-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HuEt+HZ9iM0PS1Do4/rI8N2fgw7SIKm+TQ+BrxZIH2ZyCr90CLddikEei7cU+sXQ EijOoJIzYuzk64q3EFPy3A== 0000950123-98-005161.txt : 19980518 0000950123-98-005161.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950123-98-005161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEEL DYNAMICS INC CENTRAL INDEX KEY: 0001022671 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 351929476 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21719 FILM NUMBER: 98624705 BUSINESS ADDRESS: STREET 1: 4500 COUNTY RD 59 CITY: BUTLER STATE: IN ZIP: 46721 BUSINESS PHONE: 2198688000 MAIL ADDRESS: STREET 1: 4500 COUNTY RD 59 CITY: BUTLER STATE: IN ZIP: 46721 10-Q 1 STEEL DYNAMICS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities ---- Exchange Act of 1934 For the period ended March 31, 1998 OR Transition Report Pursuant to Section 13 or 15(d) of the Securities ---- Exchange Act of 1934 Commission File Number 0-21719 STEEL DYNAMICS, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1929476 (State or other jurisdiction (I.R.S. employer of incorporation or organization) Identification No.) 4500 COUNTY ROAD 59, BUTLER, IN 46721 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (219) 868-8000 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- NONE NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No --- --- As of May 14, 1998, Registrant had outstanding 49,008,120 shares of Common Stock. 2 STEEL DYNAMICS, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Page ---- Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 .............. 1 Consolidated Statements of Operations for the three month periods ended March 31, 1998 and 1997 (unaudited)............................................................ 2 Consolidated Statements of Cash Flows for the three month periods ended March 31, 1998 and 1997 (unaudited)............................................................ 3 Notes to Consolidated Financial Statements....................................................... 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................... 5 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................. 7 SIGNATURE........................................................................................ 7
3 STEEL DYNAMICS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents ................................................. $ 5,106 $ 8,618 Accounts receivable, net .................................................. 35,897 33,465 Accounts receivable-related parties ....................................... 9,861 11,210 Inventories ............................................................... 65,796 60,163 Deferred taxes ............................................................ 18,379 19,688 Other current assets ...................................................... 4,826 2,158 --------- --------- Total current assets ............................................. 139,865 135,302 PROPERTY, PLANT, AND EQUIPMENT, NET ............................................ 531,939 491,859 OTHER ASSETS ................................................................... 29,940 13,721 --------- --------- TOTAL ASSETS ..................................................... $ 701,744 $ 640,882 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable .......................................................... $ 36,740 $ 39,347 Accounts payable-related parties .......................................... 16,325 15,352 Accrued interest .......................................................... 2,420 2,319 Other accrued expenses .................................................... 9,343 13,366 Current maturities of long-term debt ...................................... 6,332 6,144 --------- --------- Total current liabilities ........................................ 71,160 76,528 LONG-TERM DEBT, less current maturities ........................................ 253,344 213,397 DEFERRED REVENUE ............................................................... 16,840 DEFERRED TAXES ................................................................. 16,159 13,362 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Class A common stock voting, $.01 par value; 100,000,000 shares authorized; 49,136,704 and 49,131,273 shares issued and outstanding as of March 31, 1998 and December 31, 1997, respectively .................. 491 491 Treasury stock, at cost; 135,000 and 75,000 shares as of March 31, 1998 and December 31, 1997, respectively ..................................... (2,215) (1,236) Additional paid-in capital ................................................ 334,193 334,164 Retained earnings ......................................................... 11,772 4,176 --------- --------- Total stockholders' equity ....................................... 344,241 337,595 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 701,744 $ 640,882 ========= =========
See notes to consolidated financial statements. 1 4 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 --------- --------- (UNAUDITED) (UNAUDITED) NET SALES: Unrelated parties ..................... $ 87,615 $ 52,165 Related parties ....................... 30,847 45,894 --------- --------- Total net sales ................... 118,462 98,059 Cost of goods sold ......................... 103,483 73,834 --------- --------- GROSS PROFIT ............................... 14,979 24,225 Selling, general and administrative expenses 3,897 5,323 --------- --------- OPERATING INCOME ........................... 11,082 18,902 Interest expense ........................... (3,343) (2,401) Other income ............................... 4,723 752 --------- --------- INCOME BEFORE INCOME TAXES ................. 12,462 17,253 Income taxes ............................... 4,866 2,668 --------- --------- NET INCOME ................................. $ 7,596 $ 14,585 ========= ========= BASIC EARNINGS PER SHARE: Net income per share ....................... $ .16 $ .30 ========= ========= DILUTED EARNINGS PER SHARE: Net income per share ....................... $ .15 $ .30 ========= =========
See notes to consolidated financial statements. 2 5 STEEL DYNAMICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 -------- -------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES: Net income ...................................................................... $ 7,596 $ 14,585 Adjustments to reconcile net income to net cash provided in operating activities: Depreciation and amortization ............................................... 6,963 5,691 Foreign currency gain ....................................................... (92) Deferred taxes .............................................................. 4,106 2,475 Changes in certain assets and liabilities: Accounts receivable .................................................... (1,083) (8,791) Inventories ............................................................ (5,633) 19,396 Other assets ........................................................... (2,668) 512 Accounts payable ....................................................... (1,634) 3,140 Accrued expenses ....................................................... (3,924) 1,126 Deferred revenue ....................................................... 1,372 -------- -------- NET CASH PROVIDED IN OPERATING ACTIVITIES .......................... 5,095 38,042 -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment ..................................... (46,868) (46,330) Other ........................................................................... (190) (1) -------- -------- NET CASH USED IN INVESTING ACTIVITIES .............................. (47,058) (46,331) -------- -------- FINANCING ACTIVITIES: Issuance of long-term debt ...................................................... 41,252 Repayments of long-term debt .................................................... (1,333) (1,131) Purchase of treasury stock ...................................................... (979) Issuance of common stock, net of expenses ....................................... 29 150 Debt issuance costs ............................................................. (518) (11) -------- -------- NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES ................... 38,451 (992) -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS ................................................ (3,512) (9,281) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..................................... 8,618 57,460 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................................... $ 5,106 $ 48,179 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ............................................................... $ 4,336 $ 3,696 ======== ======== Cash paid for taxes .................................................................. $ 838 $ ======== ======== SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION: Investment in Nakornthai Strip Mill received in exchange for the right to use SDI technology .................................................................. $ 15,468 $ ======== ========
See notes to consolidated financial statements. 3 6 STEEL DYNAMICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The preparation of financial statements in conformity with generally accepted accounting principles requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may also be affected by the estimates and assumptions management is required to make. Actual results may differ from those estimates. In the opinion of management these estimates reflect all adjustments, consisting of only normal recurring accruals, including elimination of all significant intercompany balances and transactions, which are necessary to a fair statement of the results for the interim periods covered by such statements. Certain amounts from prior year financial statements have been reclassified to conform to the current year presentation. These financial statements and notes should be read in conjunction with the audited financial statements included in the Company's 1997 Annual Report on Form 10-K. 2. INVENTORIES (in thousands)
March 31, December 31, 1998 1997 ------- ------- Raw Materials ...................... $29,106 $22,851 Supplies ........................... 23,721 17,861 Work-in-progress ................... 3,296 6,656 Finished Goods ..................... 9,673 12,795 ------- ------- $65,796 $60,163 ======= =======
3. EARNINGS PER SHARE (in thousands) The following is a reconciliation of the weighted average common shares for the basic and diluted earnings per share computations:
March 31, ---------------------- 1998 1997 ------ ------ Basic weighted average common shares ........... 49,002 47,838 Dilutive effect of stock options ............... 449 495 ------ ------ Diluted weighted average common shares ......... 49,451 48,333 ====== ======
4. NEW ACCOUNTING PRONOUNCEMENTS On January 1, 1998 the Company adopted Statement of Financial Accounting Standard No. 130, "Comprehensive Income", which requires that separate disclosure of certain items, including foreign currency translation adjustments and gains and losses on certain securities be shown in the financial statements. SFAS No. 130 does not require a specific format for the financial statement in which comprehensive income is reported, but does require that an amount representing total comprehensive income be reported in that statement. It has been determined that the Company currently has no amounts which require classification under comprehensive income. 4 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Sales Net sales increased to $118.5 million in the first quarter of 1998 from $98.1 million in the first quarter of 1997, a 21% increase. The Company shipped 15% more tons in the first quarter of 1998 as compared to the first quarter of 1997. During 1997, the Company began producing and shipping value-added Cold Mill products including pickled and oiled coils, cold-rolled coils, hot-rolled galvanized coils and cold-rolled galvanized coils. During the first quarter of 1998, the Company shipped 168,330 tons of hot band and 153,379 tons of Cold Mill product. Shipments of Cold Mill product did not begin until the third quarter of 1997 (44,817 tons). Cost of Goods Sold For the first quarter of 1998 and 1997, total cost of goods sold were $103.5 million and $73.8 million, respectively. Gross margin for the first quarter of 1998 and 1997 was $15.0 million and $24.2 million, respectively. As a percentage of net sales, cost of goods sold was 87% and 75%, respectively. The $40 per ton decrease in gross margin is primarily attributable to a $25 per ton decrease in total per ton pricing in conjunction with a $11 per ton increase in scrap costs. Selling, General and Administrative Selling, general and administrative expense was $3.9 million and $5.3 million for the first quarter of 1998 and 1997, respectively. The decrease in selling, general and administrative expense is primarily due to the reduction in start-up costs related to expansion projects and the reduction of amortization expense as a result of the amended credit agreement that was finalized in the second quarter of 1997. During the first quarter of 1998, the Company entered into a ten year Reciprocal License and Technology Sharing Agreement (the "License Agreement") with Nakornthai Strip Mill Public Co. Limited (NSM) providing NSM with the right to use the Company's technology in exchange for shares and warrants of NSM stock valued at $15.5 million. The Company's ownership in NSM is recorded in Other Assets at its estimated fair value. Income relating to the License Agreement was deferred and is being recognized in income ratably over the ten year term of the agreement. Concurrently, the Company entered into a ten year Management Advisory and Technical Advisory Agreement to provide training and advice to a management company under contract with NSM to manage NSM's mill in return for $2.0 million annually. Such amount is payable in advance and is being recognized in income ratably throughout each year of service. Interest Expense Interest expense totaled $3.3 million and $2.4 million for the first quarter of 1998 and 1997, respectively. The additional interest expense is a result of additional borrowings to finance the expansion projects along with decreased capitalized interest. Other Income Other income was $4.7 million and $1.0 million for the first quarter of 1998 and 1997, respectively. The increase in Other Income is primarily attributable to nonrecurring services provided by the Company in connection with the NSM transaction. Taxes The provision for income taxes for the first quarter of 1998 and 1997, was $4.9 million and $2.7 million, respectively. The tax provision for 1998 reflects the Company at the statutory income tax rates. For 1997, the Company's effective tax rate differed from the statutory rate as a result of the reduction in a deferred tax valuation allowance. LIQUIDITY AND CAPITAL RESOURCES Steel Dynamics' business is capital intensive and requires substantial expenditures for, among other things, the purchase and maintenance of equipment used in its steelmaking and finishing operations and compliance with environmental laws. The Company's liquidity needs arise primarily from capital investments, working capital requirements and principal and interest payments on its indebtedness. Since its inception, SDI has met these liquidity requirements with cash provided by equity, long-term borrowings, state and local government grants and capital cost reimbursements. 5 8 Net cash provided by operating activities totaled $5.1 million for the first quarter of 1998. The cash provided from operating activities for the first quarter of 1998 primarily related to net income and deferred taxes. During the first quarter of 1997, the Company provided net cash of $38.0 million from operating activities primarily from net income and decreased raw material inventory due to increasing scrap costs. Management decided to build the raw material inventory in the first quarter of 1998 due to decreasing scrap costs and draw down the raw material inventory in the first quarter of 1997 due to increasing scrap costs. Net cash used in investing activities totaled $47.1 million for the first quarter of 1998 and $46.3 million for the first quarter of 1997. Investing activities primarily consisted of capital expenditures of $46.9 million and $46.3 million for the first quarter of 1998 and 1997, respectively, for the construction of the Company's existing facilities, the Cold Mill Project, the Caster Project and the Iron Dynamics Project. Cash provided by financing activities totaled $38.5 million for the first quarter of 1998 and cash used in financing activities totaled $992,000 for the first quarter of 1997. The 1998 increase in cash provided by financing activities primarily relates to the $41.2 million of proceeds from senior term debt. The $48.0 million in cash on hand at the end the first quarter of 1997 was carried over from the initial public offering proceeds received in the fourth quarter of 1996. ENVIRONMENTAL EXPENDITURES AND OTHER CONTINGENCIES SDI has incurred and, in the future, will continue to incur capital expenditures and operating expenses for matters relating to environmental control, remediation, monitoring and compliance. Steel Dynamics believes that compliance with current environmental laws and regulations is not likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity; however, environmental laws and regulations have changed rapidly in recent years and SDI may become subject to more stringent environmental laws and regulations in the future. INFLATION SDI does not believe that inflation has had a material effect on its results of operations. 6 9 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits - Exhibit 10.40 Management Advisory and Technical Assistance Agreement between Steel Dynamics, Inc. and NSM Management Co. LLC dated as of March 12, 1998 Exhibit 10.41 Reciprocal License and Technical Sharing Agreement Between SDI and Nakornthai Strip Mill Public Company Limited, dated as of March 12, 1998 (B) Reports on Form 8-K for the quarter ended March 31, 1998 - None Item 1 - 5 of Part II are not applicable for this reporting period and have been omitted. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange Act of 1934, Steel Dynamics, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 15, 1998 STEEL DYNAMICS, INC. By: /s/ TRACY L. SHELLABARGER ---------------------------------------------- TRACY L. SHELLABARGER VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer and Duly Authorized Officer) 7 EX-10.40 2 MANAGEMENT ADVISORY AND TECHNICAL ASSIST. AGREE. 1 MANAGEMENT ADVISORY AND TECHNICAL ASSISTANCE AGREEMENT BETWEEN STEEL DYNAMICS, INC. AND NSM MANAGEMENT COMPANY 2 MANAGEMENT ADVISORY AND TECHNICAL ASSISTANCE AGREEMENT THIS MANAGEMENT ADVISORY AND TECHNICAL ASSISTANCE AGREEMENT is made and entered into as of the _____ day of March, 1998, by and between STEEL DYNAMICS, INC., a corporation duly organized and existing under the laws of Indiana, USA, with its principal office at Butler, Indiana, and NSM MANAGEMENT CO., a Delaware limited liability company with its principal office in Singapore, Republic of Singapore. WITNESSETH THAT, WHEREAS, NSM is the owner and developer of a new mill, which combines a mini-mill steel manufacturing plant with contiguous DRI and finishing facilities for the production of the Products; WHEREAS, NSM and Management Co. have entered into a Management Agreement, pursuant to which Management Co. is to have control over the operation and management of NSM, as more fully set forth therein; WHEREAS, SDI has designed, built, started-up, and is currently operating a thin-slab flat-rolled mini-mill in Butler, Indiana, as well as a cold mill facility and a DRI facility on or contiguous to the same site, and has accumulated know-how and experience particular to its U.S. Midwestern operations in connection therewith; WHEREAS, Management Co. believes that it can better discharge its duties and obligations to NSM under the Management Agreement if it can obtain the benefit of SDI's experience and operational and management techniques, so that it could adapt such experience and techniques to NSM's particular needs, as Management Co. deems appropriate, and, accordingly, has asked SDI to provide it with technical and operational consulting services, under the terms and conditions described herein; NOW, THEREFORE, in consideration of the premises and covenants hereinafter contained and to be faithfully performed, SDI and Management Co. hereby agree as follows: 3 ARTICLE I DEFINITIONS Defined terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Definitions and Rules of Usage (March 12, 1998), which is incorporated herein by reference as though fully set forth herein, and the related Rules of Usage shall be applicable hereto. ARTICLE II AGREEMENT REGARDING MANAGEMENT ADVICE AND CONSULTATION BY SDI 2.1 Subject to the provisions of Section 2.2, SDI hereby agrees to: (a) provide Management Co. with advice and counsel regarding SDI's management techniques, methodologies, and culture, including employee relations and incentivization; (b) advise Management Co., to the best of its knowledge, experience, and ability, in relation to all problems, studies, evaluations, questions, issues, inquiries, investigations and matters relating to the actual operation of the Mill, and to the manufacture of the Products, which Management Co. may from time to time refer to SDI for its opinion and advice during the term of this Agreement; (c) provide Management Co. with reasonable assistance in relation to the business and practical applications of SDI Technology; and (d) Upon Management Co.'s request from time to time, provide Management Co. with such additional assistance as it is entitled to make available hereunder, as may be reasonably necessary or desirable for the effective performance of its duties and obligations hereunder; 2.2 It is understood that, in performing its services hereunder, SDI will: (a) in general, periodically draw upon its own personnel who are from time to time available for short-term projects or assignments, and who are professionally qualified to render advice in relation to the subject matter of the consultation; and 2 4 (b) primarily provide training-type advice and consultation to Management Co., and, subject to Management Co.'s control, supervision, and direction, to NSM's supervisory and managerial personnel, as well as, during start-up of the Mill and from time to time thereafter on an incidental basis regarding the Mill, to a reasonable number of NSM operating personnel in connection with the foregoing matters, such that the persons so trained will be able to then train their own people. 2.3 The parties agree that SDI has undertaken no independent study or analysis of NSM's proposed operations, or of its Mill, its proposed Products, its technology and equipment, its management structure, the nature of its work force, its labor relations, the sources and nature of its raw materials, its markets, its transportation system, or the impact of its Thai culture, legal system, or tax laws upon its proposed business or upon Mill operations. SDI does not know whether, and has made no representations to NSM, express or implied, to the effect that SDI Technology or SDI's techniques and culture are appropriate for or best suited to NSM's needs. SDI's undertaking herein, is solely to make available to Management Co., and, through Management Co. to NSM, its own understandings, experience, and know-how, based upon its own operations, for Management Co.'s and/or NSM's use, rejection, modification, or adaptation as Management Co. and/or NSM deems appropriate. The parties likewise agree that SDI shall have no ongoing monitoring or oversight functions over NSM's Mill operations. 2.4 The parties further acknowledge and agree that, with regard to the discharge of SDI's duties and obligations hereunder, SDI has been granted no power or authority, does not intend to exercise any such power or authority, and is undertaking no obligations to directly or indirectly manage, control, or supervise any of NSM's management or operating personnel or any of NSM's policies, practices, or procedures, to be responsible for achieving profitability of NSM's Mill or to profitably operate at any particular level, or to be able to solve any and all problems that may arise or that may be referred to SDI by Management Co. from time to time for consultation and advice. Management Co. shall in all instances have total discretion on whether and, if so, how to implement any SDI advice that it may receive, and shall derive all of its authority and take all of its directives from, and shall be solely answerable to, NSM. 3 5 ARTICLE III Additional Services 3.1 Reciprocal Right of Access to Technical Information 3.1.1 Upon the written request of the Requesting Party, made from time to time during the term of this Agreement, and subject to the execution by the Requesting Party of commercially reasonable confidentiality and non-disclosure agreements, as contemplated by Article V, with reasonable safeguards to insure that the Providing Party's Technology is neither disclosed to nor used for the benefit of persons who are not themselves authorized to receive such disclosure or to use such Technology, nor used for purposes other than as specifically contemplated hereunder, the Providing Party, on a non-exclusive basis, during reasonable business hours, and when such Technical Assistance will not unreasonably disrupt the Providing Party's business or production activities, shall provide the Requesting Party, for use either by NSM at its Mill, or at any of its other mill sites in Thailand, Malaysia, or the Philippines, or by SDI at its plants in the U.S., Canada, or Mexico, as the case may be, access to such Technical Information, including the right, subject to the Providing Party's judgment regarding the identification of and the number of persons necessary to provide the Technical Information (i) to interview certain operating, engineering, or administrative personnel, (ii) subject to reasonable safeguards and limitations, to observe processes, procedures or applications, (iii) to videotape, photograph, draw, diagram, or record such processes, procedures or applications, (iv) to make photocopies of any pertinent non-copyrighted materials with respect to such Technical Information, and (v) to copy digitally stored data, if not copyrighted, relating to the specific request. Nothing herein however, or in Sections 2.1 or 3.2, shall be construed to require SDI to provide NSM with management advice, Technical Information or Technical Assistance with respect to any person who is not an employee of the Mill, or at any facility other than the Mill, or to require NSM to provide SDI with Technical Assistance with respect to any person who is not an employee of SDI's Butler, Indiana mill, or at any facility other than its Butler, Indiana facility. 3.1.2 The Providing Party shall be under no continuing obligation to the Requesting Party, but shall make a good faith effort to update or revise any Technical Information that has previously been made available to the Requesting Party. 3.1.3 A Providing Party makes no representation or warranty for any purpose with respect to Technical Information furnished hereunder, except that the Providing Party shall use its best efforts to verify that such Technical Information is the same information and data as is used by it at the time of access. 4 6 3.1.4 The Requesting Party shall reimburse the Providing Party for all reasonable out-of-pocket expenses, including economy class air transportation, and reasonable lodging and food costs, incurred by the Providing Party in complying with a request for Technical Information under this Agreement. The Requesting Party shall not be responsible for paying any salaries, benefits or per diem charges for employees of the Providing Party involved in providing the Technical Information. 3.2 Reciprocal Right to Technical Assistance 3.2.1 In order to assist the Requesting Party in understanding Technical Information furnished under Section 3.1 and to assist the Requesting Party in the manufacture of the Products to which such Technical Information relates, and subject to the execution by the Requesting Party of commercially reasonable confidentiality and non-disclosure agreements, as contemplated by Article V, with reasonable safeguards to insure that the Providing Party's Technology is neither disclosed to nor used for the benefit of persons who are not themselves authorized to receive such disclosure or to use such Technology, nor used for purposes other than as specifically contemplated hereunder, the Providing Party shall, upon receipt of a request of the Requesting Party made from time to time during the term of this Agreement, provide reasonable Technical Assistance to personnel employed and specifically designated by the Requesting Party, subject to the availability of qualified personnel within the employ of the Providing Party. 3.2.2 In the event the Requesting Party asks the Providing Party to make its personnel available to provide Technical Assistance at the Requesting Party's facilities either at the Mill or at SDI's Butler, Indiana facility, as the case may be, the following terms and conditions shall apply: (a) The Parties shall agree upon a mutually acceptable time schedule for the provision of such services. In the case of an urgent or emergency situation, the Requesting Party shall so indicate and shall submit its request for Technical Assistance to the Providing Party as soon as possible. While the Providing Party is expected to attempt in good faith to accommodate the Requesting Party's schedule, the Providing Party shall not be required to disrupt its operations or incur additional expense in order to do so. (b) It is understood that, with respect to the level of the Providing Party's involvement at the Requesting Party's facility (including the number of staff, the nature of the expertise required, and the frequency of perceived need), the main purpose is for the Providing Party to provide the Requesting Party with a reasonable amount of initial on-site or other training, primarily directed to the Requesting Party's supervisory and managerial personnel 5 7 (with a focus on "training the trainer"), but that ultimately the Requesting Party is expected to be able to provide its own ongoing training and support for its own staff and not to depend upon the Providing Party on a continuous basis. (c) The Requesting Party shall receive and make necessary arrangements for the Providing Party's personnel being sent to the Requesting Party's facilities and shall reimburse the Providing Party for all reasonable business class air travel and other living expenses incurred by such personnel. The Requesting Party shall not be responsible for salaries, benefits or per diem expenses of the Providing Party's personnel providing Technical Assistance. The Requesting Party shall bear all of its own expenses related to such Technical Assistance. (d) The personnel of the Providing Party sent to the Requesting Party's facility to provide Technical Assistance hereunder, to provide Technical Information pursuant to Section 3.1, or to provide management advice pursuant to Section 2.1, shall not be considered for any purpose to be employees, agents or representatives of the Requesting Party, nor shall they assume any responsibility for the Requesting Party's manufacture of products. Such personnel shall not be placed on the Requesting Party's payroll and the Providing Party shall be required to insure that such personnel are covered under applicable Workmen's Compensation or comparable laws, including health and accident insurance policies, for any injury that may occur to such personnel. 3.2.3 In the event the Requesting Party asks that the Providing Party accept the Requesting Party's personnel at the facilities of the Providing Party for the purpose of receiving Technical Assistance, such assistance shall be made available under the following conditions: (a) The Parties shall agree upon a mutually acceptable time schedule for the provision of such services. In the case of an urgent or emergency situation, the Requesting Party shall so indicate and shall submit its request for Technical Assistance to the Providing Party as soon as possible. While the Providing Party is expected to attempt in good faith to accommodate the Requesting Party's schedule, the Providing Party shall not be required to disrupt its operations or incur additional expense in order to do so. (b) The Requesting Party shall bear all expenses (including travel and living expenses as previously described) incurred by the Requesting Party's personnel assigned to receive Technical Assistance under this Article, 6 8 plus all other reasonable out-of-pocket training costs incurred by the Providing Party. The Requesting Party shall not be responsible for salaries, benefits or per diem expenses of the Providing Party's personnel providing Technical Assistance. (c) Technical Assistance shall be provided in such manner as the Providing Party may allow (a) in accordance with safety requirements, (b) with due consideration to prevention of unreasonable disturbance of its manufacturing operations or production scheduling, and (c) under the guidance of the Providing Party's personnel. (d) The personnel of the Requesting Party sent to the Providing Party's facility to receive Technical Assistance shall not be considered for any purpose to be employees, agents or representatives of the Providing Party, nor shall they assume any responsibility for the Providing Party's manufacture of products. Such personnel shall not be placed on the Providing Party's payroll, and the Requesting Party shall be required to insure that such personnel are covered under its own applicable Workmen's Compensation or comparable laws, including health and accident insurance policies, for any injury that may occur to such personnel. 3.2.4 The Providing Party represents and warrants that its personnel assigned to provide Technical Assistance to the Requesting Party shall be reasonably qualified to provide such assistance, in accordance with good professional practice, and shall use their best efforts for said purpose, but no other warranty with respect to Technical Assistance is or shall be deemed to be given to the Requesting Party by the Providing Party. 3.3 Upon the request of Management Co., SDI will permit a reasonable number of representatives of Management Co. and/or of NSM, who have executed confidentiality agreements (in form and substance mutually agreeable to the parties), with safeguards to insure that SDI Technology, or, if applicable, IDI Technology, is neither disclosed to nor used for the benefit of persons who are not themselves authorized to receive such disclosures or to use such technology, nor used for purposes other than as specifically contemplated hereunder, to visit such of SDI's plants or operations, in the United States or elsewhere, as SDI deems appropriate, at such times and for such reasonable periods during the term of this Agreement as may be mutually agreed upon, in order for such representatives to attend training sessions, to learn how to train their own people, and to study SDI's and/or, if applicable, IDI's manufacturing processes and management techniques and other technical information relating to the Products and to the operation of such plants. 3.4 SDI will furnish a mutually agreed upon number of its, or, if applicable, IDI's experienced and qualified staff, on short-term assignments to the Mill, at such times and for such periods as may be mutually agreed upon in order to render management advice, provide Technical 7 9 Information, or to render Technical Assistance within the scope of this Agreement. SDI shall have the right to assign, reassign, recall, rotate or change any of its staff, at reasonable intervals, it being understood that the parties' primary objective hereunder is to train Management Co.'s and/or NSM's people to be trainers, so that they will be able to train NSM's actual operating personnel on an ongoing basis. Nothing herein shall be interpreted to mean that SDI is required to maintain, nor does SDI intend to maintain, any regular staff presence or any other permanent or semi-permanent presence or establishment at NSM's plant in Thailand, or elsewhere, nor any presence for Thai tax purposes. Management Co. shall, at no cost to SDI or its Subsidiaries, cause NSM to provide said trainers and technical experts with (i) all necessary office space and equipment, communication facilities such as telex, telephone or facsimile between Thailand and the United States, and any similar support, and (ii) necessary facilities for the conduct of such technical experts. ARTICLE IV PAYMENTS BY Management Co. OR NSM 4.1 In consideration of the services to be performed by SDI and/or, if applicable, by IDI hereunder, Management Co. shall pay or shall cause NSM to make the following payments to SDI: (a) An annual fee of Two Million Dollars (US $2,000,000) per year, payable in advance, the first $2,000,000 of which shall be paid concurrently with the Closing Date, and succeeding annual payments of $2,000,000 each payable on each anniversary of the Closing Date, so long as this Agreement remains in effect; provided that in no event shall aggregate fees be payable pursuant to this Section 4.l(a) in excess of Twenty Million Dollars (US $20,000,000) over the ten year term of this Agreement. In the event that this Agreement is terminated pursuant to the provisions of Article VIII and such termination occurs subsequent to the payment of the annual fee hereunder on the anniversary date, any unearned portion of such fee shall be refunded to NSM (pro rated by the number of days remaining in the year of termination). (b) Management Co. shall cause NSM to pay for all costs and expenses for its representatives, including, but not limited to, economy air travel, lodging and meal expenses, incurred in connection with each visitation to an SDI or, if applicable, an IDI plant, as well as in connection with any of the other training contemplated 8 10 herein. SDI shall not be responsible for any property damage or bodily injury which any representatives of Management Co. and/or NSM may sustain during their stay in the United States, or at such other locations designated by SDI, unless such damage or injury will have been caused by gross negligence or willful misconduct of SDI or its personnel. SDI shall assist Management Co. in acquiring accommodations for the said representatives, but with no obligation to bear expense for such accommodation. (c) In connection with the services to be rendered to Management Co. and/or to NSM in Thailand, Management Co. shall cause NSM to pay to or reimburse SDI, with respect to each of said trainers and technical experts, the expenses of air travel from the United States to Bangkok and/or to NSM's plant in Thailand, and return, at economy class rates, together with all out of pocket expenses for food, transportation, and lodging during each such staff person's stay in Thailand. (d) All amounts payable under Sections 4.1(c) or (d), shall be due and payable by NSM to SDI within thirty (30) days after the transmittal by SDI to Management Co. of invoices with respect thereto. Fees payable pursuant to Section 4.1(a) or (b) shall be payable in full in advance on or before the date indicated, and shall be in default if not fully paid within fifteen (15) days of the due date. Any payment not made when due shall accrue interest at an annual interest rate of ten percent (10%) from the date such payment is due until the date such payment is made. 4.2 Except as otherwise agreed upon, all financial obligations hereunder are Dollar obligations, and Management Co. shall cause all payments under this Agreement to be made by NSM in that currency via electronic transfer to SDI's account as specified by SDI, any bank charges inside Thailand to be borne by NSM. 4.3 Subject only to the following paragraph, SDI shall be responsible for all U.S. taxes and charges on any payments due and payable under this Agreement. If NSM shall be required under the laws of Thailand to deduct from any payment made to SDI hereunder any income tax which may be levied against SDI, then Management Co. shall cause NSM to deduct such amounts from the payments due to SDI hereunder, and Management Co. shall cause NSM to remit to the relevant tax authorities such income tax; provided, however, that NSM and Management Co. shall promptly furnish to SDI appropriate tax receipts or other documentary evidence issued by the competent tax authorities relating to such payment made by NSM, and showing payment in the name of SDI, so that SDI may obtain a tax credit in the United States. Recovery of such tax credit shall be the sole risk and responsibility of SDI. Management Co. agrees that any value added tax in Thailand on any payments hereunder shall be borne by NSM. 9 11 ARTICLE V CONFIDENTIALITY 5.1 All Technical Information, technical trade secrets, know-how, proprietary information, and data furnished or made available by either Party hereunder (hereinafter "Confidential Information"), will be deemed to be and will be received by the Requesting Party as confidential and proprietary, so long as it is identified as such when furnished, and such Confidential Information is for the Requesting Party's own use as limited herein and is to be kept confidential, in accordance with the standards set forth in the next paragraph, by the Requesting Party during and following the expiration or termination of this Agreement. This Article shall survive expiration or termination of this Agreement. Confidential Information shall not be made available, given, sold or disclosed by the Requesting Party to any other person without the prior written consent of the Providing Party. Each Party agrees to use its best efforts to maintain the confidentiality of the Confidential Information disclosed to it and each shall use no less than the same safeguards as it uses to protect its own Confidential Information of a similar nature. A Requesting Party shall disclose Confidential Information received from the Providing Party only to the Requesting Party's officers, agents, employees, consultants and advisors whose duties reasonably require familiarity with such information, provided that the Requesting Party shall first obtain from such persons legally enforceable undertakings, in form and substance satisfactory to the Providing Party, not to personally use Confidential Information, or knowledge derived therefrom, not to disclose it to or for the benefit of any third party and containing such other protections as the Providing Party shall reasonably request. Copies of all such undertakings shall be delivered to the Providing Party, with evidence of its proper adoption and legality. Except as otherwise agreed by the Parties, the Requesting Party shall be required at its own expense to take such legal actions as may be reasonably necessary to enforce such undertakings. 5.2 The confidentiality obligation of the Requesting Party under Section 3.1 above shall not apply to Confidential Information which: 5.2.1 is or becomes publicly known through no wrongful act of the Requesting Party or its employees; 5.2.2 is received by the Requesting Party without restriction from a third party without breach of any obligation of nondisclosure; 5.2.3 is or has been independently developed by the Requesting Party; 5.2.4 is contained in any published patent or published patent application or which becomes otherwise published or generally known to Requesting Party 10 12 through no wrongful act of Requesting Party, from and after the date it becomes published or generally known; or 5.2.5 is disclosed pursuant to Applicable Law. ARTICLE VI OPERATING METHODOLOGIES AND PRODUCT QUALITY 6.1 To the extent that Management Co. determines that such application or adaptation is appropriate, Management Co. will cause NSM to model its manufacturing operations after SDI's techniques and methodologies, with such adaptations thereof and modifications therein as Management Co. shall deem appropriate, and will endeavor to manufacture NSM's Products to a quality comparable with similar products manufactured by SDI in accordance with SDI Technology. Such determinations shall be made by Management Co., based solely upon its own assessment of whether and to what extent SDI's techniques and methodologies, and SDI Technology (or, if applicable, IDI Technology), with or without adaptation or modification, is properly applicable to meet NSM's particular needs and circumstances. 6.2 Management Co. shall permit SDI, at SDI's request from time to time, to have access to NSM's plant for inspection, testing, and/or review of NSM's operations and of its quality control. It is acknowledged and agreed, however, that SDI shall have no continuing or ongoing obligation to approve, evaluate, monitor, verify, warrant, or vouch for NSM's operating technique and methodologies, or of its Product quality, nor to monitor or report on NSM's manufacturing operations, or its compliance with SDI operating procedures or SDI Technology. 6.3 It is further acknowledged and agreed that neither Management Co. nor NSM, nor anyone active on its behalf, whether in the spoken or written word and whether in securities offerings or filings or in the sale and marketing of its Products, shall misrepresent nor make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, regarding the relationship between SDI and NSM, or state, suggest or imply that SDI manages NSM, exerts management influence or control over NSM, supervises the operations of NSM or approves or certifies NSM's quality standards or its compliance with SDI operating procedures or SDI Technology. 6.4 Neither Management Co. nor NSM shall have any right, power, or authority, by reason of any right granted hereunder or otherwise, to use or employ SDI's name, any SDI trademark (whether statutory or common law), or any other trade dress or reference to SDI, in any testimonial, advertisement, publication, electronic medium, or any other format, without SDI's prior written approval. 11 13 ARTICLE VII EFFECTIVE DATE Although this Agreement has been executed by the Parties on the date first above written, it shall become effective on and as of the Closing Date. ARTICLE VIII DURATION AND TERMINATION; DEFAULT 8.1 Unless sooner terminated as otherwise provided in this Agreement, this Agreement shall remain in effect and continue for a period of ten (10) years from the Closing Date. 8.2 Notwithstanding the provisions of Paragraph 8.1 and without prejudice to any other right and remedy that one Party may have against the other Party for material breach or non-performance of this Agreement, this Agreement may be terminated: (a) by either Party upon sixty (60) days' written notice if the other Party shall violate any of the provisions or conditions of this Agreement and shall fail to discontinue or remedy such violation within said period of sixty (60) days of the date of such notice; (b) by either Party immediately if the other Party shall become bankrupt pursuant to the judgment of a court of competent jurisdiction. 8.3 In the event that either Party fails to perform any material obligation or undertaking to be performed by it under this Agreement, and such failure shall not be cured within sixty (60) days after written notice thereof from the other Party, then a default shall have occurred hereunder and, in addition to the right to terminate described in Section 8.2, and subject to the provisions of Section 4.1(a) regarding the abatement of management fees for the year of default, the non-defaulting Party shall have no right to assert any claim for monetary damages, either in contract or in tort for ordinary negligence. NSM, however, shall be entitled to assert a claim for monetary damages in the event of SDI's gross negligence or willful misconduct, notwithstanding NSM's termination of this Agreement pursuant to Section 8.2, limited, however, to a claim for actual damages not exceeding the amount of the annual fee payable pursuant to Section 4.1(a) during the year of default. 8.4 Expiration or termination of this Agreement for any reason shall not in any case operate to relieve either Party from its responsibility to fulfill any obligations under the provisions of this Agreement which shall have accrued to such party prior to the time of such expiration or termination. 12 14 ARTICLE IX ASSIGNMENT Neither this Agreement nor any rights or benefits hereunder shall be assignable or transferable to any third party, in whole or in part, by either Party, without the prior written consent of the other Party. In the event of assignment by operation of law, absent consent by the other Party, this Agreement shall thereupon automatically terminate without notice. ARTICLE X WAIVER OF COMPLIANCE Any failure by either Party to enforce, at any time or for any period of time, any of the provisions of this Agreement shall not constitute or be construed as a waiver of that party's right thereafter to enforce each and every provision of this Agreement. ARTICLE XI GOVERNMENTAL REGULATIONS AND FORCE MAJEURE 11.1 Any obligation of either Party hereunder shall be subject to Applicable Law, respecting the export, import or disclosure of materials, products, SDI Technology, or NSM Technology. 11.2 Upon the occurrence of an event of Force Majeure, the following provisions shall apply: (a) The Party who believes that his performance is excused by such event of Force Majeure shall give written notice to the other as soon as possible and with sufficient detail to permit the other to minimize inconvenience and expense. (b) Both Parties will cooperate to minimize the financial consequences of such event of Force Majeure. (c) Either Party hereto shall have the right to request the termination of this Agreement if such event of Force Majeure continues for a period greater than 180 days. 13 15 ARTICLE XII ARBITRATION 12.1 In the event of any disputes, controversies or differences which may arise among the parties, out of or in relation to or in connection with this Agreement, or for the breach thereof, the parties hereto shall exert their utmost to settle the same by means of good faith negotiations. 12.2 The disputes, controversies or differences arising out of this Agreement shall be finally settled under the Rules of Conciliation and Arbitration of the ICC by three arbitrators appointed in accordance with said Rules, but no such award shall produce a result inconsistent with the provisions of Section 8.3 hereof. The place of arbitration shall be London, England and the proceedings shall be conducted in the English language. 12.3 Judgement upon the award rendered may be entered into any court having competent jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. ARTICLE XIII NEGATION OF AGENCY AND OTHER RELATIONSHIPS Nothing contained in this Agreement, nor anything done by either Party in the discharge of its obligations hereunder, shall be deemed to constitute either Party the agent, employee, joint venturer, or partner of the other Party. ARTICLE IV NOTICE Any notice required or contemplated hereunder shall be in English and shall be deemed to be given when received by mail or facsimile (with follow-on hard copy by mail), properly addressed as follows: If to SDI: Keith E. Busse, President Steel Dynamics, Inc. 4500 County Road 59 Butler, IN 46721 Fax: 1-219-868-8951 Phone: 1-219-868-8108 14 16 with a copy to: Robert S. Walters, Esq. Barrett & McNagny 215 East Berry Street Fort Wayne, IN 46802 Fax: 1-219-423-8924 Phone: 1-219-423-8905 If to Management Co.: Mr. David Stickler McDonald & Company Securities, Inc. 800 Superior Avenue Cleveland, OH 44114 Fax: 1-216-443-3980 Phone: 1-216-443-2790 If to NSM: Mr. John Schultes Nakornthai Strip Mill Public Company Limited Chonburi Industrial Estate (Bowin) 358 Moo 6 Highway 331, Bowin Sri Racha, Chonburi 20230 Thailand Fax: (66-38) 345-693, 345375 Phone: (66-38) 345-950-84, Ext. 255 with a copy to: Mr. Chamni Janchai Nakornthai Strip Mill Public Company Limited 16th Floor UM Tower 9 Ramkhamhaeng Road Suanluang Bangkok 10250, Thailand Fax: (662) 719-9828-9 or to such other addresses either Party shall from time to time furnish in writing to the other Party for such purpose. Such notice shall be deemed given when actually received, or ten (10) days after the date mailed if sent by certified or registered mail. 15 17 ARTICLE XV GOVERNING LANGUAGE AND LAW This Agreement is executed in English as the controlling text, and it shall be governed by and interpreted in accordance with the laws of the State of New York. The Parties agree that their rights and obligations under this Agreement shall not be governed by either the provisions of the 1980 U.N. Convention for the International Sale of Goods nor by the laws of any jurisdiction other than as specified herein. ARTICLE XVI ENTIRE AGREEMENT AND VARIATIONS This Agreement, together with the Exhibits attached hereto, or other documents referenced herein, including the License Agreement, constitutes the entire and only agreements between the Parties relative to the subject matter hereof and supersedes and cancels all previous agreements, negotiations, commitments and writings relative to the subject matter hereof, and may not be changed or modified in any manner unless in writing signed by the authorized officer or representative on behalf of each of the Parties on or after the date of execution of this Agreement. ARTICLE XVII SEVERABILITY OF PROVISIONS If any of the provisions of this Agreement shall be declared to be invalid or unenforceable by judicial or administrative decision, any such provisions shall be deemed deleted and shall not in any way affect the validity of any other provision of this Agreement. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. NSM MANAGEMENT CO. Date: _____________________ By_______________________________________ Title______________________________________ 16 18 NAKORNTHAI STRIP MILL PUBLIC COMPANY LIMITED Date: _____________________ By_______________________________________ Title______________________________________ STEEL DYNAMICS, INC. Date: _____________________ By_______________________________________ Keith E. Busse Title: President and CEO 17 EX-10.41 3 RECIPROCAL LICENSE AND TECH. SHARING AGREE. 1 RECIPROCAL LICENSE AND TECHNOLOGY SHARING AGREEMENT BETWEEN STEEL DYNAMICS, INC. AND NAKORNTHAI STRIP MILL PUBLIC COMPANY LIMITED 2 RECIPROCAL LICENSE AND TECHNOLOGY SHARING AGREEMENT THIS RECIPROCAL LICENSE AND TECHNOLOGY SHARING AGREEMENT(the "SDI License Agreement") is entered into as of the _____ day of March, 1998, by and between Steel Dynamics, Inc. ("SDI"), an Indiana corporation with its principal office and place of business in Butler, Indiana USA, and Nakornthai Strip Mill Public Company Limited ("NSM"), a public limited company organized under the laws of Thailand, and is intended to describe the Parties' reciprocal rights of access to and to the use of the SDI Technology and NSM Technology, all related to their respectively owned and operated thin-slab/flat-rolled steel mini-mills and certain additional ancillary facilities as described herein. WHEREAS, SDI has accumulated certain know-how and technical expertise in connection with the planning, construction, and operation of the SDI Facilities; WHEREAS, NSM is developing certain technical expertise and know-how in connection with the construction and impending operation of the NSM Facilities; WHEREAS, NSM desires to obtain, and SDI is willing to grant to NSM, access to and the right and license to use its know-how and technical expertise, relating to SDI Technology, to the extent that SDI possesses the rights to provide such access and licenses, all in accordance with the terms and conditions hereinafter set forth; and WHEREAS, SDI desires to obtain, and NSM is willing to grant to SDI access to and the right and license to use its know-how and technical expertise, relating to NSM Technology, to the extent that NSM possesses the rights to provide such access and licenses, all in accordance with the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and undertakings of the Parties set forth herein, the Parties agree as follows: ARTICLE I Definitions Defined terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Definitions and Rules of Usage (March ___, 1998), which is incorporated herein by reference as though fully set forth herein, and the related Rules of Usage shall be applicable hereto. 3 ARTICLE II License 2.1 Grant by SDI. Subject to the terms and conditions of this Agreement, SDI hereby grants to NSM, subject to Management Co.'s control, supervision, and direction, a non-exclusive, non-transferable, non-divisible and non-assignable license and right, without the right to grant sub-licenses hereunder, during the term of this Agreement, to have access to and to use SDI Technology, in connection with NSM's Mill or with NSM's other mill facilities, if any, in Thailand, Malaysia, and the Philippines, to manufacture the Products. SDI does not know whether, and has made no representations to NSM, express or implied, to the effect that SDI Technology is appropriate for or is best suited to NSM's needs. SDI's undertaking herein is solely to make SDI Technology available to NSM, for Management Co.'s and/or NSM's use, rejection, modification, or adaptation as Management Co. and/or NSM deems appropriate. The Parties likewise agree that SDI shall have no prospective ongoing monitoring or oversight functions over NSM's Mill operations. 2.2 Grant by NSM. Subject to the terms and conditions of this Agreement, NSM hereby grants to SDI and/or to IDI, a non-exclusive, non-transferable, non-divisible, and non-assignable license and right, without the right to grant sub-licenses hereunder, during the term of this Agreement, to have access to and to use NSM Technology in connection with its mill facilities in the United States, Mexico, and Canada, to manufacture the Products. 2.3 Each party hereby grants to the other Party a license to use any Technical Information provided by the Providing Party to the Requesting Party for any purpose, including manufacturing, using, selling or otherwise disposing of its Products. Unless otherwise agreed between the Parties, the additional license rights granted hereunder to SDI shall be for SDI's plants in the United States, Mexico, and Canada, and the license rights granted hereunder to NSM shall be for NSM's Mill or for NSM's other mill facilities, if any, in Thailand, Malaysia, and the Philippines. The licenses granted hereby are nonexclusive, nontransferable and paid-up, and do not include the right to sublicense to any third party. ARTICLE III Confidentiality 3.1 All Technical Information, technical trade secrets, know-how, proprietary information, and data furnished or made available by either Party hereunder (hereinafter "Confidential Information"), will be deemed to be and will be received by the Requesting Party as confidential and proprietary, so long as it is identified as such when furnished, and such Confidential Information is for the Requesting Party's own use as limited herein and is to be kept confidential, in accordance with the standards set forth in the next paragraph, by the Requesting Party during and 2 4 following the expiration or termination of this Agreement. This Article shall survive expiration or termination of this Agreement. Confidential Information shall not be made available, given, sold or disclosed by the Requesting Party to any other person without the prior written consent of the Providing Party. Each Party agrees to use its best efforts to maintain the confidentiality of the Confidential Information disclosed to it and each shall use no less than the same safeguards as it uses to protect its own Confidential Information of a similar nature. A Requesting Party shall disclose Confidential Information received from the Providing Party only to the Requesting Party's officers, agents, employees, consultants and advisors whose duties reasonably require familiarity with such information, provided that the Requesting Party shall first obtain from such Persons legally enforceable undertakings, in form and substance satisfactory to the Providing Party, not to personally use Confidential Information, or knowledge derived therefrom, not to disclose it to or for the benefit of any third party and containing such other protections as the Providing Party shall reasonably request. Copies of all such undertakings shall be delivered to the Providing Party, with evidence of its proper adoption and legality. Except as otherwise agreed by the Parties, the Requesting Party shall be required at its own expense to take such legal actions as may be reasonably necessary to enforce such undertakings. 3.2 The confidentiality obligation of the Requesting Party under Section 3.1 above shall not apply to Confidential Information which: 3.2.1 is or becomes publicly known through no wrongful act of the Requesting Party or its employees; 3.2.2 is received by the Requesting Party without restriction from a third party without breach of any obligation of nondisclosure; 3.2.3 is or has been independently developed by the Requesting Party; 3.2.4 is contained in any published patent or published patent application or which becomes otherwise published or generally known to Requesting Party through no wrongful act of Requesting Party, from and after the date it becomes published or generally known; or 3.2.5 is disclosed pursuant to Applicable Law. ARTICLE IV License to Improvements Made by Requesting Party A Requesting Party shall make available to a Providing Party on a fully-paid, nonexclusive, non-assignable, non-sublicensable, and as is basis, a license to use any information, 3 5 invention (whether or not patentable), improvements and innovations developed and owned by the Requesting Party substantially through the use of Technical Information provided by the Providing Party pursuant to this Agreement. Such right is to manufacture, assemble, use, sell, or otherwise dispose of products during the term of this Agreement using the information, inventions, improvements, innovations developed and owned by the Requesting Party. ARTICLE V Obtaining Rights to Patents and Technical Information From Third Parties 5.1 Neither Party represents that by virtue of its use of certain machinery, equipment, processes or technology, it necessarily possesses the legal right to disclose the trade secrets, know-how, or proprietary information involved in such activity, or that such Party has the legal right to authorize and license others to use or employ such machinery, equipment, processes or technology. 5.2 Notwithstanding Section 5.1, and subject to Section 5.3, each Party, upon receipt of a written request from the other Party for disclosure of and/or the right to use any trade secrets, know-how and proprietary information which, if solely owned and licensable by the Providing Party, would constitute Technical Information, shall use its best efforts to ascertain whether it has the legal right to make the disclosure and/or whether the Requesting Party may need to obtain third party approvals, consents, licenses (with or without royalties), or other rights in advance of disclosure or in connection with the matter of use. In the event that the Providing Party does not have such rights, the Providing Party shall so advise the Requesting Party, together with the name(s) of the person(s) to contact regarding such rights, if known, and the Providing Party shall use its best efforts to cooperate with the Requesting Party in obtaining any such necessary permission, but subject to such terms, conditions, and restrictions as the third party may impose. These provisions shall also apply to any patents which relate to SDI Technology or to NSM Technology. In the event that the Providing Party, after using its best efforts, is unable to obtain the necessary legal rights or licenses, the Providing Party shall be under no further obligation hereunder nor to violate the terms of any license or other agreements it may have with such third party. 5.3 To the extent that any obligation for compensation, for indemnity, for performance, or otherwise to a third party is required to be undertaken in connection with the disclosures or rights to use described in Section 5.2, any such obligations shall be direct obligations between the Requesting Party and the third party; and the Providing Party shall not be required to incur any primary or secondary obligations, as guarantor or otherwise, to any such third party, nor to place its own rights with such party in jeopardy by reason of such disclosures and/or use. 5.4 In the event that either Party shall, during the term of this Agreement, obtain Acquired Technology from a third party (including from its employees), such Acquired Technology shall come within the scope of this Agreement; provided, however, that, except as to Acquired Technology acquired from the Party possessing such Acquired Technology, a Party may, as a condition to including such Acquired Technology within the license granted to the other Party under Section 2.3, 4 6 require the Requesting Party to contribute a fair proportion of the cost incurred in acquiring the Acquired Technology. In such event, the Parties shall determine by mutual agreement the amount of such compensation by the Requesting Party to the Providing Party. If the Parties do not so agree, the Acquired Technology shall not be included within the scope of this Agreement, and the Requesting Party shall incur no financial obligation or liability regarding such Acquired Technology. 5.5 In the event that either Party has or acquires one or more patents, or files for one or more patent applications, relating to a process or a product that would otherwise be includable as Technical Information within a request for Technical Assistance, or within the broad definition of SDI or, if applicable, IDI Technology, or of NSM Technology, as the case may be, such patent rights shall not be deemed automatically includable within the scope of the license rights contemplated by this SDI License Agreement but may be included, at the option of the holder of such rights and unless otherwise prohibited, upon the negotiation and agreement of a specific license for each such process or product, with a royalty rate and other terms that are fair and reasonable for the type of process or product involved. ARTICLE VI Compensation 6.1 Solely in consideration of SDI's grant of the license rights described in Article IV, NSM shall issue to SDI, contemporaneously with the execution of this License Agreement, (i) 74,468,090 Shares of NSM and (ii) Warrants to purchase 11,421,480 Shares of NSM. Pursuant to the SDI Warrant Agreement, the Warrants shall become exercisable at the time, and in the proportion, that the Warrants issued to the Senior Subordinated Notes are exercised. To the extent that the Warrants shall not become exercisable on or prior to the 10th anniversary or the Closing Date, or to the extent such Warrants shall have become exercisable but shall not have been exercised on or before such date, such Warrants shall expire. Concurrently with each exercise of Warrants by SDI, NSM shall pay to SDI an amount which, after taking into account the net amount, after application of all foreign tax credits to which SDI shall be entitled as a result thereof, of all Thai and U.S. withholding and income taxes payable in respect of the receipt thereof, shall be equal to Baht 10 for each Warrant which shall have been exercised at such time. After giving effect to the exercise of all Warrants which shall become exercisable in accordance herewith and with the Warrant Agreement, SDI shall hold Shares equal to 10% of the total number of Shares issued on the Closing Date and in connection with all such Warrants. Such shares shall be deemed fully earned and paid for upon issuance, the consideration from SDI therefor being SDI's grant of license rights to NSM hereunder, without regard to any actual use thereof by NSM. No portion of the value of such shares is attributable to any future services to be rendered by SDI hereunder or under any other agreement. The value of this license grant has been determined by NSM's Board of Directors, by Management Company, and by the New Equity Investors (excluding SDI) and other shareholder signatories to the Shareholder Agreement to be fair and adequate for the NSM common shares to be issued to SDI. 5 7 6.2 The foregoing compensation shall be payable to SDI in addition to any expense reimbursements required to be paid hereunder. 6.3 Subject to the provisions of Section 6.1, SDI shall be responsible for all U.S. taxes on any shares issuable or amounts payable to SDI hereunder. 6.4 Except for the amount of any Thai withholding tax payable in respect of the receipt by SDI of the NSM common shares described in Section 6.1(i), and of the NSM common shares issuable upon exercise of the Warrants described in Section 6.1(ii), which NSM agrees to bear and to pay, in SDI's name (the same as if paid directly by SDI), if NSM shall be required under the laws of Thailand to deduct from any payment made to SDI any other income tax which may be levied against SDI for or in respect of this Agreement, then NSM shall pay or deduct such amounts from the payments due to SDI, and NSM shall promptly remit to the relevant tax authorities such income tax. NSM shall promptly furnish to SDI such necessary tax receipts or other documentary evidence issued by the competent Thai tax authorities, relating to any such payments made by NSM and showing the payment made in the name of SDI, so that SDI may obtain a tax credit in the United States. The burden of obtaining any such tax credits, and the risk of disallowance, shall be borne by SDI. ARTICLE VII Term of Agreement 7.1 Unless sooner terminated hereunder, this Agreement shall continue in effect for a term of ten (10) years. 7.2 In the event that either Party fails to perform any material obligation or undertaking to be performed by it under this Agreement, and such failure shall not be cured within sixty (60) days after written notice thereof from the other Party, then a default shall have occurred. In such event, the non-defaulting Party's sole and exclusive remedy shall be the right to terminate this Agreement forthwith, by giving written notice of termination to the defaulting Party; provided, however, that a majority of the interest in Management Co. or a majority of the Board of Directors of NSM, including a majority of the Directors nominated by the New Equity Investors, shall have approved the delivery of the foregoing notice. No claim for monetary damages shall exist against the defaulting Party, nor, in the case of a default by SDI, shall any recovery, cancellation, or recoupment of any of the NSM Common Stock or Warrants conveyed or required to be conveyed to SDI pursuant to Section 6.1, or in respect of any of the payments required to be paid to SDI hereunder shall exist or be asserted; provided, however, that no termination, regardless of cause, shall be deemed to diminish the defaulting party's rights to continue to use any Technical Information theretofore learned, communicated, or conveyed to that Party. 7.3 Upon expiration or termination of this Agreement, as provided for in this Article VII, by operation of law or otherwise, all rights granted to, and obligations undertaken by, the Parties 6 8 hereunder shall terminate, except the following, all of which shall survive expiration or termination of this Agreement: 7.3.1 Each Party's rights to continue to use any Technical Information theretofore learned, communicated or conveyed to that Party; 7.3.2 Each Party's obligation to pay all amounts accrued hereunder upon or prior to expiration or termination of this Agreement; and 7.3.3 Each Party's confidentiality obligations under Article III hereof; ARTICLE VIII Force Majeure 8.1 In the event that performance of obligations hereunder by either Party hereto is legally excusable because of an event of Force Majeure, the following provisions shall apply: 8.1.1 Either Party who believes that his performance is excused by such event of Force Majeure shall give written notice to the other as soon as possible and with sufficient detail to permit the other to minimize inconvenience and expense. 8.1.2 Both Parties will cooperate to minimize the financial consequences of such event of Force Majeure. 8.1.3 Either Party hereto shall have the right to request the termination of this Agreement if such event of Force Majeure continues for a period greater than 180 days. ARTICLE IX Notice Any notice required or contemplated hereunder shall be in English and shall be deemed to be given when received by mail or facsimile (with follow-on hard copy by mail), properly addressed as follows: 7 9 If to SDI: Keith E. Busse, President Steel Dynamics, Inc. 4500 County Road 59 Butler, IN 46721 Fax: 1-219-868-8951 Phone: 1-219-868-8108 with a copy to: Robert S. Walters, Esq. Barrett & McNagny 215 East Berry Street Fort Wayne, IN 46802 Fax: 1-219-423-8924 Phone: 1-219-423-8905 If to NSM: Mr. John Schultes Nakornthai Strip Mill Public Company Limited Chonburi Industrial Estate (Bowin) 358 Moo 6 Highway 331, Bowin Sri Racha, Chonburi 20230 Thailand Fax: (66-38) 345-693, 345375 Phone: (66-38) 345-950-84, Ext. 255 with a copy to: Mr. Chamni Janchai Nakornthai Strip Mill Public Company Limited 16th Floor UM Tower 9 Ramkhamhaeng Road Suanluang Bangkok 10250, Thailand Fax: (662) 719-9828-9 or to such other addresses either party shall from time to time furnish in writing to the other for such purpose. Such notice shall be deemed given when actually received, or ten (10) days after the date mailed if sent by certified or registered mail. ARTICLE X Governing Law This Agreement is executed in English as the controlling text, and the rights and obligations of the Parties hereunder shall be governed by and construed in accordance with the laws 8 10 of the State of New York. The Parties agree that their rights and obligations under this Agreement shall not be governed by either the provisions of the 1980 U.N. Convention for the International Sale of Goods nor by the laws of any jurisdiction other than as specified herein. ARTICLE XI Arbitration 11.1 In the event of any disputes, controversies or differences which may arise among the Parties, out of or in relation to or in connection with this Agreement, or for the breach thereof, the Parties hereto shall exert their utmost to settle the same by means of good faith negotiations. 11.2 The disputes, controversies or differences arising in connection with this Agreement shall be finally settled under the Rules of Conciliation and Arbitration of the ICC by three arbitrators appointed in accordance with said Rules, but no such award shall produce a result inconsistent with the provisions of Sections 7.2 and 7.3 regarding termination and damages. The place of arbitration shall be London, England and the proceedings shall be conducted in the English language. 11.3 Judgement upon the award rendered may be entered in any court having competent jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. ARTICLE XII Negation of Agency and Other Relationships Nothing contained in this Agreement, nor anything done by either party in the discharge of its obligations hereunder, shall be deemed to constitute either party the agent, employee, joint venturer, or partner of the other. ARTICLE XIII Miscellaneous 13.1 The relationship between SDI and NSM and/or Management Co. shall be that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either Party the power to direct and control the day-to-day activities of the other, (ii) constitute the Parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (iii) constitute either Party, its agents or employees, as the agents or employees of the other Party, or to grant to them any power or authority to act for, bind or otherwise create or assume any obligation on behalf of the other Party for any purpose whatsoever. 9 11 13.2 Neither Party shall attempt to patent or otherwise register any right to exclude other Persons from using the Technical Information that it receives from the other Party pursuant to this Agreement. Neither Party shall attempt to patent in another country the subject matter of any Patent for which it has received a license from the other Party under this Agreement. 13.3 This Agreement constitutes the entire agreement of the Parties with respect to the matters addressed herein and supersedes any prior understandings. Except as noted herein, no changes to this Agreement shall be binding unless in writing and signed by each Party. 13.4 The headings and captions used in this Agreement are for reference purposes only and shall not limit or otherwise affect the meaning, interpretation or application of this Agreement. 13.5 Neither Party may assign its rights or obligations under this Agreement and this agreement shall not inure to the benefit of any trustee in bankruptcy, receiver, or other successor of either Party, without the express written approval of the other Party. 13.6 In the event that any one or more of the provisions of this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect in any jurisdiction such part shall be deemed severed from this Agreement, and the remainder of this Agreement shall continue in full force and effect. The Parties shall consult as to the manner in which their original intention can be fulfilled as closely as possible, and if appropriate, shall amend this Agreement accordingly. 13.7 No delay or failure of any Party in exercising any right hereunder and no partial or single waiver shall be deemed to constitute a waiver of any subsequent delay or failure. No waiver of any one duty, agreement, condition or breach of this Agreement shall constitute a waiver of any other duty, agreement, condition or breach. 13.8 NSM and Management Co. agree to deliver to SDI, as promptly as possible following the NSM Closing, two (2) complete sets of all equity and debt closing documents, as executed, with all schedules and exhibits attached, and NSM further agrees that SDI shall be deemed entitled to the same rights thereunder as any other shareholder purchasing common stock for value in connection therewith. 13.9 This Agreement may be executed in one or more counterparts, each of which shall constitute an original version of the Agreement. IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written by its duly authorized officer or representative. 10 12 NAKORNTHAI STRIP MILL PUBLIC COMPANY LIMITED By_______________________________________ Title_____________________________________ STEEL DYNAMICS, INC. By:______________________________________ Keith E. Busse, President 11 EX-27 4 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 5,106,410 0 46,446,714 689,088 65,796,079 139,864,834 578,148,234 46,207,987 701,743,893 71,160,140 0 0 0 491,367 331,977,513 701,743,893 118,462,740 123,372,780 103,482,349 3,898,682 0 0 3,342,458 12,462,044 4,865,591 7,596,453 0 0 0 7,596,453 .16 .75
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