EXECUTION COPY
EXHIBIT 10.3
$100,000,000
STEEL DYNAMICS, INC.
4% Convertible Subordinated Notes Due 2012
PURCHASE AGREEMENT
December 17, 2002
December 17, 2002
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Steel Dynamics, Inc., an Indiana corporation (the "COMPANY"), proposes to
issue and sell to the several purchasers named in Schedule I hereto (the
"INITIAL PURCHASERS") $100,000,000 principal amount of its 4% Convertible
Subordinated Notes Due 2012 (the "FIRM SECURITIES") to be issued pursuant to the
provisions of an Indenture dated as of December 23, 2002 (the "INDENTURE")
between the Company and Fifth Third Bank, as Trustee (the "TRUSTEE"). The
Company also proposes to issue and sell to the Initial Purchasers not more than
an additional $25,000,000 principal amount of its 4% Convertible Subordinated
Notes Due 2012 (the "ADDITIONAL SECURITIES") if and to the extent that you, as
Managers of the offering, shall have determined to exercise, on behalf of the
Initial Purchasers, the right to purchase such 4% Convertible Subordinated Notes
Due 2012 granted to the Initial Purchasers in Section 2 hereof. The Firm
Securities and the Additional Securities are hereinafter collectively referred
to as the "SECURITIES". The Securities will be convertible into shares of the
Company's common stock, par value $.01 (the "UNDERLYING SECURITIES").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act.
The Initial Purchasers and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement dated as of the
Closing Date (as defined in Section 4) between the Company and the Initial
Purchasers (the "REGISTRATION RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will prepare
a final offering memorandum (the "FINAL MEMORANDUM" and, with the Preliminary
Memorandum, each a "MEMORANDUM") including or incorporating by reference a
description of the terms of the Securities and the Underlying Securities, the
terms of the offering and a description of the Company. As used herein, the term
"MEMORANDUM" shall include in each case the documents incorporated by reference
therein. The terms "SUPPLEMENT", "AMENDMENT" and "AMEND" as used herein with
respect to a Memorandum shall include all documents deemed to be incorporated by
reference in the Preliminary Memorandum or Final Memorandum that are filed
subsequent to the date of such Memorandum with the Securities and Exchange
Commission (the
"COMMISSION") pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
Prior to the execution of this Agreement, the Company entered into that
certain Second Amendment to the Credit Agreement dated as of December 16, 2002
(the "Second Amendment") which amends the $350.0 million Credit Agreement dated
as of March 26, 2002, as amended, among the Company, the Lenders defined
therein, JPMorgan Chase Bank, as administrative agent for the Lenders
thereunder, General Electric Capital Corporation, as documentation agent and
Morgan Stanley Senior Funding, Inc., as arranger and syndication agent, (the
"Credit Agreement") in order to allow the Company to incur the indebtedness
evidenced by the Securities.
1. Representations and Warranties. The Company represents and warrants to,
and agrees with, you that:
(a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in either Memorandum complied
or will comply when so filed in all material respects with the Exchange
Act and the applicable rules and regulations of the Commission thereunder
and (ii) the Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Initial Purchasers to confirm sales
and on the Closing Date, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in
either Memorandum based upon information relating to any Initial Purchaser
furnished to the Company in writing by such Initial Purchaser through you
expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(c) Each subsidiary of the Company has been duly incorporated or
organized, is validly existing as a corporation or limited liability
company in good standing under the laws of the jurisdiction of its
incorporation or organization, has the corporate power and authority to
own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; each subsidiary of the Company and the
percentage of capital stock or equity units and voting stock or voting
units of each such subsidiary
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owned by the Company is set forth on Schedule II hereto and all of the
issued shares of capital stock or equity units of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly by the Company, free and clear
of all liens, encumbrances, equities or claims.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Final Memorandum.
(f) The shares of common stock outstanding on the date hereof have
been duly authorized and are validly issued, fully paid and
non-assessable.
(g) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
(h) The Underlying Securities issuable upon conversion of the
Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the
Securities, will be validly issued, fully paid and non-assessable, and the
issuance of the Underlying Securities will not be subject to any
preemptive or similar rights.
(i) The Indenture has been duly authorized and, when executed and
delivered by the Company, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
(j) The Registration Rights Agreement has been duly authorized and,
when executed and delivered by the Company, will be a valid and binding
agreement of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity and except as
rights to indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement and the Securities will not
contravene any provision of applicable law or the articles of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole (including,
but not limited to, the Credit Agreement as amended by the Second
Amendment) or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any
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subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Indenture, the Registration Rights Agreement and the Securities, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Securities and by
Federal and state securities laws with respect to the Company's
obligations under the Registration Rights Agreement.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Final Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its subsidiaries
is subject other than proceedings accurately described in all material
respects in each Memorandum and proceedings that would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or
on the power or ability of the Company to perform its obligations under
this Agreement, the Indenture, the Registration Rights Agreement and the
Securities or to consummate the transactions contemplated by the Final
Memorandum.
(n) With the exception of the air permit for the Company's coil
coating facility at its Butler mini-mill which is expected to be issued
shortly and the air permit for the Company's Pittsboro mini-mill for which
the Company has yet to make an application, each of the Company and its
subsidiaries has all necessary consents, authorizations, approvals,
orders, certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals, to own, lease, license and use its properties and
assets and to conduct its business in the manner described in the Final
Memorandum, except to the extent that the failure to obtain such consents,
authorizations, approvals, orders, certificates and permits or make such
declarations and filings would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole. Neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such consent, authorization,
approval, order, certificate or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result
in a material adverse change in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, except as described in or contemplated by
the Final Memorandum.
(o) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have, with the exception of the air permit
for the Company's coil coating facility at its Butler mini-mill which is
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expected to be issued shortly and the air permit for the Company's
Pittsboro mini-mill for which the Company has not yet made an application,
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(p) In the ordinary course of business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) The Company, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Final Memorandum, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(r) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act, an "Affiliate") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the
sale of the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in any form of
general solicitation or general advertising in connection with the
offering of the Securities (as those terms are used in Regulation D under
the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
(s) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act
of 1939, as amended.
(t) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(u) The Securities conform in all material respects to the
description thereof contained in the Final Memorandum under the heading
"Description of Notes".
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(v) Subsequent to the respective dates as of which information is
given in the Final Memorandum, (1) the Company and its subsidiaries have
not incurred any material liability or obligation, direct or contingent,
nor entered into any material transaction not in the ordinary course of
business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution
of any kind on its capital stock; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its consolidated subsidiaries, except in each case as
described in or contemplated by the Final Memorandum.
(w) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Final
Memorandum or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries: and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in or contemplated by the
Final Memorandum.
(x) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unattended and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
currently employed by them in connection with the business now operated by
them, and neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in any
material adverse change in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
(y) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by
the Final Memorandum, or, to the knowledge of the Company, is imminent;
and the Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(z) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged; neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for; and neither the
Company nor any such subsidiary has any reason to believe
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that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, except as described in or contemplated by
the Final Memorandum.
(aa) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted only in accordance with management's general
or specific authorization; and (4) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Firm Securities set forth in
Schedule I hereto opposite its name at a purchase price of 97% of the principal
amount thereof plus accrued interest, if any, to the Closing Date (the "PURCHASE
PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Initial Purchasers the Additional Securities, and the Initial Purchasers
shall have the right to purchase, severally and not jointly, up to $25,000,000
principal amount of Additional Securities at the Purchase Price plus accrued
interest, if any, to the date of payment and delivery. You may exercise this
right on behalf of the Initial Purchasers, in whole or from time to time in
part, by giving written notice of each election to exercise this option. The
Initial Purchasers may exercise this option and purchase the Additional
Securities during the 13-day period commencing with, and including, the initial
issuance of the Firm Securities. Any exercise notice shall specify the principal
amount of Additional Securities to be purchased by the Initial Purchasers and
the date on which such Additional Securities are to be purchased. Each purchase
date must be at least one business day after the written notice is given and may
not be earlier than the Closing Date for the Firm Securities nor later than ten
business days after the date of such notice and provided that in no event shall
such purchase date be later than the date 12 days following the initial issuance
of the Firm Securities (the "Option Cut-off Date") and provided further that the
Initial Purchasers shall sell or otherwise dispose of such Additional Securities
on or before such date. Additional Securities may be purchased as provided in
Section 4 solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Securities. On each day, if any, that Additional
Securities are to be purchased (an "OPTION CLOSING DATE"), each Initial
Purchaser agrees, severally and not jointly, to purchase the principal amount of
Additional Securities (subject to such adjustments to eliminate fractional
Securities as you may determine) that bears the same proportion to the total
principal amount of Additional Securities to be purchased on such Option Closing
Date as the principal amount of Firm Securities set forth in
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Schedule I opposite the name of such Initial Purchaser bears to the total
principal amount of Firm Securities.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Initial Purchasers, it will
not, during the period ending 90 days after the date of the Final Memorandum,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the common stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of common stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (a) the issuance and sale of the Securities offered
by the Final Memorandum, (b) the issuance of shares of Common Stock upon
conversion of the Securities, (c) the issuance by the Company of shares of
Common Stock upon the exercise of an option or a warrant or the conversion of a
security outstanding on the date of the Final Memorandum of which the Initial
Purchasers have been advised in writing, (d) the issuance by the Company of
additional options under its existing stock option plans, provided that such
options are not exercisable during such 90-day period and (e) transactions by
any person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after completion of the
Offering.
The Company hereby agrees that, without the prior written consent of
Morgan & Stanley & Co. Incorporated on behalf of the Initial Purchasers, it will
not, during the period beginning on the date hereof and continuing to and
including the Closing Date, offer, sell, contract to sell or otherwise dispose
of any debt of the Company or warrants to purchase debt of the Company
substantially similar to the Securities (other than the sale of the Securities
under this Agreement.)
3. Terms of Offering. You have advised the Company that you will make an
offering of the Securities purchased by the Initial Purchasers hereunder on the
terms to be set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into as in your judgment is advisable.
4. Payment and Delivery. Payment for the Firm Securities shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Securities for the respective accounts of the
several Initial Purchasers at 10:00 a.m., New York City time, on December 23,
2002, or at such other time on the same or such other date, not later than
December 30, 2002, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on the date specified in the
corresponding notice described in Section 2 or at such other time on the same or
on such other date, in any event not later than the Option Cut-off Date, as
shall be designated in writing by you.
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Certificates for the Securities shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date or the applicable Option Closing Date, as the case
may be. The certificates evidencing the Securities shall be delivered to you on
the Closing Date or an Option Closing Date, as the case may be, for the
respective accounts of the several Initial Purchasers, with any transfer taxes
payable in connection with the transfer of the Securities to the Initial
Purchasers duly paid, against payment of the Purchase Price therefor plus
accrued interest, if any, to the date of payment and delivery.
5. Conditions to the Initial Purchasers' Obligations. The obligations of
the Initial Purchasers to purchase and pay for the Firm Securities on the
Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded the Company
or any of the Company's securities or in the rating outlook for the
Company by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Final Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that,
in your judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Final Memorandum.
(b) The Initial Purchasers shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied hereunder on or before the Closing
Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Initial Purchasers shall have received on the Closing Date
an opinion of Barrett & McNagny LLP, counsel for the Company, dated the
Closing Date, to the
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effect set forth in Exhibit A. Such opinion shall be rendered to the
Initial Purchasers at the request of the Company and shall so state
therein.
(d) The Initial Purchasers shall have received on the Closing Date
an opinion of Sidley Austin Brown & Wood LLP as New York counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit B.
Such opinion shall be rendered to the Initial Purchasers at the request of
the Company and shall so state therein. The Initial Purchasers shall have
received on the Closing Date an opinion of Sidley Austin Brown & Wood LLP
as special tax counsel for the Company, dated the Closing Date, in form
and substance satisfactory to counsel for the Initial Purchasers to the
effect that the Securities will be treated as contingent payment
indebtedness for United States federal income tax purposes and the
statements in the Offering Memorandum under the caption "Certain United
States Federal Income Tax Considerations" insofar as such statements
constitute a summary of the United States federal tax laws referred to
therein, are accurate and fairly summarize the United States federal tax
laws referred to therein. Such opinion shall be rendered to the Initial
Purchasers at the request of the Company and shall so state therein.
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of Shearman & Sterling, counsel for the Initial Purchasers,
dated the Closing Date, in form and substance satisfactory to you.
(f) The Initial Purchasers shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers, from Ernst & Young LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in or
incorporated by reference into the Final Memorandum; provided that the
letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit C hereto, between you and the officers and directors of the
Company and certain shareholders of the Company relating to sales and
certain other dispositions of shares of common stock or certain other
securities, delivered to you on or before the date hereof, shall be in
full force and effect on the Closing Date.
(h) The Second Amendment to the Credit Agreement has been duly
authorized, executed and delivered by the parties thereto and is in full
force and effect.
(i) The Securities shall have been designated PORTAL securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL
Market.
(j) The Initial Purchasers shall have received such other documents
and certificates as are reasonably requested by you or your counsel.
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The several obligations of the Initial Purchasers to purchase Additional
Securities hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization, execution and
authentication of the Additional Securities to be sold on such Option Closing
Date and other matters related to the execution and authentication of such
Additional Securities.
6. Covenants of the Company. In further consideration of the agreements of
the Initial Purchasers contained in this Agreement, the Company covenants with
each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 6(c), as many
copies of the Final Memorandum, any documents incorporated by reference
therein and any supplements and amendments thereto as you may reasonably
request.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use
any such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchasers, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Final Memorandum in order to
make the statements therein, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Initial Purchasers, it is necessary to
amend or supplement the Final Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Initial
Purchasers, either amendments or supplements to the Final Memorandum so
that the statements in the Final Memorandum as so amended or supplemented
will not, in the light of the circumstances when the Final Memorandum is
delivered to a purchaser, be misleading or so that the Final Memorandum,
as amended or supplemented, will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
issuance and sale of the Securities and all other fees or expenses in
connection with the preparation of each Memorandum and all amendments and
supplements thereto, including all printing costs associated therewith,
and the delivering of copies thereof to the Initial Purchasers, in the
quantities herein above specified, (ii) all costs and expenses related to
the transfer and delivery of the Securities to the Initial Purchasers,
including any transfer or other taxes payable thereon, (iii) the
11
cost of printing or producing any Blue Sky or legal investment memorandum
in connection with the offer and sale of the Securities under state
securities laws and all expenses in connection with the qualification of
the Securities for offer and sale under state securities laws as provided
in Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection with
such qualification and in connection with the Blue Sky or legal investment
memorandum, (iv) any fees charged by rating agencies for the rating of the
Securities, (v) all document production charges and expenses of counsel to
the Initial Purchasers (but not including their fees for professional
services) in connection with the preparation of this Agreement, (vi) the
fees and expenses, if any, incurred in connection with the admission of
the Securities for trading in PORTAL or any appropriate market system,
(vii) the costs and charges of the Trustee and any transfer agent,
registrar or depositary, (viii) the cost of the preparation, issuance and
delivery of the Securities, (ix) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Securities,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants and
the cost of any aircraft chartered in connection with the road show, and
(x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided
in this Section, Section 8, and the last paragraph of Section 10, the
Initial Purchasers will pay all of their costs and expenses, including
fees and disbursements of their counsel, transfer taxes payable on resale
of any of the Securities by them and any advertising expenses connected
with any offers they may make.
(f) Neither the Company nor its Affiliates will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) which could be integrated with the sale
of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the Securities
or the Underlying Securities by means of any form of general solicitation
or general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(h) While any of the Securities or the Underlying Securities remain
"restricted securities" within the meaning of the Securities Act, to make
available, upon request, to any seller of the Securities the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company
is then subject to Section 13 or 15(d) of the Exchange Act.
(i) To use its best efforts to permit the Securities to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating
to trading in the PORTAL Market.
12
(j) During the period of two years after the Closing Date or any
Option Closing Date, if later, the Company will not, and will not permit
any of its affiliates (as defined in Rule 144 under the Securities Act) to
resell any of the Securities or the Underlying Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any of
them.
7. Offering of Securities; Restrictions on Transfer. Each Initial
Purchaser, severally and not jointly, represents and warrants that such Initial
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a "QIB"). Each Initial Purchaser, severally and not jointly,
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, such Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act and (ii) it will solicit offers for such Securities only from,
and will offer such Securities only to, persons that it reasonably believes to
be QIBs that in purchasing such Securities are deemed to have represented and
agreed as provided in the Final Memorandum under the caption "Transfer
Restrictions".
8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Initial Purchaser, each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and each affiliate of any Initial Purchaser
within the meaning of Rule 405 under the Securities Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through you expressly for use therein.
(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Initial Purchaser, but only with
reference to information relating to such Initial Purchaser furnished to the
Company in writing by such Initial Purchaser through you expressly for use in
either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
13
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or 8(b)
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company, on the
one hand, and the Initial Purchasers, on the other hand, from the offering of
the Securities or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company, on the one hand, and of the Initial Purchasers,
on the other hand, in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Initial Purchasers, on the other hand, in connection with the
offering of the Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Securities (before
deducting expenses) received by the Company and the total discounts and
commissions received by the Initial
14
Purchasers in respect thereof, bear to the aggregate offering price of the
Securities. The relative fault of the Company, on the one hand, and of the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Initial Purchasers'
respective obligations to contribute pursuant to this Section 8 are several in
proportion to the respective principal amount of Securities they have purchased
hereunder, and not joint.
(e) The Company and the Initial Purchasers agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities resold by it in the initial
placement of such Securities were offered to investors exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this Section 8
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Initial Purchaser, any person controlling any Initial
Purchaser or any affiliate of any Initial Purchaser or by or on behalf of the
Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Securities.
9. Termination. The Initial Purchasers may terminate this Agreement by
notice given by you to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on, or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market,
the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
material disruption in securities settlement, payment or clearance services in
the United States shall have occurred, (iv) any moratorium on commercial banking
activities shall have been declared by Federal or New York State authorities or
(v) there shall have occurred any outbreak or escalation of hostilities, or any
change in financial markets or any calamity or crisis that, in your judgment,
15
is material and adverse and which, singly or together with any other event
specified in this clause (v), makes it, in your judgment, impracticable or
inadvisable to proceed with the offer, sale or delivery of the Securities on the
terms and in the manner contemplated in the Final Memorandum.
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, or an Option Closing Date, as the case may be,
any one or more of the Initial Purchasers shall fail or refuse to purchase
Securities that it or they have agreed to purchase hereunder on such date, and
the aggregate principal amount of Securities which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase is not
more than one-tenth of the aggregate principal amount of Securities to be
purchased on such date, the other Initial Purchasers shall be obligated
severally in the proportions that the principal amount of Firm Securities set
forth opposite their respective names in Schedule I bears to the aggregate
principal amount of Firm Securities set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Firm Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Firm
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Final Memorandum or in any
other documents or arrangements may be effected. If, on an Option Closing Date,
any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase
Additional Securities and the aggregate principal amount of Additional
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Additional Securities to be purchased on such
Option Closing Date, the non-defaulting Initial Purchasers shall have the option
to (a) terminate their obligation hereunder to purchase the Additional
Securities to be sold on such Option Closing Date or (b) purchase not less than
the principal amount of Additional Securities that such non-defaulting Initial
Purchasers would have been obligated to purchase in the absence of such default.
Any action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of such Initial Purchaser
under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
16
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.
11. Notices. All notices and other communications under this Agreement
shall be in writing and mailed, delivered or sent by facsimile transmission to:
if sent to the Initial Purchasers, Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036, attention: High Yield New Issues Group,
facsimile number (212) 761-0587 and if sent to the Company, to Steel Dynamics,
Inc., 6714 Pointe Inverness Way, Suite 200, Fort Wayne, Indiana 46804,
attention: Tracy Shellabarger, facsimile number (219) 969-3555.
12. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement
17
Very truly yours,
STEEL DYNAMICS, INC.
By: /s/ Tracy L. Shellabarger
--------------------------
Name: Tracy L. Shellabarger
Title: Vice President, Chief Financial
Officer and Secretary
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
By: Morgan Stanley & Co. Incorporated
By: /s/ David P. Sun
------------------
Name: David P. Sun
Title: Executive Director
SCHEDULE I
Initial Purchasers
PRINCIPAL AMOUNT OF FIRM
INITIAL PURCHASERS SECURITIES TO BE PURCHASED
------------------ --------------------------
Morgan Stanley & Co. Incorporated......................... $ 75,000,000
Goldman, Sachs & Co. ..................................... $ 25,000,000
Total: .................................................. $100,000,000
SCHEDULE II
Subsidiaries
PERCENT OF CAPITAL PERCENT OF VOTING
STOCK/EQUITY UNITS OWNED BY STOCK/VOTING UNITS OWNED BY
NAME STEEL DYNAMICS, INC. STEEL DYNAMICS, INC.
- ---- --------------------------- ---------------------------
Iron Dynamics, Inc. 100% 100%
New Millennium Building Systems, LLC 46.5% 50%
Omni Dynamic Aviation, LLC 50% 50%
Paragon Steel Enterprises, LLC 50% 50%
SDI Investment Company 100% 100%
STLD Holdings, Inc. 100% 100%
Ferrous Resources, LLC 100% 100%
Dynamic Bar Products, LLC 100% 100%
EXHIBIT A
OPINION OF COUNSEL FOR THE COMPANY
Attach draft opinion of the counsel for the Company to be delivered
pursuant to Section 5(c) of the Purchase Agreement to the effect that:
A. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
B. Each subsidiary of the Company has been duly incorporated or organized,
is validly existing as a corporation or as a limited liability company in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate power and authority to own its property and to
conduct its business as described in the Final Memorandum and is duly qualified
to transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock, and
all membership units or interests, of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable, and
are owned directly by the Company, free and clear of all liens, encumbrances,
equities or claims.
C. The Purchase Agreement has been duly authorized, executed and delivered
by the Company.
D. The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Final Offering Memorandum.
E. All shares of common stock of the Company and its subsidiaries
outstanding on the [Closing Date] [Option Closing Date] have been duly
authorized and are validly issued, fully paid and non-assessable.
F. The Securities have been duly authorized, executed and delivered by the
Company.
G. The Underlying Securities reserved for issuance upon conversion of the
Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the Securities,
will be validly issued, fully paid and non-assessable and the issuance of the
Underlying Securities will not be subject to any preemptive or similar rights.
H. The Indenture has been duly authorized, executed and delivered by the
Company.
I. The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company.
J. The Second Amendment to the Credit Agreement has been duly authorized,
executed and delivered by the Company and is in full force and effect.
K. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Securities will not contravene any
provision of applicable law or the articles of incorporation or by-laws of the
Company or, to the best of such counsel's knowledge, any agreement or other
instrument binding upon the Company or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole, (including, but not
limited to, the Credit Agreement as amended by the Second Amendment) or, to the
best of such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement and the Securities, except such as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and state
securities laws with respect to the Company's obligations under the Registration
Rights Agreement.
K. After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than proceedings fairly summarized in
all material respects in the Final Memorandum and proceedings which such counsel
believes are not likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Securities or to consummate the
transactions contemplated by the Final Memorandum.
L. After due inquiry, to the best of our knowledge, the Company and its
subsidiaries (i) are in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have, with the exception
of the air permit for the Company's coil coating facility at its Butler
mini-mill which is expected to be issued shortly and the air permit for the
Company's Pittsboro mini-mill for which the Company has not yet made an
application, received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
M. The Company is not, and after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described in the
Final Memorandum, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
N. The statements related to legal matters, documents or proceedings
included in the Final Memorandum under the captions "Risk Factors--We may be
required to transfer the acquired assets back to Qualitech, or we may be delayed
in the construction and start-up of this mini-mill," "Risk
Factors--Environmental regulation imposes substantial costs and limitations on
our operations," "Description of Notes," "Description of Capital Stock,"
"Description of Certain Indebtedness," "Certain ERISA Considerations," "Private
Placement," and "Transfer Restrictions," and in "Item 1 -
Business--Environmental Matters," "Item 3 - Legal Proceedings," "Item 1 -
Business--Risk Factors--Risks Related to Our Business--We face litigation risks
in connection with our terminated Thailand advisory transaction," "Item 1 -
Business--Risk Factors--Risks Related to Our Business--Environmental regulation
imposes substantial costs and limitations on our operations" and "Item 13 -
Certain Relationships and Related Transactions" of the Company's most recent
annual report on Form 10-K and in "Item 1 - Legal Proceedings," of each
quarterly report on Form 10-Q included or incorporated by reference in the Final
Memorandum, in each case fairly summarize in all material respects such matters,
documents or proceedings.
O. Such counsel (i) is of the opinion that each document incorporated by
reference in the Final Memorandum (except for financial statements and schedules
and other financial and statistical data included therein as to which such
counsel need not express any opinion), complied as to form when filed with the
Commission in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder and (ii) has no reason to believe that
(except for financial statements and schedules and other financial and
statistical data as to which such counsel need not express any belief) the Final
Memorandum when issued contained, or as of the date such opinion is delivered
contains, any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
P. Based upon the representations, warranties and agreements of the
Company in the Purchase Agreement and of the Initial Purchasers in the Purchase
Agreement, it is not necessary in connection with the offer, sale and delivery
of the Securities to the Initial Purchasers under the Purchase Agreement or in
connection with the initial resale of such Securities by the Initial Purchasers
in accordance with the Purchase Agreement to register the Securities under the
Securities Act of 1933, as amended, or to qualify the Indenture under the Trust
Indenture Act of 1939, it being understood that no opinion is expressed as to
any subsequent resale of any Security or Underlying Security.
Q. With the exception of the air permit for the Company's coil coating
facility at its Butler mini-mill which is expected to be issued shortly and the
air permit for the Company's Pittsboro mini-mill for which the Company has not
yet made an application, each of
the Company and its subsidiaries has all necessary certificates, orders,
permits, licenses, authorizations, consents and approvals of and from, and has
made all declarations and filings with, all federal, state and local
governmental authorities, all self-regulatory organizations and all courts and
tribunals, to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Final Memorandum, and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to revocation or modification of any such certificates,
orders, permits, licenses, authorizations, consents or approvals, nor is the
Company or any of its subsidiaries in violation of, or in default under, any
federal, state or local law, regulation, rule, decree, order or judgment
applicable to the Company or any of its subsidiaries the effect of which, singly
or in the aggregate, would have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, except as described in the
Final Memorandum.
With respect to paragraph O above, counsel may state that his or her
opinion and belief are based upon his or her participation in the preparation of
the Final Memorandum (and any amendments or supplements thereto), and review and
discussion of the contents thereof and review of the documents incorporated by
reference therein, but are without independent check or verification except with
respect to paragraphs N.
EXHIBIT B
OPINION OF NEW YORK COUNSEL FOR THE COMPANY
Attach draft opinion of the New York counsel for the Company to be
delivered pursuant to Section 5(d) of the Purchase Agreement to the effect that:
A. Assuming the Securities have been duly authorized, executed and
delivered by the parties thereto, the Securities, when authenticated in
accordance with the provisions of the Indenture and delivered and paid for by
the Initial Purchasers in accordance with the terms of the Purchase Agreement,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and subject to general principles of equity
(regardless of whether considered in a proceeding in equity or at law), and will
be entitled to the benefits of the Indenture.
B. Assuming the Indenture has been duly authorized, executed and delivered
by the parties thereto, the Indenture is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors' rights generally and subject to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
C. Assuming the Registration Rights Agreement has been duly authorized,
executed and delivered by the parties thereto, the Registration Rights Agreement
is a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and subject to general principles of equity (regardless of whether considered in
a proceeding in equity or at law) and except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited or
unenforceable under applicable law.
EXHIBIT C
[FORM OF LOCK-UP LETTER]
December __, 2002
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into a Purchase Agreement (the "PURCHASE
AGREEMENT") with Steel Dynamics, Inc., an Indiana corporation (the "COMPANY"),
providing for the offering (the "OFFERING") by the several Initial Purchasers,
including Morgan Stanley (the "INITIAL PURCHASERS"), of $100,000,000 principal
amount of Convertible Subordinated Notes Due 2012 of the Company (the
"SECURITIES"). The Securities will be convertible into shares of the Company's
common stock, par value $.01 of the Company (the "COMMON STOCK").
To induce the Initial Purchasers that may participate in the Offering to
continue their efforts in connection with the Offering, the undersigned hereby
agrees that, without the prior written consent of Morgan Stanley on behalf of
the Initial Purchasers, it will not, during the period commencing on the date
hereof and ending 90 days after the date of the final offering memorandum
relating to the Offering (the "FINAL MEMORANDUM"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) the issuance
and sale of the Securities offered by the Final Memorandum, (b) the issuance of
shares of Common Stock upon conversion of the Securities, (c) the issuance by
the Company of shares of Common Stock upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date of the Final
Memorandum of which the Initial Purchasers have been advised in writing, (d) the
issuance by the Company of additional options under its existing stock option
plans, provided that such options are not exercisable during such 90-day period
and (e) transactions by any person other than the Company relating to shares of
Common Stock or other securities acquired in open market transactions after
completion of the Offering. In addition, the undersigned agrees that, without
the prior written consent of Morgan
Stanley on behalf of the Initial Purchasers, it will not, during the period
commencing on the date hereof and ending 90 days after the date of the Final
Memorandum, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent and registrar against the transfer of the undersigned's share of Common
Stock except in compliance with the foregoing restrictions.
The undersigned understands that the Company and the Initial Purchasers
are relying upon this Lock-Up Agreement in proceeding toward consummation of the
Offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Whether or not the Offering actually occurs depends on a number of
factors, including market conditions. Any Offering will only be made pursuant to
a Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.
Very truly yours,
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(Name)
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(Address)