This is not an offering memorandum or offering circular or prospectus and should not be treated as offering material of any sort and is for information purposes only. NOT FOR DISTRIBUTION IN OR TO THE U.S., CANADA, AUSTRALIA OR JAPAN, OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBU- TION WOULD BE PROHIBITED BY APPLICABLE LAW. This indicative term sheet comprises only a summary of the terms of the proposed convertible bonds (the "Bonds"). The information herein is indicative only. Although the indicative information herein is reflective of the terms of the Bonds contemplated as of the time of this communication, there is no assurance that the Bonds will actually be issued. The Bonds will be issued on the basis of full Terms and Conditions that are expected to be delivered to investors prior to or upon settlement. Before making any investment decision and entering into any transaction in relation to the Bonds, you should take steps to ensure that you understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives. You should make sure that you have sufficient information available in relation to Salzgitter AG before making an investment in the Bonds, since this term sheet and the final Terms and Conditions will be the only information made available prior to or upon settlement. Pricing Term Sheet 29 September, 2009 296,450,000 million Convertible Bonds due 2016 Convertible into Ordinary Bearer Shares of Salzgitter AG Issuer: Guarantor: Securities Offered: Status of the Bonds: Maturity: Indicative summary terms for the Offering Salzgitter Finance B.V. Salzgitter AG Euro denominated convertible bonds (the Bonds ) convertible into no par value ordinary bearer shares of Salzgitter AG (the Shares ) (the Offering ). The Bonds will be in bearer form, represented by a global certificate to be held permanently by Clearstream Banking AG, Frankfurt, in its book-entry system, with a register of holders Senior, unsecured 7 years Maturity Date: 6 October 2016 Issue Size: 296,450,000 Underlying Shares: Denomination: 3,550,457 ordinary bearer shares of Salzgitter AG 50,000 denomination per Bond in global form Coupon: 1.125% (Act/Act) payable annually in arrear on 6 October of each year, commencing on 6 October 2010 Yield to Maturity: 1.125% Issue Price: Redemption Price: 100% of par 100% of par Reference Share Price: 66.7970 Conversion Premium: Conversion Ratio: Conversion Price: 83.4963 25.0% above the Reference Share Price (as per the 27 May 2009 AGM authorisation) 598.8289 shares per bond
Conversion Right: Early Redemption at the Option of the Issuer for Reasons of Share Price : Early Redemption at the Option of the Issuer for Reasons of Minimal Outstanding Principal Amount: Early Redemption at the Option of the Bondholder: Cash Payment in Lieu of Delivery of Shares in Certain Circumstances: Share Settlement Option: The Bonds will be convertible into Shares at the option of the holder from 24 November, 2009 until 27 September, 2016 subject to certain excluded periods On or after 21 October, 2012, and upon giving not less than 30 nor more than 40 calendar days notice, the Issuer may at any time redeem the Bonds in whole, but not in part, at the Principal Amount, plus interest accrued thereon until (but excluding) the date of redemption, if the XETRA-Quotation on at least 20 of the 30 consecutive trading days of the Frankfurt Stock Exchange (each a Trading Day ) immediately preceding the publication of the redemption notice exceeds 130% of the then applicable Conversion Price. Yes, at the Principal Amount plus interest accrued thereon if less than 15% of the Bonds remain outstanding, by giving no less than 30 nor more than 40 calendar days notice Any Bondholder may, at his option by giving not less than 45 calendar days and nor more than 60 calendar days prior notice declare all or some only of his Bonds not previously converted or redeemed due on 6 October 2014. In such case the Issuer will redeem such Bonds at the Principal Amount plus interest accrued thereon Yes, but only if due to legal reasons the Guarantor is unable to issue Shares from conditional capital, and, at its own discretion, does not deliver treasury shares upon the exercise of a Conversion Right Provided that there have not been any Events of Default, no Change of Control and no Merger, the Issuer may in the case of: Early Redemption at the Option of the Issuer for Reasons of Share Price Early Redemption at the Option of the Issuer for Reasons of Minimal Outstanding Principal Amount Early Redemption at the Option of the Bondholder Maturity elect in lieu of redeeming the Bonds in cash, to effect redemption in respect of each Bond by: (i) delivering the Redemption Shares (ii) paying the Additional Cash Amount, if any, and (iii) paying the accrued interest, if any Redemption Shares means, per Bond, the Shares to be delivered by the Issuer after exercise of the Share Settlement Option, the number of which is determined by dividing the Principal Amount by the Conversion Price prevailing on the Redemption Valuation Date, rounded down to the next full Redemption Share Redemption Valuation Date means the third Trading Day immediately preceding the relevant Due Date Additional Cash Amount means the amount per Bond corresponding to the difference between (i) the Principal Amount and (ii) the Share Market Value Share Market Value means per Bond the product (rounded up to the nearest full cent) of (i) the Current Market Price and (ii) the number of full Redemption Shares Tax Gross-up: Anti-dilution Protection: Current Market Price (calculated on a per share basis) means the VWAP of the Shares XETRA-Quotations for the period of the fifteen consecutive Trading Days prior to the Redemption Valuation Date rounded to the nearest full cent with 0.005 being rounded upwards No issuer tax call or gross-up Standard German market provisions as described in the Terms and Conditions 2
Extraordinary Dividend Protection: The Conversion Ratio will be adjusted if the aggregate amount of Cash Dividend distributions in respect of any Financial Year exceeds the Threshold Amounts below. Protection is for the excess dividend over the relevant Threshold Amount: For Financial Year Cash Dividend threshold per Share 2009 1.00 2010 1.20 2011 1.40 2012 1.50 2013 1.50 2014 1.50 2015 1.50 Change of Control Protection: Conversion Ratio adjustment for distributions in kind on full value of such distributions Upon notification of a Change of Control (as defined in the Terms and Conditions), each Bondholder may require the Issuer to redeem their Bonds at the Principal Amount plus accrued interest thereon until (but excluding) the Effective Date. Notice of redemption must be given not less than 10 calendar days prior to the Effective Date. The Effective Date will be published in the notice of Change of Control from the Issuer, and will be not less than 40 nor more than 60 calendar days after publication of the notice. Merger Put: Negative Pledge: Cross Default: Events of Default: Further upon notification of a Change of Control, the Conversion Ratio shall be adjusted in accordance with the following formula for any conversion notices submitted on or prior to the Effective Date: c E' E 1Pr t where E' = the adjusted Conversion Ratio, E = the Conversion Ratio immediately prior to the date on which the Change of Control occurs Pr = the initial Conversion Premium of 25%, c = the number of calendar days from and including the date the Change of Control occurs to but excluding the Maturity Date, and t = the number of calendar days from and including the Issue Date to but excluding the Maturity Date There will be no adjustments of the Conversion Ratio if E' would by applying the above formula, be lower than E Upon notification of a Merger (as defined in the Terms and Conditions), each Bondholder may require the Issuer to redeem the Bonds at the Principal Amount plus accrued interest thereon until (but excluding) the Effective Date. Notice of redemption must be given not less than 10 calendar days prior to the Effective Date Yes Yes, in respect of any Borrowing Obligation (as defined in the Terms and Conditions), subject to a threshold of 25 million, which is not paid within 14 calendar days of its Due Date Standard Euro-market events of default in relation to the Issuer and the Guarantor and its material subsidiaries, as described in the Terms and Conditions 3
Type of Offering: Placement under exclusion of pre-emptive rights of Salzgitter AG s shareholders Selling Restrictions: Private placement to institutional investors only under RegS No sale/distribution in the U.S., to investors in Canada, Australia, or Japan Offering Documents: Use of Proceeds: Governing Law: Lock-up: Listing: Clearing Systems: Clearing Codes: Stock symbols: Day count basis: The offering is being conducted solely on a private placement basis with institutional investors. There will be no offering document in connection with the offering. Investors will only receive this indicative term sheet, the Terms and Conditions and, after pricing, the pricing terms. Investors will need to take their investment decision based solely on publicly available information General corporate purposes and diversification of funding sources German law Lock-up of 120 days for the Issuer and the Guarantor Application is intended to be made for the Bonds to be listed on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange Clearstream Banking AG Frankfurt, Euroclear Brussels and Clearstream Luxembourg. Book-entry ISIN Code: DE000A1AM3Y2 Common Code: 045548945 German WKIN : A1AM3Y Bloomberg: SZG GY, Reuters: SZGG.DE, ISIN: DE0006202005 Actual/Actual Launch Date: 29 September 2009 Pricing Date: 29 September 2009 Issue/ Settlement Date: 6 October 2009 Joint Bookrunners: Commerzbank Aktiengesellschaft, Deutsche Bank AG, UniCredit Group (Bayerische Hypo- und Vereinsbank AG) 4
Important Note NOTHING IN THIS INDICATIVE TERM SHEET CONSTITUTES AN OFFER OF SECURITIES (INCLUDING THE BONDS AND THE OR- DINARY BEARER SHARES OF SALZGITTER AG DELIVERABLE UPON CONVERSION) FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REG- ISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND THE SECURITIES MAY NOT BE OFFERED, SOLD PLEDGED OR OTHERWISE TRANS- FERRED WITHIN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAIL- ABLE EXEMPTION FROM SUCH REGISTRATION AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THERE WILL BE NO PUBLIC OFFERING OF SECURITIES IN THE UNITED STATES. THIS INDICATIVE TERM SHEET MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE RE- PRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS OR DISTRIBUTED IN ANY OTHER MANNER IN THE UNITED STATES. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS INDICATIVE TERM SHEET IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. In the United Kingdom, this indicative term sheet is being distributed only to and is directed only at: (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order ); or (b) persons who are high net worth entities falling within Article 49 of the Order, and other persons to whom it may otherwise lawfully be communicated, (all such person together referred to as relevant persons ). This information has been prepared solely for information purposes and is not an offer (or a solicitation of an offer) to buy or sell the Bonds. No representation or warranty is given with respect to the accuracy or completeness of the information, or with respect to the terms of any future offer of Bonds conforming to the terms hereof. In the event of any such offering, this information shall be deemed superseded, amended and supplemented in its entirety by the terms and conditions of the Bonds, and any decision to invest in such Bonds should be made solely in reliance upon such Indicative Term Sheet. The Managers and their affiliates disclaim any and all liability relating to this information, including without limitation any express or implied representations or warranties for, statements contained in, and omissions from, this information. Additional information is available upon request. The Managers (and any of their affiliates) may make markets, have positions, and effect transactions in Bonds and instruments of the Issuer and may also provide advice to such entities. Past performance is not necessarily indicative of future results. Price and availability of the Bonds are subject to change without notice. No action has been or will be taken by the Managers or any of their affiliates that would permit a public offering of Bonds, or possession or distribution of any offering material in relation thereto, in any jurisdiction where action for the purpose is required. Purchasers and persons who receive this term sheet and any offering material are required by the Managers to comply (and will be deemed to represent that they will comply) with all applicable laws and regulations in each jurisdiction in which they purchase, offer, sell or deliver Bonds or have in their possession or distribute this term sheet or such offering material, in all cases at their own expense. In relation to each member state of the European Economic Area which has implemented the Directive 2003/71/EC of the European Parliament and the Council ( Prospectus Directive ) (each such state a Relevant Member State ), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date ), the Bonds have not and will not be offered to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Bonds which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that the Bonds may, with effect from and including the Relevant Implementation Date, be offered to the public in that Relevant Member State at any time (a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities, (b) to any legal entity which has two or more of (A) an average of at least 250 employees during the last financial year, (B) a total balance sheet of more than Euro 43,000,000 and (C) an annual net turnover of more than Euro 50,000,000, as shown in its last annual or consolidated accounts, or (c) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an offer of Bonds to the public in relation to the Bonds in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Bonds so as to enable an investor to decide to purchase or subscribe to the Bonds, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State (including any relevant implementing measure in each Relevant Member State). No application has been or will be made by any person to obtain an authorization from CONSOB for the public offering (offerta al pubblico) of the Bonds in the Republic of Italy. Accordingly, in Italy this indicative term sheet is being distributed only to and is directed only at (a) qualified investors (investitori qualificati), including individuals and small and medium size enterprises, as defined by CONSOB Regulation no. 11971 of 14 May 1999, as amended from time to time and recently supplemented by resolution n. 16850 of 1 April 2009, on the basis of the relevant criteria set out by Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003, pursuant to art. 100, paragraph 1, lett. a) of D.Lgs. no. 58 of 24 February 1998, as amended (the Financial Laws Consolidated Act ); or (b) in any other circumstances where an express exemption from compliance with the rules relating to public offers of financial products (offerta al pubblico di prodotti finanziari) provided for by the Financial Laws Consolidated Act and the relevant implementing regulations (including CONSOB Regulation no. 11971 of 14 May 1999, as amended) applies. Any offer, sale or delivery of the Bonds or any offering material relating to the Bonds in the circumstances described in the preceding paragraphs (a) and (b) shall be made (i) only by banks, investment firms (imprese di investimento) or financial companies enrolled on the special register provided for in art. 107 of Legislative Decree no. 385 of 1 September 1993, as amended (the Italian Banking Act ), in each case to the extent duly authorised to engage in the placement and/or underwriting (sottoscrizione e/o collocamento) of financial instru- 5
ments (strumenti finanziari) in Italy in accordance with the Italian Banking Act, the Financial Laws Consolidated Act and the relevant implementing regulations; and (ii) in accordance with all applicable Italian laws and regulations, including all relevant Italian securities and tax laws and regulations and any limitations as may be imposed from time to time by CONSOB or the Bank of Italy. 6