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Exhibit 10.26
SALE OF EXCESS PRODUCT AGREEMENT
This Agreement, dated this 28th day of October, 1996 (the
"Agreement"), is entered into by and between IRON DYNAMICS, INC., an Indiana
corporation ("IDI") and the wholly-owned subsidiary of STEEL DYNAMICS, INC., an
Indiana corporation ("SDI") and SUMITOMO CORPORATION OF AMERICA, a New York
corporation ("Sumitomo").
WHEREAS, IDI intends to design, build, and operate a new manufacturing
facility for the production of a direct reduced iron ("DRI") product, using iron
ore fines with coal as a reductant;
WHEREAS, IDI intends to provide all or substantially all of the DRI
that it produces to SDI for SDI's use as a feed stock by SDI either directly in
its steel making melting furnace or for further processing through a submerged
arch electric furnace;
WHEREAS, IDI may from time to time produce DRI in quantities not
required by SDI, either for immediate use or for inventory, and may desire,
instead, to sell such excess DRI into the marketplace; and
WHEREAS, if and to the extent that IDI produces Excess DRI, Sumitomo
wishes to market and sell, on behalf of IDI, some of such Excess DRI, for a fee,
and under terms and conditions satisfactory to IDI,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties set forth herein, the parties agree as follows:
1. Designation of Excess DRI: In the exercise of IDI's sole
discretion, after consulting with SDI to determine SDI's DRI
needs for each calendar quarter (which needs shall in all
events have priority over IDI's use or disposition of its DRI
for the benefit of anyone other than SDI), IDI shall decide,
not later than forty-five (45) days in advance of each such
calendar quarter, whether it plans to produce DRI that is not
required by SDI for SDI's own use and consumption in its
Butler, Indiana mini-mill, or elsewhere, or for use and
consumption by any of SDI's affiliates, ("Excess DRI"). If IDI
determines that there will be Excess DRI for the following
calendar quarter that it wishes to sell, it shall determine
the amount thereof and, not later than thirty (30) days prior
to the commencement of such calendar quarter, will provide
Sumitomo with a "Notice Of Availability" not less than fifty
percent (50%) of such Excess DRI. The Notice Of Availability
shall set forth, for each calendar quarter to which it may
apply, the amount of Excess DRI being offered to Sumitomo, the
estimated weekly or monthly amounts thereof, the description,
iron, gangue, and sulfur content thereof, and any other
necessary product information, together with the minimum price
per metric tonne, below which it will not consider a sale,
"FOB" IDI's plant facility in Butler, Indiana. If IDI wishes
and is entitled to make available
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for sale through Sumitomo more than fifty percent (50%) of its
Excess DRI, it may elect but shall not be required to do so.
2. Response By Sumitomo. From the time of its receipt of IDI's
Notice Of Availability, Sumitomo shall have fifteen (15) days
within which to provide IDI with proposed purchase orders for
all or a part of the Excess DRI, specifying the amount of DRI
including weekly or monthly quantities, delivery date, price,
and other proposed terms and conditions. Sumitomo will use its
best efforts to market the excess DRI on the best available
terms for IDI, for the type and quantities of DRI that are
made available. If Sumitomo has not provided purchase orders
on a timely basis, as set forth herein, IDI shall be free to
sell or otherwise dispose of its excess DRI in any other
manner it deems appropriate, free of any further obligation,
for that period, to Sumitomo.
3. Acceptance Of Orders. All purchase orders submitted by
Sumitomo in connection herewith shall be subject to acceptance
or rejection by IDI, and no purchase order submitted by
Sumitomo to IDI shall be binding upon IDI absent IDI's express
acceptance. All IDI sales through Sumitomo, to the extent
accepted, shall be pursuant to IDI's sales order
acknowledgments and its standard terms and conditions of sale,
unless specifically otherwise agreed. All sales to third
parties shall be further subject to IDI's credit
determination, and nothing herein shall require IDI to extend
credit to any purchaser that does not meet IDI's credit
criteria for sale on open account.
4. Fulfillment Of Orders. All orders accepted by IDI hereunder
shall be subject to a variance, within the quantities ordered,
of plus or minus ten percent (10%). Subject to such
adjustment, as well as to raw materials supply availability or
interruption in DRI production due to force majeure, as
described herein, IDI shall produce sufficient quantities of
its DRI to complete all accepted Sumitomo orders, and shall
use its best efforts to meet the delivery dates proposed in
such accepted orders. To the extent possible, Sumitomo will
use its best efforts to accommodate any IDI request for
modification of quantities or delivery dates for accepted
orders, if deemed necessary by IDI. Unless otherwise specified
in its acceptance, orders shall be "FOB" IDI's plant facility
in Butler, Indiana, and Sumitomo's customer (or Sumitomo, if
it is the customer) shall accept title to, and risk of loss of
the DRI at that point. The minimum price designated by IDI,
and any purchase orders offered to IDI by Sumitomo, shall be
stated in net dollars per tonne to IDI, and any taxes or
charges that may be imposed by any governmental agency,
whether foreign or domestic, upon the DRI or upon the sale
transaction, other than regular federal and state income taxes
that may be payable by SDI on its net taxable income derived
from IDI's activities, shall be and remain the responsibility
of the purchaser. In the event that IDI accepts a purchase
order for DRI on an accumulation basis, the terms
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thereof and any period of "free" storage pending shipment,
shall be specified in IDI's acceptance.
5. Sumitomo's Compensation. For its sales and marketing efforts,
in respect of DRI purchase orders that have been accepted, and
in which DRI has been shipped and payment received therefor,
Sumitomo shall be entitled to a sales commission of $2.00 per
tonne. If Sumitomo is the purchaser, its sales commission set
forth herein shall be treated as an additional discount and
shall be deducted from the agreed sales price. Payment of
commissions to Sumitomo shall be made on or before the
twenty-fifth (25th) day of the month following the month in
which the applicable sales invoices were invoiced and paid,
and such commissions shall be paid either by check or wire
transfer in accordance with instructions timely received from
Sumitomo. All costs and expenses of Sumitomo in connection
with its marketing and sales efforts shall be born by
Sumitomo, without reimbursement from IDI. All payments made,
both for DRI and for commissions shall be payable in United
States dollars, unless the parties shall otherwise agree in
writing.
6. General Obligations of IDI. In addition to any sales
commitments arising hereunder, t IDI shall either confirm or
reject all Sumitomo purchase orders, including any requests
for modification or cancellation transmitted to it by
Sumitomo, within two (2) days, and shall cooperate with
Sumitomo in dealing promptly and fairly with any customer
complaints concerning the quality of the DRI, including taking
such action to resolve justified complaints as may be
reasonably requested by Sumitomo. IDI agrees that, during
normal business hours, within reason, it will accommodate
Sumitomo's reasonable requests on behalf of its customers for
product consultation concerning the proper use and
applications of IDI's DRI.
7. General Obligations Of Sumitomo. Sumitomo shall be responsible
for obtaining or insuring that its customers have obtained all
necessary governmental permits and licenses that may be
necessary in effecting IDI's sale of DRI pursuant to
Sumitomo's accepted purchase orders, including any such
permits and licenses, as well as any other formalities, in
connection with any export sales beyond the territory of the
United States.
8. Term Of Agreement. This Agreement shall commence on the date
of its execution and shall continue until the earlier of five
(5) years from the date upon which IDI makes its first Excess
DRI available to Sumitomo for sale hereunder, or December 31,
2004. At the expiration of this term, this Agreement shall
terminate, although it may continue on a month to month basis
thereafter if the parties desire that this be done; provided,
however, that no such month-to-month extension shall be deemed
to imply any obligation on the part of IDI or Sumitomo to
extend the term for any period beyond thirty (30) days.
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9. Default And Early Termination.
A. Breach Of Performance By Sumitomo. In the event that
IDI notifies Sumitomo of its failure to properly
perform its marketing and sales duties in accordance
herewith, and in the further event that such failure
continues unabated for a period in excess of thirty
(30) days after such notification to Sumitomo, in
writing, with a particularized statement of the
failure to perform that is claimed by IDI, then IDI,
at its sole option, shall have the right to terminate
this Agreement, for cause, based upon Sumitomo's
default. In the event, however, that prior to the
lapse of the thirty (30) day cure period Sumitomo has
taken reasonable steps to correct the default, and if
Sumitomo can reasonably correct such default and cure
the problem within an additional thirty (30) day
period, Sumitomo shall be entitled to that additional
period before IDI is entitled to terminate the
Agreement. Any such termination shall not relieve
Sumitomo from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve Sumitomo of any claim for
damages or other liabilities arising as a consequence
of its default hereunder.
In the event that Sumitomo becomes insolvent, commits
an act of bankruptcy, makes a general assignment for
the benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceeding by or against Sumitomo under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee, or assignee
for the benefit of creditors of Sumitomo, then, at
IDI's election, this Agreement may be immediately
terminated.
B. Breach Of Performance By IDI. Apart from any
particular dispute that may from time to time involve
individual shipments by IDI of allegedly non-
conforming DRI that is subject to the "Claims
Handling" procedures described in Section 10, in the
event that Sumitomo believes that IDI has failed to
perform in its obligations in accordance with this
Agreement, and in the further event that such alleged
failure continues unabated for a period in excess of
thirty (30) days after notification to IDI in writing
with a particularized statement of the alleged
failure to perform, then Sumitomo, at its option,
shall have the right to terminate this Agreement
based upon such IDI default. In the event, however,
that prior to the lapse of the thirty (30) day cure
period, IDI has taken reasonable steps to correct the
default and if IDI can reasonably correct and cure
the problem within an additional thirty (30) day
period, IDI shall be entitled to the additional
period before Sumitomo shall be entitled to declare a
default. Any termination of this Agreement shall not
relieve IDI from any liability which may have arisen
hereunder prior to such termination, nor shall any
such termination relieve
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IDI of any claim for damages or other liabilities
that may arise as a consequence of its default
hereunder.
If IDI becomes insolvent, commits an act of
bankruptcy, makes a general assignment for the
benefit of creditors, or in the event of the
institution of any voluntary or involuntary
proceedings by or against IDI under bankruptcy,
insolvency, or similar laws for the relief of debtors
or the protection of creditors, or in the event of
the appointment of a receiver, trustee or assignee
for the benefit of creditors of IDI, then, at
Sumitomo's election, this Agreement may be
immediately terminated.
10. Claims Handling. If any DRI purchased by a customer of
Sumitomo, or directly by Sumitomo, fails to meet the proper
specifications represented by IDI, then, prior to any party's
invoking any other remedy to which it might be entitled, at
law or in equity, Sumitomo, if aware of the defect or of the
non-conformity, shall notify IDI of the non-conformity,
provide IDI an opportunity to inspect the allegedly non-
conforming DRI, and either propose a reduced price therefor or
make some other gesture of accommodation. If the parties
cannot successfully negotiate an appropriate resolution of the
problem within thirty (30) days, then the party alleging the
non- conformity may resort to any other remedy. It is
understood that, although this informal claims handling
procedure may not be formally binding upon a Sumitomo
customer, which is not a party to this Agreement, Sumitomo
will use its best efforts to encourage its customer, in the
first instance, to resort to this informal claims handling
procedure.
11. Force Majeure. In the event that performance of obligations
hereunder by either party is legally excusable by reason of a
force majeure, either party which believes that its
performance is excused thereby shall give written notice to
the other, as soon as possible and with sufficient detail to
permit the other to minimize inconvenience and expense. A
force majeure shall include (but shall not be limited to)
natural disasters, wars, acts of government (including refusal
to grant authorizations required to effectuate performance),
power failures or interruptions, unanticipated breakdowns of
equipment, extraordinary market or supply conditions beyond
the party's control, labor strife, raw material shortages,
transportation difficulties, legal restrictions on
performance, and the like. If any force majeure continues for
a period of greater than 360 days, either party shall have the
right to terminate this Agreement.
12. Notices. All communications required by this Agreement to be
given by one party to the other shall be in writing and
delivered by hand, or by certified or registered mail, with
postage pre-paid and return receipt requested, or by any other
overnight express delivery or facsimile transmission which
provide evidence of receipt, addressed or dispatched to the
appropriate party at the address set forth below (unless a
party has previously advised the other to use a different
address or facsimile number):
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If to Sumitomo:
Sumitomo Corporation of America
ATTN: Kei Kato
2750 USX Tower, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to IDI:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Iron Dynamics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any such notice shall be deemed to have been delivered when received.
13. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the sale of Excess
DRI that forms the subject matter hereof, and it supersedes
any concurrent or prior understandings or agreements between
the parties. Except as noted herein, no changes to this
Agreement shall be binding unless in writing and signed by
each party.
14. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed in
accordance with the laws of the state of Indiana.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original
version of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers or representatives as of the date
first above written.
SUMITOMO CORPORATION OF AMERICA
By
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Title
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IRON DYNAMICS, INC.
By
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Title
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