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Exhibit 10.15
IRON CARBIDE OFF-TAKE AGREEMENT
THIS AGREEMENT dated June 29, 1996 (this "Agreement"), is made by and
between QUALITECH STEEL CORPORATION, a Delaware corporation ("Qualitech"), and
STEEL DYNAMICS, INC., an Indiana corporation ("Steel Dynamics").
PRELIMINARY STATEMENT:
Steel Dynamics and Qualitech entered into a certain Seed Money Commitment
Agreement dated January 5, 1995 which, among other things, provides for Steel
Dynamics and Qualitech to negotiate a more detailed agreement relating to the
purchase by Steel Dynamics and the sale by Qualitech of iron carbide to be
manufactured at a new production facility to be constructed by Qualitech in
Corpus Christi, Texas (the "Iron Carbide Plant") planned to have an estimated
aggregate annual production capacity of 660,000 metric tonnes (each such tonne
consisting of 2,204.62 pounds and hereafter called a "Tonne"). As a result of
negotiations pursuant to that provision, the parties are entering into this
Agreement.
AGREEMENTS:
1. Purchase and Sale Commitments.
(a)Subject to the terms and conditions of this Agreement, during the
period (the "Ramp-up Period") commencing on the Commencement Date (as defined in
Section 4) and ending on the later to occur of the last day before the date of
Final Acceptance (as defined in the Contract for Supply of Iron Carbide
Production Equipment, Processes and Services, dated the date hereof, between
Qualitech and Mitsubishi International Corporation, a New York corporation
("Mitsubishi")), or the Sustained Production Date (as defined in Subsection
1(c)), but in no event later than 38 months from the date of this Agreement,
Qualitech shall sell to Steel Dynamics, and Steel Dynamics shall purchase from
Qualitech, under the terms and conditions set forth in Section 3, 60% of any and
all quantities of Product (as defined in Subsection 1(d)) produced by the Iron
Carbide Plant.
(b)Subject to the terms and conditions of this Agreement, during the
Ramp-up Period, Steel Dynamics, together with Mitsubishi and OmniSource
Corporation, an Indiana corporation ("OmniSource"), pursuant to the Iron Carbide
Off-Take Agreements of even date herewith between Qualitech and Mitsubishi and
OmniSource, respectively, shall have the option to purchase pro rata from
Qualitech up to 45.5%, 12.1% and 18.2%, respectively (the "Option Quantities"),
of any and all Product produced by the Iron Carbide Plant during any period of
one calendar month or greater in the Ramp-up Period in which Product is produced
during that particular period at an annualized rate of 330,000 Tonnes or more,
up to 660,000 Tonnes. Qualitech shall be entitled to use the remaining 24.2% of
such production for that particular period for its own consumption or other
disposition. Qualitech shall notify Steel Dynamics at
* Material has been redacted pursuant to request for Confidential Treatment.
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least 30 days in advance of each such applicable period during the Ramp-Up
Period during which such production rate is reasonably estimated to occur. Steel
Dynamic's Option Quantity option shall be exercisable by written notice to
Qualitech within 30 days after Steel Dynamic's receipt of Qualitech's notice. If
Steel Dynamics exercises such option, such purchase shall be made at the price
and pursuant to the terms and conditions set forth in Sections 2 and 3. To the
extent that any of Steel Dynamics, Mitsubishi and/or OmniSource does not elect
to purchase its respective Option Quantity in its entirety, Qualitech and each
of such other parties which has elected to purchase its respective Option
Quantity in its entirety shall have the option (exercisable upon reasonable
written notice) to purchase from Qualitech and/or use, as the case may be, and
Qualitech shall sell to the foregoing parties who exercise such option (the
"Electing Parties") quantities of such Product which Steel Dynamics, Mitsubishi
and/or OmniSource do not elect to purchase, pro rata in accordance with the
respective shares of the Electing Parties. If during the period described
herein, production (on an annualized basis) drops below 330,000 Tonnes, the
options described herein shall not apply, and Qualitech's disposition of its
iron carbide shall revert to that which is otherwise required during the Ramp-Up
Period.
(c)Subject to the terms and conditions of this Agreement, including but
not limited to Subsections 1(e), 1(f) and 1(g), commencing on the later to occur
of the date of Final Acceptance or the date, after Final Acceptance, on which
Qualitech has successfully produced Product for a sustained period of 90 days at
the average rate of 41,250 Tonnes per month (the "Sustained Production Date"),
but in no event later than 38 months from the date of this Agreement, and
continuing during the term of this Agreement, Qualitech shall annually sell to
Steel Dynamics, and Steel Dynamics shall annually purchase from Qualitech,
quantities of Product produced by the Iron Carbide Plant's initial module, under
the terms and conditions contemplated by Section 3, in each Product Year (as
defined in subsection 1(d)), determined as annualized rate as follows (prorated
for any Product Year that is not a full calendar year) ("Steel Dynamics'
Allocable Amount"):
(1) 55.6% of the first 270,000 Tonnes of Estimated Production (as
defined in Subsection 1(e)) for such Product Year, pro rata with Mitsubishi and
OmniSource each at the rate of 22.2% pursuant to their respective Iron Carbide
Off-Take Agreements of even date herewith; and
(2) 48.4% of Estimated Production for such Product Year which is
greater than 350,000 Tonnes but not in excess of 660,000 Tonnes, pro rata with
Qualitech at its rate of 25.8% and with Mitsubishi and OmniSource at their rates
of 6.4% and 19.4% pursuant to their respective Iron Carbide Off-Take Agreements
of even date herewith.
Steel Dynamics acknowledges and agrees that Qualitech shall have sole
rights to all annualized Estimated Production for each Product Year which is
greater than 270,000 Tonnes but not exceeding 350,000 Tonnes.
(d)As used in this Agreement, the following terms shall have the
following meanings:
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(1) "Product" means iron carbide manufactured by Qualitech at the
Iron Carbide Plant that (i) meets or exceeds the Product Specifications as
defined in Exhibit A attached to and made part hereof, all as determined by
testing methods prescribed for the Mossbauer analyzer (or any other commercially
accepted substantially equivalent analyzer which may be available from time to
time) and (ii) is capable of being used or consumed effectively in electric arc
furnaces as a scrap substitute product;
(2) "Product Year" means, initially, the calendar year (or portion
thereof) during which the Commencement Date occurs and, thereafter, each
calendar year (or portion thereof) during the term of this Agreement;
(3) "Product Month" means each calendar month (or portion thereof) in
any Product Year; and
(4) "Product Quarter" means a calendar quarter (or portion thereof)
in any Product Year.
(e)Qualitech shall notify Steel Dynamics in writing no less than 90 days
in advance of the Commencement Date and no less than .90 days in advance of the
beginning of each Product Year of the amount of Product reasonably estimated to
be manufactured by Qualitech for the applicable Product Year at the Iron Carbide
Plant (including monthly estimates) (the "Estimated Production"). Upon written
notice to Steel Dynamics, such estimates may be reasonably revised by Qualitech
from time to time during the applicable Product Year, but in no event less than
Steel Dynamic's Minimum Allocable Amount (as defined in Subsection 1(g)), as
additional relevant production information becomes available, with notice of any
such adjustment being given not less than 90 days in advance of the relevant
Product Year and 45 days :in advance of any quarterly adjustments. Thereafter,
if Qualitech in fact exceeds such revised Estimated Production, Steel Dynamics
shall have an option, together with Mitsubishi, OmniSource and Qualitech,
exercisable within 30 days after such written notice from Qualitech, to purchase
its pro rata portion of such excess, up to Steel Dynamics' Allocable Amount, but
shall not be required to do so. For purposes of satisfying Steel Dynamics'
purchase obligation described in Subsection 1(c), but not Qualitech's sales
obligation, Steel Dynamics shall be deemed to have purchased its full Allocable
Amount during any Product Month in which less than the entire Steel Dynamics'
Allocable Amount for that Product Month was offered to Steel Dynamics by
Qualitech.
(f)If, after the fifth business day following the close of any Product
Month, Steel Dynamics has failed to purchase at least Steel Dynamics' Allocable
Amount for such Product Month (to the extent such amount was offered to Steel
Dynamics for purchase in accordance with the terms and conditions of this
Agreement), then, upon 21 days written notice of its intent to do so, and unless
Steel Dynamics effects such purchases within such notice period or its
performance is otherwise excused hereunder, Qualitech's sole remedy, exercisable
by written notice delivered to Steel Dynamics within 15 days thereafter, shall
be to terminate this
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Agreement (it being understood that such failure by Steel Dynamics shall not be
further subject to the cure provisions of Section 6). The failure by Qualitech
to terminate this Agreement within such 15 day period shall not constitute a
waiver of Qualitech's right to terminate for any such future failure by Steel
Dynamics. Such notice shall specify the effective date of any such termination
(not to be less than 60 days from the date of notice), and upon the effective
date thereof this Agreement shall terminate and neither party shall have any
further obligations hereunder, except for the performance of prior purchase
orders and payment thereunder, and except to the extent any provisions of this
Agreement expressly survive termination. Such termination right shall not extend
or otherwise affect any other agreement or contract then existing between the
parties, except as expressly provided in any such other agreement or contract.
If Qualitech fails for any reason to give such termination notice within such
15-day period, this Agreement shall remain in full force and effect.
(g)Qualitech shall only be entitled to offer less than Steel Dynamics
full Allocable Amount and to reduce Steel Dynamic's Product to not less than
37,500 Tonnes of Product per Product Quarter ("Steel Dynamics' Minimum Allocable
Amount"), if and as long as such deficiency is not as a result of sales to third
parties (other than quantities of Product offered to OmniSource and Mitsubishi)
or taken by Qualitech for its own consumption, all as contemplated by this
Agreement or as a result of any circumstance described in Section 7(a). If, in
any Product Year, Qualitech has not offered to Steel Dynamics for purchase in
accordance with the terms and conditions of this Agreement at least (i) 37,500
Tonnes of Product in any Product Quarter of such Product Year (or a prorated
amount thereof for any Product Quarter that is not three full calendar months)
(the "Quarterly Guarantee"), or (ii) 11,250 Tonnes of Product in any Product
Month in such Product Year (or a pro rated part thereof that is not a full
month) (the "Monthly Guarantee"), then, upon 21 days advance written notice of
its intention to do so, and unless Qualitech provides such product to Steel
Dynamics within the notice period or its performance is otherwise excused
hereunder, Steel Dynamics' sole remedy, exercisable by written notice delivered
to Qualitech within 15 days thereafter, shall be to terminate this Agreement (it
being understood that such failure by Qualitech to offer Steel Dynamics the
Quarterly Guarantee or the Monthly Guarantee shall not be further subject to the
cure provisions of Section 6). The failure by Steel Dynamics to terminate this
Agreement within such 15 day period as a result of a failure by Qualitech to
offer the Quarterly Guarantee or the Monthly Guarantee shall not constitute a
waiver of Steel Dynamics' right to terminate for a future failure by Qualitech
to offer to Steel Dynamics the Quarterly Guarantee or the Monthly Guarantee.
Such notice shall specify the effective date of any such termination (not to be
less than 60 days from the date of notice), and upon the effective date thereof
this Agreement shall terminate and neither party shall have any further
obligations hereunder, except for the performance of prior purchase orders and
payments thereunder, and except to the extent any provisions of this Agreement
expressly survive termination. Such termination right shall not extend or
otherwise affect any other agreement or contract then existing between the
parties, except as expressly provided in any such other agreement or contract.
If Steel Dynamics fails for any reason to give such termination notice within
such 15-day period, this Agreement shall remain in full force and effect.
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(h)In the event that Qualitech proposes to increase the Iron Carbide
Plant's production capacity beyond 660,000 Tonnes of Product per Product Year by
installing an additional module in addition to the first module, Qualitech shall
notify Steel Dynamics at least twelve (12) months prior to the date on which
Qualitech is scheduled to commence construction of any such additional module.
Thereafter, Steel Dynamics shall have sixty (60) days after the applicable
purchase price for such additional Product has been determined as set forth
herein and, subject to Section 2, within which to provide Qualitech with written
notice of exercise of its option to purchase its pro rata share of such
additional Product, not to exceed an additional 300,000 Tonnes per Product Year
for the additional module, pursuant to the terms and conditions set forth in
this Agreement. If the parties, in good faith, do not agree on such purchase
price for any reason on or before the 180th day immediately prior to the date
that Qualitech is scheduled to commence construction of the additional module,
the establishment of such purchase price shall be resolved by arbitration
pursuant to Section 17. The fees and expenses of the arbitration shall be shared
by both parties. In no event shall Qualitech be required to construct an
additional module regardless of any decision or award by any arbitrator, and no
arbitrator shall have any authority to obligate Qualitech to construct an
additional module. So long as this Agreement is in effect, either during the
initial term or any extension thereof, if Qualitech again at any time or from
time to time proposes to increase the Iron Carbide Plant's production capacity
by installing a module in addition to the first module as aforesaid, Qualitech
and OmniSource shall again pursue the same notification, negotiation, and
arbitration procedures set forth and as limited herein.
2. Purchase Price.
(a)The purchase price of Product shall be calculated on a per Tonne
basis, f.o.b. the Iron Carbide Plant. Such purchase price shall be determined
and fixed in advance for each Product Quarter in which such Product is to be
manufactured, subject to adjustments as provided herein; provided that as of the
date of this Agreement, and until the later to occur of Final Acceptance or
Qualitech's Sustained Production Date, the purchase price shall be $*** per
Tonne. After the later to occur of Final Acceptance or Qualitech's Sustained
Production Date, such purchase price shall be adjusted and readjusted, upwards
or downwards as the case may be, from time to time pursuant to the Adjusted Cost
formula, as described in Exhibit B, with a "Floor Price" pursuant to this
formula equal to the lesser of (i) $*** per Tonne or (ii) the greater of ***% of
the published prior three month rolling average price of "No. 1 Bundles" f.o.b.
point of origin or $*** per Tonne, and a "Ceiling Price" pursuant to this
formula of $*** per Tonne (regardless of what this formula might otherwise
require). If the price of No. 1 Bundles cannot be readily determined despite
good faith efforts, the parties agree that Steel Dynamics' purchase prices
(excluding freight) for No. 1 Bundles purchased from OmniSource for use at Steel
Dynamics' Butler, Indiana mill site shall be used for purposes of determining
the Floor Price. Steel Dynamics shall have reasonable rights to audit
Qualitech's books and records for the purpose of verifying Qualitech's
compliance with the provisions of Exhibit B and the calculations required
thereby, and Qualitech shall have reasonable rights to audit Steel Dynamics'
purchase records for the purpose of verifying such prices. The Adjusted Cost per
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Tonne for any Product Quarter shall be effective commencing with the second
Product Month within such Product Quarter and shall continue through the last
day of the first month of the following Product Quarter and shall be based upon
the Adjusted Cost per Tonne, determined in accordance with Exhibit B, for the
prior Product Quarter. The effects of any year-end adjustments made for purposes
of preparing Qualitech's annual audited financial statements shall be reflected
in the second Product Quarter of each Product Year following the Product Year to
which such adjustments apply.
(b)Notwithstanding any purchase price determination made pursuant to
Subsection 2(a), and subject always to the Floor Price and Ceiling Price
limitations described in Subsection 2(a), Steel Dynamics shall always receive a
purchase price per Tonne of Product that is five percent (5%) lower than the
lowest purchase price per Tonne of Product, FOB the Iron Carbide Plant,
negotiated with any other similarly situated customer of Qualitech (excluding
Qualitech and its affiliates, Mitsubishi and OmniSource) purchasing Product of
similar quantity, quality and characteristics which is purchased in the same
Product Quarter.
(c)If Steel Dynamics disagrees with any price determination made by
Qualitech, Steel Dynamics shall notify Qualitech of such disagreement within 15
days after Qualitech's delivery of the applicable price determination to Steel
Dynamics by delivering to Qualitech a written statement setting forth in
reasonable detail the particulars of its disagreement. Qualitech and Steel
Dynamics shall make reasonable, good faith efforts promptly to resolve any such
disagreement(s). Any disagreement(s) with respect to such price determination
which cannot be resolved between the parties within 120 days shall be finally
resolved, if necessary, by arbitration pursuant to Section 17. The fees and
out-of-pocket expenses of such arbitrator shall be shared by both parties.
3. Terms of Purchase.
(a)Steel Dynamics will place orders with Qualitech using Steel Dynamics'
standard purchase order form, a copy of which is attached to and made part
hereof an Exhibit C, as the same may be reasonably modified from time to time by
mutual agreement of the parties, excluding such terms as are inconsistent with
this Agreement. Unless otherwise agreed, such orders shall provide for delivery
schedules in level amounts during each Product month, plus or minus twenty
percent (20%) based upon Steel Dynamics' Allocable Amount. Each purchase and
sale of Product shall be completed pursuant to the applicable price determined
pursuant to Subsection 1(h) and Section 2, as the case may be, and payment terms
shall be net 30 days. Risk of loss with respect to Product shall pass to Steel
Dynamics upon delivery by Qualitech to Steel Dynamics or Steel Dynamics'
designated carrier at the Iron Carbide Plant, with all necessary shipping and
consignment documents properly prepared and delivered, subject, however, to
final settlement adjustments based upon Steel Dynamics' delivered weights. If
the parties are in dispute over the price determination, the most recently
undisputed price shall apply for initial settlement, subject to adjustment after
resolution of such dispute.
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(b)Intentionally omitted.
(c)Intentionally omitted.
(d)Each delivery made pursuant to this Agreement shall be deemed a
separate sale. Default in any such delivery shall not void or terminate this
Agreement with respect to any other delivery made or to be made, nor shall any
such default in any delivery entitle Steel Dynamics to reject other deliveries,
whether made previously or subsequent thereto.
(e)In the event that any Product received by Steel Dynamics hereunder
does not meet the standards set forth in Exhibit A, or as otherwise required
hereunder, Steel Dynamics shall promptly notify Qualitech of such
deficiency(ies) (in any event within 90 days after receipt of such Product). if
Steel Dynamics does not give Qualitech notice of such deficiency as provided
herein, the Product shall be deemed accepted by Steel Dynamics. Irrespective of
any prior payment, any such defective Product may be rejected (within such
90-day notice period) and returned by Steel Dynamics, at Qualitech's reasonable
expense and risk, which action will not, however, invalidate this Agreement. Any
such rejected Product also may be held, at Qualitech's reasonable risk and
expense, subject to resolution of such deficiency by any mutual agreement of the
parties to an appropriate price reduction or to Qualitech's instruction as to
disposition, but shall be subject to replacement only at the option of Steel
Dynamics (exercisable in its reasonable discretion). If any such rejected
Product has not been paid for and is not replaced, Steel Dynamics shall not pay
for such Product. If any such defective Product is replaced, Steel Dynamics
shall pay only for the replacement Product. It any such defective Product has
been paid for, Qualitech shall refund to Steel Dynamics the purchase price paid
therefor within 30 days of Steel Dynamics' notice of such defect(s), except that
such payment shall be applied to the extent of the purchase price for any
replacement Product. If Steel Dynamics rejects any Product pursuant to this
Subsection 3(e) and does not elect replacement thereof, such quantity of Product
so rejected without replacement shall be deemed, at Steel Dynamics' election, as
having satisfied Steel Dynamics' obligation to place orders and purchase its
Allocable Amount or Option Quantity, as the case may be, to the extent of such
rejected quantity of Product.
4. Term of Purchase and Sale Obligations. The purchase and sale obligations
under this Agreement shall take effect upon the date on which the Iron Carbide
Plant commences production of Product and Steel Dynamics begins to receive
Product pursuant to Subsection 1(a) (the "Commencement Date") and shall
terminate on the fifth anniversary of the later to occur of the date of Final
Acceptance or the Sustained Production Date; provided that Steel Dynamics shall
have an option, exercisable by written notice on the later to occur of 120 days
prior to the expiration of the initial term or 30 days after the applicable
purchase price has been determined pursuant to this Section 4, and subject to
Section 2 (but in no event later than 60 days after the expiration of the
initial term), to extend the Agreement for five (5) additional years pursuant to
the terms and conditions set forth in this Agreement. If the parties, in good
faith, cannot within the period described in this Section 4 agree an such
purchase price the establishment of such price shall be resolved by arbitration
pursuant to Section 17. The applicable purchase price per
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Tonne of Product in effect from time to time for each Product Quarter during the
extended term shall equal the Adjusted Cost per Tonne of Product determined in
accordance with Exhibit B as further modified in accordance with this Section 4.
In determining the Adjusted Cost per Tonne of Product for each Product Quarter
during such extended term, whether through good faith negotiations or by
arbitration, the Price Adjustment factors set forth in Sections 1(A) through
1(E) of Exhibit B shall be binding upon the parties and upon any arbitrator,
except that the costs per Tonne of Product shown on Annex 1 to Exhibit B
regarding f actors 1(B) (depreciation), 1(D) (interest), and 1(E) (return on
equity) shall remain constant and shall not be subject to further adjustment by
the parties or by any arbitrator, absent mutual agreement by the parties to the
contrary. The fees and out-of-pocket expenses of such arbitration shall be
shared by both parties.
5. Notices. All notices required hereunder shall be personally delivered or
sent by overnight courier for next business day delivery, certified or
registered United States mail, return receipt requested, postage prepaid, or
telecopier facsimile. If a notice is personally delivered, it will be
conclusively deemed to have been received by a party when so delivered; if sent
by overnight courier for next day delivery, on the next business day after
deposit thereof with such courier; if sent by certified or registered mail, when
delivered or refused for delivery; and if sent by telecopier facsimile, the
first business day after receipt. Notices to Qualitech shall be addressed as
follows:
Qualitech Steel Corporation
Xxxxx Building, Suite 700
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention:Xxxxxx X. Xxxxxx
Facsimile:(000) 000-0000
or to such other person and place as Qualitech may hereafter designate in
writing, and notices to Steel Dynamics shall be addressed to it as follows:
Steel Dynamics, Inc.
0000 Xxxxxx Xxxx 00
Xxxxxx, Xxxxxxx 00000
Attention:Xx. Xxxxx X. Xxxxx
Facsimile:(000) 000-0000
or to each other person or place as Steel Dynamics may hereafter designate in
writing.
6. Events of Default and Remedies.
(a)Events of Default. Each of the following events shall constitute an
"Event of Default" by a party hereunder:
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(1) Except for a failure to purchase described in Subsection 1(f)
(where the sole remedy by Qualitech is termination) the failure of Steel
Dynamics to make the payment of any undisputed amount becoming due and payable
to Qualitech under this Agreement an the date which such amount becomes due and
payable hereunder (after giving effect to all applicable dispute resolution
procedures provided under this Agreement with respect to disputed amounts, if
any) if such payment is not made within 15 days after the date on which
Qualitech gives written notice to Steel Dynamics of its intention to declare a
default in respect thereof; or, except for the failure to offer Product for
purchase by Steel Dynamics described in Subsection 1(g) (where the sole remedy
by Steel Dynamics is termination), the failure by Qualitech to offer to Steel
Dynamics any material quantity of Product on the date on which such performance
becomes due under Section 3 of this Agreement, if such failure continues 15 days
subsequent to written notice to Qualitech by Steel Dynamics of its intention to
declare a default in respect thereof;
(2) The failure of a party to perform or comply in any material
respect with any of the terms of this Agreement to be performed or complied with
by such party (in addition and supplemental to those referred to in Subsection
6(a)(1) and except as excused pursuant to Section 7) if such failure is not
remedied (A) within 30 days after the non-defaulting party shall have given to
the other party written notice of such failure, or (B) in the case of any such
default which cannot with due diligence be cured within 30 days, but is
susceptible to cure without unreasonable effort, within such additional period
as may be reasonably required to cure such default (not to exceed 90 days) if
such curative action is diligently pursued;
(3) The making by a party of an assignment for the benefit of its
creditors or an admission by a party of its insolvency;
(4) The filing by or against a party of any petition seeking relief
under Title 11 of the United States Code, or the commencement by or against a
party of any proceeding with respect to relief under the provisions of any other
applicable bankruptcy, insolvency or other similar law of the United States or
any State providing for reorganization, wind-up or liquidation or arrangement,
composition, extension or adjustment with creditors; provided that no such event
shall constitute an Event of Default if it is an involuntary proceeding and is
discharged within 60 days of its filing or commencement;
(5) The appointment of a receiver or trustee for a party or for any
substantial part of a party's assets if such receiver or trustee is not
discharged within 60 days of appointment; or
(6) The institution of any proceedings for a dissolution and full or
partial liquidation of the party if such proceedings are not dismissed or
discharged within 60 days of their commencement.
(b)Performance Suspension. Upon the occurrence of an Event of Default by
Steel Dynamics, Qualitech shall have the right, so long as such Event of Default
remains uncured, at any time to suspend its performance under this Agreement by
giving written notice of such
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suspension to Steel Dynamics. Such notice shall specify the effective date of
any such suspension. Such suspension right shall not extend or otherwise affect
any other agreement or contract then existing between the parties, except as
expressly provided in any such other agreement or contract.
Upon the occurrence of an Event of Default by Qualitech, Steel Dynamics
shall have the right, so long as such Event of Default remains uncured. at any
time to suspend its performance under this Agreement by giving written notice of
such suspension to Qualitech. Such notice shall specify the effective date of
any such suspension. Such suspension right shall not extend or otherwise affect
any other agreement or contract then existing between the parties, except as
expressly provided in any such other agreement or contract.
(c)Reimbursement. Upon the occurrence of an Event of Default, the
nondefaulting party shall have, in addition to its other rights and remedies
hereunder and under law and at equity (but subject to the limitations set forth
in this Agreement), the right to recover from the party in default all
reasonable costs and expenses incurred by the nondefaulting party in enforcing
its rights and remedies hereunder, including reasonable attorneys' fees. The
termination of this Agreement by either party by reason of default by the other
party, as aforesaid, shall not relieve either party of any of its obligations
accrued under this Agreement before the effective date of such termination.
7. Force Majeure.
(a)Any other provision of this Agreement to the contrary
notwithstanding, neither party shall be liable to the other party for any loss
or damage incurred by such other party, nor shall such other party have any
right to terminate this Agreement, by reason of any default or delay at any time
in such party's performance of this Agreement caused by reason of any occurrence
or cause beyond the reasonable control of such party, including, but not limited
to, any: (i) labor dispute, work stoppage, slowdown or strike, widespread
material shortage, blockade or embargo; (ii) flood, fire, earthquake, explosion,
casualty, act of God, accident, war, revolution, civil commotion, act of a
public enemy; (iii) injunction, law, order, proclamation, regulation, ordinance,
demand or requirement of any government or subdivision, authority or
representative of any such government; (iv) electricity, gas or other utilities
outages; (v) unforeseen equipment failure; or (vi) unforeseen emergency
shutdown. Such events shall be equally applicable to Steel Dynamics as purchaser
hereunder, wherein its ability to consume the Product has been materially
adversely affected by the force majeure, as to Qualitech as seller hereunder,
wherein its ability to manufacture the Product has been materially adversely
affected by the force majeure. If any such event shall occur, or if
circumstances create a reasonable probability that such an event will occur, the
party wishing to invoke this provision shall promptly notify the other party of
the same, providing such information as is reasonably available relative to the
event, and use all reasonable efforts to resume its performance hereunder as
quickly as reasonably practicable if such performance is so delayed or
interrupted.
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(b)In the event that Qualitech is excused from performing pursuant to
Subsection 7(a), Steel Dynamics shall be entitled to make other arrangements to
satisfy its requirements for Product during the reasonably anticipated period of
Qualitech's inability to perform. In the event that Steel Dynamics is excused
from performing pursuant to Subsection 7(a), Qualitech shall be entitled to make
other arrangements to dispose of Product ordered by Steel Dynamics for
production and/or delivery during the reasonably anticipated period of Steel
Dynamics' inability to perform. Product purchased by Steel Dynamics from other
suppliers, and Product sold to other purchasers by Qualitech, pursuant to
reasonable arrangements made during, or in anticipation of, the other party's
inability to perform shall be counted in determining satisfaction of the
purchase and sale obligations of the parties pursuant to this Agreement. The
term of this Agreement shall be extended for a period equivalent to the
aggregate of all periods during which performance is excused by virtue of this
Section 7.
8. Construction of Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, and the parties
consent to the jurisdiction of the State of Indiana, any and all objections to
venue being waived. This Agreement (including the exhibits hereto) embodies the
entire agreement and understanding between Qualitech and Steel Dynamics with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, oral or written, relative to the
subject matter of this Agreement.
9. Waivers; Modifications, No waiver or modification of any provision of
this Agreement shall be effective against either party hereto unless it is set
forth in a writing signed by both parties. No waiver of any breach of any
provision hereof shall be deemed a waiver of any other breach of the same
provision or of any other provision hereof, unless expressly so stated in the
writing setting forth such waiver.
10. Assignment. Except as specifically provided in this Section 10, neither
party may assign any of its rights or delegate any of its duties under this
Agreement without first obtaining the prior written consent of the other party,
which consent will not be reasonably conditioned, delayed or withheld.
Notwithstanding the foregoing and provided that the assigning or transferring
party notifies the other party at least 60 days prior to the effective date of
the assignment or transfer, (a) Steel Dynamics shall have the right, without
Qualitech's consent, to assign or transfer this Agreement or all the benefits
and obligations hereof to any entity directly or indirectly controlling,
controlled by or under common control with Steel Dynamics (a "Steel Dynamics
Affiliate"), provided that Steel Dynamics will remain fully liable hereunder
unless there is no genuine question of the ability of such Steel Dynamics
Affiliate to perform Steel Dynamics' obligations under this Agreement, and (b)
Qualitech shall have the right, without Steel Dynamics' consent, to assign or
transfer this Agreement or all of the benefits and obligations hereof (i) as
collateral security for its obligations to its lenders (without, in the case of
this clause (b)(i), notifying Steel Dynamics prior to the effective date of the
assignment), (ii) to any entity directly or indirectly controlling, controlled
by or under common control with Qualitech, provided that the net worth of such
entity is not materially less than the net worth of
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Qualitech on the date of this Agreement or there is no genuine question of the
ability of such transferee to perform Qualitech's obligations under this
Agreement, or (iii) to an entity that acquires all or substantially all of the
stock or assets of Qualitech. regardless of the form or structure of the
transaction (including but not limited to any merger), provided that the net
worth of such transferee is not materially less than the net worth of Qualitech
on the date of this Agreement or there is no genuine question of the ability of
such transferee to perform its obligations under this Agreement; provided, that
any transferee permitted pursuant to clauses b(ii) and b(iii) above shall
execute a written instrument agreeing to be bound by all of the future
obligations (and past obligations unless the transferor remains fully liable for
such past obligations and is able to satisfy such obligations out of its
remaining assets and or proceeds of the transfer.
11. Interpretation. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement. Whenever the context
requires, words used in the singular shall be construed to include the plural
and vice versa, and pronouns of any gender shall be deemed to include and
designate the masculine, feminine or neuter gender.
12. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
13. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
14. Assistance. Qualitech does hereby agree to render reasonable assistance
to Steel Dynamics in connection with its training and/or use of the Product.
15. WAIVER OF JURY TRIAL. THE PARTIES HEREBY AGREE THAT ANY SUIT, ACTION OR
PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY EITHER PARTY
OR ANY SUCCESSOR OR ASSIGN OF SUCH PARTY WITH RESPECT TO THIS AGREEMENT OR WHICH
IN ANY WAY RELATES, DIRECTLY OR INDIRECTLY, TO THE OBLIGATIONS UNDER THIS
AGREEMENT, OR THE DEALINGS OF THE PARTIES WITH RESPECT THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES
ACKNOWLEDGE AND AGREE THAT THIS PROVISION IS A SPECIFIC AND MATERIAL ASPECT OF
THE AGREEMENT ]BETWEEN THE PARTIES AND THAT THEY WOULD NOT HAVE ENTERED INTO
THIS TRANSACTION IF THIS PROVISION WERE NOT PART OF THEIR AGREEMENT.
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16. Computing Time Periods. All time periods provided for in this Agreement
shall be based on calendar days; provided that if any such time period ends on a
day other than a business day, the time period shall be extended to the next
business day, or if any payment becomes due on a day that in not a business day,
such payment may be made on the next succeeding business day. For purposes of
this Agreement, the term "business day" means any day excluding Saturday, Sunday
and any other full day on which banks are required or authorized to close in the
State of Texas.
17. Arbitration. Provided that there is no other legal or other proceeding
then pending under or with respect to this Agreement in which the same could be
resolved, all disputes with respect to the determination of any purchase price
of Product pursuant to Section 1(h), 2 and 4 which cannot be resolved by the
parties pursuant to the provisions of Subsection 2(c) shall be finally settled
by arbitration as provided in this Section 17, subject to requirements and
limitations set forth in such Section 1(h), 2 and 4, as the case may be. Either
party may initiate arbitration hereunder upon written notice of the other party.
If the parties are unable within 15 days of such notice to agree on a single,
independent arbitrator experienced in arbitrating matters similar to those which
may be at issue, the parties shall seek appointment of such arbitrator, or, if
any party so prefers, a panel of three (3) arbitrators, one each to be selected
by each of the parties, and the third, if not selected by agreement of the other
two, to be appointed by the American Arbitration Association in accordance with
its expedited rules. Such arbitration shall be held in alternating locations of
Qualitech's home offices, and Steel Dynamics' home offices commencing with
Qualitech's home office, unless another place shall be mutually agreed upon by
the parties. The controlling rules shall be the Commercial Arbitration Rules of
the American Arbitration Association. Neither party shall suspend performance of
this Agreement solely by reason of reference of a dispute to arbitration. The
award rendered by the arbitrator shall be final, subject to the limitations set
forth in Sections 1(h) and 4, and judgment may be entered upon in accordance
with applicable law in any court having jurisdiction thereof. The award shall
also indicate how to distribute arbitrator's fees and arbitration expenses
between the parties based on the provisions of Subsection 2(c).
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above given.
QUALITECH STEEL CORPORATION
/s/ Xxxxxx X. Xxxxxx
By: ____________________________________
Xxxxxx X. Xxxxxx, Chairman
and Chief Executive Officer
STEEL DYNAMICS, INC.
/s/ Xxxxx Xxxxxxxxxxxx
By: ____________________________________
Xxxxx Xxxxxxxxxxxx
Vice President
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EXHIBIT A
PRODUCT STANDARDS
Product will be granular, free-flowing material with particle size under 2
mm and not more than 10% less than .10 mm and shall conform to the following
chemical composition by weight:
Constituent % By Weight
-----------
Total Fe Min 88.7
Carbon (as Fe(3)C) min 5.7
Gangue max 3.3
Fe(3)C min 85.0
FeO max 8.0
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EXHIBIT B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Exhibit B, "Adjusted Costs" per Tonne
for Product (all subject to audit by Steel Dynamics) manufactured during any
Product Quarter shall be the sum of the following:
(A) Qualitech's inventoriable costs (including iron ore, iron ore
transportation, iron ore agent feet, natural gas, hydrogen, electricity,
maintenance, water, operating labor and benefits, supervision payroll and
benefits, chemical and laboratory supplies, training, property taxes,
insurance, iron carbide technology license royalty, materials handling,
rent, operating lease expense, and general and administrative expense
directly related to the Iron Carbide Plant) divided by the Iron Carbide
Plant Tonneage (as defined below) to yield the applicable cost per Tonne of
such Product for the Product Quarter in which such Product is manufactured
at the Iron Carbide Plant, determined according to Qualitech GAAP (as
defined below) in all respects, except that (i) the first-in, first-out
method shall be used, (ii) depreciation of property, plant and equipment
shall be excluded and (iii) amortization of capitalized financing costs and
capitalized start-up costs shall be excluded;
(B) A depreciation charge for each Product Quarter equal to (i) the Iron
Carbide Plant PP&E Costs (as defined below) depreciated over an average life
of ** years on the straight line basis divided by (ii) the Iron Carbide
Plant Tonneage (as defined below) for such Product Quarter;
(C) An amortization charge for each Product Quarter equal to (i) the Iron
Carbide Plant Capitalization Start-Up and Financing Costs (as defined below)
amortized over an average life of ** years on the straight line basis
divided by (ii) the Iron Carbide Plant Tonneage for such Product Quarter;
(D) An interest charge for each Product Quarter equal to (i) the Iron
Carbide Plant Interest Expense (as defined below) divided by (ii) the Iron
Carbide Plant Tonneage for such Product Quarter;
(E) An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Exhibit B have the
following meanings:
(A) "Iron Carbide Plant Tonneage" means, with respect to the applicable
Product Quarter during which any Product is manufactured the greater of
165,000 Tonnes of Product of actual Tonnes of Product manufactured at the
Iron Carbide Plant for such Product Quarter.
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(B) "Iron Carbide Plant PP&E Costs" means the total of all costs of
property, plant and equipment (before depreciation) determined in accordance
with Qualitech GAAP attributable to the Iron Carbide Plant. The Iron Carbide
Plant PP&E costs will be calculated as of the Commencement Date.
(C) "Qualitech GAAP" means generally accepted accounting principles applied
on a basis consistent with prior periods without regard to materiality as
used by Qualitech in preparing financial statements to its shareholders.
(D) "Iron Carbide Plant Capitalized Start-Up and Financing Costs" means the
amount of $12,115.00.
(E) "Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement Date by
multiplying $8,110,055 by a fraction, the numerator of which is (x)
Qualitech's Iron Carbide Plant PP&E Costs and the denominator of which is
(y) $111,817,000.
A-2
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EXHIBIT C
FORM OF PURCHASE ORDER
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Annex 1 to Exhibit B
PRICE ADJUSTMENTS
1. Adjusted Cost. For purposes of this Annex 1 to Exhibit B, the
following costs per Tonne of Product (all subject to audit by Steel Dynamics)
manufactured during any Product Quarter shall remain constant during the initial
and extended terms of this Agreement:
(A)Intentionally omitted.
(B)A depreciation charge of each Product Quarter equal to (i) the Iron
Carbide Plant PP&E Costs (as defined below) depreciated over an average
life of 25 years on the straight line basis divided by (ii) the Iron
Carbide Plant Tonneage (as defined below (for such Product Quarter;
(C)Intentionally omitted.
(D)An interest charge for each Product Quarter equal to (i) the Iron
Carbide Plant Interest Expense (as defined below) divided by (ii) the
Iron Carbide Plant Tonneage for such Product Quarter;
(E)An amount of $**.** per Tonne of Product.
2. Defined Terms. The capitalized terms used in this Annex 1 to Exhibit
B have the following meanings:
(A)"Iron Carbide Plant Tonneage" means, with respect to the applicable
Product Quarter during which any Product is manufactured, the greater of
165,000 Tonnes of Product or actual Tonnes of Product manufactured at
the Iron Carbide Plant for such Product Quarter.
(B)"Iron Carbide Plant PP&E Costs" means the total of all costs of
property, plant and equipment (before depreciation) determined in
accordance with Qualitech GAAP attributable to the Iron Carbide Plant.
The Iron Carbide Plant PP&E Costs will be calculated as of the
Commencement Date.
(C)"Qualitech GAAP" means generally accepted accounting principles
applied on a basis consistent with prior periods without regard to
materiality as used by Qualitech in preparing financial statements to
its shareholders.
Page 1 of Annex 1
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(D)"Iron Carbide Plant Interest Expense" means $8,110,055, which amount
shall be adjusted by Qualitech within 90 days after the Commencement
Date by multiplying $8,110,055 by a fraction, the numerator of which is
(x) Qualitech's Iron Carbide Plant PP&E Costs and the denominator of
which is (y) $111,817,000.
Page 2 of Annex 1