holder (including certain
indemnification obligations).
In the event that the exchange offer is not consummated on or prior to the
date that is six months after the Closing Date, the annual interest rate borne
by the notes will be increased by .5% over the rate shown on the cover page of
this prospectus. Once the exchange offer is consummated or the shelf
registration statement is declared effective, the annual interest rate borne by
the notes shall be changed to again be the rate shown on the cover page of this
prospectus.
CONSEQUENCES OF FAILURE TO EXCHANGE
After we complete the exchange offer, if you have not tendered your old
notes, you will not have any further registration rights, except as set forth
above. Your old notes will continue to be subject to certain restrictions on
transfer. Therefore, the liquidity of the market for your old notes could be
adversely affected upon completion of the exchange offer if you do not
participate in the exchange offer.
THE EXCHANGE
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. We will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of old notes accepted in the exchange
offer. You may tender some or all of your old notes pursuant to the exchange
offer. However, old notes may be tendered only in integral multiples of $1,000
principal amount.
The form and terms of the Exchange Notes are substantially the same as the
form and terms of the old notes, except that the Exchange Notes to be issued in
the exchange offer have been registered under the Securities Act and will not
bear legends restricting their transfer. The Exchange Notes will be issued
pursuant to, and entitled to the benefits of, the indenture. The indenture also
governs the old notes. The Exchange Notes and the old notes will be deemed one
issue of notes under the indenture.
As of the date of this prospectus, $200.0 million in aggregate principal
amount of 9 1/2% notes due 2009 were outstanding. This prospectus, together with
the letter of transmittal, is being sent to all registered holders and to others
believed to have beneficial interests in the old notes. You do not have any
appraisal or dissenters' rights in connection with the exchange offer under the
Business Corporation Law of the State of Indiana or the indenture.
We will be deemed to have accepted validly tendered outstanding notes when,
as, and if we have given oral or written notice of our acceptance to the
exchange agent. The exchange agent will act as our agent for the tendering
holders for the purpose of receiving the Exchange Notes from us. If we do not
accept any tendered notes because of an invalid tender, the occurrence of
certain other events set forth in this prospectus or otherwise, we will return
certificates for any unaccepted old notes, without expense, to the tendering
holder as promptly as practicable after the expiration date.
You will not be required to pay brokerage commissions or fees or, except as
set forth below under "-- Transfer Taxes," transfer taxes with respect to the
exchange of your old notes in the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "-- Fees and Expenses" below.
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EXPIRATION DATE; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on October
[--], 2002, unless we determine, in our sole discretion, to extend the exchange
offer, in which case, it will expire at the later date and time to which it is
extended. We do not currently intend to extend the exchange offer, although we
reserve the right to do so. If we extend the exchange offer, we will give oral
or written notice of the extension to the exchange agent and give each
registered holder notice by means of a press release or other public
announcement of any extension prior to 9:00 a.m., New York City time, on the
next business day after the scheduled expiration date. If we amend the exchange
offer in a manner which we consider to constitute a material change, we will
promptly disclose such amendment by means of a prospectus supplement that we
will distribute to each registered holder of old notes.
We also reserve the right, in our sole discretion,
- to delay accepting any old notes or, if any of the conditions set forth
below under "-- Conditions" have not been satisfied or waived, to
terminate the exchange offer by giving oral or written notice of such
delay or termination to the exchange agent, or
- to amend the terms of the exchange offer in any manner by complying with
Rule 14e-l(d) under the Exchange Act to the extent that rule applies.
We acknowledge and undertake to comply with the provisions of Rule 14e-l(c)
under the Exchange Act, which requires us to pay the consideration offered, or
return the old notes surrendered for exchange, promptly after the termination or
withdrawal of the exchange offer. We will notify you as promptly as we can of
any extension, termination or amendment.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The old notes were issued as global securities in fully registered form
without interest coupons. Beneficial interests in the global securities, held by
direct or indirect participants in DTC, are shown on, and transfers of these
interests are effected only through, records maintained in book-entry form by
DTC with respect to its participants.
If you hold your old notes in the form of book-entry interests and you wish
to tender your old notes for exchange pursuant to the exchange offer, you must
transmit to the exchange agent on or prior to the expiration date either:
- a written or facsimile copy of a properly completed and duly executed
letter of transmittal, including all other documents required by such
letter of transmittal, to the exchange agent at the address set forth on
the cover page of the letter of transmittal; or
- a computer-generated message transmitted by means of DTC's Automated
Tender Offer Program system and received by the exchange agent and
forming a part of a confirmation of book-entry transfer, in which you
acknowledge and agree to be bound by the terms of the letter of
transmittal.
In addition, in order to deliver old notes held in the form of book-entry
interests:
- a timely confirmation of book-entry transfer of such notes into the
exchange agent's account at DTC pursuant to the procedure for book-entry
transfers described below under "-- Book-Entry Transfer" must be received
by the exchange agent prior to the expiration date; or
- you must comply with the guaranteed delivery procedures described below.
The method of delivery of old notes and the letter of transmittal and all
other required documents to the exchange agent is at your election and risk.
Instead of delivery by mail, we recommend that you use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
delivery to the exchange agent before the expiration date. You should not send
the letter of transmittal or old notes to us. You
31
may request your broker, dealer, commercial bank, trust company, or nominee to
effect the above transactions for you.
CERTIFICATED OLD NOTES
Only registered holders of certificated old notes may tender those notes in
the exchange offer. If your old notes are certificated notes and you wish to
tender those notes for exchange pursuant to the exchange offer, you must
transmit to the exchange agent on or prior to the expiration date, a written or
facsimile copy of a properly completed and duly executed letter of transmittal,
including all other required documents, to the address set forth below under
"Exchange Agent." In addition, in order to validly tender your certificated old
notes:
- the certificates representing your old notes must be received by the
exchange agent prior to the expiration date; or
- you must comply with the guaranteed delivery procedures described below.
PROCEDURES APPLICABLE TO ALL HOLDERS
If you tender an old note and you do not withdraw the tender prior to the
expiration date, you will have made an agreement with us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
If your old notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your old notes, either make appropriate arrangements to register
ownership of the old notes in your name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
- old notes tendered in the exchange offer are tendered either
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal or
- for the account of an eligible institution; and
- the box entitled "Special Registration Instructions" on the letter of
transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your old
notes must be endorsed or accompanied by a properly completed bond power and
signed by you as your name appears on those old notes.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing. Unless we waive this requirement, in
this instance you must submit with the letter of transmittal proper evidence
satisfactory to us of their authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered old notes. This determination will be final and binding.
We reserve the absolute right to reject any and all old notes not properly
tendered or any old notes our
32
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular old notes. Our interpretation of the terms and conditions of
the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties.
You must cure any defects or irregularities in connection with tenders of
your old notes within the time period we will determine unless we waive that
defect or irregularity. Although we intend to notify you of defects or
irregularities with respect to your tender of old notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
this notification. Your tender will not be deemed to have been made and your
notes will be returned to you if:
- you improperly tender your old notes;
- you have not cured any defects or irregularities in your tender; and
- we have not waived those defects, irregularities or improper tender.
In this event, the exchange agent will return your notes, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration of the exchange offer.
In addition, we reserve the right in our sole discretion to:
- purchase or make offers for, or offer Exchange Notes for, any old notes
that remain outstanding subsequent to the expiration of the exchange
offer;
- terminate the exchange offer; and
- to the extent permitted by applicable law, purchase notes in the open
market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers could differ from the terms of the
exchange offer.
By tendering, you will represent to us that, among other things:
- the Exchange Notes to be acquired by you in the exchange offer are being
acquired in the ordinary course of your business;
- you are not engaging in and do not intend to engage in a distribution of
the Exchange Notes to be acquired by you in the exchange offer;
- you do not have an arrangement or understanding with any person to
participate in the distribution of the Exchange Notes to be acquired by
you in the exchange offer; and
- you are not our "affiliate," as defined under Rule 405 of the Securities
Act.
In all cases, issuance of Exchange Notes for old notes that are accepted for
exchange in the exchange offer will be made only after timely receipt by the
exchange agent of certificates for your old notes or a timely book-entry
confirmation of your old notes into the exchange agent's account at DTC, a
properly completed and duly executed letter of transmittal, or a
computer-generated message instead of the letter of transmittal, and all other
required documents. If any tendered old notes are not accepted for any reason
set forth in the terms and conditions of the exchange offer or if old notes are
submitted for a greater principal amount than you desire to exchange, the
unaccepted or non-exchanged old notes, or old notes in substitution therefor,
will be returned without expense to you. In addition, in the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described below, the
non-exchanged old notes will be credited to your account maintained with DTC, as
promptly as practicable after the expiration or termination of the exchange
offer.
The exchange agent will establish an account with respect to the book-entry
interests at DTC for purposes of the exchange offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the exchange agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by
33
causing DTC to transfer the book-entry interests into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer.
If one of the following situations occur:
- you cannot deliver a book-entry confirmation of book-entry delivery of
your book-entry interests into the exchange agent's account at DTC; or
- you cannot deliver all other documents required by the letter of
transmittal to the exchange agent prior to the expiration date,
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your old notes and your old notes are not
immediately available or one of the situations described in the immediately
preceding paragraph occurs, you may tender if:
- you tender through an eligible financial institution;
- on or prior to 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from an eligible institution, a written or
facsimile copy of a properly completed and duly executed letter of
transmittal and notice of guaranteed delivery, substantially in the form
provided by us; and
- the certificates for all certificated old notes, in proper form for
transfer, or a book-entry confirmation, and all other documents required
by the letter of transmittal, are received by the exchange agent within
three New York Stock Exchange trading days after the date of execution of
the notice of guaranteed delivery.
The notice of guaranteed delivery may be sent by facsimile transmission,
mail or hand delivery. The notice of guaranteed delivery must set forth:
- your name and address;
- the amount of old notes you are tendering; and
- a statement that your tender is being made by the notice of guaranteed
delivery and that you guarantee that within three New York Stock Exchange
trading days after the execution of the notice of guaranteed delivery,
the eligible institution will deliver the following documents to the
exchange agent:
- the certificates for all certificated old notes being tendered, in
proper form for transfer or a book-entry confirmation of tender;
- a written or facsimile copy of the letter of transmittal, or a
book-entry confirmation instead of the letter of transmittal; and
- any other documents required by the letter of transmittal.
The exchange agent will establish an account with respect to the book-entry
interests at DTC for purposes of the exchange offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the exchange agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by causing DTC to transfer the book-entry interests into
the exchange agent's account at DTC in accordance with DTC's procedures for
transfer.
If one of the following situations occur:
- you cannot deliver a book-entry confirmation of book-entry delivery of
your book-entry interests into the exchange agent's account at DTC; or
34
- you cannot deliver all other documents required by the letter of
transmittal to the exchange agent prior to the expiration date,
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
WITHDRAWAL RIGHTS
You may withdraw tenders of your old notes at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
For your withdrawal to be effective, the exchange agent must receive a
written or facsimile transmission or a telex or telegram notice of withdrawal at
its address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the expiration date.
The notice of withdrawal must:
- state your name;
- identify the specific old notes to be withdrawn, including the
certificate number or numbers and the principal amount of withdrawn
notes;
- be signed by you in the same manner as you signed the letter of
transmittal when you tendered your old notes, including any required
signature guarantees or be accompanied by documents of transfer
sufficient for the exchange agent to register the transfer of the old
notes into your name; and
- specify the name in which the old notes are to be registered, if
different from yours.
We will determine all questions regarding the validity, form and
eligibility, including time of receipt, of withdrawal notices. Our determination
will be final and binding on all parties. Any old notes withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the exchange
offer. Any old notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to you without cost as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn old notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering" above at any time on or
prior to 5:00 p.m., New York City time, on the expiration date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer and subject to
our obligations under the registration rights agreement, we will not be required
to accept for exchange, or to issue Exchange Notes in exchange for, any old
notes and may terminate or amend the exchange offer, if at any time before the
acceptance of any old notes for exchange any of the following events occur:
- any injunction, order or decree has been issued by any court or any
governmental agency that would prohibit, prevent or otherwise materially
impair our ability to proceed with the exchange offer; or
- the exchange offer violates any applicable law or any applicable
interpretation of the staff of the Commission.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances giving rise to them, subject to applicable law. We also may
waive in whole or in part at any time and from time to time any particular
condition in our sole discretion. If we waive a condition, we may be required in
order to comply with applicable securities laws to extend the expiration date of
the exchange offer. Our failure at any time to exercise any of the foregoing
rights will not be deemed a waiver of these rights and these rights will be
deemed ongoing rights which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
Exchange Notes will be issued in exchange for any of those old notes, if at the
time the old notes are tendered any stop order is
35
threatened by the Commission or in effect with respect to the registration
statement of which this prospectus is a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
The exchange offer is not conditioned on any minimum principal amount of
old notes being tendered for exchange.
THE EXCHANGE AGENT
We have appointed Fifth Third Bank, Indiana as exchange agent for the
exchange offer. Questions, requests for assistance and requests for additional
copies of the prospectus, the letter of transmittal and other related documents
should be directed to the exchange agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL, BY HAND OR BY OVERNIGHT COURIER:
Fifth Third Bank, Indiana
Attn: George L. Bawcum, Corporate Trust Services
251 North Illinois Street, Suite 310
Indianapolis, Indiana 46204
(317) 383-2710 (phone)
(317) 383-2992 (fax)
e-mail: george.bawcum@53.com
or, in The Borough of Manhattan, The City of New York, New York:
Fifth Third Bank, Indiana
Corporate Trust Services
Attn: Computershare Trust Company of New York
Wall Street Plaza
88 Pine Street
New York, New York 10005
The exchange agent also acts as trustee under the indenture.
FEES AND EXPENSES
We will pay all registration expenses, including SEC filing fees and fees
and expenses of the Exchange Agent, printing, mailing, legal and accounting in
connection with the exchange offer, including any costs of solicitation.
However, we will not pay any underwriting discounts and commissions, if any,
relating to the sale or disposition of notes pursuant to a shelf registration.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with a
tender of your old notes for exchange unless you instruct us to register
Exchange Notes in the name of, or request that old notes not tendered or not
accepted in the exchange offer be returned to, a person other than the
registered tendering holder, in which event the registered tendering holder will
be responsible for the payment of any applicable transfer tax.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expense of the exchange
offer over the term of the Exchange Notes under generally accepted accounting
principles.
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DESCRIPTION OF THE EXCHANGE NOTES
We will issue the Exchange Notes (which, together with the old notes not
exchanged, are referred to as the Notes) under an Indenture, to be dated as of
the Closing Date, among Steel Dynamics, as issuer, SDI Investment Company, as
guarantor, and Fifth Third Bank, Indiana, as trustee. The terms of the notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939. Any old notes that remain
outstanding after the consummation of the exchange offer and the Exchange Notes
will be treated as a single class under the Indenture, including for purposes of
determining whether the required percentage of noteholders have given their
approval or consent to an amendment or waiver or joined in directing the Trustee
to take certain actions on behalf of all noteholders.
Certain terms used in this description are defined under the subheading
"-- Certain Definitions." For purposes of this "Description of the Notes," term
"Steel Dynamics" refers only to Steel Dynamics, Inc., and not to any of its
subsidiaries.
The following description is only a summary of the material provisions of
the Indenture. We urge you to read the Indenture because it, not this
description, define your rights as holders of the notes. You may request copies
of these agreements at our address set forth under the heading "Where You Can
Find More Information."
The following is a summary of the material provisions of the Indenture but
does not restate the Indenture in its entirety. You can find the definitions of
certain capitalized terms used in the following summary under the subheading
"Definitions." We urge you to read the Indenture because it, and not this
description, defines your rights as holders of the Notes. A copy of the proposed
form of Indenture is available upon request from Steel Dynamics. For purposes of
this "Description of the Notes," the term "Steel Dynamics" means Steel Dynamics,
Inc. and its successors under the Indenture, in each case excluding its
subsidiaries.
GENERAL
The Exchange Notes will be unsecured unsubordinated obligations of Steel
Dynamics, limited to $200 million aggregate principal amount, and will mature on
March 15, 2009. Subject to the covenants described below under "Covenants" and
applicable law, Steel Dynamics may issue additional Notes ("Additional Notes")
under the Indenture. The old Notes, and any Exchange Notes issued as described
in this prospectus, and any Additional Notes subsequently issued would be
treated as a single class for all purposes under the Indenture.
Each Note will initially bear interest at the rate per annum shown on the
cover page of this prospectus from the Closing Date or from the most recent
interest payment date to which interest has been paid. Interest on the Notes
will be payable semiannually on March 15 and September 15 of each year,
commencing September 15, 2002. Interest will be paid to Holders of record at the
close of business on the March 1 or September 1 immediately preceding the
interest payment date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months on a U.S. corporate bond basis.
If by the date that is six months after the Closing Date, Steel Dynamics
has not consummated a registered exchange offer for the Notes or caused a shelf
registration statement with respect to resales of the Notes to be declared
effective, the annual interest rate on the Notes will increase by .5% until the
consummation of a registered exchange offer or the effectiveness of a shelf
registration statement. See "-- Registration Rights."
The Notes may be exchanged or transferred at the office or agency of Steel
Dynamics in The Borough of Manhattan, The City of New York. Initially, the
corporate trust office of the Trustee in New York, New York will serve as such
office. If you give Steel Dynamics wire transfer instructions, Steel Dynamics
will pay all principal, premium and interest on your Notes in accordance with
your instructions. If you do not give Steel Dynamics wire transfer instructions,
payments of principal, premium and interest will be made at the office or agency
of the paying agent which will initially be the Trustee, unless Steel Dynamics
elects to make interest payments by check mailed to the Holders.
37
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and multiples of $1,000. See
"-- Book-Entry; Delivery and Form." No service charge will be made for any
registration of transfer or exchange of Notes, but Steel Dynamics may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
OPTIONAL REDEMPTION
Steel Dynamics may redeem the Notes at any time on or after March 15, 2006.
The redemption price for the Notes (expressed as a percentage of principal
amount), will be as set forth below, plus accrued interest to the redemption
date, if redeemed during the twelve-month period commencing on March 15 of the
years indicated below:
YEAR REDEMPTION PRICE
---- ----------------
2006........................................................ 104.750%
2007........................................................ 102.375
2008 and thereafter......................................... 100.000
In addition, at any time prior to March 15, 2005, Steel Dynamics may redeem
up to 35% of the principal amount of the Notes with the Net Cash Proceeds of one
or more sales of its Capital Stock (other than Disqualified Stock) at a
redemption price (expressed as a percentage of principal amount) of 109.500%,
plus accrued interest to the redemption date; provided that at least 65% of the
aggregate principal amount of Notes originally issued on the Closing Date
remains outstanding after each such redemption and notice of any such redemption
is mailed within 60 days of each such sale of Capital Stock.
Steel Dynamics will give not less than 30 days' nor more than 60 days'
notice of any redemption. If less than all of the Notes are to be redeemed,
selection of the Notes for redemption will be made by the Trustee:
- in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or,
- if the Notes are not listed on a national securities exchange, by lot or
by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate.
However, no Note of $1,000 in principal amount or less shall be redeemed in
part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note will state the portion of the principal amount to be
redeemed. A new Note in principal amount equal to the unredeemed portion will be
issued upon cancellation of the original Note.
GUARANTEES
Payment of the principal of, premium, if any, and interest on the Notes
will be Guaranteed, jointly and severally, on an unsecured unsubordinated basis
by SDI Investment Company, Ferrous Resources, LLC, STLD Holdings, Inc. and
Dynamic Bar Products, LLC. In addition, each future Restricted Subsidiary, other
than a Foreign Subsidiary, will Guarantee the payment of the principal of
premium if any and interest on the Notes. Only SDI Investment Company was a
Restricted Subsidiary on the Closing Date. All of Steel Dynamics' other
Subsidiaries existing on the Closing Date were not Restricted Subsidiaries nor
guarantors of the Notes.
The obligations of a Subsidiary Guarantor under its Note Guarantee will be
limited so as not to constitute a fraudulent conveyance or fraudulent transfer
under applicable Federal or state laws. A Subsidiary Guarantor that makes a
payment or distribution under its Note Guarantee will be entitled to
contribution from any other Subsidiary Guarantor.
The Note Guarantee issued by any Subsidiary Guarantor will be automatically
and unconditionally released and discharged upon (1) any sale, exchange or
transfer to any Person (other than an Affiliate of Steel Dynamics) of all of the
Capital Stock of such Subsidiary Guarantor or (2) the designation of such
Subsidiary Guarantor as an Unrestricted Subsidiary, in each case in compliance
with the terms of the Indenture.
38
RANKING
The Notes will be equal in right of payment with all existing and future
unsubordinated unsecured indebtedness of Steel Dynamics and senior in right of
payment to all subordinated indebtedness of Steel Dynamics. The Note Guarantees
will be equal in right of payment with all existing and future unsubordinated
unsecured indebtedness of the Subsidiary Guarantors and senior in right of
payment to all subordinated indebtedness of the Subsidiary Guarantors.
As of June 30, 2002, Steel Dynamics and the Initial Subsidiary Guarantor
had $528.4 million of consolidated indebtedness outstanding, $275.0 million of
which was secured indebtedness under the Credit Agreement. The Credit Agreement
is secured by substantially all of the assets of Steel Dynamics and its wholly
owned subsidiaries, other than Iron Dynamics until such time as the IDI Credit
Agreement is terminated in accordance with the Settlement Agreement. The Credit
Agreement is secured by the capital stock and other equity interests of Steel
Dynamics in its subsidiaries. The Notes are effectively subordinated to such
indebtedness to the extent of such security interests.
The Notes and the Note Guarantees are effectively subordinated to all of
the liabilities of the subsidiaries of Steel Dynamics that do not Guarantee the
Notes. As of June 30, 2002, these subsidiaries had $28.1 million of liabilities
outstanding, including $23.3 million of indebtedness, excluding their guarantee
of Steel Dynamics' obligations under the Credit Agreement.
SINKING FUND
There will be no sinking fund payments for the Notes.
REGISTRATION RIGHTS
The following is a summary of the material provisions of the Registration
Rights Agreement. You should read the proposed form of the Registration Rights
Agreement. A copy of the proposed form of Registration Rights Agreement is
available from Steel Dynamics upon request.
Steel Dynamics and the Initial Subsidiary Guarantor have agreed with the
Placement Agents, for the benefit of the Holders, that they will use their best
efforts, at their cost, to file and cause to become effective a registration
statement with respect to a registered offer (the "Exchange Offer") to exchange
the Notes for an issue of unsubordinated notes of Steel Dynamics (the "Exchange
Notes"), guaranteed by the Subsidiary Guarantors, with terms identical to the
Notes (except that the Exchange Notes will not bear legends restricting
transfer).
The Exchange Offer will remain open for not less than 20 business days
after the date Steel Dynamics mails notice of the Exchange Offer to Holders. For
each Note surrendered to Steel Dynamics under the Exchange Offer, the Holder
will receive an Exchange Note of equal principal amount. Interest on each
Exchange Note shall accrue from the last interest payment date on which interest
was paid on the Notes so surrendered or, if no interest has been paid on such
Notes, from the Closing Date.
If Steel Dynamics effects the Exchange Offer, it will be entitled to close
the Exchange Offer 20 business days after the commencement thereof, provided
that it has accepted all Notes validly surrendered in accordance with the terms
of the Exchange Offer. Notes not tendered in the Exchange Offer will bear
interest at the rate set forth on the cover page of this memorandum and be
subject to all of the terms and conditions specified in the Indenture and to the
transfer restrictions described in "Transfer Restrictions."
In the event that applicable interpretations of the staff of the Securities
and Exchange Commission do not permit Steel Dynamics to effect the Exchange
Offer, or under other specified circumstances, Steel Dynamics and the Subsidiary
Guarantors will, at their cost, use their best efforts to cause to become
effective a shelf registration statement (the "Shelf Registration Statement")
with respect to resale of the Notes. Steel Dynamics and the Subsidiary
Guarantors will use their best efforts to keep such Shelf Registration Statement
effective until the expiration of the time period referred to in Rule 144(k)
under the Securities Act after the Closing Date, or such shorter period that
will terminate when all Notes covered by a Shelf Registration
39
Statement have been sold pursuant to a Shelf Registration Statement. Steel
Dynamics and the Subsidiary Guarantors will, in the event of such a shelf
registration, provide to each Holder copies of the prospectus, notify each
Holder when the Shelf Registration Statement for the Notes has become effective
and take certain other actions as are required to permit resale of the Notes. A
Holder that sells its Notes pursuant to the Shelf Registration Statement (1)
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, (2) will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and (3) will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a Holder (including
certain indemnification obligations).
In the event that the Exchange Offer is not consummated on or prior to the
date that is six months after the Closing Date, the annual interest rate borne
by the Notes will be increased by .5% over the rate shown on the cover page of
this memorandum. Once the Exchange Offer is consummated or the Shelf
Registration Statement is declared effective, the annual interest rate borne by
the Notes shall be changed to again be the rate shown on the cover page of this
memorandum.
CERTAIN COVENANTS
OVERVIEW
In the Indenture, Steel Dynamics will agree to covenants that limit its and
its Restricted Subsidiaries' ability, among other things, to:
- incur additional debt;
- pay dividends, acquire shares of capital stock, make payments on
subordinated debt or make investments;
- place limitations on distributions from Restricted Subsidiaries;
- issue or sell capital stock of Restricted Subsidiaries;
- issue guarantees;
- sell or exchange assets;
- enter into transactions with shareholders and affiliates;
- create liens; and
- effect mergers.
In addition, if a Change of Control occurs, each Holder of Notes will have
the right to require Steel Dynamics to repurchase all or a part of the Holder's
Notes at a price equal to 101% of their principal amount, plus any accrued
interest to the date of repurchase. Only SDI Investment Company was a Restricted
Subsidiary on the Closing Date.
LIMITATION ON INDEBTEDNESS
(a) Steel Dynamics will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note
Guarantees and other Indebtedness existing on the Closing Date); provided that
Steel Dynamics or any Subsidiary Guarantor may Incur Indebtedness, and any
Restricted Subsidiary may Incur Acquired Indebtedness, if, after giving effect
to the Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Interest Coverage Ratio would be greater than 2.25:1.
Notwithstanding the foregoing, Steel Dynamics and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(1) Indebtedness of Steel Dynamics or any Subsidiary Guarantor
outstanding at any time under the Credit Agreement in an aggregate
principal amount (together with refinancings thereof) not to exceed
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the greater of (a) $350 million, less any amount of such Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant or (b) the sum of the amounts equal to (x) 60% of the consolidated
book value of the inventory of Steel Dynamics and the Subsidiary Guarantors
and (y) 85% of the consolidated book value of the accounts receivable of
Steel Dynamics and the Subsidiary Guarantors, in each case as of the most
recently ended fiscal quarter of Steel Dynamics for which reports have been
filed with the SEC or provided to the Trustee;
(2) Indebtedness owed (A) to Steel Dynamics or any Subsidiary
Guarantor evidenced by an unsubordinated promissory note or (B) to any
other Restricted Subsidiary; provided that (x) any event which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to Steel Dynamics or
another Restricted Subsidiary) shall be deemed, in each case, to constitute
an Incurrence of such Indebtedness not permitted by this clause (2) and (y)
if Steel Dynamics or any Subsidiary Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated in right of
payment to the Notes, in the case of Steel Dynamics or the Note Guarantee,
in the case of a Subsidiary Guarantor;
(3) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness (other than
Indebtedness outstanding under clause (2) or (5)) and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded
(plus premiums, accrued interest, fees and expenses); provided that (a)
Indebtedness the proceeds of which are used to refinance or refund the
Notes or Indebtedness that is pari passu with, or subordinated in right of
payment to, the Notes or a Note Guarantee shall only be permitted under
this clause (3) if (x) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes or a Note
Guarantee, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes or the Note Guarantee, or (y) in case the
Indebtedness to be refinanced is subordinated in right of payment to the
Notes or a Note Guarantee, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Notes or the Note Guarantee at least
to the extent that the Indebtedness to be refinanced is subordinated to the
Notes or the Note Guarantee, (b) such new Indebtedness, determined as of
the date of Incurrence of such new Indebtedness, does not mature prior to
the Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or refunded and
(c) such new Indebtedness is Incurred by Steel Dynamics or a Subsidiary
Guarantor or by the Restricted Subsidiary who is the obligor on the
Indebtedness to be refinanced or refunded;
(4) Indebtedness of Steel Dynamics, to the extent the net proceeds
thereof are promptly (A) used to purchase Notes tendered in an Offer to
Purchase made as a result of a Change of Control or (B) deposited to
defease the Notes as described under "Defeasance";
(5) Guarantees of the Notes and Guarantees of Indebtedness of Steel
Dynamics or any Subsidiary Guarantor by any Restricted Subsidiary provided
the Guarantee of such Indebtedness is permitted by and made in accordance
with the "Limitation on Issuance of Guarantees by Restricted Subsidiaries"
covenant;
(6) Indebtedness of Steel Dynamics related to the Columbia City
mini-mill in an aggregate principal amount outstanding at any time not to
exceed $20 million;
(7) Indebtedness of Steel Dynamics or any Subsidiary Guarantor
Incurred for the purpose of financing all or any part of the purchase price
or cost of construction or improvement of property, plant or equipment used
in the business of Steel Dynamics or any Subsidiary Guarantor, in an
aggregate principal amount outstanding at any time (together with
refinancings thereof) not to exceed $20 million; or
(8) Indebtedness of Steel Dynamics or any Restricted Subsidiary (in
addition to Indebtedness permitted under clauses (1) through (7) above) in
an aggregate principal amount outstanding at any
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time (together with refinancings thereof) not to exceed $25 million, less
any amount of such Indebtedness permanently repaid as provided under the
"Limitation on Asset Sales" covenant.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that may be Incurred
pursuant to this "Limitation on Indebtedness" covenant will not be deemed to be
exceeded, with respect to any outstanding Indebtedness due solely to the result
of fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (x) Indebtedness Incurred under the
Credit Agreement on or prior to the Closing Date shall be treated as Incurred
pursuant to clause (1) of the second paragraph of clause (a) of this "Limitation
on Indebtedness" covenant, (y) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (z) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant shall not be treated as Indebtedness. For
purposes of determining compliance with this "Limitation on Indebtedness"
covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above (other than Indebtedness
referred to in clause (x) of the preceding sentence), including under the first
paragraph of part (a), Steel Dynamics, in its sole discretion, shall classify,
and from time to time may reclassify, such item of Indebtedness.
(d) Steel Dynamics will not, and will not permit any Subsidiary Guarantor
to, Incur any Indebtedness if such Indebtedness is subordinate in right of
payment to any other Indebtedness unless such Indebtedness is also subordinate
in right of payment to the Notes, in the case of Steel Dynamics, or the Notes
Guarantee, in the case of a Subsidiary Guarantee, to the same extent.
LIMITATION ON RESTRICTED PAYMENTS
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (1) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries, (other than Subsidiary Guarantors) held by minority
stockholders) held by Persons other than Steel Dynamics or any of its Restricted
Subsidiaries, (2) purchase, call for redemption or redeem, retire or otherwise
acquire for value any shares of Capital Stock of (A) Steel Dynamics or a
Subsidiary Guarantor (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person or (B) a Restricted Subsidiary
other than a Subsidiary Guarantor (including options, warrants or other rights
to acquire such shares of Capital Stock) held by any Affiliate of Steel Dynamics
(other than a Wholly Owned Restricted Subsidiary) or any holder (or any
Affiliate of such holder) of 5% or more of the Capital Stock of Steel Dynamics,
(3) make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of Steel Dynamics that is subordinated in right of
payment to the Notes or any Indebtedness of a Subsidiary Guarantor that is
subordinated in right of payment to a Note Guarantee or (4) make any Investment,
other than a Permitted Investment, in any Person (such payments or any other
actions described in clauses (1) through (4) above being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
(B) Steel Dynamics could not Incur at least $1.00 of Indebtedness
under the first paragraph of part (a) of the "Limitation on Indebtedness"
covenant or
(C) the aggregate amount of all Restricted Payments made after the
Closing Date shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus
100% of the amount of such loss) accrued on a cumulative basis during
the period (taken as one accounting period) beginning on the first day
of the
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fiscal quarter immediately following the Closing Date and ending on the
last day of the last fiscal quarter preceding the Transaction Date for
which reports have been filed with the SEC or provided to the Trustee
plus
(2) the aggregate Net Cash Proceeds received by Steel Dynamics
after the Closing Date from the issuance and sale of its Capital Stock
(other than Disqualified Stock) to a Person who is not a Subsidiary of
Steel Dynamics, including an issuance or sale permitted by the Indenture
of Indebtedness of Steel Dynamics for cash subsequent to the Closing
Date upon the conversion of such Indebtedness into Capital Stock (other
than Disqualified Stock) of Steel Dynamics, or from the issuance to a
Person who is not a Subsidiary of Steel Dynamics of any options,
warrants or other rights to acquire Capital Stock of Steel Dynamics (in
each case, exclusive of any Disqualified Stock or any options, warrants
or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Notes) plus
(3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments and Investments pursuant to clause
(9) below) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to Steel Dynamics or any Restricted
Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net
Income), from the release of any Guarantee or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by Steel Dynamics
or any Restricted Subsidiary in such Person or Unrestricted Subsidiary
plus
(4) $10 million.
The foregoing provision shall not be violated by reason of:
(1) the payment of any dividend or redemption of any Capital Stock
within 60 days after the related date of declaration or call for redemption
if, at said date of declaration or call for redemption, such payment or
redemption would comply with the preceding paragraph;
(2) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes or any Note Guarantee, including premium, if any, and
accrued interest, with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (3) of the second paragraph of part (a) of the
"Limitation on Indebtedness" covenant;
(3) the repurchase, redemption or other acquisition of Capital Stock
of Steel Dynamics or a Subsidiary Guarantor (or options, warrants or other
rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a substantially concurrent offering of, shares of Capital Stock
(other than Disqualified Stock) of Steel Dynamics (or options, warrants or
other rights to acquire such Capital Stock); provided that such options,
warrants or other rights are not redeemable at the option of the holder, or
required to be redeemed prior to the Stated Maturity of the Notes;
(4) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of Indebtedness which
is subordinated in right of payment to the Notes or any Note Guarantee in
exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock (other than Disqualified Stock) of
Steel Dynamics (or options, warrants or other rights to acquire such
Capital Stock); provided that such options, warrants or other rights are
not redeemed at the option of the holder, or required to be redeemable
prior to the Stated Maturity of the Notes;
(5) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially
all of the property and assets of Steel Dynamics;
43
(6) Investments acquired in exchange for or out of the proceeds of a
substantially concurrent offering of Capital Stock (other than Disqualified
Stock) of Steel Dynamics;
(7) the repurchase of Capital Stock deemed to occur upon the exercise
of options or warrants if such Capital Stock represents all or a portion of
the exercise price thereof;
(8) the purchase, redemption, retirement or other acquisition for
value of shares of Capital Stock of Steel Dynamics, or option to purchase
such shares, held by directors, employees, or former directors or
employees, of Steel Dynamics or any Subsidiary Guarantor (or their estates
or beneficiaries under their estates) upon their death, disability,
retirement or termination of employment or pursuant to the terms of any
agreement under which such shares of Capital Stock or options were issued;
provided that the aggregate consideration paid for such purchase,
redemption, retirement or other acquisition for value of such shares of
Capital Stock or options after the Closing Date does not exceed $1.5
million in any calendar year,
(9) Investments in any Person in an aggregate amount not to exceed (a)
$7.5 million in any fiscal year, provided that any amounts not invested in
any fiscal year may be carried forward and invested in any subsequent
fiscal year and (b) $30 million; plus, in each case, the net reduction in
Investments made pursuant to this clause (9) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to Steel Dynamics or
any Restricted Subsidiary or from the Net Cash Proceeds from the sale of
any such Investment (except, in each case, to the extent any such payment
or proceeds are included in the calculation of Adjusted Consolidated Net
Income), from the release of any Guarantee or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed, in each
case, the amount of such Investments previously made by Steel Dynamics or
any Restricted Subsidiary in such Person or Unrestricted Subsidiary;
provided such Person's primary business is related, ancillary or
complementary to the business of Steel Dynamics and its Restricted
Subsidiaries; or
(10) other Restricted Payments in an aggregate amount not to exceed
$20 million.
provided that, except in the case of clauses (1) and (3), no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (2) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (3) or (4) thereof and an Investment acquired in exchange for Capital
Stock referred to in clause (6) thereof), and the Net Cash Proceeds from any
issuance of Capital Stock referred to in clauses (3), (4) or (6), shall be
included in calculating whether the conditions of clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant have been met
with respect to any subsequent Restricted Payments.
For purposes of determining compliance with this "Limitation on Restricted
Payments" covenant, (x) the amount, if other than in cash, of any Restricted
Payment shall be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution and (y) in
the event that a Restricted Payment meets the criteria of more than one of the
types of Restricted Payments described in the above clauses, including the first
paragraph of this "Limitation on Restricted Payments" covenant, Steel Dynamics,
in its sole discretion, may order and classify, and from time to time may
reclassify, such Restricted Payment if it would have been permitted at the time
such Restricted Payment was made and at the time of such reclassification.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (1) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by Steel
Dynamics or any other Restricted Subsidiary,
44
(2) pay any Indebtedness owed to Steel Dynamics or any other Restricted
Subsidiary, (3) make loans or advances to Steel Dynamics or any other Restricted
Subsidiary or (4) transfer any of its property or assets to Steel Dynamics or
any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(1) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements taken as a whole are no less
favorable in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended,
refinanced, renewed or replaced;
(2) existing under or by reason of applicable law;
(3) existing with respect to any Person or the property or assets of
such Person acquired by Steel Dynamics or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in contemplation
thereof, which encumbrances or restrictions are not applicable to any
Person or the property or assets of any Person other than such Person or
the property or assets of such Person so acquired and any extensions,
refinancings, renewals or replacements of thereof; provided that the
encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements taken as a whole are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced;
(4) in the case of clause (4) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant:
(A) that restrict in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
Steel Dynamics or any Restricted Subsidiary not otherwise prohibited by
the Indenture or
(C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of Steel
Dynamics or any Restricted Subsidiary in any manner material to Steel
Dynamics or any Restricted Subsidiary; or
(5) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent Steel Dynamics or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of Steel
Dynamics or any of its Restricted Subsidiaries that secure Indebtedness of Steel
Dynamics or any of its Restricted Subsidiaries.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Steel Dynamics will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except:
(1) to Steel Dynamics or a Wholly Owned Restricted Subsidiary;
(2) Issuances of director's qualifying shares or sales to foreign
nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to
the extent required by applicable law;
45
(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect to such
issuance or sale would have been permitted to be made under the "Limitation
on Restricted Payments" covenant if made on the date of such issuance or
sale; or
(4) sales of Common Stock (including options, warrants or other rights
to purchase shares of such Common Stock) of a Restricted Subsidiary by
Steel Dynamics or a Restricted Subsidiary, provided that Steel Dynamics or
such Restricted Subsidiary applies the Net Cash Proceeds in accordance with
of the "Limitation on Asset Sales" covenant.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
Steel Dynamics will cause each Restricted Subsidiary that is not a
Subsidiary Guarantor (other than a Foreign Subsidiary) to execute and deliver a
supplemental indenture to the Indenture providing for a Guarantee (a "Subsidiary
Guarantee") of payment of the Notes by such Restricted Subsidiary.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of Steel Dynamics, of all of Steel Dynamics' and
each Restricted Subsidiary's Capital Stock in such Restricted Subsidiary (which
sale, exchange or transfer is not prohibited by the Indenture) or upon the
designation of such Restricted Subsidiary as an Unrestricted Subsidiary in
accordance with the terms of the Indenture.
Iron Dynamics, New Millennium, Omni Dynamic Aviation LLC and Paragon Steel
Enterprises LLC will not Guarantee the Notes.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of Steel Dynamics or with
any Affiliate of Steel Dynamics or any Restricted Subsidiary, except upon fair
and reasonable terms no less favorable to Steel Dynamics or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(1) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which Steel Dynamics or a
Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized investment banking, accounting, valuation or
appraisal firm stating that the transaction is fair to Steel Dynamics or
such Restricted Subsidiary from a financial point of view;
(2) any transaction solely between Steel Dynamics and any of its
Wholly Owned Restricted Subsidiaries or solely among Wholly Owned
Restricted Subsidiaries;
(3) the payment of reasonable and customary regular fees to directors
of Steel Dynamics who are not employees of Steel Dynamics and reasonable
indemnification arrangements entered into by Steel Dynamics;
(4) any payments or other transactions pursuant to any tax-sharing
agreement between Steel Dynamics and any other Person with which Steel
Dynamics files a consolidated tax return or with which Steel Dynamics is
part of a consolidated group for tax purposes;
(5) any sale of shares of Capital Stock (other than Disqualified
Stock) of Steel Dynamics; or
(6) any Permitted Investments or any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant; or
46
(7) transactions between Steel Dynamics or any of its Restricted
Subsidiaries and its Subsidiaries, Heidtman Steel Products, Inc. and its
Affiliates and OmniSource Corporation and its Affiliates; provided, that
such transactions are in the ordinary course of Steel Dynamics' or such
Restricted Subsidiaries' business, consistent with past practice and on an
arm's length basis.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (2) through (7)
of this paragraph and not a Permitted Investment, (a) the aggregate amount of
which exceeds $2.5 million in value, must be approved or determined to be fair
in the manner provided for in clause (1)(A) or (B) above and (b) the aggregate
amount of which exceeds $10 million in value, must be determined to be fair in
the manner provided for in clause (1)(B) above.
LIMITATION ON LIENS
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to:
(1) Liens existing on the Closing Date, including Liens securing
obligations under the Credit Agreement;
(2) Liens granted after the Closing Date on any assets or Capital
Stock of Steel Dynamics or its Restricted Subsidiaries created in favor of
the Holders;
(3) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to Steel Dynamics or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to Steel Dynamics or
such other Restricted Subsidiary;
(4) Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (3) of the
second paragraph of the "Limitation on Indebtedness" covenant; provided
that such Liens do not extend to or cover any property or assets of Steel
Dynamics or any Restricted Subsidiary other than the property or assets
securing the Indebtedness being refinanced; or
(5) Liens securing Indebtedness in an amount (determined at the time
such Lien is granted) not to exceed the greater of (a) the amount of
Indebtedness that may be Incurred under clause (1) of the second paragraph
under the "Limitation on Indebtedness" covenant and (b) an amount equal to
50% of Adjustment Consolidated Net Tangible Assets (determined as of the
date of the last fiscal quarter for which a consolidated balance sheet of
Steel Dynamics and its Subsidiaries has been filed with the SEC or provided
to the Trustee);
(6) Liens securing Indebtedness Incurred under clause (6) of the
second paragraph under the "Limitation on Indebtedness" covenant;
(7) Liens (including extensions and renewals thereof) upon real or
personal property acquired after the Closing Date; provided that (a) such
Lien is created solely for the purpose of securing Indebtedness Incurred,
in accordance with the "Limitation on Indebtedness" covenant, to finance
the cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at
the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (c) any such Lien shall not extend to
or cover any property or assets other than such item of property or assets
and any improvements on such item;
47
(8) Liens on cash set aside at the time of the Incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities pre-fund the
payment of interest on such Indebtedness and are held in a collateral or
escrow account or similar arrangement to be applied for such purpose; or
(9) Permitted Liens.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby Steel Dynamics or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which Steel Dynamics or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if:
(1) the lease is for a period, including renewal rights, of not in
excess of three years;
(2) the lease secures or relates to industrial revenue or pollution
control bonds;
(3) the transaction is solely between Steel Dynamics and any Wholly
Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries;
(4) the transactions relate to the sale or transfer of assets or
properties for the Columbia City mini-mill having an aggregate fair market
value not to exceed $18 million; or
(5) Steel Dynamics or such Restricted Subsidiary, within 12 months
after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the second paragraph of the
"Limitation on Asset Sales" covenant.
LIMITATION ON ASSET SALES
Steel Dynamics will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (1) the consideration received by Steel
Dynamics or such Restricted Subsidiary is at least equal to the fair market
value of the assets sold or disposed of and (2) at least 75% of the
consideration received consists of (a) cash or Temporary Cash Investments, (b)
the assumption of unsubordinated Indebtedness of Steel Dynamics or any
Subsidiary Guarantor or Indebtedness of any other Restricted Subsidiary (in each
case, other than Indebtedness owed to Steel Dynamics or any Affiliate of Steel
Dynamics), provided that Steel Dynamics, such Subsidiary Guarantor or such other
Restricted Subsidiary is irrevocably and unconditionally released from all
liability under such Indebtedness or (c) Replacement Assets.
In the event and to the extent that the Net Cash Proceeds received by Steel
Dynamics or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of Steel Dynamics and its Subsidiaries has been filed
with the SEC or provided to the Trustee), then Steel Dynamics shall or shall
cause the relevant Restricted Subsidiary to:
(1) within twelve months after the date Net Cash Proceeds so received
exceed 10% of Adjusted Consolidated Net Tangible Assets
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of Steel Dynamics or any
Subsidiary Guarantor or any Indebtedness of any other Restricted
Subsidiary from sales of such Restricted Subsidiary's assets, in each
case owing to a Person other than Steel Dynamics or any Affiliate of
Steel Dynamics, or
48
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in
Replacement Assets, and
(2) apply (no later than the end of the 12-month period referred to in
clause (1)) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (1)) as provided in the following paragraphs of this
"Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (1)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, Steel Dynamics
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders (and if required by the terms
of any Indebtedness that is pari passu with the Notes or the Note Guarantees
("Pari Passu Indebtedness"), from the holders of such Pari Passu Indebtedness)
on a pro rata basis an aggregate principal amount of Notes (and Pari Passu
Indebtedness) equal to the Excess Proceeds on such date, at a purchase price
equal to 100% of their principal amount, plus, in each case, accrued interest
(if any) to the Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Steel Dynamics must commence, within 30 days of the occurrence of a Change
of Control, and consummate an Offer to Purchase for all Notes then outstanding,
at a purchase price equal to 101% of their principal amount, plus accrued
interest (if any) to the Payment Date.
There can be no assurance that Steel Dynamics will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of Steel Dynamics which might be
outstanding at the time).
The above covenant requiring Steel Dynamics to repurchase the Notes will,
unless consents are obtained, require Steel Dynamics to repay all indebtedness
then outstanding which by its terms would prohibit such Note repurchase, either
prior to or concurrently with such Note repurchase.
Steel Dynamics will not be required to make an Offer to Purchase upon the
occurrence of a Change of Control, if a third party makes an offer to purchase
the Notes in the manner, at the times and price and otherwise in compliance with
the requirements of the Indenture applicable to an Offer to Purchase for a
Change of Control and purchases all Notes validly tendered and not withdrawn in
such offer to purchase.
SEC REPORTS AND REPORTS TO HOLDERS
Whether or not Steel Dynamics is then required to file reports with the
SEC, Steel Dynamics shall file with the SEC all such reports and other
information as it would be required to file with the SEC by Section 13(a) or
15(d) under the Securities Exchange Act of 1934 if it were subject thereto.
Steel Dynamics shall supply the Trustee and each Holder who so requests or shall
supply to the Trustee for forwarding to each such Holder, without cost to such
Holder, copies of such reports and other information.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days;
49
(c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of Steel Dynamics and the Subsidiary
Guarantors or the failure by Steel Dynamics to make or consummate an Offer
to Purchase in accordance with the "Limitation on Asset Sales" or
"Repurchase of Notes upon a Change of Control" covenant;
(d) Steel Dynamics or any Subsidiary Guarantor defaults in the
performance of or breaches any other covenant or agreement in the Indenture
or under the Notes (other than a default specified in clause (a), (b) or
(c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of Steel Dynamics, any Subsidiary Guarantor or any Significant Subsidiary
having an outstanding principal amount of $10 million or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the holder thereof to declare such Indebtedness to
be due and payable prior to its Stated Maturity and such Indebtedness has
not been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed maturity
and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against Steel Dynamics, any Subsidiary Guarantor or any
Significant Subsidiary and shall not be paid or discharged, and there shall
be any period of 60 consecutive days following entry of the final judgment
or order that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of Steel Dynamics, any Subsidiary Guarantor
or any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of Steel Dynamics, any Subsidiary
Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of Steel Dynamics, any Subsidiary Guarantor or any
Significant Subsidiary or (C) the winding-up or liquidation of the affairs
of Steel Dynamics, any Subsidiary Guarantor or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days;
(h) Steel Dynamics, any Subsidiary Guarantor or any Significant
Subsidiary (A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to
the entry of an order for relief in an involuntary case under any such law,
(B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of Steel Dynamics, any Subsidiary Guarantor or any Significant Subsidiary
or for all or substantially all of the property and assets of Steel
Dynamics, any Subsidiary Guarantor or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors; or
(i) any Subsidiary Guarantor repudiates its obligations under its Note
Guarantee or, except as permitted by the Indenture, any Note Guarantee is
determined to be unenforceable or invalid or shall for any reason cease to
be in full force and effect.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to Steel Dynamics or any Subsidiary
Guarantor) occurs and is continuing under the Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes, then
outstanding, by written notice to Steel Dynamics (and to the Trustee if such
notice is given by the Holders), may, and the Trustee at the request of such
Holders shall, declare the principal of, premium, if any, and accrued interest
on
50
the Notes to be immediately due and payable. Upon a declaration of acceleration,
such principal of, premium, if any, and accrued interest shall be immediately
due and payable. In the event of a declaration of acceleration because an Event
of Default set forth in clause (e) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default triggering such Event of Default pursuant to clause (e) shall
be remedied or cured by Steel Dynamics, the relevant Subsidiary Guarantor or the
relevant Significant Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (g) or (h) above occurs with
respect to Steel Dynamics or any Subsidiary Guarantor, the principal of,
premium, if any, and accrued interest on the Notes then outstanding shall
automatically become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder. The Holders of at least a
majority in principal amount of the outstanding Notes by written notice to Steel
Dynamics and to the Trustee, may waive all past defaults and rescind and annul a
declaration of acceleration and its consequences if (x) all existing Events of
Default, other than the nonpayment of the principal of, premium, if any, and
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (y) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. For
information as to the waiver of defaults, see "-- Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a continuing Event
of Default;
(2) the Holders of at least 25% in aggregate principal amount of
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note
to receive payment of the principal of, premium, if any, or interest on, such
Note or to bring suit for the enforcement of any such payment, on or after the
due date expressed in the Notes, which right shall not be impaired or affected
without the consent of the Holder.
Officers of Steel Dynamics must certify, on or before a date not more than
90 days after the end of each fiscal year, that a review has been conducted of
the activities of Steel Dynamics and its Restricted Subsidiaries and Steel
Dynamics' and its Restricted Subsidiaries' performance under the Indenture and
that Steel Dynamics has fulfilled all obligations thereunder, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default and the nature and status thereof. Steel Dynamics will also be obligated
to notify the Trustee of any default or defaults in the performance of any
covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Steel Dynamics will not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
51
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into it unless:
(1) it shall be the continuing Person, or the Person (if other than
it) formed by such consolidation or into which it is merged or that
acquired or leased such property and assets (the "Surviving Person"), shall
be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee,
all of Steel Dynamics' obligations under the Indenture and the Notes;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, Steel Dynamics or the Surviving Person, as the case may be, shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of Steel Dynamics immediately prior to such transaction;
(4) immediately after giving effect to such transaction on a pro forma
basis Steel Dynamics, or the Surviving Person, as the case may be, could
Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant; provided that this clause (4) shall
not apply to a consolidation, merger or sale of all (but not less than all)
of the assets of Steel Dynamics if all Liens and Indebtedness of Steel
Dynamics or the Surviving Person, as the case may be, and its Restricted
Subsidiaries outstanding immediately after such transaction would have been
permitted (and all such Liens and Indebtedness, other than Liens and
Indebtedness of Steel Dynamics and its Restricted Subsidiaries outstanding
immediately prior to the transaction, shall be deemed to have been
Incurred) for all purposes of the Indenture;
(5) it delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (3) and (4))
and Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this
provision and that all conditions precedent provided for herein relating to
such transaction have been complied with; and
(6) each Subsidiary Guarantor, unless such Subsidiary Guarantor is the
Person with which Steel Dynamics has entered into a transaction under this
"Consolidation, Merger and Sale of Assets" section, shall have by amendment
to its Note Guarantee confirmed that its Note Guarantee shall apply to the
obligations of Steel Dynamics or the Surviving Person in accordance with
the Notes and the Indenture;
provided, however, that clauses (3) and (4) above do not apply if, in the good
faith determination of the Board of Directors of Steel Dynamics, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of Steel Dynamics and
any such transaction shall not have as one of its purposes the evasion of the
foregoing limitations.
The Surviving Person will succeed to, and except in the case of a lease be
substituted for, Steel Dynamics under the Indenture and the Notes.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose Note
Guarantee is to be released in accordance with the terms of its Note Guarantee
and the Indenture in connection with any transaction complying with the
provisions of "-- Limitation on Asset Sales") will not, and Steel Dynamics will
not cause or permit any Subsidiary Guarantor to, consolidate with or merge with
or into any Person other than Steel Dynamics or any other Subsidiary Guarantor
unless:
(1) such Subsidiary Guarantor is the surviving corporation or the
Person formed by or surviving any such consolidation or merger (if other
than the Subsidiary Guarantor) is a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and such Person assumes by supplemental indenture all of the
obligations of the Subsidiary Guarantor on its Note Guarantee;
52
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(3) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, Steel Dynamics could
satisfy the provisions of clause (3) of the first paragraph of this
covenant.
Any merger or consolidation of a Subsidiary Guarantor with and into Steel
Dynamics (with Steel Dynamics being the surviving entity) or another Subsidiary
Guarantor need only comply with clause (5) of the first paragraph of this
covenant.
The successor Subsidiary Guarantor will succeed to, and except in the case
of a lease be substituted for, such Subsidiary Guarantor under the Indenture and
such Subsidiary Guarantor's Note Guarantee.
DEFEASANCE
Defeasance and Discharge. The Indenture will provide that Steel Dynamics
will be deemed to have paid and will be discharged from any and all obligations
in respect of the Notes on the 123rd day after the deposit referred to below,
and the provisions of the Indenture will no longer be in effect with respect to
the Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things:
(A) Steel Dynamics has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes (i) on the Stated Maturity of such payments
in accordance with the terms of the Indenture and the Notes or (ii) on any
earlier Redemption Date pursuant to the terms of the Indenture and the
Notes; provided that Steel Dynamics has provided the Trustee with
irrevocable instructions to redeem all of the outstanding Notes on such
Redemption Date,
(B) Steel Dynamics has delivered to the Trustee (1) either (x) an
Opinion of Counsel to the effect that Holders will not recognize income,
gain or loss for federal income tax purposes as a result of Steel Dynamics'
exercise of its option under this "Defeasance" provision and will be
subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred, which Opinion of Counsel must be based upon
(and accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal income
tax law after the Closing Date such that a ruling is no longer required or
(y) a ruling directed to the Trustee received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel and (2)
an Opinion of Counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and after the
passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other material agreement or instrument to which Steel Dynamics or any of
its Subsidiaries is a party or by which Steel Dynamics or any of its
Subsidiaries is bound and
(D) if at such time the Notes are listed on a national securities
exchange, Steel Dynamics has delivered to the Trustee an Opinion of Counsel
to the effect that the Notes will not be delisted as a result of such
deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (3) and (4) under
53
"Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "Covenants," clause (c) under "Events of Default" with respect to
such clauses (3) and (4) under "Consolidation, Merger and Sale of Assets,"
clause (d) under "Events of Default" with respect to such other covenants and
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default upon, among other things, the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations that through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes (i) on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes or (ii) on any earlier
Redemption Date pursuant to the terms of the Indenture and the Notes; provided
that Steel Dynamics has provided the Trustee with irrevocable instructions to
redeem all of the outstanding Notes on such Redemption Date, the satisfaction of
the provisions described in clauses (B)(2), (C) and (D) of the preceding
paragraph and the delivery by Steel Dynamics to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
Defeasance and Certain Other Events of Default. In the event Steel
Dynamics exercises its option to omit compliance with certain covenants and
provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the Notes are declared due and payable
because of the occurrence of an Event of Default that remains applicable, the
amount of money and/or U.S. Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Notes at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. However, Steel
Dynamics will remain liable for such payments and any Subsidiary Guarantor's
Note Guarantee with respect to such payments will remain in effect.
MODIFICATION AND WAIVER
The Indenture may be amended, without the consent of any Holder, to:
(1) cure any ambiguity, defect or inconsistency in the Indenture;
(2) comply with the provisions described under "Consolidation, Merger
and Sale of Assets" or "Limitation on Issuances of Guarantees by Restricted
Subsidiaries";
(3) comply with any requirements of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act;
(4) evidence and provide for the acceptance of appointment by a
successor Trustee; or
(5) make any change that, in the good faith opinion of the Board of
Directors, does not materially and adversely affect the rights of any
Holder.
Modifications and amendments of the Indenture may be made by Steel Dynamics
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Note,
(2) reduce the principal amount of, or premium, if any, or interest
on, any Note,
(3) change the optional redemption dates or optional redemption prices
of the Notes from that stated under the caption "Optional Redemption,"
(4) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note,
54
(5) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a redemption,
on or after the Redemption Date) of any Note,
(6) waive a default in the payment of principal of, premium, if any,
or interest on the Notes,
(7) release any Subsidiary Guarantor from its Note Guarantee, except
as provided in the Indenture,
(8) amend, change or modify the obligation of Steel Dynamics to make
and consummate an Offer to Purchase under the "Limitation on Asset Sales"
after the obligation to make such Offer to Purchase has arisen or the
obligation of Steel Dynamics to make and consummate an Offer to Purchase
under the "Repurchase of Notes upon a Change of Control" covenant after a
Change of Control has occurred, including, in each case, amending, changing
or modifying any definition relating thereto, or
(9) reduce the percentage or aggregate principal amount of outstanding
Notes the consent of whose Holders is necessary for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of Steel Dynamics in the Indenture, or in any of the Notes or because
of the creation of any Indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer, director, employee or controlling person
of Steel Dynamics or of any successor Person thereof. Each Holder, by accepting
the Notes, waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws.
CONCERNING THE TRUSTEE
Except during the continuance of a Default, the Trustee will not be liable,
except for the performance of such duties as are specifically set forth in the
Indenture. If an Event of Default has occurred and is continuing, the Trustee
will use the same degree of care and skill in its exercise of the rights and
powers vested in it under the Indenture as a prudent person would exercise under
the circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of Steel Dynamics, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons. Notes sold in offshore transactions in reliance
on Regulation S under the Securities Act will initially be represented by one or
more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Regulation S Global Note") and will be deposited with
the Trustee as custodian for, and registered in the name of a nominee of, The
Depository Trust Company ("DTC") for the accounts of Euroclear and Clearstream.
Prior to the 40th day after the Closing Date, beneficial interests in the
Regulation S Global Notes may only be held through Euroclear or Clearstream, and
any resale or transfer of such interests to U.S. persons shall not be permitted
during such period unless such resale or transfer is made pursuant to Rule 144A
or Regulation S.
Notes sold in reliance on Rule 144A will be represented by one or more
permanent global Notes in definitive, fully registered form without interest
coupons (each a "Restricted Global Note"; and together with
55
the Regulation S Global Notes, the "Global Notes") and will be deposited with
the Trustee as custodian for, and registered in the name of a nominee of, DTC.
Each Global Note (and any Notes issued for exchange therefor) will be
subject to certain restrictions on transfer set forth therein as described under
"Transfer Restrictions."
Notes transferred to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor") who are not qualified institutional buyers ("Non-Global
Purchasers") will be in registered form without interest coupons ("Certificated
Notes"). Upon the transfer of Certificated Notes initially issued to a
Non-Global Purchaser to a qualified institutional buyer or in accordance with
Regulation S, such Certificated Notes will, unless the relevant Global Note has
previously been exchanged in whole for Certificated Notes, be exchanged for an
interest in a Global Note. For a description of the restrictions on the transfer
of Certificated Notes, see "Transfer Restrictions."
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified institutional buyers may hold their
interests in a Restricted Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Euroclear or Clearstream, if they are participants in such systems, or
indirectly through organizations that are participants in such system. On or
after the 40th day following the Closing Date, investors may also hold such
interests through organizations other than Euroclear or Clearstream that are
participants in the DTC system. Euroclear or Clearstream will hold interests in
the Regulation S Global Notes on behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Clearstream.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither Steel Dynamics, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Steel Dynamics expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. Steel Dynamics also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Steel Dynamics expects that DTC will take any action permitted to be taken
by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have
56
given such direction. However, if there is an Event of Default under the Notes,
DTC will exchange the applicable Global Note for Certificated Notes, which it
will distribute to its participants and which may be legended as set forth under
the heading "Transfer Restrictions."
Steel Dynamics understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies and certain other organizations that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC, Euroclear and Clearstream are expected to follow the
foregoing procedures in order to facilitate transfers of interests in a Global
Note among participants of DTC, Euroclear and Clearstream, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither Steel Dynamics nor the
Trustee will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by Steel Dynamics
within 90 days, Steel Dynamics will issue Certificated Notes, which may bear the
legend referred to under "Transfer Restrictions," in exchange for the Global
Notes. Holders of an interest in a Global Note may receive Certificated Notes,
which may bear the legend referred to under "Transfer Restrictions," in
accordance with the DTC's rules and procedures in addition to those provided for
under the Indenture.
DEFINITIONS
Set forth below are defined terms used in the covenants and other
provisions of the Indenture. Reference is made to the Indenture for other
capitalized terms used in this "Description of the Notes" for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted
Subsidiary assumed in connection with an Asset Acquisition by such Restricted
Subsidiary; provided such Indebtedness was not Incurred in connection with or in
contemplation of such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of Steel Dynamics and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication):
(1) the net income (or loss) of any Person that is not a Restricted
Subsidiary;
(2) the net income (or loss) of any Person accrued prior to the date
it becomes a Restricted Subsidiary or is merged into or consolidated with
Steel Dynamics or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by
Steel Dynamics or any of its Restricted Subsidiaries;
(3) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary;
(4) any gains or losses (on an after-tax basis) attributable to sales
of assets outside the ordinary course of business of Steel Dynamics and its
Restricted Subsidiaries;
57
(5) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant, any amount paid or
accrued as dividends on Preferred Stock of Steel Dynamics owned by Persons
other than Steel Dynamics and any of its Restricted Subsidiaries;
(6) all extraordinary gains and extraordinary losses; and
(7) solely for purposes of calculating the Interest Coverage Ratio,
(a) start-up expenses associated with the Columbia City mini-mill in an
aggregate amount of $8.4 million and (b) legal expenses and settlement
costs relating to litigation arising out of financings for Nakornthai Strip
Mill Public Company Limited in an aggregate amount of $8.9 million, in each
case incurred during the fiscal year ended December 31, 2001.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of Steel Dynamics and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (1) all current liabilities of Steel Dynamics and its Restricted
Subsidiaries (excluding intercompany items) and (2) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of Steel Dynamics and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the SEC or provided to the
Trustee.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (1) an investment by Steel Dynamics or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with
Steel Dynamics or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of Steel Dynamics and its Restricted Subsidiaries on the date of such
investment or (2) an acquisition by Steel Dynamics or any of its Restricted
Subsidiaries of the property and assets of any Person other than Steel Dynamics
or any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of
Steel Dynamics and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by Steel Dynamics
or any of its Restricted Subsidiaries (other than to Steel Dynamics or another
Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (2) all or substantially all of the assets that
constitute a division or line of business of Steel Dynamics or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by Steel Dynamics or any of its Restricted
Subsidiaries to any Person other than Steel Dynamics or any of its Restricted
Subsidiaries of:
(1) all or any of the Capital Stock of any Restricted Subsidiary,
(2) all or substantially all of the property and assets of an
operating unit or business of Steel Dynamics or any of its Restricted
Subsidiaries or
(3) any other property and assets (other than the Capital Stock or
other Investment in an Unrestricted Subsidiary) of Steel Dynamics or any of
its Restricted Subsidiaries outside the ordinary course of business of
Steel Dynamics or such Restricted Subsidiary and,
58
in each case, that is not governed by the provisions of the Indenture applicable
to mergers, consolidations and sales of assets of Steel Dynamics; provided that
"Asset Sale" shall not include:
(a) sales or other dispositions of inventory, receivables and other
current assets,
(b) sales, transfers or other dispositions of assets constituting a
Permitted Investment or Restricted Payment permitted to be made under the
"Limitation on Restricted Payments" covenant,
(c) sales, transfers or other dispositions of assets with a fair
market value not in excess of $1 million in any transaction or series of
related transactions or $10 million in the aggregate,
(d) sales, transfers or other dispositions of real estate with a fair
market value not in excess of $5 million in the aggregate; or
(e) any sale, transfer, assignment or other disposition of any
property or equipment that has become damaged, worn out, obsolete or
otherwise unsuitable for use in connection with the business of Steel
Dynamics or its Restricted Subsidiaries.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (1) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (2) the sum of all such principal payments.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any duly authorized committee of such Board of
Directors.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as:
(1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power of the Voting Stock of Steel Dynamics on a fully diluted
basis; or
(2) individuals who on the Closing Date constitute the Board of
Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by
Steel Dynamics' stockholders was approved by a vote of at least two-thirds
of the members of the Board of Directors then in office who either were
members of the Board of Directors on the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in
office.
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Commodity Agreement" means any forward contract, commodity swap agreement,
commodity option agreement or other similar agreement or arrangement.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income:
(1) Consolidated Interest Expense,
(2) income taxes,
59
(3) depreciation expense,
(4) amortization expense, and
(5) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for Steel Dynamics and its Restricted Subsidiaries in
conformity with GAAP;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the percentage ownership interest in the income of such
Restricted Subsidiary not owned on the last day of such period by Steel Dynamics
or any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by Steel Dynamics or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by Steel Dynamics and its Restricted Subsidiaries during such
period; excluding, however, (1) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (3) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (3) of the definition thereof) and (2) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the Refinancing, all as determined on a consolidated basis (without taking
into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of Steel Dynamics and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
plus, to the extent not included, any Preferred Stock of Steel Dynamics, less
any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of Steel Dynamics or any of its Restricted Subsidiaries, each item
to be determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Credit Agreement" means the Credit Agreement to be dated as of the Closing
Date, among Steel Dynamics, the Subsidiaries of Steel Dynamics party thereto,
the lenders from time to time party thereto, Morgan Stanley Senior Funding,
Inc., as Arranger, and JPMorgan Chase Bank, as Administrative Agent, together
with any agreements, instruments, security agreements, guaranties and other
documents executed or delivered pursuant to or in connection with such credit
agreement, as such credit agreement or such agreements, instruments, security
agreements, guaranties or other documents may be amended, supplemented,
extended, restated, renewed or otherwise modified from time to time and any
refinancing, replacement or substitution thereof or therefor, whether with the
same or different lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
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"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (1) required to be redeemed prior to
the Stated Maturity of the Notes, (2) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (3) convertible into or exchangeable for Capital Stock referred
to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior
to the Stated Maturity of the Notes; provided that any Capital Stock that would
not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the Notes shall not constitute Disqualified
Stock if the "asset sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital Stock than
the provisions contained in "Limitation on Asset Sales" and "Repurchase of Notes
upon a Change of Control" covenants and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to Steel Dynamics' repurchase of such Notes as are required to
be repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of
Notes upon a Change of Control" covenants.
"Fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"Foreign Subsidiary" means any Subsidiary of Steel Dynamics that is an
entity which is a controlled foreign corporation under Section 957 of the
Internal Revenue Code and does not guarantee or otherwise provide direct credit
support for any Indebtedness of Steel Dynamics or any Subsidiary Guarantor.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (1) the amortization of any expenses incurred in
connection with the Refinancing and (2) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles Board
Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (2) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"IDI Credit Agreement" means the Credit Agreement, dated as of December 31,
1997, by and among Iron Dynamics, Inc., the lenders parties thereto from time to
time and Mellon Bank, N.A., as Issuing Bank and Agent, together with any
agreements, instruments and documents executed or delivered pursuant to or in
connection with such credit agreement, as such credit agreement or such
agreements, instruments or documents may be amended, supplemented, extended
restated, renewed or otherwise modified from time to time and any refinancing,
replacement or substitution thereof or therefor, or of or for any previous
refinancing, replacement or substitution, as the same may from time to time be
amended, refinanced, renewed or replaced.
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"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness;
provided that (1) any Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary will be deemed to be incurred by such Restricted
Subsidiary at the time it becomes a Restricted Subsidiary and (2) neither the
accrual of interest nor the accretion of original issue discount nor the payment
of interest in the form of additional Indebtedness (to the extent provided for
when the Indebtedness on which such interest is paid was originally issued)
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication):
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto, but excluding obligations with respect to letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (1) or (2) above or (5), (6) or (7) below) entered
into in the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement);
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except Trade Payables;
(5) all Capitalized Lease Obligations;
(6) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness;
(7) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person; and
(8) to the extent not otherwise included in this definition,
obligations under Commodity Agreements, Currency Agreements and Interest
Rate Agreements (other than Commodity Agreements, Currency Agreements and
Interest Rate Agreements designed solely to protect Steel Dynamics or its
Restricted Subsidiaries against fluctuations in commodity prices, foreign
currency exchange rates or interest rates and that do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in commodity prices, foreign currency exchange rates or
interest rates or by reason of fees, indemnities and compensation payable
thereunder).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided
(A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP,
(B) that money borrowed and set aside at the time of the Incurrence of
any Indebtedness in order to prefund the payment of the interest on such
Indebtedness shall not be deemed to be "Indebtedness" so long as such money
is held to secure the payment of such interest and
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(C) that Indebtedness shall not include:
(x) any liability for federal, state, local or other taxes,
(y) performance, surety or appeal bonds provided in the ordinary
course of business or
(z) agreements providing for indemnification, adjustment of
purchase price or similar obligations, or Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of
Steel Dynamics or any of its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of
any business, assets or Restricted Subsidiary (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), so long as the principal amount does not to exceed
the gross proceeds actually received by Steel Dynamics or any Restricted
Subsidiary in connection with such disposition.
"Initial Subsidiary Guarantor" means SDI Investment Company, a Delaware
corporation.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of (1)
the aggregate amount of Consolidated EBITDA for the then most recent four fiscal
quarters prior to such Transaction Date for which reports have been filed with
the SEC or provided to the Trustee (the "Four Quarter Period") to (2) the
aggregate Consolidated Interest Expense during such Four Quarter Period. In
making the foregoing calculation:
(A) pro forma effect shall be given to any Indebtedness Incurred or
repaid during the period (the "Reference Period") commencing on the first
day of the Four Quarter Period and ending on the Transaction Date (other
than Indebtedness Incurred or repaid under a revolving credit or similar
arrangement to the extent of the commitment thereunder (or under any
predecessor revolving credit or similar arrangement) in effect on the last
day of such Four Quarter Period unless any portion of such Indebtedness is
projected, in the reasonable judgment of the senior management of Steel
Dynamics, to remain outstanding for a period in excess of 12 months from
the date of the Incurrence thereof), in each case as if such Indebtedness
had been Incurred or repaid on the first day of such Reference Period;
(B) Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being Incurred) computed on a pro forma
basis and bearing a floating interest rate shall be computed as if the rate
in effect on the Transaction Date (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months or, if shorter, at least equal
to the remaining term of such Indebtedness) had been the applicable rate
for the entire period;
(C) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during such Reference Period
as if they had occurred and such proceeds had been applied on the first day
of such Reference Period; and
(D) pro forma effect shall be given to asset dispositions and asset
acquisitions (including giving pro forma effect to the application of
proceeds of any asset disposition) that have been made by any Person that
has become a Restricted Subsidiary or has been merged with or into Steel
Dynamics or any Restricted Subsidiary during such Reference Period and that
would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if
such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (C) or (D) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date of the Person, or division or line of
business of the Person, that is acquired or disposed for which financial
information is available.
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"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable, prepaid expenses or deposits on the balance sheet of Steel
Dynamics or its Restricted Subsidiaries and endorsements for collection or
deposit arising in the ordinary course of business) or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include (1) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary and (2) the retention of the
Capital Stock (or any other Investment) by Steel Dynamics or any of its
Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (3) or (4) of the "Limitation on the Issuance
and Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of
the definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant, (a) the amount of or a reduction in an Investment shall be
equal to the fair market value thereof at the time such Investment is made or
reduced and (b) in the event Steel Dynamics or a Restricted Subsidiary makes an
Investment by transferring assets to any Person and as part of such transaction
receives Net Cash Proceeds, the amount of such Investment shall be the fair
market value of the assets less the amount of Net Cash Proceeds so received,
provided the Net Cash Proceeds are applied in accordance with clause (A) or (B)
of the "Limitation on Asset Sales" covenant.
"Lien" 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 or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the proceeds of such Asset Sale in
the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal,
but not interest, component thereof) when received in the form of cash or
cash equivalents and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of
(1) brokerage commissions and other fees and expenses (including
fees and expenses of counsel and investment bankers) related to such
Asset Sale;
(2) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of Steel Dynamics and
its Restricted Subsidiaries, taken as a whole;
(3) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (x) is secured by
a Lien on the property or assets sold or (y) is required to be paid as a
result of such sale and
(4) appropriate amounts to be provided by Steel Dynamics or any
Restricted Subsidiary as a reserve against any liabilities associated
with such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in
conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
64
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
Placement Agents' fees, discounts or commissions and brokerage, consultant
and other fees incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Note Guarantee" means a Guarantee of the obligations of Steel Dynamics
under the Indenture and the Notes by any Subsidiary Guarantor.
"Offer to Purchase" means an offer to purchase Notes by Steel Dynamics from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(1) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(2) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(3) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(4) that, unless Steel Dynamics defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date;
(5) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples of
$1,000.
On the Payment Date, Steel Dynamics shall (a) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (b)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (c) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by Steel Dynamics. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail to such Holders a new Note
equal in principal amount to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples of $1,000. Steel Dynamics will
publicly announce the results of an Offer to Purchase as soon as practicable
after the Payment Date. The Trustee shall act as the Paying Agent for an Offer
to Purchase. Steel Dynamics will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that Steel Dynamics is required to
repurchase Notes pursuant to an Offer to Purchase.
"Permitted Investment" means:
(1) an Investment in Steel Dynamics or a Subsidiary Guarantor or a
Person which will, upon the making of such Investment, become a Subsidiary
Guarantor or be merged or consolidated with or into or transfer or convey
all or substantially all its assets to, Steel Dynamics or a Subsidiary
Guarantor; provided
65
that such person's primary business is related, ancillary or complementary
to the businesses of Steel Dynamics and its Restricted Subsidiaries on the
date of such Investment;
(2) Temporary Cash Investments;
(3) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of
judgments;
(5) an Investment in an Unrestricted Subsidiary consisting solely of
an Investment in another Unrestricted Subsidiary;
(6) loans or advances to directors, officers or employees of Steel
Dynamics or any of its Restricted Subsidiaries that do not in the aggregate
exceed $5 million at any time outstanding;
(7) Investments in negotiable instruments held for collection, lease,
utility and workers' compensation, performance and other similar pledges or
deposits and other pledges or deposits permitted under the "Limitation on
Liens" covenant;
(8) Investments in a Restricted Subsidiary of Steel Dynamics other
than a Subsidiary Guarantor in an aggregate amount not to exceed $5
million;
(9) Commodity Agreements, Interest Rate Agreements and Currency
Agreements designed solely to protect Steel Dynamics or its Restricted
Subsidiaries against fluctuations in commodity prices, interest rates or
foreign currency exchange rates;
(10) any Investments that may be deemed to result from payments made
in Capital Stock (other than Disqualified Stock) of Steel Dynamics, or the
payment of Additional Bank Payments, required under the Settlement
Agreement as in effect on the Closing Date; or
(11) Investments in Iron Dynamics in an aggregate amount not to exceed
$15 million plus the net reduction in Investments made pursuant to this
clause (11) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to Steel Dynamics or any Restricted
Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net
Income), from the release of any Guarantee or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case
as provided in the definition of "Investments"), not to exceed, in each
case, the amount of such Investments previously made by Steel Dynamics or
any Restricted Subsidiary in such Person or Unrestricted Subsidiary;
provided at the time of such Investment Steel Dynamics could Incur at least
$1.00 of Indebtedness under the first paragraph of part (a) of the
"Limitation on Indebtedness" covenant.
"Permitted Liens" means:
(1) Liens for taxes, assessments, governmental charges or claims that
are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(2) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made;
(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
66
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(5) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of Steel
Dynamics or any of its Restricted Subsidiaries;
(6) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Steel Dynamics and its
Restricted Subsidiaries, taken as a whole;
(7) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of Steel Dynamics or its
Restricted Subsidiaries relating to such property or assets;
(8) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
(9) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(10) Liens on property of, or on shares of Capital Stock or
Indebtedness of, any Person existing at the time such Person becomes, or
becomes a part of, any Restricted Subsidiary; provided that such Liens do
not extend to or cover any property or assets of Steel Dynamics or any
Restricted Subsidiary other than the property or assets acquired;
(11) Liens in favor of Steel Dynamics or any Subsidiary Guarantor;
(12) Liens arising from the rendering of a final judgment or order
against Steel Dynamics or any Restricted Subsidiary that does not give rise
to an Event of Default;
(13) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(14) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(15) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case,
securing Indebtedness under Commodity Agreements, Interest Rate Agreements
and Currency Agreements designed solely to protect Steel Dynamics or any of
its Restricted Subsidiaries from fluctuations in interest rates, currencies
or the price of commodities;
(16) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
Steel Dynamics or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of Steel Dynamics and its
Restricted Subsidiaries prior to the Closing Date;
(17) Liens on shares of Capital Stock of any Unrestricted Subsidiary
to secure Indebtedness of such Unrestricted Subsidiary; and
(18) Liens on or sales of receivables.
"Refinancing" means the series of transactions whereby Steel Dynamics
permanently repays all amounts outstanding under its existing (i) $450 million
amended and restated credit agreement dated as of June 30, 1997, as amended, by
and among Steel Dynamics, the Lenders parities thereto from time to time, Mellon
Bank, N.A., as Agent for the Lenders thereunder and as Issuing Bank,
Kreditanstalt Fur Wiederaufbau and Comerica Bank, as Senior Co-Agents and Banque
Nationale de Paris, NBD Bank, N.A. and The Industrial Bank of Japan, Limited, as
Co-Agents and (ii) $50 million credit agreement dated as of May 5, 2000 by and
among Steel Dynamics, the Lenders parties thereto from time to time and Mellon
Bank, N.A., as Agent for
67
the Lenders thereunder, from the net proceeds received from the offering of the
Notes and Note Guarantees and borrowings under the Credit Agreement and
terminates such existing credit agreements.
"Replacement Assets" means, on any date, property or assets (other than
current assets) of a nature or type or that are used in a business (or an
Investment in a company having property or assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, Steel Dynamics and its Restricted
Subsidiaries existing on such date.
"Restricted Subsidiary" means any Subsidiary of Steel Dynamics other than
an Unrestricted Subsidiary.
"Settlement Agreement" means the Agreement, dated as of January 28, 2002,
by and among Iron Dynamics, Steel Dynamics, the lenders banks who are parties
thereto and Mellon Bank, N.A., as Agent to the banks, together with any
agreements, instruments and documents executed or delivered pursuant to or in
connection with such agreement, as such agreement or such agreements,
instruments or documents may be amended, supplemented, extended restated,
renewed or otherwise modified from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, and its successors.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (1) for the most
recent fiscal year of Steel Dynamics, accounted for more than 10% of the
consolidated revenues of Steel Dynamics and its Restricted Subsidiaries or (2)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of Steel Dynamics and its Restricted Subsidiaries, all as
set forth on the most recently available consolidated financial statements of
Steel Dynamics for such fiscal year.
"Stated Maturity" means, (1) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (2) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantor" means any Initial Subsidiary Guarantor and any other
Restricted Subsidiary which provides a Note Guarantee of Steel Dynamics'
obligations under the Indenture and the Notes.
"Temporary Cash Investment" means any of the following:
(1) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof, in each case maturing within one
year unless such obligations are deposited by Steel Dynamics (x) to defease
any Indebtedness or (y) in a collateral or escrow account or similar
arrangement to prefund the payment of interest on any indebtedness;
(2) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued
by a bank or trust company which is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $100 million (or the
foreign currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money market fund sponsored by a
registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank or trust company meeting the qualifications described in
clause (2) above;
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(4) commercial paper, maturing not more than one year after the date
of acquisition, issued by a corporation (other than an Affiliate of Steel
Dynamics) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-2" (or higher) according to Moody's or "A-2" (or
higher) according to S&P;
(5) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or Moody's; and
(6) any mutual fund that has at least 95% of its assets continuously
invested in investments of the types described in clauses (1) through (5)
above.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness, the date such Indebtedness is to be Incurred and, with respect to
any Restricted Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (I) Iron Dynamics, New Millennium, Omni
Dynamic Aviation and Paragon Steel and each of their Subsidiaries and (II) (1)
any other Subsidiary of Steel Dynamics that at the time of determination shall
be designated an Unrestricted Subsidiary by the Board of Directors in the manner
provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board
of Directors may designate any Restricted Subsidiary (including any newly
acquired or newly formed Subsidiary of Steel Dynamics) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, Steel Dynamics or any Restricted Subsidiary;
provided that (A) any Guarantee by Steel Dynamics or any Restricted Subsidiary
of any Indebtedness of the Subsidiary being so designated shall be deemed an
"Incurrence" of such Indebtedness and an "Investment" by Steel Dynamics or such
Restricted Subsidiary (or both, if applicable) at the time of such designation;
(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under the "Limitation on Restricted Payments" covenant and
(C) if applicable, the Incurrence of Indebtedness and the Investment referred to
in clause (A) of this proviso would be permitted under the "Limitation on
Indebtedness" and "Limitation on Restricted Payments" covenants. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that (a) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such designation and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if Incurred at such time, have been
permitted to be Incurred (and shall be deemed to have been Incurred) for all
purposes of the Indenture. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (1) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
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"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
70
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States tax consequences of
the acquisition, ownership and disposition of the notes. The summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), and United States
Treasury regulations issued thereunder, Internal Revenue Service rulings and
pronouncements and judicial decisions as of the date hereof, all of which may be
repealed, revoked or modified so as to result in United States tax consequences
different from those described below. Such changes could be applied
retroactively in a manner that could adversely affect you. In addition, the
authorities on which this summary is based are subject to various
interpretations. It is therefore possible that the consequences of the
acquisition, ownership and disposition of the notes may differ from the
treatment described below.
The tax treatment of a holder of the notes may vary depending upon the
particular situation of the holder. This summary is limited to initial
beneficial investors that purchase the old notes for cash upon their original
issuance at the price set forth on the cover of this memorandum, and is limited
to investors who hold the notes as capital assets within the meaning of Section
1221 of the Code. This summary does not deal with holders that may be subject to
special tax rules (including, but not limited to, banks, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities or
currencies, partnerships or other flow-through entities classified as
partnerships for U.S. federal income tax purposes, persons subject to the
alternative minimum tax (as defined below), U.S. Holders whose functional
currency is not the U.S. dollar, certain U.S. expatriates, Non-United States
Holders (as defined below) that are subject to a tax treaty with the United
States, or holders who will hold the notes as a hedge against currency risks or
as part of a straddle, synthetic security, conversion transaction or other
integrated investment comprised of the notes and one or more other investments).
This summary is for general information only and does not address all
aspects of United States taxation that may be relevant to holders of the notes
in light of their particular circumstances, and it does not address any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction. Prospective holders should consult their own tax advisors as to
the particular tax consequences to them of acquiring, holding or disposing of
the notes.
As used herein, a "United States Holder" of a note means a beneficial owner
of a note that, for U.S. federal income tax purposes, is a citizen or resident
of the United States; a corporation or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or under the laws of
the United States or of any state of the United States or the District of
Columbia; an estate the income of which is subject to United States federal
income taxation regardless of its source; or a trust if (1) a U.S. court is able
to exercise primary supervision over the administration of the trust and (2) one
or more U.S. persons have the authority to control all substantial decisions of
the trust.
If a partnership is a beneficial owner of a note, the U.S. tax treatment of
a partner in the partnership will generally depend upon the status of the
partner and the activities of the partnership. A beneficial owner of old notes
or Exchange Notes that is a partnership, and partners in such a partnership,
should consult their tax advisors about the U.S. Federal income tax consequences
of the acquisition, ownership and disposition of the old notes and Exchange
Notes.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
INTEREST
Except as set forth below, interest on a note generally will be taxable to
a United States Holder as ordinary income from domestic sources at the time it
is paid or accrued, or is actually or constructively received, in accordance
with the United States Holder's method of accounting for tax purposes.
Our failure to consummate the Exchange Offer or to file or cause to be
declared effective the Shelf Registration Statement as described under
"Description of Notes -- Registration Rights" will cause additional interest to
accrue on the notes in the manner described therein. According to U.S. Treasury
regulations, the possibility of a change in the interest rate will not affect
the amount of interest income recognized by a United States Holder (or the
timing of such recognition) if the likelihood of the change, as of the date the
71
notes are issued, is remote. We believe that the likelihood of a change in the
interest rate on the notes is remote and do not intend to treat the possibility
of a change in the interest rate as affecting the yield to maturity of any note.
In the unlikely event that the interest rate on the notes is increased, then
such increased interest should be treated as ordinary income for U.S. federal
income tax purposes at the time it accrues or is received in accordance with the
United States Holder's regular method of tax accounting. Our determination that
there is a remote likelihood of a change in the interest rate on the notes is
binding on each United States Holder unless the holder explicitly discloses in
the manner required by applicable U.S. Treasury regulations that its
determination is different from ours. It is possible, however, that the Internal
Revenue Service may take a different position and treat the additional interest
income as original issue discount, includable by a United States Holder in
income as such interest accrues, in advance of receipt of any cash payment
thereof, or it may treat as interest income all or a portion of any gain
recognized on the disposition of an old note or Exchange Note. If, as
anticipated, the issue price of the notes will equal their stated principal
amount, and because the likelihood of a change in the interest rate is remote,
we do not anticipate that the notes will be issued with original issue discount.
The notes may be redeemed prior to their stated maturity at our option or
at the option of the holders upon certain circumstances or automatically upon
the occurrence of certain events. We believe that none of such redemption rights
or obligations are more likely than not to occur, and, thus, under applicable
Treasury regulations, none of such redemption rights or obligations should
affect the yield of the notes.
SALE, EXCHANGE AND RETIREMENT OF NOTES OR EXCHANGE NOTES
Upon the sale, exchange, redemption, retirement or other disposition of a
note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized (the sum of cash plus the fair market
value of all other property received), except to the extent the sales proceeds
are attributable to accrued but unpaid interest, and such holder's adjusted tax
basis in the note. A United States Holder's adjusted tax basis in a note will,
in general, be equal to the initial purchase price the holder paid for the
notes, plus original issue discount, if any, previously included in income, less
any cash payment received in respect of such original issue discount, and
further reduced by any principal payments received by such United States Holder.
In general, except to the extent the gain or loss is attributable to accrued but
unpaid stated interest, such gain or loss will be capital gain or loss. Such
capital gain or loss generally will be long-term capital gain or loss if the
holding period of the note exceeds one year at the time of the disposition.
Certain noncorporate taxpayers (including individuals) are eligible for
preferential rates of taxation of such long-term capital gain. The deductibility
of capital losses is subject to limitations.
The exchange of an old note by a United States Holder for a Exchange Note
pursuant to the Exchange Offer should not constitute a taxable exchange. A
United States Holder will have the same tax basis and holding period in the
Exchange Note as it did in the old note.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed with the Internal Revenue Service in
connection with payments on the notes and the proceeds from a sale or other
disposition of the notes. A United States Holder will be subject to United
States backup withholding tax on these payments if the holder fails to provide
its taxpayer identification number to the paying agent and comply with certain
certification procedures or otherwise establish an exemption from backup
withholding. United States Holders should consult their own tax advisor
regarding their qualification for an exemption from backup withholding and the
procedures for obtaining such an exemption, if applicable. The amount of any
backup withholding from a payment will be allowed as a credit against a United
States Holder's U.S. federal income tax liability and may entitle the holder to
a refund, provided that the required information is furnished to the Internal
Revenue Service.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
A "Non-United States Holder" of a note means a beneficial owner of a note
that, for U.S. federal income tax purposes, is not a United States Holder.
72
WITHHOLDING TAXES
Generally, payments of principal and interest (including OID), on the notes
will not be subject to United States withholding taxes provided that:
- the Non-United States Holder does not actually or constructively own 10
percent or more of the total combined voting power of all classes of
stock of the Company entitled to vote,
- the Non-United States Holder is not a controlled foreign corporation that
is related to the Company through its stock ownership,
- the Non-United States Holder is not a bank described in Section
881(c)(3)(A) of the Code, and
- either (A) the Non-United States Holder provides its name and address on
an IRS Form W-8BEN (or substitute form), and certifies, under penalties
of perjury, that it is not a United States Holder or (B) it holds its
notes through certain foreign intermediaries and it satisfies the
certification requirements of applicable U.S. Treasury regulations.
Special certification rules apply to certain Non-United States Holders
that are entities rather than individuals.
If a Non-United States Holder cannot satisfy the requirements described
above, payments of interest (including OID) made to the Non-United States Holder
will be subject to U.S. federal withholding tax, unless the Non-United States
Holder provides the Company with a properly executed (1) IRS Form W-8BEN (or
substitute form) claiming an exemption from or a reduction in the rate of
withholding under the benefit of an applicable tax treaty or (2) IRS Form W-8ECI
(or successor form) stating that interest paid on the notes is not subject to
withholding because it is effectively connected with the conduct of Non-United
States Holder's trade or business in the United States.
SALE OR REDEMPTION OF NOTES
The exchange of an old note by a Non-United States Holder for a Exchange
Note pursuant to the Exchange Offer should not constitute a taxable exchange. A
Non-United States Holder will have the same tax basis and holding period in the
Exchange Note as it did in the old note.
If a Non-United States Holder meeting the United States certification
requirements as set forth above sells or otherwise disposes of a note or such
note is redeemed, the Non-United States Holder generally will not be subject to
United States federal income tax on any gain unless one of the following
applies:
- The gain is effectively connected with a trade or business that the
Non-United States Holder conducts in the United States.
- The Non-United States Holder is an individual, is present in the U.S. for
at least 183 days during the year in which the holder disposes of the
notes and certain other conditions are satisfied.
- The gain represents accrued interest, in which case the rules for
interest would apply.
EFFECTIVELY CONNECTED INCOME
If a Non-United States Holder of a note is engaged in a trade or business
in the United States, and if interest on the note is effectively connected with
the conduct of this trade or business, the Non-United States Holder, although
exempt from the withholding tax discussed above, will generally be taxed in the
same manner as a United States Holder (see "Tax Consequences to United States
Holders" above), except that the holder will be required to provide to the
Company a properly executed IRS Form W-8ECI (or successor form) in order to
claim an exemption from withholding tax.
If the Non-United States Holder is a corporation, it may also be subject to
"branch profits tax" on its earnings that are effectively connected with the
holder's U.S. trade or business, including earnings from the note. This tax is
30%, but may be reduced or eliminated by an applicable tax treaty.
73
INFORMATION REPORTING AND BACKUP WITHHOLDING
Interest payments made to Non-United States Holders will generally be
reported to the IRS and to each Non-United States Holder on Form 1042-S.
However, this reporting does not apply if one of the following conditions
applies:
- The Non-United States Holder holds its notes directly through a qualified
intermediary and the applicable procedures are complied with.
- The Non-United States Holder files Form W-8ECI.
Information reporting and backup withholding apply to Non-United States
Holders as follows:
- Principal and interest payments received will generally be exempt from
the information reporting and backup withholding if the holder is a
Non-United States Holder exempt from withholding on interest and
satisfies the United States certification requirements described above.
The exemption does not apply if the withholding agent or an intermediary
knows or has reason to know that the holder should be subject to the
usual information reporting or backup withholding rules.
- In general, a Non-United States Holder will not be subject to information
reporting and backup withholding on the sale proceeds received on sale of
a note. However, sale proceeds received on a sale of a Non-United States
Holder's notes through a broker may be subject to information reporting
and/or backup withholding may apply if the Non-United States Holder uses
the United States office of a broker, and information reporting (but not
backup withholding) may apply if it uses the foreign office of a broker
that has certain connections to the United States.
74
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for old notes where such old notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the reasonable fees and expenses of counsel to the initial purchasers
of the old notes, other than commissions or concessions of any brokers or
dealers. We will indemnify the holders of the notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes will be passed upon for
us by Barrett & McNagny LLP, Fort Wayne, Indiana.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2001, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in this registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
75
[STEEL DYNAMICS, INC. LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Chapter 37 of the Indiana Business Corporation Law, Article
IX of our Amended and Restated Articles of Incorporation provides that we shall
indemnify a director or officer against liability, including 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, or, at
our 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 reasonably belief, in
connection with the individual's "official capacity," that the conduct was in
our beset interests, or, in all other cases, that the conduct was at least not
opposed to our 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 our best interests.
We may advance or reimburse for reasonable expenses incurred by a person
entitled to indemnification, in advance of final disposition, if the individual
furnishes us 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, we 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 our
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 at the time parties to the proceeding. In the event that a person
seeking indemnification believes that it has not been properly provided that
person 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.
We may purchase and maintain insurance on behalf of our directors,
officers, employees or agents, insuring against liability arising from his or
her status as a director, officer, employee, or agent, whether or not we would
have the power to indemnify the individual against the same liability under
Article IX. Article IX does not preclude us from providing indemnification in
any other manner.
The indemnification provisions set forth in Article IX of the Amended and
Restated Articles of Incorporation, as well as the authority vested in our board
of directors by Chapter 37 of the Business Corporation Law to grant
indemnification beyond that which is described in Article IX, may be
sufficiently broad to provide indemnification of our directors and officers for
liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, we have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities, other than the payment of expenses incurred or paid by
a director, officer or controlling person in the successful defense of any
action, suit or proceeding, is asserted by such director, officer or controlling
person in connection with the
II-1
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
We have obtained liability insurance for the benefit of our directors and
officers which provides coverage for losses of directors and officers for
liabilities arising out of claims against such persons acting as our officers or
directors, or any of our subsidiaries, due to any breach of duty, neglect,
error, misstatement, misleading statement, omission or act done by such
directors and officers, except as prohibited by law.
ITEM 21. EXHIBITS
(a) The following exhibits are filed herewith or incorporated by reference
as part of this Registration Statement:
EXHIBIT NO.
-----------
3.1a+ Amended and Restated Articles of Incorporation of Steel
Dynamics, Inc.
3.1b Articles of Incorporation of Iron Dynamics, Inc.,
incorporated herein by reference to the identically numbered
exhibit in our 1996 Annual Report on Form 10-K, filed March
31, 1997
3.2a Amended Bylaws of Steel Dynamics, Inc., incorporated herein
by reference to Exhibit 3.2a to our Registration Statement
on Form S-3, SEC File No. 333-82210, effective February 28,
2002.
3.2b Bylaws of Iron Dynamics, Inc., incorporated herein by
reference to the identically numbered exhibit in our 1996
Annual Report on Form 10-K, filed March 31, 1997
4.0 Specimen stock certificate (incorporated by reference to
Exhibit 4.1 to our Registration Statement on Form 8-A, SEC
File No. 96661016, filed November 13, 1996)
4.1a Registration Agreement, dated as of June 30, 1994, by and
among Steel Dynamics Holdings, Inc. and the Stockholders
named therein (incorporated by reference to Exhibit 10.31 to
our Registration Statement on Form S-1, SEC File No.
333-12521, filed September 23, 1996)
4.1a(1) Amendment No. 1 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1a(2) Amendment No. 2 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1a(3) Amendment No. 3 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1b Registration Rights Agreement, dated as of January 28, 2002,
between Steel Dynamics, Inc., certain former Iron Dynamics,
Inc. lending institutions and Mellon Bank, N.A., as Agent,
incorporated herein by reference to Exhibit 4.1 to our
Report on Form 8-K/A filed February 26, 2002.
4.1c Registration Rights Agreement, dated as of March 26, 2002,
between Steel Dynamics, Inc., SDI Investment Company as
Guarantor, and Morgan Stanley & Co. Incorporated, J.P.
Morgan Securities Inc., BMO Nesbitt Burns Corp. and NatCity
Investments, Inc. as Placement Agents, pursuant to the
Placement Agreement dated March 14, 2002 relating to the
sale by us of $200 million of our 9 1/2% unsecured senior
notes, incorporated herein by reference to Exhibit 4.1b to
our 2001 Annual Report on Form 10-K, filed March 28, 2002.
5.1* Opinion of Barrett & McNagny LLP
10.1a Credit Agreement relating to our $350 million senior secured
credit facility, dated as of March 26, 2002 among Steel
Dynamics, Inc. as Borrower, certain designated "Initial
Lender Parties," JPMorgan Chase as Collateral Agent and
Administrative Agent, Morgan Stanley Senior Funding, Inc. as
Arranger and Syndication Agent, and others, incorporated
herein by reference to Exhibit 10.1a to our 2001 Annual
Report on Form 10-K, filed March 28, 2002.
10.1b* First Amendment to Credit Agreement referenced at Exhibit
10.1a, dated as of August 6, 2002
II-2
EXHIBIT NO.
-----------
10.2a Subsidiary Guaranty dated as of March 26, 2002 from SDI
Investment Company, Iron Dynamics, Inc. and certain future
Additional Guarantors, in favor of the Secured Parties under
the March 26, 2002 Credit Agreement, incorporated herein by
reference to Exhibit 10.2a to our 2001 Annual Report on Form
10-K, filed March 28, 2002.
10.3a Indenture relating to our issuance of $200 million senior
unsecured notes, dated as of March 26, 2002, between Steel
Dynamics, Inc. as Issuer and SDI Investment Company as
Initial Subsidiary Guarantor, and Fifth Third Bank, Indiana
as Trustee, incorporated herein by reference to Exhibit
10.3a to our 2001 Annual Report on Form 10-K, filed March
28, 2002.
10.3b* Placement Agreement dated March 14, 2002 between Steel
Dynamics, Inc. and Morgan Stanley & Co. Incorporated, et al.
as Placement Agents owe $200,000,000 of 9 1/2% Senior Notes
Due 2009.
10.12+ 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.
10.13+ 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.
10.17 Reciprocal Patent and Technical Information Transfer and
License Agreement between Steel Dynamics, Inc. and Preussag
AG, now Salzgitter AG, dated December 14, 1995, incorporated
by reference to the identically numbered exhibit to our 1996
Form S-1.
10.18+ 1994 Incentive Stock Option Plan
10.19 Amended and Restated 1996 Incentive Stock Option Plan,
incorporated herein by reference to Exhibit 10.19 to our
June 30, 2001 Form 10-Q, filed August 3, 2001.
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.
10.23a (Revised) Officer and Manager Cash and Stock Bonus Plan,
incorporated by reference to Exhibit 10.23 to our June 30,
2000 Form 10-Q, filed August 11, 2000.
10.24+ Employment Agreement between Steel Dynamics, Inc. and Tracy
L. Shellabarger
10.40 Non-Employee Director Stock Option Plan, incorporated by
reference to Exhibit 10.40 to our June 30, 2000 Form 10-Q,
filed August 11, 2000.
10.41 Agreement (Settlement Agreement), dated as of January 28,
2002, by and among Iron Dynamics, Inc., Steel Dynamics,
Inc., various signatory banks and Mellon Bank, N.A. as Agent
for the Iron Dynamics lenders, incorporated herein by
reference to Exhibit 2.1 to our Report on Form 8-K/A filed
February 26, 2002.
12.1* Computation of Ratio of Earnings to Fixed Charges
21.1* List of our Subsidiaries
23.1* Consent of Ernst & Young LLP
23.2 Consent of Barrett & McNagny LLP (included in Exhibit 5.1)
24.1 Power of attorney (included on the signature page to the
registration statement)
25.1* Form T-1, Trustee's Statement of Eligibility
99.1* Letter of Transmittal
99.2* Notice of Guaranteed Delivery
---------------
* Filed concurrently herewith
+ Incorporated herein by reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521, effective
November 21, 1996.
II-3
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) to not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, 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 action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, 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.
II-4
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Wayne, State of
Indiana, on September 19, 2002.
STEEL DYNAMICS, INC.
By: /s/ TRACY L. SHELLABARGER
------------------------------------
Name: Tracy L. Shellabarger
Title: Vice President and Chief
Financial 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.
Each person whose signature appears below hereby authorizes each of Keith
E. Busse and Tracy L. Shellabarger, each as attorney-in-fact, to sign and file
in his behalf, individually and each capacity stated below, all amendments and
post-effective amendments to this registration statement on Form S-4.
/s/ KEITH E. BUSSE President and Chief Executive Officer
------------------------------------------------ (principal executive officer)
Keith E. Busse
/s/ MARK D. MILLETT Vice President and Director
------------------------------------------------
Mark D. Millett
/s/ RICHARD P. TEETS, JR. Vice President and Director
------------------------------------------------
Richard P. Teets, Jr.
/s/ TRACY L. SHELLABARGER Vice President, Chief Financial Officer and
------------------------------------------------ Director
Tracy L. Shellabarger (principal financial and accounting officer)
/s/ LEONARD RIFKIN Director
------------------------------------------------
Leonard Rifkin
/s/ JOHN C. BATES Director
------------------------------------------------
John C. Bates
/s/ DR. JURGEN KOLB Director
------------------------------------------------
Dr. Jurgen Kolb
/s/ JOSEPH D. RUFFOLO Director
------------------------------------------------
Joseph D. Ruffolo
/s/ NAOKI HIDAKA Director
------------------------------------------------
Naoki Hidaka
/s/ RICHARD J. FREELAND Director
------------------------------------------------
Richard J. Freeland
/s/ JAMES E. KELLEY Director
------------------------------------------------
James E. Kelley
/s/ PAUL B. EDGERLEY Director
------------------------------------------------
Paul B. Edgerley
II-6
EXHIBIT
NUMBER
-------
3.1a+ Amended and Restated Articles of Incorporation of Steel
Dynamics, Inc.
3.1b Articles of Incorporation of Iron Dynamics, Inc.,
incorporated herein by reference to the identically numbered
exhibit in our 1996 Annual Report on Form 10-K, filed March
31, 1997
3.2a Amended Bylaws of Steel Dynamics, Inc., incorporated herein
by reference to Exhibit 3.2a to our Registration Statement
on Form S-3, SEC File No. 333-82210, effective February 28,
2002.
3.2b Bylaws of Iron Dynamics, Inc., incorporated herein by
reference to the identically numbered exhibit in our 1996
Annual Report on Form 10-K, filed March 31, 1997
4.0 Specimen stock certificate (incorporated by reference to
Exhibit 4.1 to our Registration Statement on Form 8-A, SEC
File No. 96661016, filed November 13, 1996)
4.1a Registration Agreement, dated as of June 30, 1994, by and
among Steel Dynamics Holdings, Inc. and the Stockholders
named therein (incorporated by reference to Exhibit 10.31 to
our Registration Statement on Form S-1, SEC File No.
333-12521, filed September 23, 1996)
4.1a(1) Amendment No. 1 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1a(2) Amendment No. 2 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1a(3) Amendment No. 3 to Registration Agreement (incorporated by
reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521,
filed September 23, 1996)
4.1b Registration Rights Agreement, dated as of January 28, 2002,
between Steel Dynamics, Inc., certain former Iron Dynamics,
Inc. lending institutions and Mellon Bank, N.A., as Agent,
incorporated herein by reference to Exhibit 4.1 to our
Report on Form 8-K/A filed February 26, 2002.
4.1c Registration Rights Agreement, dated as of March 26, 2002,
between Steel Dynamics, Inc., SDI Investment Company as
Guarantor, and Morgan Stanley & Co. Incorporated, J.P.
Morgan Securities Inc., BMO Nesbitt Burns Corp. and NatCity
Investments, Inc. as Placement Agents, pursuant to the
Placement Agreement dated March 14, 2002 relating to the
sale by us of $200 million of our 9 1/2% unsecured senior
notes, incorporated herein by reference to Exhibit 4.1b to
our 2001 Annual Report on Form 10-K, filed March 28, 2002.
5.1* Opinion of Barrett & McNagny LLP
10.1a Credit Agreement relating to our $350 million senior secured
credit facility, dated as of March 26, 2002 among Steel
Dynamics, Inc. as Borrower, certain designated "Initial
Lender Parties," JPMorgan Chase as Collateral Agent and
Administrative Agent, Morgan Stanley Senior Funding, Inc. as
Arranger and Syndication Agent, and others, incorporated
herein by reference to Exhibit 10.1a to our 2001 Annual
Report on Form 10-K, filed March 28, 2002.
10.1b* First Amendment to Credit Agreement referenced at Exhibit
10.1a dated as of August 6, 2002
10.2a Subsidiary Guaranty dated as of March 26, 2002 from SDI
Investment Company, Iron Dynamics, Inc. and certain future
Additional Guarantors, in favor of the Secured Parties under
the March 26, 2002 Credit Agreement, incorporated herein by
reference to Exhibit 10.2a to our 2001 Annual Report on Form
10-K, filed March 28, 2002.
10.3a Indenture relating to our issuance of $200 million senior
unsecured notes, dated as of March 26, 2002, between Steel
Dynamics, Inc. as Issuer and SDI Investment Company as
Initial Subsidiary Guarantor, and Fifth Third Bank, Indiana
as Trustee, incorporated herein by reference to Exhibit
10.3a to our 2001 Annual Report on Form 10-K, filed March
28, 2002.
10.3b* Placement Agreement dated March 14, 2002 between Steel
Dynamics, Inc. and Morgan Stanley & Co. Incorporated, et al.
as Placement Agents owe $200,000,000 of 9 1/2% Senior Notes
Due 2009.
10.12+ 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.
EXHIBIT
NUMBER
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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.
10.17 Reciprocal Patent and Technical Information Transfer and
License Agreement between Steel Dynamics, Inc. and Preussag
AG, now Salzgitter AG, dated December 14, 1995, incorporated
by reference to the identically numbered exhibit to our 1996
Form S-1.
10.18+ 1994 Incentive Stock Option Plan
10.19 Amended and Restated 1996 Incentive Stock Option Plan,
incorporated herein by reference to Exhibit 10.19 to our
June 30, 2001 Form 10-Q, filed August 3, 2001.
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.
10.23a (Revised) Officer and Manager Cash and Stock Bonus Plan,
incorporated by reference to Exhibit 10.23 to our June 30,
2000 Form 10-Q, filed August 11, 2000.
10.24+ Employment Agreement between Steel Dynamics, Inc. and Tracy
L. Shellabarger
10.40 Non-Employee Director Stock Option Plan, incorporated by
reference to Exhibit 10.40 to our June 30, 2000 Form 10-Q,
filed August 11, 2000.
10.41 Agreement (Settlement Agreement), dated as of January 28,
2002, by and among Iron Dynamics, Inc., Steel Dynamics,
Inc., various signatory banks and Mellon Bank, N.A. as Agent
for the Iron Dynamics lenders, incorporated herein by
reference to Exhibit 2.1 to our Report on Form 8-K/A filed
February 26, 2002.
12.1* Computation of Ratio of Earnings to Fixed Charges
21.1* List of our Subsidiaries
23.1* Consent of Ernst & Young LLP
23.2 Consent of Barrett & McNagny LLP (included in Exhibit 5.1)
24.1 Power of attorney (included on the signature page to the
registration statement)
25.1* Form T-1, Trustee's Statement of Eligibility
99.1* Letter of Transmittal
99.2* Notice of Guaranteed Delivery
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* Filed concurrently herewith
+ Incorporated herein by reference to the identically numbered exhibit in our
Registration Statement on Form S-1, SEC File No. 333-12521, effective
November 21, 1996.