<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1999
Commission File Number 1-8803
MATERIAL SCIENCES CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-2673173
(State or other jurisdiction (IRS employer identification
of incorporation or organization) number)
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (847) 439-8270
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 October 13, 1999, there were outstanding 15,604,850 shares of common
stock, $.02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended August 31, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
(a) Financial statements of Material Sciences Corporation and Subsidiaries
2
<PAGE>
Consolidated Statements of Income (Unaudited)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands, except per share data) 1999 1998 1999 1998
- ---------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales (1) $132,466 $119,157 $257,459 $232,040
Cost of Sales 105,681 98,460 206,438 192,233
-------- -------- -------- --------
Gross Profit $ 26,785 $ 20,697 $ 51,021 $ 39,807
Selling, General and Administrative
Expenses (9) 16,890 14,255 31,537 27,956
-------- -------- -------- --------
Income from Operations $ 9,895 $ 6,442 $ 19,484 $ 11,851
-------- -------- -------- --------
Other (Income) and Expense:
Interest Income $ (12) $ (333) $ (90) $ (404)
Interest Expense 2,389 3,085 4,884 6,375
Equity in Results of Joint Ventures 624 485 1,105 440
Other, Net 59 (65) 143 (493)
-------- -------- -------- --------
Total Other Expense, Net $ 3,060 $ 3,172 $ 6,042 $ 5,918
-------- -------- -------- --------
Income Before Income Taxes and Cumulative Effect of
Accounting Change $ 6,835 $ 3,270 $ 13,442 $ 5,933
Income Taxes 2,529 1,259 4,974 2,284
-------- -------- -------- --------
Income Before Cumulative Effect of Accounting Change $ 4,306 $ 2,011 $ 8,468 $ 3,649
Cumulative Effect of Accounting Change, Net (6) - - - 2,207
-------- -------- -------- --------
Net Income (7) $ 4,306 $ 2,011 $ 8,468 $ 1,442
======== ======== ======== ========
Basic Net Income Per Share:
Income Before Cumulative Effect of Accounting Change
Per Share $ 0.28 $ 0.13 $ 0.56 $ 0.24
Cumulative Effect of Accounting Change Per Share - - - 0.14
-------- -------- -------- --------
Basic Net Income Per Share $ 0.28 $ 0.13 $ 0.56 $ 0.10
======== ======== ======== ========
Diluted Net Income Per Share:
Income Before Cumulative Effect of Accounting Change
Per Share $ 0.28 $ 0.13 $ 0.55 $ 0.24
Cumulative Effect of Accounting Change Per Share - - - 0.14
-------- -------- -------- --------
Diluted Net Income Per Share $ 0.28 $ 0.13 $ 0.55 $ 0.10
======== ======== ======== ========
Weighted Average Number of Common Shares Outstanding
Used for Basic Net Income Per Share 15,124 15,330 15,188 15,311
Dilutive Common Stock Options 285 85 224 85
-------- -------- -------- --------
Weighted Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options 15,409 15,415 15,412 15,396
======== ======== ======== ========
Outstanding Common Stock Options Having No Dilutive Effect 1,263 1,434 1,309 1,434
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
August 31, February 28,
1999 1999
(In thousands) Unaudited Audited
- ------------------------------------------------------------------------ ----------- ------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,964 $ 1,227
Receivables:
Trade, Less Reserves of $5,541 and $5,233, Respectively (2) 55,525 52,029
Income Taxes - 968
Prepaid Expenses 3,476 2,180
Inventories 55,542 52,166
Prepaid Taxes 4,889 4,889
--------- ---------
Total Current Assets $ 121,396 $ 113,459
--------- ---------
Property, Plant and Equipment $ 368,685 $ 360,865
Accumulated Depreciation and Amortization (140,454) (126,384)
--------- ---------
Net Property, Plant and Equipment $ 228,231 $ 234,481
--------- ---------
Other Assets:
Investment in Joint Ventures $ 19,924 $ 20,829
Intangible Assets, Net 23,475 24,411
Other 2,391 2,141
--------- ---------
Total Other Assets $ 45,790 $ 47,381
--------- ---------
Total Assets $ 395,417 $ 395,321
========= =========
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 2,454 $ 2,429
Accounts Payable 54,431 47,920
Accrued Payroll Related Expenses 12,154 13,891
Accrued Expenses 9,009 8,660
--------- ---------
Total Current Liabilities $ 78,048 $ 72,900
--------- ---------
Long-Term Liabilities:
Deferred Income Taxes $ 19,855 $ 18,434
Long-Term Debt, Less Current Portion 127,807 140,000
Accrued Superfund Liability 3,037 3,087
Other 12,369 11,968
--------- ---------
Total Long-Term Liabilities $ 163,068 $ 173,489
--------- ---------
Shareowners' Equity:
Preferred Stock (3) $ - $ -
Common Stock (4) 344 336
Additional Paid-In Capital 57,051 54,663
Treasury Stock at Cost (5) (16,061) (10,491)
Retained Earnings 113,298 104,830
Accumulated Other Comprehensive Income (7) (331) (406)
--------- ---------
Total Shareowners' Equity $ 154,301 $ 148,932
--------- ---------
Total Liabilities and Shareowners' Equity $ 395,417 $ 395,321
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 4,306 $ 2,011 $ 8,468 $ 1,442
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 7,675 7,875 15,365 15,758
Provision for Deferred Income Taxes 700 128 1,421 256
Cumulative Effect of Accounting Change, Net - - - 2,207
Compensatory Effect of Stock Plans 1,180 (92) 1,357 4
Other, Net 631 485 1,107 315
-------- -------- -------- --------
Operating Cash Flow Prior to Changes in Assets and Liabilities $ 14,492 $ 10,407 $ 27,718 $ 19,982
-------- -------- -------- --------
Changes in Assets and Liabilities:
Receivables $ (1,946) $ (3,405) $ (3,405) $ 2,121
Income Taxes Receivable - 1,694 968 2,391
Prepaid Expenses 169 (230) (1,296) (1,038)
Inventories (3,402) 2,276 (3,376) 5,888
Accounts Payable 7,163 (1,589) 6,511 (489)
Accrued Expenses 861 1,797 (1,388) 1,010
Other, Net 165 3,492 426 3,239
-------- -------- -------- --------
Cash Flow from Changes in Assets and Liabilities $ 3,010 $ 4,035 $ (1,560) $ 13,122
-------- -------- -------- --------
Net Cash Provided by Operating Activities $ 17,502 $ 14,442 $ 26,158 $ 33,104
-------- -------- -------- --------
Investing Activities:
Capital Expenditures, Net $ (3,901) $ (4,160) $ (7,874) $ (7,384)
Investment in Joint Ventures (34) (883) (102) (1,235)
Distribution from Joint Ventures - 900 - 900
Other (38) (159) (746) (343)
-------- -------- -------- --------
Net Cash Used in Investing Activities $ (3,973) $ (4,302) $ (8,722) $ (8,062)
-------- -------- -------- --------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $(11,000) $(12,200) $(11,600) $ 38,400
Payments of Debt (413) (1,234) (568) (66,163)
Purchase of Treasury Stock (3,229) - (5,570) -
Sale of Common Stock 248 157 1,039 668
-------- -------- -------- --------
Net Cash Used in Financing Activities $(14,394) $(13,277) $(16,699) $(27,095)
-------- -------- -------- --------
Net Increase (Decrease) in Cash $ (865) $ (3,137) $ 737 $ (2,053)
Cash and Cash Equivalents at Beginning of Period 2,829 4,709 1,227 3,625
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 1,964 $ 1,572 $ 1,964 $ 1,572
======== ======== ======== ========
</TABLE>
The Changes in Assets and Liabilities for the three and six months ended August
31, 1999 and 1998, are net of assets and liabilities acquired.
The accompanying notes are an integral part of these statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MATERIAL SCIENCES CORPORATION
The data for the three and six months ended August 31, 1999 and 1998 have not
been audited by independent public accountants but, in the opinion of the
Company, reflect all adjustments (consisting of only normal, recurring
adjustments) necessary for a fair presentation of the information at those dates
and for those periods. The financial information contained in this report should
be read in conjunction with the Company's 1999 Annual Report to Shareowners and
Annual Report on Form 10-K. Certain prior year amounts have been reclassified to
conform with the fiscal 2000 presentation.
(1) During the six months ended August 31, 1999 and 1998, the Company derived
approximately 12.8% and 11.4%, respectively, of its sales from fees billed
to the Partnership by a subsidiary of the Company for operating the
Walbridge, Ohio facility.
(2) Includes trade receivables due from the Partnership of $2,018 as of August
31, 1999 and $1,897 as of February 28, 1999. Trade receivables also include
amounts due from Innovative Specialty Films, LLC of $246 as of August 31,
1999 and $452 as of February 28, 1999.
(3) Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000
Designated Series B Junior Participating Preferred; None Issued.
(4) Common Stock, $.02 Par Value; 40,000,000 Shares Authorized; 17,211,122
Shares Issued and 15,522,474 Shares Outstanding as of August 31, 1999 and
16,783,084 Shares Issued and 15,571,336 Shares Outstanding as of February
28, 1999.
(5) Treasury Stock at Cost; 1,688,648 Shares as of August 31, 1999 and
1,211,748 Shares as of February 28, 1999. On December 20, 1996, the
Company's Board of Directors authorized the repurchase of up to one million
shares of the Company's common stock, of which 523,100 shares were
purchased through February 28, 1999. During the first six months of fiscal
2000, the Company completed this program by repurchasing the remaining
476,900 shares of the one million authorization at an average purchase
price of $11.68 per share.
On September 23, 1999, the Company's Board of Directors authorized a new
program to repurchase up to one million shares of the Company's common
stock. Repurchases will be made from time to time in the open market or
through privately negotiated purchases, as the Company may determine. As of
October 13, 1999, 32,700 shares have been repurchased at an average
purchase price of $14.01 under this new authorization.
(6) In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which the Company adopted effective March 1, 1998.
The SOP requires costs of start-up activities and organization costs to be
expensed as incurred. The effect of the adoption of SOP 98-5 was to record
a non-cash charge of $2,207, net of taxes, for the cumulative
6
<PAGE>
effect of a change in accounting principle to expense costs that had
previously been capitalized prior to March 1, 1998.
(7) Comprehensive Income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
August 31, August 31,
---------- ----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $4,306 $2,011 $8,468 $1,442
Other Comprehensive Income:
Foreign Currency Translation (4) (290) 75 (524)
Adjustments ------ ------ ------ ------
Comprehensive Income $4,302 $1,721 $8,543 $ 918
====== ====== ====== ======
</TABLE>
(8) Business Segments:
The Company reports segment information based on how management
disaggregates its businesses for evaluating performance and making
operating decisions. The Company's three segments are: Coated Products and
Services, Engineered Materials and Specialty Films. Corporate represents
unallocated general corporate expenses. The net sales on a geographic basis
are not material. Information concerning the Company's business segments in
the second quarter and first six months of fiscal 2000 and 1999 was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
August 31, August 31,
---------- ----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales
---------
Coated Products and Services $ 97,900 $ 89,409 $192,018 $173,582
Engineered Materials 20,422 16,487 39,529 34,098
Specialty Films 14,941 13,808 27,061 25,499
Eliminations (797) (547) (1,149) (1,139)
-------- -------- -------- --------
$132,466 $119,157 $257,459 $232,040
======== ======== ======== ========
Income from Operations
----------------------
Coated Products and Services $ 7,358 $ 4,712 $ 14,425 $ 8,878
Engineered Materials 3,013 1,757 5,984 3,307
Specialty Films 2,499 1,823 4,513 2,808
Corporate and Eliminations (2,975) (1,850) (5,438) (3,142)
-------- -------- -------- --------
$ 9,895 $ 6,442 $ 19,484 $ 11,851
======== ======== ======== ========
</TABLE>
(9) The Company recognized a pro rata portion of compensation expense totaling
approximately $1,300 during the second quarter of fiscal 2000 related to
the 1998 Long-Term Incentive/Leverage Stock Awards Program (see Note 11 in
the Company's 1999 Annual Report to Shareowners). Under generally accepted
accounting principles, the award price was fixed based on the closing price
on the measurement date (the date the price has traded at or above a
certain performance level which was set higher than the market price on the
date of grant). During the second quarter of fiscal 2000, the price reached
the performance level and expense was recorded.
7
<PAGE>
(10) As reported in the Company's Form 10-K for the year ended February 28,
1997, on April 9, 1997, a plaintiff claiming to represent a class of
Material Sciences Corporation shareowners filed a complaint in the United
States District Court for the Northern District of Illinois. As reported in
the Company's Form 10-Q for the quarterly period ended on August 31, 1997,
on August 25, 1997, a parallel but separate complaint was filed in the
Circuit Court of Cook County, Illinois by another plaintiff seeking to
pursue similar claims on behalf of the same class. On August 10, 1999, the
Cook County Circuit Court dismissed the state action, upon the plaintiff's
motion, after the federal court's determination that the federal case
should proceed as a class action.
(11) On September 28, 1999, the Company reached a settlement agreement with the
Securities and Exchange Commission ("SEC") related to the SEC's
investigation of accounting irregularities announced in 1997. Under the
settlement agreement, MSC consents to a cease and desist order while
neither admitting nor denying the SEC's findings. The Company also agreed
to send certain personnel for continuing education.
8
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended August 31, 1999
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
Net sales in the second quarter of fiscal 2000 increased to $132,466, 11.2%
higher than $119,157 in the prior year's second quarter. For the first six
months of fiscal 2000, net sales were $257,459 compared with $232,040, an 11.0%
increase. For both periods, all business segments contributed to the increase.
Gross profit margin for the second quarter was 20.2% as compared with 17.4% in
the same quarter last year. For the year-to-date period, gross profit margin was
19.8% in fiscal 2000 versus 17.2% in fiscal 1999. The increase in gross profit
margin was due to growth in sales volume, lower material costs, favorable
product mix, as well as improved manufacturing efficiencies. Selling, general
and administrative ("SG&A") expenses were 12.8% and 12.2% of net sales in the
second quarter and first six months of fiscal 2000, respectively, compared with
12.0% in both the second quarter and year-to-date periods last year. The
increase in SG&A percentage was due mainly to the pro rata portion of
compensation expense recognized in the second quarter, as described in the
following paragraph, offset by an increase in the sales volume. During the
second quarter, income from operations increased 53.6% to $9,895 as compared
with $6,442 last fiscal year. For the six months ended August 31, 1999, income
from operations improved 64.4% to $19,484 from $11,851 in the prior year period.
The Company recognized a pro rata portion of compensation expense totaling
approximately $1,300 during the second quarter of fiscal 2000 related to the
1998 Long-Term Incentive/Leverage Stock Awards Program (see Note 11 in the
Company's 1999 Annual Report to Shareowners). Under generally accepted
accounting principles, the award price was fixed based on the closing price on
the measurement date (the date the price has traded at or above a certain
performance level which was set higher than the market price on the date of
grant). During the second quarter of fiscal 2000, the price reached the
performance level and expense was recorded.
The Company's three principal business segments are Coated Products and
Services, Engineered Materials and Specialty Films. The Coated Products and
Services segment includes the coil coating, hot-dip galvanizing and
electrogalvanizing product groups. This segment provides galvanized and
prepainted products and services primarily to the building and construction,
automotive and appliance markets. The Engineered Materials segment includes the
laminates and composites product group. This segment combines layers of metal
and other materials designed to meet specific customer requirements for the
automotive, lighting,
9
<PAGE>
appliance and computer disk drive markets. The Specialty Films segment provides
solar control and safety window film, as well as industrial films used in a
variety of products.
Coated Products and Services
Coated Products and Services' second quarter net sales increased 9.5% to $97,900
from $89,409 in the same quarter last year. Net sales for Coated Products and
Services in the first half of the fiscal year grew to $192,018, a 10.6% increase
from $173,582 last fiscal year. The increase for both periods is mainly due to
significantly higher shipments to the building and construction, automotive and
appliance markets. For the second quarter, income from operations for Coated
Products and Services increased to $7,358, a 56.2% improvement from $4,712 in
the prior year. An increase in sales volume, lower material costs and improved
operating efficiencies were the primary contributors to the increase, slightly
offset by the effects of electrical power curtailments. For the six months ended
August 31, 1999, income from operations increased 62.5% to $14,425 compared with
$8,878 last fiscal year. Higher volumes, including significant sales to ISPAT
Inland Inc. in the first quarter, lower material costs, favorable product mix
and improved operating efficiencies all contributed to the growth.
On July 23, 1999, a subsidiary of Bethlehem Steel Corporation ("BSC") sold a
portion of its ownership interest in Walbridge Coatings ("Partnership") to a
subsidiary of the LTV Corporation ("LTV"). LTV purchased a 16.5% equity interest
in the Partnership from BSC, providing LTV access to 33.0% of the facility's
available line time. This change in ownership will provide MSC with a more
diversified customer base, as well as improve the likelihood of full utilization
of the facility. In conjunction with the sale, the Partnership term was extended
from December 31, 2001 to December 31, 2004. The Company maintained its 50%
ownership interest in the Partnership. The Partnership also maintained its
long-term toll processing agreement with ISPAT Inland Inc. (a former partner)
which expires on December 31, 2001.
Engineered Materials
Sales of Engineered Materials increased 23.9% to $20,422 for the second quarter
of fiscal 2000 compared with $16,487 last fiscal year. For the year-to-date
period, Engineered Materials' net sales grew to $39,529, a 15.9% increase from
$34,098 last year. Significantly higher shipments of brake damper materials to
both the original equipment manufacturer ("OEM") and replacement markets
contributed to the growth. Income from operations was $3,013 for the second
quarter versus $1,757 in the prior year's second quarter, a 71.5% increase.
Income from operations improved 80.9% for the first six months of fiscal 2000 to
$5,984 compared with $3,307 last year. Improvements in income from operations
for both periods were mainly due to favorable product mix, material cost
reductions and improved operating efficiencies.
Specialty Films
Second quarter sales of Specialty Films materials increased 8.2% to $14,941 in
fiscal 2000 compared with $13,808 last year. Sales for the six months ended
August 31, 1999 were 6.1% higher at $27,061 compared with $25,499 in the prior
fiscal year. Higher shipments of window film materials for building and
automotive markets, along with increased sales of coated and laminated films
contributed to the gains. On October 15, 1998, a subsidiary of the Company
formed Innovative Specialty Films, LLC ("ISF") for the research and development,
manufacture
10
<PAGE>
and sale of sputtered film. Comparable sales for the second quarter and first
half of the year, excluding sputtered film sales made through the ISF joint
venture, increased 19.6% and 17.8%, respectively, versus the prior year periods.
Income from operations for Specialty Films for the second quarter increased
37.1% to $2,499 as compared with $1,823 last year. For the first six months of
fiscal 2000, income from operations was $4,513, a 60.7% increase from $2,808
last fiscal year. For both periods, the increase was due to higher sales volume,
improved operating efficiencies, as well as royalty income as a result of the
ISF agreement.
Total Other (Income) and Expense, Net and Income Taxes
Total other (income) and expense, net was expense of $3,060 in the second
quarter of fiscal 2000 compared with $3,172 of expense for the second quarter of
fiscal 1999. For the year-to-date period, total other (income) and expense, net
was expense of $6,042 in fiscal 2000 compared with $5,918 last year. Interest
expense decreased $696 and $1,491 for the second quarter and first six months,
respectively, due to significantly lower debt levels, and to a lesser extent,
favorable changes in variable interest rates. During the second quarter of
fiscal 1999, the Company recorded $318 of interest income related to amended tax
returns. In addition, Equity in Results of Joint Ventures was expense of $624
and $1,105 for the second quarter and first half of fiscal 2000, respectively,
and expense of $485 and $440 for the same periods last year, respectively. The
change is due to a decline in third party sales (other than ISPAT Inland Inc.)
by the Partnership, terminations of certain Partnership revenues from BSC and
ISPAT Inland Inc. after certain financing matured on June 30, 1998 and expenses
related to the ISF joint venture commencing operations in January 1999. MSC's
effective income tax rate was 37.0% in the second quarter and first six months
of fiscal 2000 compared with 38.5% in the same periods of fiscal 1999, primarily
due to the benefit of state income tax credits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the second quarter of fiscal 2000, MSC generated $17,502 of cash from
operating activities compared with $14,442 in the second quarter last year. The
increase in cash generation is due mainly to higher income in the second quarter
of fiscal 2000. For the six months ended August 31, 1999, MSC generated $26,158
of cash from operating activities compared with $33,104 in the same period last
year. The decrease in cash generation is due mainly to the significant
improvements in working capital made in the prior year's first six months,
offset by higher income in the first half of fiscal 2000. Earnings before
interest, taxes, depreciation and amortization ("EBITDA") increased to $16,887
and $33,601 for the second quarter and first half of fiscal 2000, respectively,
compared with $13,897 and $27,662 for the same periods last year, respectively.
MSC's capital expenditures during the second quarter and first six months of
fiscal 2000 were $3,901 and $7,874, respectively, compared with $4,160 and
$7,384 in the same periods last fiscal year.
MSC's total debt decreased as of August 31, 1999, to $130,261 from $142,429 as
of fiscal 1999 year end. As of August 31, 1999, the Company maintains a
committed line of credit totaling $90,000. There was $12,000 outstanding under
this line of credit as of August 31, 1999, versus $14,200 as of February 28,
1999. The Company has executed letters of credit totaling $4,740 against these
lines, leaving available lines of credit of $73,260 as of August 31, 1999. The
Company also maintains a $10,000 uncommitted line of credit. There was $600
outstanding under this line of credit as of August 31, 1999 as compared with
$10,000 as of
11
<PAGE>
fiscal year end. The Company believes that its cash flow from operations,
together with available financing and cash on hand will be sufficient to fund
its working capital needs, capital expenditures, stock repurchase program and
debt amortization.
On December 20, 1996, the Company's Board of Directors authorized the repurchase
of up to one million shares of the Company's common stock, of which 523,100
shares were purchased through February 28, 1999. During the first six months of
fiscal 2000, the Company completed this program by repurchasing the remaining
476,900 shares of the one million authorization at an average purchase price of
$11.68 per share.
On September 23, 1999, the Company's Board of Directors authorized a new program
to repurchase up to one million shares of the Company's common stock.
Repurchases will be made from time to time in the open market or through
privately negotiated purchases, as the Company may determine. As of October 13,
1999, 32,700 shares have been repurchased at an average purchase price of $14.01
under this new authorization.
The Company has a capital lease obligation, which was $2,199 as of August 31,
1999, relating to a facility that the Company subleases to the Partnership. In
addition, the Company is contingently responsible for 50% of ISF's financing
requirements. As of August 31, 1999, ISF's debt was $85 compared with $2,736 as
of February 28, 1999.
As reported in the Company's Form 10-K for the year ended February 28, 1997, on
April 9, 1997, a plaintiff claiming to represent a class of Material Sciences
Corporation shareowners filed a complaint in the United States District Court
for the Northern District of Illinois. As reported in the Company's Form 10-Q
for the quarterly period ended on August 31, 1997, on August 25, 1997, a
parallel but separate complaint was filed in the Circuit Court of Cook County,
Illinois by another plaintiff seeking to pursue similar claims on behalf of the
same class. On August 10, 1999, the Cook County Circuit Court dismissed the
state action, upon the plaintiff's motion, after the federal court's
determination that the federal case should proceed as a class action.
On September 28, 1999, the Company reached a settlement agreement with the
Securities and Exchange Commission ("SEC") related to the SEC's investigation of
accounting irregularities announced in 1997. Under the settlement agreement, MSC
consents to a cease and desist order while neither admitting nor denying the
SEC's findings. The Company also agreed to send certain personnel for continuing
education.
MSC continues to participate in the implementation of settlements with the
government for the clean-up of various Superfund sites. For additional
information, refer to MSC's Form 10-K for the fiscal year ended February 28,
1999.
YEAR 2000
- ---------
The Year 2000 issue exists because many computer systems and applications,
including those embedded in equipment and facilities, use two-digit rather than
four-digit date fields to designate an applicable year. Any of the Company's
systems or applications that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000, which could result in a
system failure or miscalculations. Incomplete or untimely resolution of the Year
2000 issue by the Company or its critically important suppliers or customers
could have a materially adverse impact on the Company's business, operations or
financial condition.
12
<PAGE>
To mitigate this risk, the Company has established a company-wide initiative to
identify, evaluate and address Year 2000 issues. Included within the scope of
this initiative are the operational and financial information technology
systems, embedded systems contained in machinery and equipment and other end-
user computing resources and building systems, such as security, elevator and
heating and cooling systems. In addition, the project includes a review of the
Year 2000 compliance efforts of key supplier and other principal business
partners.
Work is progressing in the following phases: inventory, assessment, remediation,
testing, deployment and monitoring. Although the pace of the work varies among
the segments and the phases often are conducted in parallel, the inventory,
assessment, remediation and testing phases have been substantially completed as
of August 31, 1999. The deployment and monitoring phases are in progress and are
expected to be completed during the third quarter of fiscal 2000. Under the
Company's Year 2000 plan, each of its segments has established target dates for
remediation and testing of critical systems and applications.
The Company cannot guarantee that third parties, on whom it depends for
essential supplies and services, will convert their critical systems and
processes in a timely manner. Failure or delay by any of these parties could
significantly disrupt the business. However, the Company has established a
supplier compliance letter program and is working with key suppliers and
partners to minimize such risks.
The total expected cost of Year 2000 compliance (including replacement of major
systems in the normal course of business) is estimated to range from $4,700 to
$5,100, of which approximately $4,400 has been incurred as of August 31, 1999.
The timing of the expenses may vary and are not, necessarily, indicative of the
readiness efforts or progress to date.
The Company believes the key risk factors associated with Year 2000 are those it
cannot directly control, primarily the readiness of its key suppliers,
distributors and partners. The Company has initiated on-going communications
with these third parties to determine their Year 2000 compliance status and
their progress toward Year 2000 readiness. The Company is in the process of
following up with those critical third parties that did not respond to the
supplier compliance letter.
The development and documentation of contingency plans are in progress and will
continue to be assessed throughout the remainder of the calendar year.
Contingency plans include sourcing alternatives for single source suppliers,
developing business resumption plans for all of the Company's segments and
evaluating alternative manual processes.
Forward-looking statements contained in this filing are qualified by the
cautionary language described in Part II, Item 7 of the Company's 1999 Annual
Report on Form 10-K, filed with the SEC pursuant to the Securities Exchange Act
of 1934, as amended.
13
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended August 31, 1999
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Paragraphs 4 and 5 on page 12 of this report are hereby incorporated by
reference.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
On June 17, 1999, the Company held its Annual Meeting of Shareowners.
Jerome B. Cohen, Eugene W. Emmerich, G. Robert Evans, E. F. Heizer, Jr.,
Gerald G. Nadig and Howard B. Witt, being six nominees named in the Company's
Proxy Statement, dated May 12, 1999, were elected at the Annual Meeting to serve
as the Board of Directors by a majority vote of shareowners. On June 8, 1999,
subsequent to the proxy solicitation for the election of the Board of Directors
and prior to the Annual Meeting, Mr. Irwin P. Pochter passed away. No votes were
cast for any other person. The details of the vote were as follows:
<TABLE>
<CAPTION>
Name For Withheld Authority
---- --- ------------------
<S> <C> <C>
Jerome B. Cohen 12,441,987 1,905,017
Eugene W. Emmerich 12,442,287 1,904,717
G. Robert Evans 12,916,798 1,430,206
E. F. Heizer 12,438,044 1,908,960
Gerald G. Nadig 12,933,638 1,413,366
Howard B. Witt 12,934,334 1,412,670
</TABLE>
Approved by a majority vote of shareowners was the proposal to amend the 1992
Omnibus Stock Awards Plan for Key Employees to increase the number of shares of
common stock issuable thereunder by 400,000 shares. The Plan provides incentives
to the key employees of the Company through rewards linked to performance of the
Company's common stock. The details of the vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
9,733,026 4,579,715 34,263
</TABLE>
14
<PAGE>
Not approved by a majority vote of shareowners was the shareowner proposal to
request the Board of Directors to redeem the shareowner rights previously
issued.
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C>
5,267,994 6,258,461 66,745 2,753,804
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) 10.1 See the exhibits listed in the Index to Exhibits.
10.2 See the exhibits listed in the Index to Exhibits.
10.3 See the exhibits listed in the Index to Exhibits.
10.4 See the exhibits listed in the Index to Exhibits.
10.5 See the exhibits listed in the Index to Exhibits.
10.6 See the exhibits listed in the Index to Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which
this report is filed.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Elk Grove Village, State of Illinois,
on the 13th day of October, 1999.
MATERIAL SCIENCES CORPORATION
By: /s/ Gerald G. Nadig
-----------------------------------
Gerald G. Nadig
Chairman, President
and Chief Executive Officer
By: /s/ James J. Waclawik, Sr.
-----------------------------------
James J. Waclawik, Sr.
Vice President,
Chief Financial Officer
and Secretary
16
<PAGE>
MATERIAL SCIENCES CORPORATION
Quarterly Report on Form 10-Q
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description of Exhibit Numbered Page
- -------------- ---------------------- -------------
<C> <S> <C>
10.1 Amended and Restated Partnership Agreement, dated as of July
23, 1999, among EGL Steel Inc., LTV-Walbridge, Inc. and MSC
Walbridge Coatings Inc., (certain confidential portions have
been omitted pursuant to a confidential treatment request
which has been separately filed). (1)
10.2 Amended and Restated Operating Agreement, dated as of July
23, 1999, by and between MSC Walbridge Coatings Inc. and
Walbridge Coatings, an Illinois Partnership (certain
confidential portions have been omitted pursuant to a
confidential treatment request which has been separately
filed). (1)
10.3 Coatings Agreement, dated as of July 23, 1999, by and between
LTV Steel Company, Inc. and Walbridge Coatings, an Illinois
Partnership (certain confidential portions have been omitted
pursuant to a confidential treatment request which has been
separately filed). (1)
10.4 Coatings Agreement, dated as of July 23, 1999, by and between
MSC Walbridge Coatings Inc. and Walbridge Coatings, an
Illinois Partnership (certain confidential portions have been
omitted pursuant to a confidential request which has been
separately filed). (1)
10.5 Amended and Restated Coating Agreement, dated as of July 23,
1999, by and between Bethlehem Steel Corporation and
Walbridge Coatings, and Illinois Partnership (certain
confidential portions have been omitted pursuant to a
confidential treatment request which has been separately
filed). (1)
10.6 Amended and Restated Parent Agreement, dated as of July 23,
1999, among Bethlehem Steel Corporation, The LTV Corporation,
Material Sciences Corporation and MSC Pre Finish Metals Inc.
(certain confidential portions have been omitted pursuant to
a confidential treatment request which has been separately
filed). (1)
27 Financial Data Schedule (1)
</TABLE>
(1) Appears only in the electronic filing of this report with the Securities and
Exchange Commission.
<PAGE>
Exhibit 10.1
------------
================================================================================
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
Dated as of July 23, 1999
Among
EGL STEEL INC.,
LTV-WALBRIDGE, INC.
and
MSC WALBRIDGE COATINGS INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions......................... 2
ARTICLE II
Undertakings and Purposes.................. 2
ARTICLE III
The Partnership
SECTION 3.01. Formation............................................ 3
SECTION 3.02. Name................................................. 3
SECTION 3.03. Executive Offices.................................... 3
SECTION 3.04. Place of Operations.................................. 3
ARTICLE IV
Capital Contributions
SECTION 4.01. Working Capital Contributions........................ 3
SECTION 4.02. Other Equity Contributions........................... 3
ARTICLE V
Term of Partnership
SECTION 5.01. Term................................................. 4
SECTION 5.02. Extensions of Term................................... 4
ARTICLE VI
Agreements
SECTION 6.01. Partnership Authority................................ 4
SECTION 6.02. Miscellaneous Banking Arrangements................... 4
SECTION 6.03. Other Agreements..................................... 5
ARTICLE VII
Actions by Partnership and Partners
SECTION 7.01. Annual Meeting of Partners........................... 5
SECTION 7.02. Special Meeting of Partners.......................... 6
SECTION 7.03. Actions Requiring Unanimous Vote..................... 6
SECTION 7.04. Other Approvals...................................... 8
SECTION 7.05. No Commitments on Behalf of the
Partnership.......................................... 8
SECTION 7.06. Fiduciary Relationship............................... 8
SECTION 7.07. Renegotiation of Certain Terms....................... 8
ARTICLE VIII
Management Committee
SECTION 8.01. Members.............................................. 10
SECTION 8.02. Meetings............................................. 11
SECTION 8.03. Authority............................................ 11
SECTION 8.04. Responsibilities..................................... 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
Books and Records
SECTION 9.01. Books of Account..................................... 12
SECTION 9.02. Records.............................................. 12
SECTION 9.03. Partner's Accounts................................... 12
SECTION 9.04. Location and Inspection of Books
and Records.......................................... 13
SECTION 9.05. Financial Reports.................................... 13
SECTION 9.06. Annual Financial Reports............................. 14
SECTION 9.07. Tax Returns.......................................... 14
ARTICLE X
Operations
SECTION 10.01. Operation and Use of EG Facility..................... 15
SECTION 10.02. Application of Funds................................. 16
SECTION 10.03. Revenues............................................. 16
SECTION 10.04. Coating Services for Outside Parties................. 16
SECTION 10.05. Service Nature of Business........................... 18
SECTION 10.06. Provision of Services and Facilities by..
Partners............................................. 18
SECTION 10.07. Licenses/Intellectual Property....................... 18
SECTION 10.08. Casualty Loss........................................ 18
SECTION 10.09. Extended Shutdown.................................... 19
SECTION 10.10. Sublease............................................. 19
ARTICLE XI
Profits and Losses
SECTION 11.01. Allocations.......................................... 19
SECTION 11.02. Distributions........................................ 21
SECTION 11.03. Inland Tolling Agreement............................. 21
SECTION 11.04. Certain Cost Reductions.............................. 22
ARTICLE XII
Capital Expenditures
SECTION 12.01. Proposals............................................ 22
SECTION 12.02. Expenditures to Be Paid for by
Partnership.......................................... 22
SECTION 12.03. Expenditures To Be Paid by Partners.................. 23
ARTICLE XIII
Transfers of Partnership Interests
SECTION 13.01. General Limitations on Transfers..................... 23
SECTION 13.02. Permissible Transfers................................ 24
SECTION 13.03. Right of First Refusal............................... 24
SECTION 13.04. Survival of Restrictions............................. 27
SECTION 13.05. Appraisals........................................... 27
SECTION 13.06. Controlling Interests in Partners.................... 27
SECTION 13.07. Excluded Transactions................................ 27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XIV
Dispute Resolution
SECTION 14.01. Executive Review..................................... 28
SECTION 14.02. Redetermination of Decisions......................... 28
SECTION 14.03. Procedure for Dispute Resolution..................... 29
SECTION 14.04. Consent to Jurisdiction; Service
of Process........................................... 30
ARTICLE XV
Dissolution
SECTION 15.01. Events Causing Dissolution........................... 30
SECTION 15.02. Liquidation and Winding Up........................... 30
SECTION 15.03. Exercise of Right or Option to Purchase.............. 32
SECTION 15.04. Appraisals........................................... 33
SECTION 15.05. Provision for Inland Tolling Agreement............... 33
SECTION 15.06. Options To Purchase Partnership
Interests............................................ 33
ARTICLE XVI
Confidentiality........................ 35
ARTICLE XVII
Miscellany
SECTION 17.01. Authority of Representatives of
Partners............................................. 36
SECTION 17.02. Entire Agreement..................................... 36
SECTION 17.03. Modification, Waiver................................. 37
SECTION 17.04. Severability......................................... 37
SECTION 17.05. Notices.............................................. 38
SECTION 17.06. Successors and Assigns............................... 39
SECTION 17.07. Governing Law........................................ 39
SECTION 17.08. Headings............................................. 39
</TABLE>
Schedule 1: Members of Management Committee
Appendix A: Definitions of Terms and Phrases
iii
<PAGE>
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
AMENDED AND RESTATED PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT, dated as of this 23rd day
of July, 1999 by and among EGL STEEL INC., a Delaware corporation ("EGL Steel"),
LTV-WALBRIDGE, INC., a Delaware corporation ("LTV-W"), and MSC WALBRIDGE
COATINGS INC., a Delaware corporation and formerly known as Pre Finish Metals
(EG) Incorporated ("MSCWC"),
W I T N E S S E T H :
WHEREAS, pursuant to the Original Partnership Agreement EGL Steel,
Inland EG and MSCWC formed a general partnership named "Walbridge Coatings, An
Illinois Partnership" under the laws of the State of Illinois for the purpose of
owning (or leasing) and operating the EG Facility; and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, EGL Steel, LTV-W and MSCWC (each being referred to
hereinafter as a "Partner" and, collectively, as the "Partners") desire to amend
and restate the Original Partnership Agreement to admit LTV-W as a Partner and
to provide that the Partnership shall continue on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises, recitals and mutual
covenants, undertakings and obligations hereinafter set forth or referred to
herein, the Partners hereby amend and restate the Original Partnership Agreement
to read as follows:
<PAGE>
ARTICLE I
Definitions
-----------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
----------
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined. Each Partner's
Voting Interest and Financial Interest shall be as set forth in Appendix A.
----------
ARTICLE II
Undertakings and Purposes
-------------------------
The undertakings and purposes of the Partnership are the following:
(a) to operate the EG Facility (which will be primarily dedicated to
the electrogalvanizing of sheet steel for Affiliates of EGL Steel and
Affiliates of LTV-W while developing new products and markets using Organic
Coatings in conjunction with EG Services) during the Term of the
Partnership and to own or lease the EG Facility;
(b) to provide the highest quality coating services (including EG
Services and Other Services) at the lowest cost for sale primarily to
Affiliates of EGL Steel and Affiliates of LTV-W and, as provided herein,
also to provide such services to other parties in a manner designed to
maximize utilization of the capacity and capability of the EG Facility,
while providing to MSCWC a reasonable profit;
(c) to perform the agreements and arrangements referred to in Article
-------
VI below and the Inland Tolling Agreement, and the actions and transactions
--
contemplated thereby and by this Article II; and
----------
(d) to engage in any other lawful act or activity, business, conduct,
action or transaction which is approved by all of the Partners.
2
<PAGE>
ARTICLE III
The Partnership
---------------
SECTION 3.01. Formation. The Partners hereby continue the
---------
Partnership in accordance with the laws of the State of Illinois, for the
limited purposes set forth in Article II.
----------
SECTION 3.02. Name. The name of the partnership shall continue to be
----
"Walbridge Coatings, An Illinois Partnership".
SECTION 3.03. Executive Offices. The executive offices of the
-----------------
Partnership shall be located at the offices of the Operating Partner at 30610
East Broadway, Walbridge, Ohio 43465.
SECTION 3.04. Place of Operations. The coating operations of the
-------------------
Partnership shall be located at the EG Facility.
ARTICLE IV
Capital Contributions
---------------------
SECTION 4.01. Working Capital Contributions. The Partnership shall
-----------------------------
maintain such working capital as is adequate, in the reasonable opinion of the
Operating Partner, for use by the Operating Partner to meet the Partnership's
obligations in the normal course of business. With the prior consent of all
Partners, the Operating Partner may issue calls for working capital
contributions. Each such call shall be issued to all Partners, shall allocate
the total amount called in amounts proportionate to the respective Financial
Interests of the Partners and shall be payable not later than 30 days after
issuance. Any idle funds shall be held by the Partnership in the form of cash,
direct obligations of the United States government or any state thereof, Prime
Commercial Paper or bank certificates of deposit, as may be determined by the
Management Committee.
SECTION 4.02. Other Equity Contributions. Equity contributions to
--------------------------
the Partnership other than those expressly set forth in this Article IV, if any,
----------
shall be made at such time, in such manner and in such amount as all of the
Partners shall agree, and shall be made by the Partners in proportion to their
respective Financial Interests.
3
<PAGE>
ARTICLE V
Term of Partnership
-------------------
SECTION 5.01. Term. The term of the Partnership (the "Term") shall
----
continue until December 31, 2004, and shall continue from year to year
thereafter unless (a) one Partner provides written notice (a "Termination
Notice") to the other Partners by July 1, 2004 (or by July 1 of any subsequent
year) of its intention to terminate the Partnership as of December 31, 2004 (or
December 31 of such subsequent year) or (b) ended earlier by dissolution of the
Partnership in accordance with Article XV hereof.
----------
SECTION 5.02. Extensions of Term. The Term of the Partnership may be
------------------
altered from that specified in Section 5.01 hereof only by mutual agreement of
------------
all of the Partners.
ARTICLE VI
Agreements
----------
SECTION 6.01. Partnership Authority. The Partnership shall have
---------------------
authority to perform any and all actions in accordance with the terms of this
Agreement which it deems necessary or advisable to achieve the undertakings and
purposes set forth in Article II of this Agreement. Except pursuant to
----------
authority expressly delegated in writing by the Management Committee or
otherwise in accordance with this Agreement and the other Definitive Agreements,
no Partner shall have the power to operate, deal with or authorize agreements
concerning the EG Facility, including (but not by way of limitation) any power:
(a) to contract for any capital improvements to the EG Facility, except as
provided in Section 12.03; (b) to borrow money in the name of and on behalf of
-------------
the Partnership; (c) to secure such borrowings with Partnership assets; (d) to
contract for the operation of the EG Facility; or (e) to encumber, mortgage or
sell any or all of the Partnership's assets.
SECTION 6.02. Miscellaneous Banking Arrangements. The Management
----------------------------------
Committee is hereby authorized to take such actions as may be necessary or
advisable in the ordinary course of business to establish and maintain one or
more bank accounts in the name of the Partnership. All funds of every kind and
nature received by the Partnership shall initially be deposited in such an
account. The Operating
4
<PAGE>
Partner shall manage all such accounts on behalf of the Partnership and, subject
to any requirements of this Agreement, shall be authorized to pay to itself such
Operator's Fees and other amounts as are properly owed to it under the
Definitive Agreements or otherwise authorized by the Management Committee. The
persons authorized to sign with respect to such accounts shall be specified in
writing by the Partnership. Each check or draft on such an account in excess of
*** shall require the signatures of two persons, with one of such persons being
a member of the Management Committee.
SECTION 6.03. Other Agreements. The Partnership is hereby authorized
----------------
to perform the agreements or arrangements set forth below and to take all
actions reasonably necessary or advisable in connection therewith, in order to
accomplish the undertakings and purposes set forth in Article II:
----------
(a) the Operating Agreement;
(b) the Coating Agreements, including each Exhibit or Annex thereto;
and
(c) the Inland Tolling Agreement.
ARTICLE VII
Actions by Partnership and Partners
-----------------------------------
SECTION 7.01. Annual Meeting of Partners. A meeting of the Partners
--------------------------
shall be held during the first Fiscal Quarter of each year at the offices of the
Operating Partner at the EG Facility or such other date and location as may be
specified by the Management Committee. At such annual meeting of the Partners,
each Partner shall appoint two individuals who shall serve as such Partner's
representatives on the Management Committee until their respective successors
are appointed. The Operating Partner shall present a report on operations for
the immediately preceding Fiscal Year and a projection of anticipated operations
for the ensuing year. Such business as may properly come before the meeting
shall be conducted.
5
<PAGE>
SECTION 7.02. Special Meeting of Partners. Special meetings of the
---------------------------
Partners may be called by any Partner upon not less than 10 days' written notice
to all of the Partners. The notice of special meeting shall set forth the
location, date, time and purpose of the meeting. Business transacted at any such
special meeting shall be limited to the purpose or purposes stated in the notice
thereof and such additional matters as are germane thereto.
SECTION 7.03. Actions Requiring Unanimous Vote. Advance written
--------------------------------
approval or consent signed by all of the Partners shall be required:
(a) to amend, modify, alter or waive any provision of or change the
Term of this Partnership Agreement, the Operating Agreement, any of the
Coating Agreements or amend, modify, alter or waive any provision of the
Inland Tolling Agreement, (including any change in the "Term" as defined in
the Inland Tolling Agreement); provided, however, that (i) the consent of
-------- -------
LTV-W shall not be required in connection with any amendment, modification,
alteration, waiver or extension of the Inland Tolling Agreement which is
not reasonably expected to have an adverse effect upon the Partner's
Interest of LTV-W and (ii) subject to MSCWC's rights under Article XIV, the
-----------
consent of MSCWC shall not be required in connection with the removal of
MSCWC as the Operator pursuant to Section 8.01 of the Operating Agreement;
------------
(b) to mortgage or lease or agree to mortgage or lease any Partnership
assets or any interest therein, or to encumber, sell, transfer, convey,
exchange or assign or agree to encumber, sell, transfer, convey, exchange
or assign any Partnership assets or any interest therein or to amend,
modify or alter, or agree to amend, modify, or alter the terms of any
mortgage or lease of any Partnership assets, except in each case in the
ordinary course of business and in accordance with the Operating Agreement;
(c) to enter into any borrowing arrangement or make any borrowings (i)
in the Partnership name or (ii) with respect to which any Partner, in its
capacity as such, guarantees or is otherwise jointly or severally obligated
for all or any portion thereof;
(d) to obligate the Partnership as a guarantor, endorser, surety or
accommodation party, or otherwise pledge the credit of the Partnership in
any way, other
6
<PAGE>
than the endorsement of checks and otherwise in the ordinary course of
business and in accordance with the Operating Agreement;
(e) to establish, change or modify pricing for coating services for
Partners or their Affiliates and the terms, conditions and priorities on
which such coating services are rendered by the Partnership;
(f) to approve any capital expenditure or series of related capital
expenditures aggregating $25,000.00 or more which are to be paid for by the
Partnership; provided, however, that as long as the Partnership's current
-------- -------
capital budget has been approved by the Management Committee, MSCWC as the
Operating Partner shall be authorized to make capital expenditures in
amounts *** within the aggregate amount budgeted without obtaining any
further approval or consent of all Partners;
(g) to enter into any line of business other than that set forth in
Article II hereof or to otherwise change the basic nature of the business
----------
of the Partnership;
(h) to enter into, amend or terminate any agreements with outside
parties relating to proprietary rights and technical cooperation;
(i) to approve dissolution of the Partnership prior to the end of the
Term of the Partnership;
(j) to approve any agreement, contract or transaction with any Partner
or any Affiliate of any Partner that is not contemplated by the Definitive
Agreements and involves more ***;
(k) to change the Fiscal Year of the Partnership or any significant
accounting principles or practices;
(l) to assume any matter in contest under Section 3.04(b) of the
---------------
Operating Agreement;
(m) to institute any litigation on behalf of the Partnership;
(n) to establish general partnership policy;
(o) to institute any change in the EG Facility or its operations that
would reduce the annual amount of
7
<PAGE>
Production Time available to any Primary Purchaser or MSCWC under any of
the Coating Agreements; or
(p) to perform any such other act or acts specifically referred to in
this Partnership Agreement as requiring agreement or approval of all of the
Partners.
SECTION 7.04. Other Approvals. Except as specified in Section 7.03,
--------------- ------------
any act or acts expressly required by this Partnership Agreement or the other
Definitive Agreements to be approved by the Partnership shall require advance
approval by the Management Committee and, except as set forth in Article XIV,
-----------
upon such approval, such action shall be binding upon all of the Partners.
SECTION 7.05. No Commitments on Behalf of the Partnership. Except as
-------------------------------------------
provided in this Partnership Agreement, the Operating Agreement or the Coating
Agreements, each Partner agrees that it will not take any action which will
commit or bind the Partnership or any other Partner or Partners to any act,
agreement, contract or undertaking of any kind or nature whatsoever, or incur
debt in the name of or on behalf of the Partnership or create any lien upon any
of the properties or the other assets of the Partnership or hold itself out as
authorized to act on behalf of the Partnership or any Partner or Partners,
unless permitted by this Partnership Agreement and expressly authorized in
advance to do so by approval of the Partnership or the Management Committee, as
the case may be. Each Partner agrees that it will indemnify the Partnership and
the other Partner or Partners against any and all claims, damages, losses and
liabilities to which the Partnership or any other Partner may be or become
subject arising or resulting from the breach by such Partner of this Section.
SECTION 7.06. Fiduciary Relationship. Each Partner acknowledges and
----------------------
agrees that it now has and will continue to have during the Term of the
Partnership a fiduciary relationship to the Partnership and to each other
Partner. However, nothing herein shall be construed to mean that any Affiliate
of a Partner has a fiduciary relationship to the Partnership or any Partner or
Affiliate thereof.
SECTION 7.07. Renegotiation of Certain Terms. (a) Commencing June 1,
------------------------------
2001, the Partners and their respective Guarantors shall engage in good faith
negotiations to review and, if agreed, revise the Coating Fees payable to the
Partnership by the Primary Purchasers
8
<PAGE>
and MSCWC under their respective Coating Agreements, the Operator's Fees payable
to the Operator by the Partnership under the Operating Agreement and any
operational matters necessary or advisable to achieve the Partnership's
purposes, including, without limitation, matters responsive to any changes from
July 1, 1998 in the effective cost of the services provided under the Operating
Agreement and the Coating Agreements and any changes from July 1, 1998 in the
efficiency or competitiveness of the EG Facility or the market for the products
produced at the EG Facility. Any such revisions shall require agreement by all
of the Partners and shall be effective commencing January 1, 2002.
(b) If the Partners and their respective Guarantors cannot reach agreement
with respect to one or more matters discussed pursuant to Section 7.07(a) by
---------------
September 30, 2001, such matters shall be referred for resolution in accordance
with the provisions of Section 14.01 (disregarding for this purpose the last
-------------
sentence thereof).
(c) If one or more any matters referred for resolution pursuant to Section
-------
7.07(b) is not resolved by October 31, 2001, all such matters shall be resolved
- -------
conclusively as follows: On or before November 7, 2001, each Partner shall
submit to an expert retained by the Partnership in accordance with the relevant
provisions of Section 14.03 (and simultaneously to the other Partners) a
-------------
proposal which shall be limited to (i) a schedule of such Partner's proposed
revisions to the Coating Fees payable to the Partnership by the Primary
Purchasers and MSCWC under their respective Coating Agreements and the Operating
Fees payable to the Operator by the Partnership under the Operator's Agreement
and (ii) position papers explaining and justifying such Partner's proposed
pricing revisions (each Partner's submission, a "Proposal"). Under this Section
-------
7.07(c), only pricing terms shall be subject to revision and, accordingly, no
- -------
Partner shall submit a Proposal that, directly or indirectly, involves or would
require, and the expert shall not consider, directly or indirectly, any revision
to any provision or term of any Definitive Agreement other than those terms
identified in clause (i) of this paragraph. The expert, acting in accordance
with the relevant provisions of Section 14.03, shall choose the one Proposal in
-------------
its entirety that the expert judges to be most appropriate in light of, and
consistent with, the provisions of Section 7.07(a). The expert's decision shall
---------------
be final and binding on the Partners, their respective Guarantors and Affiliates
and on the Partnership and shall be deemed to resolve all matters referred to in
Section 7.07(b) that were not resolved pursuant to such paragraph; provided
- ---------------
that, notwithstanding
9
<PAGE>
Section 14.03, the date for retroactive application of the expert's decision
- -------------
shall be January 1, 2002.
(d) Commencing June 1, 2001, Bethlehem, EGL Steel and MSCWC shall engage in
good faith negotiations to review and, if agreed, revise the allocation of
Production Time as between Bethlehem and MSCWC and any compensation for any such
revision (but not affecting the allocation of Production Time to LTV Steel),
taking into consideration changes from July 1, 1998 in the relative demand for
Bethlehem's EG Products and MSC Laminates and Composites(R) products and non-
automotive products. Any such revisions to the allocation of Production Time
shall require the agreement of Bethlehem, EGL Steel and MSCWC and shall be
effective commencing January 1, 2002. If Bethlehem, EGL Steel and MSCWC cannot
reach agreement with respect to such matter by September 30, 2001, such matter
shall be resolved, as between Bethlehem and EGL Steel and MSCWC, in accordance
with the dispute resolution procedures set forth in Article XIV.
(e) Once any revisions contemplated by this Section 7.07 are agreed upon
------------
or resolved in accordance with this Section, the Partners and their respective
Guarantors, as appropriate, shall amend the Definitive Agreements to reflect
such revisions, effective in each case as of January 1, 2002.
(f) No delay or failure in reaching any such agreements or resolutions
contemplated by this Section 7.07 shall result in a termination of any of the
------------
Definitive Agreements prior to December 31, 2004.
ARTICLE VIII
Management Committee
--------------------
SECTION 8.01. Members. The Management Committee shall consist of
-------
six persons, with two members being appointed by each Partner (the six members
at the date hereof being named on Schedule I to this Partnership Agreement).
Each Partner may remove or replace any member appointed by it, and may fill any
vacancy created by the death, resignation or removal of any member appointed by
it, upon notice to the Management Committee and all of the other Partners. Each
Partner shall be entitled to name an alternate member to serve in the place of
either of such Partner's members, should one such member not be able to attend a
meeting or meetings. Each Partner shall bear the
10
<PAGE>
cost incurred by the members of the Management Committee who represent such
Partner.
SECTION 8.02. Meetings. The Management Committee shall meet at
--------
least three times during each Fiscal Year and at such times and locations as it
shall determine. Meetings of the Management Committee may be called by any
member upon written notice of the time and location of the meeting given to all
other members of the Management Committee at least 10 days prior to such
meeting. A quorum shall be present at a meeting if at least one member
representing each of the Partners attends such meeting. The act by members
representing Partners holding a majority of the Voting Interests of the
Partnership shall be the act of the Management Committee. One vote may be cast
collectively by all of the members representing each Partner with respect to
each matter to be decided by the Management Committee. Any action may be taken
by the Management Committee without a meeting if at least one member
representing each Partner consents thereto in writing. The Management Committee
may designate from among its members a Chairman to preside at the meetings of
the Management Committee and at the meetings of the Partners. With the consent
of the Management Committee, any Partner may invite experts and such other
persons (at the expense of such Partner) to a meeting as it may deem proper.
SECTION 8.03. Authority. Except as otherwise expressly provided in
---------
this Partnership Agreement, the Management Committee may exercise all powers of
the Partnership and may do all such lawful things and acts as are not by statute
or by this Partnership Agreement directed or required to be exercised or done by
the Partners. All decisions of the Management Committee shall be commercially
reasonable and in furtherance of undertakings and the purposes of the
Partnership as set forth in Article II.
----------
SECTION 8.04. Responsibilities. The Management Committee shall be
----------------
responsible for:
(a) the overall management of the business and affairs of the
Partnership, except such portions thereof as are expressly delegated to
MSCWC pursuant to the Operating Agreement or reserved to the Partners as
provided herein;
(b) assuring that Partnership policy and guidelines are being
effectuated in a manner designed to achieve Partnership objectives;
11
<PAGE>
(c) making any distributions from the Partnership to the Partners;
(d) assigning, transferring, pledging, compromising or releasing any
of the claims of, or debts due to, the Partnership, except upon payment in
full;
(f) subject to Article XII, reviewing all capital expenditures
-----------
proposed for the forthcoming Fiscal Year, establishing a budget for such
expenditures, and approving expenditures proposed to be made in accordance
with such budget; and
(g) establishing guidelines for sales of coating services to outside
parties, as contemplated by Section 10.04.
-------------
ARTICLE IX
Books and Records
-----------------
SECTION 9.01. Books of Account. The Operating Partner shall
----------------
establish and at all times maintain full and complete books of account of the
Partnership on an accrual basis in accordance with the generally accepted
accounting principles used by MSC in its audited financial statements.
SECTION 9.02. Records. The Operating Partner shall establish and
-------
maintain all records of the Partnership, including (but not by way of
limitation) the minutes of all Partnership and Management Committee meetings.
SECTION 9.03. Partner's Accounts. The Operating Partner shall
------------------
establish and maintain for each Partner on the books of the Partnership, a
Partner's Account which shall show the amount of cash capital contributions, any
amounts credited to such Partner under Section 12.03 and the net fair market
value of any property contributed to the Partnership in accordance with Section
-------
4.02 by such Partner (or its predecessor in the case of a transferred Partner's
- ----
Interest). The Partner's Account of a Partner shall be increased by the amount
of any net income (or items of gross income) allocated to such Partner in
accordance with Section 11.01, and decreased by (i) the amount of any net loss
-------------
(or items of loss or deduction) allocated to such Partner in accordance with
Section 11.01, (ii) the amount of any cash distributed to such partner and (iii)
- -------------
the fair market value of any asset distributed in kind to such Partner (net of
all
12
<PAGE>
liabilities secured by such asset that such Partner is considered to assume or
take subject to under Section 752 of the Code). The Partner's Account of a
Partner also shall be adjusted appropriately to reflect any other adjustment
required pursuant to applicable Treasury Regulations.
SECTION 9.04. Location and Inspection of Books and Records. The
--------------------------------------------
Partnership's books of account and records shall be kept at the executive
offices of the Partnership in Walbridge, Ohio. Each Partner shall have the
right to inspect or to have its authorized representatives inspect the books and
records of the Partnership at any and all times upon reasonable notice and
during reasonable business hours. In addition, each Partner shall have the
right to have its authorized representatives or independent certified public
accountant audit the accounts of the Partnership at such Partner's own expense,
and, upon the request of any Partner, the independent certified public
accountants of the Partnership shall consult with and make available its
Partnership audit work papers to the authorized representatives or independent
certified public accountant of such Partner.
SECTION 9.05. Financial Reports. As promptly as practicable and not
-----------------
later than 20 days after the close of each Reporting Period during each Fiscal
Year of the Partnership, the Operating Partner shall prepare and submit to each
Partner a report showing the business and operations of the Partnership for such
period and for the current Fiscal Year to date including (but not by way of
limitation) such information concerning the Partnership as may be reasonably
required by any Partner for state or Federal tax returns or other reports
required by any governmental authority, copies of the following unaudited
financial statements and appropriate explanatory comments:
(a) a balance sheet of the Partnership as of the end of such Reporting
Period;
(b) a statement of profit and loss for such Reporting Period and
Fiscal Year to date;
(c) a statement of changes in financial position for such Reporting
Period and Fiscal Year to date; and
(d) a statement of changes in each Partner's Account for such
Reporting Period and Fiscal Year to date.
13
<PAGE>
SECTION 9.06. Annual Financial Reports. As promptly as practicable
------------------------
and not later than 60 days after the close of each Fiscal Year of the
Partnership, the Operating Partner shall prepare and submit to each Partner a
report showing the business and operations of the Partnership for such Fiscal
Year. Such report shall be accompanied or preceded by financial statements as
of the end of such Fiscal Year and the previous Fiscal Year, prepared on a
consistent basis (except as disclosed therein) and audited by an independent
certified public accountant approved by the Management Committee and at the
expense of the Partnership, which financial statements shall include:
(a) a balance sheet of the Partnership as of the end of each of such
Fiscal Years;
(b) a statement of profit and loss for each of such Fiscal Years;
(c) a statement of changes in financial position for each of such
Fiscal Years;
(d) a statement of each Partner's Account and changes therein for each
of such Fiscal Years;
(e) notes required for a fair presentation in accordance with
generally accepted accounting principles; and
(f) an opinion of such accountant on the fairness of such financial
statements.
SECTION 9.07. Tax Returns. The Operating Partner shall be the "tax
-----------
matters partner" within the meaning of Section 6231(a)(7) of the Internal
Revenue Code and shall be responsible for the preparation and filing of all
Federal, state and local tax returns, information returns and reports, and other
tax-related documents required to be filed by the Partnership. The taxable year
of the Partnership shall be as specified in Section 706(b)(1)(B) of the Code.
The Operating Partner shall provide to each other Partner for review and
approval a complete copy of each Federal, state and local income tax return,
information return or report and other tax-related document prepared for filing
by the Partnership, including underlying information reasonably necessary for
each Partner's state or federal income tax returns, at least 30 days prior to
the date on which such return, report or document is required to be filed,
taking into account all available extensions. No such return, report or
document shall be filed without the
14
<PAGE>
prior agreement by a majority in interest of the Partners as to the proper
treatment of all Partnership items, elections and other matters properly
reflected on such return, report or document. As promptly as practicable, the
Operating Partner shall deliver to each Partner a copy of each Federal, state or
local income tax return, report or tax-related document filed by the Operating
Partner on behalf of the Partnership. The Operating Partner shall give all other
Partners immediate notice of any request to audit or otherwise examine any
Partnership income tax return, report or document by any Federal, state or local
tax authority. Each Partner shall have the right to participate with the
Operating Partner in all audit and other administrative and judicial proceedings
dealing with the examination of any such return, report or document, and the
Partnership's position, response and actions in connection with all such
proceedings shall be established only by prior approval of a majority in
interest of the Partners. Nothing in this Agreement shall increase the
responsibility of the Operating Partner for taxes or any related interest and
penalties beyond that provided by applicable law.
ARTICLE X
Operations
----------
SECTION 10.01. Operation and Use of EG Facility. The Operating
--------------------------------
Partner shall have day-to-day management and operating control of the EG
Facility and shall strive to minimize unused line time and to observe production
and testing priorities, all as provided in the Definitive Agreements or
otherwise authorized by the Management Committee. In performance of its
obligations, the Operating Partner shall procure and maintain insurance with
such coverages, in such amounts and with such companies as is reasonably
satisfactory to the Partnership, and in connection therewith shall satisfy all
of the requirements of Section 3.08(b) of the Operating Agreement. Throughout
---------------
the Term of this Partnership, the EG Facility shall retain the ability to
produce and apply Organic Coatings and, notwithstanding the foregoing, in order
to develop new product opportunities, MSCWC shall be entitled to priority to
Production Time equal to that of Bethlehem for *** Standard Tons in calendar
year 2000 and *** Standard Tons in calendar year 2001 for the production of MSC
Laminate and Composite(R) products or non-automotive products, with a preference
toward using Organic Coatings over pure zinc or ZnNi coatings, all on the terms
and conditions provided for in the MSCWC Coating Agreement. Sales to MSCWC
pursuant to
15
<PAGE>
this Section 10.01 shall be treated as sales to outside parties for
-------------
the purposes of the Make Whole Provision set forth in Section 10.04 of this
-------------
Partnership Agreement.
SECTION 10.02. Application of Funds. (a) Upon receipt of funds
--------------------
from the Partners, from borrowings, from sales of coating services or otherwise,
the Operating Partner on behalf of the Partnership will make all Partnership
disbursements required in connection with the operation of the EG Facility. The
Operating Partner will account for all funds furnished to the Partnership, it
being understood that all funds furnished to the Partnership by the Partners,
all funds borrowed by the Partnership, all revenues of the Partnership and any
assets acquired by the use of such funds shall be used solely for the purpose of
carrying out the terms and provisions of this Partnership Agreement including
(but not by way of limitation) the undertakings and purposes of the Partnership
set forth in Article II and the agreements of the Partnership referred to in
----------
Article VI.
- ----------
(b) The Operating Partner shall receive an Operator's Fee for all
coating services rendered by it in its capacity as Operator in accordance with
the Operating Agreement.
SECTION 10.03. Revenues. The revenues of the Partnership will be
--------
generated from fees charged for the services associated with applying coatings
to coiled sheet metal and related services. Prices charged by the Partnership
for all services rendered by it shall be established in accordance with the
Definitive Agreements or otherwise authorized by the Management Committee. Upon
any extension of the Term of the Partnership pursuant to Section 5.02 hereof,
------------
the Coating Agreements and Operating Agreement shall be amended, if appropriate,
to reflect all changes in the Coating Fees and the Operator's Fee which all of
the Partners agree shall take effect at such time.
SECTION 10.04. Coating Services for Outside Parties. Whenever the
------------------------------------
EG Facility is not being fully utilized by Firm Orders from the Primary
Purchasers for EG Services and Other Services under Section 4.01 of the Coating
------------
Agreements, the General Manager of the Operating Partner may cause the
Partnership to sell electrogalvanizing, coating and related services to outside
parties in accordance with guidelines established from time to time by the
Management Committee. The Partnership's profit from sales to Ispat Inland up to
the amount of the Inland Option Tons shall be allocated as provided in Section
-------
16
<PAGE>
11.03. The Partnership's profit from sales to outside parties during the Term
- -----
(including sales to Ispat Inland in excess of the Inland Option Tons) shall be
allocated to the Partners in accordance with their respective Financial
Interests and the Partnership's profit from sales to MSCWC under the MSCWC
Coating Agreement shall be allocated fifty percent (50%) to EGL Steel and fifty
percent (50%) to MSCWC; provided, however, in each case under this sentence,
-------- -------
that EGL Steel and LTV-W shall not be entitled to share in any such profits
during any calendar year until the sum of:
(a) the amount of profits retained by MSCWC from sales of
electroplating services to outside parties during such year; and
(b) *** for each ton on which MSCWC performs base slitting services,
*** for each ton on which MSCWC performs critical inspection
services, and *** each for each ton on which MSCWC applies VW-
type packaging during such year; and
(c) the amount of profits retained by the Partnership on production
of MSC Laminates and Composites(R) products or non-automotive
products pursuant to the MSCWC Coating Agreement during such
year; and
(d) the amount of profits retained by MSCWC for applying Organic
Coatings to pure zinc or ZnNi products for LTV during such year;
provided that solely for purposes of this clause (d), the amount
--------
of such profit on each Ton of such product shall be deemed to be
*** of the Operator's Fees for such Organic Coatings determined
in accordance with Section 5.01(v) of the Operating Agreement;
shall exceed *** per Standard Ton produced for any Primary Purchaser on a
cumulative basis from January 1, 1999 (the "Make Whole Provision"). The
Management Committee shall prescribe guidelines for the terms, including
pricing, under which the Partnership will conduct coating services for outside
parties (other than sales of the Inland Option Tons to Ispat Inland governed by
the Inland Tolling Agreement and sales to MSCWC governed by the MSCWC Coating
Agreement). MSCWC's Operator's Fees for (a) electroplating pure zinc and ZnNi
for outside parties (other than with respect to such sales to Ispat Inland or
MSCWC) shall be as set forth in Section 5.04 of the Operating Agreement. For
------------
purposes of
17
<PAGE>
clause (c) of this Section 10.04, the Partnership's "profits" on production of
-------------
MSC Laminates and Composites(R) products or non-automotive products during the
Term shall refer to the difference between the Coating Fee applicable to such
sales as provided in Article V of the MSCWC Coating Agreement and the Operator's
Fee applicable to such sales as provided in Article V of the Operating
Agreement.
SECTION 10.05. Service Nature of Business. Unless otherwise agreed
--------------------------
by all Partners, all production operations of the Partnership at the EG Facility
shall be on a "toll coating" basis, and the Partnership shall not take title to
any metal substrate being processed at any time.
SECTION 10.06. Provision of Services and Facilities by Partners.
------------------------------------------------
The Partnership shall have no employees. The Partnership anticipates that each
Partner will, from time to time, provide the Partnership with such facilities
and services as may be necessary to assist with the internal management of the
Partnership (including those specifically set forth in this Partnership
Agreement) and that, except as provided in the Operating Agreement or otherwise
agreed by all Partners, no Partner, no Partner's respective employees, and no
Partner's representatives shall be entitled to compensation from the Partnership
for the furnishing of such facilities and services.
SECTION 10.07. Licenses/Intellectual Property. The Partnership
------------------------------
shall have the benefit of Section 4.04 of the Parent Agreement relating to
------------
certain rights to Intellectual Property of MSCWC.
SECTION 10.08. Casualty Loss. (a) In the event that the EG
-------------
Facility is subjected to a Major Loss, the Partnership may authorize and empower
one or more Partners, on behalf and in the name and at the sole expense of the
Partnership to appear in any proceeding or action, to negotiate, prosecute and
adjust any claim for any award, compensation or insurance payment on account of
any such Major Loss and to collect any such award, compensation or insurance
payment. Except as provided in clause (b) below, amounts paid in connection
with any such Major Loss shall be applied as provided in the Operating
Agreement.
(b) If a Major Loss shall affect all or a substantial portion of the
EG Facility, and shall render the EG Facility unsuitable for restoration for
continued use as contemplated by this Agreement, the Partners shall consider
whether dissolution prior to the end of the Term of the Partnership is
advisable.
18
<PAGE>
SECTION 10.09. Extended Shutdown. MSCWC, EGL and LTV-W will share
-----------------
the actual extended shutdown expense (i.e., for extraordinary maintenance and
repairs) in accordance with their respective Financial Interests. MSCWC will
provide a reasonable estimate of the extended shutdown requirements, time
schedule and costs 30 days in advance of the shutdown for review and approval by
EGL and LTV-W, which approval shall not be unreasonably withheld or delayed.
Each of EGL and LTV-W will have ten days to respond to MSCWC's estimate or
approval will be deemed granted. Any significant modifications to the approved
estimate will be discussed as soon as reasonably practicable with personnel of
EGL and LTV-W, and approval of such modifications shall not be unreasonably
withheld or delayed.
SECTION 10.10. Sublease. The Partnership's obligation to pay rent
--------
under the Sublease during the Term shall continue to be a pass through to
Bethlehem, LTV Steel and, after December 31, 1999, MSCWC of the lease cost under
the MSCPFM Lease between MSCPFM and Corporate Property Associates/Corporate
Property Associates 2 ("CPA/CPA2"), all as provided in Section 5.02 of the
------------
Coating Agreements. MSCPFM and the Partnership have previously executed a letter
agreement to extend the Sublease for the period from January 1, 1999 through
December 31, 2001, a copy of which has been delivered to CPA/CPA2, and the
Partnership shall timely enter into a second letter agreement with MSCPFM to
extend the Sublease pursuant to its terms for the period from January 1, 2002 to
December 31, 2004, a copy of which shall be delivered to CPA/CPA2.
ARTICLE XI
Profits and Losses
------------------
SECTION 11.01. Allocations. For Partner's Account purposes the
-----------
Partnership's net profits or loss for each Fiscal Year shall be equal to its
taxable income or loss for such Fiscal Year, determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss), with the following
adjustments:
(a) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing profits or loss shall be
added to such taxable income or loss;
19
<PAGE>
(b) any expenditures described in Section 705(a)(2)(B) of the Code not
otherwise taken into account in computing profit or loss shall be subtracted
from such taxable income or loss;
(c) in the event the book value of any Partnership property is
adjusted pursuant to Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations or
other pertinent sections of such Treasury Regulations, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such property for purposes of computing profit and loss (but not for purposes of
computing taxable income or loss);
(d) in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation, amortization or other cost recovery
deductions with reference to the book value of Partnership property (if
different from its adjusted tax basis) pursuant to Section 1.704-1(b)(2)(iv)(g)
of the Treasury Regulations for such fiscal year; and
(e) gain or loss resulting from any disposition of property shall be
computed by reference to the book value of the property disposed of,
notwithstanding that the adjusted tax basis of such property may differ from its
book value.
Except as provided in the Definitive Agreements, the Purchase Agreement or
otherwise authorized by the Management Committee (which provisions or
authorizations shall govern the allocations of such items for both financial
accounting and tax purposes), for Partner's Account purposes: all net profits
from all business conducted by the Partnership (without regard to the source
from which they are derived), all losses suffered or incurred by the Partnership
and all items of income and expense, gain or loss and deduction and credit,
shall be allocated to each of the Partners and reflected in their respective
Partner's Accounts in the same proportions as their Financial Interests,
provided, however, that all such allocations shall be in accordance with Section
- -------- -------
704 of the Code and the Treasury Regulations thereunder. Federal income tax
items relating to any property contributed to the Partnership or revalued by the
Partnership in a manner analogous to Treasury Regulation Section 1.704-
1(b)(2)(iv)(f) shall be allocated among the Partners in accordance with Section
704(c) of the Code and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to take
into account the difference between the fair market value
20
<PAGE>
and the tax basis of such property as of the date of its revaluation. Except as
otherwise provided herein with respect to any asset the adjusted tax basis of
which differs from its book value, all allocations for income tax purposes shall
be made in a manner consistent with the allocations made for Partner's Account
purposes. Unless otherwise required by the Code or applicable regulations
thereunder, any adjustment to the basis for Partnership properties that results
from the application of an election under Section 754 of the Code and is
applicable only to the transferee of an interest in the Partnership (a "special
basis adjustment") and any adjustment to such transferee's share of the
Partnership's income, gain, deduction, loss or credit that results from such
special basis adjustment shall be made solely by such transferee.
SECTION 11.02. Distributions. Distributions of all profits of the
-------------
Partnership, if any, shall be made in proportion to the Partners' respective
Financial Interests not less frequently than annually, at such times and in such
amounts as shall be approved by the Management Committee pursuant to Section
-------
8.04 hereof; provided, however, that any profits from sales to outside parties
- ---- -------- -------
shall be distributed in accordance with Section 10.04 of this Agreement.
-------------
SECTION 11.03. Inland Tolling Agreement. For purposes of this
------------------------
Agreement, production for Ispat Inland up to the amount of the Inland Option
Tons specified in Section 3.2 of the Inland Tolling Agreement (which shall
-----------
include rights to use of the slitter in proportion to Inland's rights thereunder
to Production Time) shall be considered as production for EGL Steel rather than
as production for outside parties, except as otherwise provided herein. The
difference between the per Ton price the Partnership is entitled to charge Ispat
Inland pursuant to the Inland Tolling Agreement (*** per Standard Ton for the
period January 1, 1999 through December 31, 1999 and *** per Standard Ton for
the period January 1, 2000 through December 31, 2001, subject to adjustment
pursuant to Section 4.2 of the Inland Tolling Agreement) and the Operator's Fee
-----------
payable to MSCWC (*** per Standard Ton for the period January 1, 1999 through
December 31, 2001, subject to adjustment only for changes in the cost of zinc
and electricity since July 1, 1998 under the same procedure provided for Ispat
Inland pursuant to the Inland Tolling Agreement) shall be credited to EGL Steel.
To the extent Ispat Inland utilizes the EG Facility pursuant to Section 3.3 of
-----------
the Inland Tolling Agreement for production in excess of the Inland Option Tons,
such excess will be treated as production for outside parties as provided in
Section 10.04 of this Agreement. The
- -------------
21
<PAGE>
Partnership shall invoice Ispat Inland for the Inland Option Tons and, upon
payment of such invoice, shall credit EGL Steel with the difference described
above. Any slitting revenue received from Ispat Inland shall be for MSCWC's
account. Any cancellation charge paid by Ispat Inland shall be for EGL Steel's
account. The Partnership shall invoice Ispat Inland for slitting charges and
cancellation charges and credit MSCWC's account or credit EGL Steel's account as
appropriate. The credit risk for the Inland Option Tons shall not be borne by
the Partnership, but rather by MSCWC (for slitting revenue owed) or by EGL Steel
(for coating revenue on the Inland Option Tons and cancellation charges). With
respect to production for Ispat Inland in excess of the Inland Option Tons and
production for other outside party accounts, the Partnership shall bear the
credit risk.
SECTION 11.04. Certain Cost Reductions. The Partners agree to
-----------------------
pursue (through jointly established teams) cost reductions in the areas of
purchasing and logistics. The benefits of any cost reductions achieved will be
divided among the Partners in accordance with their respective Financial
Interests; provided, however, that any cost reductions realized due to LTV-W's
-------- -------
entering into the Partnership shall be shared by MSCWC receiving *** of the
savings, EGL Steel receiving *** of the savings and LTV-W receiving *** of the
savings.
ARTICLE XII
Capital Expenditures
--------------------
SECTION 12.01. Proposals. Any Partner or Partners may propose that
---------
the Partnership make capital expenditures on the EG Facility by submitting a
proposal to the Management Committee for review and approval at its next meeting
and, in the case of its last meeting of each Fiscal Year, for inclusion in the
budget for capital expenditures for the following Fiscal Year.
SECTION 12.02. Expenditures to Be Paid for by Partnership. Capital
------------------------------------------
expenditures on the EG Facility shall be paid for by all of the Partners in
amounts proportionate to their respective Financial Interests if (a) the total
cost of the proposed capital expenditure or series of related expenditures is
less than *** and the proposal receives Management Committee approval or (b) the
total cost of the proposed capital expenditure equals or exceeds *** and the
proposal is approved by members of the Management Committee representing all of
the Partners; provided,
--------
22
<PAGE>
however, that as long as the Partnership's current capital budget has been
- -------
approved by the Management Committee, the Operating Partner shall be authorized
to make capital expenditures in amounts up to *** within such budget. No
provision shall be made for capital recovery by any Partner of any capital
expenditure (other than the inherent benefits which result from the capital
expenditure); provided, however, that (a) special capital recovery provisions
-------- -------
for each capital expenditure in excess of *** shall be negotiated by the
Partners and (b) the sharing by the Partners of any savings resulting from
extraordinary capital expenditures shall be negotiated at the time that the
capital expenditure is approved.
SECTION 12.03. Expenditures To Be Paid by Partners. If any proposed
-----------------------------------
capital expenditure on the EG Facility does not receive approval of the
Management Committee or of all of the Partners, as the case may be, in
accordance with Section 12.02, then the Partner or Partners proposing such
-------------
expenditure may provide notice to all of the other Partners of its or their
intent to make the capital expenditure at its or their own expense. Unless one
or more of the other Partners, within 30 days of such notice, establishes to the
reasonable satisfaction of the Management Committee that the proposed capital
expenditure will impair the residual value of the EG Facility or the capability
of the EG Facility for its intended purposes, then the Partner or Partners
submitting the proposal may proceed to make the capital expenditure at its or
their own expense. Each capital expenditure pursuant to this Section 12.03,
-------------
however, shall be considered to be a contribution to the Partnership's capital
by all Partners and shall be credited to the Partner's Accounts of all Partners,
in each case in accordance with their respective Financial Interests, and the
assets acquired thereby shall be owned by the Partnership.
ARTICLE XIII
Transfers of Partnership Interests
----------------------------------
SECTION 13.01. General Limitations on Transfers. No Partner shall,
--------------------------------
except in accordance with all terms and conditions of this Article XIII or upon
------------
agreement of all of the Partners, withdraw from this Partnership or mortgage,
pledge, sell, assign, transfer, hypothecate or otherwise encumber, transfer,
dispose or permit to be encumbered, transferred or disposed in any manner or by
any means whatever, whether voluntarily or by operation of law, all or
23
<PAGE>
any part of its Partner's Interest unless and until it has sold or otherwise
disposed of all of its Partner's Interest in accordance with Section 13.02 and
-------------
then only if the successor in ownership of the beneficial interest in such
Partner's Interest shall assume and agree in writing to carry out all of such
Partner's obligations associated with the various agreements related to such
Partner's Interest. In the event that a transfer by a Partner of all or part of
its Partnership Interest would cause a termination of the Partnership under
Section 708 of the Code, the Partners agree to cooperate to the extent
reasonably practicable (including making one or more reasonable amendments to
this Partnership Agreement) to avoid or reduce any adverse tax consequences to
the Partnership and the remaining Partners as a result of such transfer.
SECTION 13.02. Permissible Transfers. A Partner may sell, transfer
---------------------
or assign its Partner's Interest:
(a) to any other Partner (other than the Operating Partner) or any
Affiliate thereof; or
(b) in connection with any merger, consolidation, liquidation or
reorganization to which such Partner is a party or to any purchaser of all
or substantially all of the assets and business of such Partner; provided,
--------
however, that all of the Partners agree in writing, which agreement shall
-------
not be unreasonably withheld, that the purchaser, transferee, assignee or
surviving or resulting corporation, as the case may be, has the financial
and managerial capability of satisfying all obligations to be assumed by it
and is not then actively engaged in any line of business as would impair
the ability of the Partnership to achieve its purposes.
SECTION 13.03. Right of First Refusal. No sale, transfer or
----------------------
assignment of any Partner's Interest, whether or not in accordance with this
Article XIII, shall terminate the Partnership; provided, however, that
- ------------ -------- -------
(a) if any Partner receives a good faith offer to purchase its
Partner's Interest, which it decides to accept;
(b) if any Partner makes an assignment for the benefit of creditors or
applies for the appointment of a trustee, liquidator or receiver of any
substantial part of its assets or commences any proceeding relating
24
<PAGE>
to itself under any bankruptcy, reorganization, arrangement or similar law;
(c) if any such application is filed or proceeding commenced against
any Partner and such Partner indicates its consent thereto, or an order is
entered appointing any such trustee, liquidator or receiver or approving a
petition in any such proceeding and such order remains in effect for more
than 60 days;
(d) if any sale or other transfer of any interest (whether whole or
partial) in the Partnership, whether made directly or by operation of law
or by virtue of the enforcement of any pledge or encumbrance thereon, is
made contrary to the provisions hereof;
(e) if any transferee under Section 13.01 hereof shall fail promptly
-------------
to assume and agree to be bound by the provisions of this Partnership
Agreement and all of the agreements related to such Partner's Interest, and
to become a Partner for all purposes hereunder;
(f) if any Partner or transferee under Section 13.01 hereof shall
-------------
institute any proceeding in a court of competent jurisdiction for sale or
partition; or
(g) if any event occurs which could result in a change in Control of
the Operating Partner, such that the Operating Partner would thereafter be
Controlled By or Under Common Control With any foreign or domestic
integrated steel producer, any automotive assembler, any current or
anticipated purchaser of more than 5,000 Tons per year of cold rolled steel
in the United States or any Affiliate of any of the foregoing;
then, in any such event, any other Partner (or, if more than one Partner desires
to purchase, such Partners pro rata in accordance with their respective
Financial Interests or as they may otherwise decide) shall have the first right
to purchase the entire Partner's Interest in question. This right of first
refusal shall be and remain exercisable for a period of 60 days after all
Partners actually acquire knowledge of the occurrence of the event.
25
<PAGE>
Any Partner or Partners who are granted, by this Section 13.03, a
-------------
right of first refusal to purchase the Partner's Interest of another Partner
shall exercise such right by providing written notice to the Partnership and to
all other Partners within 60 days after all Partners actually acquire knowledge
of the event giving rise to such right. The purchase of such Partner's Interest
shall be consummated within 60 days after the completion of the appraisal
proceedings specified in Section 13.05 by (i) execution and delivery by the
-------------
selling Partner of such instruments of transfer, assignment and conveyance as
may reasonably be requested by the purchaser(s) and (ii) payment by the
purchaser(s) of the full applicable purchase price, in cash by bank wire
transfer or by certified or cashier's check at the closing of the purchase, to
the Partner selling its Partner's Interest and (iii) delivery to the Partner
selling its Partner's Interest of an indemnity agreement of the purchaser(s)
reasonably satisfactory to such Partner with respect to the Partnership
liabilities taken into account in determining such price and an assumption
agreement of the purchaser(s) reasonably satisfactory to such Partner with
respect to such Partner's obligations under the Definitive Agreements.
Notwithstanding the foregoing, if the consummation of such purchase shall be
subject to the review or approval of any court, such period of 60 days shall be
extended until the expiration of 10 days after the completion of such court
proceedings.
The price for such Partner's Interest shall be the Net Fair Market
Value thereof in cash or, in the case of a good faith offer to purchase, the
same price and the same terms and conditions as are contained in such offer. If
the right of first refusal expires unexercised, then such Partner's Interest may
be transferred in accordance with Sections 13.01 and 13.02 hereof; provided,
-------------- ----- --------
however, that if such transfer does not occur within 90 days of expiration of
- -------
the right of first refusal and pursuant to the event which gave rise to such
right of first refusal, then the right of first refusal shall again apply as
aforesaid; provided, further, that if such transfer does not comply with Section
-------- ------- -------
13.01 or is in violation of Section 13.02, or if the failure of the transferee
- ----- -------------
described in Section 13.03(e) continues, then neither the Partnership nor the
----------------
remaining Partners shall be required to recognize the transferee of such
interest as a Partner, and the sole right of any such transferee shall be to
receive from the Partnership any distributions to which the assignor of such
interest would have been entitled but for such sale or transfer, and to bear the
proportionate part of any expenses and liabilities which the assignor of such
interest would have been required
26
<PAGE>
to bear but for such sale or transfer and for the purpose of any act or consent
of the Partnership or the Partners following such sale or transfer, the
remaining Partners shall be deemed to be all of the Partners and to hold 100% of
the Voting Interests in the Partnership equally between them.
SECTION 13.04. Survival of Restrictions. The restrictions on
------------------------
transfer and the right of first refusal contained in this Article XIII shall
------------
survive any termination of this Partnership Agreement, and shall continue to be
binding on each of the Partners and their respective successors and assigns
until such time as the Partnership shall be wound up and liquidated in
accordance with Article XV.
----------
SECTION 13.05. Appraisals. Whenever under this Article XIII the Net
---------- ------------
Fair Market Value of any Partner's Interest is to be determined by appraisal,
such appraisal shall be made promptly by a board of two appraisers, each of whom
is a reputable expert in appraisal of the assets, business or interest being
appraised. The Partner or Partners exercising the right of first refusal and
the Partner whose Partner's Interest is subject to the exercised right of first
refusal shall each be entitled to appoint one appraiser to the appraisal board
and shall pay the cost of its own appraiser.
SECTION 13.06. Controlling Interests in Partners. In the case of
---------------------------------
any Partner a majority of the voting stock of which is owned by another person
directly, indirectly or through Affiliates, any sale or other disposition of, or
encumbrance upon, such majority of voting stock shall be deemed, for purposes of
this Article XIII, to be a sale or disposition of, or an encumbrance upon, the
------------
Partner's Interest of such Partner.
SECTION 13.07. Excluded Transactions. Notwithstanding the
---------------------
foregoing, the restrictions of this Article XIII (including but not limited to
------------
Sections 13.03(g) and 13.06) shall not apply to any bona fide public offering of
- ----------------- -----
the capital stock of MSC (the purposes of which do not include any evasion of
the restrictions of Article XIII of this Agreement) or any trading of such stock
------------
in the public market, including but not limited to any tender offer.
27
<PAGE>
ARTICLE XIV
Dispute Resolution
------------------
SECTION 14.01. Executive Review. Any dispute, controversy or
----------------
difference among EGL Steel, LTV-W, MSCWC or any of their respective Affiliates
relating to the Partnership or its business which cannot be settled by mutual
agreement at the Management Committee level shall be submitted to *** (or their
respective successors) within thirty (30) days of deadlock as declared by any
member of the Management Committee. Each such dispute, controversy or
difference shall be described in position papers prepared by each Partner
involved and submitted to Messrs. *** who shall then meet and use their best
efforts to resolve the same. Should any dispute, controversy or difference not
be resolved as above provided within thirty (30) days of submission to Messrs.
*** (or their respective successors) (unless this time period shall be extended
by unanimous consent of such persons), the dispute, controversy or difference
shall be resolved as otherwise provided in this Article XIV.
-----------
SECTION 14.02. Redetermination of Decisions. In the event that any
----------------------------
Partner objects at the time to any decision of the Management Committee or of
the Partners or any other dispute, controversy or difference is not resolved
pursuant to Section 14.01 hereof, then such Partner may elect to require such
-------------
matter to be reviewed in accordance with Section 14.03 The expert retained by
-------------
the Partnership to review the matter will be required to render his opinion as
to whether the challenged matter is commercially reasonable in furtherance of
the purposes set forth in Article II hereof or in the Operating Agreement. The
----------
Partnership and all of the Partners shall abide by the conclusion of the expert,
which shall be final and binding upon them. If the matter being reviewed
relates to termination of the Operating Agreement, the expert shall be required
to render his opinion within 45 days of being retained by the Partnership. If
the expert concludes that the making of a capital expenditure (which was not
approved by the Partners or the Management Committee, as the case may be) is
commercially reasonable in furtherance of the purposes set forth in Article II
----------
hereof or in the Operating Agreement, then the capital expenditure shall be made
and paid for by all of the Partners in amounts proportionate to their respective
Financial Interests. In the event that any such capital expenditure changes the
cost of operating the EG Facility, the Operating Agreement and the Coating
Agreements shall be amended to change the Operator's Fee and
28
<PAGE>
the Coating Fees so that the effect of the changed cost will be shared by the
Partners in proportion to their respective Financial Interests.
SECTION 14.03. Procedure for Dispute Resolution. To initiate the
--------------------------------
dispute resolution procedure, the Partner seeking review of a matter must
provide to every other Partner, within 30 days after the expiration of the
period of executive review provided for in Section 14.01 hereof, a written
-------------
notice stating its intention to seek review pursuant to this Article XIV, the
-----------
matter(s) which it seeks to have reviewed, its position with respect to such
matter(s), the resolution which it will seek and the name of an impartial expert
(who is a recognized expert in the general field of business or profession to
which the matter(s) relate) who it proposes to have review the matter(s).
Within 10 business days thereafter, each other Partner shall notify the Partner
seeking review either of its acceptance of the proposed expert or of another
impartial expert who is so recognized and who it proposes to have review the
matter(s). In the event that agreement is not reached among all of the
Partners, within 10 additional business days, on the expert to review the
matter(s), then the experts proposed by the Partners shall promptly choose
another impartial expert who is so recognized to perform the review. In the
event that the experts proposed by the Partners do not unanimously choose a
third expert within 5 additional business days, then the expert to decide the
matter(s) shall be selected by the American Arbitration Association. The
Partnership shall then retain such expert to review the matter(s) being
challenged and shall agree to pay such expert's fees and reasonable expenses.
The expert shall review this Partnership Agreement and the other Definitive
Agreements and review and hear such written and oral evidence as he shall, in
his sole discretion, deem necessary in order to render a commercially reasonable
decision in accordance with such agreements with respect to each matter;
provided that each Partner shall have an opportunity to present information
- --------
relating to its view of the matter in dispute in reasonable detail; and
provided, further, that the expert shall, in any event, render his decision in
- -------- -------
writing no later than 60 days after he is retained hereunder. Unless otherwise
determined by mutual agreement of the Partners, the site of the proceedings
hereunder shall be Chicago, Illinois. The decision rendered by the expert shall
be final and binding on the Partners and shall be retroactively applied (to the
fullest extent possible) to the date on which the matter was submitted for
executive review pursuant to Section 14.01 hereof. Judgment upon any award
rendered
29
<PAGE>
by the expert may be entered in any court having jurisdiction thereof.
SECTION 14.04. Consent to Jurisdiction; Service of Process. The
-------------------------------------------
Partners, acting for the Partnership, themselves and for their respective
successors and assigns, hereby expressly and irrevocably consent to and subject
themselves to the jurisdiction of the courts of the State of Illinois located in
Cook County, Illinois, and/or the United States District Court for the Northern
District of Illinois, Eastern Division, for the enforcement of any award under
this Article XIV or any other litigation which may arise under the Partnership
-----------
Agreement or any of the other Definitive Agreements. Each of the Partners
waives personal service of any and all process upon it and consents that all
service of process be made by registered mail directed to it at its address
indicated in Section 17.05. Each of the Partners waives any objection based on
-------------
forum non conveniens or any objection to venue of any such action instituted
hereunder.
ARTICLE XV
Dissolution
-----------
SECTION 15.01. Events Causing Dissolution. Except as required by
--------------------------
applicable law to the contrary, dissolution of the Partnership may not occur for
any reason (including, but not by way of limitation, any express will of any
Partner, any attempted withdrawal of any Partner or any transfer of a Partner's
Interest and admission of a new partner to the Partnership) other than (a) at
the end of the Term of the Partnership or any alteration thereof in accordance
with Section 5.02, or (b) upon the written agreement of all Partners.
------------
SECTION 15.02. Liquidation and Winding Up. In the event that the
--------------------------
Partnership is dissolved, the Partnership shall be wound up and liquidated in
accordance with applicable law and the following provisions:
(a) The EG Facility shall be liquidated by offering it (or such
interest as the Partnership may have in it) for sale to the Partners on the
terms and in the sequence set forth below, any of which rights of Partners
shall be exercised in accordance with Section 15.03:
-------------
30
<PAGE>
(i) the Operating Partner shall have the first option to purchase
the EG Facility (or the Partnership's interest in it) at its then Net
Fair Market Value, except that no such option shall apply if the
Partnership's dissolution is the result of a termination of the
Operating Agreement pursuant to Section 8.01 thereof;
------------
(ii) each of EGL Steel and LTV-W shall have an independent and
separate second option to purchase the EG Facility (or the
Partnership's interest in it) at its then Net Fair Market Value or, if
both of them desire to purchase it, the higher of its then Net Fair
Market Value or the highest price bid by either of them; or
(iii) if none of the Partners exercises an option to purchase the
EG Facility, it shall be sold to the independent third party that
offers the highest price therefor.
(b) Any price for the EG Facility which does not consist entirely of
cash payable at the closing shall be valued as all Partners shall agree or,
in the absence of such agreement, by appraisal proceedings in accordance
with Section 15.04 hereof.
-------------
(c) All other assets of the Partnership shall be liquidated. Each
Partner shall pay to the Partnership all amounts owing by it to the
Partnership, together with any amount of contributions necessary for the
payment of all liabilities of the Partnership in an amount which is
proportionate to such Partner's Financial Interest.
(d) An independent certified public accountant of recognized
standing, approved by all of the Partners, shall make a complete and final
audit of the books, records and accounts of the Partnership at the
Partnership's expense and all final adjustments between the Partners shall
be made on the basis of such certified audit.
(e) The assets of the Partnership together with contributions
received pursuant to the preceding paragraphs (a) and (c) shall be applied
in the following order:
31
<PAGE>
(i) first, to the payment of creditors of the Partnership,
excluding Partners and their Affiliates as creditors;
(ii) second, to the payment to Partners (and their Affiliates) of
amounts owing to them for loans or other extensions of credit to the
Partnership or upon contracts with the Partnership or upon open
account;
(iii) third, to distributions to the Partners in proportion to
their respective Partner's Accounts up to the aggregate amounts
thereof; and
(iv) fourth, to distributions to the Partners in proportion to
their respective Financial Interests.
(f) Distribution to the Partners pursuant to subclauses (iii) and
(iv) of the preceding paragraph (e) shall be made in such manner that each
Partner will receive an amount of the assets available for such
distribution which is proportionate to the Partner's Account or Financial
Interest, as the case may be, of such Partner; that is to say, each Partner
shall receive,
(i) an undivided interest, corresponding to its Partner's Account
or Financial Interest, as the case may be, in all interests in real
estate and leaseholds and other indivisible properties; and
(ii) as nearly as may be, an amount proportionate to its
Partner's Account or Financial Interest, as the case may be, in cash
and other divisible assets.
(g) All of the Partners, acting by unanimous vote, shall jointly
exercise the authority to wind up the Partnership affairs and supervise its
liquidation.
SECTION 15.03. Exercise of Right or Option to Purchase. The
---------------------------------------
determination of the Net Fair Market Value of the EG Facility (or the
Partnership's interest in it) shall be made in accordance with Section 15.04
-------------
hereof promptly after dissolution of the Partnership. Any Partner or Partners
who are granted, by this Article XV, a right or option to purchase the EG
----------
Facility (or the Partnership's interest in it) shall exercise such right or
option by
32
<PAGE>
providing notice to the Partnership and to all other Partners within 60 days
after such Net Fair Market Value has been determined. The purchase of such
assets shall be consummated within 60 days after the date of such notice by the
execution and delivery by the Partnership of such instruments of transfer,
assignment and conveyance as may reasonably be requested by the purchaser(s), by
the payment by the purchaser(s) of the full, applicable purchase price, and by
delivery to the Partnership of an indemnity agreement of the purchaser(s)'
Guarantor(s) reasonably satisfactory to all Partners with respect to the
Partnership liabilities taken into account in determining such price.
SECTION 15.04. Appraisals. Whenever under this Article XV (a) the
---------- ----------
Net Fair Market Value of the EG Facility (or the Partnership's interest in the
EG Facility) or the value of any price therefor or (b) the Appraised Partnership
Interest Dissolution Value of any Partner's interest in the Partnership is to be
determined by appraisal, such appraisal shall be made promptly by a board of
appraisers, each of whom is a reputable expert in appraisal of the assets,
business or interest being appraised. Each Partner shall be entitled to appoint
one appraiser to the appraisal board and shall pay the cost of its own
appraiser.
SECTION 15.05. Provision for Inland Tolling Agreement.
--------------------------------------
Notwithstanding the foregoing provisions of this Article XV, in the event the
----------
Partnership is dissolved in accordance with Section 15.01 hereof, the Partners
-------------
shall negotiate in good faith appropriate amendments to this Article XV to the
----------
extent necessary to ensure (i) that the operations of the EG Facility will
continue without interruption while the procedures provided for in this Article
-------
XV are carried out, and (ii) that the Partnership's commitments to Ispat Inland
- --
under the Inland Tolling Agreement will be performed or otherwise satisfied.
SECTION 15.06. Options To Purchase Partnership Interests.
-----------------------------------------
Notwithstanding the foregoing, if any Partner shall give a Termination Notice to
the other Partners in accordance with Section 5.01 hereof, the Partners shall
------------
promptly appoint a board of appraisers in accordance with Section 15.04 hereof
-------------
to estimate the amount which each Partner would receive if the Partnership were
to sell the EG Facility (or the Partnership's interest in it) at its then Net
Fair Market Value promptly after the December 31 immediately following delivery
of such Termination Notice and the Partnership were to thereafter be wound up
and liquidated in accordance with Section 15.02 hereof (the "Appraised
-------------
Partnership Interest Dissolution Value"). Such
33
<PAGE>
board of appraisers shall be instructed to render their report to all Partners
no later than the September 30 immediately after delivery of the Termination
Notice, and upon the Partners' receipt of such report, the following provisions
shall apply:
(i) the Operating Partner shall have the first option to purchase
all (but not less than all) of the Partner's Interest of both other
Partners for cash in an amount equal to the Appraised Partnership
Interest Dissolution Value of the respective Partner's Interests, such
option to be exercised by giving written notice to the other Partners
within thirty (30) days after receipt of the appraisers' report (the
"First Option Period");
(ii) if the Operating Partner does not exercise such option prior
to the expiration of the First Option Period, each of EGL Steel and
LTV-W shall have an independent and separate second option to purchase
all (but not less than all) of the Partner's Interest of both other
Partners for cash in an amount equal to the Appraised Partnership
Interest Dissolution Value of the respective Partner's Interests, such
option to be exercised by giving written notice to the other Partners
within thirty (30) days after the end of the First Option Period (the
"Second Option Period"); and
(iii) notwithstanding the foregoing, if both EGL Steel and LTV-W
give the exercise notice contemplated by the immediately preceding
clause (ii), the option provided for in such clause (ii) shall be
deemed to be exercised by whichever of them shall submit to the other
Partners, during the ten (10) days immediately following the Second
Option Period, an irrevocable written offer to purchase all (but not
less than all) of the Partner's Interest of both other Partners at the
highest price per percentage of Financial Interest (in excess of the
Appraised Partnership Interest Dissolution Value thereof).
The purchase of such Partner's Interests shall be consummated as of the business
day immediately preceding the date that the Partnership would terminate under
Section 5.01 hereof as a result of the delivery of the Termination Notice. Any
- ------------
such purchase shall be effected by (i)
34
<PAGE>
execution and delivery by the selling Partners of such instruments of transfer,
assignment and conveyance as may reasonably be requested by the purchaser, (ii)
payment by the purchaser to the selling Partners of the full Appraised
Partnership Interest Dissolution Value (or, in the case of clause (iii) of this
Section 15.06, the highest price offered by EGL Steel or LTV-W), in cash by bank
- -------------
wire transfers or by certified or cashier's checks at the closing of the
purchase and (iii) delivery to each selling Partner of an indemnity agreement of
the purchaser's Guarantor reasonably satisfactory to such selling Partner with
respect to the Partnership liabilities taken into account in determining such
price and an assumption agreement of the purchaser's Guarantor reasonably
satisfactory to such selling Partner with respect to any remaining obligations
of such selling Partner under the Definitive Agreements. Effective as of the
closing of such purchase, the previously delivered Termination Notice shall be
deemed to be withdrawn, but the selling Partners shall not thereafter be general
partners of the Partnership and the Coating Agreements and the Operating
Agreement shall be deemed to be terminated.
ARTICLE XVI
Confidentiality
---------------
Each Partner shall keep strictly confidential and not disclose (and
cause its Guarantor to keep confidential and not disclose) to any outside party
(other than its Guarantor or an Affiliate of the Partner), or use in the
business of such Partner (or its Guarantor) to the detriment of the disclosing
Partner or the Partnership, any information relating to the Partnership and the
operation of the EG Facility disclosed to such Partner or the Partnership by any
other Partner, the business of the Partnership and the particulars thereof, or
any other information set forth in written agreements or documents concerning
the Partnership or the EG Facility, in each case which expressly states the
confidential nature of the information set forth therein, except for:
(a) information as to which the disclosing Partner gives prior written
consent to disclose;
35
<PAGE>
(b) information which is or becomes otherwise known to the receiving
Partner or publicly available, without breach of any obligation of secrecy
to the disclosing Partner;
(c) information which is inadvertently disclosed notwithstanding the
receiving Partner's exercise of the same degree of care as is used in
protecting the receiving Partners' own confidential information;
(d) information used or disclosed in order to comply with applicable
law, including applicable securities laws;
(e) information used or disclosed after five years from the date of
initial disclosure to the receiving Partner, or such later date as is
provided in a written agreement between the Partners; or
(f) information required to be disclosed to the lenders or
independent certified public accountants of the receiving Partner or its
Affiliates or to securities rating agencies.
Any instruments, agreements or other documents which the disclosing Partner or
the Partnership desires to remain confidential pursuant to this Article XVI
-----------
shall be distinctively marked "Confidential".
ARTICLE XVII
Miscellany
----------
SECTION 17.01. Authority of Representatives of Partners . Any person
----------------------------------------
or persons designated by a Partner as its representative for Partnership
meetings or decisions or as its appointee to the Management Committee may be
conclusively presumed by the Partnership and by all other Partners, without
further inquiry by them, as having full authority to act on such Partner's
behalf on all Partnership matters unless such Partner or such person otherwise
informs the Partnership and all other Partners in writing in advance. The act
of any such person shall be considered, for all purposes under this Partnership
Agreement, to be the act of the Partner which designated him.
36
<PAGE>
SECTION 17.02. Entire Agreement. (a) This Partnership Agreement,
----------------
the other Definitive Agreements executed contemporaneously herewith and the
Purchase Agreement constitute the entire agreement between the parties hereto in
relation to the subject matter hereof and supersede all prior oral and written
agreements and understandings with respect to the transactions contemplated
hereby, including but not limited to the Original Partnership Agreement and the
1998 Extension Agreement; provided, however, that nothing herein shall supersede
-------- -------
any agreements or undertakings heretofore set forth in the minutes of
proceedings of the Management Committee that are not superseded in effect by
this Partnership Agreement, such other Definitive Agreements or the Purchase
Agreement; and provided, further, that no such agreements or understandings
-------- -------
heretofore set forth in the minutes of proceedings of the Management Committee
shall be applicable to or binding on LTV-W or its Affiliates.
(b) Each Partner covenants that during the Term of this Partnership
Agreement, neither such Partner nor any of its Affiliates will enter into or
become a party to any agreement with any other Partner or any of its Affiliates
relating to the use of the EG Facility that does not include both other Partners
(or their respective Affiliates) as parties, unless such agreement shall be
fully disclosed to whichever of them is not also to become a party thereto (the
"Excluded Party"), and the Excluded Party shall have a reasonable amount of time
to review such agreement before it becomes effective. If such agreement could
reasonably be expected to have an adverse impact on the Excluded Party, the
Excluded Party shall have the right to seek relief with respect thereto pursuant
to Article XIV.
-----------
SECTION 17.03. Modification, Waiver. Neither this Partnership
--------------------
Agreement nor any provision hereof may be changed, waived, discharged or
terminated verbally, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. Any waiver of any breach of any provision of this Partnership Agreement
shall not be construed as a waiver of any continuing or succeeding breach of
such provision, a waiver of the provision itself, or a waiver of any other
rights under this Partnership Agreement.
SECTION 17.04. Severability. If any provision of this Partnership
------------
Agreement or the application of any provision hereof to any party or set of
circumstances is held invalid, the remainder of this Partnership Agreement and
the application of such provision to the other party or
37
<PAGE>
set of circumstances shall not be affected, unless such invalidity would result
in such a material change as to cause performance of the remaining obligations
to be unreasonable, in which case the parties hereto shall negotiate in good
faith to amend this Partnership Agreement and the other Definitive Agreements
(a) to take into account such material change in a manner that in fair and
equitable to all parties hereto and (b) to achieve the purposes set forth in
Article II.
- ----------
SECTION 17.05. Notices. Any notice, consent, request, report or
-------
other document required or permitted under the terms of this Partnership
Agreement shall be in writing and shall be effective (a) when personally
delivered on a business day during normal business hours to the party to be
given such notice at the address designated for such delivery below or (b) on
the business day following the day such notice shall have been sent by
telecopier or similar electronic device (providing confirmation of transmission)
or by reputable overnight courier (providing proof of delivery) sent to such
address, whichever shall first occur. Until otherwise specified by notice, the
addresses for such notice shall be:
(i) To EGL Steel:
EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, PA 18016
Attention: Mr. David M. Beckwith, Vice President
Telecopier Number: (215) 694-7086
(ii) To LTV-W:
LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
38
<PAGE>
(iii) To MSCWC:
MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and General
Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643;
provided, however, that any Partner may change the address to which notices and
- -------- -------
other communications to it shall be sent by giving to the other Partners written
notice of such change, in which case notices and other communications to the
Partner giving the notice of the change of address shall not be deemed to have
been sufficiently given or delivered unless addressed to it at the new address
as stated in said notice; provided, further, that notices and other
-------- -------
communications to the Partnership shall not be deemed to have been sufficiently
given or delivered unless and until a copy thereof shall be given or delivered
as above provided to each of the Partners.
SECTION 17.06. Successors and Assigns. Subject to the provisions of
----------------------
Article XIII, this Partnership Agreement shall inure to the benefit of, and be
- ------------
binding upon, the permitted successors and assigns of the respective Partners.
SECTION 17.07. Governing Law. This Partnership Agreement shall be
-------------
governed by and construed in accordance with the laws of the State of Illinois.
SECTION 17.08. Headings. The headings of all articles, sections and
--------
subsections in this Partnership Agreement are included herein for convenience of
reference only and shall not constitute a part of this Partnership Agreement for
any other purpose.
39
<PAGE>
IN WITNESS WHEREOF, the Partners have caused this Partnership
Agreement to be signed by their respective duly authorized officers and their
respective corporate seals to be hereunto affixed, on the day and year first
above written.
EGL STEEL INC.
By: ______________________________
Name:
Title:
LTV-WALBRIDGE, INC.
By: ______________________________
Name:
Title:
MSC WALBRIDGE COATINGS INC.
By: /s/ James J. Waclawik, Sr.
------------------------------
Name: James J. Waclawik, Sr.
Title: Vice President,
Chief Financial
Officer and
Secretary
40
<PAGE>
SCHEDULE 1
TO
PARTNERSHIP AGREEMENT
Members of Management Committee
-------------------------------
as of July 23, 1999
Partner Names of Members Appointed
- ------- --------------------------
EGL Steel David M. Beckwith
John I. Kinsey
LTV-W John Mang
Daniel Reynolds
MSCWC Thomas E. Moore
James J. Waclawik, Sr.
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person
(as defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section
-------
5.02 of the Coating Agreements.
- ----
"Appraised Partnership Interest Dissolution Value" shall have the
meaning set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and
Restated Coating Agreement dated as of July 23, 1999 by and between the
Partnership and Bethlehem as amended from time to time in accordance with its
terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem
Coating Agreement, the LTV Steel Coating Agreement or the MSCWC Coating
Agreement, as amended from
<PAGE>
time to time in accordance with the terms thereof, and (b) collectively, all of
such agreements.
"Coating Fee" shall mean the various fees charged by the Partnership
for performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied
by the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services
such coated sheet metal as is capable of being marketed and sold as a prime
product (satisfying the Coating Weight and other specifications ordered) at the
then current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and
"Under Common Control With") shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the
Partnership Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to
produce *** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc
or alloy coatings to sheet steel by an electrolytic plating process.
3
<PAGE>
"EG Facility" shall mean the entire coil coating facility located at
30610 East Broadway, Walbridge, Ohio 43465, together with all fixtures,
furnishings, machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
<TABLE>
<CAPTION>
Partner Financial Interest
- ------- ------------------
<S> <C>
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
</TABLE>
"Firm Order" shall mean an order placed by a Primary Purchaser or by
MSCWC for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar
months ended on the last day of May, August, November and February of each
Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of
March of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of,
and without fault or negligence of, the entity asserting a claim of Force
Majeure, including but not limited to any acts of God, strikes, lockouts or
other labor disputes or industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, other storms, floods, washouts or other acts of
nature, civil disturbances, explosions, temporary or permanent failure of
electrical supply, acts, directives or binding orders of any court or
governmental authority or persons purporting to act therefor and such
4
<PAGE>
orders or regulations of governmental bodies or agencies asserting jurisdiction
as would materially inhibit or prohibit the entity from performing under the
Definitive Agreements or would require such entity to accept a condition
reasonably unacceptable to it, so long as such occurred without the fault or
negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of
------------
the Coating Agreements.
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated
as of May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL
Steel, as amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation
(which has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat
Inland may require the Partnership to perform pursuant to Section 3.2 of the
-----------
Inland Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement
dated as of June 30, 1998 entered into by and between Ispat Inland (as successor
to Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages
required to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
5
<PAGE>
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey
corporation and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating
Agreement dated as of July 23, 1999 by and between the Partnership and LTV
Steel, as amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or
other casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware
corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois
corporation (formerly known as Pre Finish Metals Incorporated) and a wholly-
owned subsidiary of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1,
1980 by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
6
<PAGE>
"MSCWC Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and MSCWC, as amended
from time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated
therewith (determined in accordance with generally accepted accounting
principles), on a going concern basis and assuming a willing buyer and a
willing seller, neither of whom is under any compulsion to buy or sell and
each of whom has equal access to all pertinent facts, all as determined by
appraisal under Section 13.05 of the Partnership Agreement, or
-------------
(b) In the case of the EG Facility, the fair market value of the
assets thereof, less any liabilities associated therewith (determined in
accordance with generally accepted accounting principles) which are assumed
by the purchaser in accordance with the governing instruments thereof or
with the consent of the persons or entities to whom the obligation is owed,
on a going concern basis and assuming a willing buyer and a willing seller,
neither of whom is under any compulsion to buy or sell and each of whom has
equal access to all pertinent facts, all as determined by appraisal under
Section 15.04 of the Partnership Agreement.
-------------
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as
of June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
7
<PAGE>
"Operator" shall mean MSCWC, its successor or assign, as Operating
Partner under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and between the Partnership and Bethlehem, as
amended up to the date immediately prior to the execution and delivery of the
Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating
Agreement dated as of October 15, 1984 by and between the Partnership and MSCWC,
as amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement
dated as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland,
MSCPFM and MSC, as amended up to the date immediately prior to the execution and
delivery of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic
Coating services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent
Agreement dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM
and MSC, as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of
the Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
8
<PAGE>
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i)
such Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem
or LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-1
by Moody's Investors Services, Inc., or A-1 by Standard and Poor's Corporation,
having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section
-------
4.01 of each Coating Agreement.
- ----
"Production Schedule" shall mean the schedule described in Section
-------
4.01(b) of the Operating Agreement.
- -------
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
July 23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
9
<PAGE>
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness
steel coil to which a minimum Coating Weight of *** grams of zinc per square
meter has been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
"S, G & A Expenses" shall mean all expenses of Operator or its
Affiliates for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a)
the Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of
***, divided by the Standard Capacity for such EG Product. Accordingly, the
Standard Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to
Section 5.05 of the Operating Agreement and Section 5.04 of the Coating
- ------------ ------------
Agreements.
"Sublease" shall mean the Sublease dated as of May 30, 1986, as
amended, between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof,
10
<PAGE>
such taxes to include, but not be limited to, all real estate and personal
property taxes and assessments on the EG Facility or the equipment, supplies or
inventories contained therein, all sales and use taxes, and all governmental
franchises, licenses and permits; provided, however, that if any other taxes
-------- -------
are enacted after the date hereof, such taxes shall also be included in the
terms "Taxes" to the extent appropriate to do so in accordance with the
provisions of Article II of the Partnership Agreement.
----------
"Technical Representative" shall mean the person designated by
Operator and each Partner (other than the Operating Partner) from time to time
to represent such party in connection with any of the matters specified as being
the responsibility of the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the
------------
Partnership Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01
------------
of the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such
Partner's percentage voting interest in the Partnership as set forth opposite
the Partner's name below:
<TABLE>
<CAPTION>
Partner Voting Interest
- ------- ---------------
<S> <C>
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
</TABLE>
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of
the EG Facility to produce EG Product having a given width, assuming (1) ***
inch specified thickness steel substrate, (2) a Coating Weight of *** grams of
pure zinc per square meter of coated substrate surface area (on one side), (3)
*** hours per year of Production Time and (4) *** Yield Loss and no defective
steel substrate, all as determined in the reasonable judgment of the Technical
Representatives.
11
<PAGE>
"Yield Loss" shall mean steel substrate scrap losses and rejections of
EG Product caused by quality failures in the operation of the EG Facility and
shall be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the Technical Representatives of
Operator and the Partner whose Affiliate supplied the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
12
<PAGE>
Exhibit 10.2
------------
================================================================================
AMENDED AND RESTATED
OPERATING AGREEMENT
Dated as of July 23, 1999
By and Between
MSC WALBRIDGE COATINGS INC.
and
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions.......................... 2
ARTICLE II
Purpose of Operating Agreement,
Designation of Operator and Term of Agreement
2.01. Purpose of Operating Agreement.................................. 2
2.02. Designation of Operator......................................... 2
2.03. Term............................................................ 2
ARTICLE III
Duties and Responsibilities of Operator
3.01. Operator's Responsibility....................................... 2
3.02. Operator's Duties............................................... 2
3.03. Licenses and Permits............................................ 3
3.04. Payment of Expenses............................................. 4
3.05. Sublease Rent................................................... 5
3.06. Product Liability............................................... 5
3.07. Personnel and Staffing.......................................... 6
3.08. Insurance....................................................... 6
3.09. Injuries to Persons............................................. 8
3.10. Major Loss...................................................... 8
3.11. Access to EG Facility........................................... 8
3.12. Shipping........................................................ 8
3.13. Warehousing..................................................... 9
3.14. Invoicing....................................................... 9
3.15. General Terms and Conditions.................................... 9
ARTICLE IV
Operations
4.01. Production Forecasts and Scheduling............................. 10
4.02. Product Priorities for EG Product and Other Services............ 10
4.03. Warranty Disclaimer............................................. 11
4.04. Production Time for Other Products.............................. 11
ARTICLE V
Operator's Fee(s)
5.01. For Services to the Primary Purchasers.......................... 11
5.02. For Services to Ispat Inland.................................... 13
5.03. For Services to MSCWC........................................... 14
5.04. For Services to Outside Parties................................. 15
5.05. Proportionate Adjustment........................................ 17
5.06. Cost Disclosure................................................. 17
5.07. Renegotiation of Certain Terms.................................. 17
ARTICLE VI
Accounting........................... 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII
Force Majeure
7.01. Effect.......................................................... 18
7.02. No Reduction in Payments........................................ 18
7.03. Obligation to Remedy............................................ 18
ARTICLE VIII
Termination and Extension
8.01. Termination..................................................... 18
8.02. Extension....................................................... 19
ARTICLE IX
Miscellany
9.01. Entire Agreement................................................ 19
9.02. Limitations on Liability........................................ 20
9.03. Amendments...................................................... 20
9.04. Notices......................................................... 20
9.05. Headings........................................................ 21
9.06. Waiver of Default............................................... 22
9.07. Severability.................................................... 22
9.08. Assignment...................................................... 22
9.09. Governing Law................................................... 22
9.10. Execution in Counterparts....................................... 22
9.11. Confidentiality................................................. 22
9.12. Third Party Beneficiaries....................................... 22
9.13. Dealings with MSCWC............................................. 23
</TABLE>
Exhibit 1: Standard Terms and Conditions for Sales
of EG Services
Exhibit 2: Standard Terms and Conditions for Sales
of Organic Coating Services
Appendix A: Definitions of Terms and Phrases
ii
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
THIS AMENDED AND RESTATED OPERATING AGREEMENT (this "Agreement"),
dated as of the 23rd day of July, 1999, by and between MSC Walbridge Coatings,
Inc. (formerly known as Pre Finish Metals (EG) Incorporated), a Delaware
corporation having a place of business at 30610 East Broadway, Walbridge, Ohio
43465 (the "Operator"), and Walbridge Coatings, An Illinois Partnership, having
a place of business at 30610 East Broadway, Walbridge, Ohio 43465 (the
"Partnership"),
W I T N E S S E T H:
WHEREAS, the Partnership was formed under the laws of Illinois for the
purpose, among others, of owning (or leasing) and operating a facility designed
to coat sheet metal with electrogalvanized zinc, zinc alloy or other coatings;
and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and Operator are
entering into the Partnership Agreement, Bethlehem and the Partnership are
entering into the Bethlehem Coating Agreement, LTV Steel and the Partnership are
entering into the LTV Steel Coating Agreement and MSCWC and the Partnership are
entering into the MSCWC Coating Agreement; and
WHEREAS, the Partnership Agreement provides, in part, that: (a) the
EG Facility will be primarily dedicated to the electrogalvanizing of coiled
sheet steel for the Primary Purchasers, while developing new products and
markets using Organic Coatings in conjunction with EG Services, and (b) the
Partnership will provide the highest quality coating service primarily for sale
to Primary Purchasers; and
WHEREAS, Operator and the Partnership desire to amend and restate the
Original Operating Agreement to provide for the operation and management of the
EG Facility by Operator on the terms and conditions set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Partnership and the Operator do
hereby amend and restate the Original Operating Agreement as follows:
ARTICLE I
Definitions
-----------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both singular and plural forms of the terms defined.
ARTICLE II
Purpose of Operating Agreement,
------------------------------
Designation of Operator and Term of Agreement
---------------------------------------------
SECTION 2.01. Purpose of Operating Agreement. The purpose of this
------------------------------
Agreement is to provide for the operation of the EG Facility in accordance with
the purposes of the Partnership set forth in Article II of the Partnership
----------
Agreement. All provisions of this Agreement shall be construed as nearly as can
be to achieve this purpose.
SECTION 2.02. Designation of Operator. The Partnership hereby
-----------------------
designates MSCWC to be the operator of the EG Facility under this Agreement
commencing on the date hereof.
SECTION 2.03. Term. The term of this Agreement shall be for a period
----
commencing on the date hereof and ending at the end of the Term (including any
renewals), unless this Agreement is terminated earlier or extended to a later
date by mutual agreement of the parties hereto.
ARTICLE III
Duties and Responsibilities of Operator
---------------------------------------
SECTION 3.01. Operator's Responsibility. Commencing on the date
-------------------------
hereof, Operator shall perform the duties and fulfill the responsibilities of
operator and shall operate the EG Facility, all in accordance with this Article
-------
III and the other provisions of this Agreement. Subject to the provisions of
- ---
this Agreement and the Partnership Agreement, Operator shall have exclusive
authority to manage and conduct, and shall be responsible for managing and
conducting, on behalf of the Partnership, the operations and business of the
Partnership relating to the EG Facility. During the Term, Operator shall be
responsible for maintaining the capability of the EG Facility.
2
<PAGE>
SECTION 3.02. Operator's Duties. Operator agrees to perform its
-----------------
duties and obligations hereunder so as to keep and maintain the EG Facility in
good working condition and repair, normal wear and tear excepted, and in
accordance with the standards of cleanliness of the EG Facility on the date
hereof. Operator shall provide to the Partnership such periodic reports on
operations as set forth herein or in the Coating Agreements or as are reasonably
requested from time to time. Operator may, but shall not be required to, market
and sell the services of the Partnership to the extent that Production Time is
available in accordance with Sections 4.02 of this Agreement and Section 10.04
------------- -------------
of the Partnership Agreement. Operator also agrees not to do or fail to do any
act which would result, or with the giving of notice and/or the passage of time
would result, in (i) a default under the terms of the MSCPFM Lease or the
Sublease or any mortgage, bond, indenture, agreement, lease or other instrument
or obligation to which the Partnership is a party or by which its properties or
assets may be bound, (ii) the creation of any material lien, charge or
encumbrance upon any of the Partnership's properties which is not permitted by
the MSCPFM Lease or the Sublease, or (iii) the violation of any judgment, order,
injunction, decree or award of any court, administrative agency or governmental
body against, or binding upon, Operator or the Partnership; provided in each
--------
case that Operator shall not be required by this sentence to make any capital
expenditures or other expenditures not contemplated by this Agreement or the
Partnership Agreement. Operator shall promptly notify the Partnership in
writing of the occurrence of any event described in the immediately preceding
sentence or any material violations of any law or regulation insofar as such
violation relates to Operator, any Partner, the Partnership or the EG Facility,
and of any event which, with the delivery of notice or the passage of time,
would result in an event described in this sentence or the immediately preceding
sentence. Operator shall promptly proceed to cure or remedy at its expense any
such event within its control and for which it is responsible hereunder or,
subject to Section 3.04(b) hereof, to represent the Partnership in any
---------------
proceeding (whether formal or informal) relating to such event. At all times
Operator shall keep the Partnership fully informed of the current status and all
significant developments in all such proceedings or matters.
SECTION 3.03. Licenses and Permits. Operator hereby agrees to use
--------------------
its best efforts to procure and maintain all licenses, permits and other
governmental authorization necessary or advisable to operate the EG Facility;
provided in each case that Operator shall not be required by this sentence to
- --------
make any capital expenditures or other expenditures not contemplated by this
Agreement or the Partnership Agreement. Operator shall promptly notify the
Partnership of any denial, suspension or revocation of any permit or license and
of any other action or failure to act by any governmental authority which
relates to the
3
<PAGE>
permits or licenses of the EG Facility or affects the operations of the EG
Facility.
SECTION 3.04. Payment of Expenses. (a) In consideration for the
-------------------
Operator's Fees and except as provided in this Section 3.04, Operator shall
------------
provide for and pay all expenses connected with the normal operation and
maintenance of the EG Facility, including all fixed costs and variable costs
(other than (i) depreciation and amortization, (ii) fees for auditing, tax
return preparation and other tax advice and QS9000 certification and auditing
and (iii) any other items determined by the Management Committee, each of which
shall be the responsibility of the Partnership). The Operator shall pay all
rent, if any, payable under the Sublease that is the responsibility of the
Operator pursuant to Section 3.05 of this Agreement.
------------
(b) Notwithstanding the foregoing, (i) Operator shall not be required
to pay, discharge or remove any tax, assessment, levy, fee, rent, charge, lien
or encumbrance, or to comply with any legal requirements applicable to the EG
Facility or the use thereof, so long as Operator shall contest the existence,
amount or validity thereof by appropriate proceedings which shall prevent the
collection of or other realization upon the tax, assessment, levy, fee, rent,
charge, lien or encumbrance so contested or the sale, forfeiture or loss of the
EG Facility. Operator shall give the Partnership notice of any such contest and
if the Partnership shall assume responsibility for the matter in contest,
Operator's responsibilities under this Agreement with respect to the matter in
contest shall terminate (at all times Operator shall keep the Partnership fully
informed of the current status and all significant developments in all such
contests) and (ii) the Partnership and Operator acknowledge that (A) a change of
EG Product mix to average Coating Weights significantly below *** grams per
square meter could have the effect of increasing the theoretical annual capacity
of the EG Facility to a level significantly higher than the ability of the
Primary Purchasers to market all of the EG Product that could be produced and
(B) excessive interruptions of production due to product changes could have an
adverse effect on the efficiency and productivity of the EG Facility. In such
circumstances, to compute the Standard Ton Factor strictly in accordance with
the definition thereof in Appendix A could impose an economic hardship on
Operator, and the Management Committee shall, upon the petition of Operator from
time to time, promptly review the operations of the Partnership and all
provisions of this Agreement to determine if improvements therein can be made
for the mutual benefit of Operator, the Partnership and the Partners in
accordance with the purposes of this Agreement.
(c) Operator shall not be responsible under this Agreement for any
extraordinary expenses involved or incurred in
4
<PAGE>
the maintenance or operation of the EG Facility unless such expenses are the
direct result of Operator's negligence or failure to carry out its duties and
responsibilities under this Agreement. Extraordinary expenses incurred in the
operation or maintenance of the EG Facility that are not the direct result of
Operator's negligence or failure to carry out its duties and responsibilities
under this Agreement shall be paid by the Partnership.
(d) Operator shall not be responsible under this Agreement for any
capital expenditures necessary or desirable to maintain, operate or improve the
EG Facility. All such capital expenditures shall be made only as provided in
Article XII of the Partnership Agreement. For purposes of this Section 3.04,
- ----------- ------------
all spare parts that cost more *** per item will be considered as capital
expenditures.
(e) The Management Committee shall determine whether an item (other
than spare parts) is an extraordinary expense, a capital expenditure or an
expense for which Operator is responsible under this Section 3.04 in good faith
------------
based on all relevant circumstances.
SECTION 3.05. Sublease Rent. Operator agrees to pay on behalf of the
-------------
Partnership, during the term of the Partnership and at the times provided in the
Sublease, all rent payments payable by the Partnership under the Sublease in
excess of the portion of such rent payments (included in Allocated Fixed Costs)
for the particular Reporting Period that are the responsibility of the Primary
Purchasers under Section 5.02 of their respective Coating Agreements with
------------
respect to the particular Reporting Period, all as contemplated by Section 3.04
------------
hereof. All sums payable by Operator under this Section 3.05 shall be paid in
------------
funds available to the Partnership no later than the date on which the
Partnership is obligated to pay the particular payment of rent under the
Sublease.
SECTION 3.06. Product Liability. (a) Operator shall indemnify and
-----------------
hold harmless the Partnership, the other Partners and the Primary Purchasers
from and against any and all customer claims (net of insurance and other
recoveries) resulting from improper processing or handling of coils at the EG
Facility by Operator or persons under its control.
(b) The Partnership shall indemnify and hold harmless Operator and
its Affiliates from and against any and all customer claims, including those of
the Primary Purchasers, their respective customers and outside parties, (net of
insurance and other recoveries) resulting from any of such customers supplying
defective or faulty metal substrate for coating at the EG Facility.
5
<PAGE>
(c) The Partnership's terms and conditions of sale for all coating
services shall provide that any entity which furnishes faulty or defective metal
substrate for coating at the EG Facility shall be responsible for and shall
indemnify and hold harmless the Partnership and each Partner and their
respective Affiliates (other than a Partner or its Affiliate which furnishes
such faulty or defective metal substrate) from and against any and all claims by
the customers of such entity resulting from such entity's supplying such faulty
or defective metal substrate for coating at the EG Facility.
SECTION 3.07. Personnel and Staffing. Operator shall have sole
----------------------
authority and responsibility to determine the personnel policies, practices and
needs of the EG Facility, including supervisory and line personnel, and to
determine the number, qualifications and identity of the persons to fill such
personnel needs. All such employees shall be employees of Operator and shall be
under Operator's sole direction and control. Operator shall be solely
responsible for all costs, liabilities and obligations associated with each
employee employed at the EG Facility, including but not limited to all wage and
compensation costs, fringe benefits and costs associated with compliance with
all local, state and federal employment laws applicable to the EG Facility and
operations located thereat.
SECTION 3.08. Insurance. (a) Subject to subsection (b) hereof,
--------- --------------
Operator will purchase and maintain insurance on the EG Facility, and the
operations conducted thereat, of the following character:
(i) Insurance against loss by fire, lightning and all other risks
from time to time included under "extended coverage" and "all risk"
policies, for the EG Facility and contents, including all machinery, stock
(completed and in progress) and inventory, on an "agreed amounts" basis
(i.e., not subject to a co-insurance penalty), in amounts not less than 90%
----
of the actual replacement value of the EG Facility, exclusive of
foundations and excavations and less physical depreciation;
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the EG Facility
and adjoining streets and sidewalks, in the minimum amounts of *** for
bodily injury or death to any one person, *** for any one accident, and
*** for property damage;
(iii) Contractual liability insurance (broad form) against claims for
personal injuries suffered by persons injured by any vehicle owned,
operated or hired by Operator (wherever located) or injured at the EG
Facility against the Partnership, any Partner and any of their Affiliates
6
<PAGE>
(notwithstanding any coverage by workmen's compensation laws), including
injuries caused by the negligence of the Partnership, any Partner or any of
their Affiliates or from any assault and battery caused by any of their
employees but only to the extent that Operator is responsible for such
claims under Section 3.09 hereof; provided that if at any time such
------------ --------
insurance is not obtainable at costs acceptable to the Partnership, upon
notice from the Partnership to Operator, Operator shall reduce such
insurance coverage in accordance with written instructions from the
Partnership, whereupon Operator's responsibility for such claims under
Section 3.09 hereof shall automatically be reduced to the risks for which
------------
insurance remains in effect;
(iv) Product liability insurance and business interruption insurance
(covering "all risks", including loss of operating income or earnings and
not subject to co-insurance clauses, in such amounts as are reasonably
satisfactory to the Partnership), in such amounts and with such terms, as
is commonly obtained in the case of toll coating operations;
(v) Worker's compensation coverage and employer's liability
insurance as required in customary kinds and amounts and with underwriters
reasonably satisfactory to the Partnership;
(vi) Bailee's legal liability insurance for all materials handled or
processed, including those owned by Primary Purchasers; and
(vii) Such other insurance, in such amounts and against such risks,
as is commonly obtained in the case of property and operations similar in
nature and use to the EG Facility and acceptable to the Partnership.
(b) The foregoing insurance coverages and any other insurance from
time to time purchased by Operator shall be subject to review and approval by
the Partnership with respect to the adequacy of the coverage provided and the
cost thereof. The Partnership, each Partner and their Affiliates shall all be
named in each such insurance policy as additional named insureds under such
policies. Operator shall provide to the Partnership certificates of all
insurance required by this Section, all of which shall be with companies and in
form reasonably satisfactory to the Partnership, and all of which shall provide
that such insurance companies will give the Partnership at least 20 days' prior
written notice before any such policy or policies of insurance shall be altered
or cancelled and that no act or default of Operator or any other person shall
affect the right of the Partnership to recover under such policy or policies of
insurance in case of loss or damage. Operator shall comply with
7
<PAGE>
all applicable terms and conditions of all such insurance policies.
SECTION 3.09. Injuries to Persons. Subject to Section 3.08(a)(iii),
------------------- --------------------
Operator shall be responsible for injuries to persons at the EG Facility and
shall indemnify and hold harmless the Partnership, all Partners and their
respective Affiliates from and against any and all damages, liabilities, losses,
expenses and costs, including reasonable attorneys' fees, incurred by any of
them as a result of injuries to persons at the EG Facility.
SECTION 3.10. Major Loss. (a) If Operator receives any sum as a
----------
result of any Major Loss to the EG Facility, Operator shall promptly pay such
sum to the Partnership.
(b) If the Major Loss shall affect all or a substantial portion of
the EG Facility and shall render the EG Facility unsuitable, in the reasonable
judgment of the Management Committee, for restoration for continued use as
contemplated by this Agreement and the Partnership Agreement, then Operator
shall have no obligation to repair such damage.
(c) If, after the occurrence of a Major Loss, Section 3.10(b) is not
---------------
applicable, then Operator shall repair any damages to the EG Facility caused by
such event in a prompt and commercially reasonable manner using funds provided
by the Partnership.
(d) If, after an occurrence of a Major Loss, Section 3.10(c) is
---------------
applicable, then the Partnership and Operator shall amend the affected
provisions of this Agreement to take into account such repairs and their effects
on the provisions of this Agreement. Such amendments shall be commercially
reasonable as between the Partnership and Operator.
SECTION 3.11. Access to EG Facility. Access to the EG Facility
---------------------
shall be controlled by Operator; provided that each other Partner or its
--------
Affiliates shall, upon at least one day's notice, be entitled to physically
inspect the EG Facility and to observe its operation, in which event Operator
will make available a qualified representative or representatives to accompany
the representative or representatives of such Partner (or its Affiliate) making
the inspection.
SECTION 3.12. Shipping. (a) All shipments of finished product from
--------
the EG Facility shall be arranged by Operator from shipping alternatives
provided by the customer and shall be made at the risk and at the expense of the
customer.
(b) Operator agrees to cooperate and assist in scheduling shipments
of metal substrate from the EG Facility and
8
<PAGE>
to provide dockside assistance in receiving, handling and shipping materials at
the EG Facility.
SECTION 3.13. Warehousing. Operator agrees to warehouse and provide
-----------
customary protection at the EG Facility for metal substrate and finished product
of customers stored at the EG Facility, subject to the terms and conditions set
forth in Exhibits 1 or 2 hereto, whichever is applicable, in accordance with the
---------------
standards of Operator at the EG Facility on the date hereof.
SECTION 3.14. Invoicing. Operator shall invoice the Partnership's
---------
customers (including the Primary Purchasers) on behalf of the Partnership for
each coating service performed at the EG Facility from time to time on the date
that the coating services are rendered; provided, however, that effective upon
-------- -------
the completion of installation of electronic data interchange (EDI) capability
at the EG Facility (at the expense of LTV Steel) and the successful
transmission, as determined by Operator's Information Systems Manager, of
invoices to a Primary Purchaser utilizing a X.12 data format, such Primary
Purchaser may elect by notice to the Operator to be invoiced with respect to
each coating service rendered thereafter on the date of shipment from the EG
Facility of the products to which each such coating service is applied. Such
invoices shall reflect such information as the customers of the Partnership may
reasonably request. Such invoices shall provide for payment of the total amount
within thirty days after the date of the invoice; provided, however, that each
-------- -------
invoice issued to a Primary Purchaser pursuant to the proviso to the first
sentence of this Section 3.14 shall provide for payment within fifteen (15) days
------------
after the date of such invoice in the total amount stated therein plus, if
applicable, one and one-half percent (1.5%) of such total amount per each month
(or fraction thereof) from the fifteenth (15th) day after the date that such
coating service is rendered to the date as of which Operator is instructed by
Purchaser to ship such products from the EG Facility. Except as provided in this
Agreement, including Section 3.06 and Exhibits 1 or 2 hereto, whichever is
------------ ---------------
applicable, the Partnership shall not, at any time, be obligated to pay Operator
any Operator's Fee under Section 5.01 hereof (and Operator shall promptly refund
------------
any such Operator's Fee received) with respect to EG Services or Other Services
rendered by Operator which result in a product that is not Commercially
Saleable.
SECTION 3.15. General Terms and Conditions. Except as otherwise
----------------------------
expressly provided in this Agreement, Operator shall perform all coating
services in accordance with the terms and conditions set forth in Exhibits 1 and
--------------
2 hereto, whichever is applicable, as amended from time to time by agreement of
- -
the Partnership and Operator.
9
<PAGE>
ARTICLE IV
Operations
----------
SECTION 4.01. Production Forecasts and Scheduling. (a) The
-----------------------------------
Partnership shall promptly provide to Operator all Production Forecasts and
purchase orders for EG Services and Other Services received by it under the
Coating Agreements and all "Firm Orders" (as defined in Section 6.3 of the
Inland Tolling Agreement) received from Ispat Inland. Operator shall be
responsible for all production scheduling and for the filling of purchase orders
in accordance with this Agreement.
(b) Operator shall determine the total available Production Time
during any particular Forecast Period. Upon receipt of timely Production
Forecasts from Primary Purchasers and, commencing on October 15, 1999, from
MSCWC and after taking into account any timely "Firm Order" (as so defined) from
Ispat Inland, Operator shall establish a monthly mode campaign schedule
("Production Schedule") for the performance of EG Services and Other Services
during the Forecast Period in accordance with the priorities set forth in
Section 4.02 of the Coating Agreements. Operator shall furnish a copy of the
- ------------
Production Schedule for each Forecast Period to the Partnership and each Primary
Purchaser prior to the fifth day before the beginning of such Forecast Period.
SECTION 4.02. Product Priorities for EG Product and Other Services.
----------------------------------------------------
(a) In scheduling available Production Time for the performance of EG Services
and Other Services, Operator shall give priority to (a) purchase orders of each
Primary Purchaser up to the amount of Production Time set forth in the timely
Firm Order of such Primary Purchaser for the particular month, (b) purchase
orders of Ispat Inland up to the amount of Production Time specified in a timely
"Firm Order" (as so defined) of Ispat Inland, (c) purchase orders from MSCWC
pursuant to the MSCWC Coating Agreement, and (d) purchase orders resulting from
the timely exercise of the rights of first refusal of each of the Primary
Purchasers and MSCWC, all in the order and to the extent provided in Section
-------
4.02 of the Coating Agreements.
- ----
(b) In giving effect to the above priorities, however, Operator may
make such adjustments from time to time as are reasonably necessary or advisable
to achieve economic and efficient order sizes, to make efficient use of
available steel coils and raw materials needed for such production and otherwise
to maximize efficiency and levels of production.
(c) If either Primary Purchaser (or MSCWC) shall fail to deliver its
Production Forecast by the date specified in Section 4.01(a) of the applicable
---------------
Coating Agreement, Operator shall attempt to contact the appropriate personnel
at such Primary Purchaser to obtain such Production Forecast, but if in
10
<PAGE>
Operator's judgment such Production Forecast is not received within a reasonable
period of time thereafter (or if MSCWC shall fail to provide its Production
Forecast by such date), (i) the priority set forth in Section 4.02 for such
------------
Primary Purchaser (or MSCWC) shall not be in effect for the Forecast Period
involved and (ii) the rights of first refusal provided in Section 4.02 of the
------------
applicable Coating Agreement with respect thereto shall be in effect for such
Forecast Period.
(d) Notwithstanding the foregoing, Operator shall give priority to
orders from outside parties (accepted by the Partnership in accordance with
guidelines established by the Management Committee) equal to the Primary
Purchasers' and MSCWC's rights to priority under this Section 4.02 to the extent
------------
necessary to permit the filling of such orders.
SECTION 4.03. Warranty Disclaimer. EXCEPT AS EXPRESSLY SET FORTH
-------------------
HEREIN AND IN THE EXHIBITS HERETO, OPERATOR MAKES NO WARRANTY OR REPRESENTATION
OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCT PRODUCED
AT THE EG FACILITY, AND ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE IS HEREBY DISCLAIMED. Operator shall not be liable to the
Partnership, any Primary Purchaser, Ispat Inland or any customer of any of them
for lost profits from foregone sales opportunities and all other consequential
damages resulting from productivity and quality deficiencies of Operator
hereunder.
SECTION 4.04. Production Time for Other Products. Subject to Section
---------------------------------- -------
4.02 hereof, Operator shall schedule Production Time for EG Services and Other
- ----
Services for outside parties in such a manner as in the reasonable judgment of
Operator shall maximize the profitability of the Partnership.
ARTICLE V
Operator's Fee(s)
-----------------
SECTION 5.01. For Services to the Primary Purchasers. (a) The
--------------------------------------
Partnership shall pay to Operator the following "Operator's Fees" for operating
the EG Facility to provide EG Services and Other Services for the Primary
Purchasers under their respective Coating Agreements:
(i) For each Standard Ton of pure zinc electroplating, an amount
equal to the Coating Fee specified in Section 5.01(a) of the
---------------
Coating Agreements;
(ii) For each Standard Ton of ZnNi electroplating, an amount equal
to the Coating Fee specified in Section 5.01(b) of the Coating
---------------
Agreements;
(iii) For each transition from pure zinc production to
11
<PAGE>
ZnNi production and back to pure zinc production, an amount
equal to the additional Coating Fee payable to the Partnership
from the Primary Purchasers specified in Section 5.01(c) of
---------------
the Coating Agreements;
(iv) For other items such as special packaging supplies furnished
by the Partnership, an amount equal to the Coating Fees
payable by the Primary Purchasers pursuant to Section 5.01(d)
---------------
of the Coating Agreements;
(v) For any Organic Coatings to the Primary Purchasers, the amount
determined in accordance with Section 5.01(e) of the Coating
---------------
Agreements;
(vi) For base slitting services, critical inspection processing and
VW-type packaging, the respective amounts specified as
additional Coating Fees in Section 5.01(f) of the Coating
---------------
Agreements, plus all amounts payable by the Primary Purchasers
to the Partnership under the agreements for Barnes edge
conditioning equipment, electric buy-through rates and
additional quality inspections set forth in Annex I, Annex II
and, in the case of the Bethlehem Coating Agreement, Annex
III, respectively, to the applicable Coating Agreement, as
modified by Section 5.01(f) of the applicable Coating
---------------
Agreement;
(vii) For mode changes, *** per hour of downtime, plus the cost of
any lead strip furnished by the Operator, subject to a minimum
charge for each mode change of *** (for 15 minutes); and
(viii) For warehousing finished steel coils more than 90 days after
completion of coating services, an amount equal to the
additional Coating Fees payable by the Primary Purchasers
pursuant to Section 5.01(g) of the Coating Agreements.
---------------
(b) In addition, the Partnership shall pay to Operator an additional
"Operator's Fee" equal to all amounts payable by the Primary Purchasers to the
Partnership with respect to Allocated Fixed Costs pursuant to Section 5.02(a) of
---------------
the Bethlehem Coating Agreement or the LTV Steel Coating Agreement, together
with any additional charge payable by the Primary Purchasers to the Partnership
with respect thereto pursuant to Section 5.02(b) of the Coating Agreements;
---------------
provided, however, that Operator shall give credit to the Partnership for any
- -------- -------
amount which the Partnership is required by Section 5.02(b) of the applicable
---------------
Coating Agreement to give credit to a Primary
12
<PAGE>
Purchaser.
(c) The Partnership hereby delegates to Operator all of the
Partnership's rights under Section 5.03 of the Coating Agreements to sell all
------------
scrap metal generated by the performance of EG Services or Other Services for
the Primary Purchasers under the Coating Agreements and to retain all proceeds
of such sales as additional "Operator's Fees" hereunder; provided, however, that
-------- -------
Operator shall issue credits to the Partnership in amounts equal to the credits
that the Partnership is obligated to give to the Primary Purchasers under
Section 5.03 of the Coating Agreements as and when such credits are required to
- ------------
be issued by the Partnership.
SECTION 5.02. For Services to Ispat Inland. (a) The Partnership
----------------------------
shall pay to Operator as "Operator's Fees" for operating the EG Facility to
provide services to Ispat Inland under the Inland Tolling Agreement:
(i) For each Standard Ton of pure zinc electroplating up to the
amount of the Inland Option Tons, ***, subject to adjustment
only for changes in the cost of zinc and electricity since July
1, 1998 pursuant to Section 4.2 of the Inland Tolling
-----------
Agreement;
(ii) To the extent Ispat Inland utilizes the EG Facility pursuant to
Section 3.3 of the Inland Tolling Agreement for production in
-----------
excess of the Inland Option Tons, such excess shall be treated
as production for outside parties as provided in Section 5.04
------------
of this Agreement;
(iii) For other items such as special packaging supplies furnished by
the Partnership, an amount equal to the Coating Fees payable by
the Primary Purchasers pursuant to Section 5.01(d) of the
---------------
Coating Agreements;
(iv) All revenues payable by Ispat Inland for slitting, Barnes edge
conditioning and electric buy-through rates pursuant to the
Inland Tolling Agreement or otherwise shall be for Operator's
account. Any cancellation charges paid by Ispat Inland shall be
for EGL Steel's account. Operator shall cause the Partnership
to invoice Ispat Inland for slitting charges and cancellation
charges and credit Operator's account and EGL Steel's account
as appropriate;
13
<PAGE>
(v) For mode changes, *** per hour of downtime, plus the cost of
any lead strips furnished by the Operator, subject to a minimum
charge for each mode change of *** (for 15 minutes); and
(vi) For warehousing finished steel coils more than 90 days after
completion of coating services, *** per Ton per calendar month
or fraction of a calendar month.
(b) Operator is hereby authorized to sell all scrap metal generated
by operating the EG Facility to provide EG Services and Other Services to Ispat
Inland and to retain all proceeds from such sales as additional "Operator's
Fees" hereunder; provided, however, that Operator shall issue credits to the
-------- -------
Partnership in amounts equal to the credits that the Partnership is obligated to
give to Ispat Inland under Section 6.8 of the Inland Tolling Agreement as and
-----------
when such credits are required to be issued by the Partnership.
SECTION 5.03. For Services to MSCWC. (a) The Partnership shall pay
---------------------
to Operator as "Operator's Fees" for operating the EG Facility to provide
services to MSCWC under the MSCWC Coating Agreement:
(i) For each Standard Ton of pure zinc electroplating, *** for both
MSC Laminates and Composites(R) products and non-automotive
products, subject to adjustment only for certain changes in the
cost of zinc and electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the
-----------
Inland Tolling Agreement;
(ii) For each Standard Ton of zinc-nickel alloy electroplating, ***
for both MSC Laminates and Composites(R) and non-automotive
products, subject to adjustment only for certain changes in the
cost of zinc, nickel and electricity since July 1, 1999 under
the same procedure provided for Ispat Inland under Section 4.2
-----------
of the Inland Tolling Agreement (using a price for nickel equal
to the 3-month forward quotation for nickel determined by the
London Metal Exchange and published in The Wall Street
Journal);
(iii) For each transition from pure zinc production to ZnNi
production and back to pure zinc production, an amount equal to
the additional Coating Fee payable to the Partnership specified
in Section 5.01(c) of the MSCWC Coating
---------------
14
<PAGE>
Agreement;
(iv) For other items such as special packaging supplies furnished
by the Partnership, an amount equal to the Coating Fees
payable pursuant to Section 5.01(d) of the MSCWC Coating
---------------
Agreement;
(v) For any Organic Coatings to MSCWC, the amount determined in
accordance with Section 5.01(e) of the MSCWC Coating
---------------
Agreement;
(vi) For base slitting services, critical inspection processing and
VW-type packaging, the respective amounts specified in
Sections 5.01(f) of the MSCWC Coating Agreement, plus amounts
----------------
equal to the amounts payable by MSCWC to the Partnership under
the agreements for Barnes edge conditioning equipment and
electric buy-through rates set forth in Annexes I and II,
------- - --
respectively, to the MSCWC Coating Agreement, as modified by
Section 5.01(f) of the MSCWC Coating Agreement;
---------------
(vii) For mode changes, *** per hour of downtime, plus the cost of
any lead strip furnished by the Operator, subject to a minimum
charge for each mode change of *** (for 15 minutes); and
(viii) For warehousing finished steel coils more than 90 days after
completion of coating services, an amount equal to the
additional Coating Fees payable pursuant to Section 5.01(g) of
---------------
the MSCWC Coating Agreement.
(b) In addition, the Partnership shall pay to Operator an additional
"Operator's Fee" equal to all amounts payable by MSCWC to the Partnership with
respect to Allocated Fixed Costs pursuant to Section 5.02(a) of the MSCWC
---------------
Coating Agreement, together with any additional charge payable by MSCWC to the
Partnership with respect thereto pursuant to Section 5.02(b) of the MSCWC
---------------
Coating Agreement; provided, however, that Operator shall give credit to the
-------- -------
Partnership for any amount which the Partnership is required by Section 5.02(b)
---------------
of the MSCWC Coating Agreement to give credit to MSCWC.
15
<PAGE>
(c) Operator is hereby authorized to sell all scrap metal generated
by operating the EG Facility to render services to MSCWC and to retain all
proceeds of such sales as additional "Operator's Fees" hereunder.
SECTION 5.04. For Services to Outside Parties. (a) The Partnership
-------------------------------
shall pay to Operator as "Operator's Fees" for operating the EG Facility to
provide services to outside parties (other than Ispat Inland (except as provided
in Section 5.02(a)(ii)) and MSCWC):
-------------------
(i) For each Standard Ton of pure zinc electroplating, ***, subject
to adjustment only for certain changes in the cost of zinc and
electricity since July 1, 1998 under the same procedure
provided for Ispat Inland under Section 4.2 of the Inland
-----------
Tolling Agreement;
(ii) For each Standard Ton of zinc-nickel alloy electroplating, ***,
subject to adjustment only for certain changes in the cost of
zinc, nickel and electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the
-----------
Inland Tolling Agreement (using a price of nickel equal to the
3-month forward quotation for nickel determined by the London
Metal Exchange and published in The Wall Street Journal);
(iii) For each transition from pure zinc production to ZnNi
production and back to pure zinc production, an amount equal to
the additional Coating Fee payable to the Partnership from the
Primary Purchasers specified in Section 5.01(c) of the Coating
---------------
Agreements;
(iv) For other items such as special packaging supplies furnished by
the Partnership, an amount equal to the Coating Fees payable by
the Primary Purchasers pursuant to Section 5.01(d) of the
---------------
Coating Agreements;
(v) For any Organic Coatings to such outside parties, an amount
equal to the coating fees payable by the outside parties to the
Partnership; and
(vi) For mode changes, *** per hour of downtime, plus the cost of
any lead strip furnished by the Operator, subject to a minimum
charge for each mode change of *** (for 15 minutes); and
16
<PAGE>
(vii) For warehousing finished steel coils more than 90 days after
completion of coating services, an amount equal to the additional Coating
Fees payable by the Primary Purchasers pursuant to Section 5.01(g) of the
---------------
Coating Agreements.
(b) Operator is hereby authorized to sell all scrap metal generated
by operating the EG Facility to render services to such outside parties and to
retain all proceeds of such sales as additional "Operator's Fees" hereunder;
provided, however, that Operator shall give credit to the Partnership for any
- -------- -------
amount which the Partnership is required by its agreement with the particular
outside party to give credit to such outside party.
SECTION 5.05. Proportionate Adjustment. In each case under this
------------------------
Article V in which an Operator's Fee is specified per "Standard Ton", (a) the
- ---------
Operator's Fees for services to produce Reference Strip shall be calculated by
multiplying the specified amount of Operator's Fees times the actual number of
Tons produced, and (b) the Operator's Fees for services to produce any EG
Product other than Reference Strip shall be calculated by multiplying the
specified amount of Operator's Fees times the product of the actual number of
Tons produced times the Standard Ton Factor for such EG Product.
SECTION 5.06. Cost Disclosure. Operator covenants that if at any
---------------
time during the term of this Operating Agreement, Operator shall offer or
provide any discount, rebate, refund or other similar payment or credit to
either of the Primary Purchasers with respect to services rendered to such
Primary Purchaser by the Partnership, other than as provided in such Primary
Purchaser's Coating Agreement, Operator shall promptly disclose such discount,
rebate, refund or other similar payment or credit to the other Primary
Purchaser.
SECTION 5.07. Renegotiation of Certain Terms. This Article V is
------------------------------ ---------
subject to Section 7.07 of the Partnership Agreement.
------------
ARTICLE VI
Accounting
----------
Operator shall prepare and maintain proper and complete records and
books of account and production logs in which shall be entered all transactions
and other matters relative to the Partnership and the operation and management
of the EG Facility as are usually entered into records and books of account and
production logs maintained by persons engaged in businesses of like character.
Such books, records and logs shall be prepared, and subject to inspection, in
accordance with Article IX of the Partnership Agreement. Such books, records
----------
and logs shall at all times be maintained at the executive offices of Operator
at 30610
17
<PAGE>
East Broadway, Walbridge, Ohio 43465, or at such other address as Operator shall
notify the Parties by written notice in accordance with Section 9.03 of this
------------
Agreement. Operator shall report the Partnership's actual costs for zinc, nickel
and electricity to the other Partners on a periodic basis. Operator shall supply
other cost data to the other Partners as reasonably requested for the purpose of
supporting the Partners' efforts under Section 11.04 of the Partnership
-------------
Agreement.
ARTICLE VII
Force Majeure
-------------
SECTION 7.01. Effect. Subject to the exceptions stated in Sections
------ --------
7.02 and 7.03, if as a result, in whole or substantial part, of a condition of
- ---- ----
Force Majeure, Operator is unable to perform an obligation under this Agreement,
and if Operator gives prompt notice and reasonably full particulars of such
condition and inability in writing to the Partnership and the other Partners,
then said obligation of Operator, so far as and to the extent that said
obligation is affected by such condition of Force Majeure, shall be suspended
during the continuance of any inability so caused, but for no longer period.
Any date by which performance hereunder is required shall be extended by an
amount of time equal to the aggregate amount of time during which such
performance, or any precondition to such performance, shall have been
interrupted or delayed as a result, in whole or in substantial part, of a
condition of Force Majeure.
SECTION 7.02. No Reduction in Payments. A condition of Force
------------------------
Majeure shall not relieve Operator of any obligation to pay any sum due under
this Agreement, taking into account the effect of such Force Majeure on the
computation of any such sum.
SECTION 7.03. Obligation to Remedy. A condition of Force Majeure
--------------------
shall not relieve Operator of liability in respect of any period when the
continuance of Operator's inability to perform its obligations is due to its
failure to use reasonable efforts to remedy the situation in a reasonable manner
and with reasonable dispatch; provided that the settlement of strikes and
--------
lockouts or any controversy with employees or any person purporting or seeking
to represent employees shall be entirely within the discretion of Operator, and
nothing contained in this Article VII shall require the settlement of strikes or
-----------
lockouts or such controversies or acceding to the demands of opposing persons
when such course is inadvisable in the sole discretion of Operator; and
provided, further, that if the Partnership determines in good faith that
- -------- -------
Operator is not exercising its discretion concerning the matters described in
the preceding proviso in a commercially reasonable manner, the Partnership may
exercise its rights under Section 8.01 hereof.
------------
18
<PAGE>
ARTICLE VIII
Termination and Extension
-------------------------
SECTION 8.01. Termination. This Agreement may only be terminated
-----------
prior to the completion of the term specified in Section 2.03 hereof by the
------------
Partnership: if (a) Operator dissolves, liquidates or terminates its legal
existence, (b) Operator becomes insolvent, bankrupt or subject to
receivership or, (c) EGL Steel and LTV-W, on behalf of the Partnership,
determine in good faith, subject to MSCWC's rights under Article XIV of the
-----------
Partnership Agreement, that the Operator is not performing its obligations
hereunder in a commercially reasonable manner, after notice and reasonable
opportunity to correct the matters of which complaint is made or to show
cause why such performance is commercially reasonable.
SECTION 8.02. Extension. Subject to the renegotiation provisions of
---------
Section 10.03 of the Partnership Agreement, this Agreement may be extended
- -------------
beyond its original term upon mutual agreement of the Partnership and Operator,
and shall be so extended if and to the same extent that the Term of the
Partnership is extended.
ARTICLE IX
Miscellany
----------
SECTION 9.01. Entire Agreement. (a) This Agreement, the other
----------------
Definitive Agreements referred to herein or executed contemporaneously herewith
and the Purchase Agreement supersede all prior oral and written agreements and
understandings of the parties hereto with respect to the transactions
contemplated hereby, including but not limited to the Original Operating
Agreement and the 1998 Extension Agreement, and the parties shall look only to
this Agreement, such other Definitive Agreements and the Purchase Agreement for
the rights and obligations of the parties with respect to each other in relation
to the subject matter hereof; provided, however, that nothing herein shall
-------- -------
supersede any agreements or understandings heretofore set forth in the minutes
of proceedings of the Management Committee that are not superseded in effect by
this Operating Agreement, such other Definitive Agreements or the Purchase
Agreement; and provided, further, that no such agreements or understandings
-------- -------
heretofore set forth in the minutes of proceedings of the Management Committee
shall be applicable to or binding on LTV-W or its Affiliates.
(b) Operator covenants that during the term of this Operating
Agreement, neither Operator nor any of its Affiliates will enter into or become
a party to any agreement with any other Partner or any of its Affiliates
relating to the use of the EG Facility that does not include both Bethlehem and
LTV Steel (or their respective Affiliates) as parties, unless such agreement
19
<PAGE>
shall be fully disclosed to whichever of them is not also to become a party
thereto (for purposes of this Section 9.01(b), the "Excluded Party"), and the
---------------
Excluded Party shall have a reasonable amount of time to review such agreement
before it becomes effective. If such agreement could reasonably be expected to
have an adverse impact on the Excluded Party (or any of its Affiliates), the
Excluded Party shall have the right to seek relief with respect thereto pursuant
to Article XIV of the Partnership Agreement; provided, however, that this
----------- -------- -------
Section 9.01(b) shall not apply to any agreement for the sale of sheet metal
- ---------------
pursuant to the proviso in Section 3.01 of the MSCWC Coating Agreement.
------------
SECTION 9.02. Limitations on Liability. The liability of Operator
------------------------
to the Partnership, the other Partners and their respective successors and
assigns for any loss, damage or injury of any nature or kind resulting from the
breach of Operator's covenants herein shall not, except as expressly provided
herein, include any amounts in respect of indirect or consequential damages or
commercial loss, damage or injury, such as loss of profits or production. The
liability of the Partnership and the other Partners and their respective
successors and assigns to Operator for any loss, damage or injury of any nature
or kind resulting from the breach of the Partnership's covenants herein shall
not, except as expressly provided herein, include any amounts in respect of
indirect or con sequential damages or commercial loss, damage or injury, such
as loss of profits or production.
SECTION 9.03. Amendments. This Agreement may not be modified or
----------
amended except by written agreement of the parties hereto.
SECTION 9.04. Notices. Any notice, consent, request, report or
-------
other document required or permitted under the terms of this Agreement shall be
in writing and shall be effective (a) when personally delivered on a business
day during normal business hours to the party to be given such notice at the
address designated by it for such delivery below or (b) on the business day
following the day such notice shall have been sent by telecopier or similar
electronic device (providing confirmation of transmission) or by reputable
overnight courier (providing proof of delivery) sent to such address, whichever
shall first occur. Until otherwise specified by notice, the addresses for such
notice shall be:
(i) if to Operator:
MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and
20
<PAGE>
General Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643
(ii) if to the Partnership:
Walbridge Coatings, An Illinois Partnership
30610 East Broadway
Walbridge, Ohio 43465
Attention: Management Committee
Telecopier Number: (416) 661-5951
(together with copies to the other Partners)
(iii) if to the other Partners:
(A) EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2306, Martin Tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Vice President
Telecopier Number: (215) 694-7086
(B) LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
provided, however, that any entity listed above may change the address to which
- -------- -------
notices and other communications to it shall be sent by giving to the other
entities listed above written notice of such change, in which case notices and
other communications to the entity giving the notice of the change of address
shall not be deemed to have been sufficiently given or delivered unless
addressed to it at the new address as stated in said notice; and provided,
--------
further, that notices and other communications to the Partnership shall not be
- -------
deemed to have been sufficiently given or delivered unless and until a copy
thereof shall be given or delivered as above provided to each of the Partners.
21
<PAGE>
SECTION 9.05. Headings. The headings of the Articles, Sections and
--------
Exhibits of this Agreement are for the convenience of reference only and shall
not be construed to be part of this Agreement.
SECTION 9.06. Waiver of Default. Any waiver at any time by any
-----------------
party hereto of its rights under this Agreement shall not constitute a waiver of
any other default hereunder. No delay or omission by any party to exercise any
right or power accruing upon a default hereunder shall impair any such right or
power or shall be construed to be a waiver of any such default or acquiescence
therein.
SECTION 9.07. Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
performance of the remaining obligations to be unreasonable, in which case the
parties hereto shall negotiate in good faith to amend this Agreement and the
other Definitive Agreements to take into account such material change in a
manner that is fair and equitable to all parties hereto and to achieve the
purposes of Section 2.01 hereof.
------------
SECTION 9.08. Assignment. Except as otherwise provided in the
----------
Partnership Agreement, no party hereto shall assign this Agreement or any of its
rights or obligations hereunder except with the consent of the other party and
upon the express assumption by the assignee of the obligations of such party
hereunder.
SECTION 9.09. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of Illinois.
SECTION 9.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be deemed an original,
and shall become a binding agreement when each of the parties hereto shall have
executed and delivered a counterpart of this Agreement to the other party.
SECTION 9.11. Confidentiality. The parties acknowledge that this
---------------
Agreement contains confidential information regarding the operation of the
Partnership as well as confidential information regarding the Partnership's
costs of operations. Except as required by law, including applicable securities
laws, or otherwise agreed to by the parties hereto, the parties agree to
maintain the contents of this Agreement confidential in accordance with Article
-------
XVI of the Partnership
- ---
22
<PAGE>
Agreement.
SECTION 9.12. Third Party Beneficiaries. Each of the other Partners
-------------------------
shall be an express third party beneficiary of this Agreement and entitled to
enforce the rights of the Partnership hereunder in accordance with Article XIV
of the Partnership Agreement.
SECTION 9.13. Dealings with MSCWC. All dealings between MSCWC as
-------------------
the Operator under this Operating Agreement and MSCWC as the Purchaser under the
MSCWC Coating Agreement shall be in accordance with the terms of this Operating
Agreement and the MSCWC Coating Agreement or otherwise on arm's length terms.
23
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed and delivered as of the date first above written.
MSC WALBRIDGE COATINGS INC.
By:_____________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
WALBRIDGE COATINGS, AN ILLINOIS
PARTNERSHIP
By: MSC WALBRIDGE COATINGS INC.,
General Partner
By:________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
By: EGL STEEL INC.,
General Partner
By: _______________________________
Name:
Title:
By: LTV-WALBRIDGE, INC.,
General Partner
By: ______________________________
Name:
Title:
24
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions
when capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended)
that directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in
Section 5.02 of the Coating Agreements.
- ------------
"Appraised Partnership Interest Dissolution Value" shall have the
meaning set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and
Restated Coating Agreement dated as of July 23, 1999 by and between the
Partnership and Bethlehem as amended from time to time in accordance with its
terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem
Coating Agreement, the LTV
<PAGE>
Steel Coating Agreement or the MSCWC Coating Agreement, as amended from time to
time in accordance with the terms thereof, and (b) collectively, all of such
agreements.
"Coating Fee" shall mean the various fees charged by the Partnership
for performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied
by the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services
such coated sheet metal as is capable of being marketed and sold as a prime
product (satisfying the Coating Weight and other specifications ordered) at the
then current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and
"Under Common Control With") shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the
Partnership Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to
produce *** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc
or alloy coatings to sheet steel by an electrolytic plating process.
26
<PAGE>
"EG Facility" shall mean the entire coil coating facility located at
30610 East Broadway, Walbridge, Ohio 43465, together with all fixtures,
furnishings, machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
Partner Financial Interest
- ------- ------------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
"Firm Order" shall mean an order placed by a Primary Purchaser or by
MSCWC for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar
months ended on the last day of May, August, November and February of each
Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of
March of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of,
and without fault or negligence of, the entity asserting a claim of Force
Majeure, including but not limited to any acts of God, strikes, lockouts or
other labor disputes or industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, other storms, floods, washouts or other acts of
nature, civil disturbances, explosions, temporary or permanent failure of
electrical supply, acts, directives or binding orders of any
27
<PAGE>
court or governmental authority or persons purporting to act therefor and such
orders or regulations of governmental bodies or agencies asserting jurisdiction
as would materially inhibit or prohibit the entity from performing under the
Definitive Agreements or would require such entity to accept a condition
reasonably unacceptable to it, so long as such occurred without the fault or
negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of
------------
the Coating Agreements.
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated
as of May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL
Steel, as amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation
(which has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat
Inland may require the Partnership to perform pursuant to Section 3.2 of the
-----------
Inland Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement
dated as of June 30, 1998 entered into by and between Ispat Inland (as successor
to Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages
required to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all
28
<PAGE>
losses incurred thereunder.
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey
corporation and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating
Agreement dated as of July 23, 1999 by and between the Partnership and LTV
Steel, as amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or
other casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware
corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois
corporation (formerly known as Pre Finish Metals Incorporated) and a wholly-
owned subsidiary of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1,
1980 by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
29
<PAGE>
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
"MSCWC Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and MSCWC, as amended
from time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated
therewith (determined in accordance with generally accepted accounting
principles), on a going concern basis and assuming a willing buyer and a
willing seller, neither of whom is under any compulsion to buy or sell and
each of whom has equal access to all pertinent facts, all as determined by
appraisal under Section 13.05 of the Partnership Agreement, or
-------------
(b) In the case of the EG Facility, the fair market value of the
assets thereof, less any liabilities associated therewith (determined in
accordance with generally accepted accounting principles) which are assumed
by the purchaser in accordance with the governing instruments thereof or
with the consent of the persons or entities to whom the obligation is owed,
on a going concern basis and assuming a willing buyer and a willing seller,
neither of whom is under any compulsion to buy or sell and each of whom has
equal access to all pertinent facts, all as determined by appraisal under
Section 15.04 of the Partnership Agreement.
-------------
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as
of June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
30
<PAGE>
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
"Operator" shall mean MSCWC, its successor or assign, as Operating
Partner under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and between the Partnership and Bethlehem, as
amended up to the date immediately prior to the execution and delivery of the
Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating
Agreement dated as of October 15, 1984 by and between the Partnership and MSCWC,
as amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement
dated as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland,
MSCPFM and MSC, as amended up to the date immediately prior to the execution and
delivery of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic
Coating services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent
Agreement dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM
and MSC, as amended from time to time in accordance with its terms.
31
<PAGE>
"Partner" or "Partners" shall mean a general partner or partners of
the Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i)
such Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem
or LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated
P-1 by Moody's Investors Services, Inc., or A-1 by Standard and Poor's
Corporation, having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section
-------
4.01 of each Coating Agreement.
- ----
"Production Schedule" shall mean the schedule described in Section
-------
4.01(b) of the Operating Agreement.
- -------
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling
32
<PAGE>
Agreement during which the EG Facility is not shut down for testing, for
transition to ZnNi production or back to pure zinc production, for other
scheduled or estimated unscheduled downtime, for maintenance or repairs, for the
making of capital improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
July 23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness
steel coil to which a minimum Coating Weight of *** grams of zinc per square
meter has been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
"S, G & A Expenses" shall mean all expenses of Operator or its
Affiliates for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a)
the Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of
***, divided by the Standard Capacity for such EG Product. Accordingly, the
Standard Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to
Section 5.05 of the Operating Agreement and Section 5.04 of the Coating
- ------------ ------------
Agreements.
"Sublease" shall mean the Sublease dated as of May 30, 1986, as
amended, between MSCPFM and the
33
<PAGE>
Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof, such taxes to include, but not be limited to, all real estate
and personal property taxes and assessments on the EG Facility or the equipment,
supplies or inventories contained therein, all sales and use taxes, and all
governmental franchises, licenses and permits; provided, however, that if any
-------- -------
other taxes are enacted after the date hereof, such taxes shall also be included
in the terms "Taxes" to the extent appropriate to do so in accordance with the
provisions of Article II of the Partnership Agreement.
----------
"Technical Representative" shall mean the person designated by
Operator and each Partner (other than the Operating Partner) from time to time
to represent such party in connection with any of the matters specified as being
the responsibility of the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the
------------
Partnership Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01
------------
of the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such
Partner's percentage voting interest in the Partnership as set forth opposite
the Partner's name below:
Partner Voting Interest
- ------- ----------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
The Voting Interest of any Partner shall be adjusted only to
34
<PAGE>
reflect a transfer of its Partner's Interest under the Partnership Agreement in
accordance with the provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of
the EG Facility to produce EG Product having a given width, assuming (1) ***
inch specified thickness steel substrate, (2) a Coating Weight of *** grams of
pure zinc per square meter of coated substrate surface area (on one side), (3)
*** hours per year of Production Time and (4) *** Yield Loss and no defective
steel substrate, all as determined in the reasonable judgment of the Technical
Representatives.
"Yield Loss" shall mean steel substrate scrap losses and rejections of
EG Product caused by quality failures in the operation of the EG Facility and
shall be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the Technical Representatives of
Operator and the Partner whose Affiliate supplied the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
35
<PAGE>
Exhibit 10.3
------------
================================================================================
COATING AGREEMENT
Dated as of July 23, 1999
By and Between
LTV STEEL COMPANY, INC.
and
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions.............................. 2
ARTICLE II
General Terms of Purchase and Sale................... 2
ARTICLE III
Other Terms and Conditions
3.01. Title to Steel; Liability for Defective Steel....................... 2
3.02. Reserved Production Time............................................ 3
3.03. Injuries to Persons................................................. 3
3.04. Major Loss.......................................................... 3
3.05. Shipping............................................................ 3
3.06. Warehousing......................................................... 3
3.07. Invoices and Payment................................................ 4
ARTICLE IV
Operations
4.01. Scheduling of Production Time....................................... 4
4.02. Production Priorities............................................... 5
ARTICLE V
Coating Fees
5.01. Coating Fees........................................................ 6
5.02. Fixed Fee........................................................... 8
5.03. Scrap Credit........................................................ 9
5.04. Proportionate Adjustment............................................ 9
5.05. Cost Disclosure..................................................... 9
5.06. No Minimums......................................................... 10
5.07. Costs in Connection with Modifications.............................. 10
ARTICLE VI
Miscellany
6.01. Entire Agreement.................................................... 10
6.02. Limitations on Liabilities.......................................... 11
6.03. Amendments.......................................................... 11
6.04. Notices............................................................. 11
6.05. Headings............................................................ 13
6.06. Waiver of Default................................................... 13
6.07. Severability........................................................ 13
6.08. Assignment.......................................................... 13
6.09. Governing Law....................................................... 13
6.10. Execution in Counterparts........................................... 13
6.11. Confidentiality..................................................... 14
6.12. Third Party Beneficiaries........................................... 14
</TABLE>
-i-
<PAGE>
EXHIBIT 1: Standard Terms and Conditions for Sales of EG Services by the
Partnership (the "Seller") to the Purchaser (the "Buyer")
EXHIBIT 2: Standard Terms and Conditions for Sales of Organic Coating Services
by the Partnership (the "Seller") to the Purchaser (the "Buyer")
ANNEX I: Barnes Edge Conditioning Equipment Capital Recovery and Surcharge
Agreement
ANNEX II: Billing Policy for Electric Buy-Through Rates
APPENDIX A: Definitions of Terms and Phrases
-ii-
<PAGE>
COATING AGREEMENT
THIS COATING AGREEMENT (this "Agreement"), dated as of this 23rd day
of July, 1999, by and between LTV STEEL COMPANY, INC., a New Jersey corporation,
having a place of business at 200 Public Square, Cleveland, Ohio 44114 ("LTV
Steel" or the "Purchaser") and WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP,
having a place of business at 30610 East Broadway, Walbridge, Ohio 43465 (the
"Partnership"),
W I T N E S S E T H :
WHEREAS the Partnership was formed under the laws of Illinois for the
purpose, among others, of owning (or leasing) and operating a facility designed
to coat sheet metal with electrogalvanized zinc, zinc alloy or other coatings;
and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and MSCWC are entering
into the Partnership Agreement; and
WHEREAS the Partnership Agreement provides, in part, that: (a) the EG
Facility will be primarily dedicated to the electrogalvanizing of coiled sheet
steel for the Primary Purchasers, including Purchaser, while developing new
products and markets using Organic Coatings in conjunction with EG Services, and
(b) the Partnership will provide the highest quality coating service primarily
for sale to Primary Purchasers; and
WHEREAS Purchaser and the Partnership desire to enter into this
Agreement to provide for the purchase by Purchaser of various coating services
from the Partnership on the terms and conditions set forth herein; and
WHEREAS the Partnership and Bethlehem, as the other Primary Purchaser,
are entering into the Bethlehem Coating Agreement as of the date hereof with
respect to 67% of the
<PAGE>
available Production Time, subject to certain exceptions as set forth therein,;
and
WHEREAS, the Partnership and MSCWC are concurrently entering into the
MSCWC Coating Agreement as of the date hereof relating to certain coating
services for MSCWC at the EG Facility and the Partnership and Ispat Inland have
previously entered into the Inland Tolling Agreement providing for certain pure
zinc EG Services for Ispat Inland at the EG Facility;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Purchaser and the Partnership do
hereby agree as follows:
ARTICLE I
Definitions
-----------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined.
ARTICLE II
General Terms of Purchase and Sale
----------------------------------
Except as otherwise expressly provided in this Agreement, Purchaser
will purchase from the Partnership, and the Partnership will sell to Purchaser,
coating services in accordance with the terms and conditions set forth in
Exhibits 1 or 2 hereto, whichever is applicable, as amended from time to time by
- ---------------
agreement between the Partnership and Purchaser. The term of this Agreement
shall be for a period commencing on the date hereof and ending at the end of the
Term (including renewals), unless this Agreement is earlier terminated or is
extended to a later date by mutual agreement of the parties hereto.
ARTICLE III
Other Terms and Conditions
--------------------------
SECTION 3.01. Title to Steel; Liability for Defective Steel.
---------------------------------------------
Purchaser or an Affiliate thereof shall, at all times, retain title to all sheet
metal being processed for it at the EG Facility. Purchaser shall indemnify and
hold harmless the Partnership, the Operator and its Affiliates from and against
any and all customer claims (net of insurance and other recoveries) to the
extent resulting from Purchaser supplying defective or faulty metal substrate
for coating at the EG Facility, and
-2-
<PAGE>
Purchaser shall not assert any such claim against the Partnership, the Operator
or its Affiliates.
SECTION 3.02. Reserved Production Time. Purchaser shall be entitled
------------------------
to certain priority rights during each month to available Production Time for EG
Services and Other Services at the EG Facility, all in accordance with the terms
and conditions set forth in Article IV of this Agreement.
----------
SECTION 3.03. Injuries to Persons. Purchaser shall be responsible
-------------------
for and shall indemnify and hold harmless the Partnership, all Partners and
their respective Affiliates from and against any and all damages, liabilities,
losses, expenses and costs, including reasonable attorneys' fees, incurred by
any of them as a result of injuries to persons at the EG Facility caused by the
gross negligence or willful misconduct of Purchaser or its Affiliates; provided
--------
that if at any time the Partnership determines not to obtain the insurance
specified in Section 3.08(a)(iii) of the Operating Agreement with respect to
--------------------
injuries caused by the negligence of Purchaser and its Affiliates then the
indemnification set forth in this Section 3.03 shall be deemed to apply to
injuries caused by such negligence during any period when such insurance is not
in force.
SECTION 3.04. Major Loss. If, after the occurrence of a Major Loss,
----------
Section 3.10(c) of the Operating Agreement is applicable, Purchaser and the
- ---------------
Partnership shall amend this Agreement to take into account the repairs made
pursuant to such Section 3.10(c) and their effects on the provisions of this
--------------
Agreement. Such amendments shall be commercially reasonable as between the
Partnership and Purchaser.
SECTION 3.05. Shipping. (a) Purchaser shall be responsible for
--------
arranging all of its shipments of sheet metal to the EG Facility and all such
shipments shall be at the risk and expense of Purchaser.
(b) The Partnership shall arrange shipments of Purchaser's finished
product from the EG Facility from shipping alternatives provided by Purchaser;
provided that all of such shipments shall be made at the risk and at the expense
- --------
of Purchaser.
(c) The Partnership shall provide cooperation and assistance in
scheduling shipments of metal substrate from the EG Facility and shall provide
dockside assistance in receiving, handling and shipping materials at the EG
Facility.
SECTION 3.06. Warehousing. Purchaser shall ship to the EG Facility
-----------
sheet metal as it reasonably anticipates
-3-
<PAGE>
purchasing coating services. The Partnership shall warehouse and provide
customary protection at the EG Facility for metal substrate and finished product
of Purchaser stored at the EG Facility, subject to the terms and conditions set
forth in Exhibits 1 or 2, whichever is applicable, in accordance with the
---------------
standards of MSCWC at the EG Facility on the date hereof.
SECTION 3.07. Invoices and Payment. Except in cases in which payment
--------------------
is otherwise expressly provided herein, the Partnership shall issue invoices for
the Coating Fees payable pursuant to Article V from time to time on the date
---------
that the relevant coating service is rendered and Purchaser shall pay the total
amount of each such invoice to the Partnership within thirty days after the date
of such invoice; provided, however, that effective upon the completion of
-------- -------
installation of electronic data interchange (EDI) capability at the EG Facility
(at the expense of LTV Steel) and the successful electronic transmission, as
determined by Operator's Information Systems Manager, of invoices to Purchaser
utilizing a X.12 data format, Purchaser may elect by notice to the Operator to
be invoiced with respect to each coating service rendered thereafter on the date
of shipment from the EG Facility of the products to which such coating service
is applied; provided, however, that each such invoice shall provide for payment
-------- -------
(and Purchaser shall pay such invoice) within fifteen (15) days after the date
of such invoice in the total amount stated therein plus, if applicable, one and
one-half percent (1.5%) of such total amount per each month (or fraction
thereof) from the fifteenth (15th) day after the date such coating service is
rendered to the date as of which Operator is instructed by Purchaser to ship
such products from the EG Facility. Except as provided in this Agreement,
including Section 3.01, and Exhibits 1 or 2 hereto, whichever is applicable,
------------ ---------------
Purchaser shall not, at any time, be obligated to pay the Partnership any
Coating Fee under Section 5.01 hereof with respect to EG Services or Other
------------
Services rendered by the Partnership which result in a product that is not
Commercially Saleable.
ARTICLE IV
Operations
----------
SECTION 4.01. Scheduling of Production Time. (a) On or before the
-----------------------------
15th day of each calendar month, Purchaser shall deliver to the Partnership and
to the other Primary Purchaser a binding notice ("Production Forecast") of the
number of hours of Production Time which at the then current rates of production
of the EG Facility will be required for the Partnership to perform the EG
Services and Other Services (stated separately) for Purchaser during the third
succeeding calendar month (the "Forecast Period"). Subject to the availability
of Production
-4-
<PAGE>
Time, each such Production Forecast shall constitute a "Firm Order" under this
Article IV with respect to the numbers of hours of Production Time stated in the
- ----------
Production Forecast for the Forecast Period.
(b) Purchaser shall order EG Services and Other Services in a
reasonably level manner so that excessive productivity demands will not be
placed on Operator's operation of the EG Facility during any unit of time.
SECTION 4.02. Production Priorities. (a) In scheduling available
---------------------
Production Time for EG Services during each month, the Partnership shall give
priority to purchase orders of Purchaser for EG Services and Other Services up
to the amount of Production Time for EG Services and Other Services set forth in
the timely Firm Order of Purchaser for such month; provided that (i) Purchaser's
--------
right of priority for EG Services and Other Services shall be limited to
thirty-three percent (33%) of all available Production Time during such month
and (ii) Purchaser shall have a right of first refusal for additional EG
Services and Other Services for any available Production Time which the other
Primary Purchaser, MSCWC or Ispat Inland has the right to reserve under their
respective Coating Agreements or the Inland Tolling Agreement, as the case may
be, but which the Partnership notifies Purchaser has not been so reserved;
provided, however, that if the other Primary Purchaser or MSCWC desires to
- ------- -------
exercise a similar right of first refusal with respect to such available
Production Time under its Coating Agreement, such available Production Time
shall be shared as Purchaser and Primary Purchaser or MSCWC, as the case may be,
shall agree or, in the absence of such agreement, (A) Purchaser and MSCWC shall
share any such available Production Time of the other Primary Purchaser in
accordance with the relative rights to Production Time of Purchaser and MSCWC at
the time and (B) the other Primary Purchaser shall have priority to any such
available Production Time of MSCWC or Ispat Inland. The foregoing rights of
first refusal shall be exercisable by Purchaser by giving notice to the
Partnership not more than five days after receipt of such notice from the
Partnership. Each such right of first refusal shall expire upon the expiration
of such five-day period. Purchaser acknowledges that the Bethlehem Coating
Agreement contains a priority right for the benefit of the other Primary
Purchaser with respect to sixty-seven percent (67%) of all available Production
Time, subject to certain deductions as set forth therein, and the Bethlehem
Coating Agreement and the MSCWC Coating Agreement contain rights of first
refusal with respect to Production Time that Purchaser has the right to reserve
under this Coating Agreement if Purchaser should fail to reserve it.
-5-
<PAGE>
(b) In giving effect to the above priorities, however, the
Partnership may make such adjustments from time to time as are reasonably
necessary or advisable to achieve economic and efficient order sizes, to make
efficient use of available metal substrate and raw materials needed for such
production and otherwise to maximize efficiency and levels of production.
(c) If Purchaser shall fail to deliver its Production Forecast by the
date specified in Section 4.01(a) of this Coating Agreement, the Partnership
---------------
shall attempt to contact the appropriate personnel at Purchaser to obtain such
Production Forecast, but if in the Partnership's judgment such Production
Forecast is not received within a reasonable time thereafter, (i) the priority
set forth in Section 4.02(a) for Purchaser shall not be in effect for the
---------------
Forecast Period involved and (ii) the rights of first refusal of Bethlehem and
MSCWC provided in Section 4.02(a) of their respective Coating Agreements shall
---------------
be in effect for such Forecast Period.
(d) Notwithstanding the foregoing, if the General Manager of the
Operating Partner causes the Partnership to sell electrogalvanizing, coating and
associated services to parties other than the Primary Purchasers, Ispat Inland
or MSCWC, during any Forecast Period in accordance with guidelines established
from time to time by the Management Committee and Section 10.04 of the
-------------
Partnership Agreement, the Partnership shall give priority to orders for such
sales equal to Purchaser's rights to priority under this Section 4.02 and the
------------
rights to priority of the other Primary Purchaser and MSCWC under Section 4.02
------------
of the other Coating Agreements, but only to the extent necessary to permit the
filling of such orders; provided, however, that to the extent that Production
-------- -------
Time is committed by the Partnership for sales to outside parties for a period
of time greater than six months, which shall require the consent of all
Partners, the Production Time required for such sales shall have the same
priority as the rights to production time of Purchaser, the other Primary
Purchaser and MSCWC during the term of such commitment.
(e) The Partnership shall cause Operator to furnish to Purchaser a
copy of each Production Schedule established by Operator in accordance with
Section 4.01 of the Operating Agreement not less than the fifth day before the
- ------------
beginning of each Forecast Period.
ARTICLE V
Coating Fees
------------
SECTION 5.01. Coating Fees. In consideration of the services to be
------------
rendered to Purchaser and its other benefits under this Agreement, and subject
to Section 7.07 of the Partnership
------------
-6-
<PAGE>
Agreement, Purchaser agrees to pay the following fees to the Partnership:
(a) For each Standard Ton of pure zinc electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the same
procedure as is provided for Ispat Inland in Section 4.2 of the Inland Tolling
-----------
Agreement.
(b) For each Standard Ton of ZnNi electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc, nickel or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the
procedure provided in Section 4.2 of the Inland Tolling Agreement (using a price
-----------
for nickel equal to the 3-month forward quotation for nickel determined by the
London Metal Exchange and published in The Wall Street Journal).
(c) For each transition from pure zinc production to ZnNi production
and back to pure zinc production, the Partnership shall charge Purchaser an
additional Coating Fee (subject to the last sentence of this paragraph) equal to
the product of (a) *** (the agreed number of Tons of Reference Strip that could
have been produced at standard utilization rates and at Design Capacity during
the transition time) times (b) *** (equal to the transition fee per Ton of
Reference Strip in effect immediately prior to July 1, 1998, which shall be
applicable during the entire term of this Agreement, subject to adjustment only
for certain changes in the cost of electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the Inland Tolling
-----------
Agreement). Such additional Coating Fee shall be prorated among the Primary
Purchasers and MSCWC in accordance with the number of Tons of Reference Strip
produced for each of them during the particular ZnNi production run.
(d) The Coating Fee for any other items (such as special packaging
supplies) furnished by the Partnership shall be the same as the Partnership's
cost for such items.
-7-
<PAGE>
(e) The Coating Fee for any Organic Coating shall be the same as the
Operator's Fees for such services and shall be determined by negotiations
between the Primary Purchasers and the Operator to yield a *** profit to the
Operator (i.e., Coating Fees = Operator's total costs ***). Any such negotiated
Coating Fees shall be subject to review from time to time to reflect increases
or decreases in costs.
(f) The Purchaser's Coating Fee for base slitting services shall be
*** per Ton processed, for critical inspection processing shall be *** per Ton
inspected and for VW-type packaging shall be *** per Ton packaged. The
provisions of the agreements for the Barnes edge conditioning equipment (as set
forth in Annex I hereto) and electric buy-through rates (as set forth in Annex
------- -----
II hereto) will continue in effect during the term of this Agreement; provided,
- -- --------
however, that each reference in such agreements to Inland shall be deemed to be
- -------
a reference to LTV Steel. The Purchaser's Coating Fee for mode changes shall be
*** per hour of downtime, plus the cost of any lead strip furnished by the
Partnership, subject to a minimum charge for each mode change of *** (for 15
minutes).
(g) For warehousing finished steel coils more than 90 days after
completion of coating services, the Purchaser shall pay a Coating Fee equal to
*** per Ton stored per calendar month or fraction of a calendar month after such
90-day period.
SECTION 5.02. Fixed Fee. (a) The Purchaser shall pay to the
---------
Partnership each month, commencing in August, 1999 and ending in January, 2005,
in each case for the immediately preceding month, an additional Coating Fee
equal to a portion of the Partnership's estimated fixed costs for real estate
taxes, personal property taxes, Insurance Costs, rent and fixed electricity (the
"Allocated Fixed Costs"), during the immediately preceding month. The portion
of the Allocated Fixed Costs to be paid by Purchaser each month shall equal the
product of one-twelfth of the estimated total Allocated Fixed Costs of the
Partnership for the then current Fiscal Year times thirty-three percent (0.33).
(b) The Partnership shall forward to Purchaser a copy of each invoice
or other statement for Allocated Fixed Costs within 15 days after the
Partnership's receipt thereof. Within 90 days after the end of each Fiscal Year,
the Partnership shall reconcile the estimated total annual Allocated Fixed Costs
used to calculate Purchaser's payments for such Fiscal Year pursuant to Section
-------
5.02(a) hereof to the actual Allocated Fixed Costs incurred by the Partnership
- -------
during such Fiscal Year and give credit to Purchaser for any excess of
Purchaser's total amount paid under this Section 5.02 for such Fiscal Year over
------------
the total
-8-
<PAGE>
reconciled amount receivable from Purchaser under this Section 5.02 for such
------------
Fiscal Year or charge Purchaser for any excess of such total reconciled amount
receivable for such Fiscal Year over such total amount paid for such Fiscal
Year.
SECTION 5.03. Scrap Credit. The Partnership is hereby authorized to
------------
sell all scrap metal generated by the Partnership's performance of EG Services
or Other Services for Purchaser under this Agreement and to retain all proceeds
of such sales; provided, however, that the Partnership shall issue monthly scrap
-------- -------
credits equal to (a) the product of (i) the actual weight of scrap generated by
such performance during the particular month times (ii) the price for #1 dealer
bundles (low side) as quoted in Iron Age's "New Steel" magazine for such month
for Detroit, less (b) a *** per Ton handling fee, plus (c) *** of any excess of
the proceeds of the sale of such scrap over the product of (i) the actual weight
of scrap generated by such performance during the particular month times (ii)
the price for #1 dealer bundles (low side) as quoted in Iron Age's "New Steel"
magazine for such month for Detroit.
SECTION 5.04. Proportionate Adjustment. In each case under this
------------------------
Article V in which a Coating Fee is specified per "Standard Ton," (a) the
- ---------
Coating Fees for services to produce Reference Strip shall be calculated by
multiplying the specified amount of Coating Fees times the actual number of Tons
of product produced, and (b) the Coating Fees for services to produce any EG
Product other than Reference Strip shall be calculated by multiplying the
specified amount of Coating Fees times the product of the actual number of Tons
of product produced times the Standard Ton Factor for such EG Product.
SECTION 5.05. Cost Disclosure. (a) Purchaser represents and
---------------
warrants that as of the date hereof, neither Purchaser nor any of its Affiliates
is entitled to receive any discount, rebate, refund or other similar payment or
credit from the Partnership or the Operator or any of Operator's Affiliates
other than as provided in this Coating Agreement or in the Operating Agreement.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates shall accept any
discount, rebate, refund or other similar payment or credit from the Partnership
or the Operator or any of Operator's Affiliates with respect to services
rendered to such Purchaser by the Partnership, other than as provided for
herein, unless Purchaser shall promptly disclose such discount, rebate, refund
or other similar payment or credit to the other Primary Purchaser.
-9-
<PAGE>
SECTION 5.06. No Minimums. The Partnership acknowledges that
-----------
Purchaser assumes no obligation to order any minimum amounts of EG Services or
Other Services.
SECTION 5.07. Costs in Connection with Modifications. The Purchaser
--------------------------------------
shall be solely responsible for all costs, expenses or obligations incurred by
the Partnership in connection with any extraordinary modification of the
Partnership's information systems or any other extraordinary expenses for
services that it requires, including modifications of the Partnership's
information systems required to ensure compatibility of the Partnership's
information systems with the information systems of the Purchaser, LTV-W or
their customers.
ARTICLE VI
Miscellany
----------
SECTION 6.01. Entire Agreement. (a) This Agreement, the other
----------------
Definitive Agreements referred to herein or executed contemporaneously herewith
and the Purchase Agreement supersede all prior oral and written agreements and
understandings of the parties hereto with respect to the transactions
contemplated hereby, including but not limited to the Original Coating Agreement
and the 1998 Extension Agreement, and the parties shall look only to this
Agreement, such other Definitive Agreements and the Purchase Agreement for the
rights and obligations of the parties with respect to each other in relation to
the subject matter hereof; provided, however, that nothing herein shall
-------- -------
supersede any agreements or understandings heretofore set forth in the minutes
of proceedings of the Management Committee that are not superseded in effect by
this Agreement, such other Definitive Agreements or the Purchase Agreement; and
provided, further, that no such agreements or understandings heretofore set
- -------- -------
forth in the minutes of proceedings of the Management Committee shall be
applicable to or binding on LTV-W or its Affiliates.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates will enter into or become
a party to any agreement with any Partner or any Affiliate thereof relating to
the use of the EG Facility that does not include both Bethlehem and MSCWC (or
their respective Affiliates) as parties, unless such agreement shall be fully
disclosed to whichever of them is not also to become a party thereto (for
purposes of this Section 6.01(b),the "Excluded Party"), and the Excluded Party
---------------
shall have a reasonable amount of time to review such agreement before it
becomes effective. If such agreement could reasonably be expected to have an
adverse impact on the Excluded Party (or any of its Affiliates), the Excluded
Party shall have the right to seek relief with respect
-10-
<PAGE>
thereto pursuant to Article XIV of the Partnership Agreement; provided, however,
----------- -------- -------
that this Section 6.01(b) shall not apply to any agreement for the sale of sheet
---------------
metal pursuant to the proviso in Section 3.01 of the MSCWC Coating Agreement.
------------
SECTION 6.02. Limitations on Liabilities. The liability of the
--------------------------
Partnership, Operator, the other Partners and their respective successors and
assigns to Purchaser for any loss, damage or injury of any nature or kind
resulting from the breach of the Partnership's covenants herein shall not,
except as expressly provided herein, include any amounts in respect of indirect
or consequential damages or commercial loss, damage or injury, such as loss of
profits or production. The liability of Purchaser to the Partnership, Operator,
the other Partners and their respective successors and assigns for any loss,
damage or injury of any nature or kind resulting from the breach of Purchaser's
covenants herein shall not, except as expressly provided herein, include any
amounts in respect of indirect or consequential damages or commercial loss,
damage or injury, such as loss of profits or production.
SECTION 6.03. Amendments. This Agreement may not be modified or
----------
amended except by written agreement of the parties hereto.
SECTION 6.04. Notices. Any notice, consent, request, report or other
-------
document required or permitted under the terms of this Agreement shall be in
writing and shall be effective (a) when personally delivered on a business day
during normal business hours to the party to be given such notice at the address
designated by it for such delivery below or (b) on the business day following
the day such notice shall have been sent by telecopier or similar electronic
device (providing confirmation of transmission) or by reputable overnight
courier (providing proof of delivery) sent to such address, whichever shall
first occur. Until otherwise specified by notice, the addresses for such notice
shall be:
(i) if to Purchaser:
LTV Steel Company, Inc.
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
-11-
<PAGE>
(ii) if to the Partnership:
Walbridge Coatings, an Illinois Partnership
30610 East Broadway
Walbridge, Ohio 43465
Attention: Management Committee
Telecopier Number: (419) 661-5951
(Together with copies to the Partners)
(iii) if to the Partners:
(A) EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Vice President
Telecopier Number: (215) 694-7086
(B) LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
(C) MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and General Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643
provided, however, that any entity listed above may change the address to which
- -------- -------
notices and other communications to it shall be sent by giving to the other
entities listed above written notice of such change, in which case notices and
other communications to the entity giving the notice of the change of address
shall not be deemed to have been sufficiently given or delivered unless
addressed to it at the new address as stated in said notice;
-12-
<PAGE>
provided further, that notices and other communications to the Partnership shall
- ----------------
not be deemed to have been sufficiently given or delivered unless and until a
copy thereof shall be given or delivered as above provided to each of the
Partners.
SECTION 6.05. Headings. The headings of the Articles, Sections and
--------
Exhibits of this Agreement are for the convenience of reference only and shall
not be construed to be part of this Agreement.
SECTION 6.06. Waiver of Default. Any waiver at any time by any
-----------------
party hereto of its rights under this Agreement shall not constitute a waiver of
any other default hereunder. No delay or omission by any party to exercise any
right or power accruing upon a default hereunder shall impair any such right or
power or shall be construed to be a waiver of any such default or acquiescence
therein.
SECTION 6.07. Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
performance of the remaining obligations to be unreasonable, in which case the
parties hereto shall negotiate in good faith to amend this Agreement and the
other Definitive Agreements to take into account such material change in a
manner that is fair and equitable to all parties hereto and to achieve the
purposes of Section 2.1 of the Operating Agreement.
-----------
SECTION 6.08. Assignment. Except as otherwise provided in the
----------
Partnership Agreement, no party hereto shall assign this Agreement or any of its
rights or obligations hereunder except with the consent of the other party and
upon the express assumption by the assignee of the obligations of such party
hereunder.
SECTION 6.09. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of Illinois.
SECTION 6.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be deemed an original,
and shall become a binding agreement when each of the parties hereto shall have
executed and delivered a counterpart of this Agreement to the other party.
-13-
<PAGE>
SECTION 6.11. Confidentiality. The parties acknowledge that this
---------------
Agreement contains confidential information regarding the operation of the
Partnership. Except as required by law, including applicable securities laws, or
otherwise agreed to by the parties hereto, the parties agree to maintain the
contents of this Agreement confidential in accordance with Article XVI of the
-----------
Partnership Agreement.
SECTION 6.12. Third Party Beneficiaries. Each of the Partners of
-------------------------
the Partnership, including the Operator, shall be an express third party
beneficiary of this Agreement and entitled to enforce the rights of the
Partnership hereunder.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed and delivered as of the date first above written.
LTV STEEL COMPANY, INC.
By:_____________________________________
Name:
Title:
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: MSC WALBRIDGE COATINGS
INC., General Partner
By:________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
By: EGL STEEL INC., General Partner
By:________________________________
Name:
Title:
By: LTV-WALBRIDGE, INC.,
General Partner
By:________________________________
Name:
Title:
<PAGE>
ANNEX I
Barnes Edge Conditioning Equipment Capital
Recovery and Surcharge Agreement
-16-
<PAGE>
ANNEX II
Billing Policy for Electric Buy-Through Rates
-17-
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person
(as defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section
-------
5.02 of the Coating Agreements.
- ----
"Appraised Partnership Interest Dissolution Value" shall have the
meaning set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and
Restated Coating Agreement dated as of July 23, 1999 by and between the
Partnership and Bethlehem as amended from time to time in accordance with its
terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem
Coating Agreement, the LTV Steel Coating Agreement or the MSCWC Coating
Agreement, as amended from
-18-
<PAGE>
time to time in accordance with the terms thereof, and (b) collectively, all of
such agreements.
"Coating Fee" shall mean the various fees charged by the Partnership
for performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied
by the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services
such coated sheet metal as is capable of being marketed and sold as a prime
product (satisfying the Coating Weight and other specifications ordered) at the
then current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and
"Under Common Control With") shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the
Partnership Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to
produce *** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc
or alloy coatings to sheet steel by an electrolytic plating process.
-19-
<PAGE>
"EG Facility" shall mean the entire coil coating facility located at
30610 East Broadway, Walbridge, Ohio 43465, together with all fixtures,
furnishings, machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
<TABLE>
<CAPTION>
Partner Financial Interest
- ------- ------------------
<S> <C>
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
</TABLE>
"Firm Order" shall mean an order placed by a Primary Purchaser or by
MSCWC for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar
months ended on the last day of May, August, November and February of each
Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of
March of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of,
and without fault or negligence of, the entity asserting a claim of Force
Majeure, including but not limited to any acts of God, strikes, lockouts or
other labor disputes or industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, other storms, floods, washouts or other acts of
nature, civil disturbances, explosions, temporary or permanent failure of
electrical supply, acts, directives or binding orders of any court or
governmental authority or persons purporting to act therefor and such
-20-
<PAGE>
orders or regulations of governmental bodies or agencies asserting jurisdiction
as would materially inhibit or prohibit the entity from performing under the
Definitive Agreements or would require such entity to accept a condition
reasonably unacceptable to it, so long as such occurred without the fault or
negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of
------------
the Coating Agreements.
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated
as of May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL
Steel, as amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation
(which has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat
Inland may require the Partnership to perform pursuant to Section 3.2 of the
-----------
Inland Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement
dated as of June 30, 1998 entered into by and between Ispat Inland (as successor
to Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages
required to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
-21-
<PAGE>
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey
corporation and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating
Agreement dated as of July 23, 1999 by and between the Partnership and LTV
Steel, as amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or
other casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware
corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois
corporation (formerly known as Pre Finish Metals Incorporated) and a wholly-
owned subsidiary of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1,
1980 by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
-22-
<PAGE>
"MSCWC Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and MSCWC, as amended
from time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated
therewith (determined in accordance with generally accepted accounting
principles), on a going concern basis and assuming a willing buyer and a
willing seller, neither of whom is under any compulsion to buy or sell and
each of whom has equal access to all pertinent facts, all as determined by
appraisal under Section 13.05 of the Partnership Agreement, or
-------------
(b) In the case of the EG Facility, the fair market value of the
assets thereof, less any liabilities associated therewith (determined in
accordance with generally accepted accounting principles) which are assumed
by the purchaser in accordance with the governing instruments thereof or
with the consent of the persons or entities to whom the obligation is owed,
on a going concern basis and assuming a willing buyer and a willing seller,
neither of whom is under any compulsion to buy or sell and each of whom has
equal access to all pertinent facts, all as determined by appraisal under
Section 15.04 of the Partnership Agreement.
-------------
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as
of June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
-23-
<PAGE>
"Operator" shall mean MSCWC, its successor or assign, as Operating
Partner under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and between the Partnership and Bethlehem, as
amended up to the date immediately prior to the execution and delivery of the
Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating
Agreement dated as of October 15, 1984 by and between the Partnership and MSCWC,
as amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement
dated as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland,
MSCPFM and MSC, as amended up to the date immediately prior to the execution and
delivery of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic
Coating services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent
Agreement dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM
and MSC, as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of
the Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
-24-
<PAGE>
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i)
such Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem
or LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-
1 by Moody's Investors Services, Inc., or A-1 by Standard and Poor's
Corporation, having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section
-------
4.01 of each Coating Agreement.
- ----
"Production Schedule" shall mean the schedule described in Section
-------
4.01(b) of the Operating Agreement.
- -------
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
July 23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
-25-
<PAGE>
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness
steel coil to which a minimum Coating Weight of *** grams of zinc per square
meter has been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
"S, G & A Expenses" shall mean all expenses of Operator or its
Affiliates for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a)
the Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of
***, divided by the Standard Capacity for such EG Product. Accordingly, the
Standard Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to
Section 5.05 of the Operating Agreement and Section 5.04 of the Coating
- ------------ ------------
Agreements.
"Sublease" shall mean the Sublease dated as of May 30, 1986, as
amended, between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof,
-26-
<PAGE>
such taxes to include, but not be limited to, all real estate and personal
property taxes and assessments on the EG Facility or the equipment, supplies or
inventories contained therein, all sales and use taxes, and all governmental
franchises, licenses and permits; provided, however, that if any other taxes are
-------- -------
enacted after the date hereof, such taxes shall also be included in the terms
"Taxes" to the extent appropriate to do so in accordance with the provisions of
Article II of the Partnership Agreement.
- ----------
"Technical Representative" shall mean the person designated by
Operator and each Partner (other than the Operating Partner) from time to time
to represent such party in connection with any of the matters specified as being
the responsibility of the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the
------------
Partnership Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01
------------
of the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such
Partner's percentage voting interest in the Partnership as set forth opposite
the Partner's name below:
<TABLE>
<CAPTION>
Partner Voting Interest
- ----------- ----------------
<S> <C>
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
</TABLE>
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of
the EG Facility to produce EG Product having a given width, assuming (1) ***
inch specified thickness steel substrate, (2) a Coating Weight of *** grams of
pure zinc per square meter of coated substrate surface area (on one side), (3)
*** hours per year of Production Time and (4) *** Yield Loss and no defective
steel substrate, all as determined in the reasonable judgment of the Technical
Representatives.
-27-
<PAGE>
"Yield Loss" shall mean steel substrate scrap losses and rejections of
EG Product caused by quality failures in the operation of the EG Facility and
shall be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the Technical Representatives of
Operator and the Partner whose Affiliate supplied the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
-28-
<PAGE>
Exhibit 10.4
------------
================================================================================
COATING AGREEMENT
Dated as of July 23, 1999
By and Between
MSC WALBRIDGE COATINGS INC.
and
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I
Definitions............................ 2
ARTICLE II
General Terms of Purchase and Sale................ 2
ARTICLE III
Other Terms and Conditions
3.01. Title to Steel; Liability for Defective Steel.................... 2
3.02. Reserved Production Time......................................... 3
3.03. Injuries to Persons.............................................. 3
3.04. Major Loss....................................................... 3
3.05. Shipping......................................................... 3
3.06. Warehousing...................................................... 3
3.07. Invoices and Payment............................................. 4
ARTICLE IV
Operations
4.01. Scheduling of Production Time.................................... 4
4.02. Production Priorities............................................ 4
ARTICLE V
Coating Fees
5.01. Coating Fees..................................................... 7
5.02. Fixed Fee........................................................ 8
5.03. Scrap Credit..................................................... 9
5.04. Proportionate Adjustment......................................... 9
5.05. Cost Disclosure.................................................. 9
5.06. No Minimums...................................................... 10
ARTICLE VI
Miscellany
6.01. Entire Agreement................................................. 10
6.02. Limitations on Liabilities....................................... 11
6.03. Amendments....................................................... 11
6.04. Notices.......................................................... 11
6.05. Headings......................................................... 13
6.06. Waiver of Default................................................ 13
6.07. Severability..................................................... 13
6.08. Assignment....................................................... 13
6.09. Governing Law.................................................... 13
6.10. Execution in Counterparts........................................ 13
6.11. Confidentiality.................................................. 14
6.12. Third Party Beneficiaries........................................ 14
6.13. Dealings with MSCWC.............................................. 14
</TABLE>
-i-
<PAGE>
EXHIBIT 1: Standard Terms and Conditions for Sales of EG Services by the
Partnership (the "Seller") to the Purchaser (the "Buyer")
EXHIBIT 2: Standard Terms and Conditions for Sales of Organic Coating
Services by the Partnership (the "Seller") to the Purchaser (the
"Buyer")
ANNEX I: Barnes Edge Conditioning Equipment Capital Recovery and Surcharge
Agreement
ANNEX II: Billing Policy for Electric Buy-Through Rates
APPENDIX A: Definitions of Terms and Phrases
-ii-
<PAGE>
COATING AGREEMENT
THIS COATING AGREEMENT (this "Agreement"), dated as of this 23rd day
of July, 1999, by and between MSC WALBRIDGE COATINGS INC., a Delaware
corporation, having a place of business at 2200 Pratt Boulevard, Elk Grove
Village, Illinois 60007 ("MSCWC" or the "Purchaser") and WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP, having a place of business at 30610 East Broadway,
Walbridge, Ohio 43465 (the "Partnership"),
W I T N E S S E T H :
WHEREAS the Partnership was formed under the laws of Illinois for the
purpose, among others, of owning (or leasing) and operating a facility designed
to coat sheet metal with electrogalvanized zinc, zinc alloy or other coatings;
and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and MSCWC are entering
into the Partnership Agreement; and
WHEREAS, the Partnership Agreement provides, in part, that: (a) the
EG Facility will be primarily dedicated to the electrogalvanizing of coiled
sheet steel for the Primary Purchasers, while developing new products and
markets using Organic Coatings in conjunction with EG Services, and (b) the
Partnership will provide the highest quality coating service primarily for sale
to Primary Purchasers; and
WHEREAS, Purchaser and the Partnership desire to enter into this
Coating Agreement to provide for the purchase by Purchaser of various coating
services from the Partnership on the terms and conditions set forth herein, all
as contemplated by Section 10.1 of the Partnership Agreement;
------------
WHEREAS, the Partnership and each of the Primary Purchasers are
entering into the other Coating Agreements as of the date hereof relating to
certain coating services for Bethlehem and LTV Steel, respectively, at the EG
Facility and the Partnership and Ispat Inland have previously entered into the
<PAGE>
Inland Tolling Agreement providing for certain pure zinc EG Services for Ispat
Inland at the EG Facility.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Purchaser and the Partnership do
hereby agree as follows:
ARTICLE I
Definitions
-----------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined.
ARTICLE II
General Terms of Purchase and Sale
----------------------------------
Except as otherwise expressly provided in this Agreement, Purchaser
will purchase from the Partnership, and the Partnership will sell to Purchaser,
coating services in accordance with the terms and conditions set forth in
Exhibits 1 or 2 hereto, whichever is applicable, as amended from time to time by
- ---------------
agreement between the Partnership and Purchaser. The term of this Agreement
shall be for a period commencing on the date hereof and ending at the end of the
Term (including renewals), unless this Agreement is earlier terminated or is
extended to a later date by mutual agreement of the parties hereto.
ARTICLE III
Other Terms and Conditions
--------------------------
SECTION 3.01. Title to Steel; Liability for Defective Steel.
---------------------------------------------
Purchaser or an Affiliate thereof shall, at all times, retain title to all sheet
metal being processed for it at the EG Facility; provided, however, that
-------- -------
Bethlehem and LTV Steel shall each have the right to quote on selling such
substrate to the Purchaser and to match the last offer received by the Purchaser
for such substrate based on total economics, service and quality. Purchaser
shall indemnify and hold harmless the Partnership, the Operator and its
Affiliates from and against any and all customer claims (net of insurance and
other recoveries) to the extent resulting from Purchaser supplying defective or
faulty metal substrate for coating at the EG Facility, and Purchaser shall not
assert any such claim against the Partnership, the Operator or its Affiliates.
-2-
<PAGE>
SECTION 3.02. Reserved Production Time. Purchaser shall be entitled
------------------------
to certain priority rights during each month to available Production Time for EG
Services and Other Services at the EG Facility, all in accordance with the terms
and conditions set forth in Article IV of this Agreement.
----------
SECTION 3.03. Injuries to Persons. Purchaser shall be responsible
-------------------
for and shall indemnify and hold harmless the Partnership, all Partners and
their respective Affiliates from and against any and all damages, liabilities,
losses, expenses and costs, including reasonable attorneys' fees, incurred by
any of them as a result of injuries to persons at the EG Facility caused by the
gross negligence or willful misconduct of Purchaser or its Affiliates; provided
--------
that if at any time the Partnership determines not to obtain the insurance
specified in Section 3.08(a)(iii) of the Operating Agreement with respect to
--------------------
injuries caused by the negligence of Purchaser and its Affiliates, then the
indemnification set forth in this Section 3.03 shall be deemed to apply to
injuries caused by such negligence during any period when such insurance is not
in force.
SECTION 3.04. Major Loss. If, after the occurrence of a Major Loss,
----------
Section 3.10(c) of the Operating Agreement is applicable, Purchaser and the
- ---------------
Partnership shall amend this Agreement to take into account the repairs made
pursuant to such Section 3.10(c) and their effects on the provisions of this
--------------
Agreement. Such amendments shall be commercially reasonable as between the
Partnership and Purchaser.
SECTION 3.05. Shipping. (a) Purchaser shall be responsible for
--------
arranging all of its shipments of sheet metal to the EG Facility and all such
shipments shall be at the risk and expense of Purchaser.
(b) The Partnership shall arrange shipments of Purchaser's finished
product from the EG Facility from shipping alternatives provided by Purchaser;
provided that all of such shipments shall be made at the risk and at the expense
- --------
of Purchaser.
(c) The Partnership shall provide cooperation and assistance in
scheduling shipments of metal substrate from the EG Facility and shall provide
dockside assistance in receiving, handling and shipping materials at the EG
Facility.
SECTION 3.06. Warehousing. Purchaser shall ship to the EG Facility
-----------
sheet metal as it reasonably anticipates purchasing coating services. The
Partnership shall warehouse and provide customary protection at the EG Facility
for metal substrate and finished product of Purchaser stored at the EG
-3-
<PAGE>
Facility, subject to the terms and conditions set forth in Exhibits 1 or 2,
---------------
whichever is applicable, in accordance with the standards of MSCWC at the EG
Facility on the date hereof.
SECTION 3.07. Invoices and Payment. Except in cases in which
--------------------
payment is otherwise expressly provided herein, the Partnership shall issue
invoices for the Coating Fees payable pursuant to Article V from time to time on
---------
the date that the relevant coating service is rendered and Purchaser shall pay
the total amount of each such invoice to the Partnership within thirty days
after the date of such invoice. Except as provided in this Agreement, including
Section 3.01, and Exhibits 1 or 2 hereto, whichever is applicable, Purchaser
- ------------ ---------------
shall not, at any time, be obligated to pay the Partnership any Coating Fee
under Section 5.01 hereof with respect to EG Services or Other Services rendered
------------
by the Partnership which result in a product that is not Commercially Saleable.
ARTICLE IV
Operations
----------
SECTION 4.01. Scheduling of Production Time. (a) On or before the
-----------------------------
15th day of each calendar month, commencing on October 15, 1999, Purchaser shall
deliver to the Partnership and to the Primary Purchasers a binding notice
("Production Forecast") of the number of hours of Production Time which at the
then current rates of production of the EG Facility will be required for the
Partnership to perform the EG Services and Other Services (stated separately)
for Purchaser during the third succeeding calendar month (the "Forecast
Period"). Subject to the availability of Production Time, each such Production
Forecast shall constitute a "Firm Order" under this Article IV with respect to
----------
the numbers of hours of Production Time stated in the Production Forecast for
the Forecast Period.
(b) Purchaser shall order EG Services and Other Services in a
reasonably level manner so that excessive productivity demands will not be
placed on Operator's operation of the EG Facility during any unit of time.
SECTION 4.02. Production Priorities. (a) In scheduling available
---------------------
Production Time for EG Services during each month, the Partnership shall give
priority equal to that of Bethlehem to purchase orders of Purchaser for EG
Services and Other Services up to the amount of Production Time for EG Services
and Other Services set forth in the timely Firm Order of Purchaser for such
month; provided that (i) Purchaser's right of priority for EG Services and Other
--------
Services shall be limited to *** Standard Tons in calendar year 2000 and ***
Standard Tons in each of the calendar years 2001 through 2004 for the production
-4-
<PAGE>
of MSC Laminate and Composite(R) products or non-automotive products, with a
preference toward using Organic Coatings over pure zinc or ZnNi coatings (the
"MSCWC Priority Tons"), subject to Section 7.07 of the Partnership Agreement,
------------
and (ii) Purchaser shall have a right of first refusal for additional EG
Services and Other Services for any available Production Time which either of
the Primary Purchasers or Ispat Inland has the right to reserve under their
respective Coating Agreements or the Inland Tolling Agreement, as the case may
be, but which the Partnership notifies Purchaser has not been so reserved;
provided, however, that if a Primary Purchaser desires to exercise a similar
- -------- -------
right of first refusal with respect to such available Production Time under its
Coating Agreement, such available Production Time shall be shared as Purchaser
and such Primary Purchaser, as the case may be, shall agree or, in the absence
of such agreement, (A) Purchaser and the Primary Purchaser exercising such right
of first refusal (the "Exercising Primary Purchaser") shall share in accordance
with their relative rights to Production Time at the time any such available
Production Time of (x) the Primary Purchaser that did not reserve its Production
Time, and (y) if the Exercising Primary Purchaser is LTV Steel, such available
Production Time of Ispat Inland and (B) if the Exercising Primary Purchaser is
Bethlehem, the Exercising Primary Purchaser shall have priority to any such
available Production Time of Ispat Inland. The foregoing rights of first
refusal shall be exercisable by Purchaser by giving notice to the Partnership
not more than five days after receipt of such notice from the Partnership. Each
such right of first refusal shall expire upon the expiration of such five-day
period. Purchaser acknowledges that the Bethlehem Coating Agreement and the LTV
Steel Coating Agreement contain a priority right for the benefit of the Primary
Purchasers with respect to all of the available Production Time that is not
reserved to Purchaser pursuant to the proviso of the first sentence of this
Section 4.02, and the Bethlehem Coating Agreement and the LTV Steel Coating
- ------------
Agreement contain rights of first refusal with respect to Production Time that
Purchaser has the right to reserve under this Coating Agreement if Purchaser
should fail to reserve it.
(b) In giving effect to the above priorities, however, the
Partnership may make such adjustments from time to time as are reasonably
necessary or advisable to achieve economic and efficient order sizes, to make
efficient use of available metal substrate and raw materials needed for such
production and otherwise to maximize efficiency and levels of production.
(c) If Purchaser shall fail to deliver its Production Forecast by the
date specified in Section 4.01(a) of this Coating Agreement, the Partnership
---------------
shall attempt to contact the appropriate personnel at Purchaser to obtain such
Production
-5-
<PAGE>
Forecast, but if in the Partnership's judgment such Production Forecast is not
received within a reasonable time thereafter, (i) the priority set forth in
Section 4.02(a) for Purchaser shall not be in effect for the Forecast Period
- ---------------
involved and (ii) the rights of first refusal of Bethlehem and LTV Steel
provided in Section 4.02(a) of their respective Coating Agreements shall be in
---------------
effect for such Forecast Period.
(d) Notwithstanding the foregoing, if the General Manager of the
Operating Partner causes the Partnership to sell electrogalvanizing, coating and
associated services to parties other than the Primary Purchasers, Ispat Inland
or the Purchaser during any Forecast Period in accordance with guidelines
established from time to time by the Management Committee and Section 10.04 of
-------------
the Partnership Agreement, the Partnership shall give priority to orders for
such sales equal to Purchaser's rights to priority under this Section 4.02 and
------------
the Primary Purchasers' rights to priority under Section 4.02 of the other
------------
Coating Agreements, but only to the extent necessary to permit the filling of
such orders; provided, however, that to the extent that Production Time is
-------- -------
committed by the Partnership for sales to outside parties for a period of time
greater than six months, which shall require the consent of all Partners, the
Production Time required for such sales shall have the same priority as the
rights to production time of Purchaser and the Primary Purchasers during the
term of such commitment.
(e) On the same terms as provided herein, MSCWC and its Affiliates
shall also be entitled to solicit sales of MSC Laminates and Composites(R)
products and non-automotive products in excess of the MSCWC Priority Tons and,
on a toll-coating basis, sales of other products from outside parties, in each
case subject to the availability of Production Time; such sales shall have
priority to Production Time equal to that of Bethlehem or LTV Steel (a) to the
extent that Bethlehem or LTV Steel fails to reserve such Production Time in
accordance with Section 4.02(a) of the applicable Coating Agreement (including
---------------
the rights of first refusal of Bethlehem and LTV Steel provided therein) or (b)
to the extent that such priority is given in accordance with Section 4.02(d) of
---------------
the applicable Coating Agreement.
(f) The Partnership shall cause Operator to furnish to Purchaser a
copy of each Production Schedule established by Operator in accordance with
Section 4.01 of the Operating Agreement not less than the fifth day before the
- ------------
beginning of each Forecast Period.
-6-
<PAGE>
ARTICLE V
Coating Fees
------------
SECTION 5.01. Coating Fees. In consideration of the services to be
------------
rendered to Purchaser and its other benefits under this Agreement, and subject
to Section 7.07 of the Partnership Agreement, Purchaser agrees to pay the
------------
following fees to the Partnership:
(a) For each Standard Ton of pure zinc electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) *** for MSC Laminate and
Composites(R) products and (ii) *** for non-automotive products. Such fees may
be adjusted for changes in the cost of zinc or electricity (i.e., the twelve
month average variable kilowatt hour cost per Standard Ton) since July 1, 1998,
pursuant to the same procedure as is provided for Ispat Inland in Section 4.2 of
-----------
the Inland Tolling Agreement.
(b) For each Standard Ton of ZnNi electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) *** for MSC Laminate and
Composites(R) products and (ii) *** for non-automotive products. Such fees may
be adjusted for changes in the cost of zinc, nickel or electricity (i.e., the
twelve month average variable kilowatt hour cost per Standard Ton) since July 1,
1998, pursuant to the procedure provided in Section 4.2 of the Inland Tolling
-----------
Agreement (using a price for nickel equal to the 3-month forward quotation for
nickel determined by the London Metal Exchange and published in The Wall Street
Journal).
(c) For each transition from pure zinc production to ZnNi production
and back to pure zinc production, the Partnership shall charge the Purchaser an
additional Coating Fee (subject to the last sentence of this paragraph) equal to
the product of (a) 750 (the agreed number of Tons of Reference Strip that could
have been produced at standard utilization rates and at Design Capacity during
the transition time) times (b) *** (equal to the transition fee per Ton of
Reference Strip in effect immediately prior to July 1, 1998, which shall be
applicable during the entire term of this Agreement, subject to adjustment only
for certain changes in the cost of electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the Inland Tolling
-----------
Agreement). Such additional Coating Fee shall be prorated among the Primary
Purchasers and MSCWC in accordance with the number of Tons of Reference Strip
produced for each of them during the particular ZnNi production run.
(d) The Coating Fee for any other items (such as special packaging
supplies) furnished by the Partnership shall be the same as the Partnership's
cost for such items.
-7-
<PAGE>
(e) The Coating Fee for any Organic Coating shall be the same as the
Operator's Fees for such services and shall be determined by negotiations
between (i) the Purchaser and (ii) EGL Steel and LTV-W, acting for the
Partnership, to yield a *** profit to the Operator (i.e., Coating Fees =
Operator's total costs ***). Any such negotiated Coating Fees shall be subject
to review from time to time to reflect increases or decreases in costs.
(f) The Purchaser's Coating Fee for base slitting services shall be
*** per Ton processed, for critical inspection processing shall be *** per Ton
inspected and for VW-type packaging shall be *** per Ton packaged. The
provisions of the agreements for the Barnes edge conditioning equipment (as set
forth in Annex I hereto) and electric buy-through rates (as set forth in Annex
------- -----
II hereto). The Purchaser's Coating Fee for mode changes shall be *** per hour
- --
of downtime, plus the cost of any lead strip furnished by the Partnership,
subject to a minimum charge for each mode change of *** (for 15 minutes).
(g) For warehousing finished steel coils more than 90 days after
completion of coating services, the Purchaser shall pay a Coating Fee equal to
*** per Ton stored per calendar month or fraction of a calendar month after such
90-day period.
SECTION 5.02. Fixed Fee. (a) The Purchaser shall pay to the
---------
Partnership each month, commencing in February, 2000 and ending in January,
2005, an additional Coating Fee equal to a portion of the Partnership's
estimated fixed costs for real estate taxes, personal property taxes, Insurance
Costs, rent and fixed electricity (the "Allocated Fixed Costs"), during the
immediately preceding month. The portion of the Allocated Fixed Costs to be
paid by Purchaser each month shall equal (i) with respect to the payment due in
each month from February, 2000 to January, 2001, both inclusive, each payment
relating to the immediately preceding month, an amount equal to the product of
one-twelfth of the estimated total Allocated Fixed Costs for the then current
Fiscal Year times *** (i.e., ***); and (ii) with respect to the payment due in
each month from February, 2001 to January, 2005, both inclusive, each payment
relating to the immediately preceding month, an amount equal to the product of
one-twelfth of the estimated total Allocated Fixed Costs for the then current
Fiscal Year times *** (i.e., ***); provided, however, that this sentence shall
-------- -------
be subject to Section 7.07 of the Partnership Agreement.
------------
(b) The Partnership shall forward to Purchaser a copy of each invoice
or other statement for Allocated Fixed Costs within 15 days after the
Partnership's receipt thereof. Within 90 days after the end of each Fiscal Year,
the Partnership shall
-8-
<PAGE>
reconcile the estimated total annual Allocated Fixed Costs used to calculate
Purchaser's payments for such Fiscal Year pursuant to Section 5.02(a) hereof to
---------------
the actual Allocated Fixed Costs incurred by the Partnership during such Fiscal
Year and give credit to Purchaser for any excess of Purchaser's total amount
paid under this Section 5.02 for such Fiscal Year over the total reconciled
------------
amount receivable from Purchaser under this Section 5.02 for such Fiscal Year or
------------
charge Purchaser for any excess of such total reconciled amount receivable for
such Fiscal Year over such total amount paid for such Fiscal Year.
SECTION 5.03. Scrap Credit. The Partnership is hereby authorized to
------------
sell all scrap metal generated by the Partnership's performance of EG Services
or Other Services for Purchaser under this Agreement and to retain all proceeds
of such sales; provided, however, that the Partnership shall issue monthly scrap
credits equal to (a) the product of (i) the actual weight of scrap generated by
such performance during the particular month times (ii) the price for #1 dealer
bundles (low side) as quoted in Iron Age's "New Steel" magazine for such month
for Detroit, less (b) a *** per Ton handling fee, plus (c) *** of any excess of
the proceeds of the sale of such scrap over the product of (i) the actual weight
of scrap generated by such performance during the particular month times (ii)
the price for #1 dealer bundles (low side) as quoted in Iron Age's "New Steel"
magazine for such month for Detroit.
SECTION 5.04. Proportionate Adjustment. In each case under this
------------------------
Article V in which a Coating Fee is specified per "Standard Ton," (a) the
- ---------
Coating Fees for services to produce Reference Strip shall be calculated by
multiplying the specified amount of Coating Fees times the actual number of Tons
of product produced, and (b) the Coating Fees for services to produce any EG
Product other than Reference Strip shall be calculated by multiplying the
specified amount of Coating Fees times the product of the actual number of Tons
of product produced times the Standard Ton Factor for such EG Product.
SECTION 5.05. Cost Disclosure. (a) Purchaser represents and
---------------
warrants that as of the date hereof, neither Purchaser nor any of its Affiliates
is entitled to receive any discount, rebate, refund or other similar payment or
credit from the Partnership or the Operator or any of Operator's Affiliates
other than as provided in this Coating Agreement or in the Operating Agreement.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates shall accept any
discount, rebate, refund or other similar payment or credit from the Partnership
or the Operator or any of
-9-
<PAGE>
Operator's Affiliates with respect to services rendered to such Purchaser by the
Partnership, other than as provided for herein, unless Purchaser shall promptly
disclose such discount, rebate, refund or other similar payment or credit to the
Primary Purchasers.
SECTION 5.06. No Minimums. The Partnership acknowledges that
-----------
Purchaser assumes no obligation to order any minimum amounts of EG Services or
Other Services.
ARTICLE VI
Miscellany
----------
SECTION 6.01. Entire Agreement. (a) This Agreement, the other
----------------
Definitive Agreements referred to herein or executed contemporaneously herewith
and the Purchase Agreement supersede all prior oral and written agreements and
understandings of the parties hereto with respect to the transactions
contemplated hereby, including but not limited to the Original Coating Agreement
and the 1998 Extension Agreement, and the parties shall look only to this
Agreement, such other Definitive Agreements and the Purchase Agreement for the
rights and obligations of the parties with respect to each other in relation to
the subject matter hereof; provided, however, that nothing herein shall
-------- -------
supersede any agreements or understandings heretofore set forth in the minutes
of proceedings of the Management Committee that are not superseded in effect by
this Agreement, such other Definitive Agreements or the Purchase Agreement; and
provided, further, that no such agreements or understandings heretofore set
- -------- -------
forth in the minutes of proceedings of the Management Committee shall be
applicable to or binding on LTV-W or its Affiliates.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates will enter into or become
a party to any agreement with any Partner or any Affiliate thereof relating to
the use of the EG Facility that does not include both Bethlehem and LTV Steel
(or their respective Affiliates) as parties, unless such agreement shall be
fully disclosed to whichever of them is not also to become a party thereto (for
purposes of this Section 6.01(b) the "Excluded Party"), and the Excluded Party
---------------
shall have a reasonable amount of time to review such agreement before it
becomes effective. If such agreement could reasonably be expected to have an
adverse impact on the Excluded Party (or any of its Affiliates), the Excluded
Party shall have the right to seek relief with respect thereto pursuant to
Article XIV of the Partnership Agreement; provided, however, that this Section
-------- ------- -------
6.01 shall not apply to any agreement for the sale of sheet metal pursuant to
- ----
the proviso in Section 3.01.
------------
-10-
<PAGE>
SECTION 6.02. Limitations on Liabilities. The liability of the
--------------------------
Partnership, Operator, the other Partners and their respective successors and
assigns to Purchaser for any loss, damage or injury of any nature or kind
resulting from the breach of the Partnership's covenants herein shall not,
except as expressly provided herein, include any amounts in respect of indirect
or consequential damages or commercial loss, damage or injury, such as loss of
profits or production. The liability of Purchaser to the Partnership, Operator,
the other Partners and their respective successors and assigns for any loss,
damage or injury of any nature or kind resulting from the breach of Purchaser's
covenants herein shall not, except as expressly provided herein, include any
amounts in respect of indirect or consequential damages or commercial loss,
damage or injury, such as loss of profits or production.
SECTION 6.03. Amendments. This Agreement may not be modified or
----------
amended except by written agreement of the parties hereto.
SECTION 6.04. Notices. Any notice, consent, request, report or
-------
other document required or permitted under the terms of this Agreement shall be
in writing and shall be effective (a) when personally delivered on a business
day during normal business hours to the party to be given such notice at the
address designated by it for such delivery below or (b) on the business day
following the day such notice shall have been sent by telecopier or similar
electronic device (providing confirmation of transmission) or by reputable
overnight courier (providing proof of delivery) sent to such address, whichever
shall first occur. Until otherwise specified by notice, the addresses for such
notice shall be:
(i) if to Purchaser:
MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President
and General Manager
Telecopier Number: (419) 661-5951
-11-
<PAGE>
(ii) if to the Partnership:
Walbridge Coatings, An Illinois Partnership
30610 East Broadway
Walbridge, Ohio 43465
Attention: Management Committee
Telecopier Number: (419) 661-5951
(Together with copies to the Partners)
(iii) if to the Partners:
(A) EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Vice President
Telecopier Number: (215) 694-7086
(B) LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
(C) MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and General
Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643
provided, however, that any entity listed above may change the address to which
- -------- -------
notices and other communications to it shall be sent by giving to the other
entities listed above written notice of such change, in which case notices and
other communications to the entity giving the notice of the change of address
shall not be deemed to have been sufficiently given or delivered unless
addressed to it at the new address as stated in said notice;
-12-
<PAGE>
provided further, that notices and other communications to the Partnership shall
- ----------------
not be deemed to have been sufficiently given or delivered unless and until a
copy thereof shall be given or delivered as above provided to each of the
Partners.
SECTION 6.05. Headings. The headings of the Articles, Sections and
--------
Exhibits of this Agreement are for the convenience of reference only and shall
not be construed to be part of this Agreement.
SECTION 6.06. Waiver of Default. Any waiver at any time by any
-----------------
party hereto of its rights under this Agreement shall not constitute a waiver of
any other default hereunder. No delay or omission by any party to exercise any
right or power accruing upon a default hereunder shall impair any such right or
power or shall be construed to be a waiver of any such default or acquiescence
therein.
SECTION 6.07. Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
performance of the remaining obligations to be unreasonable, in which case the
parties hereto shall negotiate in good faith to amend this Agreement and the
other Definitive Agreements to take into account such material change in a
manner that is fair and equitable to all parties hereto and to achieve the
purposes of Section 2.1 of the Operating Agreement.
-----------
SECTION 6.08. Assignment. Except as otherwise provided in the
----------
Partnership Agreement, no party hereto shall assign this Agreement or any of its
rights or obligations hereunder except with the consent of the other party and
upon the express assumption by the assignee of the obligations of such party
hereunder.
SECTION 6.09. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of Illinois.
SECTION 6.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be deemed an original,
and shall become a binding agreement when each of the parties hereto shall have
executed and delivered a counterpart of this Agreement to the other party.
-13-
<PAGE>
SECTION 6.11. Confidentiality. The parties acknowledge that this
---------------
Agreement contains confidential information regarding the operation of the
Partnership. Except as required by law, including applicable securities laws, or
otherwise agreed to by the parties hereto, the parties agree to maintain the
contents of this Agreement confidential in accordance with Article XVI of the
-----------
Partnership Agreement.
SECTION 6.12. Third Party Beneficiaries. Each of the Partners of
-------------------------
the Partnership, including the Operator, shall be an express third party
beneficiary of this Agreement and entitled to enforce the rights of the
Partnership hereunder.
SECTION 6.13. Dealings with MSCWC. All dealings between MSCWC as
-------------------
the Operator under the Operating Agreement and MSCWC as the Purchaser under this
Coating Agreement shall be in accordance with the terms of the Operating
Agreement and this Coating Agreement or otherwise on arm's length terms.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed and delivered as of the date first above written.
MSC WALBRIDGE COATINGS INC.
By:__________________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: MSC WALBRIDGE COATINGS
INC., General Partner
By:_______________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
By: EGL STEEL INC.,
General Partner
By:____________________________________
Name:
Title:
By: LTV-WALBRIDGE, INC.,
General Partner
By:____________________________________
Name:
Title:
-15-
<PAGE>
ANNEX 1
Barnes Edge Conditioning Equipment Capital
Recovery and Surcharge Agreement
-16-
<PAGE>
ANNEX II
Billing Policy for Electric Buy-Through Rates
-17-
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person (as
defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section 5.02
------------
of the Coating Agreements.
"Appraised Partnership Interest Dissolution Value" shall have the meaning
set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and Restated
Coating Agreement dated as of July 23, 1999 by and between the Partnership and
Bethlehem as amended from time to time in accordance with its terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem Coating
Agreement, the LTV Steel Coating Agreement or the MSCWC Coating Agreement, as
amended from time to time in accordance with the terms thereof, and (b)
collectively, all of such agreements.
-18-
<PAGE>
"Coating Fee" shall mean the various fees charged by the Partnership for
performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied by
the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services such
coated sheet metal as is capable of being marketed and sold as a prime product
(satisfying the Coating Weight and other specifications ordered) at the then
current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and "Under
Common Control With") shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the Partnership
Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to produce
*** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc or
alloy coatings to sheet steel by an electrolytic plating process.
"EG Facility" shall mean the entire coil coating facility located at 30610
East Broadway, Walbridge, Ohio 43465, together with all fixtures, furnishings,
machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
-19-
<PAGE>
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
Partner Financial Interest
- ----------- ------------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
"Firm Order" shall mean an order placed by a Primary Purchaser or by MSCWC
for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar months
ended on the last day of May, August, November and February of each Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of March
of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of, and
without fault or negligence of, the entity asserting a claim of Force Majeure,
including but not limited to any acts of God, strikes, lockouts or other labor
disputes or industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
hurricanes, tornadoes, other storms, floods, washouts or other acts of nature,
civil disturbances, explosions, temporary or permanent failure of electrical
supply, acts, directives or binding orders of any court or governmental
authority or persons purporting to act therefor and such orders or regulations
of governmental bodies or agencies asserting jurisdiction as would materially
inhibit or prohibit the entity from performing under the Definitive Agreements
or would require such entity to accept a condition reasonably unacceptable to
it, so long as such occurred without the fault or negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of the
------------
Coating Agreements.
-20-
<PAGE>
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated as of
May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel, as
amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation (which
has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat Inland
may require the Partnership to perform pursuant to Section 3.2 of the Inland
-----------
Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement dated
as of June 30, 1998 entered into by and between Ispat Inland (as successor to
Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages required
to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
-21-
<PAGE>
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey corporation
and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and LTV Steel, as
amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or other
casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois corporation
(formerly known as Pre Finish Metals Incorporated) and a wholly-owned subsidiary
of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1, 1980
by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
"MSCWC Coating Agreement" shall mean that certain Coating Agreement dated
as of July 23, 1999 by and between the Partnership and MSCWC, as amended from
time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated therewith
(determined in
-22-
<PAGE>
accordance with generally accepted accounting principles), on a going concern
basis and assuming a willing buyer and a willing seller, neither of whom is
under any compulsion to buy or sell and each of whom has equal access to all
pertinent facts, all as determined by appraisal under Section 13.05 of the
-------------
Partnership Agreement, or
(b) In the case of the EG Facility, the fair market value of the assets
thereof, less any liabilities associated therewith (determined in accordance
with generally accepted accounting principles) which are assumed by the
purchaser in accordance with the governing instruments thereof or with the
consent of the persons or entities to whom the obligation is owed, on a going
concern basis and assuming a willing buyer and a willing seller, neither of
whom is under any compulsion to buy or sell and each of whom has equal access
to all pertinent facts, all as determined by appraisal under Section 15.04 of
-------------
the Partnership Agreement.
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as of
June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
"Operator" shall mean MSCWC, its successor or assign, as Operating Partner
under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and
-23-
<PAGE>
between the Partnership and Bethlehem, as amended up to the date immediately
prior to the execution and delivery of the Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating Agreement
dated as of October 15, 1984 by and between the Partnership and MSCWC, as
amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement dated
as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland, MSCPFM and
MSC, as amended up to the date immediately prior to the execution and delivery
of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic Coating
services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent Agreement
dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM and MSC,
as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of the
Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i) such
Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
-24-
<PAGE>
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem or
LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-1 by
Moody's Investors Services, Inc., or A-1 by Standard and Poor's Corporation,
having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section 4.01 of
------------
each Coating Agreement.
"Production Schedule" shall mean the schedule described in Section 4.01(b)
---------------
of the Operating Agreement.
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of July
23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness steel
coil to which a minimum Coating Weight of *** grams of zinc per square meter has
been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
-25-
<PAGE>
"S, G & A Expenses" shall mean all expenses of Operator or its Affiliates
for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a) the
Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of ***,
divided by the Standard Capacity for such EG Product. Accordingly, the Standard
Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to Section
-------
5.05 of the Operating Agreement and Section 5.04 of the Coating Agreements.
- ---- ------------
"Sublease" shall mean the Sublease dated as of May 30, 1986, as amended,
between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof, such taxes to include, but not be limited to, all real estate
and personal property taxes and assessments on the EG Facility or the equipment,
supplies or inventories contained therein, all sales and use taxes, and all
governmental franchises, licenses and permits; provided, however, that if any
-------- -------
other taxes are enacted after the date hereof, such taxes shall also be included
in the terms "Taxes" to the extent appropriate to do so in accordance with the
provisions of Article II of the Partnership Agreement.
----------
"Technical Representative" shall mean the person designated by Operator
and each Partner (other than the Operating Partner) from time to time to
represent such party
-26-
<PAGE>
in connection with any of the matters specified as being the responsibility of
the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the Partnership
------------
Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01 of
------------
the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such Partner's
percentage voting interest in the Partnership as set forth opposite the
Partner's name below:
Partner Voting Interest
- ------- ---------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of the
EG Facility to produce EG Product having a given width, assuming (1) *** inch
specified thickness steel substrate, (2) a Coating Weight of *** grams of pure
zinc per square meter of coated substrate surface area (on one side), (3) ***
hours per year of Production Time and (4) *** Yield Loss and no defective steel
substrate, all as determined in the reasonable judgment of the Technical
Representatives.
"Yield Loss" shall mean steel substrate scrap losses and rejections of EG
Product caused by quality failures in the operation of the EG Facility and shall
be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the
-27-
<PAGE>
Technical Representatives of Operator and the Partner whose Affiliate supplied
the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
-28-
<PAGE>
Exhibit 10.5
------------
================================================================================
AMENDED AND RESTATED
COATING AGREEMENT
Dated as of July 23, 1999
By and Between
BETHLEHEM STEEL CORPORATION
and
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions.......................... 2
ARTICLE II
General Terms of Purchase and Sale............... 2
ARTICLE III
Other Terms and Conditions
3.01. Title to Steel; Liability for Defective Steel................... 2
3.02. Reserved Production Time........................................ 3
3.03. Injuries to Persons............................................. 3
3.04. Major Loss...................................................... 3
3.05. Shipping........................................................ 3
3.06. Warehousing..................................................... 3
3.07. Invoices and Payment............................................ 4
ARTICLE IV
Operations
4.01. Scheduling of Production Time................................... 4
4.02. Production Priorities........................................... 5
ARTICLE V
Coating Fees
5.01. Coating Fees.................................................... 6
5.02. Fixed Fee....................................................... 8
5.03. Scrap Credit.................................................... 9
5.04. Proportionate Adjustment........................................ 9
5.05. Cost Disclosure................................................. 9
5.06. No Minimums..................................................... 10
ARTICLE VI
Miscellany
6.01. Entire Agreement................................................ 10
6.02. Limitations on Liabilities...................................... 10
6.03. Amendments...................................................... 11
6.04. Notices......................................................... 11
6.05. Headings........................................................ 12
6.06. Waiver of Default............................................... 12
6.07. Severability.................................................... 13
6.08. Assignment...................................................... 13
6.09. Governing Law................................................... 13
6.10. Execution in Counterparts....................................... 13
6.11. Confidentiality................................................. 13
6.12. Third Party Beneficiaries....................................... 13
</TABLE>
-ii-
<PAGE>
EXHIBIT 1: Standard Terms and Conditions for Sales of EG Services by the
Partnership (the "Seller") to the Purchaser (the "Buyer")
EXHIBIT 2: Standard Terms and Conditions for Sales of Organic Coating
Services by the Partnership (the "Seller") to the Purchaser (the
"Buyer")
ANNEX I: Barnes Edge Conditioning Equipment Capital Recovery and Surcharge
Agreement
ANNEX II: Billing Policy for Electric Buy-Through Rates
ANNEX III: Billing Agreement for Additional Quality Inspector
APPENDIX A: Definitions of Terms and Phrases
-i-
<PAGE>
AMENDED AND RESTATED
COATING AGREEMENT
THIS AMENDED AND RESTATED COATING AGREEMENT (this "Agreement"), dated
as of this 23rd day of July, 1999, by and between BETHLEHEM STEEL CORPORATION, a
Delaware corporation, having a place of business at Martin Tower, 1170 Eighth
Avenue, Bethlehem, Pennsylvania 18016 ("Bethlehem" or the "Purchaser") and
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP, having a place of business at 30610
East Broadway, Walbridge, Ohio 43465 (the "Partnership"),
W I T N E S S E T H :
WHEREAS the Partnership was formed under the laws of Illinois for the
purpose, among others, of owning (or leasing) and operating a facility designed
to coat sheet metal with electrogalvanized zinc, zinc alloy or other coatings;
and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and MSCWC are entering
into the Partnership Agreement; and
WHEREAS, the Partnership Agreement provides, in part, that: (a) the
EG Facility will be primarily dedicated to the electrogalvanizing of coiled
sheet steel for the Primary Purchasers, including Purchaser, while developing
new products and markets using Organic Coatings in conjunction with EG Services,
and (b) the Partnership will provide the highest quality coating service
primarily for sale to Primary Purchasers; and
WHEREAS, Purchaser and the Partnership desire to amend and restate the
Original Coating Agreement to provide for the purchase by Purchaser of various
coating services from the Partnership on the terms and conditions set forth
herein;
WHEREAS, the Partnership and LTV Steel, as the other Primary
Purchaser, are entering into the LTV Steel Coating
<PAGE>
Agreement as of the date hereof with respect to 33% of available Production
Time; and
WHEREAS, the Partnership and MSCWC are entering into the MSCWC Coating
Agreement as of the date hereof relating to certain coating services for MSCWC
at the EG Facility and the Partnership and Ispat Inland have previously entered
into the Inland Tolling Agreement providing for certain pure zinc EG Services
for Ispat Inland at the EG Facility;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Purchaser and the Partnership do
hereby agree to amend and restate the Original Coating Agreement to read as
follows:
ARTICLE I
Definitions
-----------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined.
ARTICLE II
General Terms of Purchase and Sale
----------------------------------
Except as otherwise expressly provided in this Agreement, Purchaser
will purchase from the Partnership, and the Partnership will sell to Purchaser,
coating services in accordance with the terms and conditions set forth in
Exhibits 1 or 2 hereto, whichever is applicable, as amended from time to time by
- ---------------
agreement between the Partnership and Purchaser. The term of this Agreement
shall be for a period commencing on the date hereof and ending at the end of the
Term (including renewals), unless this Agreement is earlier terminated or is
extended to a later date by mutual agreement of the parties hereto.
ARTICLE III
Other Terms and Conditions
--------------------------
SECTION 3.01. Title to Steel; Liability for Defective Steel.
---------------------------------------------
Purchaser or an Affiliate thereof shall, at all times, retain title to all sheet
metal being processed for it at the EG Facility. Purchaser shall indemnify and
hold harmless the Partnership, the Operator and its Affiliates from and against
any and all customer claims (net of insurance and other recoveries) to the
extent resulting from Purchaser supplying defective or faulty metal substrate
for coating at the EG Facility, and
-2-
<PAGE>
Purchaser shall not assert any such claim against the Partnership, the Operator
or its Affiliates.
SECTION 3.02. Reserved Production Time. Purchaser shall be entitled
------------------------
to certain priority rights during each month to available Production Time for EG
Services and Other Services at the EG Facility, all in accordance with the terms
and conditions set forth in Article IV of this Agreement.
----------
SECTION 3.03. Injuries to Persons. Purchaser shall be responsible
-------------------
for and shall indemnify and hold harmless the Partnership, all Partners and
their respective Affiliates from and against any and all damages, liabilities,
losses, expenses and costs, including reasonable attorneys' fees, incurred by
any of them as a result of injuries to persons at the EG Facility caused by the
gross negligence or willful misconduct of Purchaser or its Affiliates; provided
--------
that if at any time the Partnership determines not to obtain the insurance
specified in Section 3.08(a)(iii) of the Operating Agreement with respect to
--------------------
injuries caused by the negligence of Purchaser and its Affiliates, then the
indemnification set forth in this Section 3.03 shall be deemed to apply to
injuries caused by such negligence during any period when such insurance is not
in force.
SECTION 3.04. Major Loss. If, after the occurrence of a Major Loss,
----------
Section 3.10(c) of the Operating Agreement is applicable, Purchaser and the
- ---------------
Partnership shall amend this Agreement to take into account the repairs made
pursuant to such Section 3.10(c) and their effects on the provisions of this
--------------
Agreement. Such amendments shall be commercially reasonable as between the
Partnership and Purchaser.
SECTION 3.05. Shipping. (a) Purchaser shall be responsible for
--------
arranging all of its shipments of sheet metal to the EG Facility and all such
shipments shall be at the risk and expense of Purchaser.
(b) The Partnership shall arrange shipments of Purchaser's finished
product from the EG Facility from shipping alternatives provided by Purchaser;
provided that all of such shipments shall be made at the risk and at the expense
- --------
of Purchaser.
(c) The Partnership shall provide cooperation and assistance in
scheduling shipments of metal substrate from the EG Facility and shall provide
dockside assistance in receiving, handling and shipping materials at the EG
Facility.
SECTION 3.06. Warehousing. Purchaser shall ship to the EG Facility
-----------
sheet metal as it reasonably anticipates
-3-
<PAGE>
purchasing coating services. The Partnership shall warehouse and provide
customary protection at the EG Facility for metal substrate and finished product
of Purchaser stored at the EG Facility, subject to the terms and conditions set
forth in Exhibits 1 or 2, whichever is applicable, in accordance with the
---------------
standards of MSCWC at the EG Facility on the date hereof.
SECTION 3.07. Invoices and Payment. Except in cases in which
--------------------
payment is otherwise expressly provided herein, the Partnership shall issue
invoices for the Coating Fees payable pursuant to Article V from time to time on
---------
the date that the relevant coating service is rendered and Purchaser shall pay
the total amount of each such invoice to the Partnership within thirty days
after the date of such invoice; provided, however, that effective upon the
-------- -------
completion of installation of electronic data interchange (EDI) capability at
the EG Facility (at the expense of LTV Steel) and the successful electronic
transmission, as determined by Operator's Information Systems Manager, of
invoices to Purchaser utilizing a X.12 data format, Purchaser may elect by
notice to the Operator to be invoiced with respect to each coating service
rendered thereafter on the date of shipment from the EG Facility of the products
to which such coating service is applied; provided, however, that each such
-------- -------
invoice shall provide for payment (and Purchaser shall pay such invoice) within
fifteen (15) days after the date of such invoice in the total amount stated
therein plus, if applicable, one and one-half percent (1.5%) of such total
amount per each month (or fraction thereof) from the fifteenth (15th) day after
the date such coating service is rendered to the date as of which Operator is
instructed by Purchaser to ship such products from the EG Facility. Except as
provided in this Agreement, including Section 3.01, and Exhibits 1 or 2 hereto,
------------ ---------------
whichever is applicable, Purchaser shall not, at any time, be obligated to pay
the Partnership any Coating Fee under Section 5.01 hereof with respect to EG
------------
Services or Other Services rendered by the Partnership which result in a product
that is not Commercially Saleable.
ARTICLE IV
Operations
----------
SECTION 4.01. Scheduling of Production Time. (a) On or before the
-----------------------------
15th day of each calendar month, Purchaser shall deliver to the Partnership and
to the other Primary Purchaser a binding notice ("Production Forecast") of the
number of hours of Production Time which at the then current rates of production
of the EG Facility will be required for the Partnership to perform the EG
Services and Other Services (stated separately) for Purchaser during the third
succeeding calendar month (the "Forecast Period"). Subject to the availability
of Production
-4-
<PAGE>
Time, each such Production Forecast shall constitute a "Firm Order" under this
Article IV with respect to the numbers of hours of Production Time stated in
- ----------
the Production Forecast for the Forecast Period.
(b) Purchaser shall order EG Services and Other Services in a
reasonably level manner so that excessive productivity demands will not be
placed on Operator's operation of the EG Facility during any unit of time.
SECTION 4.02. Production Priorities. (a) In scheduling available
---------------------
Production Time for EG Services during each month, the Partnership shall give
priority to purchase orders of Purchaser for EG Services and Other Services up
to the amount of Production Time for EG Services and Other Services set forth in
the timely Firm Order of Purchaser for such month; provided that (i) Purchaser's
--------
right of priority for EG Services and Other Services shall be limited to sixty-
seven percent (67%) of all available Production Time during such month less (x)
the Production Time required by the Partnership to perform the services
requested by MSCWC pursuant to the MSCWC Coating Agreement, subject to Section
-------
7.07 of the Partnership Agreement, and (y) the Production Time specified in a
- ----
timely "Firm Order" of Ispat Inland as defined in Section 6.3 of the Inland
-----------
Tolling Agreement; and (ii) Purchaser shall have a right of first refusal for
additional EG Services and Other Services for any available Production Time
which the other Primary Purchaser, MSCWC or Ispat Inland has the right to
reserve under their respective Coating Agreements or the Inland Tolling
Agreement, as the case may be, but which the Partnership notifies Purchaser has
not been so reserved; provided, however, that if the other Primary Purchaser or
-------- -------
MSCWC desires to exercise a similar right of first refusal with respect to such
available Production Time under its Coating Agreement, such available Production
Time shall be shared as Purchaser and the other Primary Purchaser or MSCWC, as
the case may be, shall agree or, in the absence of such agreement, (A) Purchaser
and MSCWC shall share any such available Production Time of the other Primary
Purchaser in accordance with the relative rights to Production Time of Purchaser
and MSCWC at the time and (B) Purchaser shall have priority to any such
available Production Time of MSCWC or Ispat Inland. The foregoing rights of
first refusal shall be exercisable by Purchaser by giving notice to the
Partnership not more than five days after receipt of such notice from the
Partnership. Each such right of first refusal shall expire upon the expiration
of such five-day period. Purchaser acknowledges that the LTV Steel Coating
Agreement contains a priority right for the benefit of the other Primary
Purchaser with respect to thirty-three percent (33%) of all available Production
Time without any of the deductions set forth in clause (i) of the proviso to the
first sentence of this
-5-
<PAGE>
Section 4.02, and the LTV Steel Coating Agreement and the MSCWC Coating
- ------------
Agreement contain rights of first refusal with respect to Production Time that
Purchaser has the right to reserve under this Coating Agreement if Purchaser
should fail to reserve it.
(b) In giving effect to the above priorities, however, the
Partnership may make such adjustments from time to time as are reasonably
necessary or advisable to achieve economic and efficient order sizes, to make
efficient use of available metal substrate and raw materials needed for such
production and otherwise to maximize efficiency and levels of production.
(c) If Purchaser shall fail to deliver its Production Forecast by the
date specified in Section 4.01(a) of this Coating Agreement, the Partnership
---------------
shall attempt to contact the appropriate personnel at Purchaser to obtain such
Production Forecast, but if in the Partnership's judgment such Production
Forecast is not received within a reasonable time thereafter, (i) the priority
set forth in Section 4.02(a) for Purchaser shall not be in effect for the
---------------
Forecast Period involved and (ii) the rights of first refusal of LTV Steel and
MSCWC provided in Section 4.02(a) of their respective Coating Agreements shall
---------------
be in effect for such Forecast Period.
(d) Notwithstanding the foregoing, if the General Manager of the
Operating Partner causes the Partnership to sell electrogalvanizing, coating and
associated services to parties other than the Primary Purchasers, Ispat Inland
or MSCWC during any Forecast Period in accordance with guidelines established
from time to time by the Management Committee and Section 10.04 of the
-------------
Partnership Agreement, the Partnership shall give priority to orders for such
sales equal to Purchaser's rights to priority under this Section 4.02 and the
------------
rights to priority of the other Primary Purchaser and MSCWC under Section 4.02
------------
of the other Coating Agreements, but only to the extent necessary to permit the
filling of such orders; provided, however, that to the extent that Production
-------- -------
Time is committed by the Partnership for sales to outside parties for a period
of time greater than six months, which shall require the consent of all
Partners, the Production Time required for such sales shall have the same
priority as the rights to production time of Purchaser, the other Primary
Purchaser and MSCWC during the term of such commitment.
(e) The Partnership shall cause Operator to furnish to Purchaser a
copy of each Production Schedule established by Operator in accordance with
Section 4.01 of the Operating Agreement not less than the fifth day before the
- ------------
beginning of each Forecast Period.
-6-
<PAGE>
ARTICLE V
Coating Fees
------------
SECTION 5.01. Coating Fees. In consideration of the services to be
------------
rendered to Purchaser and its other benefits under this Agreement, and subject
to Section 7.07 of the Partnership Agreement, Purchaser agrees to pay the
------------
following fees to the Partnership:
(a) For each Standard Ton of pure zinc electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the same
procedure as is provided for Ispat Inland in Section 4.2 of the Inland Tolling
-----------
Agreement.
(b) For each Standard Ton of ZnNi electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc, nickel or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the
procedure provided in Section 4.2 of the Inland Tolling Agreement (using a price
-----------
for nickel equal to the 3-month forward quotation for nickel determined by the
London Metal Exchange and published in The Wall Street Journal).
(c) For each transition from pure zinc production to ZnNi production
and back to pure zinc production, the Partnership shall charge Purchaser an
additional Coating Fee (subject to the last sentence of this paragraph) equal to
the product of (a) *** (the agreed number of Tons of Reference Strip that could
have been produced at standard utilization rates and at Design Capacity during
the transition time) times (b) *** (equal to the transition fee per Ton of
Reference Strip in effect immediately prior to July 1, 1998, which shall be
applicable during the entire term of this Agreement, subject to adjustment only
for certain changes in the cost of electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the Inland Tolling
-----------
Agreement). Such additional Coating Fee shall be prorated among the Primary
Purchasers and MSCWC in accordance with the number of Tons of Reference Strip
produced for each of them during the particular ZnNi production run.
-7-
<PAGE>
(d) The Coating Fee for any other items (such as special packaging
supplies) furnished by the Partnership shall be the same as the Partnership's
cost for such items.
(e) The Coating Fee for any Organic Coating shall be the same as the
Operator's Fees for such services and shall be determined by negotiations
between the Primary Purchasers and the Operator to yield a *** profit to the
Operator (i.e., Coating Fees = Operator's total costs divided by ***). Any such
negotiated Coating Fees shall be subject to review from time to time to reflect
increases or decreases in costs.
(f) The Purchaser's Coating Fee for base slitting services shall be
*** per Ton processed, for critical inspection processing shall be *** per Ton
inspected and for VW-type packaging shall be *** per Ton packaged. The
provisions of the agreements for the Barnes edge conditioning equipment (as set
forth in Annex I hereto), electric buy-through rates (as set forth in Annex II
------- --------
hereto) and additional quality inspections (as set forth in Annex III hereto)
---------
will continue in effect during the term of this Agreement; provided, however,
-------- -------
that each reference in such agreements to Inland shall be deemed to be a
reference to LTV Steel. The Purchaser's Coating Fee for mode changes shall be
*** per hour of downtime, plus the cost of any lead strip furnished by the
Partnership, subject to a minimum charge for each mode change of *** (for 15
minutes).
(g) For warehousing finished steel coils more than 90 days after
completion of coating services, the Purchaser shall pay a Coating Fee equal to
*** per Ton stored per calendar month or fraction of a calendar month after such
90-day period.
SECTION 5.02. Fixed Fee. (a) The Purchaser shall pay to the
---------
Partnership each month, commencing in August, 1999 and ending in January, 2005,
in each case for the immediately preceding month, an additional Coating Fee
equal to a portion of the Partnership's estimated fixed costs for real estate
taxes, personal property taxes, Insurance Costs, rent and fixed electricity (the
"Allocated Fixed Costs"), during the immediately preceding month. The portion
of the Allocated Fixed Costs to be paid by Purchaser each month shall equal the
product of one-twelfth of the estimated total Allocated Fixed Costs of the
Partnership for the then current Fiscal Year times sixty-seven percent (0.67),
less (i) an amount equal to the product of *** times the total number of
Standard Tons of products produced by the Partnership for Ispat Inland and its
subsidiaries during the immediately preceding month; provided, however, that
-------- -------
such amount shall be limited to the amount which when divided by one-twelfth of
the estimated total Allocated Fixed Costs for the then current Fiscal Year
results in the total percentage of Production Time to
-8-
<PAGE>
which Ispat Inland is entitled under the Inland Tolling Agreement for the
immediately preceding month; (ii) with respect to the payment due in each month
from February, 2000 to January, 2001, both inclusive, each payment relating to
the immediately preceding month, an amount equal to the product of (x) one-
twelfth of the estimated total Allocated Fixed Costs for the then current Fiscal
Year times (y) *** (i.e., ***); and (iii) with respect to the payment due in
each month from February, 2001 to January, 2005, both inclusive, each payment
relating to the immediately preceding month, an amount equal to the product of
(x) one-twelfth of the estimated total Allocated Fixed Costs for the then
current Fiscal Year times (y) *** (i.e., ***); provided, further, that clauses
-------- -------
(ii) and (iii) of this sentence shall be subject to Section 7.07 of the
------------
Partnership Agreement.
(b) The Partnership shall forward to Purchaser a copy of each invoice
or other statement for Allocated Fixed Costs within 15 days after the
Partnership's receipt thereof. Within 90 days after the end of each Fiscal Year,
the Partnership shall reconcile the estimated total annual Allocated Fixed Costs
used to calculate Purchaser's payments for such Fiscal Year pursuant to Section
-------
5.02(a) hereof to the actual Allocated Fixed Costs incurred by the Partnership
- -------
during such Fiscal Year and give credit to Purchaser for any excess of
Purchaser's total amount paid under this Section 5.02 for such Fiscal Year over
------------
the total reconciled amount receivable from Purchaser under this Section 5.02
------------
for such Fiscal Year or charge Purchaser for any excess of such total reconciled
amount receivable for such Fiscal Year over such total amount paid for such
Fiscal Year; provided, however, that such reconciliation for Fiscal Year 1999
-------- -------
shall be as set forth in a separate letter agreement dated as of the date hereof
among the Partnership, Bethlehem, LTV Steel and MSCWC.
SECTION 5.03. Scrap Credit. The Partnership is hereby authorized to
------------
sell all scrap metal generated by the Partnership's performance of EG Services
or Other Services for Purchaser under this Agreement and to retain all proceeds
of such sales; provided, however, that the Partnership shall issue monthly scrap
-------- -------
credits equal to (a) the product of (i) the actual weight of scrap generated by
such performance during the particular month times (ii) the price for #1 dealer
bundles (low side) as quoted in Iron Age's "New Steel" magazine for such month
for Detroit, less (b) a *** per Ton handling fee, plus (c) *** of any excess of
the proceeds of the sale of such scrap over the product of (i) the actual weight
of scrap generated by such performance during the particular month times (ii)
the price for #1 dealer bundles (low side) as quoted in Iron Age's "New Steel"
magazine for such month for Detroit.
-9-
<PAGE>
SECTION 5.04. Proportionate Adjustment. In each case under this
------------------------
Article V in which a Coating Fee is specified per "Standard Ton," (a) the
- ---------
Coating Fees for services to produce Reference Strip shall be calculated by
multiplying the specified amount of Coating Fees times the actual number of Tons
of product produced, and (b) the Coating Fees for services to produce any EG
Product other than Reference Strip shall be calculated by multiplying the
specified amount of Coating Fees times the product of the actual number of Tons
of product produced times the Standard Ton Factor for such EG Product.
SECTION 5.05. Cost Disclosure. (a) Purchaser represents and
---------------
warrants that as of the date hereof, neither Purchaser nor any of its Affiliates
is entitled to receive any discount, rebate, refund or other similar payment or
credit from the Partnership or the Operator or any of Operator's Affiliates
other than as provided in this Coating Agreement or in the Operating Agreement.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates shall accept any
discount, rebate, refund or other similar payment or credit from the Partnership
or the Operator or any of Operator's Affiliates with respect to services
rendered to such Purchaser by the Partnership, other than as provided for
herein, unless Purchaser shall promptly disclose such discount, rebate, refund
or other similar payment or credit to the other Primary Purchaser.
SECTION 5.06. No Minimums. The Partnership acknowledges that
-----------
Purchaser assumes no obligation to order any minimum amounts of EG Services or
Other Services.
ARTICLE VI
Miscellany
----------
SECTION 6.01. Entire Agreement. (a) This Agreement, the other
----------------
Definitive Agreements referred to herein or executed contemporaneously herewith
and the Purchase Agreement supersede all prior oral and written agreements and
understandings of the parties hereto with respect to the transactions
contemplated hereby, including but not limited to the Original Coating Agreement
and the 1998 Extension Agreement, and the parties shall look only to this
Agreement, such other Definitive Agreements and the Purchase Agreement for the
rights and obligations of the parties with respect to each other in relation to
the subject matter hereof; provided, however, that nothing herein shall
-------- -------
supersede any agreements or understandings heretofore set forth in the minutes
of proceedings of the Management Committee that
-10-
<PAGE>
are not superseded in effect by this Agreement, such other Definitive Agreements
or the Purchase Agreement; and provided, further, that no such agreements or
-------- -------
understandings heretofore set forth in the minutes of proceedings of the
Management Committee shall be applicable to or binding on LTV-W or its
Affiliates.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates will enter into or become
a party to any agreement with any Partner or any Affiliate thereof relating to
the use of the EG Facility that does not include both LTV Steel and MSCWC (or
their respective Affiliates) as parties, unless such agreement shall be fully
disclosed to whichever of them is not also to become a party thereto (for
purposes of this Section 6.01(b), the "Excluded Party"), and the Excluded Party
---------------
shall have a reasonable amount of time to review such agreement before it
becomes effective. If such agreement could reasonably be expected to have an
adverse impact on the Excluded Party (or any of its Affiliates), the Excluded
Party shall have the right to seek relief with respect thereto pursuant to
Article XIV of the Partnership Agreement; provided, however, that this Section
-------- ------- -------
6.02(b) shall not apply to any agreement for the sale of sheet metal pursuant to
- ----
the proviso in Section 3.01 of the MSCWC Coating Agreement.
------------
SECTION 6.02. Limitations on Liabilities. The liability of the
--------------------------
Partnership, Operator, the other Partners and their respective successors and
assigns to Purchaser for any loss, damage or injury of any nature or kind
resulting from the breach of the Partnership's covenants herein shall not,
except as expressly provided herein, include any amounts in respect of indirect
or consequential damages or commercial loss, damage or injury, such as loss of
profits or production. The liability of Purchaser to the Partnership, Operator,
the other Partners and their respective successors and assigns for any loss,
damage or injury of any nature or kind resulting from the breach of Purchaser's
covenants herein shall not, except as expressly provided herein, include any
amounts in respect of indirect or consequential damages or commercial loss,
damage or injury, such as loss of profits or production.
SECTION 6.03. Amendments. This Agreement may not be modified or
----------
amended except by written agreement of the parties hereto.
SECTION 6.04. Notices. Any notice, consent, request, report or
-------
other document required or permitted under the terms of this Agreement shall be
in writing and shall be effective (a) when personally delivered on a business
day during normal business hours to the party to be given such notice at the
-11-
<PAGE>
address designated by it for such delivery below or (b) on the business day
following the day such notice shall have been sent by telecopier or similar
electronic device (providing confirmation of transmission) or by reputable
overnight courier (providing proof of delivery) sent to such address, whichever
shall first occur. Until otherwise specified by notice, the addresses for such
notice shall be:
(i) if to Purchaser:
Bethlehem Steel Corporation
Room 2036, Martin tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Counsel
Telecopier Number: (215) 694-7086
(ii) if to the Partnership:
Walbridge Coatings, An Illinois Partnership
30610 East Broadway
Walbridge, Ohio 43465
Attention: Management Committee
Telecopier Number: (419) 661-5951
(Together with copies to the Partners)
(iii) if to the Partners:
(A) EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Vice President
Telecopier Number: (215) 694-7086
(B) LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
-12-
<PAGE>
(C) MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and General
Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643
provided, however, that any entity listed above may change the address to which
- -------- -------
notices and other communications to it shall be sent by giving to the other
entities listed above written notice of such change, in which case notices and
other communications to the entity giving the notice of the change of address
shall not be deemed to have been sufficiently given or delivered unless
addressed to it at the new address as stated in said notice; provided further,
----------------
that notices and other communications to the Partnership shall not be deemed to
have been sufficiently given or delivered unless and until a copy thereof shall
be given or delivered as above provided to each of the Partners.
SECTION 6.05. Headings. The headings of the Articles, Sections and
--------
Exhibits of this Agreement are for the convenience of reference only and shall
not be construed to be part of this Agreement.
SECTION 6.06. Waiver of Default. Any waiver at any time by any
-----------------
party hereto of its rights under this Agreement shall not constitute a waiver of
any other default hereunder. No delay or omission by any party to exercise any
right or power accruing upon a default hereunder shall impair any such right or
power or shall be construed to be a waiver of any such default or acquiescence
therein.
SECTION 6.07. Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
performance of the remaining obligations to be
-13-
<PAGE>
unreasonable, in which case the parties hereto shall negotiate in good faith to
amend this Agreement and the other Definitive Agreements to take into account
such material change in a manner that is fair and equitable to all parties
hereto and to achieve the purposes of Section 2.1 of the Operating Agreement.
-----------
SECTION 6.08. Assignment. Except as otherwise provided in the
----------
Partnership Agreement, no party hereto shall assign this Agreement or any of its
rights or obligations hereunder except with the consent of the other party and
upon the express assumption by the assignee of the obligations of such party
hereunder.
SECTION 6.09. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of Illinois.
SECTION 6.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be deemed an original,
and shall become a binding agreement when each of the parties hereto shall have
executed and delivered a counterpart of this Agreement to the other party.
SECTION 6.11. Confidentiality. The parties acknowledge that this
---------------
Agreement contains confidential information regarding the operation of the
Partnership. Except as required by law, including applicable securities laws, or
otherwise agreed to by the parties hereto, the parties agree to maintain the
contents of this Agreement confidential in accordance with Article XVI of the
-----------
Partnership Agreement.
SECTION 6.12. Third Party Beneficiaries. Each of the Partners of
-------------------------
the Partnership, including the Operator, shall be an express third party
beneficiary of this Agreement and entitled to enforce the rights of the
Partnership hereunder.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed and delivered as of the date first above written.
BETHLEHEM STEEL CORPORATION
By:________________________________________
Name:
Title:
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: MSC WALBRIDGE COATINGS
INC., General Partner
By:__________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
By: EGL STEEL INC., General Partner
By:__________________________________
Name:
Title:
By: LTV-WALBRIDGE, INC.,
General Partner
By:__________________________________
Name:
Title:
-15-
<PAGE>
ANNEX I
Barnes Edge Conditioning Equipment Capital
Recovery and Surcharge Agreement
-16-
<PAGE>
ANNEX II
Billing Policy for Electric Buy-Through Rates
-17-
<PAGE>
ANNEX III
Billing Agreement for Additional Quality Inspector
-18-
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person (as
defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section 5.02
------------
of the Coating Agreements.
"Appraised Partnership Interest Dissolution Value" shall have the meaning
set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and Restated
Coating Agreement dated as of July 23, 1999 by and between the Partnership and
Bethlehem as amended from time to time in accordance with its terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem Coating
Agreement, the LTV Steel Coating Agreement or the MSCWC Coating Agreement, as
amended from time to time in accordance with the terms thereof, and (b)
collectively, all of such agreements.
<PAGE>
"Coating Fee" shall mean the various fees charged by the Partnership for
performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied by
the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services such
coated sheet metal as is capable of being marketed and sold as a prime product
(satisfying the Coating Weight and other specifications ordered) at the then
current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and "Under
Common Control With") shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the Partnership
Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to produce
*** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc or
alloy coatings to sheet steel by an electrolytic plating process.
"EG Facility" shall mean the entire coil coating facility located at 30610
East Broadway, Walbridge, Ohio 43465, together with all fixtures, furnishings,
machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
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<PAGE>
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
Partner Financial Interest
- ------- ------------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
"Firm Order" shall mean an order placed by a Primary Purchaser or by MSCWC
for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar months
ended on the last day of May, August, November and February of each Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of March
of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of, and
without fault or negligence of, the entity asserting a claim of Force Majeure,
including but not limited to any acts of God, strikes, lockouts or other labor
disputes or industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
hurricanes, tornadoes, other storms, floods, washouts or other acts of nature,
civil disturbances, explosions, temporary or permanent failure of electrical
supply, acts, directives or binding orders of any court or governmental
authority or persons purporting to act therefor and such orders or regulations
of governmental bodies or agencies asserting jurisdiction as would materially
inhibit or prohibit the entity from performing under the Definitive Agreements
or would require such entity to accept a condition reasonably unacceptable to
it, so long as such occurred without the fault or negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of the
------------
Coating Agreements.
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<PAGE>
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated as of
May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel, as
amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation (which
has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat Inland
may require the Partnership to perform pursuant to Section 3.2 of the Inland
-----------
Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement dated
as of June 30, 1998 entered into by and between Ispat Inland (as successor to
Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages required
to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
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<PAGE>
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey corporation
and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and LTV Steel, as
amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or other
casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois corporation
(formerly known as Pre Finish Metals Incorporated) and a wholly-owned subsidiary
of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1, 1980
by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
"MSCWC Coating Agreement" shall mean that certain Coating Agreement dated
as of July 23, 1999 by and between the Partnership and MSCWC, as amended from
time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated therewith
(determined in
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<PAGE>
accordance with generally accepted accounting principles), on a going concern
basis and assuming a willing buyer and a willing seller, neither of whom is
under any compulsion to buy or sell and each of whom has equal access to all
pertinent facts, all as determined by appraisal under Section 13.05 of the
-------------
Partnership Agreement, or
(b) In the case of the EG Facility, the fair market value of the assets
thereof, less any liabilities associated therewith (determined in accordance
with generally accepted accounting principles) which are assumed by the
purchaser in accordance with the governing instruments thereof or with the
consent of the persons or entities to whom the obligation is owed, on a going
concern basis and assuming a willing buyer and a willing seller, neither of
whom is under any compulsion to buy or sell and each of whom has equal access
to all pertinent facts, all as determined by appraisal under Section 15.04 of
-------------
the Partnership Agreement.
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as of
June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
"Operator" shall mean MSCWC, its successor or assign, as Operating Partner
under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and
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<PAGE>
between the Partnership and Bethlehem, as amended up to the date immediately
prior to the execution and delivery of the Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating Agreement
dated as of October 15, 1984 by and between the Partnership and MSCWC, as
amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement dated
as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland, MSCPFM and
MSC, as amended up to the date immediately prior to the execution and delivery
of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic Coating
services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent Agreement
dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM and MSC,
as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of the
Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i) such
Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
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<PAGE>
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem or
LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-1 by
Moody's Investors Services, Inc., or A-1 by Standard and Poor's Corporation,
having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section 4.01 of
------------
each Coating Agreement.
"Production Schedule" shall mean the schedule described in Section 4.01(b)
---------------
of the Operating Agreement.
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of July
23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness steel
coil to which a minimum Coating Weight of *** grams of zinc per square meter has
been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
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<PAGE>
"S, G & A Expenses" shall mean all expenses of Operator or its Affiliates
for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a) the
Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of ***,
divided by the Standard Capacity for such EG Product. Accordingly, the Standard
Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to Section
-------
5.05 of the Operating Agreement and Section 5.04 of the Coating Agreements.
- ---- ------------
"Sublease" shall mean the Sublease dated as of May 30, 1986, as amended,
between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof, such taxes to include, but not be limited to, all real estate
and personal property taxes and assessments on the EG Facility or the equipment,
supplies or inventories contained therein, all sales and use taxes, and all
governmental franchises, licenses and permits; provided, however, that if any
-------- -------
other taxes are enacted after the date hereof, such taxes shall also be included
in the terms "Taxes" to the extent appropriate to do so in accordance with the
provisions of Article II of the Partnership Agreement.
----------
"Technical Representative" shall mean the person designated by Operator
and each Partner (other than the Operating Partner) from time to time to
represent such party
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<PAGE>
in connection with any of the matters specified as being the responsibility of
the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the Partnership
------------
Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01 of
------------
the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such Partner's
percentage voting interest in the Partnership as set forth opposite the
Partner's name below:
Partner Voting Interest
- ------- ---------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of the
EG Facility to produce EG Product having a given width, assuming (1) *** inch
specified thickness steel substrate, (2) a Coating Weight of *** grams of pure
zinc per square meter of coated substrate surface area (on one side), (3) ***
hours per year of Production Time and (4) *** Yield Loss and no defective steel
substrate, all as determined in the reasonable judgment of the Technical
Representatives.
"Yield Loss" shall mean steel substrate scrap losses and rejections of EG
Product caused by quality failures in the operation of the EG Facility and shall
be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the
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<PAGE>
Technical Representatives of Operator and the Partner whose Affiliate supplied
the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
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<PAGE>
Exhibit 10.6
------------
================================================================================
AMENDED AND RESTATED
PARENT AGREEMENT
Dated as of July 23, 1999
Among
BETHLEHEM STEEL CORPORATION
THE LTV CORPORATION
MATERIAL SCIENCES CORPORATION
And
MSC PRE FINISH METALS INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Definitions................................................... 2
ARTICLE II
Guaranty
SECTION 2.01. Guaranties.................................................... 2
SECTION 2.02. Absolute Guaranty............................................. 4
SECTION 2.03. Character of Each Guarantor's Obligation...................... 4
SECTION 2.04. Discharge Only Upon Dissolution and Winding Up of the
Partnership; Reinstatement In Certain Circumstances........... 6
SECTION 2.05. Waivers....................................................... 6
SECTION 2.06. Corporate Changes............................................. 7
SECTION 2.07. Subrogation................................................... 7
SECTION 2.08. Limitation.................................................... 7
ARTICLE III
Representations and Warranties
SECTION 3.01. By MSC and MSCPFM to LTV...................................... 8
SECTION 3.02. By MSC and MSCPFM to Bethlehem................................ 10
SECTION 3.03. By Bethlehem to LTV........................................... 10
SECTION 3.04. Knowledge..................................................... 11
ARTICLE IV
Additional Covenants
SECTION 4.01. MSCPFM's Obligation as Tenant................................. 11
SECTION 4.02. Dedication of Management...................................... 11
SECTION 4.03. Marketing Product............................................. 12
SECTION 4.04. Licenses/Intellectual Property................................ 12
SECTION 4.05. Other Joint EG Projects....................................... 12
SECTION 4.06. Independent EG Projects....................................... 12
ARTICLE V
Miscellaneous
SECTION 5.01. Entire Agreement.............................................. 13
SECTION 5.02. Modification, Waiver.......................................... 13
SECTION 5.03. Severability.................................................. 13
SECTION 5.04. Notices....................................................... 13
SECTION 5.05. Successors and Assigns........................................ 14
SECTION 5.06. Governing Law................................................. 15
SECTION 5.07. Confidentiality............................................... 15
SECTION 5.08. No Consequential Damages...................................... 15
SECTION 5.09. Headings...................................................... 16
Schedule 1: Legal Description of Leased Premises
Schedule 2: Certain Officers of MSCPFM and MSCWC
Appendix A: Definitions of Terms and Phrases
</TABLE>
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<PAGE>
AMENDED AND RESTATED
PARENT AGREEMENT
THIS AMENDED AND RESTATED PARENT AGREEMENT, dated as of the 23rd day
of July, 1999, among BETHLEHEM STEEL CORPORATION, a Delaware corporation
("Bethlehem"), THE LTV CORPORATION, a Delaware corporation ("LTV"), MATERIAL
SCIENCES CORPORATION, a Delaware corporation ("MSC"), and MSC PRE FINISH METALS
INC., an Illinois corporation and formerly known as Pre Finish Metals
Incorporated ("MSCPFM"), (Bethlehem, LTV, MSC and MSCPFM sometimes also referred
to individually as a "Guarantor" and collectively or in combination as
"Guarantors").
W I T N E S S E T H:
WHEREAS, pursuant to the Original Partnership Agreement, EGL Steel,
Inland EG and MSCWC formed a general partnership named "Walbridge Coatings, An
Illinois Partnership" under the laws of the State of Illinois for the purpose of
owning (or leasing) and operating the EG Facility; and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and MSCWC are entering
into the Partnership Agreement, Bethlehem and the Partnership are entering into
the Bethlehem Coating Agreement, LTV Steel and the Partnership are entering into
the LTV Steel Coating Agreement, MSCWC and the Partnership are entering into the
MSCWC Coating Agreement, MSCWC and the Partnership are entering into the
Operating Agreement and MSCPFM is continuing as the lessee under the MSCPFM
Lease; and
WHEREAS, MSC owns all of the issued and outstanding stock of MSCPFM;
and
<PAGE>
WHEREAS, the Guarantors desire to amend and restate the Original
Parent Agreement as provided for herein; and
WHEREAS, the execution and delivery of this Parent Agreement is made
to induce each of the Guarantors to cause their respective subsidiaries (in the
case of Bethlehem, EGL Steel; in the case of LTV, LTV-W and LTV Steel; in the
case of MSCPFM, MSCWC; and in the case of MSC, MSCPFM and MSCWC; such
subsidiaries referred to individually as a "Subsidiary" and collectively or in
combination as "Subsidiaries" and EGL Steel, LTV-W and MSCWC also referred to
individually as a "Partner" and collectively or in combination as "Partners") to
execute and deliver the Definitive Agreements required by the Purchase Agreement
to be executed and delivered by each of them;
NOW, THEREFORE, in consideration of the premises, recitals, and mutual
covenants, undertakings and obligations hereinafter set forth or referred to
herein, Bethlehem, MSC and MSCPFM hereby amend and restate the Original Parent
Agreement to read, and LTV hereby covenants and agrees, as follows:
ARTICLE I
Definitions
------------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined.
ARTICLE II
Guaranty
---------
SECTION 2.01. Guaranties. (a) Guaranty of Bethlehem. Bethlehem, as
---------- ---------------------
direct obligor and not merely as surety, hereby irrevocably and unconditionally
guarantees only to the Partnership, each other Guarantor and its Subsidiaries
and their respective successors and assigns: (i) the full, timely and complete
performance and/or payment when due (including but not limited to principal,
premium, interest, fees, expenses, or other payment or obligation) to be
performed or paid by EGL Steel (including any Affiliate of EGL Steel to whom any
Partner's Interest may be sold, transferred or assigned pursuant to Section
-------
13.02 of the Partnership Agreement) pursuant to any of the Definitive Agreements
- -----
to which it is a party and pursuant to the Purchase Agreement; and (ii) the
payment, upon demand, of all
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<PAGE>
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) as shall have been expended or incurred by the Partnership, the other
Guarantors or their respective Subsidiaries, in the enforcement of any
agreement, obligation or duty to be performed by Bethlehem or EGL Steel pursuant
to any of the Definitive Agreements to which Bethlehem or EGL Steel is a party
or pursuant to the Purchase Agreement.
(b) Guaranty of LTV. LTV, as direct obligor and not merely as
---------------
surety, hereby irrevocably and unconditionally guarantees only to the
Partnership, each other Guarantor and its Subsidiaries and their respective
successors and assigns: (i) the full, timely and complete performance and/or
payment when due (including but not limited to principal, premium, interest,
fees, expenses, or other payment or obligation) to be performed or paid by LTV
Steel or LTV-W (including any Affiliate of LTV-W to whom any Partner's Interest
may be sold, transferred or assigned pursuant to Section 13.02 of the
-------------
Partnership Agreement) pursuant to any of the Definitive Agreements to which
either of them is a party and pursuant to the Purchase Agreement; and (ii) the
payment, upon demand, of all reasonable costs and expenses (including reasonable
attorneys' fees and expenses) as shall have been expended or incurred by the
Partnership, the other Guarantors or their respective Subsidiaries, in the
enforcement of any agreement, obligation or duty to be performed by LTV, LTV
Steel or LTV-W pursuant to any of the Definitive Agreements to which LTV, LTV
Steel or LTV-W is a party or pursuant to the Purchase Agreement.
(c) Guaranty of MSC. MSC, as direct obligor and not merely as
---------------
surety, hereby irrevocably and unconditionally guarantees only to the
Partnership, each other Guarantor and its Subsidiaries and their respective
successors and assigns: (i) the full, timely and complete performance and/or
payment when due (including but not limited to principal, premium, interest,
fees, expenses, or other payment or obligation) to be performed or paid by
MSCPFM or MSCWC (including any Affiliate of MSCWC to whom any Partner's Interest
may be sold, transferred or assigned pursuant to Section 13.02 of the
-------------
Partnership Agreement) pursuant to any of the Definitive Agreements to which
either of them is a party and pursuant to the Purchase Agreement; and (ii) the
payment, upon demand, of all reasonable costs and expenses (including reasonable
attorneys' fees and expenses) as shall have been expended or incurred by the
Partnership, the other Guarantors or their respective Subsidiaries, in the
enforcement of any agreement, obligation or duty to be performed by MSC, MSCPFM
or MSCWC pursuant to any of the Definitive Agreements to which MSC, MSCPFM or
MSCWC is a party or pursuant to the Purchase Agreement.
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<PAGE>
(d) Guaranty of MSCPFM. MSCPFM, as direct obligor and not merely as
------------------
surety, hereby irrevocably and unconditionally guarantees only to the
Partnership, each other Guarantor and its Subsidiaries and their respective
successors and assigns: (i) the full, timely and complete performance and/or
payment when due (including but not limited to principal, premium, interest,
fees, expenses, or other payment or obligation) to be performed or paid by MSCWC
(including any Affiliate of MSCWC to whom any Partner's Interest may be sold,
transferred or assigned pursuant to Section 13.02 of the Partnership Agreement)
pursuant to any of the Definitive Agreements to which it is a party and pursuant
to the Purchase Agreement; and (ii) the payment, upon demand, of all reasonable
costs and expenses (including reasonable attorneys' fees and expenses) as shall
have been expended or incurred by the Partnership, the other Guarantors or their
respective Subsidiaries, in the enforcement of any agreement, obligation or duty
to be performed by MSCPFM or MSCWC pursuant to any of the Definitive Agreements
to which MSCPFM or MSCWC is a party or pursuant to the Purchase Agreement.
SECTION 2.02. Absolute Guaranty. Each guaranty set forth in Section
-----------------
2.01 hereof:
(a) is a primary and original obligation of the Guarantor making such
guaranty;
(b) is an absolute, unconditional, present, continuing and
irrevocable guaranty of performance or payment, as the case may be; and
(c) is neither conditioned nor contingent upon any attempt to collect
from or other action against a Guarantor's respective Subsidiary.
To the fullest extent lawfully possible, each of the respective guaranties shall
remain in full force and effect without respect to future changes in conditions,
including changes in law.
SECTION 2.03. Character of Each Guarantor's Obligation. The
----------------------------------------
obligations of each Guarantor under Section 2.01 are several and independent and
shall be binding upon each respective Guarantor, and its respective successors
and assigns, and to the fullest extent lawfully possible, shall not be subject
to, reduced, terminated, released, discharged, impaired or otherwise affected
by:
(a) any failure or inability on the part of any party to any
Definitive Agreement or the Purchase Agreement to perform or comply with
such Definitive Agreement or the Purchase Agreement;
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<PAGE>
(b) any invalidity, illegality or unenforceability relating to the
formation, existence or performance of any Definitive Agreement or the
Purchase Agreement;
(c) any modification, release, settlement, compromise or limitation
of liability of any Subsidiary, for any reason whatsoever, unless such
modification, release, settlement, compromise or limitation of liability
shall be expressly agreed to in writing by the relevant parties;
(d) any proceeding which under appropriate law may result in
voluntary or involuntary liquidation, dissolution, consolidation, merger,
sale or other disposition of all or substantially all of the assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, moratorium, arrangement, composition
with creditors or readjustment of, or other similar proceedings affecting,
any Guarantor or its respective Subsidiary;
(e) any waiver, consent, renewal, release, extension, supplement,
indulgence or other action or inaction respecting any Definitive Agreement
or the Purchase Agreement by any party thereto, unless such waiver,
consent, renewal, release, extension, supplement, indulgence or other
action or inaction shall be expressly agreed to in writing by the party
against whom it is to be effective;
(f) any claim or right of setoff, counterclaim, recoupment,
termination or defense against any Subsidiary with respect to its
respective Guarantor, or any act, omission or breach on the part of any
Guarantor or any Subsidiary;
(g) the acceptance of any security or other guaranty or any extension
of time for the performance or payment of any obligation;
(h) any action taken under any Definitive Agreement or the Purchase
Agreement in the exercise of any right or power thereby conferred or any
failure or omission to take action on the part of any party guaranteed
hereunder or on the part of any party to any Definitive Agreement or the
Purchase Agreement; or
(i) any other matter that might be raised in avoidance of, or in
defense against, an action to enforce the obligations of each Guarantor
hereunder.
The specific enumeration of the above-mentioned acts, failures or
omissions shall not be deemed to exclude any other
-5-
<PAGE>
acts, failures or omissions, though not specified above, it being the purpose
and intent of this paragraph that the obligations of each Guarantor, as a
guarantor hereunder, shall be absolute and unconditional to the extent herein
specified and shall not be discharged, impaired or varied except by the full and
complete performance or payment in full of all obligations of such Guarantor's
respective Subsidiary under all of the Definitive Agreements and the Purchase
Agreement. Each Guarantor independently hereby acknowledges that this Parent
Agreement is executed for the benefit of the Partnership, the other Guarantors
and their respective Subsidiaries and that the Partnership shall have standing
to enforce this Parent Agreement against any Guarantor.
SECTION 2.04. Discharge Only Upon Dissolution and Winding Up of the
-----------------------------------------------------
Partnership; Reinstatement In Certain Circumstances. The obligations of each
- ---------------------------------------------------
Guarantor hereunder shall remain in full force and effect until the later of (i)
the completion of dissolution and winding up of the Partnership in accordance
with Article XV of the Partnership Agreement and (ii) the termination or expiry
of the Operating Agreement and the applicable Coating Agreement. If at any time
any payment made to the Partnership under the Partnership Agreement, the
Operating Agreement or the applicable Coating Agreement or any payment to any
party under the Purchase Agreement is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of a Subsidiary or
its Affiliate or otherwise, the obligation of the applicable Guarantor with
respect to such payment shall be reinstated as though such payment had been due
but not made at such time.
SECTION 2.05. Waivers. To the fullest extent lawfully possible, each
-------
Guarantor for its own account hereby unconditionally and irrevocably waives:
(a) notice of any matter or matters referred to in Section 2.03
hereof;
(b) notice of any filing of claims with a court in the event of
receivership or bankruptcy of any Subsidiary;
(c) all notices which may be required by statute, rule of law or
otherwise to preserve any rights under any of the Definitive Agreements or
the Purchase Agreement;
(d) any right to the enforcement, assertion or exercise of any right,
power or remedy conferred in any of the Definitive Agreements or the
Purchase Agreement;
-6-
<PAGE>
(e) any requirement of diligence on the part of the Partnership, any
Guarantor or its respective Affiliates as parties being guaranteed
hereunder;
(f) any defense which may now or hereafter exist by virtue of any
statute of limitation, stay, moratorium or similar law; and
(g) all demands upon the Subsidiary of the respective Guarantor and
all other formalities the omission of any of which, or delay in performance
of which might, but for the provisions of this paragraph, by rule of law or
otherwise, constitute grounds for relieving or discharging such Guarantor
in whole or in part from its irrevocable, absolute, and continuing
obligation hereunder, it being the intention of each Guarantor that its
respective obligations hereunder shall not be discharged except by
performance or payment, as the case may be, and then only to the extent of
such performance or payment.
To the fullest extent lawfully possible, (i) each Guarantor, for its
own account, hereby waives any and all defenses to which a surety may be
entitled, whether at common law, in equity or by statute and (ii) without
limiting the generality of the foregoing, each Guarantor, for its own account,
consents that, without notice to it and without the necessity for any additional
endorsement, consent or guaranty by it, any liability or obligation of its
respective Subsidiary guaranteed hereby may, from time to time, be renewed,
extended, modified, compromised, released or discharged, and any security held
for amounts payable may be exchanged, sold or surrendered, all without impairing
or affecting in any way the liability of such Guarantor hereunder.
SECTION 2.06. Corporate Changes. No change in the name, objects,
-----------------
capital stock or corporate charter of any Guarantor shall in any way affect such
Guarantor's liability hereunder.
SECTION 2.07. Subrogation. Each Guarantor, for its own account,
-----------
agrees not to exercise any rights of subrogation which such Guarantor may
acquire due to payments made pursuant to the terms hereof until all overdue sums
payable by its Subsidiary under all of the Definitive Agreements and the
Purchase Agreement have been paid in full.
SECTION 2.08. Limitation. Notwithstanding anything herein to the
----------
contrary, each Guarantor hereby disclaims any liability or responsibility to
make any payment or perform any obligation or duty not expressly agreed to or
otherwise assumed
-7-
<PAGE>
by each Guarantor or its Subsidiary in the Definitive Agreements or the Purchase
Agreement. No Guarantor is hereby guaranteeing any payment required or
obligation or duty to be performed under the Definitive Agreements or the
Purchase Agreement by any other Guarantor or any Affiliate thereof. This Parent
Agreement (including the guaranties made herein) is for the sole benefit of the
Guarantors, the Partners and the Partnership and nothing herein shall create any
rights in any other person or entity (other than the Partners and the
Partnership) as a third party beneficiary of this Parent Agreement; provided,
--------
however, that each Partner is hereby authorized to enforce the rights of the
- -------
Partnership as a beneficiary of this Parent Agreement.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. By MSC and MSCPFM to LTV. MSC and MSCPFM hereby
------------------------
jointly and severally represent and warrant to LTV as follows:
(a) Power and Authority. MSCPFM (a) is a corporation duly
-------------------
incorporated, validly existing and in good standing under the laws of the
state of its incorporation; (b) is duly qualified to transact business in
all jurisdictions where such qualification is required; and (c) has the
corporate power and authority to (i) own, lease and operate its properties
and carry on its business (including, without limitation, all aspects of
this Parent Agreement and the MSCPFM Lease); (ii) execute and deliver this
Parent Agreement and the Purchase Agreement; and (iii) perform and observe
the terms and conditions of this Parent Agreement, the Purchase Agreement
and the MSCPFM Lease.
(b) Due Authorization. MSCPFM has taken all requisite corporate
-----------------
action to authorize the execution and delivery of this Parent Agreement and
the Purchase Agreement and observance of the terms and conditions hereof.
This Parent Agreement and the Purchase Agreement have been duly authorized,
executed and delivered by MSCPFM and constitute the legal, valid and
binding obligations of MSCPFM, enforceable in accordance with their
respective terms, assuming the due execution and delivery of this Parent
Agreement and the Purchase Agreement by the other parties thereto.
(c) No Violations. Neither the execution or delivery of this Parent
-------------
Agreement and the Purchase Agreement, nor the consummation of the
transactions contemplated thereunder
-8-
<PAGE>
will (i) violate any provisions of the Articles of Incorporation or By-laws
of MSCPFM, (ii) violate, result in the termination of, or constitute a
default under the terms of, any mortgage, bond, indenture, agreement, lease
or other instrument or obligation to which MSCPFM is a party or by which
the properties or assets of MSCPFM may be bound, in each case which would
materially and adversely affect the ability of MSCPFM to perform its
obligations under this Parent Agreement and the MSCPFM Lease, (iii) result
in the creation of any lien, charge or encumbrance upon any of MSCPFM's
properties pursuant to the terms of any such mortgage, bond, indenture,
agreement, lease or other instrument or obligation, in each case which
would materially and adversely affect the ability of MSCPFM to perform its
obligations under this Parent Agreement and the MSCPFM Lease, (iv) violate
any judgment, order, injunction, decree, or award of any court,
administrative agency or governmental body against, or binding upon, MSCPFM
or upon its respective businesses or properties, or (v) to the knowledge of
MSC and MSCPFM, constitute a violation by MSCPFM of any law or regulation
of any jurisdiction insofar as such law or regulation relates to MSCPFM or
to its respective businesses or properties.
(d) EG Facility. (i) MSCPFM is the lessee pursuant to the terms and
-----------
provisions of the MSCPFM Lease which creates and grants to MSCPFM a
leasehold estate in and to the real estate (the legal description of which
is attached hereto as Schedule 1), including all buildings and related
improvements, comprising the EG Facility. As of the date hereof, the
MSCPFM Lease is a valid and binding agreement and remains in full force and
effect and all activities carried on at the EG Facility are in substantial
compliance with the MSCPFM Lease. MSCPFM has heretofore delivered to
Bethlehem a true, correct and complete copy of the MSCPFM Lease. MSCPFM is
not in material uncured default of any material term or provision of the
MSCPFM Lease and no condition exists which, with the passage of time or the
delivery of notice, would constitute a material uncured default under any
material provision of the MSCPFM Lease. MSCPFM has all requisite corporate
authority to sublet the premises subject to the MSCPFM Lease, pursuant to
the Sublease.
(e) Governmental Proceedings. During the nine year period preceding
------------------------
the date of this Parent Agreement, no notice from any governmental body has
been served upon, or threatened in a written notice from a governmental
body to be served upon, the Partnership, MSC, MSCPFM or MSCWC claiming any
violation of any law or any building, zoning or
-9-
<PAGE>
other ordinance, code or regulation by the EG Facility, which could have a
material adverse effect on the operation of the EG Facility and which has
not been substantially complied with and satisfied.
(f) Easements. The EG Facility includes all easements and rights for
---------
utility service, roadways, railroad spurs and other means of ingress and
egress necessary to conduct the operation of the EG Facility as currently
conducted.
(g) Intellectual Property. The Partnership owns, is a party to
---------------------
license agreements or possesses other rights to use all material patents,
processes, inventions, trade secrets, copyrights, know-how, software or
other proprietary information (collectively, "Intellectual Property")
necessary to conduct the business of the EG Facility as currently conducted
that was furnished to the Partnership by or through MSC or any of its
Subsidiaries and Affiliates or jointly furnished by or through MSC or any
of its Subsidiaries and Affiliates and Bethlehem or any of its Subsidiaries
or Affiliates, except that no representation is made with respect to
MSCPFM's proprietary processes for Other Services.
(h) Contracts. The Partnership (either directly or through the
---------
Operator) is a party to all material contracts, agreements, leases and
licenses (other than licenses of Intellectual Property) necessary to
conduct the business of the EG Facility as currently conducted.
(i) Consents, Etc. No authorization, consent, approval, license,
-------------
exemption of or filing or registration with any governmental department or
agency is or will be required to be obtained by MSCPFM for the execution
and delivery of this Parent Agreement or the Purchase Agreement by MSCPFM.
SECTION 3.02. By MSC and MSCPFM to Bethlehem. MSC and MSCPFM hereby
------------------------------
represent and warrant to Bethlehem that the representations and warranties of
MSC and MSCPFM set forth in Article V of the Original Parent Agreement were true
---------
and correct in all material respects as of the date of the Original Parent
Agreement.
SECTION 3.03. By Bethlehem to LTV. Bethlehem hereby represents and
-------------------
warrants to LTV that the Partnership owns, is a party to license agreements or
possesses other rights to use all Intellectual Property necessary to conduct the
business of the EG Facility as currently conducted that was furnished to the
Partnership by or through Bethlehem or any of its Subsidiaries
-10-
<PAGE>
and Affiliates or jointly furnished by or through Bethlehem or any of its
Subsidiaries and Affiliates and MSC or any of its Subsidiaries or Affiliates.
SECTION 3.04. Knowledge. In this Article III, the word "knowledge"
---------
or any similar qualification refers, in the case of MSC and MSCPFM, to the
actual knowledge of any Vice President or more senior officer of MSC, any of the
persons listed on the attached Schedule 1 or any MSCWC designee to the
Management Committee.
ARTICLE IV
Additional Covenants
---------------------
SECTION 4.01. MSCPFM's Obligation as Tenant. For as long as MSCPFM
-----------------------------
continues to hold its present leasehold interest in the EG Facility pursuant to
the MSCPFM Lease, MSCPFM agrees to observe, or cause MSCWC to observe on its
behalf, all material terms and conditions of the MSCPFM Lease in a timely
manner, including, without limitation the timely payment of all rent, taxes and
assessments, the due performance of all material maintenance and repairs, the
maintenance of the amounts and types of insurance coverage required by the
MSCPFM Lease (which coverage shall be no less than that customarily carried, in
the reasonable opinion of MSCPFM, by other companies owning similar properties)
and the full and timely performance of all material agreements, obligations and
duties imposed upon it by the MSCPFM Lease; and, except as permitted by the
MSCPFM Lease, MSCPFM shall not do or suffer any act which would cause the
imposition of any lien or other encumbrance upon the EG Facility. MSCPFM shall
promptly provide to each of the other Guarantors a copy of each notice of
default or event of default received by MSCPFM under the MSCPFM Lease. MSCPFM
shall timely elect to extend the MSCPFM Lease to a date not earlier than
December 31, 2004 and enter into a letter agreement with the Partnership to
extend the Sublease pursuant to its terms for the period from January 1, 2002 to
December 31, 2004, a copy of which shall be delivered to CPA/CPA2.
SECTION 4.02. Dedication of Management. MSCPFM agrees to dedicate,
------------------------
or cause to be dedicated, sufficient management personnel of MSCPFM and MSCWC to
assure the performance of MSCPFM's and MSCWC's duties under the Definitive
Agreements.
-11-
<PAGE>
SECTION 4.03. Marketing Product. Subject to Section 5.05 of the
-----------------
applicable Coating Agreements, Bethlehem, LTV, and MSC each agree to market and
sell (or cause their respective Affiliates to market and sell) independently
such types of products as are produced by the Partnership in accordance with the
Definitive Agreements, at prices to be independently determined by each of them.
SECTION 4.04. Licenses/Intellectual Property. Any and all right,
------------------------------
title and interest (including licenses) in or to all Intellectual Property
previously acquired from ARUS Andritz Ruthner, Inc., a Delaware corporation, for
the use of the Partnership at the EG Facility has previously been irrevocably
transferred and assigned to the Partnership. MSC and MSCPFM agree (a) to cause
MSCWC to continue to grant to the Partnership an irrevocable, royalty free, non-
exclusive license for the Term and to disclose to the Partnership, upon demand
therefor by the Partnership from time to time, all other Intellectual Property
owned by MSCWC or any of its Affiliates (or licensed to, and capable of being
sublicensed by, any of them) relating to the business and operations
contemplated by the Definitive Agreements (other than the name "MSC Walbridge
Coatings" and the Intellectual Property of MSC or any of its Affiliates relating
to Other Services); and (b) not to take any action or engage in any transaction
which makes MSCPFM's ability to perform this Section dependent upon the consent
or approval of any outside parties. All parties acknowledge that the
Intellectual Property of MSC Laminates and Composites Inc., a Delaware
corporation and wholly-owned subsidiary of MSC, relating to its laminates and
composites products and processes is an example of Intellectual Property of MSC
or any of its Affiliates that does not relate to the business and operations
contemplated by the Definitive Agreements.
SECTION 4.05. Other Joint EG Projects. Should Bethlehem and LTV (or
-----------------------
their respective Affiliates) participate together in the construction and
operation of another EG coating line, other than an EG coating line which is
located adjacent to one of their steel mills, and if MSCWC is not then
participating in another EG coating line with any integrated steel producer
other than Bethlehem or LTV, then Bethlehem and LTV agree to offer MSCWC the
opportunity to be involved in such project and will negotiate in good faith
MSCWC's possible involvement in such project.
SECTION 4.06. Independent EG Projects. Should either Bethlehem or
-----------------------
one of its Affiliates or LTV or one of its Affiliates choose to construct and
operate another EG coating line independently of each other, then such Guarantor
will give MSCWC a reasonable opportunity to present a proposal to it for MSCWC
to be involved in such project.
-12-
<PAGE>
ARTICLE V
Miscellaneous
--------------
SECTION 5.01. Entire Agreement. The Purchase Agreement, this Parent
----------------
Agreement and the other Definitive Agreements executed contemporaneously
herewith constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior oral and written
discussions and understandings, with respect to the transactions contemplated
hereby, including but not limited to the Original Parent Agreement and the 1998
Extension Agreement; provided, however, that nothing herein shall supersede any
-------- -------
agreements or undertakings heretofore set forth in the minutes of proceedings of
the Management Committee that are not superseded in effect by this Parent
Agreement, such other Definitive Agreements or the Purchase Agreement; and
provided, further, that no such agreements or understandings heretofore set
- -------- -------
forth in the minutes of proceedings of the Management Committee shall be
applicable to or binding on LTV or its Subsidiaries or Affiliates.
SECTION 5.02. Modification, Waiver. Neither this Parent Agreement
--------------------
nor any provision hereof may be changed, waived, discharged or terminated
verbally, but only by an agreement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. Any
waiver of any breach of any provision of this Parent Agreement shall not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any other rights under this
Parent Agreement.
SECTION 5.03. Severability. If any provision of this Parent
------------
Agreement or the application of any provision hereof to any party or set of
circumstances is held invalid, the remainder of this Parent Agreement and the
application of such provision to the other party or set of circumstances shall
not be affected, unless such invalidity would result in such a material change
as to cause performance of the remaining obligations to be unreasonable, in
which case the parties hereto shall negotiate in good faith to amend this Parent
Agreement and the other Definitive Agreements (a) to take into account such
material change in a manner that is fair and equitable to all parties hereto or
thereto and (b) to achieve the purposes set forth in Article II of the
Partnership Agreement.
SECTION 5.04. Notices. Any notice, consent, request, report, or
-------
other document required or permitted under the terms of this Parent Agreement
shall be in writing and shall be effective (a) when personally delivered on a
business day during
-13-
<PAGE>
normal business hours to the party to be given such notice at the address
designated by it for such delivery below or (b) on the business day following
the day such notice shall have been sent by telecopier or similar electronic
device (providing confirmation of transmission) or by reputable overnight
courier (providing proof of delivery) sent to such address, whichever shall
first occur. Until otherwise specified by notice, the addresses for such notice
shall be:
(i) To Bethlehem:
Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, PA 18016
Attn: Mr. David M. Beckwith, Counsel
Telecopier Number: (215) 694-7086
(ii) To LTV:
The LTV Corporation
200 Public Square
Cleveland, OH 44114
Attn: General Counsel
Telecopier Number: (212) 622-5688
(iii) To MSCPFM or MSC:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, IL 60007
Attn: Chief Financial Officer
Telecopier Number: (847) 718-8643
provided, however, that any Guarantor may change the address to which notices
- -------- -------
and other communications to it shall be sent by giving to the other Guarantors
written notice of such change, in which case notices and other communications to
the Guarantor giving the notice of the change of address shall not be deemed to
have been sufficiently given or delivered unless addressed to it at the new
address as stated in said notice.
SECTION 5.05. Successors and Assigns. This Parent Agreement shall
-----------------------
inure to the benefit of, and be binding upon, the successors and assigns of the
respective Guarantors. Without limiting the generality of the foregoing, each
Guarantor agrees that it will not directly or indirectly sell, lease, transfer
or otherwise dispose of all or any substantial part of its assets to
-14-
<PAGE>
any Affiliate, unless such Affiliate becomes jointly and severally liable under
this Parent Agreement.
SECTION 5.06. Governing Law. This Parent Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of Illinois.
SECTION 5.07. Confidentiality. Each Guarantor shall keep strictly
---------------
confidential and not disclose (and cause its Subsidiary or Subsidiaries, as
applicable, and Affiliates to keep confidential and not disclose) to any third
party (other than its Subsidiary and Affiliates), or use in the business of such
Guarantor (or its Subsidiary and Affiliates) to the detriment of the disclosing
Guarantor or the Partnership, any information disclosed to the Partnership, such
Guarantor or its Subsidiary or Subsidiaries, as applicable, and Affiliates by
any other Guarantor, the business of the Partnership and the particulars
thereof, or any other information set forth in this Parent Agreement or any
other written agreements or documents concerning the Partnership or the EG
Facility, except for:
(a) information as to which the disclosing Guarantor gives prior
written consent to disclose;
(b) information which is or becomes otherwise known to the receiving
Guarantor or publicly available, without breach of any obligation of
secrecy to the disclosing Guarantor;
(c) information which is inadvertently disclosed notwithstanding the
receiving Guarantor's exercise of the same degree of care as is used in
protecting the receiving Guarantor's own confidential information;
(d) information used or disclosed in order to comply with applicable
law, including applicable securities laws;
(e) information used or disclosed after five years from the date of
initial disclosure to the receiving Guarantor, or such later date as is
provided in a written agreement among the Guarantors; and
(f) information required to be disclosed to the lenders or
independent certified public accountants of the receiving Guarantor or its
Affiliates or to securities rating agencies.
SECTION 5.08. No Consequential Damages. The liability of each
------------------------
Guarantor to the Partnership, the other Guarantors, their Subsidiaries and their
respective successors and assigns for any
-15-
<PAGE>
loss, damage or injury of any nature or kind resulting from the breach of such
Guarantor's covenants herein or from the participation of such Guarantor's
Subsidiary as a Partner in the Partnership shall not include any amounts in
respect of indirect or consequential damages or commercial loss, damage or
injury, such as loss of profits or production.
SECTION 5.09. Headings. The headings of all articles, sections and
--------
subsections in this Parent Agreement are included herein for convenience of
reference only and shall not constitute a part of this Parent Agreement for any
other purpose.
-16-
<PAGE>
IN WITNESS WHEREOF, Bethlehem, LTV, MSC and MSCPFM have caused this
Parent Agreement to be executed and delivered by their respective duly
authorized officers, all as of the day and year first above written.
BETHLEHEM STEEL CORPORATION
By:_____________________________
Name:
Title:
THE LTV CORPORATION
By:_______________________________
Name:
Title:
MATERIAL SCIENCES CORPORATION
By:_______________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
MSC PRE FINISH METALS INC.
By:_______________________________
Name:
Title:
-17-
<PAGE>
Schedule 1:
-----------
Legal Description of Leased Premises
------------------------------------
-18-
<PAGE>
Schedule 2:
----------
Certain Officers of MSCPFM and MSCWC
------------------------------------
Gerald G. Nadig
Chairman and
Chief Executive Officer of MSCPFM
Thomas E. Moore
Executive Vice President and
Chief Operating Officer of MSCPFM
James J. Waclawik, Sr.
Vice President, Chief Financial Officer
and Secretary of MSCPFM
Edward A. Williams
Group Vice President and
General Manager of MSCWC
Allen M. Bishop
Controller of MSCWC
<PAGE>
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT AND
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person
(as defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section
-------
5.02 of the Coating Agreements.
- ----
"Appraised Partnership Interest Dissolution Value" shall have the
meaning set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and
Restated Coating Agreement dated as of July 23, 1999 by and between the
Partnership and Bethlehem as amended from time to time in accordance with its
terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem
Coating Agreement, the LTV Steel Coating Agreement or the MSCWC Coating
Agreement, as amended from
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<PAGE>
time to time in accordance with the terms thereof, and (b) collectively, all of
such agreements.
"Coating Fee" shall mean the various fees charged by the Partnership
for performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied
by the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services
such coated sheet metal as is capable of being marketed and sold as a prime
product (satisfying the Coating Weight and other specifications ordered) at the
then current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and
"Under Common Control With") shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the
Partnership Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to
produce *** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc
or alloy coatings to sheet steel by an electrolytic plating process.
-21-
<PAGE>
"EG Facility" shall mean the entire coil coating facility located at
30610 East Broadway, Walbridge, Ohio 43465, together with all fixtures,
furnishings, machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
Partner Financial Interest
- ------- ------------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
"Firm Order" shall mean an order placed by a Primary Purchaser or by
MSCWC for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar
months ended on the last day of May, August, November and February of each
Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of
March of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of,
and without fault or negligence of, the entity asserting a claim of Force
Majeure, including but not limited to any acts of God, strikes, lockouts or
other labor disputes or industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, other storms, floods, washouts or other acts of
nature, civil disturbances, explosions, temporary or permanent failure of
electrical supply, acts, directives or binding orders of any court or
governmental authority or persons purporting to act therefor and such
-22-
<PAGE>
orders or regulations of governmental bodies or agencies asserting jurisdiction
as would materially inhibit or prohibit the entity from performing under the
Definitive Agreements or would require such entity to accept a condition
reasonably unacceptable to it, so long as such occurred without the fault or
negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of
------------
the Coating Agreements.
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated
as of May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL
Steel, as amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation
(which has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat
Inland may require the Partnership to perform pursuant to Section 3.2 of the
-----------
Inland Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement
dated as of June 30, 1998 entered into by and between Ispat Inland (as successor
to Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages
required to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
-23-
<PAGE>
"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey
corporation and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating
Agreement dated as of July 23, 1999 by and between the Partnership and LTV
Steel, as amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or
other casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware
corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois
corporation (formerly known as Pre Finish Metals Incorporated) and a wholly-
owned subsidiary of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1,
1980 by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
-24-
<PAGE>
"MSCWC Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and MSCWC, as amended
from time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated
therewith (determined in accordance with generally accepted accounting
principles), on a going concern basis and assuming a willing buyer and a
willing seller, neither of whom is under any compulsion to buy or sell and
each of whom has equal access to all pertinent facts, all as determined by
appraisal under Section 13.05 of the Partnership Agreement, or
-------------
(b) In the case of the EG Facility, the fair market value of the
assets thereof, less any liabilities associated therewith (determined in
accordance with generally accepted accounting principles) which are assumed
by the purchaser in accordance with the governing instruments thereof or
with the consent of the persons or entities to whom the obligation is owed,
on a going concern basis and assuming a willing buyer and a willing seller,
neither of whom is under any compulsion to buy or sell and each of whom has
equal access to all pertinent facts, all as determined by appraisal under
Section 15.04 of the Partnership Agreement.
-------------
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as
of June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
-25-
<PAGE>
"Operator" shall mean MSCWC, its successor or assign, as Operating
Partner under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and between the Partnership and Bethlehem, as
amended up to the date immediately prior to the execution and delivery of the
Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating
Agreement dated as of October 15, 1984 by and between the Partnership and MSCWC,
as amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement
dated as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland,
MSCPFM and MSC, as amended up to the date immediately prior to the execution and
delivery of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic
Coating services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent
Agreement dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM
and MSC, as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of
the Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
-26-
<PAGE>
"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i)
such Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem
or LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-
1 by Moody's Investors Services, Inc., or A-1 by Standard and Poor's
Corporation, having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section
-------
4.01 of each Coating Agreement.
- ----
"Production Schedule" shall mean the schedule described in Section
-------
4.01(b) of the Operating Agreement.
- -------
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
July 23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
-27-
<PAGE>
"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness
steel coil to which a minimum Coating Weight of *** grams of zinc per square
meter has been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
"S, G & A Expenses" shall mean all expenses of Operator or its
Affiliates for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a)
the Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of
***, divided by the Standard Capacity for such EG Product. Accordingly, the
Standard Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to
Section 5.05 of the Operating Agreement and Section 5.04 of the Coating
- ------------ ------------
Agreements.
"Sublease" shall mean the Sublease dated as of May 30, 1986, as
amended, between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof,
-28-
<PAGE>
such taxes to include, but not be limited to, all real estate and personal
property taxes and assessments on the EG Facility or the equipment, supplies or
inventories contained therein, all sales and use taxes, and all governmental
franchises, licenses and permits; provided, however, that if any other taxes are
-------- -------
enacted after the date hereof, such taxes shall also be included in the terms
"Taxes" to the extent appropriate to do so in accordance with the provisions of
Article II of the Partnership Agreement.
- ----------
"Technical Representative" shall mean the person designated by
Operator and each Partner (other than the Operating Partner) from time to time
to represent such party in connection with any of the matters specified as being
the responsibility of the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the
------------
Partnership Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01
------------
of the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such
Partner's percentage voting interest in the Partnership as set forth opposite
the Partner's name below:
Partner Voting Interest
- ------- ----------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of
the EG Facility to produce EG Product having a given width, assuming (1) ***
inch specified thickness steel substrate, (2) a Coating Weight of *** grams of
pure zinc per square meter of coated substrate surface area (on one side), (3)
*** hours per year of Production Time and (4) *** Yield Loss and no defective
steel substrate, all as determined in the reasonable judgment of the Technical
Representatives.
-29-
<PAGE>
"Yield Loss" shall mean steel substrate scrap losses and rejections of
EG Product caused by quality failures in the operation of the EG Facility and
shall be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the Technical Representatives of
Operator and the Partner whose Affiliate supplied the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
-30-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 1,964
<SECURITIES> 0
<RECEIVABLES> 55,525
<ALLOWANCES> 5,541
<INVENTORY> 55,542
<CURRENT-ASSETS> 121,396
<PP&E> 368,685
<DEPRECIATION> 140,454
<TOTAL-ASSETS> 395,417
<CURRENT-LIABILITIES> 78,048
<BONDS> 127,807
0
0
<COMMON> 344
<OTHER-SE> 153,957
<TOTAL-LIABILITY-AND-EQUITY> 395,417
<SALES> 257,459
<TOTAL-REVENUES> 257,459
<CGS> 206,438
<TOTAL-COSTS> 206,438
<OTHER-EXPENSES> 31,537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,884
<INCOME-PRETAX> 13,442
<INCOME-TAX> 4,974
<INCOME-CONTINUING> 8,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,468
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.55
</TABLE>
