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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: February 28, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 1-8803
MATERIAL SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2673173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-439-8270
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
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Title of each class registered
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Common Stock, $.02 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
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The aggregate market value of the voting stock of the registrant held by
shareowners (not including any voting stock owned by directors or executive
officers of the registrant (such exclusion shall not be deemed an admission that
any such person is an affiliate of the registrant)) of the registrant was
approximately $162,047,875 at April 23, 1999 (based on the closing sale price on
the New York Stock Exchange on such date, as reported by The Wall Street Journal
Midwest Edition).
At April 23, 1999, the registrant had outstanding an aggregate of 15,542,199
shares of its Common Stock.
Documents Incorporated by Reference
Portions of the following documents are incorporated herein by reference into
the indicated part of this Form 10-K:
<TABLE>
<CAPTION>
Part of Form 10-K
-----------------
Document into which incorporated
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<S> <C>
Registrant's 1999 annual report to shareowners Parts I, II, IV
Registrant's proxy statement for the Annual Part III
Meeting of Shareowners to be held on
June 17, 1999
</TABLE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.[_]
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PART I
ITEM 1. BUSINESS
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Introduction
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Material Sciences Corporation (unless otherwise indicated by the context,
including its subsidiaries, "MSC" or the "Company") develops, manufactures and
markets continuously processed, coated and laminated materials. The Company's
three segments are: Coated Products and Services, Engineered Materials and
Specialty Films (see Note 12 of the Notes to the Consolidated Financial
Statements under the caption "Business Segments" on page 31 of the Company's
annual report, which is incorporated by reference herein). 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, 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.
Customers generally benefit from the energy savings and environmental
advantages of MSC's manufacturing processes and products. In the engineered
materials, specialty films and hot-dip galvanizing portion of its business, the
Company is primarily a manufacturer and marketer of its own products. In the
coil coating and electrogalvanizing area, MSC generally acts as a "toll coater"
by processing its customers' metal for a fee, without taking ownership of the
metal.
Headquartered near Chicago, the Company, through its MSC Pre Finish Metals
Inc. ("PFM"), MSC Pinole Point Steel Inc. ("MSCPPS"), MSC Walbridge Coatings
Inc. ("MSCWC"), MSC Laminates and Composites Inc. ("MSCLC") and MSC Specialty
Films, Inc. ("MSCSF") subsidiaries, operates 11 manufacturing plants in the
United States and Europe. PFM operates two facilities in Elk Grove Village,
Illinois, one facility in Morrisville, Pennsylvania, and one facility in
Middletown, Ohio. MSCPPS operates one coil coating and one galvanizing facility
in Richmond, California. MSCWC, a subsidiary of PFM, operates a facility in
Walbridge, Ohio, on behalf of Walbridge Coatings, an Illinois Partnership
("Partnership"), owned by MSCWC and Bethlehem Steel Corporation ("BSC"). MSCLC
operates one facility in Elk Grove Village, Illinois. MSCSF operates one
facility in San Diego, California. MSCSF also has a 50% interest in a facility
in Research Triangle Park, North Carolina, and a facility in Zulte, Belgium,
through Innovative Specialty Films, LLC ("ISF"), a joint venture formed on
October 15, 1998, with Bekaert Corporation.
Additional information concerning certain transactions and events is
incorporated herein by reference to Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's annual report,
which is incorporated herein by reference.
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MSC, a Delaware corporation, was founded in 1971 and has been a publicly
traded company since 1984. The principal executive offices of the Company are
located at 2200 East Pratt Boulevard, Elk Grove Village, Illinois 60007, and its
telephone number at that address is (847) 439-8270.
Coated Products and Services
Coil Coating
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The Company believes that coil coating is the most environmentally safe and
energy-efficient method available for applying paint and other coatings to
metal. This continuous, roll-to-roll, highly automated, high-speed process
applies coatings to coiled metal of varying widths and thicknesses. In the
process, sheet metal is unwound from a coil, cleaned, chemically treated,
coated, oven-cured and rewound into coils for shipment to manufacturers that
fabricate the coated metal into finished products that are sold into a variety
of industrial and commercial markets. The coatings are designed to produce both
protective and decorative finishes. Through techniques such as printing,
embossing and striping, special finishing effects can also be created. The
finished product (i.e. prepainted or coil coated metal) is a versatile material
capable of being drawn, formed, bent, bolted, riveted, chemically bonded and
welded. The Company generally acts as a "toll coater" by processing coils for
steel mills, or their customers, without taking ownership of the metal. The
Company charges by weight or surface area processed.
The Company's coil coated products are used by manufacturers in building
products, appliances, heating and air conditioning, fuel tanks, lighting, above-
ground swimming pools and other products. The Company's strategy in coil coating
has been to produce high-volume, competitively coated products at low cost, as
well as to identify, develop and produce specialty niche products meeting
specific customer requirements.
Coil coating technology reduces the environmental impact of painting and
reduces manufacturers' energy needs. In coil coating processes, over 95% of the
coating material is applied, in contrast with the significant waste from
"overspray" typical in post-fabrication painting. The energy required to cure
coil coated metal is substantially less than that required by other coating
methods. These savings are achieved because of high-speed material processing
and because 90% to 95% of the coatings' volatile organic compounds are recycled
back into the curing ovens and used as fuel.
Manufacturers that use prepainted materials can eliminate or significantly
reduce on-site post-fabrication paint lines and the associated costs of
compliance with complex environmental and other regulations. Prepainted
materials facilitate the adoption of just-in-time and continuous process
manufacturing techniques that can result in improvements to work in process
inventory, plant utilization and productivity. Since prepainted metal is
cleaned, treated and painted while flat, the result is a more uniform and higher
quality finished part than can be achieved by even the best post-fabrication
painting operation. There are no hidden areas where paint is difficult to reach
and where corrosion can begin after the product has been marketed. As a result,
companies
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using prepainted material generally benefit from lower manufacturing costs and
improved product quality. Use of prepainted metal may, however, require product
design or fabrication changes and more stringent handling procedures during
manufacturing.
The coil coating process competes with other methods of producing coated sheet
metal, principally post-fabrication finishing methods such as spraying, dipping
and brushing. The Company believes that coil coating accounts for approximately
10% of all the sheet metal now being coated. The Company expects that, although
there can be no assurance in this regard, the market penetration of coil coated
metal will increase as a result of more stringent environmental regulation and
the energy efficiency, quality and cost advantages provided by prepainted metal
as compared to post-fabrication painting, particularly in high-volume
manufacturing operations. The Company estimates that there are approximately 45
companies operating coil coating lines in North America. The Company believes it
is one of the largest coil coaters, with approximately 15% of the total tons
processed in the United States in calendar 1998. Competition in the coil coating
industry is heavily influenced by geography, due to the high costs involved in
transporting sheet metal coils. Within geographic areas, coil coaters compete on
the basis of quality, price, customer service, technical support and product
development capability.
Hot-Dip Galvanizing
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On December 15, 1997, the Company purchased certain assets and assumed certain
liabilities of a West Coast hot-dip galvanizing and coil coating business
("Colorstrip, Inc."). Consideration for the purchase was approximately $129
million which was financed through a bank line of credit and long-term debt.
Located in the San Francisco Bay Area, the operation consists of a 300,000 ton
capacity hot-dip galvanizing line and a coil coating line capable of producing
150,000 tons of prepainted metal. The two facilities operate as MSCPPS, a
subsidiary of MSC, and serve the building and construction market across the
western United States.
Hot-dip galvanizing ("HDG") is a continuous, high-speed roll-to-roll process
for depositing zinc on steel. HDG deposits zinc onto steel by immersing the
steel strip into a molten bath of zinc (hot-dip) making it corrosion resistant.
Zinc in the presence of a corrosive environment will sacrifice itself to protect
the steel. As such, zinc gives the maximum sacrificial protection to steel in
the greatest number of applications. HDG steel may be used as is or can be
painted, resulting in enhanced corrosion protection and versatility.
MSCPPS's products are primarily used by the building and construction market
where they are manufactured into such products as roofing, siding, doors, duct
works, lighting fixtures and a wide variety of other structural components.
MSCPPS generally takes ownership of the metal it processes.
Coated steel continues to be a growing choice for various industrial and
commercial needs because of its economy, versatility, attractiveness and long
life. The volatility and generally rising prices of lumber also has made coated
steel a growing alternative in the residential construction market, where
durability, strength, fire-resistance, easy maintenance and environmental
soundness have all contributed to its growth.
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Electrogalvanizing
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MSCWC, through its participation in the Partnership, serves the market for
motor vehicles by producing electrogalvanized ("EG") steel. EG steel is the
primary corrosion-resistant steel product used to manufacture automobile and
light truck bodies. Domestic demand for EG steel began in 1985, and the Company
believes that it will continue as automobile manufacturers respond to consumer
demands for longer warranty protection against rust and, to a lesser extent, due
to increased applications for EG steel in the appliance and other non-automotive
markets.
Through the Partnership, MSCWC electrogalvanizes zinc and zinc-alloy coatings
and applies organic coatings onto sheet metal in coil form. There is a demand by
the automotive industry for a full complement of products such as zinc-nickel,
zinc-nickel with a thin organic coating and pure zinc or zinc-nickel with other
top coats that offer corrosion or forming advantages over competitive products.
These newer materials are particularly in demand by Japanese automakers in the
United States - currently among the end-use customers for the Partnership's
services. The Partnership's facility is the only facility in North America
capable of meeting, in a single pass through its line, the demand for this full
complement of products.
Effective as of June 30, 1998, MSCWC and a subsidiary of Bethlehem Steel
Corporation each have a 50% interest in the Partnership, which owns or leases an
electroplating facility in Walbridge, Ohio. The original term (12 years ending
June 30, 1998) of the Partnership was extended to December 31, 2001. In
addition, the Partnership entered into a long-term toll processing arrangement
with a former partner, ISPAT Inland Inc. ("Inland") through December 31, 2001.
MSCWC acts principally as the operating partner, and BSC and other integrated
steel mills (including Inland) are primarily responsible for the sales and
marketing activities.
MSC's net sales for electrogalvanizing consists of various fees charged to the
Partnership for operating the facility. Sales to the Partnership represented
13%, 20% and 21% of MSC's net sales in fiscal 1999, 1998 and 1997, respectively.
The fees consist of a variable portion, based on the production volumes and
product mix, and a fixed portion, including taxes, insurance and the fixed
portion of electricity. The overall profitability depends on MSCWC's processing
skill and efficiency. Beginning on January 1, 2000, MSCWC will have rights to
market a portion of the line time of the facility.
BSC and the other mills utilizing the Partnership's facility are major
suppliers of sheet steel to the United States automobile industry. The orders
for the Partnership's toll coating services are primarily and independently
generated by BSC and Inland for their respective customers, although the
Partnership may also accept orders from outside parties ("Third Party") to the
extent available capacity and production schedules permit. Through fiscal 1999,
Third Party sales were not significant.
BSC and another integrated steel mill currently are negotiating agreements to
convert an existing electrogalvanizing facility into a state-of-the-art
automotive hot-dip galvanizing plant. If
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such negotiations are successful, MSC expects the other steel mill to purchase a
portion of BSC's interest in the Partnership in order to obtain a source for
electroplating services. This could improve the likelihood of full utilization
of the Partnership's facility.
Competition in the production and sale of EG steel for the automotive industry
comes from other steel companies that, either directly or through joint
ventures, produce EG steel on eight manufacturing lines in the United States,
including Inland's other facility. Limited quantities of EG steel also are
imported from foreign steel suppliers. The Company believes the Partnership's
line is well positioned to serve the current and expected end-users of EG steel.
The Company is unable to determine the effect, if any, on the market resulting
from the existence of excess capacity, the entrance of additional capacity,
improved galvanizing technology or the substitution of other materials.
Engineered Materials
Engineered Materials typically consist of steel or other metals in combination
with polymers or other materials to achieve specific properties, such as noise
and vibration reduction and thermal insulation. These products consist of
functionally engineered materials that are designed to meet specific customer
requirements. Products in this segment largely result from the Company's
research and development efforts and the proprietary equipment and processes
designed and implemented by its engineering and manufacturing organizations. The
Company supplies its Engineered Materials to a variety of markets both in the
United States and internationally. The majority of these materials are used in
the automotive, lighting, appliance and computer disk drive industries. The
major products in this segment are disc brake noise dampers, Polycore
Composites(R) and Specular+(R).
The disc brake noise damper market developed as manufacturers moved to
asbestos-free brake linings. The increased brake noise these linings produce can
be virtually eliminated by the composite materials pioneered by the Company. The
Company believes its material is used in over 50% of the domestic disc brake
noise dampers manufactured for the original equipment market. The Company also
believes it is a significant supplier to the emerging domestic aftermarket.
Polycore Composites are multilayer composites consisting of various metals,
coatings and other materials, typically consisting of metal outer skins
surrounding a thin viscoelastic core material. Polycore Composites are
engineered to meet a variety of needs. The Company believes it is a leader in
developing and manufacturing continuously processed coated materials that reduce
noise and create thermal barriers. The automotive industry is the largest market
for metal composites, which are being used to replace solid sheet metal parts,
including oil pans, valve covers, front engine covers and heat shields. Polycore
Composites are also being evaluated for use in dash panels, floor pans and other
internal components in order to help reduce road noise. Polycore Composites are
also found in a number of other products, including lawn mower engines, air
conditioners, computer disk drive covers and appliances, and other uses are
under evaluation.
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Specular+ is a silver-sputtered film laminated to metal and then fabricated
into energy-efficient fluorescent lighting fixtures by the Company's customers.
Because pure silver offers unsurpassed reflectivity and precise light control,
lighting fixtures made from Specular+ produce virtually the same amount of light
with only half the bulbs of a typical white painted fixture. The result is a
significant reduction in the cost of electricity for lighting. The high
reflective lighting market has experienced a general softness due to the lack of
utility rebates to offset the higher initial cost of these fixtures and the
deregulation of electric utilities.
The market for Engineered Materials is competitive, both domestically and
internationally. There are competitors in each product market served by the
Company, some of which have greater resources than the Company. The Company
believes, however, that its technology, product development capability,
technical support and customer service place it in a strong competitive position
in this market.
Specialty Films
The Company (through MSCSF's investment in ISF) uses continuous, roll-to-roll
sputter-deposition technology to metallize wide rolls of flexible substrates,
generally consisting of thin polymeric films. In the sputter-deposition process,
a target material is disintegrated inside a vacuum chamber by ion bombardment
into its component atoms or molecules, which are then redeposited onto the
surface of the base material to be coated. Such base material (commonly called
the substrate or flexible web) can be polymeric film, foil, fabric or paper.
Sputter-deposition permits the use of a wide range of target materials, singly
or in combination (including metals, metal alloys and metal oxides), some of
which cannot be applied in any other way. This flexibility allows formation of
composites of metals, dielectrics and semiconductors. Sputter-coated, flexible
polymeric substrates may be designed to have specific properties, including
energy reflectance, transmission, absorption and electrical conductance. After
the sputtering process, these materials are often further enhanced with other
coatings, adhesives and films on a coating and laminating line, resulting in a
multilayer laminate.
The Company's specialty films sales consist principally of solar control and
safety window films for use in the automotive aftermarket and in the
retrofitting of buildings. The Company sells these products through its own in-
house distribution network and independent distributors. The Company believes
there are significant growth opportunities in the building market, since there
is currently low market penetration, and industrial, commercial and residential
building owners are becoming more familiar with the benefits of solar control
and safety window films. Solar control window films can lower energy bills year-
round by reducing heat penetration in the summer and by retaining residual
warmth in the winter. They also reject almost 100 percent of ultraviolet light,
providing draperies and furnishings with significant protection from fading. In
commercial environments, window film generally improves productivity by reducing
glare and heat generation. Safety films, which are sold to the retrofit market
and also to window manufacturers, offer security by making glass shatter
resistant.
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This segment also manufactures a number of specialty coated, laminated and
adhesive films. These films are used in the electronic, printing, label and
other industrial markets. The Company believes that its unique capabilities,
including clean room facilities and West Coast location, provide significant
competitive advantages in rapidly growing markets.
On October 15, 1998, MSCSF formed a 50:50 joint venture partnership with
Bekaert Corporation called Innovative Specialty Films, LLC. ISF combines the
sputtering operations of both companies, which the Company believes makes it one
of the leading sputtering companies in the world. MSC also believes this new
entity will not only enhance its window film development efforts, it will also
provide the basis for a number of new products in electronic surveillance, high
grade packaging, touch panels and anti-reflection display applications. ISF
commenced operations on January 1, 1999.
MSC believes that there are four major domestic companies producing
competitive specialty film materials in addition to the Company. Some of these
competitors have greater resources than the Company, including patented
technology. The Company competes on the basis of a number of factors, including
product performance and quality, completeness of product offering, new product
development capabilities, service and price. The Company believes that it is
competitive in these areas.
International
The Company believes that significant opportunities exist internationally,
particularly for the Company's disc brake noise damper products, Polycore
Composites and solar control and safety window film. Direct export sales have
grown each year, but slower than the consolidated net sales of the Company. As
a percentage of net sales, direct export sales represented 7%, 10% and 11% in
fiscal 1999, 1998 and 1997, respectively.
The Company has certain distribution agreements and licensing and royalty
agreements with agents and companies in Europe, Latin America and the Far East
that cover disc brake noise dampers, Polycore Composites, powder coating and
lighting products. These agreements provide the Company with opportunities for
market expansion in those geographic areas.
The Company is pursuing a variety of other business relationships, including
direct sales, distribution agreements, licensing and other forms of partnering
to increase its international sales and expand its international presence.
Marketing and Sales
The Company markets its coil coating, hot-dip galvanizing and laminates and
composites' products, services and technologies primarily through its in-house
sales organization and also through independent distributors, agents and
licensees. The Company focuses its sales efforts on manufacturers, but also
sells to steel mills and their intermediaries, metal service centers and metal
brokers. BSC is currently the primary marketing partner for EG steel. The
Company sells its specialty films' products primarily through its internal
distribution network, as well as
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domestic and international distributors. All of the Company's selling activities
are supported by technical service departments that aid the customer in the
choice of available materials and their use in the customer's manufacturing
process.
The Company estimates that customers in the building products market were the
end-users for approximately 48%, 25% and 18% of MSC's net sales in fiscal 1999,
1998 and 1997, respectively. The Company also estimates the original equipment
and aftermarket segment of the transportation industry were the end-users for
approximately 31%, 48% and 52% of MSC's net sales in fiscal 1999, 1998 and 1997,
respectively. Due to concentration in the automobile industry, the Company
believes that sales to individual automobile companies, including indirect
sales, are significant.
The Company is a party to a ten year tolling agreement in which MSC agrees to
provide AK Steel Corporation ("AKS") with coil coating and other ancillary
services from the Middletown, Ohio facility until June 2003. For calendar year
1998, MSC was required to provide AKS with 51% of the facility's capacity. The
balance of capacity is being marketed by the Company's sales force and shifting
production from other MSC plants that, at times, reach their capacity.
The Company's backlog of orders as of February 28, 1999, was approximately
$82.6 million, all of which is expected to be filled during the remainder of the
current fiscal year. The Company's backlog was approximately $79.3 million as of
February 28, 1998.
MSC is generally not dependent on any one source for raw materials or
purchased components essential to its business, and it is believed that such raw
materials and components will be available in adequate quantities to meet
anticipated production schedules.
MSC believes that its business, in the aggregate, is not seasonal. Certain of
its products, however, sell more heavily in some seasons than in others.
Environmental Matters
The Company is subject to federal, state and local environmental laws. As a
result of these laws, the Company has incurred, and will continue to incur in
the future, capital expenditures and operating costs and charges. The Company is
involved in two Superfund sites located in Gary and Kingsbury, Indiana. Although
the ultimate cost of the Company's share of necessary cleanup expenses is not
yet known, the Company believes that it is adequately reserved for environmental
matters given the information currently available. See Note 4 of the Notes to
the Consolidated Financial Statements entitled "Environmental and Legal
Matters," on pages 25 and 26 of the Company's annual report, which is
incorporated by reference herein. The Company cannot predict the impact of new
or changed laws or regulations.
The Company believes it operates its facilities and conducts its business, in
all material respects, in accordance with all environmental laws presently
applicable to its facilities. The Company spent approximately $4.0 million in
fiscal 1999, and has budgeted approximately
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$3.1 million during fiscal 2000, for maintenance or installation of
environmental controls at its facilities. See Item 3 "Legal Proceedings" below.
Research and Development
Management estimates that it spent approximately $7.1 million in fiscal 1999,
$6.1 million in fiscal 1998 and $6.7 million in fiscal 1997 for product and
process development activities.
While it considers its various patents, licenses and trademarks to be
important, it does not believe that the loss of any individual patent, license
or trademark would have a material adverse effect upon its business.
Employees
At February 28, 1999, the Company (excluding ISF) had 1,206 full-time
employees. Of these, approximately 866 were engaged in manufacturing, 160 in
marketing and sales, 129 in administrative and clerical positions and 51 in
process and product development.
The employees at the San Diego, California; Walbridge, Ohio; and the MSCSF
distribution facilities are not represented by a union. Hourly manufacturing
employees at Elk Grove Village, Illinois; Morrisville, Pennsylvania; and
Middletown, Ohio are covered by separate union contracts expiring in February
2002, November 2000 and May 2002, respectively. Hourly manufacturing employees
at Richmond, California are covered by two separate union contracts expiring in
March 2000 and January 2003. The Company believes that its relations with its
employees are good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of April 23, 1999, are as follows:
<TABLE>
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Position and
Name Age Year First Elected
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<S> <C> <C>
Gerald G. Nadig 53 Chairman, President and Chief Executive
Officer, MSC since January 1998; previously
President and Chief Executive Officer, MSC
since January 1997; previously President and
Chief Operating Officer, MSC since July 1991.
Thomas E. Moore 53 Executive Vice President and Chief Operating
Officer, MSC since May 1997; previously
Executive Vice President and General
Manager, MSCWC since 1993.
James J. Waclawik, Sr. 40 Vice President, Chief Financial Officer and
Secretary, MSC since October 1996;
previously Vice President and Controller,
MSC since July 1991.
Frank J. Lazowski, Jr. 59 Senior Vice President, Human Resources, MSC
since March 1999; previously Vice President,
Human Resources, MSC since July 1991.
Anton F. Vitzthum 64 Senior Vice President, Manufacturing, MSC
since March 1994.
Robert J. Mataya 56 Vice President, Business Planning and
Development, MSC since July 1991.
Edward J. Vydra 60 Vice President and Chief Technology Officer,
MSC since November 1998; Vice President,
Research and Development (various
subsidiaries of the Company) since 1991.
</TABLE>
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<TABLE>
<CAPTION>
Position and
Name Age Year First Elected
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<S> <C> <C>
David J. DeNeve 30 Controller, MSC since October 1996;
previously Accounting and Tax Manager, MSC
since November 1995; previously Financial
Analyst, MSC since June 1994.
David A. Catterlin 43 President, MSCPPS since June 1998.
David A. Fletcher 45 President and Chief Operating Officer, MSCSF
since September 1993.
Ronald L. Millar 48 Group Vice President and General Manager,
MSCLC since November 1995; previously Vice
President, PFM since 1991.
Douglas M. Rose 49 President, PFM since December 1997.
Edward A. Williams 40 Group Vice President and General Manager,
MSCWC since May 1997; previously Plant
Manager, MSCWC since 1993.
</TABLE>
Prior to joining the Company in 1994, Mr. DeNeve was on the audit staff of
Arthur Andersen LLP. Mr. Catterlin was Vice President, Commercial for
California Steel Industries, Inc. from 1994 until joining the Company. Mr. Rose
was Executive Vice President, Toyoda Machinery USA, prior to joining the
Company.
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ITEM 2. PROPERTIES
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The Company owns or leases facilities with an aggregate of approximately
1,988,000 square feet of space. The Company considers all of such facilities to
be in good operating condition. In addition to the principal physical properties
used by the Company in its manufacturing operations as summarized in the table
below, the Company leases numerous sales and administrative offices pursuant to
short-term leases.
<TABLE>
<CAPTION>
Approximate
Area in Lease Expiration
Location Square Feet (or Ownership)
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<S> <C> <C>
Elk Grove Village, Illinois 58,000 Owner
Plant No. 1
Elk Grove Village, Illinois 205,000 Owner
Plant No. 2
Elk Grove Village, Illinois 290,000 Owner
Plant No. 3
Morrisville, Pennsylvania 121,000 Owner
Middletown, Ohio 170,000 Owner
Richmond, California 276,000 Owner
Plant No. 1
Richmond, California 203,000 Owner
Plant No. 2
Walbridge, Ohio 440,000 June 2003/(1)/
San Diego, California 73,000 February 2007/(2)/
Research Triangle Park,
North Carolina (ISF) 17,000 December 2003/(3)/
Zulte, Belgium (ISF) 65,000 December 2004
</TABLE>
(1) The lease is renewable, at the Company's option, for additional periods
totaling 25 years. Since April 1, 1986, this facility has been subleased to the
Partnership, and the initial sublease expired on June 30, 1998. MSC and BSC have
extended the sublease until December 31, 2001 (see Coated Products and Services
- - Electrogalvanizing).
(2) The lease is renewable, at the Company's option, for additional periods
totaling 5 years. Since October 15, 1998, a portion (29.1%) of this facility
has been subleased to ISF, and the sublease expires December 31, 2003.
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(3) The sublease expires the earlier of the termination of the ISF agreement
(December 31, 2003, if not extended) or February 28, 2007.
ITEM 3. LEGAL PROCEEDINGS
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See Note 4 of the Notes to Consolidated Financial Statements entitled
"Environmental and Legal Matters," on pages 25 and 26 of the Company's annual
report, which is incorporated by reference herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS
- ------- --------------------------------------------------
There were no matters submitted to the Company's security owners during the
fourth quarter of fiscal 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- ------- ---------------------------------------------
RELATED SHAREOWNER MATTERS
--------------------------
The Company's common stock, $.02 par value, is listed on the New York Stock
Exchange under the symbol "MSC." The table below sets forth, by fiscal quarter,
the high and low sales prices of the Company's common stock during its past two
fiscal years.
<TABLE>
<CAPTION>
Fiscal Fiscal
Year Quarter High Low
- --------------- ------- -------- -------
<S> <C> <C> <C>
1999 1st 12 5/8 10
2nd 13 1/8 7 9/16
3rd 10 1/16 6 3/4
4th 9 7/8 7 3/16
Fiscal Fiscal
Year Quarter High Low
- --------------- ------- -------- -------
1998 1st 17 1/2 13 1/2
2nd 16 1/8 14 1/4
3rd 16 15/16 13 7/8
4th 14 7/16 10 5/16
</TABLE>
There were 1,182 owners of record of the Company's common stock at the close
of business on April 23, 1999. MSC has not paid cash dividends other than a
nominal amount in lieu of fractional shares in connection with stock dividends.
Management currently anticipates that all earnings will be retained for
development of the Company's business. If business circumstances
15
<PAGE>
should change, the Board of Directors may declare and instruct the Company to
pay cash dividends.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
Reference is made to the information found under the caption "Selected
Financial Data" on pages 32 and 33 of the Company's annual report, which is
incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Reference is made to the information found under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 17 through 19 of the Company's annual report, which is incorporated by
reference herein.
Certain statements in this Form 10-K and in future filings of the Company with
the SEC and in the Company's written and oral statements made by or with the
approval of an authorized officer of the Company contain, or will contain,
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including assumptions concerning MSC's operations, future results and prospects,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. These forward-looking statements are based on
MSC's current expectations and are subject to risk and uncertainties which could
cause actual results or events to differ materially from those set forth or
implied. Examples of forward-looking statements include, but are not limited
to, statements regarding the Company's future financial position, results of
operations and cash flows (including future capital expenditures and anticipated
debt levels and strategies for growth), plans and objectives. Uncertainties and
factors which could cause actual results or events to differ materially from
those set forth or implied include, but are not limited to, (i) successful
development and market introduction of anticipated new products and
technologies; (ii) competitive factors and competitor's responses to MSC's
initiatives; (iii) changes in the current and future business environment; (iv)
adverse changes in government laws and regulations applicable to the Company;
(v) continuation of the favorable environment to make acquisitions, including
regulatory requirements and market values of candidates; (vi) the stability of
governments and business conditions inside and outside the United States which
may affect successful penetration of the Company's products; (vii) the health of
the automobile, building and construction and durable goods industries; (viii)
environmental risks associated with the manufacturing operations of the Company;
(ix) the loss of one or more significant customers of the Company; (x) risks
associated with the termination of the Partnership in December 2001; (xi)
increases in the price of raw and other material inputs used by the Company that
cannot be passed on to its customers; and (xii) the incompleteness or untimely
resolution of the Year 2000 issue by the Company or its critically important
suppliers or customers. The Company does not undertake any obligation to update
or revise any forward-looking statement made by it or on its behalf, whether as
the result of new information, future events or otherwise.
16
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
- -------- ------------------------------------------------------
RISK
----
The Company operates internationally, and thus is subject to potentially
adverse movements in foreign currency rate changes. As of February 28, 1999,
foreign sales, operating income and assets each comprised less than 5% of
consolidated amounts. Historically, the effect of movements in the exchange
rates have not been material to the financial position or the results of
operations of the Company.
The Company uses steel as a raw material in many of its products. The Company
has entered into certain vendor contracts, not exceeding a term of one year,
which have established a fixed price for steel.
The table below provides information about the Company's debt that is
sensitive to changes in interest rates.
<TABLE>
<CAPTION>
(Dollars in Thousands) Expected Maturity Date (Fiscal Year)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 Thereafter Total Fair Value
------ ------- ------ ------- ------- ---------- -------- ----------
Total Debt:
Fixed Rate:
Principal Amount $2,429 $ 2,499 $8,019 $14,059 $18,708 $72,515 $118,229 $118,889
Average Interest Rate 7.7% 7.8% 7.3% 7.1% 6.9% 6.9% 7.0%
Variable Rate:
Principal Amount $ - $10,000 $ - $14,200 $ - $ - $ 24,200 $ 24,200
Average Interest Rate* N/A 5.9% N/A 6.6% N/A N/A 6.3%
</TABLE>
* Average variable rates are based on fiscal 1999 year end rates. Actual rates
may be higher or lower.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
(a) The Report of Independent Public Accountants, Consolidated Statements of
Income for the years ended February 28, 1999, 1998 and 1997, Consolidated
Balance Sheets as of February 28, 1999 and 1998, Consolidated Statements of Cash
Flows for the years ended February 28, 1999, 1998 and 1997, Consolidated
Statements of Changes in Shareowners' Equity for the years ended February 28,
1999, 1998 and 1997, Consolidated Statements of Comprehensive Income for the
years ended February 28, 1999, 1998 and 1997 and Notes to Consolidated Financial
Statements, set forth on page 16 and pages 20 through 31 of the Company's annual
report, are incorporated by reference herein.
(b) The unaudited selected quarterly financial data is set forth in Note 13 of
the Notes to Consolidated Financial Statements under the caption "Selected
Quarterly Results of Operations (Unaudited)" on page 31 of the Company's annual
report, which is incorporated by reference herein.
17
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Reference is made to the information found under the caption "Election of
Directors" on pages 2 and 3 of the Company's proxy statement for the 1999 annual
meeting of shareowners ("proxy statement"), all of which is incorporated by
reference herein, for information on the directors of the Company. Reference is
made to the information under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" set forth on page 21 of the proxy statement, all of which
is incorporated herein by reference. Reference is made to Part I of this report
for information on the executive officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Reference is made to the information under the captions "Compensation of
Executive Officers", "Compensation and Organization Committee Report", "MSC
Performance Graph", "Employment and Other Agreements" and "Employee and Other
Plans" on pages 7 through 13 of the proxy statement, all of which is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
- ------- ----------------------------------------
HOLDERS AND MANAGEMENT
----------------------
Reference is made to the information under the captions "Security Ownership of
Management of the Company" and "Information with Respect to Certain Shareowners"
set forth on pages 5 and 6 of the proxy statement, all of which is incorporated
by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Reference is made to the information under the caption "Employment and Other
Agreements" and "Employee and Other Plans" set forth on pages 12 and 13 of the
proxy statement, all of which is incorporated herein by reference.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
- -------- -------------------------------------------
REPORTS ON FORM 8-K
-------------------
(A) FINANCIAL STATEMENTS AND SCHEDULE OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by reference
-----------------------------------
to page 16 and pages 20 through 31 of the Company's annual report.
(i) Report of Independent Public Accountants
(ii) Consolidated Statements of Income for the years ended
February 28, 1999, 1998 and 1997
(iii) Consolidated Balance Sheets - February 28, 1999 and 1998
(iv) Consolidated Statements of Cash Flows for the years ended
February 28, 1999, 1998 and 1997
(v) Consolidated Statements of Changes in Shareowners' Equity
for the years ended February 28, 1999, 1998 and 1997
(vi) Consolidated Statements of Comprehensive Income for the
years ended February 28, 1999, 1998 and 1997
(vii) Notes to Consolidated Financial Statements
II Supplemental Schedule
---------------------
(i) Report of Independent Public Accountants with respect to
Supplemental Schedule to the Financial Statements
(ii) Schedule II - Reserve for Receivable Allowances
All other schedules have been omitted, since the required information is not
significant, is included in the financial statements or the notes thereto or is
not applicable.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter.
19
<PAGE>
(C) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2(a) Parent Agreement dated as of October 15, 1984, by and among Bethlehem
Steel Corporation, Inland Steel Company, Pre Finish Metals Incorporated
and Material Sciences Corporation.(1)
2(b) Partnership Agreement dated as of August 30, 1984, by and among EGL Steel
Inc., Inland Steel Electrogalvanizing Corporation and Pre Finish Metals
(EG) Incorporated.(1)
2(c) Amendment No. 1 to the Partnership Agreement dated as of August 30,
1984.(2)
2(d) Amendment No. 2 to the Partnership Agreement dated as of August 30,
1984.(2)
2(e) Operating Agreement dated as of October 15, 1984, by and between Pre
Finish Metals (EG) Incorporated and Walbridge Coatings, An Illinois
Partnership.(1)
2(f) Coating Agreement dated as of October 15, 1984, by and between Bethlehem
Steel Corporation and Walbridge Coatings, An Illinois Partnership.(1)
2(g) Coating Agreement dated as of October 15, 1984, by and between Inland
Steel Company and Walbridge Coatings, An Illinois Partnership.(1)
2(h) Amendments to Definitive Agreements dated as of March 31, 1986, among EGL
Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre Finish Metals
(EG) Incorporated, Bethlehem Steel Corporation, Inland Steel Company, Pre
Finish Metals Incorporated and Material Sciences Corporation.(11)
2(i) Further Amendments to Definitive Agreements dated as of July 24, 1986,
among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland Steel
Company, Inland Steel Industries, Inc., Pre Finish Metals Incorporated and
Material Sciences Corporation.(11)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2(j) Further Amendments to Definitive Agreements dated as of April 23, 1992,
among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland Steel
Company, Inland Steel Industries, Inc., Pre Finish Metals Incorporated and
Material Sciences Corporation.(11)
2(k) Asset Purchase Agreement by and among Colorstrip, Inc., the Registrant,
and MSC Pinole Point Steel Inc., dated as of November 14, 1997.(8)
3(a) Registrant's Restated Certificate of Incorporation.(7)
3(b) Certificate of Designation, Preferences and Rights of Series B Junior
Participating Preferred Stock.(3)
3(c) Registrant's By-laws, as amended.(10)
4(a) Credit Agreement, dated as of December 12, 1997, among Registrant, Bank of
America National Trust and Savings Association, as Agent and Letter of
Credit Issuing Bank, and other financial institutions party thereto.(8)
4(b) First Amendment dated as of April 30, 1998, among Registrant, Bank of
America National Trust and Savings Association, as Agent and Letter of
Credit Issuing Bank, and other financial institutions party thereto.(9)
4(c) Note Agreement dated as of February 15, 1997, by and among the Registrant
and the purchasers described on Schedule I attached thereto.(6)
4(d) Note Agreement dated as of February 15, 1998, by and among the Registrant
and the purchasers described on Schedule I attached thereto.(9)
4(e) First Amendment to Note Agreement dated as of January 23, 1998 among the
Registrant, Principal Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance
Company, and West Coast Life Insurance Company.(9)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
4(f) Second Amendment to Note Agreement dated as of February 27, 1998 among the
Registrant, Principal Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance
Company, and West Coast Life Insurance Company.(9)
4(g) Option Agreement dated as of February 26, 1998, between the Registrant and
Stern Stewart & Co.(9)
4(h) Rights Agreement dated as of June 20, 1996, between Material Sciences
Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights
Agent.(3)
4(i) First Amendment to Rights Agreement dated as of June 17, 1998 between the
Registrant and Chase Mellon Shareholder Services, L.L.C., as Rights
Agent.(10)
There are omitted certain instruments with respect to long-term debt, the
total amount of securities authorized under each of which does not exceed
10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. A copy of each such instrument will be furnished to
the Commission upon request.
10(a) Material Sciences Corporation Stock Purchase Plan.(1)
10(b) Material Sciences Corporation Supplemental Pension Plan.(1)
10(c) Material Sciences Corporation Employee Stock Purchase Plan.(11)
10(d) Material Sciences Corporation 1985 Stock Option Plan for Key Employees.(11)
10(e) Material Sciences Corporation 1985 Stock Option Plan for Directors.(11)
10(f) Material Sciences Corporation 1992 Omnibus Stock Awards Plan for Key
Employees.(4)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10(g) Employment Agreement effective February 27, 1991, between Material
Sciences Corporation and G. Robert Evans.(11)
10(h) Material Sciences Corporation 1991 Stock Option Plan for Directors.(11)
10(i) Material Sciences Corporation Directors Deferred Compensation Plan.(11)
10(j) Material Sciences Corporation 1996 Stock Option Plan for Non-Employee
Directors.(5)
10(k) Deferred Compensation Plan of Material Sciences Corporation and Certain
Participating Subsidiaries.(11)
10(l) Lease and Agreement dated as of December 1, 1980, between Line 6 Corp. and
Pre Finish Metals Incorporated, relating to Walbridge, Ohio facility.(1)
10(m) First Amendment to Lease and Agreement dated as of May 30, 1986, between
Corporate Property Associates and Corporate Property Associates 2 and Pre
Finish Metals Incorporated.(11)
10(n) Sublease dated as of May 30, 1986, between Pre Finish Metals Incorporated
and Walbridge Coatings, An Illinois Partnership.(11)
10(o) Lease Guaranty dated as of May 30, 1986, from Material Sciences
Corporation to Corporate Property Associates and Corporate Property
Associates 2.(11)
10(p) Agreement dated as of May 30, 1986, between Material Sciences Corporation
and Corporate Property Associates and Corporate Property Associates 2.(11)
10(q) Form of Standstill Agreement dated as of January 29, 1986, among Material
Sciences Corporation, Richard L. Burns and Joyce Burns.(11)
10(r) Form of Indemnification Agreement between Material Sciences Corporation
and each of its officers and directors.(11)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10(s) Severance Benefits Agreement dated October 22, 1996 between Material
Sciences Corporation and James J. Waclawik, Sr.(6)
10(t) Extension of Sublease Agreement dated as of December 7, 1998 between MSC
Pre Finish Metals Inc. and Walbridge Coatings.(11)
10(u) 1998 Extension Agreement dated as of December 31, 1998 (certain
confidential portions have been omitted pursuant to a confidential
treatment request which has been separately filed).(11)
10(v) Tolling Agreement dated as of June 30, 1998 between Walbridge Coatings and
Inland Steel Company (certain confidential portions have been omitted
pursuant to a confidential treatment request which has been separately
filed).(11)
10(w) Form of Change in Control Agreement.(10)
10(x) Amendment to the Supplemental Employee Retirement Plan.(10)
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.(11)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(1) Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 2-93414), which was declared effective on November 27, 1984.
(2) Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-00828), which was filed on October 11, 1985.
(3) Incorporated by reference to the Registrant's Form 8-A filed on June 25, 1996 (File No.
1-8803).
(4) Incorporated by reference to the Registrant's Registration Statement on Form S-8
(Registration No. 333-15679) which was filed on November 6, 1996.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(5) Incorporated by reference to the Registrant's Registration Statement on Form S-8
(Registration No. 333-15677) which was filed on November 6, 1996.
(6) Incorporated by reference to the Registrant's Form 10-K Annual Report for the Fiscal Year
Ended February 28, 1997 (File No. 1-8803).
(7) Incorporated by reference to the Registrant's Form 10-Q Quarterly Report for the Quarter
Ended August 31, 1997 (File No. 1-8803).
(8) Incorporated by reference to the Registrant's Form 8-K filed on December 30, 1997 (File
No. 1-8803).
(9) Incorporated by reference to the Registrant's Form 10-K filed on May 26, 1998 (File No.
1-8803).
(10) Incorporated by reference to the Registrant's Form 8-K filed on June 22, 1998 (File No.
1-8803).
(11) Appears only in the electronic filing of this report with the Securities and Exchange
Commission.
</TABLE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
-------------------------------------
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MATERIAL SCIENCES CORPORATION
By: /s/ Gerald G. Nadig
---------------------
Gerald G. Nadig
Chairman, President and Chief Executive Officer
Date: May 24, 1999
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed by the following persons in the capacities indicated on May 24,
1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Gerald G. Nadig Chairman, President and Chief Executive Officer and Director
- --------------------------------------
Gerald G. Nadig (Principal Executive Officer)
/s/ James J. Waclawik, Sr. Vice President, Chief Financial Officer and Secretary
- --------------------------------------
James J. Waclawik, Sr. (Principal Financial Officer)
/s/ David J. DeNeve Controller
- --------------------------------------
David J. DeNeve (Principal Accounting Officer)
/s/ Jerome B. Cohen Director
- --------------------------------------
Jerome B. Cohen
/s/ Roxanne J. Decyk Director
- --------------------------------------
Roxanne J. Decyk
/s/ Eugene W. Emmerich Director
- --------------------------------------
Eugene W. Emmerich
/s/ G. Robert Evans Director
- --------------------------------------
G. Robert Evans
/s/ E. F. Heizer, Jr. Director
- --------------------------------------
E. F. Heizer, Jr.
/s/ Irwin P. Pochter Director
- --------------------------------------
Irwin P. Pochter
/s/ Howard B. Witt Director
- --------------------------------------
Howard B. Witt
</TABLE>
26
<PAGE>
EXHIBIT INDEX
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
- ------- -------------------------------------------
REPORTS ON FORM 8-K
-------------------
(A) FINANCIAL STATEMENTS AND SCHEDULE OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by
-----------------------------------
reference to page 16 and pages 20 through 31 of the Company's annual
report.
(i) Report of Independent Public Accountants
(ii) Consolidated Statements of Income for the years ended
February 28, 1999, 1998 and 1997
(iii) Consolidated Balance Sheets - February 28, 1999 and 1998
(iv) Consolidated Statements of Cash Flows for the years ended
February 28, 1999, 1998 and 1997
(v) Consolidated Statements of Changes in Shareowners' Equity
for the years ended February 28, 1999, 1998 and 1997
(vi) Consolidated Statements of Comprehensive Income for the
years ended February 28, 1999, 1998 and 1997
(vii) Notes to Consolidated Financial Statements
II Supplemental Schedule
---------------------
(i) Report of Independent Public Accountants with respect to
Supplemental Schedule to the Financial Statements
(ii) Schedule II - Reserve for Receivable Allowances
All other schedules have been omitted, since the required information is not
significant, is included in the financial statements or the notes thereto or is
not applicable.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter.
27
<PAGE>
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2(a) Parent Agreement dated as of October 15, 1984, by and among Bethlehem
Steel Corporation, Inland Steel Company, Pre Finish Metals Incorporated
and Material Sciences Corporation.(1)
2(b) Partnership Agreement dated as of August 30, 1984, by and among EGL Steel
Inc., Inland Steel Electrogalvanizing Corporation and Pre Finish Metals
(EG) Incorporated.(1)
2(c) Amendment No. 1 to the Partnership Agreement dated as of August 30,
1984.(2)
2(d) Amendment No. 2 to the Partnership Agreement dated as of August 30,
1984.(2)
2(e) Operating Agreement dated as of October 15, 1984, by and between Pre
Finish Metals (EG) Incorporated and Walbridge Coatings, An Illinois
Partnership.(1)
2(f) Coating Agreement dated as of October 15, 1984, by and between Bethlehem
Steel Corporation and Walbridge Coatings, An Illinois Partnership.(1)
2(g) Coating Agreement dated as of October 15, 1984, by and between Inland
Steel Company and Walbridge Coatings, An Illinois Partnership.(1)
2(h) Amendments to Definitive Agreements dated as of March 31, 1986, among EGL
Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre Finish Metals
(EG) Incorporated, Bethlehem Steel Corporation, Inland Steel Company, Pre
Finish Metals Incorporated and Material Sciences Corporation.(11)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
2(i) Further Amendments to Definitive Agreements dated as of July 24, 1986,
among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland Steel
Company, Inland Steel Industries, Inc., Pre Finish Metals Incorporated and
Material Sciences Corporation.(11)
2(j) Further Amendments to Definitive Agreements dated as of April 23, 1992,
among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre
Finish Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland Steel
Company, Inland Steel Industries, Inc., Pre Finish Metals Incorporated and
Material Sciences Corporation.(11)
2(k) Asset Purchase Agreement by and among Colorstrip, Inc., the Registrant,
and MSC Pinole Point Steel Inc., dated as of November 14, 1997.(8)
3(a) Registrant's Restated Certificate of Incorporation.(7)
3(b) Certificate of Designation, Preferences and Rights of Series B Junior
Participating Preferred Stock.(3)
3(c) Registrant's By-laws, as amended.(10)
4(a) Credit Agreement, dated as of December 12, 1997, among Registrant, Bank of
America National Trust and Savings Association, as Agent and Letter of
Credit Issuing Bank, and other financial institutions party thereto.(8)
4(b) First Amendment dated as of April 30, 1998, among Registrant, Bank of
America National Trust and Savings Association, as Agent and Letter of
Credit Issuing Bank, and other financial institutions party thereto.(9)
4(c) Note Agreement dated as of February 15, 1997, by and among the Registrant
and the purchasers described on Schedule I attached thereto.(6)
4(d) Note Agreement dated as of February 15, 1998, by and among the Registrant
and the purchasers described on Schedule I attached thereto.(9)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
4(e) First Amendment to Note Agreement dated as of January 23, 1998 among the
Registrant, Principal Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance
Company, and West Coast Life Insurance Company.(9)
4(f) Second Amendment to Note Agreement dated as of February 27, 1998 among the
Registrant, Principal Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and Annuity Insurance
Company, and West Coast Life Insurance Company.(9)
4(g) Option Agreement dated as of February 26, 1998, between the Registrant and
Stern Stewart & Co.(9)
4(h) Rights Agreement dated as of June 20, 1996, between Material Sciences
Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights
Agent.(3)
4(i) First Amendment to Rights Agreement dated as of June 17, 1998 between the
Registrant and Chase Mellon Shareholder Services, L.L.C., as Rights
Agent.(10)
There are omitted certain instruments with respect to long-term debt, the
total amount of securities authorized under each of which does not exceed
10% of the total assets of the registrant and its subsidiaries on a
consolidated basis. A copy of each such instrument will be furnished to
the Commission upon request.
10(a) Material Sciences Corporation Stock Purchase Plan.(1)
10(b) Material Sciences Corporation Supplemental Pension Plan.(1)
10(c) Material Sciences Corporation Employee Stock Purchase Plan.(11)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10(d) Material Sciences Corporation 1985 Stock Option Plan for Key Employees.(11)
10(e) Material Sciences Corporation 1985 Stock Option Plan for Directors.(11)
10(f) Material Sciences Corporation 1992 Omnibus Stock Awards Plan for Key
Employees.(4)
10(g) Employment Agreement effective February 27, 1991, between Material
Sciences Corporation and G. Robert Evans.(11)
10(h) Material Sciences Corporation 1991 Stock Option Plan for Directors.(11)
10(i) Material Sciences Corporation Directors Deferred Compensation Plan.(11)
10(j) Material Sciences Corporation 1996 Stock Option Plan for Non-Employee
Directors.(5)
10(k) Deferred Compensation Plan of Material Sciences Corporation and Certain
Participating Subsidiaries.(11)
10(l) Lease and Agreement dated as of December 1, 1980, between Line 6 Corp. and
Pre Finish Metals Incorporated, relating to Walbridge, Ohio facility.(1)
10(m) First Amendment to Lease and Agreement dated as of May 30, 1986, between
Corporate Property Associates and Corporate Property Associates 2 and Pre
Finish Metals Incorporated.(11)
10(n) Sublease dated as of May 30, 1986, between Pre Finish Metals Incorporated
and Walbridge Coatings, An Illinois Partnership.(11)
10(o) Lease Guaranty dated as of May 30, 1986, from Material Sciences
Corporation to Corporate Property Associates and Corporate Property
Associates 2.(11)
10(p) Agreement dated as of May 30, 1986, between Material Sciences Corporation
and Corporate Property Associates and Corporate Property Associates 2.(11)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10(q) Form of Standstill Agreement dated as of January 29, 1986, among Material
Sciences Corporation, Richard L. Burns and Joyce Burns.(11)
10(r) Form of Indemnification Agreement between Material Sciences Corporation
and each of its officers and directors.(11)
10(s) Severance Benefits Agreement, dated October 22, 1996 between Material
Sciences Corporation and James J. Waclawik, Sr.(6)
10(t) Extension of Sublease Agreement dated as of December 7, 1998 between MSC
Pre Finish Metals Inc. and Walbridge Coatings.(11)
10(u) 1998 Extension Agreement dated as of December 31, 1998 (certain
confidential portions have been omitted pursuant to a confidential
treatment request which has been separately filed).(11)
10(v) Tolling Agreement dated as of June 30, 1998 between Walbridge Coatings and
Inland Steel Company (certain confidential portions have been omitted
pursuant to a confidential treatment request which has been separately
filed).(11)
10(w) Form of Change in Control Agreement.(10)
10(x) Amendment to the Supplemental Employee Retirement Plan.(10)
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.(11)
</TABLE>
<TABLE>
<S> <C>
(1) Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 2-93414), which was declared effective on November 27, 1984.
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
(2) Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-00828), which was filed on October 11, 1985.
(3) Incorporated by reference to the Registrant's Form 8-A filed on June 25, 1996 (File No.
1-8803).
(4) Incorporated by reference to the Registrant's Registration Statement on Form S-8
(Registration No. 333-15679) which was filed on November 6, 1996.
(5) Incorporated by reference to the Registrant's Registration Statement on Form S-8
(Registration No. 333-15677) which was filed on November 6, 1996.
(6) Incorporated by reference to the Registrant's Form 10-K Annual Report for the Fiscal Year
Ended February 28, 1997 (File No. 1-8803).
(7) Incorporated by reference to the Registrant's Form 10-Q Quarterly Report for the Quarter
Ended August 31, 1997 (File No. 1-8803).
(8) Incorporated by reference to the Registrant's Form 8-K filed on December 30, 1997 (File
No. 1-8803).
(9) Incorporated by reference to the Registrant's Form 10-K filed on May 26, 1998 (File No.
1-8803).
(10) Incorporated by reference to the Registrant's Form 8-K filed on June 22, 1998 (File No.
1-8803).
(11) Appears only in the electronic filing of this report with the Securities and Exchange
Commission.
</TABLE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
-------------------------------------
33
<PAGE>
MATERIAL SCIENCES CORPORATION AND SUBSIDIARIES
Supplemental Schedule
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO SUPPLEMENTAL SCHEDULE
TO THE FINANCIAL STATEMENTS
To the Shareowners and Board of Directors of Material Sciences Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Material Sciences Corporation
1999 Annual Report to Shareowners incorporated by reference in this Form 10-K,
and have issued our report thereon dated April 22, 1999. Our audits were made
for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental financial statement schedule is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. The supplemental financial
statement schedule has been subjected to the auditing procedures applied in the
audit of the basic consolidated financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 22, 1999
35
<PAGE>
SCHEDULE II
MATERIAL SCIENCES CORPORATION AND SUBSIDIARIES
RESERVE FOR RECEIVABLE ALLOWANCES
(in thousands)
<TABLE>
<CAPTION>
Additions
---------------------------------------------
Balance at Charged to Charged Reclassifications Deductions Balance at
beginning costs and to other and from end of
of year expense accounts Acquisitions reserve year
----------- ------------ ---------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1997
- --------------------
Receivable Allowances $4,407 $ 4,132 $ - $ - $ (6,268) $2,271
=========== ============ ========== ================ ========== ==========
Fiscal 1998
- --------------------
Receivable Allowances $2,271 $11,980 $ - $ 1,354 $(10,820) $4,785
=========== ============ ========== ================ ========== ==========
Fiscal 1999
- --------------------
Receivable Allowances $4,785 $10,622 $ - $ - $(10,174) $5,233
=========== ============ ========== ================ ========== ==========
</TABLE>
The activity in the Receivable Allowances account includes the Company's bad
debt, claim and scrap allowance.
36
<PAGE>
EXHIBIT NO. 2 (h)
Amendments to Definitive Agreements
dated March 31, 1986,
among EGL Steel Inc., Inland Steel Electrogalvanizing
Corporation, Pre Finish Metals (E.G.) Incorporated,
Bethlehem Steel Corporation, Inland Steel Company,
Pre Finish Metals Incorporated,
and Materials Sciences Corporation
<PAGE>
Dated as of March 31, 1986
EGL Steel Inc. and Inland Steel Electrogalvanizir
Bethlehem Steel Corporation Corporation and
701 East Third Street Inland Steel Company
Bethlehem, Pennsylvania 18015 30 West Monroe Street
Chicago, IL 60603
Pre Finish Metals (E.G.)
Incorporated and
Pre Finish Metals Incorporated and
Material Sciences Corporation
2300 East Pratt Boulevard
Elk Grove Village, IL 60007
Re: Amendments to Definitive Agreements
-----------------------------------
Dear Sirs:
Reference is made to the Partnership Agreement dated as of August 30,
1986 by and among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation
and Pre Finish Metals (E.G.) Incorporated, pursuant to which Walbridge Coatings,
an Illinois Partnership was formed, and to the various Definitive Agreements, as
amended, referred to therein. All capitalized terms in this letter agreement
which are defined in the Appendix to such Definitive Agreements shall have the
meaning herein as therein provided.
At a meeting of representatives of all partners held on March 12,
1986, it was agreed that for commercial reasons it was necessary for the
Commissioning Date to occur prior to the closing of the Permanent Financing of
the E.G. Facility, and that it was advisable for the Partnership to acquire the
Transfer Facility on or about the Commissioning Date, or as soon as practicable
thereafter, rather than on the closing of the Permanent Financing, as
contemplated by the Definitive Agreements.
Various changes to the Definitive Agreements and related agreements
are advisable in order to reflect this decision. Accordingly, the Partnership
and each of the Partners and their respective Parents hereby agree to the
following amendments:
Partnership Agreement:
- ---------------------
1. The last paragraph of Section 6.2 is hereby deleted.
2. The third and fourth paragraphs of Section 6.3 are hereby deleted
and replaced with the following:
<PAGE>
Page 2
March 31, 1986
"On or about the Commissioning Date, or as soon as practicable
thereafter, (a) each Parent shall loan to the Partnership the
following funds: Bethlehem: $18,072,772, Inland: $18,072,772 and PFM
and MSC (in the aggregate): $22,236,141, (b) the Partnership shall
purchase the equipment included in the Transfer Facility from PFM in
accordance with Section 15 of the Construction Agreement, as amended,
in consideration for the assumption by the Partnership of all
obligations of PFM under the OKB Note (other than interest previously
accrued) plus the payment to PFM of the total proceeds of the Parent
Loans (equal to the estimated completed cost of such equipment less
the principal amount of the OKB Note so assumed), provided that PFM
--------
shall apply all of such proceeds to (i) the repayment to each Parent
of the principal amount of the construction financing furnished by
such Parent (excluding, in the case of PFM, the OKB Note), (ii) the
repayment of all capitalized interest due each Parent thereon in
accordance with the Funding Agreement and the Construction Agreement,
(iii) an escrow account for the payment of the 10% hold back under the
Purchase Agreement and any other construction expenses not yet paid by
PFM in form satisfactory to all Partners, and (iv) the balance to the
purchase price of the equipment included in the Existing Facility, and
(c) the Partnership shall enter into a lease and/or sublease with PFM
of the real estate included in the Transfer Facility for the period
from the Commissioning Date to the end of the initial Term pursuant to
Section 5.1, in form satisfactory to all Partners (the "Bridge
Sublease"). With respect to all periods between the Commissioning
Date and the closing of the Permanent Financing each Partner agrees to
advance to the Partnership the portion of each payment required to be
made by the Partnership under the OKB Note and the Bridge Sublease
equal to the Financial Interest of such Partner in the Partnership on
or before the date that such payment is due thereunder."
"The closing of the Permanent Facility will be scheduled for a
date as soon as possible thereafter. At such closing, the Bridge
Sublease will be replaced by PFM conveying the real estate in the E.G.
Addition to the lessor of the PFM Lease, amending the PFM Lease in
various ways, including a commitment by such lessor to accept a new
mortgage for $11 million, and subleasing the amended lease to the
Partnership, all in form reasonably satisfactory to all Partners. At
such closing, (a) the Partnership shall apply all of the cash proceeds
from the equipment portion of Permanent Financing to the repayment of
the Parent Loans, with each Parent receiving an amount equal to the
total of such cash proceeds multiplied by the Financial Interest of
the Partner subsidiary of such Parent in the Partnership plus, in the
case of Bethlehem and Inland, $727,350 and minus, in the case of PFM,
$1,454,700, until all of such loan proceeds have been so applied and
(b) PFM shall
<PAGE>
Page 3
March 31, 1986
retain the cash proceeds of the real estate mortgage portion Of the
Permanent Financing (after payment of the existing mortgage).
"From and after the Commissioning Date control of the Transfer
Facility shall be transferred to the Partnership, and the Transfer
Facility shall be operated for the benefit and at the risk of the
Partnership in accordance with the Definitive Agreements. Prior to
the Commissioning Date, the Transfer Facility shall continue to be
under the control of, and to be operated for the benefit and at the
risk of, PFM."
Construction Agreement:
- ----------------------
1. Section 6(c) shall be amended to insert immediately preceding the
last sentence thereof the following:
"It is contemplated that the proceeds of the Parent Loans paid to PFM
pursuant to Section 6.3 of the Partnership Agreement will be applied
to the payment in full of the then aggregate outstanding principal
amounts of such borrowings and to the repayment to General Contractor
of amounts extended by General Contractor as described in subparagraph
(iii) above, together with all interest paid or payable by General
Contractor with respect to such borrowings, excluding in the case of
PFM, the OKB Note."
2. Section 15 is hereby amended to provide that the transfer of the
Transfer Facility shall occur as of the Commissioning Date, rather than on the
closing of the Permanent Financing, and that clause (i) of paragraph (a) thereof
shall be amended to read as follows:
"(i) The PFM Lease shall not be paid off by the Permanent
Financing and as of the Commissioning Date the Partnership shall enter
into a sublease agreement with PFM with respect thereto and a lease of
the real estate included in the E.G. Addition relating in each case to
the period between the Commissioning Date and the end of the initial
term of the Partnership. The amount included in the Transfer Value
for the assets originally subject to the PFM Lease shall reduce,
dollar for dollar, PFM E.G.'s obligation to provide Permanent
Financing pursuant to the Partnership Agreement (which reduction is
reflected in the amounts set forth in Section 6.3 of the Partner-ship
Agreement, as amended). Upon the closing of the Permanent Financing,
the sublease and lease between PFM and the Partnership will be
replaced by PFM conveying the real estate in the E.G. Addition to the
Lessor of the PFM Lease, amending the PFM Lease in various ways and by
subleasing the amended lease to the Partnership, all in such form as
shall be satisfactory to all Partners and to the lenders of the
Permanent Financing. One or more of such lenders will then become
<PAGE>
Page 4
March 31, 1986
the successor mortgagee under the PFM Lease as part of the Permanent
Financing. The proceeds of the successor mortgage shall be used to
retire the existing mortgage and to reimburse PFM for the amount
included in the Transfer Value for the assets so included in the PFM
Lease."
Clauses (iv) and (v) of paragraph (a) of Section 15 are hereby deleted as
inapplicable. In lieu thereof, the following shall be added as a new clause
(iv) thereof:
"(iv) Effective as of the Commissioning Date, the Partnership
shall assume and agree to pay and otherwise perform all of PFM's
obligations under the OKB Note, other than interest with respect to
any period prior to such effective date of such transfer, and the
Partnership shall indemnify and hold harmless PFM with respect
thereto. The amount paid to PFM for the Transfer Value pursuant to
Section 15 shall be reduced by the principal amount of the OKB Note
outstanding on such effective date. Notwithstanding the foregoing, if
PFM should borrow additional loan or loans under the Credit Facility
Agreement, PFM shall promptly thereafter pay an amount equal to the
proceeds of each such additional loan to the Partnership and upon each
such payment, the Partnership shall be deemed to have assumed and
agreed to pay all principal and interest under the particular
additional loan without any further act of any party hereto. The
Partnership shall promptly utilize such proceeds to proportionately
prepay the Notes of the Partnership to PFM, Bethlehem Steel
Corporation and Inland Steel Company dated April 1, 1986 in accordance
with the financial interest of their respective partner subsidiaries
in the Partnership as contemplated therein."
All action by PFM required to be taken pursuant to Paragraph (b) of Section 15
is hereby deemed to have been satisfactorily performed or waived by the
Partnership.
3. Exhibit I of the Construction Agreement is hereby amended to
substitute the attached Schedule A-2 as the legal description of the "Fee
Parcel".
Parent Agreement:
- ----------------
1. Section 5.4(a) of the Parent Agreement is hereby amended by
adding the following sentence:
"PFM has all requisite right and authority to sublet the premises
subject to the PFM Lease pursuant to the proposed Sublease and Lease
dated as of March 31, 1986 between PFM and the Partnership."
<PAGE>
Page 5
March 31, 1986
2. Schedule 3 of the Parent Agreement is hereby amended to read as
set forth in the attached Schedule A-2.
3. Schedule 4 of the Parent Agreement is hereby amended to add the
following at the end thereof:
"17. Grant of easement to Consolidated Rail Corporation recorded in
Volume 604, page 57, Deed Records, Wood County, Ohio."
4. Schedule 5 of the Parent Agreement is hereby amended to add the
following at the end of paragraph 3 thereof:
"(i)* Two Printronic printers leased from Norwest Financial Leasing,
Inc."
"(j)* Additional computer equipment leased from Wang Laboratories,
Inc."
Funding Agreement and Security Agreement:
- ----------------------------------------
1. The Funding Agreement and the Security Agreement are hereby
terminated in their entirety and each of Bethlehem and Inland shall promptly
deliver to PFM appropriate termination statements under the Uniform Commercial
Code to reflect such termination.
Appendix A:
- ----------
1. Appendix A to the Definitive Agreements is hereby amended to add
the following:
"'Credit Facility Agreement' shall mean that certain Credit
Facility Agreement dated as of January 11, 1985 between Creditanstalt
and PFM."
"'Parent Loans' shall mean the loans made to the Partnership by
Bethlehem, Inland and PFM on or about the Commissioning Date.
"'OKB Note' shall mean that certain note of PFM issued pursuant
to the Credit Facility Agreement."
2. The definition of the term "Commissioning Date" shall be amended
to read as follows:
"'Commissioning Date' shall mean April 1, 1986."
<PAGE>
Page 6
March 31, 1986
Anything in this letter agreement to the contrary notwithstanding,
each party hereto (including PFM) shall have the right to review the records of
PFM relating to the computations of the Transfer Value and the respective
amounts of the Parent Loans and if and to the extent that any such review
discloses that one or more errors in such computation exist, the parties agree
to make an equitable adjustment or adjustments with respect thereto.
In order to evidence such amendments, please sign a counterpart of
this letter at the place indicated below, and return such counterpart to the
undersigned.
Very truly yours,
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: PRE FINISH METALS (E.G.) INCORPORATED
General Partner
By:________________________________________
By: EGL STEEL INC.
General Partner
By:________________________________________
By: INLAND STEEL ELECTROGALVANIZING CORPORATION
General Partner
By:_______________________________________
<PAGE>
Page 7
March 31, 1986
Agreed as of the 31st day of March, 1986
EGL STEEL INC.
By:_____________________________________
BETHLEHEM STEEL CORPORATION
By:_____________________________________
INLAND STEEL ELECTROGALVANIZING CORPORATION
By:_____________________________________
INLAND STEEL COMPANY
By:_____________________________________
PRE FINISH METALS (E.G.) INCORPORATED
By:_____________________________________
PRE FINISH METALS INCORPORATED
By:_____________________________________
<PAGE>
Page 8
March 31, 1986
MATERIAL SCIENCES CORPORATION
By:_____________________________________
<PAGE>
Exhibit Number 2(i)
Further Amendments to Definitive Agreements
dated as of July 24, 1986,
among
ECL Steel Inc.,
Inland Steel Electrogalvanizing Corporation,
Pre Finish Metals (EG) Incorporated,
Bethlehem Steel Corporation,
Inland Steel Company,
Inland Steel Industries, Inc.,
Pre Finish Metals Incorporated
and
Materials Sciences Corporation
<PAGE>
Dated as of July 24, 1986
EGL Steel Inc. and Inland Steel Electrogalvanizing
Bethlehem Steel Corporation Corporation
701 East Third Street Inland Steel Company
Bethlehem, Pennsylvania 18015 Inland Steel Industries, Inc.
30 West Monroe Street
Chicago, Illinois 60603
Pre Finish Metals (EG) Incorporated and
Pre Finish Metals Incorporated and
Material Sciences Corporation
2300 East Pratt Boulevard
Elk Grove Village, Illinois 60007
Re: Further Amendments to Definitive Agreements
-------------------------------------------
Dear Sirs:
Reference is made to the Partnership Agreement dated as of August 30,
1984 by and among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation
and Pre Finish Metals (EG) Incorporated, pursuant to which Walbridge Coatings,
An Illinois Partnership was formed, and to the various Definitive Agreements, as
amended, referred to therein. All capitalized terms in this letter agreement
which are defined in Appendix A to such Definitive Agreements, as amended
hereby, shall have the meaning herein as therein provided.
This letter agreement is a condition precedent to the closing of the
Project Lenders' Loans (as herein defined). Accordingly, the Partnership and
each of the Partners and their respective Guarantors hereby agree to the
following amendments to the Definitive Agreements:
Partnership Agreement
- ---------------------
1. Section 5.1, as previously amended, is hereby further amended to
read as follows:
<PAGE>
May 17, 1999
Page 2
"5.1 Initial Term. The term of the Partnership ("Term")
------------
shall commence on the date hereof and shall continue until
June 30, 1998 unless (a) extended in accordance with
Section 5.2 hereof or (b) ended earlier by dissolution of
-----------
the Partnership in accordance with Article XV hereof."
----------
2. The penultimate paragraph of Section 6.3 is hereby amended to
change the amount "$727,350" to "$750,000" and the amount $1,454,700" to
"$1,500,000".
3. Section 6.3, as previously amended is hereby amended to add at
the end of the penultimate paragraph and before the last paragraph thereof the
following:
"If the 'New Mortgage Financing' as defined in the
Sublease is not renewed after six years due to the failure
of any of the conditions set forth in subparagraphs (d),
(e), (f) or (g) of Section 1.01 of the note under the real
------------
estate portion of the Permanent Financing, and substitute
mortgage financing is thereafter procured as contemplated
by Section 30 of the Sublease, then to the extent that the
'Basic Rent' payable as a result of such substitute
financing exceeds the sum of the 'Equity Portion of the
Basic Rent' (as such quoted terms are defined in the
Sublease) plus principal and interest on the balance of
such note at then current mortgage rates (the 'Increased
Cost'), PFM EG shall be responsible to the Partnership for
such Increased Cost. If such 'New Mortgage Financing' is
not so renewed due to a failure of the condition set forth
in subparagraph (b) of Section 1.01 under such note, then
EGL Steel and Inland EG shall be jointly and severally
responsible to the Partnership for the resulting Increased
Cost. If for any other reason substitute mortgage financing
is procured in accordance with Section 30 of the Sublease
due to any default under any of the 'Loan Documents' (as
defined in such note) caused directly or indirectly by EGL
Steel, Inland EG, PFM EG, any of their respective
Guarantors or any combination thereof, then such defaulting
party or parties shall be responsible to the Partnership
for the resulting Increased Cost to be shared if more than
one such party is involved in an equitable manner.
The Sublease shall have a term extending to the end of
the Term of the Partnership, provided, however, that (1) if
-------- -------
the Term of the Partnership is extended beyond June 30,
1998, then at the option of the Partnership, PFM shall
extend the term of the Sublease for up to six consecutive
additional terms of five years each to and including June
2
<PAGE>
May 17, 1999
Page 3
29, 2028 (the 'Extended Terms'), but not more than the
extended Term of the Partnership, and (2) if the
Partnership shall at the end of the Partnership Term assign
its rights under the Sublease to a party in which PFM has
no ownership interest, then at the option of such assignee,
PFM shall extend the term of the Sublease for one or more
of the Extended Terms, provided that concurrently with the
exercise of such option the assignee shall deliver to PFM a
written agreement reasonably satisfactory to PFM to pay to
PFM a reasonable fee for remaining as lessee under the
amended PFM Lease and as lessor under the Sublease based on
the credit standing of the assignee and the duration of the
Extended Terms. The amount of such fee shall be determined
by agreement of PFM and such assignee or, at the option of
either of them, by arbitration proceedings substantially
identical to those contemplated in Article XIV. If the
-----------
Partnership or the assignee shall exercise any such option
to extend the term of the Sublease for an Extended Term, it
shall give written notice thereof to PFM not later than
nine months prior to the expiration of the then existing
term of the Sublease. Notwithstanding the foregoing, (a) if
PFM has no ownership interest in such assignee, PFM, the
Partnership and such assignee shall use their best efforts
to obtain the approval of the lessor under the amended PFM
Lease to an assignment of the amended PFM Lease to the
assignee and a termination and cancellation of the
Sublease, with the effect that PFM would be relieved of all
liability thereafter arising under the amended PFM Lease
and the Sublease would terminate, and (b) PFM shall have no
obligation to extend the term of the Sublease if the term
thereof shall have expired or be terminated pursuant to any
provision thereof or if PFM shall not have received notice
of exercise of the option to extend as specified above."
4. Article VI is hereby amended to add at the end of Section 5.3
thereof the following:
"6.3A Performance of Credit Agreements. (A) If upon
--------------------------------
the occurrence of a Designated Event relating to any
Partner or its Guarantor(s), the Project Lenders shall
apply any funds held under the Cash Collateral Agreement to
the payment of the series of Notes and/or Promissory Notes
(as such terms are defined in the Credit Agreements)
relating to such defaulting Partner and its Guarantor(s)
under the Credit Agreements, such defaulting Partner or its
Guarantor(s), jointly and severally, shall within two
business days
3
<PAGE>
May 17, 1999
Page 4
after such application of funds reimburse to each of the
other Partners the amount of such funds so applied that was
paid by such other Partner to the "Accounts" as defined in
the Cash Collateral Agreement and all interest accrued
therein to the date of such application.
(b) If upon the occurrence of a Designated Event
relating to any Partner or its Guarantor(s) the series of
Notes and/or Promissory Notes (as such terms are defined in
the Credit Agreements) relating to such defaulting Partner
and its Guarantor(s) under the Credit Agreements shall be
accelerated and become forthwith due and payable, such
defaulting Partner or its Guarantor(s), jointly and
severally, shall within two business days after such
acceleration either (i) pay for the benefit of the
Partnership and in accordance with the guaranty of its
Guarantor(s) to the Project Lenders all principal, interest
and other amounts remaining due and payable under the
series of Notes and/or Promissory Notes so accelerated, or
(ii) cause such acceleration to be withdrawn or otherwise
annulled by a written instrument signed by the Project
Lenders who took such action in form and substance
reasonably satisfactory to all other Partners. In the event
that such defaulting Partner and its Guarantor(s) shall
fail to perform their obligations under the preceding
sentence within the time specified therein, then at all
times thereafter any other Partner or both other Partners
(acting in proportion to their Financial Interests or such
other proportion as such other Partners shall agree) shall
be deemed to be authorized by the defaulting partner and
its Guarantor(s) to take from time to time any one or both
of the following actions:
(i) If the "Designated Event" involves a monetary default referred to
in paragraph (h) or (i) of Section 6.02 of each of the Credit Agreements,
to pay such sums as shall be necessary to cure such monetary default; and
(ii) In any case, to give to the Project Lenders notice of repayment
pursuant to Section 2.10(b) of the Term Loan Agreement and Section 2.08(b)
of the Restated Credit Facility Agreement and thereafter to repay the
series of Notes or Promissory Notes so accelerated and the corresponding
series of Promissory Notes or Notes under the other Credit Agreement, as
contemplated by such Section 2.10(b) and Section 2.08(b)."
4
<PAGE>
May 17, 1999
Page 5
The defaulting Partner or its Guarantor(s), jointly and severally, shall
reimburse to the other Partner or Partners making such payment or payments all
monies so expended upon demand therefor in accordance with Section 17.5.
------------
"(c) Upon the payment by such defaulting Partner (or its Guarantor(s)) of
the amounts required by paragraph (a) or (b) of this Section within the time
specified therein, the defaulting Partner or Guarantor(s) making such payments
(i) shall be deemed to have made a Parent Loan to the Partnership in the amount
of the principal of the Notes and/or Promissory Notes so retired and bearing
interest and having payment terms, subordination and security corresponding to
the balance of the Parent Loans then outstanding and (ii) shall be entitled to
an appropriate promissory note of the Partnership to evidence such Parent Loan.
(d) Upon any failure of the defaulting Partner or its Guarantor(s) to make
any reimbursement required by under paragraphs (a) or (b) of this Section 6.3A
------------
within the time specified therein, then at all times thereafter the other
Partner or Partners, at its or their joint option and in proportion to the
amounts of reimbursement due to each of them, if any, shall be entitled to
purchase the entire Partner's Interest of the defaulting Partner (except, at the
option of the purchasing Partner or Partners, the Parent Loans of its
Guarantor(s)) in accordance with Section 13.3A. In addition, the defaulting
-------------
Partner hereby agrees to indemnify and hold harmless the Partnership, the other
Partners and their respective Guarantor(s) from and against any and all loss,
cost or damage, including but not limited to reasonable attorneys' fees and
expenses, incurred by the Partnership, such other Partners and their respective
Guarantor(s) as a result of any "Designated Event" under any of the Project
Lender Loans caused by such Partner or its Guarantor(s), whether or not
resulting in the application of funds held under the Cash Collateral Agreement
or the acceleration of any Notes or Promissory Notes, including but not limited
to any loss, cost and damage incurred as a result of any actions taken by such
partners or their Guarantor(s) to cure such Designated Event."
5. Section 10.2(b) is hereby amended by adding at the end thereof
the following:
"Notwithstanding the foregoing, (1) this Section 10.2(b) shall not
---------------
apply to the portion of the Permanent Financing consisting of the
Parent Loans and (2) payments to such reserve may be made directly by
the Primary Purchasers pursuant to the Coating Agreements and by the
Operator pursuant to the Operating Agreement in lieu of such payments
by the Partnership."
6. Section 10.2(c) is hereby amended to read as follows:
"(c) Subject to any requirements of the Project Lenders' Loans,
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 and in
5
<PAGE>
May 17, 1999
Page 6
connection therewith the Operator may cause the Partnership to apply
funds received on Per Ton Financing Payments pursuant to Section 6.10
------------
of the Coating Agreements to the payment of the Fixed Portion of the
Operator's Fee payable pursuant to Section 6.2 of the Operating
-----------
Agreement."
7. The first paragraph of Section 13.3 is hereby amended by adding
at the end thereof the following:
"Notwithstanding the foregoing, this right of refusal shall be subject
to the rights provided to Partners pursuant to Section 13.3A."
-------------
8. The second paragraph of Section 13.3 is hereby amended by adding
at the end thereof the following:
"Notwithstanding the foregoing, if the consummation of such purchase
shall be subject to the review or approval of any court, such period
of sixty days shall be extended until the expiration of ten days after
the completion of such court proceedings."
9. Article XIII is hereby amended by adding at the end of Section
13.3 thereof the following:
"13.3A Defaulting Partner's Interest. (a) Notwithstanding the
-----------------------------
foregoing provisions of this Article XIII, if any defaulting Partner
------------
and its Guarantor(s) shall fail to make any reimbursement payment
described in paragraphs (a) or (b) of Section 6.3A by the time
------------
specified therein, the other Partner or Partners, in proportion to the
amounts of reimbursement due each of them, if any, shall have the
first right to purchase the entire Partner's Interest of such
defaulting Partner (except, at the option of the purchasing Partner or
Partners, the Parent Loans of its Guarantor(s)) in the same manner and
at the same price as provided in Section 13.3, provided, however, that
------------ -------- -------
at the option of the purchasing Partner or Partners, the reimbursement
payment and any and all other indemnification payments then known to
be due to the purchasing Partner or Partners pursuant to Section 6.3A
------------
and remaining unpaid as of the closing of such purchase shall be set
off, dollar for dollar, against the purchase price for such Partner's
Interest. Upon the purchasing Partner or partners giving the written
notice of exercise of such right to purchase, (i) the defaulting
Partner shall have no further interest in the Partnership other than
(A) the right to receive the purchase price for its Partner's Interest
in accordance with this Article XIII and (B) any Parent Loans which
------------
the purchasing Partner or Partners elect not to purchase and (ii) the
remaining Partners and their Guarantor(s) shall promptly (A) amend the
Definitive Agreements to adjust
6
<PAGE>
May 17, 1999
Page 7
the Financial and Voting Interests of the remaining Partners so that
each purchasing Partner receives that fraction of the Financial and
Voting Interests of the defaulting Partner which is equal to the
fraction of the total reimbursement payable by the defaulting Partner
that was due to such purchasing Partner and (B) negotiate in good
faith and enter into such additions, deletions and other amendments to
the Definitive Agreements as shall be necessary or appropriate to
equitably share the burdens caused by the absence of the bankrupt
Partner and its Guarantor(s) and to take into account all related
changed circumstances, provided, that to the extent of any
--------
disagreement with respect thereto, either of the remaining Partners
may elect to have the disagreement resolved in accordance with the
informal dispute resolution procedures set forth in Article XIV.
-----------
(b) Anything in clause (ii) of the immediately preceding
paragraph to the contrary notwithstanding, if the Designated Event
which resulted in the obligation to make reimbursement payments
pursuant to Section 6.3A causes the Partnership to dissolve by
------------
operation of law, each of the remaining Partners agrees for the
benefit of the other remaining Partner (and not for the benefit of the
bankrupt Partner) to promptly form a successor partnership for the
purposes set forth in Article II and in connection therewith the
----------
remaining Partners and their Guarantor(s), subject to any approvals
required by the Project Lenders, shall negotiate in good faith and
enter into or reaffirm agreements substantially similar to the
Definitive Agreements to carry on the business theretofore conducted
by the Partnership, but excluding in each case the bankrupt Partner
and its Affiliates, together with such additions, deletions or other
amendments thereto as shall be necessary or appropriate to share the
burdens caused by the absence of the bankrupt Partner and its
Guarantor(s) and to take into account all related changed
circumstances; provided that to the extent of any disagreement with
--------
respect thereto, either of the remaining Partners may elect to have
the disagreement resolved in accordance with the dispute resolution
procedures set forth in Article XIV.
-----------
(c) If pursuant to paragraph (a) of this Section 13.3A, the
-------------
purchasing Partner or Partners shall elect not to purchase the Parent
Loans of the Guarantors of the defaulting Partner, such Parent Loans
shall continue as obligations of the Partnership (or in circumstances
contemplated by paragraph (b) of this Section 13.3A, assumed by the
-------------
successor partnership formed in accordance therewith) and paid or
otherwise performed in accordance with the terms thereof."
7
<PAGE>
May 17, 1999
Page 8
10. Section 13.4 is hereby amended to read as follows:
"13.4 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, including any
dissolution of the Partnership contemplated by paragraph (b) of
Section 13.3A, 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."
----------
11. Section 15.2 is hereby amended by adding at the end thereof the
following:
"(h) Notwithstanding the foregoing, the provisions of Article
-------
XIII shall take precedence over this Section 15.2 in the case of
---- ------------
dissolution of the Partnership by operation of law in the
circumstances contemplated by paragraph (b) of Section 13.3A, provided
------------- --------
that the Partner's Interest of the bankrupt Partner (other than the
Parent Loans of its Guarantor(s)) is purchased by one or more of the
other Partners pursuant to Article XIII."
------------
Coating Agreements
- ------------------
1. Article II is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, (a) the Partnership shall have no
obligation to sell to Purchaser coating services under this Agreement
during any period that Purchaser or its Subsidiary shall be in default
under its obligations under Section 6.3A of the Partnership Agreement or
------------
Section 6.12 of the Parent Agreement and (b) the Partnership may, at any
------------
time after any other Partner gives the notice of exercise of the right to
purchase the Partner's Interest of the Subsidiary of Purchaser pursuant to
Section 13.A of the Partnership Agreement, terminate by notice to Purchaser
------------
all of Purchaser's rights and obligations under this Agreement arising
after the giving of such notice of termination."
2. Section 6.1 is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, each payment by Purchaser into the Project
Lenders' Account shall be deemed to have been made fifty percent (50%)
pursuant to Section 6.2 and fifty percent (50%) pursuant to Section 6.9
----------- -----------
hereof."
3. The second sentence of Section 4.3(a) is hereby deleted and the
following added:
8
<PAGE>
May 17, 1999
Page 9
"Each Coating Fee Advance shall be paid monthly on or before the last
business day of each calendar month of the Phase-in Period, commencing
April 30, 1986 and ending September 30, 1986 in such a manner that the
payment funds are available to the Partnership not later than the end of
such month. Notwithstanding the foregoing, commencing with the Coating Fee
Advance due on July 31, 1986, Purchaser shall pay a part of each Coating
Fee Advance equal to twenty-five percent (25%) of the Periodic Financing
Costs accrued by the Partnership under the Project Lenders' Loans and the
Sublease during the particular Reporting Period directly to the Project
Lenders' Account at the same time and in the same manner specified in this
Section 4.3 for payment, in lieu of paying such part to the Partnership as
-----------
hereinabove provided."
4. Section 5.4 is hereby amended to change the references to
"Section 7.5" of the Operating Agreement to "Section 7.4" of such agreement.
----------- -----------
5. The first sentence of Section 6.2 is hereby amended by deleting
-----------
the clause "commencing with the calendar month in which the Commissioning Date
occurs" and by inserting in lieu thereof the words "commencing with the month of
October, 1986".
6. Section 6.2 is hereby further amended to add at the end thereof
the following:
"Notwithstanding the foregoing, commencing with the Fixed Portion of the
Coating Fee due on October 31, 1986, Purchaser shall pay a part of each
Fixed Portion of the Coating Fee equal to twenty-five percent (25%) of the
Periodic Financing Costs accrued by the Partnership under the Project
Lenders' Loans and the Sublease during the particular Reporting Period
directly to the Project Lenders' Account at the same time and in the same
manner specified in this Section 6.3 for payment, in lieu of paying such
-----------
part to the Partnership as hereinabove provided."
7. Section 6.9 is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, commencing with the Reporting Period ended
July 31, 1986, Purchaser shall pay a part of each Fixed Financing Costs
Payment equal to twenty-five percent (25%) of the Periodic Financing Costs
accrued by the Partnership under the Project Lenders' Loans and Sublease
during the particular Reporting Period directly to the Project Lenders'
Account at the same time and in the same manner specified in this Section
-------
6.9 for payment, in lieu of paying such part to the Partnership as
---
hereinabove provided."
9
<PAGE>
May 17, 1999
Page 10
8. Section 7.7 is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, the Partnership may assign its rights
hereunder to an agent of the Project Lenders as contemplated by to Section
-------
1 of the Security Agreement."
-
Operating Agreement
- -------------------
1. Section 2.3 is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, the Partnership may, at any time after the
giving of the notice of exercise of the right to purchase the Partner's
Interest of the Operator pursuant to Section 13.3A of the Partnership
-------------
Agreement, terminate by notice to Operator all of Operator's rights and
obligations under this Agreement arising after the giving of such notice of
termination."
2. Section 3.5 is hereby deleted and replaced with the following:
"3.5 Financing Costs. (a) Operator agrees to pay to the Project
---------------
Lenders' Account, commencing with the Reporting Period ended July 31, 1986
and at the end of each Reporting Period thereafter, all Periodic Financing
Costs accrued by the Partnership under the Project Lenders' Loans and the
Sublease during the particular Reporting Period in excess of the total of
the parts of the Fixed Financing Costs Payments and the Fixed Portions of
the Coating Fee (or, in the case of the Phase-in Period, the Coating Fee
Advances) which under Sections 6.9 and 6.2 (or Section 4.3) of the Coating
------------ --- -----------
Agreements, the Primary Purchasers are required to pay to the Project
Lenders' Account with respect to the particular Reporting Period, provided
--------
that in the event that one or both of the Primary Purchasers should fail to
pay any amount which they are so required to pay to the Project Lenders'
Account, Operator shall be responsible for and shall pay to the Project
Lenders' Account an amount equal to fifty percent (50%) of the amount which
such Primary Purchasers shall have so failed to pay thereto, and no more.
(b) In addition, Operator agrees to pay to the Partnership,
commencing with the Reporting Period ended July 31, 1986 and at the end of
each Reporting Period thereafter, (i) all Financing Costs accrued by the
Partnership with respect to the Parent Loans during the particular
Reporting Period in excess of the total of the parts of the Fixed Financing
Cost Payments and Per Ton Financing Costs Payments which under Sections 6.9
------------
and 6. are required to pay to the Partnership with respect to (A) the
----
particular Reporting Period and (B) the production of EG Product for the
10
<PAGE>
May 17, 1999
Page 11
Primary Purchasers during such Reporting Period, and (ii) an amount
equal to the excess, if any, of (A) the parts of the Fixed Portions
of the Coating Fee (or, in the case of the Phase-in Period, the
Coating Fee ____ Advances) which under Section 6.2 (or Section )
----------- ----------
of the Coating Agreements, the Primary Purchasers paid to the Project
Lenders' Account with respect to the particular Reporting Period,
over (B) _____ Per Ton Financing Costs Payments which under Section
-------
6.10 of the Coating Agreements, the Primary Purchasers paid to the
----
Partnership with respect to the production of EG Product for the
Primary Purchasers during such Reporting Period, provided that in no
--------
event shall Operator be responsible for more than fifty percent (50%)
of the total Financing Costs accrued by the Partnership with respect
to the Parent Loans during the particular Reporting Period."
3. Paragraph (a) of Section 3.8 is hereby amended to read as
follows:
"3.8 Insurance. (a) Subject to paragraph (b) hereof, Operator
---------
will purchase and maintain such insurance on its EG Facility, and the
operations conducted thereat, as is commercially reasonable in the
circumstances."
4. Section 6.3(b) is hereby amended to add at the end thereof the
following:
"Notwithstanding the foregoing, the Partnership may, at its option,
during any period that Operator shall be in default under its
obligations under Section 6.3A of the Partnership Agreement, wi___
------------
from the Variable Portion Fee Per Ton of EG Product the amount
specified in clause (viii) of Exhibit (representing the assumed
-------
profit to Operator) pay such amount to the Partners or Guarantors
whom such obligations are owed, until such time all such obligations
have been paid."
5. Section 7.3(b) is hereby amended to change the reference to
"Section 7.5" to "Section 7.4".
- ------------ -----------
6. Section 11.7 is hereby amended to add to the end thereof the
following:
"Notwithstanding the foregoing, the Partnership _____ assign its
rights hereunder to an agent of the Project Lenders as contemplated
by Section 1 of the Security Agreement."
---------
11
<PAGE>
May 17, 1999
Page 12
Construction Agreement
- ----------------------
1. Section 12 is hereby amended to add a___ thereof the
following:
"Notwithstanding the foregoing, the Partnership _____ assign its
rights hereunder to an agent of the Project Lenders as contemplated
by Section 1 of the Security Agreement."
---------
Parent Agreement
- ----------------
1. Section 2.1 is hereby amended to add _____ thereof the following
new paragraph (e):
"(e) Guaranty of Inland Industries. Inland Industries, as direct
-----------------------------
obligor and not merely ___ surety, hereby irrevocably and
unconditionally guarantees only to the Partnership, the other
Guarantors and their Subsidiaries and their respective successors and
assigns" (i) the full, _____ and complete performance and/or payment
when _____ (including but not limited to principal, ________
interest, fees, expenses, or other payment or obligation) to be
performed or paid by Inland ______, Inland EG (including any
Affiliate of Inland ____ Inland EG to whom any Partner's Interest shall
_____ sold, transferred or assigned pursuant to Section 13.2 of the
------------
Partnership Agreement) pursuant to any of the Definitive Agreements
to which either of them is a party; and (ii) the payment, upon _____
of all reasonable costs and expenses (including time to time in
effect, affecting creditors' rights 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 Inland or by
Inland EG pursuant to any of the Definitive Agreements to which
either of them is a party."
2. Article IV is hereby amended as follows:
"ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF INLAND AND INLAND INDUSTRIES
Inland Industries and Inland hereby jointly and severally
represent and warrant to Bethlehem, PFM and MSC as follows:
12
<PAGE>
May 17, 1999
Page 13
Section 4.1 Power and Authority. Each of Inland
----------- -------------------
Industries, Inland and Inland EG: (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 all aspects
of this Agreement or its participation in the Partnership),
(ii) execute and deliver each Definitive Agreement to which
it is a party, and (iii) perform and observe the terms and
conditions of such respective agreements.
Section 4.2 Due Authorization. Each of Inland
----------- -----------------
Industries, Inland and Inland EG has taken all requisite
corporate action to authorize the execution and delivery of
the Definitive Agreements and the performance and
observance of the terms and conditions thereof. Each of the
Definitive Agreements required to be executed and delivered
by Inland Industries, Inland and Inland EG has been duly
authorized, executed and delivered by Inland Industries,
Inland or Inland EG, as the case may be, and constitutes
the legal, valid and binding obligation of Inland
Industries, Inland or Inland EG, as the case may be,
enforceable in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws,
from generally and limitations on the availability of
equitable remedies), assuming the due execution and
delivery thereof by the other parties thereto.
Section 4.3 No Violation. Neither the execution or
----------- ------------
delivery of any Definitive Agreement required to be
executed and delivered by Inland Industries, Inland or
Inland EG, as the case may be, nor the consummation of the
transactions contemplated thereunder will (i) violate any
provisions of the Certificate of Incorporation or By-laws
of each of them, (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 either of them is a party
or by which either of their respective properties or assets
may be bound, in each case which would materially and
adversely affect the ability of Inland Industries, Inland
or Inland EG to perform their respective obligations under
this Agreement or any other Definitive Agreement, (iii)
result in the creation of any lien,
13
<PAGE>
May 17, 1999
Page 14
charge or encumbrance upon any of their respective
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 Inland Industries, Inland
or Inland EG to perform their respective obligations under
this Agreement or any other Definitive Agreement, (iv)
violate any judgment, order, injunction, decree, or award
of any court, administrative agency or governmental body
against, or binding upon, either of them or upon their
respective businesses or properties, or (v) to the best
knowledge of Inland Industries or Inland constitute a
violation of either of them or Inland EG of any law or
regulation of any jurisdiction insofar as such law or
regulation relates to any of them or to their respective
businesses or properties.
Section 4.4 Consents, etc. To the best knowledge of
----------- -------------
Inland Industries or Inland, no authorization, consent,
approval, license, exemption of or filing or registration
with any governmental department or agency is or will be
necessary for the execution and delivery of any of the
Definitive Agreements by Inland Industries, Inland or
Inland EG.
Section 4.5 Disclosures; No Omissions. (a) As of the
----------- -------------------------
date hereof, none of the representations and warranties of Inland
Industries and Inland in this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the representations and warranties herein, in the light of the
circumstances under which they are made, not misleading.
(b) Inland Industries and Inland acknowledge that
Inland has given to the other Guarantors information about
itself and other information consisting of projections and
estimates about the proposed construction and operation of
the EG Facility which have been included in the Definitive
Agreements or have materially affected the provisions
contained therein. A portion of such information,
projections and estimates relate to matters with respect to
which Inland lacks material information; and while Inland
Industries and Inland expressly disclaim any representation
or warranty with respect to the accuracy or completeness of
such information, projections and estimates (other than as
expressly set forth in this Agreement), Inland Industries
and Inland nevertheless do hereby represent and warrant to
14
<PAGE>
May 17, 1999
Page 15
the other Guarantors that Inland (i) has given such
information, projections and estimates to the other
Guarantors in good faith based, in the reasonable judgment
of Inland, on whatever material information is known to it
as of the date hereof and (ii) has provided to the other
Guarantors all information known to it as of the date
hereof necessary, in the reasonable judgment of Inland, to
make such information, projections and estimates not
materially misleading."
3. Article VI is hereby amended by adding at the end thereof the
following:
"Section 6.12 Certain Indemnification. If a
------------ -----------------------
"Designated Event" (as defined in Section 6.02 of each of
the Credit Agreements) relating to any Guarantor or its
Subsidiary shall occur, whether or not resulting in the
application of funds held under the Cash Collateral
Agreement or the acceleration of any Notes or Promissory
Notes, such Guarantor shall promptly reimburse the other
Guarantors and their Subsidiaries for all moneys expended
and otherwise indemnify and hold harmless the Partnership,
the other Guarantors and their respective Subsidiaries from
and against any and all loss, cost or damage, including but
not limited to reasonable attorneys' fees and expenses,
incurred by the Partnership, such other Guarantors and
their respective Subsidiaries as result of such "Designated
Event," including but not limited to any and all moneys
expended and loss, cost and damage incurred as a result of
any actions taken by such Guarantors and their Subsidiaries
pursuant to Section 6.3A of the Partnership Agreement to
------------
cure such Designated Event or to pay such accelerated Notes
and/or Promissory Notes."
4. Section 7.4 is hereby amended to provide that the address for
notices to Inland Industries shall be the same as the address for notices to
Inland.
5. Section 7.5 is hereby amended to add at the end thereof the
following:
"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 any Affiliate, unless
such Affiliate becomes jointly and severally liable under
this Agreement."
15
<PAGE>
May 17, 1999
Page 16
Appendix A
----------
1. Appendix A to the Definitive Agreements is hereby amended to add
the following:
"CABV" shall mean Creditanstalt-Bankverein, a bank incorporated
under Austrian law.
"Cash Collateral Agreement" shall mean that certain Cash
Collateral Agreement dated as of July 24, 1986, as amended from time
to time, among EGL Steel, Inland EG, PFM EG, the banks parties to the
Term Loan Agreement, CABV, Creditanstalt, as agent for the Project
Lenders, and Toledo Trust Company, as custodian of such agent.
"Credit Agreements" shall mean the Term Loan Agreement dated as
of July 23, 1986 among the Partnership, Creditanstalt, and Toledo
Trust Company (the "Term Loan Agreement") and the Amended and Restated
Credit Facility Agreement dated as of July 23, 1986 between the
Partnership and CABV (the "Restated Credit Facility Agreement").
"Designated Event" shall mean the events described in Section
6.02 of each of the Credit Agreements.
"Inland Industries" shall mean Inland Steel Industries, Inc., a
Delaware corporation.
"Periodic Financing Costs" shall mean the periodic payments of
(a) principal, interest and insurance fees with respect to the Project
Lenders' Loans and (b) 'Basic Rent' as defined in the Sublease.
"Project Lenders" shall mean Creditanstalt, CABV and Toledo
Trust Company.
"Project Lenders' Account" shall mean account no. 16-6201-00
established at Toledo Trust Company pursuant to Section 10 of the
----------
Security Agreement.
"Project Lenders' Loans" shall mean the portion of the Permanent
Financing Agreement represented by the Credit Agreements.
16
<PAGE>
May 17, 1999
Page 17
"Security Agreement" shall mean that certain Security Agreement
dated July 24, 1986, as amended from time to time, among the
Partnership, the Project Lenders, Creditanstalt, as agent, and Toledo
Trust Company, as paying agent."
"Sublease" shall mean the portion of the Permanent Financing
Agreement represented by the Sublease dated as of May 30, 1986 between
PFM and the Partnership."
2. The definition of the term "Financing Costs" is hereby amended to
add at the end thereof the following sentence
"Such term shall include all principal, interest, rent, fees and costs
payable by the Partnership under the Project Lender"s Loans, the
Sublease and the Parent Loans including, without limitation, the
insurance fees specified by Section 2.05 of the Restated Credit
Facility Agreement."
3. The definitions of the terms "Fiscal Quarter," "Fiscal Semi-
Annual Period," "Fiscal Year," "Guarantor" and "Reporting Period" are hereby
amended to read as follows:
"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 Semi-Annual Period" shall mean each of the periods of
six calendar months ended on the last day of August 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.
"Guarantor" shall mean: (a) with respect to EGL Steel,
Bethlehem; (b) with respect to Inland EG, Inland and Inland
Industries; and (c) with respect to PFM (EG), PFM and MSC.
"Reporting Period" shall mean a calendar month.
17
<PAGE>
May 17, 1999
Page 18
In order to evidence such amendments, please sign a counterpart
of this letter at the place indicated below, and return such counterpart to
the undersigned.
Very truly yours,
WALBRDIGE COATINGS, AN ILLINOIS
PARTNERSHIP
By: PRE FINISH METALS (EG)
INCORPORATED
By:____________________________
By: EGL STEEL INC.
General Partner
By:____________________________
By:____________________________
18
<PAGE>
May 17, 1999
Page 19
By: INLAND STEEL ELECTROGALVANIZING
CORPORATION
General Partner
By:____________________________
19
<PAGE>
May 17, 1999
Page 20
Agreed as of the ______ day of July, 1986
EGL STEEL INC. PRE FINISH METALS (EG) INCORPORATED
By: _____________________________ By: _______________________________
Treasurer
By: _____________________________
BETHLEHEM STEEL CORPORATION PRE FINISH METALS INCORPORATED
By: _____________________________ By: _______________________________
Vice President and Treasurer
By: _____________________________
Senior Vice President
INLAND STEEL ELECTRO- MATERIAL SCIENCES CORPORATION
GALVANIZING CORPORATION
By: _____________________________ By: ________________________________
INLAND STEEL COMPANY
By: _____________________________
INLAND STEEL INDUSTRIES, INC.
By: _____________________________
20
<PAGE>
EXHIBIT 2(j)
Further Amendments to Definitive Agreements dated as of April 23, 1992, among
EGL Steel Inc., Inland Steel Electrogalvanizing Corporation, Pre Finish
Metals (EG) Incorporated, Bethlehem Steel Corporation, Inland Steel Company,
Inland Steel Industries, Inc., Pre Finish Metals Incorporated and Material
Sciences Corporation
<PAGE>
Walbridge Coatings
Dated as of April 23, 1992
EGL Steel Inc. and Inland Steel Electrogalvanizing
Bethlehem Steel Corporation Corporation,
701 East Third Street Inland Steel Company and
Bethlehem, Pennsylvania 18015 Inland Steel Industries, Inc.
30 West Monroe Street,
Chicago, Illinois 60603
Pre Finish Metals (EG)
Incorporated,
Pre Finish Metals Incorporated and
Material Sciences Corporation
2300 East Pratt Boulevard
Elk Grove Village, Illinois 60007
Re: Amendments to Definitive Agreements
-----------------------------------
Gentlemen:
Reference is made to the Partnership Agreement dated as of August 30, 1984
by and among EGL Steel Inc., Inland Steel Electrogalvanizing Corporation and Pre
Finish Metals (EG) Incorporated, as amended, pursuant to which Walbridge
Coatings, An Illinois Partnership ("Walbridge Coatings") was formed, and to the
various Definitive Agreements, as amended, referred to therein. All capitalized
terms not defined in this letter agreement shall have the meaning specified in
the Definitive Agreements.
The following amendments are intended to formally document certain matters which
involve provisions of the agreements modified herein. Accordingly, each party to
this agreement hereby agrees to the following amendments with respect to those
agreements identified below to which they are a party:
Appendix A to the Parent Agreement, Partnership Agreement, Construction
- -----------------------------------------------------------------------
Agreement, Operating Agreement and Coating Agreements:
- ------------------------------------------------------
The following definitions are hereby added to Appendix A in proper
alphabetical order:
<PAGE>
Dated as of April 23,1992
Page 3
"Purchase Closing" shall mean the date, if any, of the closing of the sale
and transfer of Inland's Walbridge Interests (as such term is defined in
the Transfer Agreement) pursuant to the terms and conditions of the
Transfer Agreement.
"Purchase Percentage" shall mean that percentage of Inland's Walbridge
Interests (as such term is defined in the Transfer Agreement) to be
transferred to and assumed by Bethlehem and/or EGL Steel on the Purchase
Closing under the Transfer Agreement, which shall be 50%, as such
percentage may be reduced pursuant to the terms of the Transfer Agreement.
"Purchaser" shall mean a) with respect to the Inland Coating Agreement,
Inland, and b) with respect to the Bethlehem Coating Agreement, Bethlehem.
"Ramp-up Period" shall mean the period, if any, commencing on the Initial
Production Date (as such term is defined in the Transfer Agreement) and
ending on the Purchase Closing or as otherwise provided in the Transfer
Agreement.
"Transfer Agreement" shall mean the Transfer Agreement dated as of May 29,
1991, among Inland Industries, Inland, Inland EG, Bethlehem and EGL Steel,
as amended by the amendment thereto dated the date hereof (a certified copy
of which has been delivered to PFM on the date hereof, including all
exhibits and other attachments, but not including dollar amounts). All
provisions of the Transfer Agreement referred to in any of the Definitive
Agreements shall be deemed to be a part of such Definitive Agreements and
incorporated therein as though such provisions were set forth verbatim
therein.
The following definitions currently contained in Appendix A are hereby deleted
and replaced with the following:
"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 and at the time indicated below:
Prior to the Purchase Closing
-----------------------------
Partner Financial Interest
------- ------------------
EGL Steel 25%
Inland EG 25%
PFM EG 50%
<PAGE>
Dated as of April 23,1992
Page 4
On and After the Purchase Closing
---------------------------------
Partner Financial Interest
------- ------------------
EGL Steel 25% plus the
----
product of 25% times
the Purchase Percentage
Inland EG 25% minus the
-----
product of 25% times
the Purchase Percentage
PFM EG 50%
"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 and at the time indicated below:
Prior to the Purchase Closing
-----------------------------
Partner Voting Interest
------- ---------------
EGL Steel 26%
Inland EG 26%
PFM EG 48%
<PAGE>
Dated as of April 23,1992
Page 5
On or After the Purchase Closing
--------------------------------
Partner Voting Interest
- ------- ---------------
EGL Steel 26% plus the
----
product of 26% times
the Purchase Percentage
Inland EG 26% minus the
product of 26% times
the Purchase Percentage
PFM EG 48%
Partnership Agreement:
- ---------------------
Section 7.1, Annual Meeting of Partners, is hereby amended by adding the
--------------------------
following parenthetical after the words "two individuals" in the second sentence
of such Section:
"(or a fewer or greater number as provided in Section 8.1 hereof)"
Section 8.1, Members, is hereby amended by adding the following at the end
-------
of such Section:
"After the Purchase Closing, if, for any reason, Inland EG relinquishes, in
its sole and absolute discretion, one of its two positions on the
Management Committee, EGL Steel shall be entitled to appoint one additional
member to the Management Committee, provided, however, that no such
-------- -------
relinquishment or appointment shall affect or change the voting procedures
set forth in Section 8.2 hereof."
Section 13.2, Permissible Transfers, is hereby amended by adding the
---------------------
following at the end of such Section:
"(c) in connection with the Transfer Agreement.
As of the Purchase Closing, a portion equal to the Purchase Percentage
of all of Inland's, Inland EG's and Inland Industries' (if any) interests
in Walbridge and in and under the Definitive Agreements, as amended,
including, without limitation, Inland's and Inland EG's Partner's Interest,
Financial Interest, Voting Interest, rights to Production Time and residual
equity interest (if any), shall be transferred to EGL Steel and/or
Bethlehem and all
<PAGE>
Dated as of April 23,1992
Page 6
rights, liabilities and obligations corresponding thereto and arising
thereafter in the Partnership and under the Definitive Agreements shall be
transferred to and assumed by EGL Steel and/or Bethlehem, all in accordance
with the Transfer Agreement; provided, however, that the documents to
-----------------
effect such transfer and assumption (without dollar amounts) shall be
reasonably satisfactory to counsel for MSC, PFM and PFM EG. Payment
obligations for any payment period and any other calculations with respect
to a period of time which includes the Purchase Closing shall be calculated
pro-rata in proportion to the respective interests of Inland EG and EGL
Steel in the Partnership and under the Partnership Agreement before as
compared with on and after the Purchase Closing. During the Ramp-up Period,
certain percentages of Inland's rights to Production Time shall be assigned
to Bethlehem and certain rights and payment obligations corresponding
thereto shall be assumed by Bethlehem in accordance with the Transfer
Agreement. During the Ramp-up Period, Production Time assigned to Bethlehem
shall be reassigned to Inland upon the occurrence of certain events
specified in the Transfer Agreement and payment obligations corresponding
thereto shall be allocated pro rata between Inland and Bethlehem for the
month of reassignment in accordance with the Transfer Agreement."
Coating Agreement dated October 15. 1984 between Inland Steel Company and
- -------------------------------------------------------------------------
Walbridge Coatings. An Illinois Partnership:
- -------------------------------------------
The first sentence of Section 3.2, Reserved Production Time, is hereby
------------------------
amended by deleting the reference to "one-half" and substituting therefor:
"(a) until the commencement of the Ramp-up Period, one-half, (b) during the
Ramp-up Period, one-half minus the product of fifty percent times the
-----
percentage of the Purchaser's rights to Production Time to which the other
Primary Purchaser is entitled to pursuant to the Transfer Agreement, and
(c) on and after the Purchase Closing, one-half minus the product of fifty
-----
percent times the Purchase Percentage,".
The third sentence of clause (a) of Section 4.3, Fixed Cost Advances, which
-------------------
was added to Section 4.3 by the Further Amendments to Definitive Agreements
dated as of July 24, 1986, is hereby amended by deleting the words "twenty-five
percent (25%)" and substituting the following:
"(i) until the commencement of the Ramp-up Period, twenty-five
percent, (ii) during the Ramp-up Period, twenty-five percent minus the
-----
product of twenty-five percent times the percentage of the other Primary
Purchaser's rights to Production Time to which the Purchaser is entitled
pursuant to the Transfer Agreement (regardless of whether the Purchaser
used any or all of such Production Time), and
<PAGE>
Dated as of April 23,1992
Page 7
(iii) on and after the Purchase Closing, twenty-five percent minus the
-----
product of twenty-five percent times the Purchase Percentage,"
Section 5.1(a), Scheduling of Production Time, is hereby amended by adding
-----------------------------
the following at the end thereof:
"Purchaser shall be required to reduce its Production Forecasts by or
otherwise reflect therein the transfer of the amounts of any Production
Time to which the other Primary Purchaser has or will become entitled
pursuant to the Transfer Agreement during the Forecast Period."
Paragraph (a) of Section 5.2, Production Priorities, is hereby deleted and
---------------------
replaced with the following:
"(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 up to the amount of Production Time for EG
Services set forth in the timely Firm Order of Purchaser, for such month,
provided that (a) Purchaser's right of priority for EG Services shall be
limited to (x) until the commencement of the Ramp-up Period, one-half, (y)
during the Ramp-up Period, one-half minus the product of fifty percent
-----
times the percentage of the Purchaser's rights to Production Time to which
the other Primary Purchaser is entitled pursuant to the Transfer Agreement,
and (z) on and after the Purchase Closing, one-half minus the product of
-----
fifty percent times the Purchase Percentage, of all available Production
Time during such month and (b) Purchaser shall have a right of first
refusal for additional EG Services for all or part of the available
Production Time not reserved by the timely Firm Order for EG Services of
the other Primary Purchaser under its Coating Agreement. To the extent that
the Firm Orders of the Primary Purchasers for EG Product do not exceed the
available Production Time of the EG Facility, operator shall give priority
to purchase orders of Purchaser for Z Services up to the amount of
Production Time for Z 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 Z Services in the aggregate shall be limited to (x)
until the commencement of the Ramp-up Period, one-half, (y) during the
Ramp-up Period, one-half minus the product of fifty percent times the
-----
percentage of the Purchaser's rights to Production Time to which the other
Primary Purchaser is entitled pursuant to the Transfer Agreement, and (z)
on and after the Purchase Closing, one-half minus the product of fifty
-----
percent times the Purchase Percentage, of all available Production Time
during such month and (ii) Purchaser shall have a right of first refusal
for additional Z Services for all or part of the
<PAGE>
Dated as of April 23,1992
Page 8
available Production Time not reserved by the timely Firm Order for Z
Services of the other Primary Purchaser under its Coating Agreement. Such
rights of first refusal shall be exercisable by Purchaser by giving notice
to the Partnership not less than five days after receipt of the Production
Forecast of the other Primary Purchaser for such month. Each such right of
first refusal shall expire upon the expiration of such five-day period.
Purchaser acknowledges that the Coating Agreement with the other Primary
Purchaser contains similar rights of first refusal for the benefit of the
other Primary Purchaser with respect to available Production Time not
reserved by the timely Firm Order of Purchaser."
The first sentences of Section 5.3, Reduced Production and Yield Loss
---------------------------------
Rebates, and of Section 5.4, Rebates of Unabsorbed Costs, are hereby amended by
- ------- ---------------------------
deleting the words "one-half of such amount to each of them" and substituting
the following:
"(a) in connection with periods prior to the commencement of the Ramp-up
Period, one-half of such amount to each of them, (b) in connection with
periods during the Ramp-up Period, one-half minus the product of fifty
-----
percent times the percentage of the Purchaser's rights to Production Time
to which the other Primary Purchaser is entitled pursuant to the Transfer
Agreement to the Purchaser, and one-half minus the product of fifty percent
-----
times the percentage of the Purchaser's rights to Production Time to which
the other Primary Purchaser is entitled pursuant to the Transfer Agreement
to the other Primary Purchaser (in each case regardless of whether the
other Primary Purchaser uses any or all of such Production Time), and (c)
in connection with periods on and after the Purchase Closing, one-half
minus the product of fifty percent times the Purchase Percentage to the
-----
Purchaser and one-half plus the product of fifty percent times the Purchase
----
Percentage to the other Primary Purchaser."
The first sentence of Section 6.2, EG Fixed Portion, is hereby deleted and
----------------
replaced with the following:
"The Fixed Portion of the Coating Fee shall be (a) until the commencement
of the Ramp-up Period, fifty percent, (b) during the Ramp-up Period, fifty
percent minus the Product of fifty percent times the percentage of the
-----
Purchaser's rights to Production Time to which the other Primary Purchaser
is entitled pursuant to the Transfer Agreement (regardless of whether the
other Primary Purchaser uses any or all of such Production Time), and (c)
on and after the Purchase Closing, fifty percent minus the product of fifty
-----
percent times the Purchase Percentage, of the Fixed Portion of the
Operator's Fee provided in Section 6.2 of the Operating Agreement
-----------
<PAGE>
Dated as of April 23,1992
Page 9
(including without limitation any adjustments thereto pursuant to Section
-------
6.5 of the Operating Agreement). The Fixed Portion of the Coating Fee shall
---
be payable to the Partnership by Purchaser monthly on or before the last
business day of each calendar month in such a manner that the payment funds
are available to the Partnership not later than the end of such month."
The second sentence of Section 6.2, EG Fixed Portion, is hereby amended by
----------------
deleting the reference to "Section 6.2(b)(i) of the Operating Agreement" and
-----------------
substituting therefor "Section 6.2(b) of the Operating Agreement."
--------------
The last sentences of Section 6.2, EG Fixed Portion, and of Section 6.9,
----------------
Fixed Financing Costs Payments, which were added to Sections 6.2 and 6.9 by the
- --------------------------------
Further Amendments to Definitive Agreements dated as of July 24, 1986, are
hereby amended by deleting the words "twenty-five percent (25%)" and
substituting the following:
"(a) until the commencement of the Ramp-up Period, twenty-five
percent, (b) during the Ramp-up Period, twenty-five percent minus the
-----
product of twenty-five percent times the percentage of the Purchaser's
rights to Production Time to which the other Primary Purchaser is entitled
pursuant to the Transfer Agreement (regard less of whether the other
Primary Purchaser uses any or all of such Production Time), and (c) on and
after the Purchase Closing, twenty-five percent minus the product of
-----
twenty-five percent times the Purchase Percentage,"
The first sentence of Section 6.9, Fixed Financing Costs Payments, is
------------------------------
hereby deleted and replaced with the following:
"During each Reporting Period of each Financing Costs Payment Period,
Purchaser shall pay to the Partnership a sum (the "Fixed Financing Costs
Payment") equal to (a) until the commencement of the Ramp-up Period,
twenty-five percent, (b) during the Ramp-up Period, twenty-five percent
minus the product of twenty-five percent times the percentage of the
-----
Purchaser's rights to Production Time to which the other Primary Purchaser
is entitled pursuant to the Transfer Agreement (regardless of whether the
other Primary Purchaser uses any or all of such Production Time), and (c)
on and after the Purchase Closing, twenty five percent minus the product of
twenty-five percent times the Purchase Percentage, of the Financing Costs
incurred by the Partnership for the particular Financing Costs Payment
Period under the Permanent Financing Agreement multiplied by the number of
days during such Reporting Period and divided by the number of days between
the date of the
<PAGE>
Dated as of April 23,1992
Page 10
immediately preceding payment of Permanent Financing and the due date of
the next forthcoming payment of Permanent Financing."
Clause (A) of Section 6.10, Per Ton Financing Costs Payments, is hereby
--------------------------------
amended by deleting the reference to "fifty percent" and substituting therefor:
"(x) until the commencement of the Ramp-up Period, fifty percent, (y)
during the Ramp-up Period, fifty percent minus the product of fifty percent
-----
times the percentage of the Purchaser's rights to Production Time to which
the other Primary Purchaser is entitled pursuant to the Transfer Agreement
(regardless of whether the other Primary Purchaser uses any or all of such
Production Time), and (z) on and after the Purchase Closing, fifty percent
minus the product of fifty percent times the Purchase Percentage,"
-----
Section 7.7, Assignment, is hereby amended by adding the following at the
----------
end thereof:
"As of the Purchase Closing a portion equal to the Purchase Percentage of
Inland's right to Production Time under this Agreement shall be transferred
to Bethlehem and all rights, liabilities and obligations corresponding
thereto and arising thereafter in the Partnership and under this Agreement
shall be transferred to and assumed by Bethlehem. Payment obligations for
any payment period and any other calculations with respect to a period of
time which includes the Purchase Closing shall be calculated pro-rata in
proportion to the respective interests of Inland and Bethlehem under this
Agreement before as compared with on and after the Purchase Closing. During
the Ramp-up Period, certain percentages of Inland's rights to Production
Time shall be assigned to Bethlehem and certain rights and payment
obligations corresponding thereto shall be assumed by Bethlehem in
accordance with the Transfer Agreement. During the Ramp-up Period,
Production Time assigned to Bethlehem shall be reassigned to Inland upon
the occurrence of certain events specified in the Transfer Agreement and
payment obligations corresponding thereto shall be assumed by Inland. If
such reassignment occurs on other than the first day of any month, payment
obligations corresponding to reassigned Production Time shall be allocated
pro rata between Inland and Bethlehem for the month of reassignment in
accordance with the Transfer Agreement. Inland and Bethlehem shall promptly
notify the Partnership of any assignment or reassignment of Production Time
and any payment obligations to be assumed by Bethlehem and/or Inland
corresponding thereto."
<PAGE>
Dated as of April 23,1992
Page 11
Coating Agreement dated October 15, 1984 between Bethlehem Steel Corporation and
- --------------------------------------------------------------------------------
Walbridge Coatings, An Illinois Partnership:
- -------------------------------------------
The first sentence of Section 3.2, Reserved Production Time, is hereby
--------------------------
amended by deleting the reference to "one-half" and substituting therefor:
"(a) until the commencement of the Ramp-up Period, one-half, (b) during the
Ramp-up Period, one-half plus the product of fifty percent times the
----
percentage of the other Primary Purchaser's rights to Production Time to
which the Purchaser is entitled pursuant to the Transfer Agreement, and (c)
on and after the Purchase Closing, one-half plus the product of fifty
----
percent times the Purchase Percentage,".
The third sentence of clause (a) of Section 4.3, Fixed Cost Advances, which
-------------------
was added to Section 4.3 by the Further Amendments to Definitive Agreements
dated as of July 24, 1986, is hereby amended by deleting the words "twenty-five
percent (25%)" and substituting the following:
"(i) until the commencement of the Ramp-up Period, twenty-five
percent, (ii) during the Ramp-up Period, twenty-five percent plus the
----
product of twenty-five percent times the percentage of the other Primary
Purchaser's rights to Production Time to which the Purchaser is entitled
pursuant to the Transfer Agreement (regardless of whether the Purchaser
used any or all of such Production Time), and (iii) on and after the
Purchase Closing, twenty-five percent Plus the product of twenty-five
----
percent times the Purchase Percentage,"
Section 5.1(a), Scheduling of Production Time, is hereby amended by adding
-----------------------------
the following at the end thereof:
"Purchaser shall be entitled, but shall not be required, to include in its
Production Forecasts any Production Time requirements to which it has or
will become entitled pursuant to the Transfer Agreement during the Forecast
Period."
Paragraph (a) of Section 5.2, Production Priorities, is hereby deleted and
---------------------
replaced with the following:
"(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 up to the amount of Production Time for EG Services set
forth in the timely Firm Order of Purchaser for such month, provided that
(a) Purchaser's right of priority for EG Services shall be limited to (x)
until the commencement of the Ramp-up Period, one-half, (y) during the
Ramp-up Period, one-half plus the product of fifty percent
----
<PAGE>
Dated as of April 23,1992
Page 12
times the percentage of the other Primary Purchaser's rights to Production
Time to which the Purchaser is entitled pursuant to the Transfer Agreement,
and (z) on and after the Purchase Closing, one-half plus the product of
----
fifty percent times the Purchase Percentage, of all available Production
Time during such month and (b) Purchaser shall have a right of first
refusal for additional EG Services for all or part of the available
Production Time not reserved by the timely Firm Order for EG Services of
the other Primary Purchaser under its Coating Agreement. To the extent that
the Firm Orders of the Primary Purchasers for EG Product do not exceed the
available Production Time of the EG Facility, Operator shall give priority
to purchase orders of Purchaser for Z Services up to the amount of
Production Time for Z 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 Z Services in the aggregate shall be limited to (x)
until the commencement of the Ramp-up Period, one-half, (y) during the
Ramp-up Period, one-half Plus the product of fifty percent times the
----
percentage of the other Primary Purchaser's rights to Production Time to
which the Purchaser is entitled pursuant to the Transfer Agreement, and (z)
on and after the Purchase Closing, one-half plus the product of fifty
----
percent times the Purchase Percentage, of all available Production Time
during such month and (ii) Purchaser shall have a right of first refusal
for additional Z Services for all or part of the available Production Time
not reserved by the timely Firm Order for Z Services of the other Primary
Purchaser under its Coating Agreement. Such rights of first refusal shall
be exercisable by Purchaser by giving notice to the Partnership not less
than five days after receipt of the Production Forecast of the other
Primary Purchaser for such month. Each such right of first refusal shall
expire upon the expiration of such five-day period. Purchaser acknowledges
that the Coating Agreement with the other Primary Purchaser contains
similar rights of first refusal for the benefit of the other Primary
Purchaser with respect to available Production Time not reserved by the
timely Firm Order of Purchaser."
The first sentences of Section 5.3, Reduced Production and Yield Loss
---------------------------------
Rebates, and of Section 5.4, Rebates of Unabsorbed Costs, are hereby amended by
- ------- ---------------------------
deleting the words "one-half of such amount to each of them" and substituting
the following:
"(a) in connection with periods prior to the commencement of the Ramp-up
Period, one-half of such amount to each of them, (b) in connection with
periods during the Ramp-up Period, one-half Plus the product of fifty
----
percent times the percentage of the other Primary Purchaser's rights to
Production Time to which the Purchaser is entitled pursuant to the Transfer
Agreement to the Purchaser and one-half minus the product of fifty percent
-----
times the percentage of the other Primary Purchaser's rights
<PAGE>
Dated as of April 23, 1992
Page 13
to Production Time to which the Purchaser is entitled pursuant to the
Transfer Agree ment to the other Primary Purchaser (in each case regardless
of whether the Purchaser uses any or all of such Production Time), and (c)
in connection with periods on and after the Purchase Closing, one-half plus
----
the product of fifty percent times the Purchase Percentage to the Purchaser
and one-half minus the product of fifty percent times the Purchase
-----
Percentage to the other Primary Purchaser."
The first sentence of Section 6.2, EG Fixed Portion, is hereby deleted and
----------------
replaced with the following:
"The Fixed Portion of the Coating Fee shall be (a) until the commencement
of the Ramp-up Period, fifty percent, (b) during the Ramp-up Period, fifty
percent plus the product of fifty percent times the percentage of the other
----
Primary Purchaser's rights to Production Time to which the Purchaser is
entitled pursuant to the Transfer Agreement (regardless of whether the
Purchaser uses any or all of such Production Time), and (c) on and after
the Purchase Closing, fifty percent plus the product of fifty percent times
the Purchase Percentage, of the Fixed Portion of the operator's Fee
provided in Section 6.2 of the Operating Agreement (including without
-----------
limitation any adjustments thereto pursuant to Section 6.5 of the Operating
-----------
Agreement). The Fixed Portion of the Coating Fee shall be payable to the
Partnership by Purchaser monthly on or before the last business day of each
calendar month, in such a manner that the payment funds are available to
the Partnership not later than the end of such month."
The second sentence of Section 6.2, EG Fixed Portion, is hereby amended by
----------------
deleting the reference to "Section 6.2(b)(i) of the Operating Agreement" and
------------------
substituting therefor "Section 6.2(b) of the Operating Agreement."
--------------
The last sentences of Section 6.2, EG Fixed Portion, and of Section 6.9,
-----------------
Fixed Financing Costs Payments, which were added to Sections 6.2 and 6.9 by the
- ------------------------------
Further Amendments to Definitive Agreements dated as of July 24, 1986, are
hereby amended by deleting the words "twenty-five percent (25%)" and
substituting the following:
"(a) until the commencement of the Ramp-up Period, twenty-five percent, (b)
during the Ramp-up Period, twenty-five percent plus the product of twenty-
----
five percent times the percentage of the other Primary Purchaser's rights
to Production Time to which the Purchaser is entitled pursuant to the
Transfer Agreement (regardless of whether the Purchaser used any or all of
such Production Time), and (c) on and after
<PAGE>
Dated as of April 23, 1992
Page 14
the Purchase Closing, twenty-five percent Plus the product of twenty-five
----
percent times the Purchase Percentage,"
The first sentence of Section 6.9, Fixed Financing Costs Payments, is
------------------------------
hereby deleted and replaced with the following:
"During each Reporting Period of each Financing Costs Payment Period,
Purchaser shall pay to the Partnership a sum (the "Fixed Financing Costs
Payment") equal to (a) until the commencement of the Ramp-up Period,
twenty-five percent, (b) during the Ramp-up Period, twenty-five percent
plus the product of twenty-five percent times the percentage of the other
----
Primary Purchaser's rights to Production Time to which the Purchaser, is
entitled pursuant to the Transfer Agreement (regardless of whether the
Purchaser uses any or all of such Production Time), and (c) on and after
the Purchase Closing, twenty-five percent plus the product of twenty-five
----
percent times the Purchase Percentage, of the Financing Costs incurred by
the Partnership for the particular Financing Costs Payment Period under the
Permanent Financing Agreement multiplied by the number of days during such
Reporting Period and divided by the number of days between the date of the
immediately preceding payment of Permanent Financing and the due date of
the next forthcoming payment of Permanent Financing."
Clause (A) of Section 6.10, Per Ton Financing Costs Payments, is hereby
--------------------------------
amended by deleting the reference to "fifty percent" and substituting therefor:
"(x) until the commencement of the Ramp-up Period, fifty percent, (y)
during the Ramp-up Period, fifty percent plus the product of fifty percent
----
times the percentage of the other Primary Purchaser's rights to Production
Time to which the Purchaser is entitled pursuant to the Transfer Agreement
(regardless of whether the Purchaser uses any or all of such Production
Time), and (z) on and after the Purchase Closing, fifty percent plus the
----
product of fifty percent times the Purchase Percentage,".
Section 7.7, Assignment, is hereby amended by adding the following at the
----------
end thereof:
"As of the Purchase Closing a portion equal to the Purchase Percentage of
Inland's right to Production Time arising under the Coating Agreement dated
the date hereof between Inland and the Partnership shall be transferred to
Bethlehem and all rights, liabilities and obligations corresponding thereto
and arising thereafter in the Partnership and under such Coating Agreement
shall be transferred to' and assumed by Bethlehem. Payment obligations for
any payment period and any other
<PAGE>
Dated as of April 23, 1992
Page 15
calculations with respect to a period of time which includes the Purchase
Closing shall be calculated pro-rata in proportion to the respective
interests of Inland and Bethlehem under such Coating Agreement before as
compared with on and after the Purchase Closing. During the Ramp-up Period,
certain percentages of Inland's rights to Production Time shall be assigned
to Bethlehem and certain rights and payment obligations corresponding
thereto shall be assumed by Bethlehem in accordance with the Transfer
Agreement. During the Ramp-up Period, Production Time assigned to Bethlehem
shall be reassigned to Inland upon the occurrence of certain events
specified in the Transfer Agreement and payment obligations corresponding
thereto shall be assumed by Inland. If such reassignment occurs on other
than the first day of any month, payment obligations corresponding to
reassigned Production Time shall be allocated pro rata between Inland and
Bethlehem for the month of reassignment in accordance with the Transfer
Agreement. Inland and Bethlehem shall promptly notify the Partnership of
any assignment or reassignment of Production Time and any payment
obligations to be assumed by Bethlehem and/or Inland corresponding
thereto."
Operating Agreement:
- -------------------
Section 11.7, Assignment, is amended by adding the following at the end
----------
thereof:
"As of the Purchase Closing a portion equal to the Purchase Percentage of
Inland's, Inland EG's and Inland Industries' (if any) rights, liabilities
and obligations arising thereafter in the Partnership and under this
Agreement shall be transferred to and assumed by Bethlehem and EGL Steel.
If the Purchase Closing occurs on other than the first day of any month,
payment obligations corresponding to Production Time assigned pursuant to
the Purchase Closing shall be allocated pro rata between Inland and
Bethlehem in accordance with the number of days Inland and Bethlehem are
entitled to such Production Time during the month in which such Purchase
Closing occurs. Payment obligations for any period and any other
calculations with respect to a period of time which includes the Purchase
Closing shall be calculated pro-rata in proportion to the respective
interests of the Inland parties and the Bethlehem parties under this
Agreement before as compared with on and after the Purchase Closing. During
the Ramp-up Period, certain percentages of Inland's rights to Production
Time shall be assigned to Bethlehem and certain rights and payment
obligations corresponding thereto shall be assumed by Bethlehem in
accordance with the Transfer Agreement. During the Ramp-up Period,
Production Time assigned to Bethlehem shall be reassigned to Inland upon
the occurrence of certain events specified in the Transfer Agreement and
payment obligations corresponding thereto
<PAGE>
Dated as of April 23, 1992
Page 16
shall be assumed by Inland. If such reassignment occurs on other than the
first day of any month, payment obligations corresponding to reassigned
Production Time shall be allocated pro rata between Inland and Bethlehem
for the month of reassignment in accordance with the Transfer Agreement.
Upon notification by Bethlehem and Inland of any assignment or reassignment
of Production Time, the Partnership shall promptly notify PFM EG of such
assignment or reassignment and any payment obligations to be assumed by
Bethlehem and/or Inland corresponding thereto."
Section 7.3(c), Allocation of Remaining Revenues, is hereby amended by
--------------------------------
adding the following at the end thereof:
"in connection with periods prior to the Ramp-up Period or after Purchase
Closing, and in proportion to their respective rights to Production Time
during the Ramp-up Period."
Exhibit 4, Items Included in Fixed Portion of Operator's Fee, is hereby
-------------------------------------------------
amended by adding the following at the end thereof:
"(iii) those extraordinary shutdown fees or such other fees or costs which
in each case have been or are unanimously approved in writing by the
Management Committee to be included in the Fixed Portion of the Operator's
Fee."
Exhibit 5, Items Included in Variable Portion of Operator's Fee, is hereby
----------------------------------------------------
amended by adding the following at the end thereof:
"(ix) those surcharges or other fees or costs which in each case have been
or are unanimously approved in writing by the Management Committee to be
included in the Variable Portion Fee per Ton of EG Product."
In order to clarify the grammar of the first clause of section (a) of
Exhibit 6, Productivity and Quality Standards, and without implying any
----------------------------------
substantive change to such clause, section or Exhibit, or any effect upon prior
waivers of or amendments to such clause, section or Exhibit, such clause is
hereby deleted and replaced with the following restatement:
"(a) The Partnership shall cause the Primary Purchasers to order EG
Services and Z 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. To the extent that any purchase orders
from Primary Purchasers for EG Services to be
<PAGE>
Dated as of April 23, 1992
Page 17
rendered during any unit of time, converted to Standard Tons, exceed the
number of Tons of Reference Strip included in the Design Capacity of the EG
Facility for such unit of time, divided by 965, such Purchase Orders shall
be disregarded for purposes of this Exhibit 6. Subject to the foregoing and
---------
to Paragraph (d) of this Exhibit 6, if during the Normal Operations
------------- ---------
Period:"
All other terms and conditions of the Definitive Agreements not amended
hereby shall remain in full force and effect.
Anything in these Amendments to Definitive Agreements to the contrary
notwithstanding, Inland shall continue to pay the part of the Fixed Portion of
the Coating Fee and Fixed Financing costs Payments which shall have been the
responsibility of Bethlehem and EGL Steel as a result of any assignment of
Production Time to Bethlehem and EGL Steel under Section 3.1 of the Transfer
Agreement for all periods until the earlier of the date of the Purchase Closing
or the date of the return of such Production Time to Inland pursuant to Section
6.1 of the Transfer Agreement or otherwise, provided, however, that Bethlehem
-------- -------
and EGL steel shall reimburse Inland on the earlier of such dates for all
amounts which are the responsibility of Bethlehem and EGL Steel under Section
3.1 or Section 6.1 of the Transfer Agreement but which shall have been paid by
Inland in accordance with this sentence. Anything in these Amendments to
Definitive Agreements to the contrary notwithstanding, except as provided below,
all of these Amendments to Definitive Agreements shall become null and void in
the event that the Inland Production Time which was theretofore assigned to
Bethlehem and EGL Steel under Section 3.1 of the Transfer Agreement shall be
returned to Inland in accordance with Section 6.1 of the Transfer Agreement or
otherwise; provided, further, that these Amendments to Definitive Agreements
-----------------
shall be automatically reinstated in the event that Bethlehem and EGL Steel
shall require a Purchase Closing to occur under Section 6.2 of the Transfer
Agree ment. Bethlehem and EGL Steel shall, however, remain liable for payment
of the Fixed Portion of the Coating Fee and Fixed Financing Costs Payments in
accordance with the first sentence of this paragraph and, with respect to
Production Time actually used by Bethlehem and EGL Steel, the Variable Portions
of the Coating Fee and Per Ton Financing Cost Payments of Production Time, which
had been assigned to Bethlehem and EGL Steel under the Transfer Agreement,
through the date of the return of any such Production Time to Inland; provided
--------
that to the extent Production Time is reassigned to Inland pursuant to the terms
of Section 6.1 on other than the first day of any month, the Fixed Portion of
the Coating Fee and Fixed Financing Costs Payments associated with such
reassigned Production Time shall be allocated pro rata between Inland and
--- ----
Bethlehem and EGL Steel in accordance with the number of days Inland and
Bethlehem are entitled to such reassigned Production Time during the month in
which such reassignment of Production Time occurred.
Bethlehem, EGL Steel, Inland Industries, Inland and Inland EG agree that
the differences between these Amendments to Definitive Agreements and the form
of such amendments attached
<PAGE>
Dated as of April 23, 1992
Page 18
as Exhibit F to the Transfer Agreement are all "non-material changes" necessary
to consummate the transactions contemplated by the Transfer Agreement for
purposes of Sections 8.2 and 8.3 of the Transfer Agreement.
<PAGE>
Dated as of April 23, 1992
Page 19
In order to evidence such amendments, please sign two counterpart copies of
this letter at the location indicated below, and return such counterparts to the
Walbridge headquarters offices.
Very truly yours,
WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP
By: PRE FINISH METALS (EG)
INCORPORATED
General Partner
By:_______________________________
By: EGL STEEL INC.
General Partner
By:_______________________________
By: INLAND STEEL ELECTROGALVANIZING
CORPORATION
General Partner
By:_______________________________
<PAGE>
Dated as of April 23, 1992
Page 18
In order to evidence such amendments, please sign two counterpart copies of
this letter at the location indicated below, and return such counterparts to the
Walbridge headquarters offices.
Very truly yours,
WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP
By: PRE FINISH METALS (EG)
INCORPORATED
General Partner
By:_______________________________
By: EGL STEEL INC.
General Partner
By:_______________________________
By: INLAND STEEL ELECTROGALVANIZING
CORPORATION
General Partner
By:_______________________________
<PAGE>
Dated as of April 23, 1992
Page 18
In order to evidence such amendments, please sign two counterpart copies of
this letter at the location indicated below, and return such counterparts to the
Walbridge headquarters offices.
Very truly yours,
WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP
By: PRE FINISH METALS (EG)
INCORPORATED
General Partner
By:_______________________________
By: EGL STEEL INC.
General Partner
By:_______________________________
By: INLAND STEEL ELECTROGALVANIZING
CORPORATION
General Partner
By:_______________________________
<PAGE>
Dated as of April 23, 1992
Page 19
Agreed as of the 23/rd/ day
of April, 1992.
EGL STEEL INC.
By:_______________________________
BETHLEHEM STEEL CORPORATION
By:_______________________________
INLAND STEEL ELECTROGALVANIZING
CORPORATION
By:_______________________________
INLAND STEEL COMPANY
By:_______________________________
INLAND STEEL INDUSTRIES, INC.
By:_______________________________
PRE FINISH METALS (EG) INCORPORATED
By:_______________________________
PRE FINISH METALS INCORPORATED
By:_______________________________
MATERIAL SCIENCES CORPORATION
By:_______________________________
<PAGE>
Dated as of April 23, 1992
Page 19
Agreed as of the 23/rd/ day
of April, 1992.
EGL STEEL INC.
By:_______________________________
BETHLEHEM STEEL CORPORATION
By:_______________________________
INLAND STEEL ELECTROGALVANIZING
CORPORATION
By:_______________________________
INLAND STEEL COMPANY
By:_______________________________
INLAND STEEL INDUSTRIES, INC.
By:_______________________________
PRE FINISH METALS (EG) INCORPORATED
By:_______________________________
PRE FINISH METALS INCORPORATED
By:_______________________________
MATERIAL SCIENCES CORPORATION
By:_______________________________
<PAGE>
Dated as of April 23, 1992
Page 19
Agreed as of the 23/rd/ day
of April, 1992.
EGL STEEL INC.
By:_______________________________
BETHLEHEM STEEL CORPORATION
By:_______________________________
INLAND STEEL ELECTROGALVANIZING
CORPORATION
By:_______________________________
INLAND STEEL COMPANY
By:_______________________________
INLAND STEEL INDUSTRIES, INC.
By:_______________________________
PRE FINISH METALS (EG) INCORPORATED
By:_______________________________
PRE FINISH METALS INCORPORATED
By:_______________________________
MATERIAL SCIENCES CORPORATION
By:_______________________________
<PAGE>
EXHIBIT NO. 10(c)
Material Sciences Corporation
Employee Stock Purchase Plan
<PAGE>
MATERIAL SCIENCES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The Purpose of this Employee Stock Purchase Plan (the
"Plan") is to provide employees of Material Sciences Corporation (the "Company")
and its subsidiaries (as defined in Section 14 hereof) (collectively, the
"Participating Companies") with added incentive to continue in the employment of
the Participating Companies and to encourage increased efforts to promote the
best interests of the Participating Companies by permitting eligible employees
to purchase shares of common stock of the Company (the "Stock"), having a par
value of $.02 per share, at a price less than the then current market price
thereof. The Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Eligibility. Participation under the Plan shall be open to all
active employees of the Participating Companies except (a) employees whose
customary employment by the Participating Companies is 20 hours or less per
week; and (b) employees whose customary employment by the Participating
Companies is for not more than five months in any calendar year. No right to
purchase Stock shall accrue under the Plan in favor of any person who is not an
eligible employee, and no eligible employee shall acquire such right to purchase
Stock (i) if, immediately after receiving such right, such employee would own 5%
or more of the total combined voting power or value of all classes of stock of
the Company or any subsidiary corporation (as defined in Section 424 of the
Code) , taking into account in determining stock ownership any stock
attributable to such employee under Section 424 of the Code; or (ii) if such
purchase would permit such employee's rights to purchase stock under all
employee stock purchase plans from time to time in effect of the Company and its
subsidiary corporations (as so defined) to accrue at a rate which exceeds
$25,000 of fair market value of such stock (determined at the time such option
is granted) for each calendar year, all determined in the manner provided by
Section 423 of the Code.
3. Effective Date of Plan. The Plan shall become effective on such
date as may be specified by the Board of Directors of the Company (the "Board"),
provided that in no event shall the Plan become effective unless within 12
months of the date of its adoption by the Board it has been approved at a duly
called meeting of the shareholders of the Company.
4. Participation and Purchase of Shares. Each eligible employee
shall be entitled to become a participant in the Plan (a "participant") during
either of two one-month enrollment periods in each fiscal year of the Company.
Unless otherwise determined by the Board or a committee of directors not
eligible to participate in the Plan (the "Committee") designated by the Board to
administer the Plan, such enrollment periods shall be the months of February and
August. To become a participant, an eligible employee shall execute and deliver
to his employer a payroll deduction authorization card (the "Authorization")
which shall become effective on the first day following the end of the
enrollment period. Each Authorization shall direct that payroll deductions be
made by the employee's employer for each payroll period ending during the period
of such employee's participation in the Plan and shall specify the amount of
such payroll deduction
<PAGE>
as a percentage of the participant's gross earnings from the Participating
Companies for such period (before withholding or other deductions) that is not
less than 2 percent or greater than 5 percent.
Payroll deductions shall be made for each participant in accordance
with his Authorization until his participation in the Plan terminates, his
Authorization is revised or the Plan terminates, all as hereinafter Provided.
During any enrollment period, a participant may change the amount of
his payroll deductions. No other changes shall be permitted except that a
participant may elect to terminate his participation in the Plan as hereinafter
provided. All such permitted changes shall be effected by filing a new
Authorization in the manner described in the first paragraph of this Section 4.
Payroll deductions made pursuant to the Plan shall be credited to the
purchase account of the participant in question. At the end of each purchase
period (as hereinafter defined), the amount in each participant's account,
including any interest thereon as provided in Section 7 hereof, shall be applied
to the purchase of the maximum number of whole shares of Stock, not in excess of
500, which can be purchased with such amount, determined by dividing such amount
by the Purchase Price (as hereinafter defined) for such purchase period. Any
amount remaining in the purchase account after the purchase of such shares shall
remain credited to such account and shall be carried over to the following
purchase period.
The first purchase period under the Plan shall commence on March 1,
1985 and shall end on August 31, 1985. So long as the Plan remains in effect,
new 6 month purchase periods shall commence on each succeeding September 1 and
March 1.
5. Purchase Price. The purchase price (the "Purchase Price") per
share of Stock hereunder for any purchase period shall be 85% of the lesser of
(a) the fair market value of a share of Stock on the first day of such purchase
period, and (b) the fair market value of a share of Stock on the last day of
such purchase period, provided that if such percentage results in a fraction of
one cent, the Purchase Price shall be increased to the next higher full cent.
6. Issuance of Shares and Delivery of Certificates. To the extent
that the Company's obligations hereunder are to be satisfied by the issuance of
Stock, shares which each participant has purchased for each purchase period
shall be issued at the time they are purchased. Certificates representing the
shares purchased shall be delivered to the participant within a reasonable time
after the end of each purchase period. Notwithstanding any other provision of
the Plan, each participant who is an "officer" or "director" of the Company (as
such terms are used in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act")) shall, prior to such participant's receipt
of any certificates representing shares (other than as contemplated in the
second paragraph of Section 8 hereof in the event of such participant's death,
retirement, disability or termination of employment) , either (i) provide a
written representation to the Company that the shares so distributed will be
held by such participant for at least six months prior to sale or other
disposition or (ii) terminate his participation in the Plan for a period of at
least
-2-
<PAGE>
six months in accordance with Section 8 hereof. Notwithstanding the foregoing or
any other provision of the Plan, each participant who is an officer or director
of the Company (as such terms are used in Rule 16b-3 promulgated under the 1934
Act) may not sell or dispose of shares of stock purchased hereunder for a
purchase period until at least six months after the last day of such purchase
period.
7. Interest on Purchase Accounts. Interest shall accrue during each
purchase period with respect to amounts credited from time to time to a purchase
account of a participant at a rate equal to the rate paid on the first business
day of such purchase period on United States Government Treasury Bills having
ninety-day maturities less two percentage points. After the close of each
purchase period, a report will be made to each participant stating the entries
made to his purchase account, including the interest accrued and the number of
shares purchased and the applicable Purchase Price.
8. Termination of Participation. A participant may at any time
elect to terminate his participation in the Plan, except that no such
termination shall be effective as to any purchase period unless such election is
received by one of the Participating Companies in writing prior to the last
business day of such period. A participant may also at any time request in
writing payment to him of the full amount to his credit in his purchase account,
including any interest thereon as provided in Section 7 hereof, without thereby
terminating his participation in the Plan, provided that no such request shall
be effective as to any purchase period unless received prior to the last
business day of such period. Upon any such termination or request, the employer
of such participant shall promptly refund to him the amount to his credit in his
purchase account. Notwithstanding any other provision of the Plan, if an
officer or director of the Company (as such terms are used in Rule 16b-3
promulgated under the 1934 Act) terminates his participation in the Plan, he
shall not be entitled to again become a participant in the Plan until the first
enrollment period which ends on or after six months after such termination
becomes effective.
In the event any participant shall die, terminate his employment with
the Participating Companies for any reason or otherwise cease to be eligible to
participate in the Plan, his participation in the Plan shall immediately
terminate, and the amount to his credit in his purchase account, including any
interest thereon as provided in Section 7 hereof, on the date of such
termination, together with certificate(s) for the full shares of Stock held for
his benefit and a cash payment in lieu of any fractional share, shall be
returned to him or his legal representatives promptly.
9. Termination or Amendment of the Plan. The Company, by action of
the Board, may terminate the Plan as of the beginning of any purchase period.
Notice of termination shall be given to all participants, but any failure to
give such notice shall not impair the effectiveness of the termination.
Without any action being required, the Plan will terminate whenever
the maximum number of shares of Stock to be sold under the Plan (as hereinafter
provided in Section 13) has been purchased, but such termination shall not
impair the rights of the participants to shares purchased
-3-
<PAGE>
pursuant to the Plan on or prior to the date of such termination. If at any time
the number of shares remaining available for purchase under the Plan is not
sufficient to satisfy all then outstanding purchase rights, the Board or the
Committee may determine an equitable basis of apportioning available shares
among all participants.
The Board may amend the Plan from time to time in any respect in order
to meet changes in legal requirements or for any other reason; provided,
however, that no such amendment shall (a) materially adversely affect any
purchase rights outstanding under the Plan during the purchase period in which
such amendment is to be effected, (b) increase the maximum number of shares of
Stock which may be purchased under the Plan, (c) decrease the Purchase Price of
the Stock for any purchase period below the amounts set forth in paragraph 5 of
this Plan, or (d) adversely affect the qualification of the Plan under Section
423 of the Code.
Upon termination of the Plan, the respective amounts to the credit of
the participants in their purchase accounts shall be returned to them promptly.
10. Non-Transferability. Rights acquired under the Plan are not
transferable and may be exercised only by a participant.
11. Shareholders' Rights. No eligible employee or participant shall
by reason of the Plan have any rights of a shareholder of the Company until and
to the extent he shall acquire shares of Stock as herein provided.
12. Administration of the Plan. The Plan shall be administered so as
to ensure that all participants have the same rights and privileges as are
provided by Section 423(b)(5) of the Code.
Members of the Committee may be appointed from time to time by the
Board and shall be subject to removal by the Board. The decision of a majority
in number of the members of the Committee in office at the time shall be deemed
to be the decision of the Committee.
The Board or the Committee, from time to time, may approve the forms
of any documents or writings provided for in the Plan, may adopt, amend and
rescind rules and regulations not inconsistent with the Plan for carrying out
the Plan and may construe the Plan. The Board or the Committee may delegate the
responsibility for maintaining all or a portion of the records pertaining to
participants' accounts to persons not affiliated with the Participating
Companies. All expenses of administering the Plan shall be paid by the
Participating Companies.
13. Maximum Number of Shares. Subject to adjustment as hereinafter
set forth, the total number of shares of Stock which are either purchased under
the Plan or issued pursuant to all grants and awards made under the Material
Sciences Corporation 1991 Stock Option Plan for Directors, the Material Sciences
Corporation 1985 Stock Option Plan for Directors or the Material Sciences
Corporation 1985 Stock Option Plan for Key Employees, may not exceed 750,000.
Stock
-4-
<PAGE>
sold hereunder may be treasury shares or authorized but unissued shares. In the
event the Company shall at any time after the effective date of the Plan change
its issued Stock into an increased number of shares, with or without par value,
through a stock dividend or a split-up of shares, or into a decreased number of
shares, with or without par value, through a combination of shares, then,
effective with the record date for such change, the maximum number of shares of
Stock which thereafter may be purchased under the Plan shall be the maximum
number of shares which, immediately prior to such record date, remained
available for purchase under the Plan, proportionately increased, in the case of
such stock dividend or split-up, or proportionately decreased, in the case of
such combination of shares.
14. Miscellaneous. Except as otherwise expressly provided herein,
any Authorization, election, notice or document to be submitted by an eligible
employee or participant pursuant to the Plan shall be delivered to his employer
corporation and, subject to any limitations specified in the Plan, shall be
effective when so delivered.
The term "business day" shall mean any day other than Saturday, Sunday
or a legal holiday in Illinois.
The term "subsidiaries" shall mean all corporations which are
subsidiary corporations (within the definition of Section 424(f) of the Code) in
respect of the Company.
The masculine pronoun shall include the feminine.
The Plan, and the Company's obligation to sell and deliver shares of
Stock hereunder, shall be subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approval by any regulatory or
governmental agency as may, in the opinion of counsel for the Company, be
required.
-5-
<PAGE>
EXHIBIT NO. 10(d)
Material Sciences Corporation 1985
Stock Option Plan for Key Employees
<PAGE>
MATERIAL SCIENCES CORPORATION
1985 STOCK OPTION PLAN
FOR KEY EMPLOYEES
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is to
provide incentives to the management of Material Sciences Corporation (the
"Company") and its subsidiaries through rewards based upon the ownership and
performance of the common stock of the Company. Toward that end, the
Compensation Committee of the Board of Directors of the Company (the
"Committee") may (1) grant options to purchase shares of common stock of the
Company to officers and other key management personnel of the Company or its
subsidiaries, (2) grant stock appreciation rights in conjunction with such
options and (3) issue shares of restricted stock as incentive awards to officers
and other key management personnel of the Company or its subsidiaries. Such
grants and awards shall be made on terms and conditions not inconsistent with
the Plan. The Compensation Committee shall consist of two or more persons, all
of whom shall be "disinterested persons" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended.
2. Limitations on Shares To Be Issued. The total number of shares of
common stock, par value $.02 per share, which may be issued pursuant to all
grants and awards made under the Plan, the Material Sciences Corporation 1985
Stock Option Plan for Directors (the "1985 Directors' Plan") or the Material
Sciences Corporation 1991 Stock Option Plan for Directors (the "1991 Directors'
Plan"), or purchased under the Material Sciences Corporation Employee Stock
Purchase Plan, shall not exceed 750,000 (subject to adjustment as provided in
Section 13 hereof or such other Plans). Shares of common stock which are covered
by an option granted pursuant to the Plan, the 1985 Directors' Plan or the 1991
Directors' Plan that expires or is otherwise terminated prior to its exercise
shall again be available for the grant of new options under the Plan, except as
provided in Section 7 hereof in connection with the exercise of stock
appreciation rights.
Shares of common stock issued under the Plan may be authorized and unissued
shares of common stock, treasury stock or a combination thereof.
3. Terms of Options. Options granted under the Plan may be either
incentive stock options which qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") , or options which do not qualify under
that Section ("non-qualified options"). Options that are intended to be treated
as incentive stock options will be labelled "Incentive Stock Options." Options
that are intended to be treated as non-qualified options will contain an
explicit statement to that effect.
Each option granted under the Plan shall be evidenced by a written
agreement between the Company and the optionee. Each option shall be
exercisable immediately in full or shall become exercisable in installments over
the option period in such percentages of the total number of shares covered by
the option as shall be determined by the Committee and stated in the agreement
evidencing such option, provided that if a major corporate transaction as
defined in Section 9 hereof shall occur one year or more after a grant of an
option pursuant to the Plan and before the optionee
<PAGE>
has exercised the percentage of such option set forth in the following table
which corresponds to the number of years that have elapsed since the grant of
the option, the optionee may, within the 60 day period beginning on the
effective date of such transaction, exercise such option with respect to a
number of shares not to exceed the greater of (a) the number of shares with
respect to which the optionee is then entitled to exercise the option under the
terms of the option agreement, after any adjustments required to be made
pursuant to Section 13 hereof, and (b) the number of shares which would cause
the percentage of such option which has been exercised to equal the percentage
specified in the following table:
YEARS SINCE PERCENTAGES OF
GRANT OF OPTION OPTION EXERCISABLE
--------------- ------------------
1 to 2 20%
2 to 3 40%
3 to 4 60%
4 or 5 80%
5 or more 100%
The per share option price shall be a price determined by the Committee and
specified in the option agreement, provided that the per share option price with
respect to an incentive stock option shall be not less than 100% of the fair
market value of a share of common stock of the Company on the date the option is
granted, and further provided that the per share option price with respect to
------- --------
any options granted under the Plan to an optionee who is a director of the
Company shall be not less than 75% of the fair market value of a share of common
stock on the date the option is granted.
An incentive stock option shall in no event be exercisable more than ten
years after the date of grant, and a non-qualified option shall in no event be
exercisable more than ten years and one day after the date of grant. Subject to
the limitations expressed in the first sentence of this paragraph, an optionee
may exercise options granted under the Plan for a period of three months
following termination of the optionee's employment (12 months if termination of
employment is due to total and permanent disability as defined in Section
22(e)(3) of the Code) to the same extent that the optionee might have exercised
such option at the time of such termination of employment, provided that the
Company shall not be required to issue shares pursuant to the exercise of
options after termination of the employment of the optionee to the extent
provided in Section 9 hereof. Options shall not be transferable other than by
will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order" as defined under the Code. Options may be exercised by
the executor, administrator or personal representative of a deceased optionee
for a period of not longer than one year after the death of such optionee at
such time and to such extent that the optionee, had he lived, would have been
entitled to exercise such option.
4. Loan of Exercise Price. Upon written request by an optionee
(including an officer or director of the Company or any of its subsidiaries) or
any person exercising the option after an optionee's death in accordance with
Section 3 hereof, the Company may, with the approval of the Committee, lend such
optionee or such person an amount not exceeding the aggregate option price
-2-
<PAGE>
of any shares which such optionee or such person shall elect to purchase under
the option. Such loan shall be secured by a pledge of the shares of the Company
purchased with the proceeds of the loan, and shall bear interest at a rate
determined by the Committee, provided, however, that in the case of an incentive
stock option, if the loan is a term loan, such loan shall bear interest at a
rate not less than the applicable federal rate then in effect under Sections
7872(f)(2) and 1274(d) of the Code.
5. Limitation on Value of Stock Subject to Options Exercisable in Any
Calendar Year. If an optionee is granted incentive stock options under the Plan
or any other plan of either the Company or any parent or subsidiary corporation
(within the meaning of Sections 424(e) and 424(f) of the Code), the aggregate
fair market value of shares with respect to which the incentive stock options
first become exercisable by the optionee for any calendar year shall not exceed
$100,000. For this purpose, fair market value shall be determined on the date
any such option is granted with regard to any restriction except any restriction
which by its terms will never lapse.
6. Exercise of Options. Subject to the terms of the option agreement,
options granted pursuant to the Plan may be exercised from time to time in whole
or in part. Each exercise of an option shall be accomplished by giving written
notice of such exercise to the Treasurer of the Company, specifying the number
of shares to be purchased and accompanied by payment in full of the purchase
price therefor. Payment for the options exercised shall be either in (i) cash
or check, bank draft or money order to the order of Material Sciences
Corporation (collectively, "cash"), or (ii) with the consent of the Committee,
shares of common stock of the Company (valued as of the date of the notice of
exercise) with a value equal to or less than the total option price, plus cash
in the amount, if any, by which the total option price exceeds the value of such
shares of common stock. Payment for shares with respect to options exercised
for cash shall be delivered with the notice specifying the number of shares
being purchased. Payment for shares with respect to options exercised for
Company stock and cash, if any, shall be delivered to the Treasurer of the
Company not later than the end of the third business day after the exercise
date. In the case of payment in stock, such payment shall be made by delivery
of the necessary share certificates, with executed stock powers attached, to the
Treasurer of the Company or, if such certificates have not yet been delivered to
the optionee, by written notice to the Treasurer of the Company requesting that
the shares presented by such certificates be applied toward payment as
hereinabove provided.
7. Stock Appreciation Rights. Any grant of stock appreciation rights in
conjunction with all or part of any option granted under the Plan may be made at
the time of the grant of such option or at any time thereafter, and provision
for the exercise of such stock appreciation rights shall be made in the option
agreement for such option or in an amendment thereto, as the case may be. A
"stock appreciation right", is a right to receive, without payment to the
Company, a number of shares of common stock of the Company or cash, as provided
in this Section 7, in lieu of the purchase of shares under a related option.
Stock appreciation rights granted under the Plan shall terminate and no longer
be exercisable upon termination or exercise of the related option to the same
extent as such option is terminated or exercised. Stock appreciation rights
granted under the Plan shall be subject to such terms and conditions not
inconsistent with other provisions of the Plan as shall be determined from time
to time by the Committee, which shall include the following:
-3-
<PAGE>
(a) Stock appreciation rights shall be exercisable at such time
or times as may be provided in the agreement evidencing such stock
appreciation rights, provided that stock appreciation rights shall not be
exercisable other than at a time that the option to which they relate shall
be exercisable under the Plan and only to the extent, if any, that such
option is exercisable.
(b) Stock appreciation rights shall be exercisable only at such
time or times that the fair market value of a share of common stock of the
Company exceeds the per share option price under the option to which such
rights relate.
(c) Upon the exercise of a stock appreciation right, an optionee
shall be entitled to receive at the time and in the form specified in this
paragraph (c) an amount equal to the excess of the fair market value of one
share of common stock of the Company over the option price per share
specified in the related option multiplied by the number of shares in
respect of which the stock appreciation right shall have been exercised,
subject to the forfeiture of the right to such payments in the
circumstances set forth in the final sentence of this paragraph (c). At the
discretion of the Company, to be exercised by the Committee at the time of
exercise of stock appreciation rights, such amount shall be payable either
in cash, in common stock of the Company or in any combination thereof. (i)
To the extent that such amount is payable in cash, it shall be paid at such
time or times as the respective shares that would have been issued upon
exercise of the option surrendered in whole or in part in connection with
exercise of such stock appreciation rights first would have not been
subject to the Right of Repurchase set forth in Section 9 hereof had the
optionee exercised such option to such extent at the time he exercised the
stock appreciation rights (the "option vesting dates" of the shares with
respect to which such stock appreciation rights were exercised), with
interest, if any, from the date of exercise of the stock appreciation
rights at such rate as may be specified in the option agreement. (ii) To
the extent that shares of common stock of the Company are to be delivered
in payment of such excess amount in respect of stock appreciation rights
which are exercised in accordance with this Section 7, the number of whole
shares shall be determined by dividing the portion of such excess amount to
be paid in the form of stock by the fair market value of one share of
common stock of the Company on the date of exercise of the stock
appreciation right. No fractional shares shall be issued upon exercise of
the stock appreciation rights and no cash shall be paid for such fractional
shares. Such shares shall be subject to the restrictions on disposition set
forth in Section 9 hereof until the respective option vesting dates of the
shares to which the stock appreciation rights in question relate. (iii) In
the event of either (A) the termination of employment of the optionee prior
to the time that any such cash becomes payable or at a time when any such
shares are subject to such restrictions or (B) an attempt by the optionee
to dispose of any such shares in violation of such restrictions, the
Company may in its sole discretion determine that such cash or shares shall
be forfeited, provided that the Company notifies such optionee of such
forfeiture within 60 days after such termination of
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<PAGE>
employment or after the Company's receipt of written notice of the proposed
disposition of such shares from the optionee.
(d) Each option agreement which provides for stock appreciation
rights shall provide for enforcement of the restrictions on the disposition
of stock and forfeiture of cash or shares of common stock of the Company
set forth in this Section 7. In aid of such enforcement, the optionee
shall, immediately upon receipt of the certificate or certificates for
shares issued pursuant to exercise of a stock appreciation right issued
under the Plan and subject to such restrictions, deposit such certificate
or certificates together with a stock power or other instrument of
transfer, appropriately endorsed in blank, in escrow under a deposit
agreement containing such terms and conditions as the Committee shall
approve, with the escrow agent designated pursuant to such agreement, the
expenses of such escrow to be borne by the Company.
(e) The obligation to make payments with respect to stock
appreciation rights shall not be funded or secured in any manner.
Upon the exercise of a stock appreciation right, the option to which such stock
appreciation right is related shall no longer be exercisable to the extent that
the related stock appreciation rights have been exercised and shall be deemed to
have been exercised to that extent for the purpose of the limitation of the
number of shares of common stock to be issued under the Plan as set forth in
Section 2 hereof, provided that the shares of common stock subject to such
options shall again be available for the grant of new options to the extent that
payment for such stock appreciation rights is forfeited under paragraph (c) of
this Section 7.
8. Exercise of Stock Appreciation Rights. The grantee of stock
appreciation rights granted pursuant to the Plan, or such other party having the
power pursuant to Section 3 hereof to exercise the option to which such stock
appreciation rights relate, may exercise such rights in whole or in part in
accordance with Section 7 hereof by surrendering the related option or
applicable portion thereof to the Treasurer of the Company, specifying the
number of shares with respect to which such stock appreciation rights are being
exercised. Upon such exercise and surrender, the party exercising such rights
shall be entitled to receive an amount determined in the manner prescribed in
Section 7 hereof at the time specified therein.
9. Repurchase of Shares on Termination of Employment and Restrictions on
Shares. In addition to any restrictions on the common stock of the Company
contained in the Company's By-laws, shares issued upon exercise of options under
the Plan shall not be sold, transferred, assigned, pledged, or otherwise
encumbered, except by will or by the laws of descent and distribution, without
the prior written consent of the Committee, at a time at which they are (1)
subject either to the Company's right to repurchase, as set forth in this
Section 9, or to such other restrictions on disposition of the shares as the
Committee shall impose on such shares pursuant to the terms of the option
agreement or (2) pledged as collateral for any loan from the Company.
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<PAGE>
If an optionee's employment by the Company terminates within five years
after a grant of an option to the optionee under the Plan, or if such optionee
attempts to dispose of shares issued upon exercise of such options other than as
allowed by the Plan, the Company shall have the right in its sole discretion to
repurchase from such optionee at the option price a number of the shares issued
pursuant to such grant up to but not exceeding the number of shares originally
subject to such grant multiplied by the percentage set forth in the following
table which corresponds to the number of years since the grant, subject to the
limitations expressed in the following sentence:
NUMBER OF SHARES
SUBJECT TO REPURCHASE
NUMBER OF YEARS AS A PERCENTAGE OF
SINCE GRANT OF OPTION SHARES SUBJECT TO GRANT
--------------------- -----------------------
0 to 1 100%
1 to 2 80%
2 to 3 60%
3 to 4 40%
4 to 5 20%
In the event of (i) a merger in which the Company is not the continuing or
surviving entity (or a reverse or reverse subsidiary merger or consolidation in
which the Company is, in effect, acquired by another corporation), other than a
merger which effects only a change in the jurisdiction of incorporation of the
Company, (ii) an acquisition of all or substantially all of the Company's assets
by another entity which then conducts the business of the Company, or (iii) a
transfer of more than 50% of the voting power of the Company in one transaction
or a series of related transactions (each of which events shall hereinafter be
called a "major corporate transaction"), the right of repurchase contained in
this Section 9 shall cease to be effective as of the effective date of such
transaction, except to the extent expressly provided in the option agreement.
The right of repurchase specified in this Section 9 shall be determined
separately for each separate grant of options to such optionee, and such right
of repurchase may be exercised by the Company by means of a refusal to issue
shares with respect to options exercised pursuant to Section 3 hereof (or to pay
for stock appreciation rights exercised pursuant to Section 7 hereof) after such
termination of employment, to the extent that such shares would have been
subject to such right of repurchase if such options had been exercised prior to
such termination. The Company may assign any rights of repurchase arising under
this Section 9 to any party. Each option agreement shall provide for
enforcement of the restrictions and rights to repurchase set forth in this
Section 9. In aid of such enforcement, the optionee shall, immediately upon
receipt of the certificate or certificates for shares issued pursuant to
exercise of options issued under the Plan and subject to such restrictions,
deposit such certificate or certificates together with a stock power or other
instrument of transfer, appropriately endorsed in blank, in escrow under a
deposit agreement containing such terms and conditions as the Committee shall
approve, with the escrow agent designated pursuant to such agreement, the
expenses of such escrow to be borne by the Company.
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<PAGE>
The Company's right of repurchase set forth in this Section 9 shall be
exercised by (1) written notice to such escrow agent and to the owner of the
shares being repurchased within 30 days after the time of the optionee's
termination of employment or the time that the Company receives written notice
from the Employee of the proposed transfer or sale of shares and (2) payment by
the Company to the optionee or his legal representative of the amount due
pursuant to the exercise of such right of repurchase, provided that notice of
exercise of such right to repurchase by means of a refusal to issue shares
pursuant to options outstanding at the time of termination of the optionee's
employment may be made within 30 days after the Company's receipt of written
notice of the exercise of such options from the optionee. Payment for repurchase
of such shares may be made by cancellation of a corresponding amount of any note
given the Company by the optionee or, in the event the outstanding balance of
such note is equal to the amount of the payment, by returning the note to the
optionee or his legal representative. The optionee whose shares are repurchased
shall forthwith return such shares to the Company. The terms and conditions of
this Section 9 shall be binding on the heirs, executors or personal
representatives of the optionee, as the case may be.
10. Incentive Awards of Restricted Stock. Shares of common stock of the
Company issues as incentive awards pursuant to the Plan shall be subject to
restrictions prohibiting their sale, transfer, assignment, pledge or other
encumbrance, except by will or by the laws of descent and distribution or
pursuant to a "qualified domestic relations order" as defined under the Code.
With the exception of such restrictions, the persons to whom such shares are
awarded shall have all of the rights of a shareholder, including the rights to
receive dividends and to vote such shares. In the event that the person awarded
such shares ceases to be employed by the Company or one of its subsidiaries
prior to any time or the occurrence of any event specified by the Committee as
occasion for the lapse of such restrictions, any shares subject to such
restrictions shall be forfeited and returned to the Company, provided that the
Committee may specify circumstances in which such forfeiture will not occur on
termination of employment due to retirement, total or permanent disability or
death. The Committee shall specify with respect to each award of restricted
stock made under the Plan the circumstances under which the restrictions on such
shares shall lapse. At the time of such lapse (or upon the earlier filing of an
election under Section 83 of the Code), the Company may compute the amount of
withholding taxes then due on income realized as a result of such lapse (or
election), and either (1) require a participant to pay to the Company the amount
of such withholding taxes or (2) purchase from the participant at the then
current market value that number of shares having an aggregate purchase price
equal to the amount of such taxes and retain such purchase price for purposes of
satisfying withholding requirements in respect of the income realized.
11. Necessary Approvals. Each option and stock appreciation right granted
under the Plan shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that either the consent or
approval of any governmental authority or the listing, registration or
qualification of the shares subject to such option upon any securities exchange
or under any state or federal law is necessary or desirable as a condition of,
or in connection with, the issuance or purchase of shares under such option,
such option may not be exercised in whole or in part and shares thereunder may
not be delivered, as the case may be, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not
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<PAGE>
acceptable to the Committee. Any option or stock appreciation right may be
exercised only in accordance with the provisions of all applicable law.
12. Administration of the Plan. The Committee shall, within the limits of
the Plan, select eligible persons for participation and determine the number of
shares to be subject to option or to option and stock appreciation rights, the
number of shares to be issued as restricted shares, the time and conditions of
exercise of options or stock appreciation rights, the terms and conditions of
any loan made by the Company pursuant to Section 4 hereof (subject to approval
thereof by the Board of Directors), all other terms and conditions of the
options and stock appreciation rights not specified in the Plan, and all other
terms and conditions not specified in the Plan governing the issuance of
restricted shares and the lapse of restrictions with respect thereto. The
Committee shall interpret the Plan, any option agreements entered into pursuant
to the Plan and the rights of the holders of any restricted stock issued under
the Plan. The Committee may establish rules and regulations not inconsistent
with the Plan for the administration of the Plan. All such rules, regulations
and interpretations relating to the Plan adopted by the Committee shall be
conclusive and binding on all parties. Notwithstanding any other provisions of
the Plan, all incentive stock options granted under the Plan shall be subject to
such additional or more restrictive terms and conditions as the Committee shall
determine to be necessary to meet the requirements of Section 422 of the Code
and the regulations thereunder relating to incentive stock options, including
restrictions necessary where the optionee owns 10% or more of the Common Stock.
13. Adjustments for Change in Capitalization or Corporate Reorganizations.
Appropriate adjustments shall be made by the Committee in the maximum number and
kind of shares to be issued under the Plan, and in the number and kind of shares
that are the subject of any option or stock appreciation rights, to give effect
to any stock splits, stock dividends and other relevant changes in
capitalization occurring after the effective date of the Plan. If the Company
shall effect a merger, consolidation or other reorganization, pursuant to which
the outstanding shares of common stock of the Company shall be exchanged for
other shares or securities of the Company or of another corporation which is a
party to such merger, consolidation or other reorganization, the Company shall
use its best efforts to provide in any agreement or plan which it enters into or
adopts to effect any such merger, consolidation or other reorganization that (1)
any holder of restricted shares of the Company issued pursuant to the Plan shall
receive in such transaction, subject to substantially the same restrictions on
transferability as apply to such restricted shares, the kind and number of
shares or other securities of the Company or such other corporation which is
issuable to the owner of a like number of unrestricted shares of the Company,
and (2) any optionee under the Plan shall have the right (a) to purchase, at the
aggregate option price provided for in his option agreement and on the same
terms and conditions, the kind and number of shares or other securities of the
Company or such other corporation which would have been issuable to him in
respect of the number of shares of common stock of the Company which were
subject to such option immediately prior to the effective date of such merger,
consolidation or other reorganization if such shares had been then owned by him,
and (b) to exercise stock appreciation rights with respect to such shares in
lieu of such purchase to the extent such optionee had such rights with respect
to the options
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<PAGE>
outstanding immediately prior to the effective date of such merger,
consolidation or other reorganization.
To the extent that such provision insofar as it relates to options or stock
appreciation rights has not been made by the date ten days prior to the
scheduled effective date of such merger, consolidation or other reorganization,
the options and stock appreciation rights outstanding under the Plan shall
thereupon become exercisable in full. If the provision for restricted stock
described in the first paragraph of this Section 13 has not been made with
respect to any of the restricted stock issued pursuant to the Plan by the date
ten days prior to the scheduled effective date of such merger, consolidation or
other reorganization, then the restrictions on the transfer, assignment, pledge
or other encumbrance of such restricted stock as to which such provision has not
been made shall thereupon lapse as of that date. If as a result of the preceding
sentence shares cease to be subject to restrictions arising under Section 9
hereof, such shares shall thereupon cease to be subject to any right of the
Company to repurchase such shares as set forth in Section 9 hereof. Any
adjustment with respect to options and stock appreciation rights required as a
result of the foregoing provisions of this Section 13 shall be effected in such
manner that the difference between the aggregate fair market value of the shares
or other securities subject to the options immediately after giving effect to
such adjustment and the aggregate option price of such shares or other
securities shall be substantially equal to (but shall not be more than) the
difference between the aggregate fair market value of the shares subject to such
options immediately prior to such adjustment and the aggregate option price of
such shares. Any adjustments made under this Section 13 shall be determined by
the Committee.
Upon the approval by the shareholders of the Company of a merger,
consolidation or other reorganization, under which the outstanding shares of the
Company are to be exchanged for cash, or upon the adoption by the shareholders
of the Company of a plan of complete liquidation, the restrictions on the
transfer, assignment, pledge or other encumbrance of restricted stock issued
pursuant to the Plan shall thereupon lapse, and all options outstanding under
the Plan shall thereupon become exercisable in full.
14. Effective Date and Term of Plan. The Plan shall be submitted to the
Board of Directors of the Company for approval at the meeting scheduled to be
held on February 26, 1985, and if approved shall become effective on that date,
provided, however, that the Plan shall cease to be effective and any options and
stock appreciation rights granted and restricted stock awards made hereunder
shall become null and void if this plan is not approved by the Company's
shareholders before February 26, 1986. The Plan shall terminate ten years after
it becomes effective unless terminated prior thereto by action of the Board of
Directors. No further grants shall be made under the Plan after termination,
but termination shall not affect the right of any participant under any grants
made prior to termination.
15. Amendments. The Plan may be terminated or amended in any respect by
the Board of Directors, provided that no amendment may be made without the
approval of the Company's shareholders if such amendment would increase the
maximum number of shares available for
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<PAGE>
issuance under the Plan, change the designation of employees eligible to receive
options, stock appreciation rights or restricted stock under the Plan, change
the purchase price at which shares may be sold or stock appreciation rights
measured pursuant to options granted under the Plan, or change the rights or
obligations of the Company with respect to the right of repurchase specified in
Section 9 hereof.
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<PAGE>
EXHIBIT NO. 10(e)
Material Sciences Corporation
1985 Stock Option Plan for Directors
<PAGE>
MATERIAL SCIENCES CORPORATION
1985 STOCK OPTION PLAN
FOR DIRECTORS
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is
to provide incentives to certain directors of Material Sciences Corporation (the
"Company") through rewards based upon the ownership and performance of the
common stock of the Company. Toward that end, the Board of Directors of the
Company (the "Board") may grant options to purchase shares of common stock of
the Company to directors of the Company who are not officers or employees of the
Company or its subsidiaries, on terms and conditions not inconsistent with the
Plan.
2. Limitations On Options To Be Granted and Shares To Be Issued.
The total number of shares of common stock, par value $.02 per share, which may
be issued pursuant to all grants and awards made under the Plan, the Material
Sciences Corporation 1991 Stock Option Plan for Directors (the "1991 Directors'
Plan") or the Material Sciences Corporation 1985 Stock Option Plan for Key
Employees, adopted on February 26, 1985 (the "Key Employees' Plan"), or
purchased under the Material Sciences Corporation Employee Stock Purchase Plan,
shall not exceed 750,000 (subject to adjustment as provided in Section 8 hereof
or in such other Plans). Shares of common stock which are covered by an option
granted pursuant to the Plan, the 1991 Directors' Plan or the Key Employees'
Plan that expires or is otherwise terminated prior to its exercise shall again
be available for the grant of new options under the Plan, except as provided in
Section 7 of the Key Employees' Plan in connection with the exercise of stock
appreciation rights.
The total number of shares of common stock subject to options granted
to an Optionee under the Plan shall not exceed 15,000.
Shares of common stock issued under the Plan may be authorized and
unissued shares of common stock, treasury stock or a combination thereof.
3. Terms of Options. Each option granted under the Plan shall be
evidenced by a written agreement between the Company and the Optionee. Each
option shall be exercisable immediately in full. The per share option price
shall be specified in the option agreement and shall be 75 percent of the fair
market value of a share of common stock of the Company on the date the option is
granted. An option issued pursuant to the Plan shall in no event be exercisable
for more than five years and ten days after the date of grant. Subject to such
limitation, an Optionee may exercise options granted under the Plan for a period
of three months following the time the Optionee ceases to be a director of the
Company (12 months if he ceases to be a director due to total and permanent
disability) to the same extent that the Optionee might have exercised such
option at the time he ceased to be a director, provided that to the extent
provided in Section 5 hereof the Company shall not be required to issue shares
pursuant to an exercise of an option after the Optionee ceases to be a director
of the Company. Options shall not be transferable, except that options maybe
exercised by the executor, administrator or personal representative of a
deceased Optionee for a period of not longer than one year after the death of
such Optionee at such time and to such extent that the Optionee had he lived
would have been entitled to exercise such option.
<PAGE>
4. Exercise of Options. Subject to the terms of the option
agreement, options granted pursuant to the Plan may be exercised from time to
time in whole or in part. Each exercise of an option shall be accomplished by
giving written notice of such exercise to the Treasurer of the Company,
specifying the number of shares to be purchased and accompanied by payment in
full of the purchase price therefor. Payment for the options exercised shall be
either in (i) cash or check, bank draft or money order to of Material Sciences
Corporation (collectively, "cash"), or (ii) with the consent of the Board,
shares of common stock of the Company (valued as of the date of the notice of
exercise) with a value equal to or less than the total option price, plus cash
in the amount, if any, by which the total option price exceeds the value of such
shares of common stock. Payment for shares with respect to options exercised
for cash shall be delivered with the notice specifying the number of shares
being purchased. Payment for shares with respect to options exercised for
Company stock and cash, if any, shall be delivered to the Treasurer of the
Company not later than the end of the third business day after the exercise
date. In the case of payment in stock, such payment shall be made by delivery
of the necessary share certificates, with executed stock powers attached, to the
Treasurer of the Company or, if such certificates have not yet been delivered to
the Optionee, by written notice to the Treasurer of the Company requesting that
the shares represented by such certificates be applied toward payment as
hereinabove provided.
5. Repurchase of Shares on Termination of Directorship or Change of
Control and Restrictions on Shares. In addition to any restrictions on the
common stock of the Company contained in the Company's By-laws, shares issued
upon exercise of options under the Plan shall not be sold, transferred,
assigned, pledged, or otherwise encumbered, except by will or by the laws of
descent and distribution, without the prior written consent of the Board, at a
time at which they are (1) subject either to the Company's right to repurchase
the shares or to a requirement that the Company repurchase such shares, as set
forth in this Section 5 (collectively the "Right of Repurchase"), or to other
restrictions on disposition of the shares as the Board shall impose pursuant to
the terms of the option agreement or (2) pledged as collateral for any loan from
the Company.
If an Optionee ceases to be a director of the Company within five
years after a grant of an option to the Optionee under the Plan, or if such
Optionee attempts to dispose of shares issued upon exercise of such options
other than as allowed under the Plan, the Company shall have the right in its
sole discretion to repurchase from such Optionee at the option price a number of
the shares issued pursuant to such grant up to but not exceeding the number of
shares originally subject to such grant multiplied by the percentage set forth
in the following table which corresponds to the number of years since such
grant:
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<PAGE>
Number of Shares
Subject to Repurchase
Number of Years Since as a Percentage of
Grant of Option Shares Subject to Grant
---------------------- -----------------------
0 to 1 ................................... 100%
1 to 2 ................................... 80%
2 to 3 ................................... 60%
3 to 4 ................................... 40%
4 to 5 ................................... 20%
In the event of (i) a merger in which the Company is not the continuing or
surviving entity (or a reverse or reverse subsidiary merger or consolidation in
which the Company is, in effect, acquired by another corporation), other than a
merger which effects only a change in the jurisdiction of incorporation of the
Company, (ii) an acquisition of all or substantially all of the Company's assets
by another entity which then conducts the business of the Company, or (iii) a
transfer of more than 50% of the voting power of the Company in one transaction
or a series of related transactions (each of which events shall hereinafter be
called a "major corporate transaction"), the Company or its successor shall
purchase from the Optionee or his personal representative, as the case may be,
at the option price, as of the effective date of the major corporate transaction
or as soon as practicable thereafter, the number of shares of common stock of
the Company which would have been subject to the Right of Repurchase if the
Optionee had ceased to be a director of the Company on such effective date. If
the Right of Repurchase arises with respect to a share of common stock as a
result of a major corporate transaction, it shall remain in effect until such
share is repurchased in accordance with the terms of the Plan.
The Right of Repurchase shall be determined separately for each
separate grant of options to such Optionee and may be exercised by the Company
by means of a refusal after a major corporate transaction or after the Optionee
ceases to be a director of the Company to issue shares which would have been
subject to the Right of Repurchase on the date of such major corporate
transaction or the date the Optionee ceased to be a director of the Company if
such shares had been purchased by exercise of the option prior to such date.
The Company may assign the Right of Repurchase arising under this Section 5 with
respect to any share of common stock to any party. Each option agreement shall
provide for enforcement of the restrictions and the Right of Repurchase set
forth in this Section 5. In aid of such enforcement, the Optionee shall,
immediately upon receipt of the certificate or certificates for shares issued
pursuant to exercise of options issued under the Plan deposit such certificate
or certificates together with a stock power or other instrument of transfer,
appropriately endorsed in blank, in escrow under a deposit agreement containing
such terms and conditions as the Board shall approve with an escrow agent
designated pursuant to such agreement, the expenses of such escrow to be borne
by the Company.
The Right of Repurchase shall be exercised by (1) written notice to
such escrow agent and to the owner of the shares being repurchased (a) within 30
days after the time that the Optionee
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<PAGE>
ceases to be a director of the Company or the time that the Company receives
written notice from the Director of the proposed transfer or sale of shares or
(b) within 30 days before or as soon as practicable after the effective date of
a major corporate transaction, and (2) payment by the Company to the Optionee or
his legal representative of the amount due pursuant to such exercise of the
Right of Repurchase, provided that notice of exercise of the Right of Repurchase
by means of a refusal to issue shares pursuant to options outstanding at the
time of a major corporate transaction or the time that the Optionee ceases to be
a director of the Company may be made within 30 days after the Company's receipt
of written notice of the exercise of such options from the Optionee. Payment for
repurchase of such shares may be made by cancellation of a corresponding amount
of any note given to the Company by the Optionee or, in the event the
outstanding balance of such note is equal to the amount of the payment, by
returning such note to the Optionee or his legal representative. The Optionee
whose shares are repurchased shall forthwith return such shares to the Company.
The terms and conditions of this Section 5 shall be binding on the heirs,
executors or personal representatives of the Optionee, as the case may be.
6. Necessary Approvals. Each option granted under the Plan shall be
subject to the requirement that if at any time the Board shall determine, in its
discretion, that either the consent or approval of any governmental authority or
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares under such option, such option may not be exercised in whole or in part
and shares thereunder may not be delivered, as the case may be, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board. Any
option may be exercised only in accordance with the provisions of all applicable
law.
7. Administration of the Plan. The Board shall, within the limits
of the Plan, select directors of the Company for participation and determine the
number of shares to be subject to option, the time and conditions of exercise of
options, and all other terms and conditions of the options not specified in the
Plan. The Board shall interpret the Plan and any option agreements entered into
pursuant to the Plan. The Board may establish rules and regulations not
inconsistent with the Plan for the administration of the Plan. All such rules,
regulations and interpretations relating to the Plan adopted by the Board shall
be conclusive and binding on all parties.
8. Adjustments for Changes in Capitalization or Corporate
Reorganizations. Appropriate adjustments shall be made by the Board in the
maximum number and kind of shares to be issued under the Plan to give effect to
any stock splits, stock dividends and other relevant changes in capitalization
occurring after the effective date of the Plan. If the Company shall effect a
merger, consolidation or other reorganization (other than a major corporate
transaction described in Section 5 hereof, to which this Section 8 shall have no
application), pursuant to which the outstanding shares of common stock of the
Company shall be exchanged for other shares or securities of the Company or of
another corporation which is a party to such merger, consolidation or other
reorganization, the Company shall provide in any agreement or plan which it
enters into or adopts to effect any such merger, consolidation or other
reorganization that (1) any holder of restricted shares of the Company
-4-
<PAGE>
issued pursuant to the Plan shall receive in such transaction with respect to
such shares subject to substantially the same restrictions on transferability as
apply to such restricted shares, the kind and number of shares or other
securities of the Company or such other corporation which are issuable to the
owner of a like number of unrestricted shares of the Company, and (2) any
Optionee under the Plan shall have the right to purchase, at the aggregate
option price provided for in his option agreement and on the same terms and
conditions, the kind and number of shares or other securities of the Company or
such other corporation which would have been issuable to him in respect of the
number of shares of common stock of the Company which were subject to such
option immediately prior to the effective date of such merger, consolidation or
other reorganization if such shares had been then owned by him.
Any adjustment required as a result of the foregoing provisions of
this Section 8 shall be effected in such manner that the difference between the
aggregate fair market value of the shares or other securities subject to the
option immediately after giving effect to such adjustment and the aggregate
option price of such shares or other securities shall be substantially equal to
(but shall not be more than) the difference between the aggregate fair market
value of the shares subject to such option immediately prior to such adjustment
and the aggregate option price of such shares. Any adjustments made under this
Section 8 shall be determined by the Board.
9. Effective Date and Term of Plan. The Plan shall be submitted to
the Board for approval at the meeting scheduled to be held on February 26, 1985,
and if approved shall become effective on that date, provided, however, that the
Plan shall cease to be effective and any options granted hereunder shall become
null and void if the Plan is not approved by the Company's shareholders before
February 26, 1986. The Plan shall terminate ten years after it becomes
effective unless terminated prior thereto by action of the Board. No further
grants shall be made under the Plan after termination, but termination shall not
affect the right of any participant under any grants made prior to termination.
10. Amendments. The Plan may be terminated or amended in any respect
by the Board, provided that no amendment may be made without the approval of the
Company's shareholders if such amendment would increase the maximum number of
shares available for issuance under the Plan, change the maximum number of
shares that may be subject to options granted to any Optionee under the Plan,
change the designation of persons eligible to receive options under the Plan,
change the purchase price at which shares may be sold pursuant to options
granted under the Plan, or change the rights or obligations of the Company with
respect to the Right of Repurchase.
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<PAGE>
EXHIBIT NO. 10(g)
Employment Agreement effective February 27, 1991,
between the Company and G. Robert Evans
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made and entered into the 22nd day of April, 1991,
effective February 27, 1991 (the "Effective Date"), by and between Material
Sciences Corporation, a Delaware corporation (the "Company"), and G. Robert
Evans of Wayne, Illinois (the "Executive").
WHEREAS, the Company wishes to employ the Executive as Chairman of the
Board, President and Chief Executive officer of the Company, under the terms and
conditions hereinbelow set forth; and
WHEREAS, the Executive wishes to accept such employment under those terms
and conditions;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (the "Parties") agree as follows:
1. Term of Employment.
------------------
The term (the "Term") of the Executive's employment hereunder
commenced on the Effective Date, and shall continue through February 28, 1994
(the "Termination Date"); provided that (i) the Term shall automatically renew
for one year on the Termination Date and each anniversary thereof, unless either
Party shall deliver written notice to the other Party, at least one year in
advance, of such Party's election not to have the term renewed, (ii) the Term
shall terminate upon the Executive's death, Disability (as defined below) or
resignation and (iii) the Term may be terminated by the Company at any time for
Cause (as defined below) or without Cause.
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<PAGE>
2. Position, Duties, Responsibilities.
----------------------------------
(a) During the Term, the Executive will serve as President and Chief
Executive Officer of the Company, with duties and responsibilities including
general supervision, direction and control of the business and affairs of the
Company, subject to the control of the Board of Directors of the Company (the
"Board"), and such additional duties, consistent with his position, as may be
assigned from time to time by the Board. The Executive will devote his full
business time, attention and energies to the operations and activities of the
Company, except for reasonable vacations and for reasonable periods of illness
or incapacity. It is understood that the Executive may need to devote small
amounts of time during the first weeks of his employment to concluding certain
transactions on behalf of his prior business. It is also understood that the
Executive may, with the prior consent of the Board (which consent shall not be
unreasonably withheld), serve on the board of directors of one or more other
corporations not in competition with the Company and its subsidiaries.
(b) The Board has appointed Executive to fill a newly created vacancy
on the Board and nominated Executive for election as a director at the annual
meeting of the Company's stockholders scheduled for June 19, 1991. With respect
to all regular elections of directors during the Term, subject to the fiduciary
duties of the Board, the Company shall nominate, and use its best efforts to
elect, Executive to serve as a member of the Board. Upon the termination of the
Term for any reason, Executive shall resign as a direct subsidiaries, as the
case may be. During the Term, so long as the Executive shall be a director,
Executive shall serve as Chairman of the Board.
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<PAGE>
3. Salary.
------
The Company will pay the Executive a base salary ("Base Salary") at an
annual rate of $250,000, payable in accordance with the Company's payroll
practices. The Board or the Compensation Committee thereof (the "Compensation
Committee") shall review the Base Salary annually for increase, in the sole
discretion of the Board or the Compensation Committee, as the case may be.
4. Initial Payment.
---------------
In connection with the execution of this Agreement, the Executive has
received a payment of $60,000. Such payment is separate from, and in addition
to, any compensation otherwise received hereunder.
5. Annual Bonus.
------------
The Executive shall participate in the Company's annual bonus program
(the "Bonus Program"). His target bonus for the Company's 1992 Fiscal Year,
stated as a percentage of salary, will be the target currently provided under
the Bonus Program for the chief executive officer. The Compensation Committee
will work with the Executive to establish personal performance targets for the
Company's 1992 Fiscal Year.
6. Equity Opportunity.
------------------
(a) Restricted Stock.
----------------
(i) The Company hereby grants to the Executive, on the terms,
conditions and restrictions set forth in this Section 6(a), 20,000 shares (the
"Restricted Shares") of the Company's common stock, $.02 par value ("Stock").
The Executive shall have all the rights of a stockholder with respect to the
Restricted Shares (including the right to vote the Restricted Shares
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<PAGE>
and the right to receive dividends with respect to the Restricted Shares),
except as provided in subsection (ii) below.
(ii) Except as provided in subsection (iii) below, the Executive
may not sell, transfer, assign, pledge or otherwise encumber any of the
Restricted Shares (any such disposition or encumbrance being referred to herein
as a "transfer"). Any transfer or purported transfer by the Executive of any
Restricted Shares shall be null and void and the Company shall not recognize or
give effect to such transfer on its books and records or recognize the person to
whom such purported transfer has been made as the legal or beneficial holder of
such shares. The Restricted Shares shall not be subject to execution,
attachment or other process and no person shall be entitled to exercise any
rights of the Executive as the holder of such Restricted Shares by virtue of any
attempted execution, attachment or other process until the restrictions imposed
herein on the transfer of the Restricted Shares lapse as provided in subsection
(iii) below. All certificates representing Restricted Shares shall have
endorsed thereon the following legend:
"The shares represented by this certificate are subject to
restrictions on transfer set forth in an Employment Agreement made
April 22, 1991, between the Company and the registered holder, a copy
of which is on file at the principal office of the Company. Any
transfer or purported transfer of the shares represented by this
certificate in violation of such Employment Agreement shall be null
and void."
The Executive may request the removal of such legend from certificates
representing any Restricted Shares as to which the restrictions imposed herein
on the transfer of such Restricted Shares have lapsed as provided in subsection
(iii) below.
(iii) If the Executive's employment with the Company has not been
terminated by the Company or the Executive prior to February 27, 1993, the
restrictions on transfer
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<PAGE>
imposed by subsection (ii) above shall lapse as of February 27, 1993 with
respect to all of the Restricted Shares. In the event that, prior to February
27, 1993, (a) the Company terminates the employment of the Executive without
Cause or (b) following a Change in Control (as defined below), the Executive's
employment with the Company is terminated by the Executive for Good Reason (as
defined below) or by the Company without Cause, the restrictions on transfer
imposed by subsection (ii) above shall lapse as of the date of such termination
with respect to all of the Restricted Shares. In the event that, prior to
February 27, 1993, the Executive's employment with the Company is terminated due
to the Executive's Disability, (y) the restrictions on transfer imposed by
subsection (ii) above shall lapse as of the date of such termination with
respect to 10,000 of the Restricted Shares and (z) the Executive shall forfeit
to the Company, on the date of such termination, the other 10,000 of the
Restricted Shares. In the event that, prior to February 27, 1993, the
Executive's employment with the Company is terminated (including in the event of
the death of the Executive) other than as specified in one of the two
immediately preceding sentences, the Executive shall forfeit to the Company, on
the date on which his employment is terminated, all of the Restricted Shares.
(iv) In the event of any change in capitalization of the Company
which affects the Restricted Shares (such as a stock dividend, a stock
distribution, a stock split, a subdivision or combination of shares, or a merger
or consolidation to which the Company is a party), the Compensation Committee
shall make or cause to be made any proportionate adjustments necessary to
reflect such change with respect to the Restricted Shares, notwithstanding that
the Restricted Shares are subject to the restrictions on transfer imposed by
subsection (ii) above. The
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<PAGE>
decision of the Compensation Committee as to the amount and timing of any such
adjustment shall be conclusive.
(v) Such rights are not subject to execution, attachment or other
process and no person shall be entitled to exercise any rights hereunder by
virtue of any attempted execution, attachment or other process.
(vi) The Restricted Shares are being acquired for investment and
not with a view to the distribution thereof within the meaning of the Securities
Act of 1933, as amended.
(b) Stock Options.
-------------
The Executive was awarded, on February 27, 1991, options (the
"Options") under the Company's 1985 Stock Option Plan for Key Employees (the
"1985 Plan") for 80,000 shares of Stock at an exercise price of $11.88 per share
subject, in the case of 10,000 of such shares, to the approval of an amendment
to Section 2 of the 1985 Plan by the Company's stockholders. To confirm such
grant, the Company and the Executive shall execute a Non-Qualified Stock Option
Agreement with respect to 36,400 of such shares in the form of Exhibit A
attached hereto, a Non Qualified Stock Option Agreement with respect to 10,000
of such shares in the form of Exhibit B attached hereto and an incentive Stock
Option Agreement with respect to 33,600 of such shares in the form of Exhibit C
attached hereto (collectively, the "option Agreements"). If such amendment to
the 1985 Plan is not approved by the Company's stockholders, the Company and the
Executive will agree on a mutually satisfactory arrangement to secure the
economic benefits of such grant for the Executive.
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<PAGE>
7. Supplemental Pension.
---------------------
In lieu of participation in the Company's Supplemental Pension Plan
applicable to other members of senior management, the Executive shall be
entitled to a supplemental pension (the "Special Pension"), which, when stated
as a single life annuity commencing at age 65, will provide an annual benefit
calculated as: (A) (i) the Executive's average Base Salary over the last 12
consecutive months of his employment with the Company times (ii) six percent
(6%) times the number of years the Executive is employed by the Company, up to a
maximum of five (5) years, reduced by (B) (x) the primary old age benefit
payable to the Executive under the Social Security Act, and (y) any benefit
payable to the Executive pursuant to any other pension or retirement plan or
program of the Company, other than any amounts payable under the Company's
Savings and Investment Plan on account of contributions thereunder made by the
Executive (but not matching contributions made by the Company or any of its
subsidiaries). A partial accrual of 1-1/2 percent (1-1/2%) per fiscal quarter
will be credited for purposes of clause (A) (ii) above for any partial year of
employment after the third anniversary of the Effective Date. It is understood
that the percentage calculated pursuant to clause (A)(ii) above shall never
exceed 30%.
The Executive shall be entitled to receive the Special Pension in any
form available under the Company's tax-qualified defined benefit pension plan
for salaried employees (the "Company Plan"), adjusted using such actuarial
assumptions and interest rates as are in effect under the Company Plan from time
to time (the "Plan Methods"). Amounts described in clause (B) above shall also
be determined using the Plan Methods.
-8-
<PAGE>
8. Other Benefits.
--------------
The Company will provide or make available to the Executive such other
benefits and perquisites as are provided to other members of senior management
from time to time. These shall include, without limitation, membership dues at
a country club, and an automobile to be made available pursuant to the Company's
automobile program. The Executive will be reimbursed for all reasonably
incurred business expenses properly accounted for.
9. Termination of Employment.
-------------------------
9.1 Death.
-----
In the event the Term is terminated due to the death of the
Executive:
A. Base Salary accrued to the date of the Executive's death will be
paid to the Executive's estate.
B. Other benefits shall be as set forth herein and as determined
under the terms and conditions of any other applicable plans, programs or
other coverages maintained by the Company, including, without limitation,
Section 6(a) hereof with respect to the Restricted Shares and the option
Agreements with respect to the Options.
9.2 Disability.
----------
In the event the Term is terminated due to the Executive's Disability
(as defined in the Company's long-term disability plan as in effect from time to
time):
A. Base Salary, at the rate in effect on the date of the Executive's
termination of employment, will continue to be paid until the Executive
begins receiving benefits under the Company's long-term disability plan.
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<PAGE>
B. Other benefits will be as set forth herein and as determined under
the terms and conditions of any other applicable plans, programs or other
coverages maintained by the Company, including, without limitation, Section
6(a) hereof with respect to the Restricted Shares and the Option Agreements
with respect to the Options.
9.3 Termination by the Company without Cause.
----------------------------------------
The Company may terminate the Executive's employment at any time
without Cause, in which case, except as otherwise provided in section 9.6:
A. The Executive shall continue to be paid his Base Salary as in
effect on the date of termination of employment as follows:
(i) if termination occurs on or prior to the second anniversary of the
Effective Date, during the 12 months from and after the end of the month in
which such termination occurs, and
(ii) if termination occurs thereafter, during the 24 months from
and after the end of the month in which such termination occurs.
B. Medical, hospitalization and any other health benefits shall
continue to be provided to the Executive by the Company for: (i) twelve
months, if termination occurs on or prior to the second anniversary of the
Effective Date, or (ii) twenty-four months, if termination occurs
thereafter; provided that the Company shall have no obligation to provide
such benefits from and after the date on which the Executive is eligible
for comparable coverage under any plan maintained by a successor employer.
C. Other benefits will be as set forth herein and as determined under
the terms and conditions of any other applicable plans, programs or other
coverages maintained by the
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<PAGE>
Company, including, without limitation, Section 6(a) hereof with respect to
the Restricted Shares and the Option Agreements with respect to the
Options.
9.4 Termination by the Company for Cause.
------------------------------------
If the Company terminates the Executive's employment for Cause,
the Executive shall be entitled only to such Base Salary as is accrued to the
date of termination. Other benefits will be as set forth herein and as
determined under the terms and conditions of any other applicable plans,
programs or other coverages maintained by the Company, including, without
limitation, Section 6(a) hereof with respect to the Restricted Shares and the
Option Agreements with respect to the Options. For purposes of this Agreement,
Cause shall mean:
A. the Executive's conviction of, or plea of nolo contendere to, a
---- ----------
felony or a crime involving moral turpitude;
B. the commission by the Executive of an act involving fraud with
respect to the Company or any of its subsidiaries;
C. the Executive's continued willful neglect of duties, after
written notice and an opportunity to correct; or
D. the Executive's gross misconduct in the performance of duties,
injurious to the reputation, business or operation of the Company or any of
its subsidiaries.
The Executive must be notified in writing of any termination of
his employment for Cause. The Executive will then have the right, within ten
days of receipt of such notice, to file a written request for review. In such
case, the Executive will be given the opportunity to be heard, personally or by
counsel, by the members of the Board who are not then employees of the Company
(the "Independent Directors") and a majority of the Independent Directors must
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<PAGE>
thereafter confirm that such termination is for Cause. If the Independent
Directors do not provide such confirmation, the termination shall be treated as
a termination by the Company without Cause.
9.5 Termination by the Executive.
----------------------------
The Executive may terminate the Term at any time, in which case
the Executive shall be entitled only to such Base Salary, except as otherwise
provided in Section 9.6, as is accrued to the date of termination. Other
benefits will be as set forth herein and as determined under the terms and
conditions of any other applicable plans, programs or other coverages maintained
by the Company, including, without limitation, Section 6(a) hereof with respect
to the Restricted Shares and the Option Agreements with respect to the Options.
9.6 Certain Terminations of Employment Following a Change in Control.
----------------------------------------------------------------
Following a Change in Control (as defined below), in the event
the Term is terminated by the Executive for Good Reason (as defined below) or by
the Company without Cause, in lieu of the provisions of Section 9.3 or 9.5:
A. Executive shall, within ten (10) days, receive a lump sum payment
equal to 200% of his Base Salary at the rate in effect on the date of
termination of employment.
B. Medical, hospitalization and any other health benefits shall
continue to be provided to the Executive by the Company for twenty-four
months; provided that the Company shall have no obligation to provide such
benefits from and after the date on which the Executive is eligible for
comparable coverage under any plan maintained by a successor employer.
C. Other benefits will be as set forth herein and as determined
under the terms and conditions of any other applicable plans, programs or
other coverages maintained by the
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<PAGE>
Company, including, without limitation, Section 8 hereof with respect to
the Restricted Shares and the Option Agreements with respect to the
options.
Notwithstanding anything herein to the contrary, if any portion of
the payments or benefits provided to the Executive under this Agreement and any
other plan or program of the Company constitutes a "parachute payment," as such
term is defined in Section 28OG(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), such payments and benefits shall be reduced to the extent
necessary so that no portion thereof shall be subject to the excise tax imposed
by Section 4999 of the Code. The determinations to be made with respect to this
paragraph shall be made by the Company. If within 30 days after the Company
gives the Executive notice that there will be a reduction pursuant to this
paragraph, the Executive gives the Company notice that he reasonably objects to
such determination, the Parties shall use reasonable efforts to resolve the
matter. If the Parties are unable to so resolve such matter within 30 days after
the Executive gives such notice, the matter shall be submitted to an accounting
firm (the "Auditor") jointly selected by the Company and the Executive. The
Auditor shall be a nationally recognized United States public accounting firm
that has not during the two years preceding the date of its selection acted, in
any way, on behalf of the Company, or any of its subsidiaries. If the Executive
and the Company cannot agree on the firm to serve as the Auditor, then the
Auditor shall be selected by lot from the "Big Five" nationally recognized
United States public accounting firms after eliminating one firm designated as
objectionable by each of the Company and the Executive. The fees and expenses of
the Auditor shall be paid 50% by the Company and 50% by the Executive. The
determination of the Auditor shall be final and binding upon the Parties. If the
notice described above is not given by the Executive within such 30 day period,
the Company's determination shall be final and binding upon
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<PAGE>
the Parties. If a final and binding determination is made that a reduction in
the aggregate of all payments due to the Executive upon a Change in control is
required by this paragraph, the Executive shall have the right to specify the
portion of such reduction, if any, that will be made under this Agreement and
each plan or program of the Company. If the Executive does not so specify within
60 days following the date of such determination, the Company shall determine,
in its sole discretion, the portion of such reduction, if any, to be made under
this Agreement and each plan or program of the Company.
For purposes of this Section 9.6, Good Reason shall mean (i) the
loss of the Executive's position as either President or Chief Executive officer,
or any significant loss of responsibility in connection with such position, or
the assignment of duties inconsistent with his position as Chief Executive
Officer, (ii) an attempted reduction in the Executive's compensation or
benefits, other than a reduction in benefits applicable to all employees of the
Company receiving such benefit or to all senior executives of the Company
receiving such benefit, or (iii) a relocation of the CompanyFs headquarters,
without the Executive's consent, beyond a fifty (50) mile radius of Chicago,
Illinois.
For purposes of this Agreement, Change in Control shall mean (i) any
individual, partnership, joint venture, association, trust, company or other
entity (including a "group" as defined in section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) becomes the owner of more than thirty-five
percent (35%) of the outstanding shares of Stock, (ii) the Incumbent Directors,
as defined below, cease to constitute a majority of the Board, or (iii) the
Company combines with another company, and the shareholders of the Company,
determined as of the date immediately before such combination, hold less than
fifty percent (50%) of. the total of all voting shares of the
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<PAGE>
entity resulting from such combination outstanding or to be outstanding as a
result of the combination; provided, however, that a Change in Control shall not
include any such ownership, change in directors or combination if the Executive
(i) receives payments in connection therewith from the Acquiring Person (as
defined below), other than payments pursuant to his employment arrangements with
the Company as in effect prior to such ownership, change in directors or
combination and payments with respect to shares of Stock and Options owned by
the Executive on the same terms as payments are made to other stockholders and
optionholders of the company, or (ii) owns (not including ownership prior to the
commencement of the transactions resulting in the Change in Control of less than
one percent of the outstanding stock of any class of an Acquiring Person which
is publicly traded) or acquires in connection with such ownership, change in
directors or combination (on terms different from those available to other
stockholders and optionholders of the Company) equity securities of the
Acquiring Person. For purposes of the foregoing, Acquiring Person means the
Person or Persons owning such shares, sponsoring such change in directors or
combining with the Company, and affiliates of such Person or Persons. "Incumbent
Directors" shall mean the directors of the Company on February 26, 1991 who were
not then employed by the Company, and any new director whose appointment or
election is not opposed in writing by a majority of the then Incumbent
Directors.
Following a Change in Control, the Company's obligation to make the
payments described in this Section 9.6 shall be absolute and unconditional and
shall not be subject to setoff, counterclaim, recoupment or other defenses or
rights the Company may have against the Executive. All amounts payable by the
Company under this Section 9.6 shall be paid without notice or demand. Each and
every payment made under this Section 9.6 by the Company shall be final and the
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<PAGE>
Company will not seek to recover all or any part of any such payment from the
Executive or other person entitled thereto for any reason whatsoever.
If there is a termination of the Term after a Change in Control and a
good faith dispute arises with respect to the enforcement of the Executive's
rights under this Agreement with respect thereto, the Executive shall recover
from the Company any reasonable attorney's fees and necessary costs and
disbursements incurred as a result of such dispute, regardless of the outcome,
together with prejudgment interest on any money judgment or arbitration award
obtained by the Executive with respect to such dispute, calculated at the Base
Rate of interest announced by Continental Bank, N.A., from time to time, from
the date that payments to him should have been made under this Agreement.
10. Confidential Information. The Executive acknowledges that the trade
------------------------
secrets and other confidential information and data obtained by him while
employed by the Company concerning the business or affairs of the Company and
its subsidiaries ("Confidential Information") are the property of the Company or
such subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Board, unless and to the extent that
such matters become generally known to and available for use by the public other
than as a result of Executive's acts or omissions to act or as may be required,
upon the advice of counsel, to comply with any lawful request made by a court or
other governmental agency. Executive shall deliver to the Company at the
termination of the Term, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to
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<PAGE>
the Confidential Information or the business of the Company or any subsidiary
which he may then possess or have under his control.
11. Non-Compete: Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the Company's trade secrets and with
other confidential information concerning the Company and its Subsidiaries and
that his services will be of special, unique and extraordinary value to the
Company. Therefore, Executive agrees that, during the Term and for two years
thereafter (one year if the Executive's employment is terminated without Cause
on or prior to the second anniversary of the Effective Date) (the "Noncompete
Period"), he shall not, directly or indirectly, own, manage, control,
participate in, consult with, render services for, or in any manner engage in
any business competing with the businesses of the Company or its subsidiaries as
such businesses exist or are in process on the date of the termination of the
Term, within any geographical area in which the Company or its subsidiaries
engage or plan to engage in such businesses. Nothing herein shall prohibit
Executive from (i) being a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such corporation, or
(ii) with the prior consent of the Board (which consent shall not be
unreasonably withheld), serving as a member of the board of directors of any
corporation (it being understood that in determining whether or not to grant
such consent the Board shall consider, among other factors, the extent to which
the members of any such board generally participate in the management of any
such corporation).
(b) During the Noncompete Period, Executive shall not, directly or
indirectly through another entity, (i) induce or attempt to induce any employee
(other than his secretary) of the
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<PAGE>
Company or any subsidiary of the Company to leave the employ of the Company or
such subsidiary, or in any way interfere with the relationship between the
Company or any subsidiary of the Company and any employee thereof, or (ii)
induce or attempt to induce any customer, supplier, licensee, partner or other
business relation of the Company or any subsidiary of the Company to cease doing
business with the Company or such subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee, partner or business
relation and the Company or any subsidiary of the Company.
12. Payment Limitations.
-------------------
Notwithstanding anything contained in this Agreement to the contrary,
the Company shall not be obligated to make any payment under this Agreement
after the date on which the Executive is in breach of Section 10 or 11 hereof.
13. Enforcement.
-----------
If, at the time of enforcement of Section 10 or 11 of this Agreement,
a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. Because the Executive's
services are unique and because the Executive has access to Confidential
information, the Parties agree that money damages would be an inadequate remedy
for any breach of this Agreement. Therefore, in the event a breach or threatened
breach of this Agreement, the Company or its successors or assigns may, in
addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce, or prevent any violation of, the provisions
hereof (without posting a bond or other security).
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<PAGE>
14. Arbitration.
------------
The Parties agree that any controversy or claim arising out of or
relating to this Agreement, or the breach of any provision hereof, or the terms
or conditions of employment, including whether such controversy or claim is
arbitrable, will be settled by arbitration in Chicago, Illinois, in accordance
with the rules for commercial arbitration of the American Arbitration
Association as in effect at the time a demand for arbitration under the rules is
made, and judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The decision of the arbitrators,
including determination of the amount of any damages suffered, will be
conclusive, final and binding on the Parties, their heirs, executors,
administrators, successors and assigns. Subject to Section 9.6 above, the cost
of arbitration incurred by either Party will be borne by that Party unless
otherwise determined by the arbitrators.
15. Withholding; Other Tax Matters.
------------------------------
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive, his spouse, his estate or
beneficiaries, will be subject to withholding of such amounts relating to taxes
as the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation. In lieu of withholding such amounts in whole or in
part, the Company may, in its sole discretion, accept other provisions for
payment of taxes as required by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold such taxes have
been satisfied. As a condition precedent to his receipt of the Restricted Shares
hereunder, the Executive agrees to pay to the Company at such times as the
Committee shall determine such amounts as the Committee shall deem necessary to
satisfy any withholding taxes due on income that the Executive recognizes as a
result of the lapse of the restrictions described in
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subsection of Section 6(a) hereof. The Executive has elected, in his sole
discretion, not to make an election with the Internal Revenue Service under
Section 83(b) of the Code. Notwithstanding the foregoing, the Parties
acknowledge and agree that the Executive is responsible for all federal, state
and local income and other taxes payable as a result of any transaction
contemplated by this Agreement or any other plan, program or coverage maintained
by the Company.
16. Assignability; Binding Nature.
-----------------------------
This Agreement is binding upon, and will inure to the benefit of, the
Parties and their respective successors, heirs, administrators, executors and
assigns. No rights or obligations of the Executive under this Agreement may be
assigned or transferred by the Executive except that (a) his rights to
compensation and benefits hereunder, which rights will remain subject to the
limitations of this Agreement, may be transferred by will or operation of law,
and (b) his rights under employee benefit plans or programs as described in
Section 8 above, may be assigned or transferred in accordance with such plans,
programs or regular practices thereunder. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that such
rights or obligations may be assigned or transferred by operation of law in the
event of a merger or consolidation in which the Company is not the continuing
entity, or the sale or liquidation of all or substantially all of the assets of
the Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law.
17. Entire Agreement.
----------------
-20-
<PAGE>
This Agreement (including the documents referred to herein) contains
the entire agreement between the Parties concerning the subject matter hereof
and supersedes all prior agreements, understandings, discussions, negotiations,
and undertakings, whether written or oral, between the Parties with respect
thereto.
18. Amendments and Waivers.
----------------------
This Agreement may not be modified or amended except by a writing
signed by both Parties. A Party may waive compliance by the other Party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving Party. Any
waiver will be limited to the facts or circumstances giving rise to the
noncompliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or provision of this Agreement, nor will it be deemed a waiver of
compliance with respect to any other facts or circumstances then or thereafter
occurring.
19. Notices.
-------
Any notice given hereunder will be in writing and will be deemed given
when delivered personally or by courier, or five days after being mailed,
certified or registered mail, duly addressed to the Party concerned at the
address indicated below or at such other address as such Party may subsequently
provide, in accordance with the notice and delivery provisions of this Section
19, such notice and delivery:
-21-
<PAGE>
To the Company:
Material Sciences Corporation
2300 East Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Secretary
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Francis J. Gerlits, P.C.
To the Executive:
G. Robert Evans
P.O. Box 710
33 West Army Trail Road
Wayne, Illinois 60184
20. Severability.
------------
In the event that any provision or portion of this Agreement will be
determined to be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement will be unaffected thereby and will
remain in full force and effect to the fullest extent permitted by law.
21. Survivorship.
------------
The respective rights and obligations of the Parties hereunder will
survive any termination of the Term.
-22-
<PAGE>
22. References.
----------
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive will be deemed,
where appropriate, to refer to his legal representative or, where appropriate,
to his beneficiary or beneficiaries.
23. Governing Law.
-------------
This Agreement will be governed by and construed and interpreted in
accordance with the laws of the State of Illinois without reference to the
principles of conflicts of law.
24. Headings.
--------
The headings of Sections contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first written above.
Material Sciences Corporation
By:__________________________________
Its:_________________________________
_____________________________________
G. Robert Evans
-23-
<PAGE>
EXHIBIT A
MATERIAL SCIENCES CORPORATION
-----------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
(1985 STOCK OPTION PLAN FOR KEY EMPLOYEES)
------------------------------------------
Material Sciences Corporation, a Delaware corporation (the "Company"),
hereby grants to G. Robert Evans (the "Employee"), pursuant to the Material
Science Corporation 1985 Stock Option Plan for Key Employees (the "Plan"), an
option to purchase from the Company 36,400 shares of its common stock, $.02 par
value (the "Common Stock"), at a price of $11.88 per share (the "Option Price"),
to be exercisable on the terms and conditions set forth herein. This option
shall expire on February 27, 2001 (the "Expiration Date"), subject to earlier
expiration in connection with the termination of your employment or your death
as provided in paragraphs 1, 2, 8 and 10 below. This option is not intended to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code of 2986, as amended (the "Code"), and will be treated accordingly by the
Company and the Employee.
1. The option to purchase shares hereunder may be exercised only to the
extent that it has vested and, except as provided in paragraphs 8 and 10 below,
only if on the date of exercise the Employee has been continuously employed by
the Company since February 27, 1991. The option shall vest and become
exercisable as follows:
(a) 9,100 shares of Common Stock shall vest on the earlier of (i)
February 27, 1993 or (ii) the date on which the price of a share of Common Stock
on any domestic securities exchange on which shares Common Stock are listed (the
"Trade Price") equals or exceeds $25.00;
-1-
<PAGE>
(b) an additional 9,200 shares of Common Stock shall vest on the
earlier of (i) February 27, 1994 or (ii) the date on which the Trade Price
equals or exceeds $30.00;
(c) an additional 9,100 shares of Common Stock shall vest on the
earlier of (i) February 27, 1995 or (ii) the date on which the Trade Price
equals or exceeds $40.00; and
(d) an additional 9,100 shares of Common Stock shall vest on the
earlier of (i) February 27, 1996 or (ii) the date on which the Trade Price
equals or exceeds $50.00.
Except as provided in paragraph 2 below, upon the Employee ceasing to
be employed by the Company for any reason (including death or disability), any
portion of this option that was not exercisable and not vested on the date of
such employment termination shall expire and be forfeited as of such date.
Leaves of absence for periods and purposes conforming to the personnel policies
of the Company and approved by the Compensation Committee (the "Committee") of
the Board of Directors of the Company (the "Board") shall not be deemed
termination of employment or interruptions of continuous service.
2. Notwithstanding paragraph 1 above, if, following a Change in Control
(as defined below), the employment of the Employee with the Company is
terminated by the Employee for Good Reason (as defined below) or by the Company
without Cause (as defined below), this option shall vest and become exercisable
with respect to a number of shares of Common Stock equal to 50% of the number of
shares of Common Stock subject to this option that were not vested on the date
of such employment termination. The option with respect to the shares of Common
Stock that remain unvested shall expire and be forfeited as of the date of such
employment termination. For purposes of this paragraph, Change in Control, Good
Reason and Cause shall have the respective
-2-
<PAGE>
meanings assigned to such terms in the Employment Agreement made April __, 1991
by and between the Company and the Employee.
3. Subject to the limitations herein set forth, exercise of this option
shall be by delivery of written notice to the Secretary of the Company in Elk
Grove Village, Illinois, specifying the number of shares to be purchased,
provided, however, that no fractional shares may be purchased hereunder at any
time, and the Company shall not be obligated to make any payment in lieu of
fractional shares. Payment shall be made either (i) in cash or by check, bank
draft or money order to the order of Material Sciences Corporation
(collectively, "cash"), or (ii) with the consent of the Board, in shares of
Common Stock (valued as of the date of the notice of exercise) with a value
equal to or less than the total option price, plus cash in the amount, if any,
by which the total option price exceeds the value of such shares of Common
Stock. Payment for shares with respect to options exercised for cash shall be
delivered with the notice specifying the number of shares being purchased.
Payment for shares with respect to options exercised for Common Stock and cash,
if any, shall be delivered to the Treasurer of the Company not later than the
end of the third business day after the exercise date. In the case of payment in
stock, such payment shall be made by delivery of the necessary share
certificates, with executed stock powers attached, to the Treasurer of the
Company or, if such certificates have not yet been delivered to the optionee, by
written notice to the Treasurer of the Company requesting that the shares
represented by such certificates be applied toward payment as hereinabove
provided.
4. The Employee hereby represents that any shares which are not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
purchased upon exercise of this option will be purchased for investment and not
with a view to the distribution thereof within the meaning
-3-
<PAGE>
of the Securities Act; and if requested by the Company, the Employee shall
submit a written statement, in form satisfactory to counsel for the Company, to
the effect that such representation is true and correct as of the date of
purchase of any shares hereunder. As a further condition precedent to the
exercise of this option, the Employee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance of the Common Stock and, in connection therewith, shall execute any
documents which the Committee shall, in its sole discretion, deem necessary or
advisable.
5. As a condition precedent to the exercise of this option, the Employee
shall, if requested by the Company, pay or deliver to the Company (or, in the
case of shares of Common Stock, have the Company hold back), in addition to the
option price, such amount of cash and/or shares of Common Stock (valued as of
the date of exercise) as the Company may be required, under applicable federal,
state or local law or regulations, to withhold and pay over as income or other
withholding taxes.
6. Upon the exercise of this option in whole or in part, the Company
shall deliver a certificate or certificates representing the number of shares
purchased against full payment therefore in the manner set forth in paragraph 3
hereof and the Company shall pay all original issue or transfer taxes and all
other fees and expenses incident to such delivery, except as otherwise provided
in paragraph 5 hereof.
7. The Employee shall not be entitled to any privileges of ownership with
respect to the shares subject to this option unless and until purchased and
delivered upon the exercise of this option, in whole or in part.
-4-
<PAGE>
8. Subject to paragraph 15 below, if the Employee shall cease to be
employed by the Company for any reason other than death, this option may be
exercised by the Employee within three months after he ceases to be employed by
the Company (12 months if he ceases to be so employed due to total and permanent
disability), but in no event after the Expiration Date.
9. Neither this option nor any rights hereunder may be transferred other
than by will or the laws of descent and distribution, and during his lifetime
this option shall be exercisable only by the Employee. Any other transfer or any
attempted assignment, pledge or hypothecation, whether or not by operation of
law, shall be void. This option shall not be subject to execution, attachment or
other process, and no person shall be entitled to exercise any rights of the
Employee hereunder or possess any rights hereunder by virtue of any attempted
execution, attachment or other process.
10. Subject to paragraph 15 below, if the Employee shall die while
employed by the Company, within twelve months after ceasing to be employed by
the Company due to total and permanent disability or within three months after
ceasing to be employed by the Company for any other reason, this option may be
exercised at such time and to such extent that the Employee, had he lived, would
have been entitled to exercise such option (but in no event after the Expiration
Date or the expiration of one year from the date of the Employee's death) either
by the person designated in the Employee's will for such purpose or, if no such
person is so designated or if the Employee dies intestate, the Employee's
personal representative.
11. The Company shall at all times prior to the Expiration Date reserve
and keep available, either in its treasury or out of its authorized but unissued
shares of Common Stock, the full number of shares subject hereto from time to
time.
-5-
<PAGE>
12. The Company hereby waives any rights it may have under Section 9 of
the Plan to repurchase shares of Common Stock purchased upon the exercise of
this option.
13. Upon the occurrence of any of the following events prior to the
Expiration Date, this option shall be adjusted as follows:
(a) in case the number of outstanding shares of Common Stock shall be
increased by stock split, stock dividend, recapitalization or other similar
relevant change in the capitalization of the Company after the date hereof
(which shall not include the sale by the Company of shares of Common Stock or
securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately increased and the
option price per share shall be proportionately decreased;
(b) in case the number of outstanding shares of Common Stock shall be
decreased by reverse stock split, combination of shares, recapitalization or
other similar relevant change in the capitalization of the Company (which shall
not include the purchase or retirement by the Company of shares of Common Stock
or securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately decreased and the
option price per share shall be proportionately increased; and
(c) in case the Company shall be a party to a merger, consolidation
or any other reorganization not described in clauses (a) and (b) above, or shall
sell all or substantially all of its assets, and pursuant to such transaction
the outstanding shares of Common Stock shall be exchanged for other shares or
securities of the Company or of another corporation, the Employee shall have the
right to purchase, at the aggregate option price provided for in this option and
on the same terms and conditions (including with respect to vesting), the kind
and number of shares or other securities of the Company or of such other
corporation which would have been issuable to him in respect of the number of
shares of Common Stock subject to this option immediately prior to the effective
date of such transaction if such shares had been then owned by him. The Company
agrees to use its best efforts to provide for the preservation of the Employee's
rights as described in the second sentence of Section 13 of the Plan.
Any adjustment pursuant to this paragraph 13 shall be effected in a manner such
that the difference between the aggregate fair market value of the shares or
other securities subject to this option immediately after giving effect to such
adjustment and the aggregate option price of such shares or other securities
shall be substantially equal to (but shall not be greater than) the difference
between the aggregate fair market value of the shares of Common Stock subject to
this option immediately
-6-
<PAGE>
prior to such adjustment and the aggregate option price of such shares. The
decision of the Board as to the exact manner, amount and tinting of any such
adjustment shall be conclusive.
14. As used in this option, employment by the Company shall include
employment by a corporation which is a "parent corporation" or a "subsidiary
corporation" of the Company, as such terms are defined in subsections (e) and
(f) of Section 424 of the Code, and employment by any corporation, or a "parent
corporation" or "subsidiary corporation" of such corporation, assuming this
option, or issuing a stock option in lieu thereof, in a transaction to which
Section 424 (a) of the Code shall apply.
15. This option is subject to the condition that if at any time the
Committee shall reasonably determine, in its discretion, that the listing of the
shares subject hereto on any securities exchange, or the registration or
qualification of such shares under any federal or state law, or the consent or
approval of any regulatory body, shall be necessary or desirable as a condition
of , or in connection with, the granting of this option or the purchase or
delivery of shares hereunder, this option may not be exercised, in whole or in
part, and the shares hereunder may not be delivered, as the case may be, unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Committee; provided, however, that to the extent this option is to expire
prior to the Expiration Date at a time when this option may not be exercised due
to the provisions of this paragraph 15, this option shall continue to be
exercisable until the earlier of (i) one month after the date the exercise of
this option is not so restricted by this paragraph 15 and (ii) the Expiration
Date. The Company agrees to make every reasonable effort to effect or obtain any
such listing, registration, qualification, consent or approval.
-7-
<PAGE>
16. In no event shall the granting of this option or its acceptance by the
Employee give or be deemed to give the Employee any right to continue in the
employment of the Company or any of its subsidiaries.
17. The Committee shall have the right to resolve all questions which may
arise in connection with this option or its exercise.
18. This option shall be binding upon and inure to the benefit of any
successor or successors of the Company and any person or persons who shall, upon
the death of the Employee, acquire any rights under paragraph 10 hereof.
19. The parties agree to execute such further instruments and to take such
further actions as may reasonably be required to carry out the intent of this
Agreement.
20. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post office, by certified mail with postage and fees prepaid,
return receipt requested, addressed to the other party hereto at his address
hereinafter shown below his signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party.
21. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
22. This Agreement shall be governed by and construed under the laws of
the State of Illinois.
-8-
<PAGE>
23. This option shall be null and void unless the Employee shall accept
the same below.
Dated this _____ day of ____________, 199__.
MATERIAL SCIENCES CORPORATION
By:__________________________________
Its:_________________________________
Accepted this ___ day
- ---------------------
of _________, 1991.
____________________
G. Robert Evans
Address: _________________
__________________________
__________________________
-9-
<PAGE>
EXHIBIT B
---------
MATERIAL SCIENCES CORPORATION
-----------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
(1985 STOCK OPTION PLAN FOR KEY EMPLOYEES)
------------------------------------------
Material Sciences Corporation, a Delaware corporation (the "Company"),
hereby grants to G. Robert Evans (the "Employee"), pursuant to the Material
Science Corporation 1985 Stock Option Plan for Key Employees (the "Plan"), an
option to purchase from the Company 10,000 shares of its common stock, $.02 par
value (the "Common Stock"), at a price of $11.88 per share (the "Option Price"),
to be exercisable on the terms and conditions set forth herein. This option
shall expire on February 27, 2001 (the "Expiration Date"), subject to earlier
expiration in connection with the termination of your employment or your death
as provided in paragraphs 1, 2, 8 and 10 below. This option is not intended to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will be treated accordingly by the
Company and the Employee. Notwithstanding anything to the contrary herein, this
option shall become null and void if the Company's stockholders do not approve
an amendment to the Plan deleting the second paragraph of Section 2 thereof
prior to April 10, 1992.
1. The option to purchase shares hereunder may be exercised only to the
extent that it has vested and, except as provided in paragraphs 8 and 10 below,
only if on the date of exercise the Employee has been continuously employed by
the Company since February 27, 1991. The option shall vest and become
exercisable as follows:
-1-
<PAGE>
(a) 2,500 shares of Common Stock shall vest on the earlier of (i)
February 27, 1993 or (ii) the date on which the price of a share of Common Stock
on any domestic securities exchange on which shares of Common Stock are listed
(the "Trade Price") equals or exceeds $25.00;
(b) an additional 2,500 shares of Common Stock shall vest on the
earlier of (i) February 27, 1994 or (ii) the date on which the Trade Price
equals or exceeds $30.00;
(c) an additional 2,500 shares of Common Stock shall vest on the
earlier of (i) February 27, 1995 or (ii) the date on which the Trade Price
equals or exceeds $40.00; and
(d) an additional 2,500 shares of Common Stock shall vest on the
earlier of (i) February 27, 1996 or (ii) the date on which the Trade Price
equals or exceeds $50.00.
Except as provided in paragraph 2 below, upon the Employee ceasing to
be employed by the Company for any reason (including death or disability), any
portion of this option that was not exercisable and not vested on the date of
such employment termination shall expire and be forfeited as of such date.
Leaves of absence for periods and purposes conforming to the personnel policies
of the Company and approved by the Compensation Committee (the "Committee") of
the Board of Directors of the Company (the "Board") shall not be deemed
termination of employment or interruptions of continuous service.
2. Notwithstanding paragraph 1 above, if, following a Change in Control
(as defined below), the employment of the Employee with the Company is
terminated by the Employee for Good Reason (as defined below) or by the Company
without Cause (as defined below), this option shall vest and become exercisable
with respect to a number of shares of Common Stock equal to 50% of the number of
shares of Common Stock subject to this option that were not vested on the date
of such employment termination. The option with respect to the shares of Common
Stock that
-2-
<PAGE>
remain unvested shall expire and be forfeited as of the date of such employment
termination. For purposes of this paragraph, Change in Control, Good Reason and
Cause shall have the respective meanings assigned to such terms in the
Employment Agreement made April ___, 1991 by and between the Company and the
Employee (the "Employment Agreement").
3. Subject to the limitations herein set forth, exercise of this option
shall be by delivery or written notice to the Secretary of the Company in Elk
Grove Village, Illinois, specifying the number of shares to be purchased,
provided, however, that no fractional shares may be purchased hereunder at any
time, and the Company shall not be obligated to make any payment in lieu of
fractional shares. Payment shall be made either (i) in cash or by check, bank
draft or money order to the order of Material Sciences Corporation
(collectively, "cash"), or (ii) with the consent of the Board, in shares of
Common Stock (valued as of the date of the notice of exercise) with a value
equal to or less than the total option price, plus cash in the amount, if any,
by which the total option price exceeds the value of such shares of Common
Stock. Payment for shares with respect to options exercised for cash shall be
delivered with the notice specifying the number of shares being purchased.
Payment for shares with respect to options exercised for Common Stock and cash,
if any, shall be delivered to the Treasurer of the company not later than the
end of the third business day after the exercise date. In the case of payment in
stock, such payment shall be made by delivery of the necessary share
certificates, with executed stock powers attached, to the Treasurer of the
Company or, if such certificates have not yet been delivered to the optionee, by
written notice to the Treasurer of the Company requesting that the shares
represented by such certificates be applied toward payment as hereinabove
provided.
-3-
<PAGE>
4. The Employee hereby represents that any shares which are not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
purchased upon exercise of this option will be purchased for investment and not
with a view to the distribution thereof within the meaning of the Securities
Act; and if requested by the Company, the Employee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation is true and correct as of the date of purchase of any shares
hereunder. As a further condition precedent to the exercise of this option, the
Employee shall comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance of the Common Stock
and, in connection therewith, shall execute any documents which the Committee
shall, in its sole discretion, deem necessary or advisable.
5. As a condition precedent to the exercise of this option, the Employee
shall, if requested by the Company, pay or deliver to the Company (or, in the
case of shares of Common Stock, have the Company hold back), in addition to the
option price, such amount of cash and/or shares of Common Stock (valued as of
the date of exercise) as the Company may be required, under applicable federal,
state or local law or regulations, to withhold and pay over as income or other
withholding taxes.
6. Upon the exercise of this option in whole or in part, the Company
shall deliver a certificate or certificates representing the number of shares
purchased against full payment therefore in the manner set forth in paragraph 3
hereof and the Company shall pay all original issue or transfer taxes and all
other fees and expenses incident to such delivery, except as otherwise provided
in paragraph 5 hereof.
-4-
<PAGE>
7. The Employee shall not be entitled to any privileges of ownership with
respect to the shares subject to this option unless and until purchased and
delivered upon the exercise of this option, in whole or in part.
8. Subject to paragraph 15 below, if the Employee shall cease to be
employed by the Company for any reason other than death, this option may be
exercised by the Employee within three months after he ceases to be employed by
the Company (12 months if he ceases to be so employed due to total and permanent
disability), but in no event after the Expiration Date.
9. Neither this option nor any rights hereunder may be transferred other
than by will or the laws of descent and distribution, and during his lifetime
this option shall be exercisable only by the Employee. Any other transfer or any
attempted assignment, pledge or hypothecation, whether or not by operation of
law, shall be void. This option shall not be subject to execution, attachment or
other process, and no person shall be entitled to exercise any rights of the
Employee hereunder or possess any rights hereunder by virtue of any attempted
execution, attachment or other process.
10. Subject to paragraph 15 below, if the Employee shall die while
employed by the Company, within twelve months after ceasing to be employed by
the Company due to total and permanent disability or within three months after
ceasing to be employed by the Company for any other reason, this option may be
exercised at such time and to such extent that the Employee, had he lived, would
have been entitled to exercise such option (but in no event after the Expiration
Date or the expiration of one year from the date of the Employee's death) either
by the person designated in the Employee's will for such purpose or, if no such
person is so designated or if the Employee dies intestate, the Employee's
personal representative.
-5-
<PAGE>
11. The Company shall at all times prior to the Expiration Date reserve
and keep available, either in its treasury or out of its authorized but unissued
shares of Common Stock, the full number of shares subject hereto from time to
time.
12. The Company hereby waives any rights it may have under Section 9 of
the Plan to repurchase shares of Common Stock purchased upon the exercise of
this option.
13. Upon the occurrence of any of the following events prior to the
Expiration Date, this option shall be adjusted as follows:
(a) in case the number of outstanding shares of Common Stock shall be
increased by stock split, stock dividend, recapitalization or other similar
relevant change in the capitalization of the Company after the date hereof
(which shall not include the sale by the Company of shares of Common Stock or
securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately increased and the
option price per share shall be proportionately decreased;
(b) in case the number of outstanding shares of Common Stock shall be
decreased by reverse stock split, combination of shares, recapitalization or
other similar relevant change in the capitalization of the Company (which shall
not include the purchase or retirement by the Company of shares of Common Stock
or securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately decreased and the
option price per share shall be proportionately increased; and
(c) in case the company shall be a party to a merger, consolidation
or any other reorganization not described in clauses (a) and (b) above, or shall
sell all or substantially all of its assets, and pursuant to such transaction
the outstanding shares of Common Stock shall be exchanged for other shares or
securities of the Company or of another corporation, the Employee shall have the
right to purchase, at the aggregate option price provided for in this option and
on the same terms and conditions (including with respect to vesting), the kind
and number of shares or other securities of the Company or of such other
corporation which would have been issuable to him in respect of the number of
shares of Common Stock subject to this option immediately prior to the effective
date of such transaction if such shares had been then owned by him. The Company
agrees to use its best efforts to provide for the preservation of the Employee's
rights as described in the second sentence of Section 13 of the Plan.
-6-
<PAGE>
Any adjustment pursuant to this paragraph 13 shall be effected in a manner such
that the difference between the aggregate fair market value of the shares or
other securities subject to this option immediately after giving effect to such
adjustment and the aggregate option price of such shares or other securities
shall be substantially equal to (but shall not be greater than) the difference
between the aggregate fair market value of the shares of Common Stock subject to
this option immediately prior to such adjustment and the aggregate option price
of such shares. The decision of the Board as to the exact manner, amount and
timing of any such adjustment shall be conclusive.
14. As used in this option, employment by the Company shall include
employment by a corporation which is a "parent corporation" or a "subsidiary
corporation" of the Company, as such terms are defined in subsections (e) and
(f) of Section 424 of the Code, and employment by any corporation, or a "parent
corporation" or "subsidiary corporation" of such corporation, assuming this
option, or issuing a stock option in lieu thereof, in a transaction to which
Section 424(a) of the Code shall apply.
15. This option is subject to the condition that if at any time the
Committee shall reasonably determine, in its discretion, that the listing of the
shares subject hereto on any securities exchange, or the registration or
qualification of such shares under any federal or state law, or the consent or
approval of any regulatory body, shall be necessary or desirable as a condition
of, or in connection with, the granting of this option or the purchase or
delivery of shares hereunder, this option may not be exercised, in whole or in
part, and the shares hereunder may not be delivered, as the case may be, unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Committee; provided, however, that to the extent this option is to expire
prior to the Expiration Date at a time
-7-
<PAGE>
when this option may not be exercised due to the provisions of this paragraph
15, this option shall continue to be exercisable until the earlier of (i) one
month after the date the exercise of this option is not so restricted by this
paragraph 15 and (ii) the Expiration Date. The Company agrees to make every
reasonable effort to effect or obtain any such listing, registration,
qualification, consent or approval.
16. In no event shall the granting of this option or its acceptance by the
Employee give or be deemed to give the Employee any right to continue in the
employment of the Company or any of its subsidiaries.
17. The Committee shall have the right to resolve all questions which may
arise in connection with this option or its exercise.
18. This option shall be binding upon and inure to the benefit of any
successor or successors of the Company and any person or persons who shall, upon
the death of the Employee, acquire any rights under paragraph 10 hereof.
19. The parties agree to execute such further instruments and to take such
further actions as may reasonably be required to carry out the intent of this
Agreement.
20. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by certified mail with postage and fees prepaid,
return receipt requested, addressed to the other party hereto at his address
hereinafter shown below his signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party.
21. This Agreement, together with the Employment Agreement, constitutes
the entire agreement of the parties with respect to the subject matter hereof.
-8-
<PAGE>
22. This Agreement shall be governed by and construed under the laws of
the State of Illinois.
23. This option shall be null and void unless the Employee shall accept
the same below.
Dated this _____ day of ____________, 199__.
MATERIAL SCIENCES CORPORATION
By:__________________________________
Its:_________________________________
Accepted this ___ day
of _________, 1991.
__________________________
G. Robert Evans
Address: _________________
__________________________
__________________________
-9-
<PAGE>
EXHIBIT C
MATERIAL SCIENCES CORPORATION
-----------------------------
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
(1985 STOCK OPTION PLAN FOR KEY EMPLOYEES)
------------------------------------------
Material Sciences Corporation, a Delaware corporation (the "Company"),
hereby grants to G. Robert Evans (the "Employee"), pursuant to the Material
Science corporation 1985 Stock Option Plan for Key Employees (the "Plan"), an
option to purchase from the Company 33,600 shares of its common stock, $.02 par
value (the "Common Stock"), at a price of $11.88 per share (the "Option Price"),
to be exercisable on the terms and conditions set forth herein. This option
shall expire on February 26, 2001 (the "Expiration Date"), subject to earlier
expiration in connection with the termination of your employment or your death
as provided in paragraphs 1, 2, 8 and 10 below. This option is intended to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will be treated accordingly by the
Company and the Employee.
1. The option to purchase shares hereunder may be exercised only to the
extent that it has vested and, except as provided in paragraphs 8 and 10 below,
only if on the date of exercise the Employee has been continuously employed by
the Company since February 27, 1991. The option shall vast and become
exercisable as follows:
(a) 8,400 shares of Common Stock shall vast on the earlier of (i)
February 27, 1993 or (ii) the date on which the price of a share of Common Stock
on any domestic securities exchange on which shares of Common Stock are listed
(the "Trade Price") equals or exceeds $25.00;
-1-
<PAGE>
(b) an additional 8,400 shares of Common Stock shall vest on the
earlier of (i) February 27, 1994 or (ii) the date on which the Trade Price
equals or exceeds $30.00;
(c) an additional 8,400 shares of Common Stock shall vest on the
earlier of (i) February 27, 1995 or (ii) the date on which the Trade Price
equals or exceeds $40.00; and
(d) an additional 8,400 shares of Common Stock shall vest on the
earlier of (i) February 27, 1996 or (ii) the date on which the Trade Price
equals or exceeds $50.00.
Except as provided in paragraph 2 below, upon the Employee ceasing to
be employed by the Company for any reason (including death or disability), any
portion of this option that was not exercisable and not vested on the date of
such employment termination shall expire and be forfeited as of such date.
Leaves of absence for periods and purposes conforming to the personnel policies
of the Company and approved by the Compensation Committee (the "Committee") of
the Board of Directors of the Company (the "Board") shall not be deemed
termination of employment or interruptions of continuous service.
2. Notwithstanding paragraph 1 above, if, following a Change in Control
(as defined below), the employment of the Employee with the Company is
terminated by the Employee for Good Reason (as defined below) or by the Company
without Cause (as defined below), this option shall vest and become exercisable
with respect to a number of shares of Common Stock equal to 50% of the number of
shares of Common Stock subject to this option that were not vested on the date
of such employment termination. The option with respect to the shares of Common
Stock that remain unvested shall expire and be forfeited as of the date of such
employment termination. For purposes of this paragraph, Change in Control, Good
Reason and Cause shall have the respective
-2-
<PAGE>
meanings assigned to such terms in the Employment Agreement made April ___, 1991
by and between the Company and the Employee.
3. Subject to the limitations herein set forth, exercise of this option
shall be by delivery of written notice to the Secretary of the Company in Elk
Grove Village, Illinois, specifying the number of shares to be purchased,
provided, however, that no fractional shares may be purchased hereunder at any
time, and the Company shall not be obligated to make any payment in lieu of
fractional shares. Payment shall be made either (i) in cash or by check, bank
draft or money order to the order of Material Sciences Corporation
(collectively, "cash"), or (ii) with the consent of the Board, in shares of
Common Stock (valued as of the date of the notice of exercise) with a value
equal to or less than the total option price, plus cash in the amount, if any,
by which the total option price exceeds the value of such shares of Common
Stock. Payment for shares with respect to options exercised for cash shall be
delivered with the notice specifying the number of shares being purchased.
Payment for shares with respect to options exercised for Common Stock and cash,
if any, shall be delivered to the Treasurer of the Company not later than the
end of the third business day after the exercise date. In the case of payment in
stock, such payment shall be made by delivery of the necessary share
certificates, with executed stock powers attached, to the Treasurer of the
Company or, if such certificates have not yet been delivered to the optionee, by
written notice to the Treasurer of the Company requesting that the shares
represented by such certificates be applied toward payment as hereinabove
provided.
4. The Employee hereby represents that any shares -which -are not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
purchased upon exercise of this option will be purchased for investment and not
with a view to the distribution thereof within the meaning
-3-
<PAGE>
of the Securities Act; and if requested by the Company, the Employee shall
submit a written statement, in form satisfactory to counsel for the Company, to
the effect that such representation is true and correct as of the date of
purchase of any shares hereunder. As a further condition precedent to the
exercise of this option, the Employee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance of the Common Stock and, in connection therewith, shall execute any
documents which the Committee shall, in its sole discretion, deem necessary or
advisable.
5. As a condition precedent to the exercise of this option, the Employee
shall, if requested by the Company, pay or deliver to the Company (or, in the
case of shares of Common Stock, have the Company hold back), in addition to the
option price, such amount of cash and/or shares of Common Stock (valued as of
the date of exercise) as the Company may be required, under applicable federal,
state or local law or regulations, to withhold and pay over as income or other
withholding taxes.
6. Upon the exercise of this option in whole or in part, the Company
shall deliver a certificate or certificates representing the number of shares
purchased against full payment therefore in the manner set forth in paragraph 3
hereof and the Company shall pay all original issue or transfer taxes and all
other fees and expenses incident to such delivery, except as otherwise provided
in paragraph 5 hereof.
7. The Employee shall not be entitled to any privileges of ownership with
respect to the shares subject to this option unless and until purchased and
delivered upon the exercise of this option, in whole or in part.
-4-
<PAGE>
8. Subject to paragraph 15 below, if the Employee shall cease to be
employed by the Company for any reason other than death, this option may be
exercised by the Employee within three months after he ceases to be employed by
the Company (12 months if he ceases to be so employed due to total and permanent
disability), but in no event after the Expiration Date.
9. Neither this option nor any rights hereunder may be transferred other
than by will or the laws of descent and distribution, and during his lifetime
this option shall be exercisable only by the Employee. Any other transfer or any
attempted assignment, pledge or hypothecation, whether or not by operation of
law, shall be void. This option shall not be subject to execution, attachment or
other process, and no person shall be entitled to exercise any rights of the
Employee hereunder or possess any rights hereunder by virtue of any attempted
execution, attachment or other process.
10. Subject to paragraph 15 below, if the Employee shall die while
employed by the Company, within twelve months after ceasing to be employed by
the Company due to total and permanent disability or within three months after
ceasing to be employed by the Company for any other reason, this option may be
exercised at such time and to such extent that the Employee, had he lived, would
have been entitled to exercise such option (but in no event after the Expiration
Date or the expiration of one year from the date of the Employee's death) either
by the person designated in the Employee's will for such purpose or, if no such
person is so designated or if the Employee dies intestate, the Employee's
personal representative.
11. The company shall at all times prior to the Expiration Date reserve
and keep available, either in its treasury or out of its authorized but unissued
shares of Common Stock, the full number of shares subject hereto from time to
time.
-5-
<PAGE>
12. The Company hereby waives any rights it may have under Section 9 of
the Plan to repurchase shares of Common Stock purchased upon the exercise of
this option.
13. Upon the occurrence of any of the following events prior to the
Expiration Date, this option shall be adjusted as follows:
(a) in case the number of outstanding shares of Common Stock shall be
increased by stock split, stock dividend, recapitalization or other similar
relevant change in the capitalization of the Company after the date hereof
(which shall not include the sale by the Company of shares of Common Stock or
securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately increased and the
option price per share shall be proportionately decreased;
(b) in case the number of outstanding shares of Common Stock shall be
decreased by reverse stock split, combination of shares, recapitalization or
other similar relevant change in the capitalization of the Company (which shall
not include the purchase or retirement by the Company of shares of Common Stock
or securities convertible into such shares), the number of shares which may
thereafter be purchased hereunder shall be proportionately decreased and the
option price per share shall be proportionately increased; and
(c) in case the Company shall be a party to a merger, consolidation
or any other reorganization not described in clauses (a) and (b) above, or shall
sell all or substantially all of its assets, and pursuant to such transaction
the outstanding shares of Common Stock shall be exchanged for other shares or
securities of the Company or of another corporation, the Employee shall have the
right to purchase, at the aggregate option price provided for in this option and
on the same terms and conditions (including with respect to vesting), the kind
and number of shares or other securities of the Company or of such other
corporation which would have been issuable to him in respect of the number of
shares of Common Stock subject to this option immediately prior to the effective
date of such transaction if such shares had been then owned by him. The Company
agrees to use its best efforts to provide for the preservation of the Employee's
rights as described in the second sentence of Section 13 of the Plan.
Any adjustment pursuant to this paragraph 13 shall be effected in a manner such
that the difference between the aggregate fair market value of the shares or
other securities subject to this option immediately after giving effect to such
adjustment and the aggregate option price of such shares or other securities
shall be substantially equal to (but shall not be greater than) the difference
between the aggregate fair market value of the shares of Common Stock subject to
this option immediately
-6-
<PAGE>
prior to such adjustment and the aggregate option price of such shares. The
decision of the Board as to the exact manner, amount and timing of any such
adjustment shall be conclusive.
14. As used in this option, employment by the Company shall include
employment by a corporation which is a "parent corporation" or a "subsidiary
corporation" of the Company, as such terms are defined in subsections (e) and
(f) of Section 424 of the Code, and employment by any corporation, or a "parent
corporation" or "subsidiary corporation" of such corporation, assuming this
option, or issuing a stock option in lieu thereof, in a transaction to which
Section 424(a) of the Code shall apply.
15. This option is subject to the condition that if at any time the
Committee shall reasonably determine, in its discretion, that the listing of the
shares subject hereto on any securities exchange, or the registration or
qualification of such shares under any federal or state law, or the consent or
approval of any regulatory body, shall be necessary or desirable as a condition
of, or in connection with, the granting of this option or the purchase or
delivery of shares hereunder, this option may not be exercised, in whole or in
part, and the shares hereunder may not be delivered, as the case may be, unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not reasonably acceptable
to the Committee; provided, however, that to the extent this option is to expire
prior to the Expiration Date at a time when this option may not be exercised due
to the provisions of this paragraph 15, this option shall continue to be
exercisable until the earlier of (i) one month after the date the exercise of
this option is not so restricted by this paragraph 15 and (ii) the Expiration
Date. The Company agrees to make every reasonable effort to effect or obtain any
such listing, registration, qualification, consent or approval.
-7-
<PAGE>
16. In no event shall the granting of this option or its acceptance by the
Employee give or be deemed to give the Employee any right to continue in the
employment of the Company or any of its subsidiaries.
17. The Committee shall have the right to resolve all questions which may
arise in connection with this option or its exercise.
18. This option shall be binding upon and inure to the benefit of any
successor or successors of the Company and any person or persons who shall, upon
the death of the Employee, acquire any rights under paragraph 10 hereof.
19. The parties agree to execute such further instruments and to take such
further actions as may reasonably be required to carry out the intent of this
Agreement.
20. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post office, by certified mail with postage and fees prepaid,
return receipt requested, addressed to the other party hereto at his address
hereinafter shown below his signature or at such other address as such party may
designate by ten (10) days advance written notice to the other party.
21. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
22. This Agreement shall be governed by and construed under the laws of
the State of Illinois.
23. This option shall be null and void unless the Employee shall accept
the same below.
-8-
<PAGE>
Dated this ____ day of _____________, 1991.
MATERIAL SCIENCES CORPORATION
By:__________________________________
Its:_________________________________
Accepted this ___ day
of _________, 1991
___________________________
G. Robert Evans
Address:____________________
____________________________
____________________________
-9-
<PAGE>
EXHIBIT NO. 10(h)
Materials Sciences Corporation
1991 Stock Option Plan for Directors
<PAGE>
MATERIAL SCIENCES CORPORATION
1991 STOCK OPTION PLAN
FOR DIRECTORS
1. Purpose. The purpose of this 1991 Stock Option Plan for Directors (the
-------
"Plan") is to provide incentives to members of the Board of Directors (the
"Board") of Material Sciences Corporation (the "Company") who are not
officers or employees of the Company or its subsidiaries through rewards
based upon the ownership and performance of the common stock of the
Company.
2. Limitations on Options To Be Granted and Shares To Be Issued. The total
------------------------------------------------------------
number of shares of common stock par value $.02 per share, which may be
issued pursuant to all grants and awards made under the Plan, the Material
Sciences Corporation 1985 Stock Option Plan for Directors (the "1985
Directors' Plan") or the Material Sciences Corporation 1985 Stock Option
Plan for Key Employees (the "Key Employees' Plan"), or purchased under the
Material Sciences Corporation Employee Stock Purchase Plan, shall not
exceed 750,000 (subject to adjustment as provided in Section 7 hereof or in
such Plans). Shares of common stock which are covered by an option granted
pursuant to the Plan, the 1985 Directors' Plan or the Key Employees' Plan
that expires or is otherwise terminated prior to its exercise shall again
be available for the grant of new options under the Plan, except as
provided in Section 7 of the Key Employees' Plan in connection with the
exercise of stock appreciation rights.
Each director of the Company who is not an officer or employee of the
Company on the date such option is otherwise to be granted pursuant to this
Section 2 and during the two years prior thereto shall receive an option
entitling such director to purchase 8,000 shares of the common stock of the
Company as follows: (i) in the case of each director on the Effective Date
(as defined in Section 8 hereof) who does not hold on the Effective Date an
outstanding option granted under the 1985 Directors' Plan, such option
shall be granted automatically to such director upon the Effective Date;
(ii) in the case of each director on the Effective Date who holds on the
Effective Date an outstanding option granted under the 1985 Directors'
Plan, such option shall be granted automatically upon the scheduled
expiration date of such option if such person is a member of the Board on
such expiration date; and (iii) in the case of any person who is first
elected to the Board after the Effective Date, such option shall be granted
automatically to such person upon the date that such person is first
elected to the Board (either by the shareholders of the Company or, in the
case of the filling of a vacancy, by the Board).
Shares of common stock issued under the Plan may be authorized and unissued
shares of common stock, treasury stock or a combination thereof.
3. Terms of Options. Each option granted under the Plan shall be evidenced by
----------------
a written agreement between the Company and the optionee in such form as
the Board shall prescribe
<PAGE>
in accordance with the Plan. The per share option price shall be specified
in the option agreement and shall be the fair market value of a share of
common stock of the Company on the date the option is granted. An option
issued pursuant to the Plan shall be exercisable only to the extent it has
vested. An option issued pursuant to the Plan shall be vested as to the
number of shares of common stock set forth below if as of the date of the
anniversary of the grant of such option set forth opposite such number the
optionee has not ceased to be a director of the Company:
ANNIVERSARY OF NUMBER OF
THE DATE OF SHARES
GRANT VESTED
---------------- --------------
First 1,600
Second 3,200
Third 4,800
Fourth 6,400
Fifth 8,000
Any portion of an option issued pursuant to the Plan that has not vested
prior to the date an optionee ceases to be a director of the Company shall
expire and be forfeited as of such date. An option issued pursuant to the
Plan shall not be exercisable after the first to occur of (i) the tenth
anniversary of the date of grant of such option and (ii) three months after
the optionee ceases to be a director of the Company (12 months if the
optionee ceases to be a director of the Company due to total and permanent
disability). Options shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a "qualified domestic
relations order" as defined under the Internal Revenue Code of 1986, as
amended (the "Code").
4. Exercise of Options. Subject to the terms of the option agreement and
-------------------
paragraph 3 above, options granted pursuant to the Plan may be exercised
from time to time in whole or in part. Each exercise of an option shall be
accomplished by giving written notice of such exercise to the Treasurer of
the Company, specifying the number of shares to be purchased and
accompanied by payment in full of the purchase price therefor. Payment for
the options exercised shall be either in (i) cash or check, bank draft or
money order to the order of Material Sciences Corporation (collectively,
"cash"), or (ii) shares of common stock of the Company (valued as of the
date of the notice of exercise) with a value equal to or less than the
total option price, plus cash in the amount, if any, by which the total
option price exceeds the value of such shares of common stock. Payment for
shares with respect to options exercised for cash shall be delivered with
the notice specifying the number of shares being Purchased. Payment for
shares with respect to options exercised for common stock and cash, if any,
shall be delivered to the Treasurer of the Company not later than the end
of the third business day after the exercise date. In the case of payment
in common stock, such payment shall be made by delivery of the necessary
share certificates, with executed stock powers attached, to the Treasurer
of the Company or, if such certificates have not yet been delivered
-2-
<PAGE>
to the optionee, by written notice to the Treasurer of the Company
requesting that the shares represented by such certificates be applied
toward payment as hereinabove provided.
5. Necessary Approvals. Each option granted under the Plan shall be subject
-------------------
to the requirement that if at any time the Board shall determine, in its
discretion, that either the consent or approval of any governmental
authority or the listing, registration or qualification of the shares
subject to such option upon any securities exchange or under any state or
federal law is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares under such option, such option may
not be exercised in whole or in part and shares thereunder may not be
delivered, as the case may be, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board. Any option may be
exercised only in accordance with the provisions of all applicable law.
6. Administration of the Plan. The Board shall be responsible for the
--------------------------
administration of the Plan and shall interpret the Plan and any option
agreements entered into pursuant to the Plan. The Board may establish
rules and regulations not inconsistent with the Plan for the administration
of the Plan. All such rules, regulations and interpretations relating to
the Plan adopted by the Board shall be conclusive and binding on all
parties.
7. Adjustments for Changes In Capitalization or Corporate Reorganizations.
----------------------------------------------------------------------
Appropriate adjustments shall be made by the Board in the maximum number
and kind of shares to be issued under the Plan to give effect to any stock
splits, stock dividends and other relevant changes in capitalization
occurring after the Effective Date. If the Company shall effect a merger,
consolidation or other reorganization, pursuant to which the outstanding
shares of common stock of the Company shall be exchanged for other shares
or securities of the Company or of another corporation which is a party to
such merger, consolidation or other reorganization, the Company shall
provide in any agreement or plan which it enters into or adopts to effect
any such merger, consolidation or other reorganization that any optionee
under the Plan shall have the right to purchase, at the aggregate option
price provided for in his option agreement and on the same terms and
conditions, the kind and number of shares or other securities of the
Company or such other corporation which would have been issuable to him in
respect of the number of shares of common stock of the Company which were
subject to such option immediately prior to the effective date of such
merger, consolidation or other reorganization if such shares had been then
owned by him.
Any adjustment required as a result of the foregoing provisions of this
Section 7 shall be effected in such manner that the difference between the
aggregate fair market value of the shares or other securities subject to
the option immediately after giving effect to such adjustment and the
aggregate option price of such shares or other securities shall be
substantially equal to (but shall not be more than) the difference between
the aggregate fair market value of the shares subject to such option
immediately prior to such adjustment and
-3-
<PAGE>
the aggregate option price of such shares. Any adjustments made under this
Section 7 shall be determined by the Board.
8. Effective Date and Term of Plan. The Plan shall become effective on May 1,
-------------------------------
1991 (the "Effective Date"), provided, however, that the Plan shall cease
-------- -------
to be effective and any options granted hereunder shall become null and
void if the Plan is not approved by the Company's shareholders before April
10, 1992. The Plan shall terminate April 10, 2001 unless terminated prior
thereto by action of the Board. No further grants shall be made under the
Plan after termination, but termination shall not affect the right of any
participant under any grants made prior to termination.
9. Amendments. The Plan may be terminated or amended in any respect by the
----------
Board; provided that the power of the Board to amend the Plan shall also be
--------
subject to any approval of any such amendment required of the Company's
shareholders under applicable law, regulations or the requirements of any
stock exchange on which shares of the Company's capital stock are listed;
and provided further that Sections 2 and 3 hereof shall not be amended more
-------- -------
than once every six months, other than to comport with changes in the Code
or the Employee Retirement Income Security Act of 1974, as amended, or the
rules and regulations thereunder.
-4-
<PAGE>
EXHIBIT NO. 10(i)
Material Sciences Corporation
Directors Deferred Compensation Plan
<PAGE>
MATERIAL SCIENCES CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
-------------------------------------
Purpose
- -------
The purpose of this plan is to allow a member of the Board of Directors
("the Board") of Material Sciences Corporation ("the Company") to elect annually
to defer payment of a portion of his compensation for any year of service until
after he ceases to serve as a director.
Time of Election
- ----------------
An election to defer shall be made by written notice signed by the director
and delivered to the Vice President - Finance & Secretary of the Company before
the beginning of the period of service for which the compensation is payable.
Any such election shall be irrevocable.
Deferred Amount
- ---------------
A Director may elect to defer all or part of the total of his annual
retainer and meeting attendance compensation for each year of service as a
director. The amount to be deferred shall be specified in the notice of
election and shall be either (A) a specified dollar amount of his annual
retainer compensation or (B) a specified percentage of, or dollar amount from
any meeting attendance compensation to which he may become entitled during a
year of service as director, or both.
Directors' Deferred Compensation Accounts
- -----------------------------------------
As of the date on which deferred amounts would otherwise have been payable
to the director, the Company shall credit the deferred amount to a deferred
compensation account in the name of the Director. The Company shall maintain
the necessary records and shall forward to the Director at least once each year
a statement indicating the amount credited to his account. Nothing in this Plan
or any agreement entered into hereunder shall be interpreted as requiring the
Company to set aside any assets for purposes of satisfying its obligations under
this plan or any such agreement. The rights of a director under this plan and
any agreement entered into pursuant to this plan shall be solely those of a
general creditor of the Company.
Quarterly Increase in Directors' Deferred Compensation Amounts
- --------------------------------------------------------------
The Company shall credit to each deferred compensation account as of the
end of each calendar quarter additional compensation equal to interest on the
amounts credited to such account from the date credited (or the end of the
preceding quarter, if later) to the end of such quarter at the rate of interest
payable on the last issue of U.S. 90-day Treasury Bill made prior to the end of
such quarter as determined by Continental Illinois National Bank & Trust Company
of Chicago. Such
<PAGE>
additional compensation shall continue to be credited after the commencement of
distributions pursuant to the succeeding paragraph until the account has been
completely distributed.
Distribution of Directors' Deferred Compensation
- ------------------------------------------------
Upon a Director's retirement, death or other termination of his membership
on the Board of Directors of the Company, the Director shall receive the amount
credited to his deferred compensation account in five substantially equal annual
installments commencing with the first anniversary of the date after which he
ceased to serve as a director. Each such payment shall be equal to the amount
credited to the Director's account immediately prior to the date of payment
divided by the number of payments remaining to be made (including such payment).
If the Director shall die while serving as a director, or if the Director shall
die after ceasing to serve as a director, but before complete distribution of
the amount credited to his deferred compensation account, distribution shall be
made to the person designated by him in a written notice to the Vice President -
Finance & Secretary of the Company or, in the absence of any such notice, to his
estate. In the sole discretion of the Board of Directors of the Company
distributions may be made in a lump sum following termination of a Director's
membership on the Board of Directors or in installments, equal or otherwise,
more rapidly than provided in this paragraph.
Nonassignability
- ----------------
It shall be a condition of this plan and all rights of each director and
beneficiary shall be subject thereto that no amount payable hereunder shall be
assignable in whole or in part, either directly or by operation of law or
otherwise, including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge or bankruptcy, but excluding devolution by death
or mental incompetency, and no right or interest of any director or beneficiary
under the plan shall be liable for, or subject to, any obligation or liability
of such director or beneficiary, including claims for alimony or the support of
any spouse.
Agreements
- ----------
Directors electing to defer compensation under the Plan will enter into a
written agreement with the Company in a form provided by the Company evidencing
the terms of the deferral which shall be consistent with the plan.
-2-
<PAGE>
NOTICE OF ELECTION TO DEFER DIRECTORS' COMPENSATION
---------------------------------------------------
TO: Mr. William R. Beattie
Vice President - Finance & Secretary
Material Sciences Corporation
2300 E. Pratt Boulevard
Elk Grove Village, IL 60007
Pursuant to the Material Sciences Corporation Directors' Deferred
Compensation Plan, I hereby irrevocably elect to defer an amount of my
compensation earned and payable hereafter during the twelve month period
commencing with the annual meeting of the shareholders of Material Sciences
Corporation ("the Company") coincident with or next following the date of the
agreement as follows:
[_] $____________ of my annual retainer compensation from
the date hereof to the end of my services as a Director.
[_] ___% of, or $__________ of, the compensation for board
meeting attendance which may be payable to me for such
year which is attributable to services rendered between
the date of the Board of Director's annual meeting and
the end of such year.
If my membership on the Company's Board of Directors is terminated by
death, or if I shall die after I cease to serve as a Director but before
complete distribution of the amount credited to my deferred compensation account
under the Material Sciences Corporation Directors' Deferred Compensation Plan, I
direct that the balance in such account shall be paid to:
_________________________________________
Name
________________________________________
Address
________________________________________
Relationship to Me
Date__________________, 198___. ________________________________________
Director
-3-
<PAGE>
DIRECTORS' DEFERRED COMPENSATION AGREEMENT
------------------------------------------
Material Sciences Corporation, a Delaware corporation (hereinafter called
"the Company"), and _________________________ a Member of the Board of Directors
of the Company (hereinafter called "the Director"), hereby agree as follows:
1. The Director agrees that the amount specified in the notice attached
hereto as Exhibit B of his compensation earned and payable during the twelve
month period commencing on the date of the annual meeting of the Company's
shareholders coincident with or next following the date of this agreement, shall
be deferred and paid to him at such time as he shall cease to be a member of the
Board of Directors of the Company or following his death, while serving as a
member of such board in accordance with the provisions of the Material Sciences
Corporation Directors' Deferred Compensation Plan attached hereto as Exhibit A,
together with such additional amount as may be payable with respect thereto in
accordance with the provisions of such plan.
2. The Company agrees to pay such deferred compensation to the Director
at the time he ceases to be a member of the Board of Directors of the Company or
in the event of the death of the Director prior to complete payment thereof, to
make payment of the remaining balance to the person designated by the Director
in the notice attached hereto as Exhibit B, all in accordance with the Material
Sciences Corporation Directors' Deferred Compensation Plan attached hereto as
Exhibit A.
IN WITNESS WHEREOF, the Company and the Director have executed this
agreement this ______ day of _________________, 19__.
MATERIAL SCIENCES CORPORATION
By__________________________________________
Vice President
____________________________________________
Director
-4-
<PAGE>
EXHIBIT NO. 10(k)
Deferred Compensation Plan of
Material Sciences Corporation and Certain Participating Subsidiaries
<PAGE>
Exhibit 6
MATERIAL SCIENCES CORPORATION
DEFERRED COMPENSATION PLAN
Purpose
- -------
The purpose of this plan is to allow an officer of Material Sciences
Corporation or any of its subsidiary companies ("the Company") and any other key
employee with the consent of the Chief Executive Officer to elect annually to
defer payment of a portion of his compensation for any fiscal year until after
termination of his employment.
Timing of Election
- ------------------
An election to defer shall be made by written notice signed by the employee
and delivered to the Vice President - Human Resources of the Company before the
beginning of the period of service for which the compensation is payable. Any
such election shall be irrevocable.
Deferred Amount
- ---------------
The employee may elect to defer an amount not exceeding 15 percent of the
total of his salary and bonus for a fiscal year. The amount to be deferred
shall be specified in the notice of election and shall be either (A) a specified
dollar amount of his salary for each and every pay period or (B) a specified
percentage of, or dollar amount from, any bonus to which he may become entitled
during a fiscal year.
Deferred Compensation Accounts
- ------------------------------
As of the date on which deferred amounts would otherwise have been payable
to the employee, the Company will credit the deferred amount to a deferred
compensation account in the name of the employee. The Company will maintain the
necessary records and will forward to the employee at least once each fiscal
year a statement indicating the amount credited to the account.
Quarterly Increase in Deferred Compensation Amount
- --------------------------------------------------
The Company will credit to each deferred compensation account as of the end
of each fiscal quarter additional compensation equal to interest in the amounts
credited to such account from the date credited (or the and of the preceding
fiscal quarter, if later) to the end of such fiscal quarter at the rate of
interest payable on the last issue of U.S. 90-day Treasury Notes made prior to
the end of such fiscal quarter as determined by Continental Bank. Such
quarterly increases shall continue to be made after the commencement of
distributions pursuant to the succeeding paragraph until the account has been
completely distributed.
<PAGE>
Distribution of Deferred Compensation
- -------------------------------------
Upon the employee's retirement, death or other termination of his
employment with the Company, the employee shall receive the amount credited to
his deferred compensation account in five substantially equal annual
installments commencing with the first anniversary of the date of his
termination of employment. Each such payment shall be equal to the amount
credited to the employee's account immediately prior to the date of payment
divided by the number of payments remaining to be made (including such payment).
If employment is terminated by death of the employee, or if the employee shall
die after termination of employment, but before complete distribution of the
amount credited to his deferred compensation account, distribution shall be made
to the person designated by him in a written notice to the Vice President -
Human Resources of the Company or in the absence of any such notice, to his
estate. In the sole discretion of the Board of Directors of the Company
distributions may be made in a lump sum following termination of employment or
in installments, equal or otherwise, more rapidly than provided in this
paragraph.
Agreement
- ---------
Employees electing to defer compensation under the Plan will enter into a
written agreement with the Company in a form provided by the Company evidencing
the terms of the deferral which shall be consistent with the Plan.
-2-
<PAGE>
Exhibit Number 10(m)
First Amendment to Lease and Agreement
dated as of May 30, 1986,
between
Corporate Property Associates
and
Corporate Property Associates 2
and
Pre Finish Metals Incorporated
<PAGE>
FIRST AMENDMENT TO LEASE
AND AGREEMENT
------------------------------------
THIS FIRST AMENDMENT TO LEASE AND AGREEMENT, dated as of May 30, 1986 (this
"Amendment") between CORPORATE PROPERTY ASSOCIATES, a California limited
partnership, and CORPORATE PROPERTY ASS0CIATES 2, a California limited
partnership, jointly and severally as tenants-in-common (collectively "Lessor"),
having an address at c/o W.P. Carey & CO., Inc., 911 Fifth Avenue, New York, New
York 10022, and PRE FINISH METALS INCORPORATED, an Illinois corporation, as
lessee ("Lessee"), having an address at 2340 Pratt Boulevard, Elk Grove Village,
Illinois 60007.
W I T N E S S E T H
WHEREAS, Line 6 Corp., as lessor, and Lessee, as lessee, entered into a
certain Lease and Agreement (the "12/1/80 Lease") dated as of December 1, 1980,
covering the land described on Schedule A attached hereto (the "Original Leased
Land"), together with certain improvements located thereon defined as
"Improvements" in paragraph 1 of the 12/1/80 Lease (the "Original Leased
Improvements"; the Original Leased Land and the Original Leased Improvements
covered by the 12/1/80 Lease being hereinafter called the "Original Premises");
and
WHEREAS, Lessor has succeeded to the rights of Line 6 Corp. and is now the
owner of the original Premises and the lessor under the 12/1/80 Lease; and
WHEREAS, Lessee has conveyed to Lessor fee ownership of the land described
on Schedule A-2 attached hereto (the "New Land"), and Lessee has granted and
sold to Lessor certain improvements located on the New Land, and, to the extent
owned by Lessee, located on the Original Leased Land (the "New Improvements");
and
<PAGE>
WHEREAS, the conveyance of the New Land and the grant and sale of the New
Improvements by Lessee to Lessor were made upon the condition and understanding
that the New Land and New Improvements would be made subject to the 12/1/80
Lease; and
WHEREAS, the parties have agreed that in order to carry out the conditions
and understandings referred to above, the 12/1/80 Lease shall be amended as
hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged by Lessor and Lessee it is agreed as
follows:
ARTICLE I
Amendments of 12/1/80 Lease
---------------------------
SECTION 1.01. Effective as of the date of this Amendment (the "Effective
Date") the 12/1/80 Lease is amended as follows:
(a) The following terms defined in paragraph 1 are amended as follows:
(i) the Land: shall be the Original Leased Land and New Land
taken as a single tract as described on Schedule A-4 attached hereto.
(ii) the Improvements: shall be the Original Leased Improvements
and the New Improvements as described in Schedule A-3 attached hereto.
(iii) the Premises: shall consist of the Land and Improvements
as redefined in clauses (i) and (ii) above.
(iv) Manufacturing Machinery: manufacturing machinery and
equipment and other property and equipment which are used in the operation
of Lessee's business, at the business of a sublessee or assignee of Lessee
including Walbridge Coatings, An Illinois Partnership (the Partnership) and
not related to the care, and maintenance of the buildings
-2-
<PAGE>
included in the Improvements and which are owned by Lessee, or a sublessee
or assignee of Lessee including the Partnership.
(b) Paragraph 3 is deleted in its entirety and the following is inserted in
its place and stead:
"3. Terms. The Premises are leased for an interim term (the Interim
-----
Term), an initial term (the initial Term), a partnership term (the
Partnership Term), a primary term (the Primary Term), and, at Lessee's
option, for five consecutive additional terms of five years each (the
Extended Terms), unless and until the term of this Lease shall expire or be
terminated earlier pursuant to any provision hereof or by law. The Interim
Term, Initial Term, Partnership Term, Primary Term and each Extended Term
shall commence and expire on the dates set forth in Schedule B hereto. The
word "Term" or "term" used in this Lease without the remainder of any of
the foregoing definitions shall mean and refer to the entire term of this
Lease including all of such defined Terms which have been, or shall become,
applicable. If Lessee shall exercise its option to extend the terms of
this Lease for an Extended Term it shall give notice thereof to Lessor not
earlier than twelve months and not later than six months prior to the
expiration of the then existing Term.
(c) Paragraph 4(b) is amended by deleting the last sentence thereof and
replacing it with the following sentence:
"Lessee shall perform all of its obligations under this Lease at its
sole cost and expense, and shall pay all Basic Rent and additional rent
when due without notice or demand and without any abatement, deduction, or
setoff for any reason whatsoever, except as may be expressly provided in
this Lease."
-3-
<PAGE>
(d) Paragraph 5(a) is amended by deleting the last sentence thereof and
replacing such sentence with the following:
"Without limiting the generality of the foregoing, it is intended that
unless otherwise herein expressly provided, the Basic Rent shall be
absolutely net to Lessor so that this Lease shall yield, net, to Lessor
during the Term, the Basic Rent and all costs, expenses and obligations of
every kind and nature whatsoever relating to the Premises which may arise
and be attributable to the ownership, use or occupancy of the Premises
during the Term shall be paid by Lessee. Lessor and Lessee intend that the
liability and obligations of Lessee hereunder to pay the Basic Rent and to
perform all other covenants and agreements of Losses are each separate,
absolute, unconditional and independent covenants unless, and then only to
the extent that, any such obligation shall have been modified or terminated
pursuant to an express provision of this Lease. Lessor and Lessee hereby
covenant and agree that this Lease is intended to be and is a true lease
and not a financing lease."
(e) Paragraph 6(a) is amended by inserting in the 16th line thereof after
the words "levied or assessed" the words "in lieu of or" and after the word
"levy" in the 17th line the words "or any increase".
(f) Paragraph 8 is amended by inserting in the second line thereof after
the word "Lessor" the words: "and the holder of any mortgage to which this
Lessee is subject and subordinate".
(g) Paragraph 9 is amended by deleting from the second line thereof the
following wording: ", except for ordinary wear and tear,".
-4-
<PAGE>
(h) Paragraph 10 is amended as follows: (i) The last two sentences of
paragraph 10(a) are deleted in their entirety and the following inserted in
their place and stead:
"Lessee may place upon the Premises any inventory, trade fixtures,
machinery or equipment belonging to Lessee or third parties, including the
Manufacturing Machinery, and may remove the same at any time during the
term of this Lease. Lessee shall repair any damage to the Premises caused
by such placement or removal. Notwithstanding anything hereinabove to the
contrary, Lessee agrees that it will not make any such additions to or
alterations of the Improvements during any time when this Lease is subject
and subordinate to the First Mortgage (as defined in paragraph 26 of this
Lease) without having first obtained the prior written consent of Lessor
for any structural alterations, additions or improvements which approval
Lessor agrees will not be unreasonably withheld subject to compliance with
the requirements of such First Mortgage"; and
(i) Paragraphs 10(b), (c) and (d) are deleted therefrom. (i)
Paragraph 11 is amended as follows:
(i) By deleting therefrom the phrase ", or its assignee if this
Lease shall be assigned," wherever such phrase appears;
(ii) By inserting in the fourth line of Paragraph 11(a) on page 6
after the word "'Premises" which first appears the words "or otherwise
(other than in respect of the Manufacturing Machinery and other personal
property owned by persons other than Lessor or Lessee)";
(iii) By adding at the end of the first sentence of paragraph 21(a) on
page 7 after the word "domain", the following words:
-5-
<PAGE>
";provided, however, that notwithstanding the foregoing, if Lessor's
award is not affected or diminished thereby, Lessee shall be entitled
to make a separate claim in any such condemnation proceeding or other
action for any compensation to which Lessee shall be lawfully entitled
in respect of any property of Lessee, or of anyone who claims through
or under Lessee, which may be removed from the Premises during or upon
the expiration of the Term by Lessee or such other such person
pursuant to the terms of this Lease and also for moving expenses or
other items which by applicable law are payable to tenants without
diminishing an award to a Landlord.";
(iv) By amending the last sentence of paragraph 11(a) to read as
follows:
-6-
<PAGE>
Lessor and First Mortgagee in order to establish to their reasonable
satisfaction that the amounts being requested are due and payable and
do not exceed the value of the services and materials described in
such requests, and that upon such payment by Lessor and there will not
be outstanding any indebtedness which, if unpaid, might become the
basis of a vendor's, mechanic's, laborer's, or materialmen's lien on
the Premises or any part thereof, Lesser and First Mortgagee shall
have the right to withhold payment of any portion of such Net Proceeds
if it shall, reasonably appear at any time that the remaining amount
of such Net Proceeds may not be sufficient to complete such
Restoration, and Lessee shall promptly provide any deficiency from its
own funds. Any Net Proceeds remaining after final payment has been
made for such work shall be paid to Lessee if such amount is less than
$5,000. If such excess Net Proceeds are $5,000 or more they shall be
retained by Lessor and (i) the Basic Amount set forth in Schedule C
shall be reduced by an amount equal to such Net Proceeds so retained
by Lessor and (ii) if such Net Proceeds do not exceed the amount, if
any, then payable to First Mortgagee each installment of the Debt
Portion of the Basic Rent payable on or after the first Payment Date
occurring three months or more after the final payment to Lessee or
any other person for such work shall be reduced to the reduced amount
of monthly debt service thereafter payable under the First Mortgage
and if such Net Proceeds exceed the amount, if any, then payable to
First Mortgagee then, in addition to eliminating the Debt Portion of
the Basic Rent as above provided, each installment of the Equity
Portion of the Basic Rent payable on or after the first Payment Date,
occurring three months or more after the final
-7-
<PAGE>
payment to Lessee at any other person for such work shall be reduced
by a fraction thereof, the numerator of which shall be the amount so
retained by Lessor in excess of the amount, if any, payable to the
First Mortgagee and the denominator of which shall be the $5,453,099
portion of the Basic Amount prior to the reduction thereof referred to
in clause (i) hereinabove. In the event of any temporary requisition,
this Lease shall remain in full force and effect for the remainder of
the Term and Lessee shall be entitled to receive the entire Net
Proceeds payable during the remainder of the Term by reason of such
requisition."
(j) Paragraph 12 is deleted in its entirety and the following inserted in
its place and stead:
"12. Insurance. (a) Throughout the Term of this Lease, Lessee shall,
---------
at its own cost and expense:
(1) Keep the Improvements and equipment on, in or appurtenant to
the Improvements (other than the Manufacturing Machinery and other
personal property owned by persons other than Lessor) at any time
during the Term, including all alterations, additions and
improvements, insured for the benefit of Lessor against loss or damage
by fire, with all standard extended coverage and, if required by the
First Mortgagee and generally required on similar buildings, war
damage coverage, if such war damage insurance is available from a
governmental agency of the United States of America, in an amount
which will comply with less than ninety percent (90%) of the full
replacement value thereof, exclusive of excavations and foundations.
Such full replacement value shall be reevaluated at least every two
years by means of a so-called trend analysis report prepared by a
qualified appraiser taking into account,
-8-
<PAGE>
among other things, increases in construction costs in the area where
the Premises are located, or by such other reasonable, and customary
means approved by Lessor as are commonly used in respect of properties
similar to the Premises in order to determine, the amounts of
insurance to be carried thereon. Lessee shall provide to Lessor
promptly after Lessee's receipt thereof and, in any event, promptly
after Lessor's request therefor, copies of such reports and shall
carry additional amounts of insurance in accordance with the same. If
Lessee shall fail to have any such study made, Lessee shall have the
right to have such a report made at Lessee's expense. Supplementing
the foregoing, said fire insurance shall:
(i) be, written on a replacement cost basis;
(ii) be issued by such insurance companies under insurance
policies in form and content reasonably satisfactory to lessor;
(iii) comply with any changes in co-insurance requirements
applicable to the premises by the Fire Insurance Rating
Organization having jurisdiction thereof, if any, or any similar
body, or by statute;
(iv) in no event be in an amount less than required by the
first Mortgage;
(v) be carried in favor of Lessor, Lessee and First
Mortgage, as their interests may appear;
(vi) effectively provide that any act or omission of Lessee
shall not void the insurance coverage in respect of the interest
of Lessor at the First Mortgagee; and
-9-
<PAGE>
(vii) provide that, subject to the right of the First
Mortgagee whose interest may be covered by said policy or
policies, that the loss, if any, under any such policies shall be
adjusted with the insurance company or companies as follows:
A. by Lessee if the less is less than $5,000 and
B. by Lessor and the First Mortgagee if the loss
equals or exceeds $5.000.
The Net Proceeds of such fire insurance, if greater than $5,000,
shall be paid to and deposited with the First Mortgagee or a bank
or trust company in Toledo, Ohio designated by First Mortgagee
(hereafter in its capacity as the holder of such deposit, the
Depository) which shall hold, apply and make available the Net
Proceeds of such insurance, subject to the terms of this Lease,
to pay the cost of Restoration of the Premises as more
particularly provided in paragraph 11(c) hereof.
(2) Provide Lessor with comprehensive public liability insurance,
boiler (should boilers now or hereafter be installed), and machinery
insurance; and such other insurance as may from time to time be
reasonably required by Lessor as insurance against insurable hazards
which are customarily and generally required to be insured in respect
of similar buildings and improvements, with due regard for the height
and depth and type of the building, its construction and use and
occupancy. Such public liability insurance shall be not less than Five
Million Dollars ($5,000,000) Single Limit of liability including
property damage with provisions for
-10-
<PAGE>
deductibles if the parties shall agree in writing. Lessee shall every
three years increase such coverage in accordance with what in
appropriate and customary for a property of like character. Such
personal injury and property damage liability policies shall cover the
entire Premises. All the insurance described in this subparagraph
12(a)(2) shall be carried in favor of and insure Lessor, Lessee and
the First Mortgagee as their interest may appear.
(3) Provide Workers' Compensation insurance and employer's
liability insurance as required by law.
(4) Such other insurance, in such amounts and against such risks,
as is commonly obtained in the case of property similar in use to the
Premises in the State of Ohio.
(b) Lessee shall procure policies for all said insurance for periods
from one (1) to five (5) years, as Lessee shall elect, and shall deliver to
Lessor simultaneously with the execution of this Lease binders in respect
of the required insurance and within 30 days after the execution of this
Lease shall use its best efforts to deliver the originals or certified
copies of such policies, with evidence, by stamping or otherwise, of the
payment of the premiums thereon. Such insurance coverage may be part of a
blanket insurance coverage carried by Lessee covering several properties.
In addition, the insurance to be provided pursuant to subparagraphs
12(a)(1), (2) and (4) may provide for a deductible of not more than $50,000
per loss.
Each such policy shall contain provisions precluding the cancellation
of the same without at least thirty (30) days, prior written notice to
Lessor and the First Mortgagee and
-11-
<PAGE>
providing for written notice to Lessor of the non-payment of any premium
due thereunder. Lessee shall deliver to Lessee by no later than twenty (20)
days prior to the expiration of each such policy satisfactory evidence of
renewal and shall use its best efforts, to deliver to Lessor and the First
Mortgagee within thirty (30) days thereafter the original policy or a
duplicate thereof and a duplicate receipt evidencing the payment thereof.
(c) All premiums and charges for all of such policies shall be paid by
Lessee, and if Lessee shall fail to make such payment when due, or carry
any such policy, Lessor may, but shall not be obligated to, make such
payment or carry such policy, and the amount paid by Lessor, with interest
thereon, shall be repaid to Lessor by Lessee an additional rent on demand
and all such mounts so repayable, together with such interest, shall be
considered as additional rent payable hereunder, for the collection of
which Lessor shall have all of the remedies herein or by law provided for
the collection of rent. Payment by Lessor of any such premium or the
carrying by Lessor of any such policy shall not be deemed to waive or
release the default of Lessee in respect thereof.
(d) Lessee shall not violate or permit to be violated any of the
conditions or provisions of any such policy, and Lessee shall so perform
and satisfy the reasonable requirements of the companies writing such
policies.
(e) All of the insurance policies to be obtained and maintained by
Lessee under this paragraph 12 shall be held by Lessor or the First
Mortgagee, at the option of the First Mortgagee. In such event, duplicate
originals of such policies, if obtainable, or, if not obtainable, certified
copies, if obtainable, or, if not obtainable, certificates thereof shall be
delivered to Lessor and the First Mortgages.
-12-
<PAGE>
(f) Lessee shall not carry separate insurance, concurrent in coverage
and contributing in the event of loss with any insurance required to be
furnished by Lessee under the provisions of this paragraph 12 if the effect
of such separate insurance would be to reduce the protection or the payment
to be made under said insurance required to be furnished by Lessee, unless
Lessor (and the mortgagee(s) where said insurance required to be carried
requires the inclusion of the mortgagee(s)) are included as insureds with
loss payable as hereinabove provided. Lessee shall promptly notify Lessor
of the issuance of any such separate insurance and shall cause such
policies to be delivered to Lessor and the First Mortgagee as provided in
this paragraph."
(k) Paragraph 13 is deleted in its entirety and the following inserted in
its place and stead:
"13. Purchase Option; Right of First Refusal.
---------------------------------------
(a) If Lessee is not at the time in default hereunder, Lessee shall
have the irrevocable right, option and privilege to purchase the Premises
(which right, option and privilege is coupled with an interest in the
Premises) with a closing date falling in the period of time beginning with
the termination date of the Partnership Term and ending with the
termination date of the Primary Term at a purchase price equal to the
greater of (i) the fair market value of the Premises (exclusive of
manufacturing machinery) at the date the notice of exercise of the option
is given, as determined by an appraiser selected by Lessee and approved by
Lessor or (ii) an amount equal to $13,222,044 plus 2 1/2% thereof per
annum, not compounded, from December 9, 1960 to the closing date. If Lessee
desires to exercise its option under this paragraph, it must do so not
later than six months before such closing date
-13-
<PAGE>
by giving notice of such exercise designating such closing date to Lessor
in the manner provided in paragraph 20 of this Lease.
(b) If at any time during the Primary Term or any Extended Term of
this Lease, Lessor receives a bona fide offer to purchase the Premises (or
any part thereof), other than a bid or offer to purchase the Premises at
any sale incidental to the exercise of any remedy provided for in the First
Mortgage or any other mortgage or similar instrument creating a lien
thereon (severally herein a Mortgage), which Lessor desires to accept,
Lessor will prior to accepting the same, give Lessee an opportunity to
purchase the Premises (or such part thereof) upon the same terms and
conditions contained in such offer. Lessee must exercise its rights within
60 days of receiving written notice of the full terms of sale and Lessor's
intention to sell. If Lessee fails to exercise its right to purchase,
Lessor may proceed to sell the Premises (or such part thereof) in
accordance with the terms of the offer. If such sale is not made, Lessee's
right to purchase shall be reinstated as aforesaid, and if only a part of
the Premises is sold in such manner, Lessee's rights to purchase shall
remain as to the balance of the Premises and are coupled with an interest.
Except as provided above in respect of a sale incidental to the exercise of
a remedy under a Mortgage, this right in favor of Lessee shall be binding
upon any grantee of the Premises, or part thereof, during the period the
Lease is in effect so that Lessee shall have such rights to purchase from
the owners of the Premises during the Primary Term and all Extended Terms
of the Lease in the event Lessee does not exercise its rights in earlier
sales. The rights granted Lessee under this paragraph are coupled with an
interest in the Premises. The provisions of paragraph 14 of this Lease
shall not apply to any purchase and sale made under this paragraph. Any
such conveyance
-14-
<PAGE>
or transfer pursuant to this paragraph 13(b) shall be expressly subject to
this Lease and any mortgage to which this Lease is subject and subordinate
including, without limitation, the First Mortgage; provided, however, that
Lessor's and Lessee's rights and obligations hereunder shall be subject to
Lessor's obligation to comply with the requirements of the First Mortgage."
(l) Paragraph 14(a) is amended by inserting in the sixth line thereof at
page 11 before the word "Mortgage" the word "First" and inserting after the word
"Mortgage" the words "(provided that such First Mortgage shall have been paid in
full and satisfied either prior to or in connection with such purchase of the
Premises by Lessee)".
(m) Paragraph 15 is deleted in its entirety and the following is inserted
in its place and stead:
"15. Performance by Subtenant. Lessor agrees that it will accept
------------------------
from Subtenant (as defined in Paragraph 16 of this Lease) performance of
the Lessee's obligations hereunder which are not by their nature
susceptible of performance only by Lessee. Lessor also agrees that after
receipt from Lessee of specific written documentation reasonably
satisfactory to Lessor by which Lessee grants to a particular subtenant the
benefits of any particular provision(s) of this Lease, Lessor will deal
with such subtenant in accordance with such documentation. Nothing in this
paragraph shall relieve Lessee from its primary liability for the
performance of its obligations under this Lease nor shall the provisions of
this paragraph limit or affect the provisions of paragraph 16 hereof."
(n) Paragraph 16 is deleted in its entirety and the following is inserted
in its place and stead:
-15-
<PAGE>
"16. Assignment and Subletting. (a) Except as hereinafter expressly
-------------------------
provided, Lessee may not voluntarily or involuntarily, by operation of law
or otherwise, (i) assign or otherwise transfer this Lease or the term and
estate hereby granted, (ii) sublet the Premises or any part thereof to
anyone other than Walbridge Coatings, An Illinois Partnership (Walbridge
Coatings, An Illinois Partnership, together with any successor thereto as
Subtenant under its Sublease dated as of the date of this Lease (the
Sublease) which has succeeded as such Subtenant in accordance with the
Sublease and this Lease, being referred to herein as the Subtenant), or
allow the same to be used, occupied or utilized by anyone other than Lessee
or Subtenant, or (iii) mortgage, pledge, encumber or otherwise hypothecate
this Lease or the Premises or any part thereof, in any manner whatsoever,
without in each instance obtaining the prior written consent of Lessor.
Notwithstanding the preceding provisions of this paragraph, Lessee may,
without Lessor's consent, assign this Lease to or sublet to or allow all or
a portion of the Premises to be used, occupied or utilized by a corporation
or other entity which owns all of the stock of Lessee, a wholly owned
subsidiary of Lessee or another corporation or entity which is wholly owned
by any corporation or entity which wholly owns Lessee. Lessor shall not
unreasonably withhold its consent to an assignment or subletting of the
entire Premises provided that Lessee shall have provided such financial and
other information and have executed such documentation in respect thereof
as Lessor shall reasonably require, which may include, without being
limited to, a reconfirmation by any guarantor of Lessee's obligations under
this Lease that such
-16-
<PAGE>
assignment or subletting shall not affect such guaranty, and provided that
all other provisions of this Lease shall have been complied with."
(b) If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Lessor may collect rent from the assignee. If
the Premises or any part thereof are sublet or used or occupied by anybody
other than Lessee, whether or not in violation of this Lease, Lessor may,
after default by Lessee, and expiration of Lessee's time to cure such
default, collect rent from the subtenant or occupant. In either event,
Lessor may apply the net amount collected to Basic Rent and any additional
rent herein reserved, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of any of the provisions of paragraph
16(a), or the acceptance of the assignee, subtenant or occupant as tenant,
or a release of Lessee from the performance by Lessee of Lessee's
obligations under this Lease. The consent by Lessor to an assignment,
mortgaging, subletting or use or occupancy by others or an assignment,
subletting, use or occupancy by others without Lessor's consent shall not
in any way be considered to relieve Lessee from obtaining the express
written consent of Lessor to any other or further assignment, mortgaging or
subletting or use or occupancy by others not expressly permitted by this
paragraph. References in this Lease to use or occupancy by others (that is,
anyone other than Lessee) shall not be construed as limited to subtenants
and those claiming under or through subtenants but as including also
licensees and others claiming under or through Lessee, immediately or
remotely.
-17-
<PAGE>
(c) Any assignment or transfer, whether made with or without Lessor's
consent pursuant to paragraph 16(a), shall be made only if, and shall not
be effective until, the assignee or transferee shall execute, acknowledge
and deliver to Lessor an executed copy of such assignment or other transfer
document and an agreement in form and substance reasonably satisfactory to
Lessor whereby the assignee or transferee shall assume the obligations of
this Lease on the part of Lessee to be performed or observed from and after
the effective date of the assignment and whereby the assignee or transferee
shall agree that the provisions in subparagraph 16(a) shall,
notwithstanding such assignment or transfer, continue to be binding upon it
in respect of all future assignments and transfers. The original named
Lessee covenants that, notwithstanding any assignment or transfer, whether
or not in violation of the provisions of this Lease, and notwithstanding
the acceptance of Basic Rent and/or additional rent by Lessor from an
assignee, transferee, or any other party, the original named Lessee shall
remain fully and primarily liable for the payment of Basic Rent and
additional rent and for the other obligations of this Lease on the part of
Lessee to be performed or observed. No sublease shall be effective until
Lessee shall deliver to Lessor an executed copy thereof.
(d) The joint and several liability of Lessee and any immediate or
remote successor in interest of Lessee and the due performance of the
obligations of this Lease on Lessee's part to be performed or observed
shall not be discharged, released or impaired in any respect by any
agreement or stipulation made by Lessor extending the time of, or modifying
any of the obligations of, this Lease, or by any waiver or failure of
Lessor to enforce any of the obligations of this Lease or by reason of the
applicability of any surety
-18-
<PAGE>
defenses, generally; provided, however, that in no event shall Lessee's
liability be any greater than it would have been in the absence of such a
modification of this Lease.
(e) Notwithstanding the foregoing provisions of this paragraph 16,
from and after the end of the Partnership Term and provided the
indebtedness secured by the First Mortgage has been fully paid, Lessee may
sublet the Premises or assign its interests hereunder, provided that each
sublease shall expressly be made subject to the provisions hereof. No such
assignment or sublease shall modify or limit any right or power of Lessor
hereunder or affect or reduce any obligation of Lessee hereunder, and all
such obligations shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no assignment or
subletting had been made."
(o) Paragraph 17 is amended by adding at the end thereof the following:
"Notwithstanding the foregoing, Lessee shall comply with all
requirements imposed upon Lessor by the First Mortgage in respect of a
permitted contest."
(p) Paragraph 18 is amended by deleting the words which commence with "if
Lessee shall" in the 3rd line and end with the words "if Lessee" in the 14th
line thereof which appear on page 19 and inserting in their place the following:
"if Lessee shall (1) fail to pay any Basic Rent, additional rent, or
other sum required to be paid by Lessee hereunder when and as the same
shall became due and payable and such default has continued for ten
(10) days after Lessor has given written notice of such default to
Lessee, or (2) fail to duly observe or perform any other covenant,
condition or agreement of Lessee contained in this Lease and such
default shall have continued for fifteen (15) days after Lessor has
given written notice of such default,
-19-
<PAGE>
or if such default cannot be cured by the payment of money and cannot
with diligence be cured within such 15 day period, if Lessee shall fail
to promptly and with due diligence cure the same; or (ii) it any
default shall be made in the due observance or performance of any
covenant, condition or agreement of Material Sciences Corporation, a
Delaware corporation (MSC) contained in its Lease Guaranty Agreement to
Lessor and First Mortgagee and such default shall have continued for 10
days after written notice thereof, in the case of a monetary default,
or for 15 days after written notice of such default in the case of any
other default, or, if such other default cannot with diligence be cured
within such 15 day period, if Lessee".
(q) Paragraph 19(c) is amended by adding at the end thereof the following:
"Lessee also agrees to indemnify and hold First Mortgagee
harmless from and against any and all claims, loss, liability, damages
or expenses, including but not limited to reasonable attorneys' fees,
which are incurred by First Mortgagee by reason of any accident,
personal injury or property damage sustained in, on or about the
Premises."
(r) Paragraph 21 is amended by deleting the last sentence thereof and
replacing it with the following:
"Any such certificate may be relied upon by any prospective
mortgages or purchaser of the Premises and also by Lessor and First
Mortgagee."
(s) Paragraph 26 is deleted in its entirety and the following is inserted
in its place and stead:
-20-
<PAGE>
"26. Subordination; Miscellaneous. (a)(i) Subject to
----------------------------
subparagraph 26(a)(ii), this Lease, and all rights of Lessee
hereunder, are and shall be subject and subordinate to that certain
first mortgage on Lessor's interest in the Land and Improvements from
Lessor to Creditanstalt-Bankverein (New York Branch) (such mortgagee,
together with any subsequent holder of such first mortgage or other
successor in interest to such mortgagee, including, without
limitation, MSC, Lessee's parent corporation, or its designee, being
herein referred to as First Mortgagee) and to each and every advance
made or hereafter to be made under such first mortgage, and to all
renewals, modifications, replacements and extensions of such first
mortgage and spreaders and consolidations of such first mortgage (such
first mortgage, together with or as modified by such advances,
renewals, modifications, substitutions, replacements, extensions,
spreaders and consolidations, the First Mortgage). This subparagraph
26(a)(i) shall be self-operative and no further instrument of
subordination shall be required. Nonetheless, in confirmation of such
subordination Lessee shall promptly execute, acknowledge, and deliver
any instrument that Lessor or First Mortgagee or any of their
respective successors in interest may reasonably request to evidence
such subordination.
(ii) The subordination provisions contained in subparagraph
26(a)(i) in respect of the First Mortgage are subject to the express
condition that so long as Lessee is not in default in the payment of
any Basic Rent or additional rent or in the performance of any other
obligations hereunder for a period beyond the time allowed in this
Lease to cure such default, Lessee will not be made a party to any
action or
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<PAGE>
proceeding to foreclose the First Mortgage and such action or
proceeding will not result in a cancellation or termination of this
Lease, and that in the event First Mortgagee becomes the owner of the
fee or in the event of the sale of the Land and/or improvements as a
result of any action or proceeding to foreclose the First Mortgage,
this Lease shall continue in full force and effect (subject to the
provisions of subparagraph 26(a)(iv)) as a direct lease between Lessee
and the then owner of the fee upon all of the terms, covenants and
conditions of this Lease. The provisions of this subparagraph shall be
self-operative and no further instrument of subordination and
nondisturbance shall be required by the First Mortgagee.
(iii) If any act or omission of Lessor would give Lessee the
right, immediately or after lapse of a period of time, to cancel or
terminate this Lease, or to claim a partial or total eviction, Lessee
shall not exercise such right (1) until it has given written notice of
such act or omission to Lessor and First Mortgagee and (2) until a
reasonable period for remedying such act or omission shall have
elapsed following the giving of such notice and following the time
when the First Mortgagee shall have become entitled under the First
Mortgage to remedy the same (which reasonable period shall in no event
be less than the period to which Lessor would be entitled under this
Lease or otherwise, after similar notice, to effect such remedy),
provided First Mortgagee shall with due diligence give Lessee notice
of intention to, and commence and continue to, remedy such act or
omission. This is a net lease and nothing in this subparagraph is
intended to imply the existence of or to create any right on the part
of Lessee to cancel or terminate this Lease.
-22-
<PAGE>
(iv) If First Mortgagee or any other person shall succeed to the
rights of Lessor under this Lease, whether through possession or
foreclosure action or delivery of a deed, then at the request of such
party so succeeding to Lessor's rights (herein called Successor
Lessor) and upon such Successor Lessor's written agreement to accept
Lessee's attornment, Lessee shall attorn to and recognize such
Successor Lessor as Lessee's landlord under this Lease and shall
promptly execute and deliver any instrument that such Successor Lessor
may reasonably request to evidence such attornment. Upon such
attornment this Lease shall continue in full force and effect as a
direct lease between the Successor Lessor and Lessee upon all of the
terms, conditions and covenants as are set forth in this Lease except
that the Successor Lessor shall not (i) be liable for any previous act
or omission or default of Lessor under this Lease; (ii) be subject to
any offset, not expressly provided for in this Lease, which
theretofore shall have accrued to Lessee against Lessor; or (iii) be
bound by any previous modification, termination or surrender of this
Lease which is not expressly provided for in this Lease or by any
previous prepayment of more than one month's Basic Rent, unless such
modification or prepayment shall have been expressly approved in
writing by First Mortgagee.
(v) Lessor and Lessee acknowledge that pursuant to the terms of
Section 1.01 of the Note (as defined in the First Mortgage) and
pursuant to various provisions of the First Mortgage including,
without being limited to, Section 3.3 thereof, and of the Assignment
(as defined in the First Mortgage) Lessor may be required to make
various deliveries and/or payments to First Mortgagee in order to
obtain, among
-23-
<PAGE>
other things, an extension of the term of the Note and various
consents and approvals. If Lessor shall incur any obligations to First
Mortgagee in order to obtain such an extension of the Note or to
obtain other consents or approvals, Lessee agrees that it will, upon
demand by Lessor, pay and/or perform, or cause to be paid and/or
performed, the obligations of Lessor to First Mortgagee pursuant to
such provision of the Note or pursuant to the First Mortgage or
Assignment.
(vi) Lessor agrees that without Lessee's prior written consent,
Lessor shall not agree to any modification of the First Mortgage (or
other Loan Documents, as defined in the First Mortgage) which would
materially increase Lessee's obligations under this Lease. Lessor
further agrees that if Lessee shall request Lessor to consent to
changes in the terms or conditions of the First Mortgage which may
result in a concomitant change in the obligations of Lessor and Lessee
under this Lease including, but not being limited to, changes in the
Basic Rent payable by Lessee, Lessor will not unreasonably withhold or
delay its agreement to any such changes upon and subject to the
following terms and conditions, all or any or which may be waived by
Lessor:
(1) The First Mortgage shall then held by a First Mortgagee
which is a commercial or savings bank, savings and loan
association, insurance company, trust company, pension fund or
other similar institutional lender;
(2) The proposed changes shall be such as are customary in
institutional mortgage loans covering property similar to the
Premises upon terms and conditions such as those proposed by
Lessee;
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<PAGE>
(vii) Without limiting any other provision of this Lease, if
the First Mortgage or the Note contains any covenant or agreement of
Owner in respect of the, ownership, operation, repair or maintenance
of the Premises, or any portion thereof, or in respect of the payment
of any interest due after a default under the Note which is greater in
scope than any similar provision of this Lease or which is not
contained in this Lease, Lessee agrees that such covenant or agreement
shall be deemed to be incorporated herein and Lessee shall comply with
the same on Owner's behalf as if such covenant or agreement were set
forth at length herein.
(b) No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease,
in whole or in part, unless such agreement is in writing, refers
expressly to this Lease and is signed by the party against whom
enforcement of the change, modification, waiver, release, discharge,
termination or effectuation of the abandonment is sought. Without
limiting the generality of the foregoing, no agreement to accept or
surrender of all or any part of the Premises shall be valid unless in
writing and signed by Lessor and the delivery of keys to an employee
or agent of Lessor shall not operate as termination of this Lease or a
surrender of the Premises. Further, no payment by Lessee or receipt by
Lessor with knowledge of a default on the part of the other party
shall be deemed a waiver of such default and no payment by Lessee or
acceptance by Lessor of a lesser amount than the correct amount of
rent due hereunder shall be deemed to be other than a payment on
account, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and
satisfaction,
-25-
<PAGE>
and Lessor may accept such check or payment without prejudice to
Lessor's right to recover the balance or pursue any other remedy in
this Lease or by law provided.
(c) Lessee shall look only to Lessor's estate and property in the
Land and Improvements (and the unaccrued rents, issues and profits
thereof) for the satisfaction of Lessee's remedies for the collection
of a judgment (or other judicial process) requiring the payment of
money by Lessor in the event of any default by Lessor hereunder, and
no other property or assets of any of (i) Lessor, Corporate Property
Associates, Corporate Property Associates 2, Carey Corporate Property,
Inc., Second Carey Corporate Property, Inc., (ii) any person
affiliated with any person referred to in the proceeding clause (i),
(iii) any director, officer, general or limited partner, employee or
agent of any person referred to in the preceding clauses (i) and (ii)
(or any legal representative, heir, estate, successor or assign of any
thereof) or (iv) any predecessor or successor to any person referred
to in clause (i) above, whether a partnership, corporation or other
entity shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Lessee's remedies under or in
respect of this Lease, the relationship of Lessor or Lessee hereunder
or Lessee's use or occupancy of the Premises.
(d) The term "Lessee" shall mean the Lessee herein named and any
assignee or other successor in interest (immediate or remote) of the
Lessee herein named, which at the time in question is the owner of all
or any part of the Lessee's estate or any reversion therein or any
interest granted by this Lease as though such person had been named
herein as Lessee; but the foregoing provisions of this
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<PAGE>
subparagraph shall not be construed to permit any assignment of this
Lease or to relieve the Lessee herein named or any assignee or other
successor in interest (whether immediate or remote) of the Lessee
herein named from the full and prompt payment, performance and
observance of the covenants, obligations and conditions to be paid,
performed and observed by Lessee under this Lease.
(e) The term "Lessor" shall mean only the owner at the time in
question of the Land and Improvements so that in the event of any
transfer or transfers of title to the Land and Improvements, the
transferor shall be and hereby is relieved and freed of all
obligations of Lessor under this Lease accruing after such transfer,
and it shall be deemed without further agreement that such transferee
has assumed and agreed to perform and observe all obligations of
Lessor herein during the period it is the holder of Lessor's interest
under this Lease.
(f) The term "and/or" when applied to two or more matters or
things shall be construed to apply to any one or more or all thereof
as the circumstances warrant at the time in question.
(g) The term "person" shall mean any natural person or persons, a
partnership, a corporation, and any other form of business or legal
association or entity.
(h) This Lease may be executed in one or more counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
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<PAGE>
(i) Lessee expressly acknowledges and agrees that Lessor has not
made and is not making, and Lessee, in executing and delivering this
Lease, is not relying upon, any warranties, representations, promises
or statements, except to the extent that the same are expressly set
forth in this Lease or in any other written agreement which way be
made between the parties concurrently with the execution and delivery
of this Lease and which shall expressly refer to this Lease. This
Lease and said other written agreement(s) made concurrently herewith,
if any, are hereinafter referred to as the "Lease Documents". It is
understood and agreed that all understandings and agreements
heretofore had between the parties are merged in the Lease Documents,
which alone fully and completely express their agreement and that the
same are entered into after full investigation, neither party relying
upon any statement or representation not embodied in the Lease
Documents, made by the other."
SECTION 1.02. Schedules A, A-1, A-2, A-3, A-4, B and C as corrected,
amended and attached hereto are incorporated herein by reference and effective
as of the Effective Date shall replace all schedules now attached to the 12/1/80
Lease.
ARTICLE II
Other Provisions
----------------
SECTION 2.01. As amended hereby, the 12/1/80 Lease is ratified and
confirmed by Lessor and by Lessee and shall be binding upon and inure to the
benefit of Lessor and of Lessee, their respective successors and assigns.
Without limiting the generality of the foregoing, Lessor and Lessee agree that
Paragraph 25 is intended to apply to the Premises, as the same have been
expanded pursuant to this Amendment.
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<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Amendment to be
duly executed and delivered, all as of the date first above written.
Witnesses as to both signatures: PRE FINISH METALS INCORPORATED
___________________________ By: /s/_______________________________
Name: J.R. Robinson
___________________________ Title: Vice President
By: /s/______________________________
Name: W.R. Beattie
Title: Secretary
(Seal)
Witnesses as to both signatures: CORPORATE PROPERTY ASSOCIATES
By: Carey Corporate Property, Inc.,
___________________________ Corporate General Partner
___________________________ By: /s/______________________________
Name: Stephen G. Nordquist
Title: President
By: /s/______________________________
Name: Samuel H. Karsch
Title: Assistant Secretary
(Seal)
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<PAGE>
Witnesses as to both signatures: CORPORATE PROPERTY ASSOCIATES 2
By: Second Carey Corporate Property, Inc.,
___________________________ Corporate General Partner
___________________________ By: /s/______________________________
Name: Stephen G. Nordquist
Title: Executive Vice President
By: /s/______________________________
Name: Samuel H. Karsch
Title: Assistant Secretary
(Seal)
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<PAGE>
Exhibit 10(n)
Sublease dated as of May 30, 1986, between Pre Finish Metals Incorporated
and Walbridge Coatings, an Illinois Partnership
-1-
<PAGE>
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
PRE FINISH METALS INCORPORATED
Closing of Transfer of E.G. Facility
as of March 31, 1996
-------------------------
Number Description of Document
- ------ -----------------------
A. Agreements and Bills of Sale
----------------------------
1. Amendments to Definitive Agreements
2. Sublease and Lease between P.M. and the Partnership
3. Bill of Sale of Existing Equipment
4. Bill of Sale of EQ Equipment
5. Indemnification Agreement
6. Assignment of Warranties
7. Assignment and Assumption Agreement
8. Note evidencing Inland Parent Loan
9. Note evidencing Bethlehem Parent Loan
10. Note evidencing PFM Parent Loan
11. Release and Satisfaction of Mortgage and Related Instruments
12. Cancelled note dated Be September 17, 1984
13. Assumption Agreement
14. Escrow Agreement
-2-
<PAGE>
15. Memorandum of Sublease and Lease
16. Letter agreement dated April 14, 1986
-3-
<PAGE>
SUBLEASE AND LEASE
------------------
THIS SUBLEASE AND LEASE, dated as of March 31, 1986, (this Sublease)
between PRE FINISH METALS INCORPORATED, an Illinois corporation (PFM) a 2300
Pratt Boulevard, Elk Grove Village, Illinois 60067 an d WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP (the Partnership) with offices at 30610 East Broadway,
Walbridge, Ohio 3465, Attention: Management Committee;
W I T N E S S E T H
WHEREAS, Line 6 Corp., as lessor, and PFM did enter into a certain
lease and agreement (the Prime Lease) dated December 1, 1980 with regard to land
described an Schedule A to the Prime Lease and attached hereto (the Leased
Land), together with certain improvements located thereon defined as
Improvements in paragraph I of the Prime Lease (the Leased Improvements); and
WHEREAS, CORPORATE PROPERTY ASSOCIATES, a California limited
partnership, and CORPORATE PROPERTY ASSOCIATES, a California limited partnership
(collectively Owner) of 689 Fifth Avenue New York, New York 10022, have
succeeded to the rights of Line 6 Corp. and are now the owners of the Leased
Land and of the Leased Improvements and is the lessor under the Prime Lease; and
WHEREAS, PFM is the owner of the land described on Schedule A-2,
attached hereto and made a part hereof (the New Land) as well as certain
improvements located on the New Land, and to some extent located on the Leased
Land, as described in Schedule A-3 (the New Improvements); and
-4-
<PAGE>
WHEREAS, by Bills of Sale of even date herewith PFM has transferred to
the Partnership all of the equipment installed and to be installed on the
Premises (as hereinafter defined) pursuant to an Electroplating Line
Construction Agreement (the Construction Agreement) dated October 15, 1984
between PFM and the Partnership (the E.G. Equipment) and the coil coating line
and coil lighting line and other machinery, apparatus, equipment, fittings,
fixtures and articles of personal property used in the business of PFM (the
Existing Equipment); and
WHEREAS, pursuant to the terms of various agreements between PFM and
the Partnership, PFM has agreed to lease and sublease the Premises to the
Partnership for the Initial Term (as hereinafter defined); and
WHEREAS, at the closing of the permanent financing with regard to the
project set forth in a letter dated September 6, 1984 from Creditanstalt,
Bankverein (CA) to Bethlehem Steel Corporation, Inland Steel Company and PFM and
in a Proposed Financing Commitment dated March 28, 1986 from CA addressed to
Owner PFM and Material Sciences Corporation (MSC) (the New Mortgage Financing)
(collectively the Permanent Financing), it is contemplated that (i) PFM will
convey the New Land and New Improvement to Owner, (ii) the Prime Lease shall be
amended to provide for rentals sufficient to maintain equity payments due Owner
together with amounts due CA under the New Mortgage Financing, to include the
New Land and New Improvements as part of the Promises and to make such other
changes and amendments required or appropriate to the New Mortgage Financing or
to the Owner in connection therewith and (iii) PFM and the Partnership shall
then amend this Sublease to reflect essentially the same
-5-
<PAGE>
rentals and terms as the Prime Lease, as so amended, on a pass through basis for
the Partnership's term of' twelve (12) years from the date of the closing of the
Permanent Financing; and
WHEREAS, PFM's right to possession of the Leased Land and Leased
Improvements arises from its position as lessee under the Prime Lease, to which
this Sublease is made expressly subject.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged by PFM and by the Partnership it is agreed
from and after April 1, 1996 as follows:
1. Certain Definitions. The following terms as used in this Sublease
-------------------
shall have the following meanings:
(a) the Land: shall be the Leased Land and New Land taken as a single
tract as described on Schedule A-4 attached hereto and made a part hereof.
(b) the Improvements: shall be the Leased Improvements and the New
Improvements.
(c) the Premises: shall consist of the Land and Improvements as
defined in the two immediately preceding subparagraphs.
(d) Manufacturing Machinery: manufacturing machinery and equipment
and other property and equipment including the E.G. Equipment and the Existing
Equipment, which are used in the operation of the Partnership's business, or the
business of a sublessee or assignee of the Partnership and not related to the
care and maintenance of the building included as part of the Improvements and
which are owned by the Partnership or a sublessee or assignee of the
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<PAGE>
Partnership.
2. Lease of Premises; Title and Condition. In consideration of rents and
--------------------------------------
covenants herein stipulated to be paid and performed-by the Partnership and upon
the terms and conditions herein specified, PFM hereby subleases to the
Partnership, and the Partnership hereby subleases from PFM, the Leased Land and
Leased Improvements and PFM leases to the Partnership, and the Partnership
hereby leases from PFM, the New Land and New Improvements, such subleased and
leased properties constituting the Premises, together with in both cases all
easements, rights and appurtenances relating thereto. Except as set forth in
paragraph 9A the Premises are subleased and leased to the Partnership in their
present condition without representation or warranty by PFM and subject to the
existing state of title, and to all applicable legal requirements now or
hereafter in effect. The Partnership has examined the Premises and title thereto
and has found the same satisfactory. It is hereby agreed that the Manufacturing
Machinery is not subject to this Sublease and shall at all times remain the
property of the Partnership.
3. Use. The Partnership may use the Premises for any lawful purpose.
---
4. Term. The Premises are leased for an initial term (Initial Term)
----
unless and until the term of this Sublease shall expire or be terminated
pursuant to any provision hereof. The Initial Term shall commence and expire on
the dates set forth in Schedule B.
5. Rent.
----
(a) The Partnership shall pay to PFM in lawful money of the United
States, as fixed rent, for the Premises, the amounts set forth in Schedule Z
(Basic Rent) on the dates set forth therein (Payment Dates), at PFM's address
set forth above, or at such other address or to such other person as PFM may
from time to time designate. PFM does hereby designate that
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<PAGE>
Basic Rent shall be paid to the Owner, PFM shall not revoke this designation
without the consent of the Partnership during the Initial Term.
(b) All amount which the Partnership is required to pay pursuant to
this Sublease (other than Basic Rent, amounts payable upon purchase of the
Premises and amounts payable as liquidated damages pursuant to paragraph 18),
together with every fine, penalty interest and cost which may be added for
nonpayment or late payment thereof, shall constitute additional rent if the
Partnership shall fail to pay any additional rent, PFM shall give immediate
notice of such failure to the Partnership and shall have the right but not the
obligation to pay the same and shall have all rights, powers and remedies with
respect thereto as are provided herein or by law in the case of non-payment of
Basic Rent. The Partnership shall pay to PFM, interest at the rate (the Default
Rate) of the lesser of the maximum amount not prohibited by law or 13% per annum
on all overdue Basic Rent from the due date thereof until paid, and on all
overdue additional rent paid by PFM on behalf of the Partnership from the date
of payment by PFM until repaid by the Partnership. If PFM shall fail to pay any
additional rent due under the Prime Lease, the Partnership shall give immediate
notice of such failure to PFM and shall have the right but not the obligation to
pay the same and shall have all rights, powers and remedies with respect thereto
as provided herein or by law in the non-patent for amounts due and owing. PFM
shall have to reimburse the Partnership for amounts so incurred together with
interest at the Default Rate on all overdue additional rent paid by the
Partnership to Owner on PFM's behalf from the date of payment until repaid by
PFM. The Partnership shall perform all its obligations under this Sublease at
its sole cost and expense, and shall pay all Basic Rent and additional rent when
due, without notice or demand.
-8-
<PAGE>
6. Net Lease; Non-Terminability.
----------------------------
(a) This Sublease is a net lease and, except as to termination of the
Prime Lease for any reason other than the fault of the Partnership hereunder and
as otherwise expressly provided herein, any present or future law to the
contrary notwithstanding, shall not terminate, nor shall the Partnership be
entitled to any abatement, reduction, set-off, counterclaim, defense or
deduction with respect to any Basic Rent, additional rent or other sum payable
hereunder, nor shall the obligations of the Partnership hereunder be affected by
reason of: any damage to or destruction of the Premises; any taking of the
Premises or any part thereby condemnation or otherwise; any prohibition,
limitation, restriction or prevention of the Partnership's use, occupancy or
enjoyment of the Premises, or any interference with such use, occupancy or
enjoyment by any person other than PPM; any eviction by paramount title or
otherwise; the impossibility or illegality of performance by Owner, PFM, the
Partnership or any combination of the foregoing; any action of any governmental
authority; or any other cause whether similar or dissimilar to the foregoing.
The parties intend that the obligations of the Partnership hereunder shall be
separate and independent covenants and agreements and shall continue unaffected
unless such obligations shall have been modified or terminated pursuant to an
express provision of this Sublease.
(b) The Partnership shall remain obligated under this Sublease in
accordance with its terms and shall not take any action to terminate, rescind or
avoid this Sublease, notwithstanding any bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding affecting Owner, PFM or any
assignee of Owner or PFM or any action with respect to this Sublease which may
be taken by any trustee, receiver or liquidator or by any court. Except
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<PAGE>
as set forth in Paragraph 9A the Partnership waives all rights to terminate or
surrender this Sublease, or to any abatement or deferment of Basic Rent,
additional rent or other sums payable hereunder.
6A. Covenant of Quiet Enjoyment. Provided that the Partnership shall
---------------------------
pay the Basic Rent and the additional rent as and when provided in this
Sublease, and provided further that the Partnership shall observe and perform
the other obligations and agreements required of it hereunder, PFM shall
promptly and faithfully observe and perform all of its obligations and
agreements as lessee under the Prime Lease; and the Partnership shall, at all
times during the term of this Sublease, have the peaceable and quiet enjoyment
of the Premises, free of any let, hindrance, or ejectment by PFM or any person
claiming by or through PFM.
7. Taxes and Assessments Compliance with Law.
-----------------------------------------
(a) The Partnership shall pay: (i) all taxes, assessments,
levies, fees, water and sewer rents and charges, and all other governmental
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are, at any time prior to or during the term hereof, imposed
or levied upon or assessed against (A) the Premises, (B) any Basic Rent,
additional rent or other sum payable hereunder or (C) this Sublease or the
leasehold estates hereby created, or which arise in respect of the operation,
possession or use of the Premises; (ii) all cross receipts or similar taxes
imposed or levied upon, assessed against or measured by any Basic Rent,
additional rent or other sum payable hereunder; (iii) all sales, use and similar
taxes at any time levied, assessed or payable on account of the acquisition,
leasing or use of the Premises; and (iv) all charges for utilities serving the
Premises. The Partnership shall not be required to pay any franchise, estate,
inheritance, transfer, income or similar tax of owner or PFM (other than
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any tax referred to in clause (ii) above) unless such tax is imposed, levied or
assessed in substitution for any other tax, assessment, charge or levy which the
Partnership is required to pay pursuant to this paragraph 7(a), but only in an
amount calculated as if the Owner and PFM only owned the Premises and their
income consisted only of amounts payable hereunder. The Partnership will furnish
to PFM, promptly after demand therefor, proof of payment of all items referred
to above which are payable by the Partnership. If any such assessment may
legally be paid in installments, the Partnership may pay such assessment in
installments; in such event, the Partnership shall be liable only for
installments which become due and payable prior to or during the term hereof.
(b) The Partnership shall comply with and cause the Premises to
comply with (i) all legal requirements applicable to the Premises or the use
thereof and (ii) all contracts (including insurance policies), agreements and
restrictions applicable to the Premises or the ownership, occupancy or use
thereof, including but not limited to all such legal requirements, contracts,
agreements and restrictions which require structural unforeseen or extraordinary
changes to the Improvements.
8. Liens. The Partnership will promptly remove and discharge any charge,
-----
lien, security interest or encumbrance upon the Premises or any Basic Rent,
additional rent or other sum payable hereunder which arises for any reason,
including all liens which arise out of the use, occupancy, construction, repair
or rebuilding of the Premises or by reason of labor or materials furnished or
claimed to have been furnished to the Partnership or for the Premises, but not
including the liens and encumbrances set forth in Part II of Schedule A, liens
or encumbrances arising from the acts or obligations of PFM and any mortgage,
charge, lien, security interest or
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encumbrance created by Owner or PFM without the consent of the Partnership;
provided, however, PFM shall not encumber the Premises or assign, cancel,
terminate or pledge its interest in the Prime Lease except as contemplated by or
in connection with the Permanent Financing without the prior written consent of
the Partnership.
9. Indemnification. Subject to the provisions of paragraph 9A, the
---------------
Partnership shall pay, and shall protect, indemnify and save harmless PFM and
owner from and against, all liabilities, losses, damages , costs, expenses
(including reasonable attorneys' fees and expenses), causes of action, suits,
claims, demands or judgments of any nature arising from (i) injury to or death
of any person, or damage to or loss of property, on the Premises or on adjoining
sidewalks, streets or ways, or connected with the use, condition or occupancy of
any thereof, (ii) violation of this Sublease and (iii) any contest referred to
in paragraph 17.
9A. Other Controlling Documents. PFM and the Partnership acknowledge
---------------------------
and agree that PFM has and will continue to have certain obligations to the
Partnership in respect of the design, construction, condition, and quality of
the electrogalvanizing facilities comprised within or to be operated at and from
the Premises, or both, pursuant to the construction Agreement, and that,
pursuant to that certain Operating Agreement (the Operating Agreement) dated as
of October 15, 1984, by and between the Partnership and Pre Finish Metals (EG)
Incorporated (PFM-EG), a wholly-owned subsidiary of PFM, PFM-EG shall have
certain duties and obligations to the Partnership in respect of the operation,
maintenance, and insurance of the Premises and of the indemnification of the
Partnership from and against loss, damage, or expense in connection therewith.
The parties acknowledge, further, that PFM-EG is a partner of the Partnership
and that the Construction Agreement, the Operating Agreement, and certain other
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documents, instruments, and agreements between PFM or PFM-EG and the Partnership
represent the agreed-upon and specific terms whereby the Premises and the EG
Equipment have been and will be constructed, completed, and operated for the
benefit of the Partnership. In the event of any conflict between the terms of
the Construction Agreement, the Operating Agreement, any such other document,
instrument or agreement executed and delivered by PFM or PFM-EG, or both of
them, to the Partnership with respect to the construction, design, use, or
operation of the EG Equipment or the Premises (all of which are hereinafter
described as the Operative Documents) and the terms of this Sublease, the
provisions of the Operative Documents shall govern. The parties specifically
covenant and agree that the Operative Documents shall survive the execution and
delivery of this Sublease, and that under no circumstances shall this Sublease
release, alter, affect, reduce waive, or extinguish any obligation of PFM or
PFM-EG un or any one or more of the Operative Documents.
10. Maintenance and Repair. The Partnership will maintain the premises in
----------------------
good repair and condition, except for ordinary wear and tear, and will make all
structural and non-structural, foreseen and unforeseen and ordinary and
extraordinary changes and repairs which may be required to keep the Premises in
good repair and condition. PFM shall not be required to maintain, r pair or
rebuild the improvements or to maintain the Premises, and the Partnership waives
the right to make repairs at the expense of PFM pursuant to any law at any time
in effect.
11. Alterations; Reimbursement for Certain Additions. The Partnership
------------------------------------------------
may, at its expense, make additions to and alterations of the Improvements,
construct additional Improvements and make substitutions and replacements for
the Improvements, provided that (i) the market value of the Premises shall not
be materially lessened thereby, (ii) such work shall
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be expeditiously completed in a good and workmanlike manner and in compliance
with all applicable legal requirements and the requirements of any insurance
policy required to be maintained by the Partnership hereunder, and (iii) no
improvements shall be demolished unless the Partnership shall have first
furnished PFM with such surety bonds or other security acceptable to PFM as
shall be necessary to assure rebuilding of such Improvements. All such
additions, alterations, additional Improvements, substitutions and replacements
shall be and remain part of the realty and the property of PFM, or Owner, as the
case may be, and shall be subject to this Sublease. The Partnership may place
upon the Premises any inventory, trade fixtures, machinery or equipment
belonging to the Partnership or third parties, including the Manufacturing
Machinery, and may remove the same at any time during the term of this Sublease.
The Partnership shall repair any damage to the Premises caused by such removal.
12. Condemnation and Casualty.
-------------------------
(a) The Partnership hereby irrevocably assigns to PFM for its own
account as to the New Land and New Improvements and for assignment to Owner as
to the Leased Land and Leased Improvements, or its assignee if the Prime Lease
shall be assigned, any award, compensation or insurance payment to which the
Partnership may become entitled by reason of its interest in the Premises (i) if
the Premises are damaged or destroyed by fire or other casualty or (ii) if the
use, occupancy or title of the Premises or any part thereof is taken,
requisitioned or sold in, by or on account of any actual or threatened eminent
domain proceeding or other action by any person having the power of eminent
domain. The Partnership is hereby authorized and empowered in the name and an
behalf of PFM and Owner, or its assignee as if the Prime Lease shall be
assigned, to appear in any such proceeding or action, to negotiate, prosecute
and adjust
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any claim for any award, compensation or insurance payment on account of any
such damage, destruction, taking, requisition. or sale, shall be applied
pursuant to this paragraph 12, and all such amounts (minus the expense of
collecting such amounts) are herein called the Net Proceeds. The Partnership
shall take all appropriate action in connection with each such proceeding,
action, negotiation, prosecution and adjustment and shall pay all expenses
thereof, including the cost of PFM's, Owner's or its assignee's if the Prime
Lease shall be assigned, participation therein.
(b) if an occurrence of the character referred to in clause (i) or
(ii) of paragraph 12(a) shall affect all or a substantial portion of the
Premises and shall render the Premises unsuitable for restoration for continued
use and occupancy in the Partnership's business, then the Partnership shall, not
later than 25 days after such occurrence deliver to PFM (A) notice of its
intention to terminate this Sublease on the next Payment Date (the Termination
Date) which occurs not less than 95 days after the delivery of such notice and
(B) a certificate of the Partnership describing the event giving rise to such
termination and stating that the Partnership has determined that such event has
rendered the Premises unsuitable for restoration for continued use and occupancy
in the Partnership's business. Such notice shall be accompanied by an
irrevocable offer by the Partnership to purchase any remaining portion of the
Premises from PFM and Owner and the Net Proceeds, if any, payable in connection
with such occurrence (or the right to receive the same when made, if payment
thereof has not yet been made) on the Termination Date, at a price determined in
accordance with Schedule C. If PFM shall reject such offer by notice given to
the Partnership not later than the 10/th/ day prior to the Termination Date
except with respect to obligations and liabilities of the Partnership, actual or
contingent, which have arisen on or prior to the Termination Date, upon payment
by the Partnership of all Basic
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Rent, additional rent and other sums then due and payable hereunder to and
including the Termination Date, and the Net Proceeds shall belong to PFM. Unless
PFM shall have rejected such offer in accordance with his paragraph, PFM shall
be conclusively presumed to have accepted such offer, and, on the Termination
Date, PFM shall grant and convey, and cause Owner to grant and convey, the
remaining Portion of the Promises, if any, to the Partnership or its designee
and shall assign to the Partnership or its designee all its interest in the Net
Proceeds. Owner and PFM need not grant and convey any better title than existed
on the closing date of the New Mortgage Financing, and the Partnership, or its
designee shall accept such title, subject, however, to all charges, liens,
security interests and encumbrances on the Premises and all legal requirements,
but free of the lien of the Mortgage and charges, liens, security interests and
encumbrances resulting from the acts of Owner or PFM taken without the consent
of the Partnership. The Partnership at its option may require proof of such
state of title as a condition to closing consisting of a current title
commitment from a title insurance company, financing statement searches or a
plat of survey prepared by a licensed surveyor, or any combination thereof, al
to be paid for by the Partnership. Upon the date fixed for transfer of the
Premises, the Partnership shall pay to Owner and PFM, as directed by them, the
purchase price therefor specified herein together with all Basic Rent,
additional rent and other sums due and payable hereunder to the Termination
Date, and Owner and PFM shall deliver such deeds and bills of sale to the
Premises and any other instruments necessary to assign any property then
required to be assigned to the Partnership. The Partnership shall pay all
charges incident to such conveyance, grant and assignment, including counsel
fees, escrow fees, recording fees, title insurance premiums and all applicable
taxes (other than any income or franchise taxes of Owner and PFM)
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which may be imposed by reason of such conveyance, grant and assignment and the
delivery of said deed and other instruments. Upon the completion of such
purchase, but not prior thereto (whether or not any delay or failure in the
completion of such purchase shall be the fault of Owner or PFM), the Prime Lease
and this Sublease shall terminate, except with respect to obligations and
liabilities of the Partnership hereunder, actual or contingent, which have
arisen on or prior to such date of purchase.
(c) If, after an occurrence of the character referred to in clause
(i) or (ii) of paragraph 12(a), the Partnership is not required to give notice
of its intention to terminate this Sublease, then this Sublease shall continue
in full effect, and the Partnership shall repair any damage to the Premises
caused by such event in conformity with the requirements of paragraph 11(a) so
as to restore the Premises (as nearly as practicable) to the condition and
market value thereof immediately prior to such occurrence. The Partnership shall
be entitled to receive the Net Proceeds payable in connection with such
occurrence, but only against certificates of the Partnership delivered to PFM
from time to time as such work or repair progresses, each such certificate
describing the work of repair for which the Partnership is requesting payment
and the cost incurred by the Partnership in connection therewith and stating
that the Partnership has not theretofore received payment for such work. Any Net
Proceeds remaining after final payment has been made for such work shall be paid
to the Partnership if such amounts are less than $5,000. If such excess proceeds
are $5,000 or more, they shall be retained by PFM and (i) the Basic Amount set
forth in Schedule C shall be reduced by an amount equal to such Net Proceeds so
retained by PFM and (ii) each installment of Basic Rent payable on and after the
first Payment Date occurring three months or more after the final payment to the
Partnership for such work
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<PAGE>
shall be reduced by a fraction thereof, the numerator of which shall be the
amount so retained by PFM and the denominator of which shall be the Basic Amount
prior to the reduction thereof referred to in clause (i) above. In the event of
any temporary requisition, this Sublease shall remain in full effect for the
remainder of the term hereof and the Partnership shall be entitled to receive
the entire Net Proceeds payable during the remainder of the term hereof by
reason of such requisition. If the cost of any repairs required to be made by
the Partnership pursuant to this paragraph 12(c) shall exceed the amount of such
Net Proceeds, the deficiency shall be paid by the Partnership.
13. Insurance.
---------
(a) The Partnership will maintain insurance on the Premises of the
following character:
(i) Insurance against loss by fire, lightning and other risks
from time to time included after "extended coverage"
policies, in amounts sufficient to prevent Owner, PFM or
the Partnership from becoming a co-insurer of any loss but
in any event in amounts not less than 90% of the actual
replacement value of the Improvements, 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 Premises and adjoining streets and sidewalks,
in the minimum amounts of $500,000 for bodily injury or
death to any one person, $1,000,000 for any one accident,
and $1,000,000 for property damage.
(iii) Workmen's compensation insurance to the extent required by
the law of the state in which the Premises are located and
to the extent necessary to protect Owner, PFM, the
Partnership and the Premises against workmen's
compensation claims.
(iv) Such other insurance, in such amounts and against such
risks, as is commonly obtained in the case of property
similar in use to the Premises are located, including war-
risk insurance when and to the
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extent obtainable from the United States Government or any
agency thereof.
Such insurance shall be written by companies of nationally recognized financial
standing legally qualified to issue such insurance in the state in which the
Premises are located and shall name as insured parties Owner, PFM and the
Partnership as their interests may appear.
(b) Every such policy (other than any general public liability or
workmen's compensation policy) shall bear a first mortgagee endorsement in favor
of the mortgagee or beneficiary (the Mortgagee) under any instrument creating a
first lien on owner's interest in the Premises (the Mortgage); and any loss
under any such policy shall be payable to the Mortgagee to be held and applied
pursuant to paragraph 12(c). Every policy referred to in paragraph 13(a) shall
provide that it will not be cancelled except after 30 days' written notice to
owner, PFM and the Mortgagee and that it shall not be invalidated by any act or
neglect of Owner, PFM or the Partnership, nor by occupancy of the Premises for
purposes more hazardous than permitted by such policy, nor by any foreclosure or
other proceedings relating to the Premises, nor by change in title to the
Premises.
(c) The Partnership shall deliver to the Mortgagee original or
duplicate policies or certificates of insurers, satisfactory to the Mortgagee,
evidencing the existence of all insurance which is required to be maintained by
the Partnership hereunder, such delivery to be made (i) promptly after the
execution and delivery hereof and (ii) within 30 days prior to the expiration of
any such insurance. The Partnership shall not obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this paragraph 13 unless Owner and PFM are named insureds therein, with loss
payable as provided herein. The Partnership shall immediately notify owner and
PFM whenever any such separate insurance is
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<PAGE>
obtained and shall deliver to the Mortgagee the policies or certificates
evidencing the same. Any insurance required hereunder may be provided under
blanket policies with a deductible of not more than $50,000. PFM acknowledges
that PFM-EG is, pursuant to the Operating Agreement, obligated to furnish
certain insurance coverage to the Partnership; to the extent that PFM-EG shall
procure and maintain the Partnership shall not be required to provide
corresponding coverage hereunder.
14. Right of First Refusal. If at any time during the Partnership Term of
----------------------
this Sublease, owner receives a bona fide offer to purchase the Leased Land and
Leased Improvements (or any part thereof), other than a bid or offer to purchase
the Leased Land and Leased Improvements at any sale incidental to the exercise
of any remedy provided for in a mortgage or similar instrument creating a lien
thereon (the Mortgage), which owner desires to accept, Owner will, prior to
accepting the same, give PFM an opportunity to purchase the Leased Land and
Leased Improvements (or such part thereof) upon the same terms and conditions
contained in such offer and PFM shall pass on that opportunity to the
Partnership. The Partnership must exercise its rights within 7 days of receiving
written notice of the full terms of sale and owner's intention to sell which
shall be delivered to the Partnership by PFM within 5 days of PFM's receipt
thereof. If the time periods for the right of first refusal granted PFM by Owner
under the Prime Lease are extended by amendment of the Prime Lease at the time
of closing of the Permanent Financing, then the time periods in the preceding
sentence shall also be extended by amendment to this Sublease, provided that PFM
shall have a reasonable period within which to exercise the right of first
refusal under the Prime Lease as so amended should the Partnership fail to do so
under this Sublease as amended. If the Partnership fails to exercise its right
to purchase, then PFM is free
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to do so, and, if both the Partnership and PFM fail to do so, then the Owner may
proceed to sell the Leased Land and Leased Improvements (or such part thereof)
in accordance with the terms of the offer. If such sale is not made, the
Partnership's right to purchase shall be reinstated as aforesaid, and if only a
part of the Leased Land and Leased Improvements is sold in such manner, the
Partnership's rights to purchase shall remain as to the balance of the Leased
Land and Leased Improvements and are coupled with an interest. Except as
provided above with respect to a sale incidental to the exercise of a remedy
under a Mortgage, this right in favor of the Partnership shall be binding upon
any grantee of the Leased Land and Leased Improvements, or part thereof
(including PFM) during the Partnership Term is in effect so that the Partnership
shall have such rights from the owners of the Leased Land and Leased
Improvements during the Partnership Term in the event the Partnership does not
exercise its rights in earlier sales. The rights granted the Partnership under
this paragraph are coupled with an interest in the Leased Land and Leased
Improvements. Any such conveyance or transfer pursuant to this paragraph 14
shall be expressly subject to this Sublease and any Mortgage.
15. Amendments at Closing of the Permanent Financing. At the time the
------------------------------------------------
closing of the Permanent Financing PFM agrees to convey the New Land and New
Improvements to Owner, provided that, concurrently with such conveyance, the
Prime Lease shall be amended in a reasonable manner acceptable to PFM so that
the Prime Lease as amended, shall provide for Basic Rent in an amount sufficient
to maintain equity payments due Owner plus an amount equal to debt service
payable to CA under the New Mortgage Financing for the full twelve year period
from the date of closing of the Permanent Financing, to include the New and New
Improvements as part of the Premises under the Prime Lease and to make such
other changes and amendments
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required or appropriate to accommodate the terms and requirement of the New
Mortgage Financing and the Owner in connection therewith. PFM shall use
reasonable efforts to include in such amendment provisions providing for the
Owner to acknowledge and consent to this Sublease (as the same shall be amended
a provided herein), and to provide that Owner shall, in the event of a default
under the Prime Lease (as amended), refrain from exercising any rights or
remedies which it then may have without first providing the Partnership with
written notice of the occurrence of such default and the reasonable opportunity
to cure the same. Concurrently therewith, PFM and the Partnership shall amend
this Sublease to reflect essentially the same rentals and terms as the Prime
Lease, as so amended, on a pass through basis for a term of twelve (12) years;
provided that paragraph 9A hereof shall remain in force and effect. If for any
reason the Permanent Financing does not close at the time the construction under
the Construction Agreement is completed, PFM shall negotiate extensions and
amendments to this Sublease in good faith.
16. Assignment and Subletting. The Partnership may sublet the Premises
-------------------------
or assign its interests hereunder, provided that each sublease shall expressly
be made subject to the provisions hereof and the Prime Lease. No such assignment
or sublease shall modify or limit any right or Power of PFM hereunder or the
Owner under the Prime Lease, or affect or reduce any obligation of the
Partnership hereunder, and all such obligations shall continue in full effect as
obligations of a principal and not of a guarantor or surety, as though no
assignment or subletting had been made. Neither this Sublease nor the term
hereby demised shall be mortgaged by the Partnership, nor shall the Partnership
mortgage or pledge its interests in any sublease of the Premises or the rentals
payable thereunder unless such pledge or mortgage has been approved in advance
by
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PFM, which approval shall not be unreasonably withheld. The Partnership shall,
within 7 days after the execution of any such sublease or assignment, deliver a
conformed copy there of to PFM. Permitted Contests. The Partnership shall not be
------------------
required, nor shall PFM have the right, to pay, discharge or remove any tax,
assessment, levy, fee, rent, charge, lien or encumbrance, or to comply with any
legal requirement applicable to the Premises or the use thereof, as long as the
Partnership 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, and the sale, forfeiture or loss of the Premises or
any Basic Rent or any additional rent, to satisfy the same, and which shall not
affect the payment of any Basic Rent or any additional rent, provided that such
contest shall not subject PFM to the risk of any criminal liability. The
Partnership shall give such reasonable security as may be demanded by PFM, Owner
or the Mortgagee to insure payment of such tax, assessment, levy, fee, rent,
charge, lien or encumbrance and to prevent any sale or forfeiture of the
Premises of such non-payment.
17. Conditional Limitations; Default Provision.
------------------------------------------
(a) Any of the following occurrences or acts shall constitute an
event of default under this Sublease: (i) if the Partnership shall (1) fail to
pay any Basic Rent, additional rent or other sum required to be paid by the
Partnership hereunder, or (2) fail to observe or perform any other provision
hereof and such failure shall continue for 25 days after written notice thereof
to the Partnership; or (ii) if the Partnership shall file a petition in
bankruptcy or for reorganization or for an arrangement pursuant to any federal
or state bankruptcy law or any similar federal or state law, or shall be
adjudicated a bankrupt or become insolvent or shall make
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an assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of the Partnership as a bankrupt or its
reorganization pursuant to any federal or state bankruptcy law or any similar
federal or state law shall be filed in any court and the Partnership shall
consent to or acquiesce in the filing thereof or such petition or answer shall
not be discharged or denied within 90 days after the filing thereof, or (iii) if
a receiver, trustee or liquidator of the Partnership or of all or substantially
all of the assets of the Partnership or of the Premises shall be appointed in
any proceeding brought by the Partnership or if any such receiver, trustee or
liquidator shall be appointed in any proceeding brought against the Partnership
and shall not be discharged within 90 days after such appointment, or if the
Partnership shall consent to or acquiesce in such appointment; or (iv) if the
Premises shall have been left unoccupied and unattended for a period of 30 days.
(b) If an event of default shall have happened and be continuing, PFM
shall have the right to give the Partnership notice of PFM's intention to
terminate the term of this Sublease on a date not less than 3 days after the
date of such notice. Upon the giving of such notice, the term of this Sublease
and the estate hereby granted shall expire and terminate on such date as fully
and completely and with the same effect as if such date were the date herein
fixed for the expiration of the term of this Sublease, and all rights of the
Partnership hereunder shall expire and terminate, but the Partnership shall
remain liable as hereinafter provided.
(c) if an event of default shall have happened and be continuing, PFM
shall have the immediate right, whether or not the term of this Sublease shall
have been terminated pursuant to paragraph 18(b), to re-enter and repossess the
Premises by summary proceedings,
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<PAGE>
ejectment or in any manner PFM determines to be necessary or desirable and the
right to remove all persons and property therefrom. PFM shall be under no
liability by reason of any such reentry or repossession or removal. No such re-
entry or repossession of the Premises shall be construed as an election by PFM
to terminate the term of this Sublease unless a notice of such intention is
given to the Partnership pursuant to paragraph 18(b), or unless such termination
is decreed by a court of competent jurisdiction.
(d) At any time or from time to time after the re-entry or
repossession of the Premises pursuant to paragraph 18(c), whether or not the
term of this Sublease shall have been terminated pursuant to paragraph 18(b),
PFM may (but shall be under no obligation to) relet the Premises for the account
of the Partnership, in the name of the Partnership or PFM or otherwise, without
notice to the Partnership, for such term or terms and on such conditions and for
such uses as PFM, in its absolute discretion, may determine. PFM may collect and
receive any rents payable by reasons of such reletting. PFM shall not be liable
for any failure to relet the Premises or for any failure to collect any rent due
upon any such reletting.
(e) No expiration or termination of the term of this Sublease
pursuant to Paragraph 18(b), by operation of law or otherwise, and no re-entry
or repossession of the Premises pursuant to paragraph 18(c) or otherwise, and no
reletting of the Premises pursuant to paragraph 18(d) or otherwise, shall
relieve the Partnership of its liabilities and obligations hereunder, all of
which shall survive such expiration, termination, re-entry, repossession or
reletting.
(f) In the evert of any expiration or termination of the term of this
Sublease or re-entry or repossession of the Premises by reason of the occurrence
of an event of default, the
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Partnership will pay to PFM all Basic Rent, additional rent and other sums
required to be paid by the Partnership to and including the date of such
expiration, termination, re-entry or repossession, and whether or not the
Premises shall have been relet, be liable to PFM from, and shall pay to PFM, as
liquidated and agreed current damages: (i) all Basic Rent, additional rent and
other sums which would be payable under this Sublease by the Partnership in the
absence of such expiration, termination, re-entry or repossession, lease (ii)
the net proceeds, if any, of any reletting effected for the account of the
Partnership pursuant to paragraph 18(d), after deducting from such proceeds all
expenses of PFM and Owner in connection with such reletting (including all
repossession costs, brokerage commissions, reasonable attorneys' fees and
expenses, employees' expenses, alteration costs and expenses of preparation for
such reletting). The Partnership will pay such current damages on the days on
which Basic Rent would be payable under this Sublease in the absence of such
expiration, termination, re-entry, or repossession, and PFM shall be entitled to
recover the same from the Partnership on each such day.
(g) At any time after such expiration or termination of the term of
this Sublease or re-entry or repossession of the Premises by reason of the
occurrence of an event of default, whether or not PFM shall have collected any
current damages pursuant to paragraph 18(f), PFM shall be entitled to recover
from the Partnership, and the Partnership will pay to PFM on demand, as and for
liquidated and agreed final damages for the Partnership's default and in lieu of
all current damages beyond the date of such demand (it being agreed that it
would be impracticable or extremely difficult to fix the actual damages), an
amount equal to the excess, if any, of (a) all Basic Rent, additional rent and
other sums which would be payable under this Sublease from the date of such
demand (or, if it be earlier, the date to which the Partnership shall
-26-
<PAGE>
have satisfied in full its obligations under paragraph 18(f) to pay current
damages) for what would be the then unexpired term of this Sublease in the
absence of such expiration, termination, re-entry or repossession, discounted at
the rate of 5% per annum over (b) the then fair rental value of the Premises
(determined by applying a discount rate of 5% per annum) for the same period. If
any law shall limit the amount of such liquidated final damages to less than the
amount above agreed upon, PFM shall be entitled to the maximum amount allowable
under such law.
18. Additional Rights of PFM.
------------------------
(a) No right or remedy hereunder shall be exclusive of any other
right or remedy, but shall be cumulative and in addition to any other right or
remedy hereunder or now or hereafter existing. Failure to insist upon the str ct
performance of any provision hereof or to exercise any option, right, power or
remedy contained herein shall not constitute a waiver or relinquishment thereof
for the future. Receipt by PFM of any Basic Rent, additional rent or other sums
payable hereunder with knowledge of the breach of any provision hereof shall not
constitute a waiver of such breach, and no waiver by PFM of any provision hereof
shall be deemed to have been made unless made in writing. PFM shall be entitled
to injunctive relief increase of the violation, or attempted or threatened
violation, of any of the provisions hereof, or to a decree compelling
performance of any of the provisions hereof, or to any other remedy allowed to
PFM by law.
(b) The Partnership hereby waives and surrenders for itself and all
those claiming under it, including creditors of all kinds, (i) any right and
privilege which it or any of them may have to redeem the Premises or to have a
continuance of this Sublease after
-27-
<PAGE>
termination of the Partnership's right of occupancy by order or judgment of any
court or by any legal process or writ, or under the terms of this Sublease, or
after the termination of the term of this Sublease as herein provided, and (ii)
the benefits of any law which exempts property from liability for debt or for
distress for rent.
(c) If the Partnership shall be in default in the performance of any
of its obligations hereunder, the Partnership shall pay to PFM, on demand, all
expenses incurred by PFM and Owner as a result thereof, including reasonable
attorneys' fees and expenses. If PFM or owner, or both, shall be made a party to
any litigation commenced against the Partnership and the Partnership, at its'
expense, shall fail to provide PFM with counsel approved by PFM and owner, the
Partnership shall pay all costs and reasonable attorneys' fees incurred by PFM
and Owner in connection with such litigation (including all appeals).
19. Notices, Demands and Other Instruments.
--------------------------------------
(a) All notices, demands, designations, certificates, requests,
offers, consents, approvals and other instruments given pursuant to this
Sublease shall be in writing and shall be validly given when mailed by prepaid
registered mail, (i) if to PFM, addressed to PFM at its address set forth above,
and (ii) if to the Partnership, addressed to the Partnership at its address set
forth above. PFM and the Partnership each may from time to time specify any
address in the United States as its address for purposes of this Sublease by
giving 15 days' notice to the other party.
(b) PFM agrees to forward to the Partnership immediately upon receipt
thereof copies of all notices from Owner and to provide concurrent copies of
PFM's notices to Owner under the Prime Lease.
-28-
<PAGE>
20. Estoppel Certificates.
---------------------
(a) Each party will, from time to time, upon 15 days' prior request
by the other party, execute, acknowledge and deliver to the requesting party a
certificate stating that this Sublease is unmodified and in full effect (or, if
there have been modifications, that this Sublease is in full effect as modified,
and setting forth such modifications) and the dates to which Basic Rent,
additional rent and other sums payable hereunder have been paid, and either
stating that to the knowledge of the signer of such certificate no default
exists hereunder or specifying each such default of which the signer has
knowledge. Any such certificate may be relied upon by the prospective mortgagee
or purchaser of requesting party's and Owner's interest in the Premises.
(b) PFM will, from time to time, upon 15 days' prior request by the
partnership, execute, acknowledge and deliver to the Partnership a certificate
of PFM stating that the Prime Lease is unmodified and in full effect (or, if
there have been modifications, that the Prime Lease is in full effect as
modified, and setting forth such modifications) and the dates to which Basic
Rent, additional rent and other sums payable thereunder have been paid, and
either stating that to the knowledge of the signer of such certificate no
default exists hereunder or specifying each such default of which the signer has
knowledge. Any such certificate may be relied upon by the Partnership or any
prospective sublessee or assignee of the Partnership's interest in the Premises.
PFM hereby represents to the Partnership that as of the effective date of this
Sublease that (i) the Prime Lease is in full force and effect and unmodified,
(ii) all sums payable thereunder by PFM through the date hereof have been paid,
(iii) no notice of default has been received by PFM from Owner hereunder and
(iv) there are no facts or circumstances known to PFM which with the delivery of
notice or the passage of time or both, constitute a default
-29-
<PAGE>
under the Prime Lease which have not been waived and consented to by Owner.
21. No Merger. There shall be no merger of this Sublease or of the
---------
leasehold estate hereby created with the fee estate in the Premises by reason of
the fact that the same person acquires or holds, directly or indirectly, this
Sublease or the leasehold estate hereby created or any interest herein or in
such leasehold estate as well as the fee estate in the Premises or any interest
in such fee estate.
22. Surrender. Upon the expiration or termination of the term of this
---------
Sublease, the Partnership shall surrender the Premises to PFM in the condition
in which the Premises were originally received from PFM, except as repaired,
rebuilt, restored, altered or added to as permitted or required hereby, and
except for ordinary wear and tear. The Partnership shall remove from the
Premises on or prior to such expiration or termination all property situated
thereon which is not owned by PFM, and shall repair any damage caused by such
removal. Property not so removed shall be deemed to be abandoned by the
Partnership and the Partnership's interests therein shall become the property of
PFM, and PFM may cause such property to be removed from the Premises and
disposed of, but the cost of any such removal and disposition and of repairing
any damage caused by such removal shall be borne by the Partnership.
23. Separability; Binding Effect. Each provision hereby shall be separate
----------------------------
and independent and the breach of any such provision by PFM shall not discharge
or relieve the Partnership from its obligations to perform each and every
covenant to be performed by the Partnership hereunder. If any provision hereof
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remaining provisions hereof, or
-30-
<PAGE>
the application of such provision to persons or circumstances other than those
as to which it is valid or unenforceable, shall not be affected thereby, and
each provision hereof shall be valid and shall be enforceable to the extent
permitted by law. All provisions contained in this Sublease shall be binding
upon, inure to the benefit of, and be enforceable by, the respective successors
and assigns of PFM and the Partnership to the same extent as if each such
successor and assign were named as a party hereto. This Sublease may not be
changed, modified or discharged except by a writing signed by PFM and the
Partnership. This Sublease shall be governed by the laws of the state in which
the Premises are located.
24. Investment Tax Credit. PFM agrees to elect, concurrently with the
---------------------
execution and delivery of this Sublease, in accordance with Section 48(d) of the
Internal Revenue Code and the regulations thereunder to treat the Partnership as
having acquired the New Improvements for an amount equal to its fair market
value so that the Partnership may obtain the benefit of the credit, if any,
allowable by Section 38 of the Internal Revenue Code with respect to the New
Improvements. PFM shall not claim any such credit with respect to the New
Improvements.
25. Schedules. Attached hereto are Schedules A, A-1, A-2, A-3, A-4, B
---------
and C referred to in this Sublease, which Schedules are hereby incorporated by
reference herein.
26. Memorandum. At the request of either party, PFM and the Partnership
----------
shall execute and deliver a Memorandum of Sublease and Lease, making reference
to this instrument and in form suitable for recording in the public records of
Wood County, Ohio.
27. No Personal Liability. Unless and until Owner agrees to allow personal
---------------------
liability of PFM-EG as a partner of the Partnership, it is expressly agreed and
understood between PFM and the Partnership, anything in this Sublease to the
contrary notwithstanding, that any and all of the
-31-
<PAGE>
covenants, undertakings and agreements herein made by the Partnership are not
made or intended as personal covenants, undertakings and agreements of the
individual partners of the Partnership, or their respective parent corporations,
but are made and intended for the purpose or with the intent of binding the
assets of the Partnership only, and no personal liability or responsibility is
assumed by or shall at any time be asserted or enforceable against the
individual partner of the Partnership, or their respective parent corporations
on account of this Sublease or on account of any covenants, undertakings or
agreements contained in this Sublease, either express or implied, and on account
of any judgments brought to enforce or determine such covenants, undertakings or
agreements, all such liability, if any. being expressly waived by PFM and by-
persons claiming by through or under PFM.
-32-
<PAGE>
IN WITNESS WHEREOF, PFM and the Partnership have each caused this
Sublease to be duly executed and delivered, all as of the date first above
written.
PRE FINISH METALS INCORPORATED
By:___________________________________
Chairman
(CORPORATE SEAL)
ATTEST:
_______________________________________
Secretary
Witnesses as to WALBRIDGE COATINGS, AN ILLINOIS
both signatures: PARTNERSHIP
______________ By: E. G. Steel Inc., a partner
______________ By:____________________________________
Mgr. Financial Services
Witnesses By: Inland Steel Electrogalvanizing Corporation, a
partner
______________
______________ By:____________________________________
Treasurer
Witnesses By: Pre Finish Metals (EG)
Incorporated, a partner
______________
By:____________________________________
______________ Chairman
-33-
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
Before me, Mary L. Arden a Notary Public, in and for said county,
personally appeared the above named PRE FINISH METALS, INCORPORATED, an Illinois
corporation, by W. N. GUTHRIE and W. R. BEATTIE, known to me to be the persons
who, as Chairman and Secretary, respectively, of Pre Finish Metals,
Incorporated, the corporation which executed the foregoing instrument, signed
the same and who acknowledged that they did sign the foregoing instrument on
behalf of said corporation and by authority of its Board of Directors, that said
instrument is the free act and deed of each of them personally, and in the
capacities indicated, and the free act and deed of such corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name at Chicago,
IL this 14th day of April, 1986.
/s/ Mary L. Arden
---------------------------------
Notary Public
My Commission expires: 10/29/88
[Seal]
-34-
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
Before me, Mary L. Arden a Notary Public, in and for said county,
personally appeared the above named EGL STEEL, INC., a partner of WALBRIDGE
COATINGS, An Illinois Partnership, by Volker Oakey, known to me to be the person
who, as Manager Financial Services of such partner which executed the foregoing
instrument, signed the same and who acknowledged that he did sign the foregoing
instrument on behalf of the partnership and had full authority to do so, that
said instrument is his free act and deed and in the capacity indicated, and the
free act and deed of such partnership.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name at Chicago,
IL this 14th day of April, 1986.
/s/ Mary L. Arden
-----------------------------------
Notary Public
My Commission expires: 10/29/88
[Seal]
-35-
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
Before me, Mary L. Arden a Notary Public, in and for said county,
personally appeared the above named PRE FINISH METALS (EG) INCORPORATED, a
partner of WALBRIDGE COATINGS, An Illinois Partnership, by W. N. Guthrie, known
to me to be the person who, as Chairman of such partner which executed the
foregoing instrument, signed the same and who acknowledged that he did sign the
foregoing instrument on behalf of the partnership and had full authority to do
so, that said instrument is his free act and deed and in the capacity indicated,
and the free act and deed of such partnership.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name at Chicago,
IL this 14th day of April, 1986.
/s/ Mary L. Arden
------------------------------------
Notary Public
My Commission expires: 10/29/88
[Seal]
-36-
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
Before me, Mary L. Arden a Notary Public, in and for said county,
personally appeared the above named INLAND ELECTROGALVANIZING CORPORATION, a
partner of WALBRIDGE COATINGS, An Illinois Partnership, by J. E. Dittus, known
to me to be the person who, as Treasurer of such partner which executed the
foregoing instrument, signed the same and who acknowledged that he did sign the
foregoing instrument on behalf of the partnership and had full authority to do
so, that said instrument is his free act and deed and in the capacity indicated,
and the free act and deed of such partnership.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name at Chicago,
IL this 14th day of April, 1986.
/s/ Mary L. Arden
------------------------------------
Notary Public
My Commission expires: 10/29/88
[Seal]
-37-
<PAGE>
Exhibit 10(o)
LEASE GUARANTY
FROM
MATERIAL SCIENCES CORPORATION
TO
CORPORATE PROPERTY ASSOCIATES
and
CORPORATE PROPERTY ASSOCIATES 2
and
to
CREDITANSTALT-BANKVEREIN
(New York Branch)
Dated as of May 30, 1986
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Guaranty ........................................................ 2
1.1. Guaranty of Payment and Performance ............................. 2
1.2 MSC's Obligations Absolute ...................................... 3
1.3 Waiver .......................................................... 4
1.4 Waiver of Subrogation ........................................... 5
SECTION 2. Representations and Warranties .................................. 5
2.1 Organization and Standing of MSC ................................ 5
2.2 Subsidiaries .................................................... 5
2.3 Qualification ................................................... 6
2.4 Financial Statements ............................................ 6
2.5 Changes ......................................................... 7
2.6 Title to Properties; Liens ...................................... 7
2.7 Tax Returns and Payments ........................................ 8
2.8 Litigation ...................................................... 8
2.9 Compliance with Other Instruments ............................... 9
2.10. (a) Relationship of Vested Benefits to Pension Plan Assets ....... 10
2.11 Governmental Consent ........................................... 11
2.12 Indebtedness ................................................... 11
2.13 Disclosure ..................................................... 11
SECTION 3. Accounting; Financial Statements and Other Information ......... 12
SECTION 4. Inspection ..................................................... 14
SECTION 5. Presentation of Corporate Existence ............................ 15
SECTION 6. Insurance ...................................................... 15
SECTION 7. Indebtedness ................................................... 15
SECTION 8. Business ....................................................... 15
SECTION 9. Transactions with Affiliates ................................... 16
SECTION 10. Certain Definitions ............................................ 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 11. Term of Agreement .............................................. 18
SECTION 12. Notices ........................................................ 18
SECTION 13. Remedies ....................................................... 19
SECTION 14. Amendments and Waivers; Severability ........................... 19
SECTION 15. Survival of Agreements ......................................... 20
SECTION 16. Miscellaneous .................................................. 20
</TABLE>
ii
<PAGE>
THIS LEASE GUARANTY, dated as of May 30, 1986, by MATERIAL SCIENCES
CORPORATION ("MSC"), a Delaware corporation, to CORPORATE PROPERTY ASSOCIATES, a
California limited partnership, and CORPORATE PROPERTY ASSOCIATES 2, a
California limited partnership, jointly and severally as tenants-in-common
(hereinafter jointly and severally referred to as "Lessor"), and to
CREDITANSTALT-BANKVEREIN (New York Branch) (hereinafter, "Lender"), as their
respective interests may appear.
W I T N E S S E T H:
WHEREAS, MSC is the owner of all of the issued and outstanding common
stock of PRE FINISH METALS INCORPORATED, an Illinois corporation ("PFM");
WHEREAS, PFM has entered into a Lease and Agreement, dated as of
December 1, 1980 with Lessor's predecessor in interest, Line 6 Corp. (the
"12/1/80 Lease"), which has been amended by a First Amendment To Lease and
Agreement, dated as of the date hereof (the "Lease Amendment"), between Lessor
and PFM (the 12/1/80 Lease as so amended by such Lease Amendment, being
hereinafter called the "Lease"), relating to the leasing of the Premises
referred to in the Lease;
WHEREAS, Lessor has requested Lender to make a mortgage loan to Lessor
in order to refinance certain existing indebtedness covering a portion of the
Premises and to provide funds for the acquisition of another portion of the
Premises (such loan being hereinafter referred to as the "Loan");
NOW, THEREFORE, in order to induce Lessor to enter into the Lease
Amendment and Lender to make the Loan, and in consideration of the premises, the
parties
1
<PAGE>
hereto agree as follows (each defined term used in this Agreement has the
meaning therefor set forth in the Agreement, or, if not so set forth, the
meaning therefor set forth in the Lease):
SECTION 1. Guaranty.
--------
1.1. Guaranty of Payment and Performance. (a) MSC hereby
-----------------------------------
unconditionally guarantees to Lessor the due and punctual payment of all sums
stated in Lease to be payable by PFM ("Rent"), when and as the same shall become
due and payable during or after the expiration or earlier termination of the
Term. Such guaranty is an absolute, unconditional, present and continuing
irrevocable guaranty of payment and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from PFM, any attempt to
realize upon any or all security existing at any time for the benefit of Lessor
or upon any other condition or contingency. If PFM shall fail to pay punctually
any Rent when and as the same shall become due and payable, MSC will immediately
pay the same to Lessor or to any other person to whom the same is due and
payable. Should Lessor or Lender be obligated by any bankruptcy or other law to
repay to PFM or MSC or to any trustee, receiver or other representative of
either of them, any amounts previously paid, then this Agreement shall be
reinstated in the amounts of such repayment. Neither Lessor nor Lender shall be
required to litigate or otherwise dispute its obligation to make such repayments
if it in good faith and on the advice of counsel believes that such obligation
exists.
(b) MSC unconditionally guarantees that PFM will duly perform and
comply with all of the terms of the Lease which are required to be performed or
complied with by PFM. In case PFM shall fail so to perform or comply with any
such term, whether or not such failure shall constitute a Default or an Event of
Default, MSC, upon receipt of notice of such failure
2
<PAGE>
(regardless of the source of such notice), will promptly perform or comply with
such term or cause the same to be performed or complied therewith.
1.2 MSC's Obligations Absolute. The obligations of MSC under this
--------------------------
Agreement are absolute, unconditional, present and continuing and irrevocable,
are not subject to any counterclaim, set-off, deduction or defense based upon
any claim MSC may have against PFM or Lessor or Lender and shall remain in full
force and effect without regard to, and shall not be impaired or affected,
except to the extent otherwise specifically agreed by Lessor and Lender, by:
(a) any extension or indulgence in respect of the payment of Rent or
any part thereof, or any prepayment of any part; or
(b) any renewal, extension, amendment or modification of or addition
or supplement to or deletion from any of the terms of the Lease, or any other
agreement which may be made relating to the Lease; or
(c) any waiver, indulgence, compromise, release or consent or other
action or inaction in respect of any of the terms of the Lease; or
(d) any exercise or non-exercise by Lessor of any right, power or
remedy under or in respect of the Lease; or any waiver of any such right, power
or remedy or of any default in respect of the Lease; or any amendment, whether
or not material, to the Lease; or
(e) any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, or liquidation of PFM; or
3
<PAGE>
(f) any limitation of the liability of PFM under the Lease which may
now or hereafter be imposed by any statute, regulation or rule of law, or any
invalidity, illegality, lack of binding effect or unenforceability, in whole or
in part, of the Lease or any term thereof; or
(g) any merger or consolidation of PFM into or with any other Person,
or any sale, lease or transfer of any or all of the assets of PFM to any other
Person; or
(h) any defect in the title of PFM to any of its property or the
failure of the Lessor to record properly the Lease or to file properly any
financing statement with respect thereto; or
(i) absence of any notice to, or knowledge by, MSC of the existence or
occurrence of any of the matters or events set forth in the foregoing paragraphs
(a) through (h); or
(j) any other circumstance similar or dissimilar to any of the
foregoing which might now or hereafter constitute a legal or equitable discharge
or defense of a guarantor, other than payment and performance in full of all of
the obligations of PFM under the Lease.
1.3 Waiver. MSC unconditionally waives (a) notice of any of the
------
matters referred to in Section 1.2, (b) all notices which may be required by
statute, rule of law or otherwise, to preserve intact any rights of Lessor or
Lender against MSC, including, without limitation, any demand, presentment and
protest, notice of acceptance, proof of notice of non-payment under the Lease,
and notice of any failure on the part of PFM to perform and comply with any
covenant, agreement, term or condition of the Lease, (c) any right to the
enforcement, assertion or exercise by Lessor or Lender of any right, power or
remedy conferred in the Lease or otherwise, (d) any requirement of diligence on
the part of Lessor or Lender, and (e) any
4
<PAGE>
requirement on the part of Lessor or Lender to mitigate the damages resulting
from default under the Lease.
1.4 Waiver of Subrogation. In the event MSC shall at any time pay
---------------------
any sums on account of the Rent or take any other action in performance of its
obligations under this Agreement, MSC shall notify Lessor and Lender of such
payment and/or performance and MSC shall have no rights, by way of subrogation
or otherwise, to the rights of Lessor or Lender and MSC hereby waives all such
rights of subrogation and all rights of reimbursement or indemnity whatsoever
and all rights of recourse to any security for the Lease unless and until all of
the payment and performance obligations of PFM which are then due shall have
been paid and performed in full.
SECTION 2. Representations and Warranties. MSC represents and
------------------------------
warrants to Lessor and Lender as follows:
2.1 Organization and Standing of MSC. MSC is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority necessary to own
and operate its properties and to carry on its business as now conducted and
presently proposed to be conducted, to enter into this Agreement, and to carry
out the terms hereof.
2.2 Subsidiaries. Each Subsidiary of MSC is duly organized, validly
------------
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority necessary to
own and operate its properties and to carry on its business. All of the issued
and outstanding shares of capital stock of each Subsidiary of MSC have been duly
and validly issued, are fully paid and non-assessable. Each of MSC and its
5
<PAGE>
Subsidiaries own 100% of the securities of each Subsidiary owned by it, which
securities are free and clear of any mortgage, pledge, lien, security interest,
encumbrance or charge. PFM is a Subsidiary.
2.3 Qualification. MSC and its Subsidiaries are duly qualified,
-------------
licensed at domesticated and in good standing as foreign corporations duly
authorized to do business in all jurisdictions wherein the character of the
properties owned or the nature of the activities conducted makes such
qualification, licensing or domestication necessary and where the failure to so
qualify would have a material adverse effect upon the condition of MSC or of any
of its Subsidiaries.
2.4 Financial Statements. MSC has furnished Lessor and Lender with
--------------------
complete and correct copies of consolidated balance sheets of MSC and its
Subsidiaries as at its fiscal year end in each of the years 1985 and 1984,
inclusive, and the related statements of income, stockholders, investments and
changes in financial position for the fiscal years then ended, accompanied by
the reports thereon of Arthur Andersen & Co., independent public accountants.
Such financial statements have been prepared in accordance with generally
accepted accounting principles, reflect all known liabilities of such
corporations, including all contingent liabilities, and present fairly the
financial position of such corporations as at such dates and the results of
their operations for the periods indicated, in conformity with generally
accepted accounting principles consistently applied. It is the intent of this
Agreement that unless the context hereof shall clearly express a contrary intent
the financial statements or financial conditions referred to herein mean the
consolidated financial statement or financial conditions of
6
<PAGE>
MSC and its Subsidiaries determined in a manner consistent with the financial
statements referred to hereinabove.
2.5 Changes. Since February 28, 1996, there has been no change in the
-------
assets, liabilities or financial condition of MSC and its Subsidiaries other
than changes contemplated hereby and changes in the ordinary course of business
which have not been, either in any case or in the aggregate, material and
adverse, and neither the financial condition, business or operations of MSC and
its Subsidiaries nor any of their respective properties or assets have been
materially and adversely affected by any occurrence or development, whether or
not insured against. It is agreed and understood that changes since February 28,
1986 shown on Exhibit A hereto shall be deemed to be in the ordinary course of
business and not be deemed materially adverse.
2.6 Title to Properties; Liens. MSC and its subsidiaries have good
--------------------------
and sufficient title to their respective properties and assets, including those
shown on the balance sheet as at February 28, 1986, referred to in Section 2.4,
and those acquired since such date (except properties and assets disposed of
since such date in the ordinary course of business or for fair consideration),
subject to no mortgage, pledge, lien, security interest, lease, encumbrance or
charge except those disclosed in footnotes to MSC's financial statements or
contemplated by this Agreement. MSC and its Subsidiaries possess all patents,
patent rights or licenses, trademarks, trademark rights, trade names, trade name
rights, and copyrights which are required to conduct their respective businesses
as now conducted or as proposed to be conducted without known conflict with the
rights of others. None of the properties or assets the value of which is
reflected in such balance sheet is held by MSC or any Subsidiary as lessee under
any lease (other than
7
<PAGE>
capitalized lease obligations) or as conditional vendee under any conditional
sale or other title retention agreement.
2.7 Tax Returns and Payments. All tax returns and reports of MSC
------------------------
and its Subsidiaries required by law to be filed through the date hereof have
been duly filed, and all taxes, assessments, fees and other governmental charges
upon MSC and its Subsidiaries or upon any of their properties, assets, income or
franchises which are due and payable have been paid, other than those presently
payable without penalty or interest, together with those whose payment is being
legally contested by MSC or its Subsidiaries, the amounts of which, either in
any case or in the aggregate, do not materially and adversely affect the
business, operation, affairs or condition (financial or otherwise) of MSC and
its Subsidiaries or any of their respective properties or assets. All such tax
returns were prepared in accordance with standards customarily used in preparing
similar returns by persons engaged in businesses similar to those of MSC and its
Subsidiaries and all such returns were prepared in a proper manner in accordance
with applicable law and regulations. MSC and its Subsidiaries have provided
adequate reserves for the payment of all Federal and state income taxes the
payment of which is not yet due. There is no unpaid assessment for Federal
income tax liability of MSC and its Subsidiaries for any period. The Federal
income tax liability of MSC and its Subsidiaries has been finally determined
through the fiscal year ended February 28, 1982.
2.8 Litigation. There is no action, suit, proceeding or
----------
investigation pending or, to the best knowledge of MSC, threatened (or any basis
therefor) which either in any case or in the aggregate might result in any
material adverse change in the financial conditions, business or operations of
MSC and its Subsidiaries or in any of their respective properties or assets, or
in
8
<PAGE>
any material impairment of the right or ability of MSC or any of its
Subsidiaries to carry and their respective businesses substantially as now
conducted and as presently proposed to be conducted, or in any material
liability (whether or not covered by insurance) an the part of MSC or any of its
Subsidiaries to carry on their respective businesses substantially as now
conducted and as presently proposed to be conducted, or in any material
liability (whether or not covered by insurance) on the part of MSC or any of its
Subsidiaries, or which questions the validity of this Agreement or of any action
taken or to be taken in connection with the transactions contemplated hereby.
2.9 Compliance with Other Instruments. Neither MSC nor any of its
---------------------------------
Subsidiaries is a party to, bound by, or subject to or in violation of any deed,
franchise, indenture, lease, mortgage, security agreement, permit, pledge,
contract or agreement of any nature whatsoever or, to the best of MSC's
knowledge after due inquiry having been made, any license or instrument, or
subject to any corporate restriction or to any order, rule, regulation, writ,
injunction or decree of any court or governmental authority or to any statute
which or which may in the future (so far as MSC can presently reasonably
foresee) materially and adversely affect the business, operations, financial
condition, properties or assets of MSC or any Subsidiary. Neither the execution,
delivery or performance of this Agreement nor compliance herewith (a) conflicts
or will conflict with or results or will result in a breach of or constitutes or
will constitute a default under (i) the charter documents or by-laws of MSC or
any Subsidiary, (ii) any law or any order, rule, regulation, writ, injunction or
decree of any court or governmental authority, or (iii) any deed, franchise,
indenture, license, lease, instrument, mortgage, security agreement, permit,
pledge, contract or agreement of any nature whatsoever to which MSC or any
Subsidiary is a
9
<PAGE>
party, by which it is bound or to which it is subject or, to the extent of any
such conflict, breach or default, a valid waiver or consent has been obtained or
(b) results or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of MSC or any Subsidiary as a
consequence thereof.
2.10. (a) Relationship of Vested Benefits to Pension Plan Assets. The
------------------------------------------------------
present value of all benefits vested under all "employee pension benefit plans",
as such term is defined in Section 3 of the Employment Retirement Income
Security Act of 1974, as amended from time to time ("ERISA"), maintained by MSC
and its Subsidiaries, as from time to time in effect (herein called the "Pension
Plans"), do not exceed the value of the assets of the Pension Plans allocable to
such vested benefits by more than $500,000.
(b) Prohibited Transactions. None of the Pension Plans and no
-----------------------
trusts created thereunder, and no trustee or administrator thereof, has engaged
in a "prohibited transaction", as such term is defined in Section 4175 of the
Internal Revenue Code of 1954, as amended,. which could subject the Pension
Plans or any of them, any such trust, or any trustee or administrator thereof,
or any party dealing with the Pension Plans or any such trust to the tax or
penalty on prohibited transactions imposed by said Section 4975.
(c) Reportable Events. None of the Pension Plans and none of such
-----------------
trusts have been terminated. There have been no "reportable events", as that
term is defined in Section 4043 of ERISA, since the effective date of ERISA.
(d) Accumulated Funding Deficiency. None of the Pension Plans and no
------------------------------
such trusts have incurred any "accumulated funding deficiency", as such term is
defined in Section 302 of ERISA (whether or not waived), since the effective
date of ERISA.
10
<PAGE>
2.11 Governmental Consent. No consent, approval or authorization of
--------------------
or registration, qualification, designation. declaration or filing with any
governmental authority on the part of MSC or any of its Subsidiaries is required
in connection with the execution, delivery and performance of or compliance with
this Agreement or the consummation of any other transaction contemplated hereby.
2.12 Indebtedness. Neither MSC nor any of its Subsidiaries is in
------------
default in respect of any outstanding indebtedness or any instrument or
agreement relating thereto.
2.13 Disclosure. None of this Agreement, the financial statements
----------
referred to in Section 2.4 or any certificate or written statement furnished to
Lessor or Lender by or on behalf of MSC in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact the omission of which makes the statements contained
herein or therein misleading. There is no presently known fact which materially
and adversely effect or in the future may (so far as MSC can now foresee)
materially and adversely affect the business, financial condition or operations
of MSC or any of its Subsidiaries or any of their respective properties or
assets which has not been disclosed to Lessor and Lender in writing by or on
behalf of MSC.
11
<PAGE>
SECTION 3. Accounting; Financial Statements and Other Information.
--------------------------------------------------------
MSC will maintain and cause each of its subsidiaries to maintain a uniform
system of accounting established and administered in accordance with generally
accepted accounting principles, and will set aside and cause each of its
Subsidiaries to set aside on its books all such proper reserves for each fiscal
year for depreciation, obsolescence and amortization and other purposes as shall
be required by generally accepted accounting principles. MSC will deliver to
Lessor and Lender:
(a) as soon as practicable after the end of each of the first three
quarterly fiscal periods of each fiscal year of MSC, and in any event
within 45 days thereafter, consolidated balance sheets of MSC and its
Subsidiaries as at the end of such period and consolidated statements of
income and of surplus of MSC and its Subsidiaries for such period and (in
the case of the second and third quarterly periods) for the portion of the
current fiscal year to the end of such period, setting forth in each case,
in comparative form, the figures for the corresponding period (or periods)
of the previous fiscal year, all in reasonable detail and certified by the
principal financial officer of MSC as being complete and as fairly
presenting the financial position of MSC and its Subsidiaries and results
of their operations for the period then ended, subject only to changes
resulting from year-end audit adjustments;
(b) as soon as practicable after the end of each fiscal year of MSC,
and in any event within 90 days thereafter, a consolidated balance sheet of
MSC and its Subsidiaries as at the end of such year and a consolidated
statement of income and of surplus of MSC and its Subsidiaries for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and accompanied by, in
12
<PAGE>
respect of the consolidated financial statements, the report and opinion
thereon of independent public accountants of recognized national standing
selected by MSC, whose opinion shall be prepared in accordance with
generally accepted auditing standards relating to reporting and shall be
based upon an examination by such accountants of the accounts of MSC and
all of its Subsidiaries;
(c) together with each delivery of financial statements referred to
in subdivisions (a) and (b) above, an Officers' Certificate of MSC (i)
stating that each of the persons signing such Certificate has reviewed the
relevant terms of this Agreement and the Lease and has made, or caused to
be made under his supervision, an adequate review of the transaction and
condition of MSC and its Subsidiaries during the fiscal period covered by
such financial statements, and (ii) stating that such review has not
disclosed the existence during such period nor does either of the Persons
signing such Certificate have knowledge of the existence, as at the date of
such Certificate, of any Default or Event of Default, or, if any Default or
Event of Default existed or exists, specifying the nature and period of
existence thereof and the action MSC has taken or is taking or proposes to
take with respect thereto;
(d) promptly upon receipt thereof, copies of all reports, if any,
submitted to MSC by independent accountants in connection with each annual
or interim audit of the books of MSC or any of its Subsidiaries made by
such Accountants;
(e) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by MSC or at any of
its Subsidiaries to stockholders and of (i) all regular and periodic
reports, if any, filed by MSC or any of its
13
<PAGE>
Subsidiaries and (ii) all substantive communications, if any, and all
information and reports filed with, or provided to any securities exchange
or the Securities and Exchange Commission or any governmental authority
succeeding to any of the functions of such Commission;
(f) prompt written notice of (i) any litigation involving a claim of
more that $500,000 against MSC or any of its Subsidiaries, or (ii) any
matter which, in the opinion of MSC, might have a material and adverse
effect an the financial condition, business, operations or prospects of MSC
or any of its Subsidiaries;
(g) forthwith upon any officer of MSC obtaining knowledge of any
actual or claimed Default or Event of Default, a certificate of such
officer specify the nature and period of existence thereof and what action
MSC has taken, is taking or proposes to take with respect thereto; and
(h) as soon as practicable, all such other information and data with
respect to the business, affairs or condition of MSC at any of its
Subsidiaries as from time to time may reasonably be requested.
SECTION 4. Inspection. MSC will permit any authorized representative
----------
designated by Lessor or Lender, to visit and inspect, at its own expense, any of
the properties of MSC or any of its Subsidiaries, including its and their books
(and to make copies thereof or extracts therefrom), and to discuss its and their
affairs, finances and accounts with its and their officers, all at such
reasonable times and as often to may be reasonably requested. Lessor and Lender
are hereby authorized to deliver any documents, or copies thereof, received by
Lessor or Lender from MSC pursuant to any provision of this Agreement or in
connection with
14
<PAGE>
any of the transactions contemplated hereby to any governmental body having or
acquiring jurisdiction over Lessor or Lender which may request or require the
same. Lessor and Lender agree, subject to the foregoing, to use their best
efforts to maintain the confidentiality of information specified as confidential
relating to, and received from, MSC and its Subsidiaries pursuant to this
Agreement.
SECTION 5. Presentation of Corporate Existence. MSC will at all times
-----------------------------------
preserve and keep in full force and effect its corporate existence.
SECTION 6. Insurance. MSC will maintain or cause to be maintained,
---------
with financially sound and reputable unaffiliated insurers, insurance in respect
of the properties and business of MSC and its Subsidiaries against loss or
damage of the kinds customarily insured against by companies conducting similar
business with respect to like properties.
SECTION 7. Indebtedness. MSC will not, and will not permit any
------------
Subsidiary to, default (as principal or guarantor or other surety) in the
payment of any principal of or premium, if any, or interest on any Indebtedness
or with respect to any term of any evidence of any such Indebtedness or of any
mortgage or indenture relating thereto.
SECTION 8. Business. MSC will not engage on a consolidated basis in
--------
any business other than the application of paints and other coatings to flexible
substrates for functional and aesthetic use in a wide range of industries,
consulting and engineering services rendered to others and research and
development activities for its own use and for sale to others within the primary
and finished metal process industry and the investment in, management of and
disposal of companies involved in emerging materials technology, without the
prior written consent of Lessor and Lender. MSC shall not dispose of any of the
shares of stock of PFM and
15
<PAGE>
shall not permit PFM to engage in any business other than the business in which
PFM is engaged on the date of this Agreement and others which are directly
related and incidental thereto and will not permit PFM to dispose of any of its
assets other than in the ordinary course of business or due to the obsolescence
thereof provided that any such obsolescent assets which are so disposed of shall
be replaced with assets of equivalent value such replacements are reasonably
required for the ongoing conduct of PFM's business.
SECTION 9. Transactions with Affiliates. MSC will not enter into any
----------------------------
transaction, including, without limitation, the purchase, sale or exchange of
property, tax consolidation, or consolidation, or the rendering of any service,
with any Affiliate except in the ordinary course of and pursuant to the
reasonable requirements of MSC's business and upon fair and reasonable terms no
less favorable to MSC than would obtain in a comparable arm's-length transaction
with a Person not an Affiliate.
SECTION 10. Certain Definitions. "Affiliate" means a Person (other
-------------------
than a Restricted Subsidiary) (1) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, MSC, (2) which beneficially owns or holds 5% or more of any class of the
voting stock of MSC or (3) 5% or more of the voting stock (or in the case of a
Person which is not a corporation, 5% or more of the equity interest) of which
is beneficially owned or held by MSC or a Subsidiary. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the Management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
16
<PAGE>
"Indebtedness" of any corporation shall mean (i) all items ("except items
of capital stock, surplus or retained earnings) which in accordance with
generally accepted accounting principles would be included in determining total
liabilities as shown on the liability side of a balance sheet of such
corporation as at the date on which Indebtedness is to be determined, (2) all
indebtedness secured by any mortgage, lien, charge or encumbrance on, or
security interest in, or pledge of, or conditional sale or other title retention
agreement, (including any lease in the nature thereof) in respect of any
property or asset of such corporation existing at such date or any property or
asset then held by such corporation subject thereto, whether or not the
indebtedness secured thereby shall have been assumed, (3) any direct or indirect
liability of such corporation in respect of any indebtedness, lease, dividend or
other obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit of negotiable instruments in the ordinary course of business) or
discounted with recourse by such corporation, or in any other manner guaranteed
by such corporation through any agreement (contingent or otherwise) (a) to
purchase, repurchase, or otherwise acquire such obligation or any security
therefor, or (b) to provide funds for the payment or discharge of such
obligation or any other liability of the obligor thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or (c) to
maintain the solvency or any balance sheet or other financial condition of such
obligor, or (d) to make payment for any products, materials or supplies or for
any transportation or services, regardless of the non-delivery or non-furnishing
thereof, for the primary purpose of assuring the payment or discharge of such
obligation, or (a) to provide assurance in any other manner that such obligation
will be
17
<PAGE>
paid or discharged, or that any agreements relating thereto will be complied
with, or that the owner of such obligation will be protected against loss in
respect thereof.
"Restricted Subsidiary" shall mean, as to a particular parent corporation,
any directly or indirectly 100% owned Subsidiary organized under the laws of any
state of the United States of America and having substantially all of its assets
located within, and operating substantially entirely within, the United States
of America, which, in accordance with generally accepted accounting practice,
should be consolidated with such parent corporation.
"Subsidiary" means a corporation of which MSC owns, directly or indirectly,
more than 50% of the voting stock.
SECTION 11. Term of Agreement. This Agreement, the representatives
-----------------
and warranties contained herein, and all guarantees, covenants and agreements of
MSC contained herein shall continue in full force and effect and shall not be
discharged until such time as all rent shall be paid in full and all of the
obligations of PFM under the Lease shall be duly performed. Notwithstanding the
foregoing, this Agreement shall terminate when the Note and First Mortgage (as
defined in the Lease) and all of the obligations secured thereby have been fully
paid and performed. Lender agrees that upon the reasonable written request of
either MSC or Lessor made after such payment and performance, Lender will
acknowledge in writing that it is no longer a party to this Agreement.
SECTION 12. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be delivered or mailed by certified mail, postage
prepaid, return receipt requested, or by telex or telecopy or private courier
service, addressed, if to Lessor, at c/o W.P. Carey & Co., Inc., 689 Fifth
Avenue, New York, New York 10022. Attention: Stephen
18
<PAGE>
G. Nordquist, Executive Vice President and Secretary, or at such other address
as Lessor shall have furnished to MSC and Lender in writing, or if to MSC, at
2200 Pratt Boulevard, Elk Grove Village, Illinois 60007. Attention: William R.
Beattie, Vice President, or at such other address as MSC shall have furnished to
Lessor and Lender in writing, or if to Lender, at 717 Fifth Avenue, New York,
New York 10022, Attention: Petrina Jones, Vice President, or at such other
address as Lender shall have furnished to Lessor and MSC in writing. Any notice
so given shall be deemed to have been given on the first business day after the
day on which it is received.
SECTION 13. Remedies. All remedies afforded to Lessor or Lender by
--------
reason of this Agreement are separate and cumulative remedies and it is agreed
that no one of such remedies, whether exercised by Lessor or Lender, as the case
may be, or not, shall be deemed to be an exclusion of any other remedy available
to Lessor or Lender, as the case may be, and shall not limit or prejudice any
other legal or equitable remedy which Lessor or Lender, as the case may be, may
have. MSC shall pay to Lessor and to Lender, as the case may be, upon demand,
all of the costs and expenses, including but not being limited to, reasonable
attorneys' fees, incurred by it in connection with the enforcement of this
Agreement.
SECTION 14. Amendments and Waivers; Severability. (a) Any term of
------------------------------------
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by Lender and/or Lessor. Any such waiver shall
be effective only for the specific instance for which it is given.
(b) If any provision of this Agreement or the application thereof to any
person or circumstances shall to any extent be held void, unenforceable or
invalid, then the remainder of
19
<PAGE>
this Agreement or the application of such provision to such person or
circumstances other than those as to which it is held void, unenforceable or
invalid shall not be affected thereby and each provision of this Agreement shall
be valid and enforced to the fullest extent permitted by law. If this Agreement
shall be held ineffective or unenforceable by any court of competent
jurisdiction. MSC shall be deemed to be a tenant under the Lease with the same
force and effect as if MSC were expressly named as a joint tenant therein with
joint and several liability.
SECTION 15. Survival of Agreements. All Agreements, representations
----------------------
and warranties contained herein or made in writing by or on behalf of MSC in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement, and any investigation at any time made by Lessor
or Lender or on behalf of Lessor or Lender. All statements contained in any
certificate or other instrument or document delivered by or on behalf of MSC
pursuant hereto shall be deemed representations and warranties by MSC hereunder.
Except as otherwise expressly stated herein, this Agreement embodies the entire
agreement and understanding among Lessor, Lender and MSC and supersedes all
prior agreements and understandings relating to the subject matter hereof.
SECTION 16. Miscellaneous. (a) This Agreement shall be construed and
-------------
enforced in accordance with and governed by the laws of the State of New York.
(b) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not. MSC acknowledges that Lessor will assign to Lender
Lessor's rights under this Agreement. In addition to Lender's rights pursuant
to such assignment, if any to the extent that there is an express provision of
this Agreement which is for the benefit of Lender then the parties hereto
20
<PAGE>
acknowledge and agree that such rights shall be independent of and not derived
from Lessor's rights hereunder.
(c) The Table of Contents and headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
(d) This Agreement may be executed in any number of counterparts, or by
different parties in separate counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
(e) As a further inducement to Lessor to make and enter into the Lease and
in consideration thereof and as a further inducement to Lender to make and enter
into the Loan and in consideration thereof, MSC hereby waives trial by jury and
the right thereto in any action or proceeding of any kind or nature, arising on,
under or by reason of or relating to, this Agreement.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives thereunto duly
authorized as of the date first above written.
MATERIAL SCIENCES CORPORATION
By___________________________________________
Name: F.J. Lazowski, Jr.
Title: Vice President
By:__________________________________________
Name: W.R. Beattie
Title: Vice President and Secretary
(Seal)
Agreed to and accepted by:
CORPORATE PROPERTY ASSOCIATES
By: Carey Corporate Property, Inc.,
Corporate General Partner
By:____________________________________
Name: Stephen G. Nordquist
Title: President
By:____________________________________
Name: Samuel H. Karsch
Title: Assistant Secretary
(Seal)
22
<PAGE>
CORPORATE PROPERTY ASSOCIATES 2
By: Second Carey Corporate
Property, Inc., Corporate
General Partner
By:____________________________________
Name: Stephen G. Nordquist
Title: Executive Vice President
By:____________________________________
Name: Samuel H. Karsch
Title: Assistant Secretary
(Seal)
CREDITANSTALT-BANKVEREIN
(New York Branch)
By:____________________________________
Name: Petrina L. Jones
Title: Vice President
By:____________________________________
Name: Christian ___________________
Title: Assistant Treasurer
(Seal)
23
<PAGE>
Exhibit Number 10(p)
Agreement dated as of May 30, 1986,
between
Material Sciences Corporation
and
Corporate Property Association
and
Corporate Property Associates 2
<PAGE>
MATERIAL SCIENCES CORPORATION
AGREEMENT
---------
THIS AGREEMENT, dated as of May 30, 1986 by MATERIAL SCIENCES
CORPORATION ("MSC"), a Delaware corporation, and CORPORATION PROPERTY
ASSOCIATES, a California limited partnership, and CORPORATE PROPERTY ASSOCIATES
2, a California limited partnership, jointly and severally as tenants-in-common,
as their respective interests may appear, and for their responsive successors
and assigns as lessor under the Lease (collectively "Lessor") referred to below:
WITNESSETH
WHEREAS, PFM entered into a lease and agreement dated December 1, 1980
(the 12/1/80 Lease) with Line 6 Corp., an Ohio corporation (Line 6 Corp.),
leasing the Premises therein referred to (the 12/1/80 Premises); and
WHEREAS, in connection therewith MSC executed and delivered a lease
guaranty dated December 1, 1980 (the 12/1/80 Lease Guaranty) from MSC to Line 6
Corp.; and
WHEREAS, all Line 6 Corp.'s interest in the Premises, the 12/1/80
Lease and the 12/1/80 Lease Guaranty has been conveyed and transferred to
Lessor, and Lessor is now the fee owner of the Premises, the Lessor under the
12/1/80 Lease and the successor to Line 6 Corp. under the 12/1/80 Lease
Guaranty; and
WHEREAS, MSC and Lessor desire to cancel and terminate the 12/1/80
Lease Guaranty and have entered into a new lease guaranty of even date herewith
for the benefit of the Lessor and Creditanstalt-Bankverein (the "Lease
Guaranty") and desire to enter into this guaranty for the benefit of Lessor.
-1-
<PAGE>
NOW THEREFORE, in order to induce the Lessor to enter into the First
Amendment of even date herewith to the 12/1/80 Lease, and in consideration of
the Premises, the parties hereto agree as follows (each defined term used in
this Agreement has the meaning therefor set forth in this Agreement, or, if not
so set forth, the meaning therefor set forth in the 12/1/80 Lease, as amended by
the aforesaid First Amendment, herein called the Lease):
SECTION 1. CANCELLATION OF 12/1/80 LEASE GUARANTY.
---------------------------------------------------
MSC and Lessor do hereby mutually cancel, terminate and release the
12/1/80 Lease Guaranty and do hereby agree that all obligations, duties and
claims arising out of the existence of the 12/1/80 Lease Guaranty are hereby
terminated, cancelled, liquidated and released.
SECTION 2. FUNDED INDEBTEDNESS; LONG-TERM LEASES.
--------------------------------------------------
MSC will not, and will not permit any Subsidiary (other than as
provided in the Lease with respect to PFM) to incur, create, assume, guarantee
or in any manner become or be liable in respect of, any Funded Indebtedness or
any Long-Term Leases other than:
(1) the date (as defined in a First Mortgage dated as of the date
hereof from Lessor as mortgagor to Creditanstalt-Bankverein (New York
Branch) as mortgagee);
(2) Funded Indebtedness as shown on Exhibit A hereto;
(3) Long-Term Leases in effect on the date hereof; and
(4) additional Funded Indebtedness and Long-Term Leases (exclusive of
the Lease) if the amount of Consolidated Net Worth at the date of
incurrence thereof is
-2-
<PAGE>
greater than $23,000,000 and the amount of additional Funded Indebtedness
and Long-Term Leases at such date is less than Consolidated Net Worth.
SECTION 3. CURRENT RATIO AND WORKING CAPITAL.
---------------------------------------------
MSC will not permit Consolidated Current Assets to be less than 125%
of Consolidated Current Liability as to the end of any fiscal year ending
February 28, 1986, and thereafter. MSC will at all times maintain Consolidated
Current Assets less Consolidated Current Liabilities at an amount not less than
$5,000,000.
SECTION 4. NET WORTH.
----------------------
MSC will not permit the amount of Consolidated Net Worth to be less
than $23,000,000 at any time after February 28, 1986.
SECTION 5. DIVIDENDS.
---------------------
If at any time Consolidated Net Worth shall exceed $25,000,000 and no
Event of Default has occurred and is existing, MSC may pay Dividends on any
shares of any class of its capital stock in an amount not in excess of 30%
of Consolidated Net Income accruing after February 25, 1986 so long as
Consolidated Net Worth shall at least equal $25,000,000 after the paying of
such dividends.
SECTION 6. SHORT-TERM INDEBTEDNESS AND INVENTORY.
--------------------------------------------------
MSC will have no Short-Term Indebtedness outstanding for thirty
consecutive days within any twelve consecutive months during the term hereof;
provided, however, that with respect to Short-Term Indebtedness outstanding
incurred with respect to the financing of inventory for subsequent resale as
coated substrates, MSC will have no such Short-Term Indebtedness outstanding for
forty-five consecutive days during the term hereof in the aggregate
-3-
<PAGE>
in excess of 10% of the principal amount of the MSC sales for the preceding
twelve month period. MSC will not maintain an inventory of steel for resale as
coated substances, which at any time during the term hereof would exceed the
greater of (i) the amount needed to fill firm contracts for such steel as a
finished product, or (ii) an amount sufficient to fill contracts for the
finished product equal in amount to 25% of the MSC sales for the preceding
twelve months.
SECTION 7. CERTAIN DEFINITIONS.
--------------------------------
"Consolidated" when used with reference to assets, liabilities and net
income or earnings of two such persons, shall mean the aggregate of the assets,
liabilities and net income or earnings of such persons, as the case may be,
determined in accordance with generally accepted accounting principles with
intercompany items eliminated and, with respect to income or earnings, after
eliminating the portion thereof properly attributable to minority interests, if
any, in stocks of Subsidiaries or attributable to shares of preferred stock of
Subsidiaries not owned by such person.
"Consolidated Current Assets" and "Consolidated Current Liability"
shall mean the aggregate of the Current Assets and Current Liabilities,
respectively, of MSC and its Restricted Subsidiaries, consolidated in accordance
with generally accepted account principles.
"Consolidated Funded Indebtedness" shall mean the aggregate Funded
Indebtedness of MSC and its Restricted Subsidiaries, consolidated in accordance
with generally accepted accounting principles.
"Consolidated Net Income" shall mean the aggregate of Net Income of
MSC and its Restricted Subsidiaries consolidated in accordance with generally
accepted accounting principles.
-4-
<PAGE>
"Consolidated Net Worth" shall mean the aggregate Net Worth of MSC and
its Restricted Subsidiaries consolidated in accordance with generally accepted
accounting principles.
"Current Assets" of any corporation, to the extent permitted by, and
in all cases as determined in accordance with, generally accepted accounting
principles, shall include (1) cash on hand or in transit or on deposit in any
bank or trust company which has not suspended business; (2) readily marketable
securities issued by the United States of America and other readily marketable
securities maturing within one year from the date of issuance, taken at not more
than cost or current market value, whichever is lower; (3) customers' accounts,
bills and notes receivable; (4) inventories of any materials and supplies, of
work or materials in process and of finished products, all taken at not more
than cost or current market value, whichever is lower; and (5) such other assets
including prepaid expenses but not deferred charges, except those which, in
accordance with generally accepted accounting principles, would be included in
"current assets"; all after deduction of adequate reserves in each case where a
reserve is proper under generally accepted accounting principles; provided,
however, that in computing Current Assets there shall be excluded, under all
circumstances, real estate, fixtures and equipment, and any assets which are
pledged or deposited as security for, or for the purpose of paying, any
obligation which is not included in Current Liabilities.
"Current Liabilities" of any corporation shall mean Indebtedness of
such corporation, other than that portion of Funded Indebtedness due after one
year, and without limitation, shall include (1) all Indebtedness, including that
portion of Funded Indebtedness, maturing on demand or within one year after the
date as of which such determination is made, (2)
-5-
<PAGE>
final maturities and prepayments of Indebtedness and sinking fund payments
within twelve months after said date including, with respect to the Note, not
only (a) fixed prepayments, but also (b) other prepayments on and after the date
of notice of prepayment thereof required to be made in respect of any
Indebtedness, and (3) all other items (including taxes accrued as estimated)
which in accordance with generally accepted accounting principles would be
included as current liabilities.
"Funded Indebtedness" of any corporation shall mean all Indebtedness
which by its terms matures more than one year from the date as of which any
calculation of Funded Indebtedness is made, excluding the portion of Funded
Indebtedness due within one year, and any Indebtedness maturing within one year
from such date which is renewable or extendable at the option of the obligor to
a date beyond one year from such date, including any Indebtedness renewable or
extendable (whether or not theretofore renewed or extended) under, or payable
from the proceeds of other Indebtedness which may be incurred pursuant to the
provisions of, any revolving credit agreement or other similar agreement.
"Indebtedness" of any corporation shall mean (1) all items (except
items of capital stock, surplus or retained earnings) which in accordance with
generally accepted accounting principles would be included in determining total
liabilities as shown on the liability side of a balance sheet of such
corporation as at the date on which Indebtedness is to be determined, (2) all
indebtedness secured by any mortgage, lien, charge or encumbrance on, or
security interest on, or pledge of, or conditional sale or other title retention
agreement (including any lease in the nature thereof; with respect to any
property or asset of such corporation existing at such date or any property or
asset then held by such corporation subject thereto, whether or not the
indebtedness
-6-
<PAGE>
secured thereby shall have been assumed, (3) any direct or indirect liability of
such corporation with respect to any indebtedness, lease, dividend or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit of negotiable instruments in the ordinary course of business) or
discounted with recourse by such corporation, or in any other manner guaranteed
by such corporation through any agreement (contingent or otherwise, (a) to
purchase, repurchase, or otherwise acquire such obligation or any security
therefor, or (b) to provide funds for the payment or discharge of such
obligation or any other liability of the obligor thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or (c) to
maintain the solvency or any balance sheet or other financial condition of such
obligor, or (d) to make payment for any products, materials or supplies or for
any transportation or services, regardless of the non-delivery or non-furnishing
thereof, for the primary purpose of assuring the payment or discharge of such
obligation, or (e) to provide assurance in any other manner that such obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the cause of such obligation will be presented against
loss in respect thereof.
"Long-Term Lease" shall mean a lease of real or personal property, or
both, having a term (including renewals at the option of the lessor or lessee)
of more than five years and any such lease of a shorter duration (Short-Term
Lease) to the extent the annual rental payments due under such lease would case
the aggregate annual rental payments under all Short-Term Leases to exceed
$250,000.
-7-
<PAGE>
"Net Income" of any corporation for any fiscal period shall mean the
net earnings after income taxes of the corporation, but excluding:
(1) any gain or loss arising from the sale of capital assets except
with respect to the gain or loss resulting from the sale of consulting and
engineering services and research and development activities to others;
(2) any gain arising from any write-up of assets;
(3) earnings of any Restricted Subsidiary accrued prior to the date it
became a Restricted Subsidiary;
(4) earnings of any person, substantially all the assets of which have
been acquired in any manner, realized by such other corporation prior to
the date of such acquisition;
(5) net earnings of any person in which the corporation or any
Restricted Subsidiary has an ownership interest unless such net earnings
shall have actually been received by the corporation or such Restricted
Subsidiary in the form of cash distributions;
(6) any portion of the net earnings of any Restricted Subsidiary which
for any reason is unavailable for payment of dividends to the corporation
or any other Restricted Subsidiary, except on account of restrictions
contained herein or in the Lease; and
(7) the earnings of any person to which assets of the corporation
shall have been sold, transferred or disposed of, or into which the
corporation shall have merged, prior to the date of such transaction.
-8-
<PAGE>
"Restricted Subsidiary" shall mean, as to a particular parent
corporation, any directly or indirectly 100% owned Subsidiary organized under
the laws of any state of the United States of America and having substantially
all of its assets located within, and operating substantially entirely within,
the United States of America, which, in accordance with generally accepted
accounting practices, should be consolidated with such parent corporation.
"Short-Term Indebtedness" shall mean Indebtedness for borrowed money
which is required to be paid within 365 days of the date such Indebtedness is
incurred, provided, however, that such Indebtedness shall not include amounts
incurred under items 3, 4 and 7 referred to in Exhibit A hereto.
"Subsidiary" means a corporation of which MSC owns, directly or
indirectly more than 50% of the voting stock.
SECTION 10. AMENDMENTS AND WAIVERS.
------------------------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by MSC and the Lessor.
SECTION 11. SURVIVAL OF AGREEMENT.
-----------------------------------
All agreements, representations and warranties contained herein or
made in writing by or on behalf of MSC in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement
and, any investigation at any time made by the Lessor or on behalf of the
Lessor. All statements contained in any certificate or other instrument or
document, delivered by or on behalf of MSC pursuant herein shall be deemed
representations and warranties by MSC hereunder.
-9-
<PAGE>
SECTION 12. TERM OF AGREEMENT.
-------------------------------
This Agreement, the representations and warranties contained herein,
and all guarantees, covenants and agreements of MSC contained herein shall
continue in full force and effect and shall not be discharged until such time as
all rent shall be paid in full and all other obligations of PFM under the Lease
shall be duly performed.
SECTION 13. MISCELLANEOUS.
---------------------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, whether so expressed or not. Except as
stated in Section 11 this Agreement embodies the entire agreement and
understanding between the Lessor and MSC and supersedes all prior agreements and
understandings relating to the subject matter hereof. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement may be executed in any number of
counterparts, or by different parties in separate counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized as of the date first above written.
MATERIAL SCIENCES CORPORATION
[Corporate Seal] By: _______________________________
-10-
<PAGE>
Vice President
Attest:
By:____________________________
AGREES AND ACCEPTED
this 30/th/ day of May, 1986
CORPORATION PROPERTY ASSOCIATES
By: Casey Corporate Product, Inc.,
Corporate Cetera, Parties
By:_______________________
Name:
Title:
CORPORATE PROPERTY ASSOCIATES 2
By: Second Carey Corporate Property, Inc.
Corporate General Partner
By:_______________________
Name:
Title:
-11-
<PAGE>
EXHIBIT NO. 10(q)
Form of Standstill Agreement dated January 29, 1986,
among Material Sciences Corporation,
Richard L. Burns and Joyce Burns
<PAGE>
AGREEMENT
THIS AGREEMENT, made and entered into as of January 29, 1986, among
Material Sciences Corporation, a Delaware Corporation (the "Company"), Richard
L. Burns and Joyce Burns (Mr. Burns and Mrs. Burns being hereinafter referred to
collectively as the "Noteholders" and individually as a "Noteholder").
W I T N E S S E T H:
WHEREAS, pursuant to a Share Purchase Agreement dated as of January
29, 1986 (the "Share Purchase Agreement") between the Company and all of the
shareholders of Deposition Technology, Inc. ("DTI"), including the Noteholders,
the Noteholders have agreed to exchange shares of the common stock of DTI for
subordinated convertible notes due January 29, 1996 of the Company (the
"Notes"); and
WHEREAS, the Notes are convertible into shares of the series of
authorized common stock of the Company designated as "Common Stock" (the "Common
Stock"); and
WHEREAS, the parties believe it is not in the best interests of the
Noteholders or the Company for the Noteholders to become involved in, or in any
way to interfere with, the management or operations of the Company, DTI or any
of their Affiliates or the Company's relationships with any of its other
security holders; and
WHEREAS, the Share Purchase Agreement requires the execution and
delivery of this Agreement by the Noteholders as a condition to the consummation
of the transactions provided for therein;
NOW, THEREFORE, in consideration of the foregoing and the agreements
hereinafter set forth, the parties hereto agree as follows:
<PAGE>
1. Stand Still Agreement. The Noteholders agree that from the date
---------------------
hereof to the Termination Date (as hereinafter defined), they will not, nor will
they permit any of their Affiliates (as hereinafter defined), directly or
indirectly, to:
(a) acquire, directly or indirectly, by purchase or otherwise (except
as provided in the Share Purchase Agreement or by way of stock dividends or
other distributions made available to security holders generally), any
additional Notes, Common Stock or other securities of the Company, except
that the foregoing shall not prohibit the Noteholders and their Affiliates
from acquiring such number of shares of Common Stock of the Company which
when added to all such shares then owned or otherwise controlled by them,
directly or indirectly, shall not exceed a total of 100,000 shares of
Common Stock of the Company;
(b) "solicit" proxies or become a "participant" or a "participant in
a solicitation" with respect to any securities of the Company under any
circumstances (including, without limitation, any "election contest"
relating to the election of directors of the Company), as such terms are
defined in Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(c) initiate, propose or otherwise solicit shareholders for the
approval of one or more shareholder proposals at any time, or induce or
attempt to induce any other person to initiate any shareholder proposal; or
(d) form or join a partnership, limited partnership, syndicate or
other group, or otherwise act in concert with any other person, for the
purpose of acquiring, holding, voting or disposing of any securities of the
Company, or otherwise become a "person" within the meaning of Section
13(d)(3) of the Exchange Act.
2
<PAGE>
2. Non-Interference Agreement. The Noteholders further agree that
--------------------------
from date hereof to the Termination Date, they will not act in any way, nor will
they permit any of their Affiliates to act in any way, directly or indirectly,
either alone or in concert with any other person, to seek to control, influence
or otherwise interfere with the management, board of directors or policies of
the Company, DTI or any of their Affiliates.
3. Transfer Restrictions.
---------------------
(a) For a period of three years from the date hereof, neither
Noteholder shall sell or otherwise dispose of any Note, except pursuant to
a registered public distribution or with the prior written consent of the
Company.
(b) After the expiration of three years from the date hereof, neither
Noteholder (or any successor thereto) shall sell or otherwise dispose of
any interest in his or her Notes and/or any shares of Common Stock acquired
upon conversion of any Notes or otherwise acquired after the date hereof
except in accordance with the terms and conditions of this Agreement.
4. Right of First Refusal.
----------------------
(a) Each Noteholder agrees that from the date hereof to the
Termination Date, the Noteholder will not, directly or indirectly, sell or
otherwise dispose of any interest in any or all of his or her Notes and/or
Common Stock subject to the restrictions of Section 3(b) other than
------------
pursuant to (i) a registered public distribution in accordance with Section
-------
5.11 of Exhibit B of the Share Purchase Agreement (a "Registration"), (ii)
---- ---------
a bona fide offer from a third party who is not an Affiliate (an "Offer")
or (iii) in open market transactions (a "Market Disposition"). In the case
of a Registration, the provisions of Section 5.11 of Exhibit B of the Share
------------ ---------
Purchase Agreement shall apply in lieu of the balance this Section 4.
---------
Prior to any
3
<PAGE>
such sale or other disposition pursuant to either an Offer or a Market
Disposition, such Noteholder shall transmit a written notice (the "Sales
Notice") to the Company setting forth (A) with respect to an Offer: (I) the
name, address and principal business activity of each person to whom a sale
or other disposition is proposed to be made, (II) the amount of Notes
and/or Common Stock proposed to be sold to each such person, (III) the
manner in which the sale is proposed to be made, and (IV) the price at
which or other consideration for which, and the material terms upon which,
such sale is proposed to be made, and stating that each such person's Offer
is, to the best of the knowledge of such Noteholder, bona fide; and (B)
---- ----
with respect to a Market Disposition: (I) the approximate date the sales
are scheduled to commence (which shall not be earlier than the expiration
of the time period specified in paragraph (c) hereof), (II) the amount of
-------------
Notes and/or Common Stock sought to be disposed of, and (III) the manner in
which, and the names of the brokers through which, the Market Disposition
is proposed to be made and the maximum rate of commission to be charged by
such brokers.
(b) Upon receipt of a Sales Notice pursuant to paragraph (a), the
-------------
Company shall have an option to purchase all or any part of the Notes
and/or Common Stock covered by such Sales Notice on the following terms and
conditions:
(i) If the option arises pursuant to an Offer, the purchase
price and terms for the purchase of the Notes and/or Common Stock
purchasable upon exercise of the option shall be the price and terms
specified in the Sales Notice; provided, however, that: (A) if the
-------- -------
Offer is a publicly announced tender offer, the price shall be the
highest price paid by the successful tender offeror pursuant to the
4
<PAGE>
tender offer to any of the security holders of the Company (it being
understood that if the price offered in any tender offer is increased,
either by the original tender offeror or a third party, after the
Company has elected to exercise its option at a lower price, then the
Company shall have the right to reexamine its decision and to elect
not to exercise such option so long as notice of its election not to
exercise is received by such Noteholder at least twenty-four hours
prior to the earlier of (I) the expiration of the tender offer or (II)
any date after which securities tendered may be treated less favorably
than securities tendered prior thereto), and (B) if the price so
specified is payable in whole or in part in property (which term shall
include the securities of any other issuer), the price allocable to
such property shall be cash equal to the Appraisal Value (as
hereinafter defined) of such property on the date the Sales Notice is
sent to the Company.
(ii) If the option arises pursuant to a Market Disposition, the
exercise price per unit shall be equal to the Market Price
(hereinafter defined) of this Common Stock or Notes, as the case may
be, for the trading day next preceding the date on which the Purchase
Notice (hereinafter defined) is dispatched, less the estimated
underwriting discounts and commission (based on the maximum rate set
forth in the Sales Notice prescribed by Section 4(a)) which the
------------
Noteholders would have incurred if the Company had not elected to
purchase such securities, but no other expenses of sale.
5
<PAGE>
(c) If the Company desires to exercise the aforesaid option to
purchase all or any part of the Notes and/or Common Stock covered by a
Sales Notice, the Company shall transmit to such Noteholder a written
notice (the "Purchase Notice") specifying the principal amount of Notes
and/or number of shares of Common Stock to be purchased pursuant to the
exercise of such option. The Purchase Notice must be sent to the Noteholder
prior to the later of (A) sixty days after the date on which the Company
shall have received the Sales Notice or (B) if applicable, thirty days
after the determination of any required Appraisal Value; provided, however,
-------- -------
that, in the case of a tender offer, in no event shall the Purchase Notice
be received later than twenty-four hours prior to the earlier of (C) the
expiration of the tender offer or (D) any date after which securities
tendered may be treated less favorably than securities tendered prior
thereto.
(d) If with respect to an Offer or a Market Disposition the conditions
prescribed in paragraphs (a) and (b) of this Section 4 have been met in
-------------- ---
connection with a proposed sale of any or all of either Noteholder's Notes
and/or Common Stock, and the Company has not transmitted the Purchase
Notice within the period required by paragraph (c) hereof, then such
-------------
Noteholder shall be free to effect such sale under the following terms and
conditions:
(i) if a sale pursuant to an Offer was proposed, such sale may
be effected for a period of sixty days from the last date on which the
Company could have transmitted such notice, but only to the person or
persons specified in the Sales Notice at the price (or for the
consideration) and on the terms specified in the Sales Notice; or
6
<PAGE>
(ii) if sales pursuant to a Market Disposition were proposed,
such sales may be effected for a period of six months, but only in the
manner and through the broker specified in the Sales Notice; and
(iii) in either event, if or to the extent such sale or sales do
not occur within such sixty days or six month period, whichever is
applicable, the Notes and/or Common Stock so proposed to be sold will
again become subject to this Agreement to the same extent as if the
Sales Notice with respect to such sale or sales had never been given.
(e) Notwithstanding the foregoing, each Noteholder may (i) subject
any or all of his or her Notes and/or Common Stock subject to the
restrictions of Section 3(b) to a bona fide pledge or (ii) make gifts of
------------ ---- ----
any or all of such Notes and/or Common Stock to or for the benefit of the
Noteholder's spouse, children, grandchildren or parents or to charitable
organizations, provided that the pledgee or donee, as the case may be,
--------
delivers to the Company a written agreement to be bound by the restrictions
contained herein in form reasonably satisfactory to the Company.
5. Repurchase Upon Death of Noteholder.
-----------------------------------
(a) In the event of the death of either Noteholder prior to the
Termination Date, the administrator or executor (the "Estate
Representative") of the estate (the "Estate") of the deceased Noteholder
shall transmit to the Company a written notice (the "Estate Notice")
setting forth the date of such Noteholder's death and including a copy of a
duly certified death certificate.
7
<PAGE>
(b) Upon receipt of an Estate Notice, the Company shall have an
option to purchase all or any part of the Notes and/or Common Stock subject
to the restrictions of Section 3(b) and held by the Estate at the following
------------
price:
(i) To the extent that there is a Market Price for the Common
Stock or Notes, the exercise price per unit shall be equal to the
Market Price of the Common Stock or Notes, as the case may be, for the
trading day next preceding the date on which the Estate Purchase
Notice is dispatched.
(ii) To the extent that there is no Market Price, the exercise
price per unit shall be equal to the Appraisal Value of the Common
Stock or Notes, as the case may be, on the date of such Noteholder's
death.
(c) If the Company desires to exercise the aforesaid option to
purchase any or all of such Notes and/or Common Stock held by the Estate,
the Company shall send a written notice (the "Estate Purchase Notice") to
the Estate Representative specifying the principal amount of Notes and/or
the number of shares of Common Stock to be purchased pursuant to the
exercise of such option. The Estate Representative must receive the Estate
Purchase Notice prior to the later of (A) ninety days after the date on
which the Company shall have received the Estate Notice or (B) if
applicable, sixty days after the determination of any required Appraisal
Value.
6. Option Exercise; Closing.
------------------------
(a) At the time the Purchase Notice or Estate Purchase Notice, as the
case may be, is transmitted pursuant to Section 4(c) or 5(c) hereof, there
------------ ----
shall be deemed to be a
8
<PAGE>
binding agreement between such Noteholder or Estate, as the case may be,
and the Company concerning the sale at the price and on the terms provided
for in such notice. On the twentieth business day following receipt of such
notice (or such other time as the parties to such agreement shall agree),
such Noteholder or Estate, as the case may be, shall deliver to the Company
the Notes and/or certificates for the Common Stock to be purchased by the
Company pursuant to such notice, duly endorsed by, or accompanied by
instruments of transfer in form reasonably satisfactory to the Company duly
executed by, the Noteholder or his or her attorney duly authorized in
writing, with signatures guaranteed by a bank or member firm of the New
York Stock Exchange, and the Company will deliver to such Noteholder or
Estate, as the case may be, the purchase price to be paid in cash by
certified or bank cashier's check.
(b) The Company may assign its right to purchase Notes and/or Common
Stock pursuant to Sections 4 or 5 hereof and may designate in the Purchase
---------- -
Notice any person or persons to take title to any or all of the Notes
and/or Common Stock subject to such option, provided, however, that to the
-------- -------
extent that any such assignee or designee shall default in its performance
of any of the obligations of the Company hereunder, such assignment or
designation shall not relieve the Company of its responsibility therefor.
7. Definitions.
-----------
(a) As used herein, the term "Affiliate" shall have the meaning set
forth in Rule 12b-2 under the Exchange Act and the term "person" (except in
Section 1(d) hereof) shall mean any individual, partnership, corporation,
------------
trust or other entity.
(b) As used herein, the term "Appraisal Value" of an item of property
shall mean the fair market value of that property (less, in the case of the
Common Stock or the Notes,
9
<PAGE>
an estimate of the brokerage commissions which the Noteholder or the Estate
involved would have incurred, if any, if the Company had not elected to
purchase such Common Stock or Notes) as of a given date as determined by an
appraiser mutually acceptable to the Company and the Noteholder or the
Estate involved. If a determination of the Appraisal Value of an item of
property is required hereunder, it shall be incumbent upon the Company to
request the appointment of an appraiser within thirty days of its receipt
of a Sales Notice or Estate Notice, as the case may be. In the event that
the Company and the party giving such Sales Notice or Estate Notice, as the
case may be, are unable to agree on an appraiser, each of them shall
appoint its own appraiser and such appraisers shall select a third
appraiser who alone shall determine such Appraisal Value. The costs and
expenses of any such appraisal shall be borne equally by the Company and
the party giving such Sales Notice or Estate Notice, as the case may be.
(c) As used herein, the term "Market Price" shall mean the last
reported sales price regular way for the day if the Common Stock or Notes,
as the case may be, are listed on a national securities exchange (or, if
there was no sale on such day, the closing bid price) or if the Common
Stock or the Notes, as the case may be, are not so listed the last reported
sales price or the average of the reported closing bid and asked prices for
such security in the over-the-counter market for the applicable day as
furnished by National Quotation Bureau, Inc. or, in its absence, any other
firm regularly engaged in the business of reporting such prices.
8. Legends and Stop Transfer Orders.
--------------------------------
(a) Each of the Noteholders agrees as follows:
10
<PAGE>
(i) to the placement of the following legend on the face of any
Notes and/or certificates for Common Stock held by them subject to
this Agreement at any time prior to the Termination Date:
"No sale, transfer, pledge or other disposition of this Note (or,
in the case of Common Stock, 'the shares represented by this
certificate' ) may be made except in accordance with the
Agreement dated as of January 29, 1986, among Material Sciences
Corporation, Richard L. Burns and Joyce Burns, a copy of which is
on file in the office of the Secretary of Material Sciences
Corporation.";
and
(ii) to the entry of stop transfer orders with any transfer
agent of the Company's Notes and/or Common Stock and with the Voting
Trustee under the Voting Trust Agreement dated January 29, 1986, among
the Company, the Noteholders, 0. Morris Sievert, D. W. Watt and the
Voting Trustee thereunder against the transfer of Notes or
certificates for Common Stock legended pursuant hereto otherwise than
in compliance with the provisions of this Agreement.
(b) The Company agrees that it will, upon the presentation to its
transfer agent of the Notes or certificates for Common Stock containing
such legend, remove such legend and withdraw such stop transfer orders with
respect to such Notes or certificates for Common Stock under the following
circumstances:
(i) any sale of such Notes or of the Common Stock represented
by such certificates made in compliance with the provisions of this
Agreement; or
11
<PAGE>
(ii) at any time after the Termination Date.
9. Corporate Name. The Noteholders hereby acknowledge that the
--------------
Company and DTI have an exclusive and perpetual right to use the name
"Deposition Technology, Inc.," and, in view of such exclusive and perpetual
right, the Noteholders shall cause Deposition Technology Corporation, a Texas
corporation, to change its corporate name to a name which is not confusingly
similar to the name of DTI within 30 days of the date hereof and shall not use
the term "Deposition Technology," or any variant thereof, in any manner in
connection with operations of any corporation, or other business or entity with
which the Noteholders are, or may become, affiliated.
10. Termination Date. The Agreement (other than Section 9 hereof)
---------------- ---------
shall terminate (herein referred to as the "Termination Date") on January 29,
2001.
11. Miscellany.
----------
(a) The Noteholders, on the one hand, and the Company on the other,
acknowledge and agree that irreparable injury would occur in the event that
any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly
agreed that the Parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in addition to any
other remedy to which they may be entitled at law or equity.
(b) The Company and the Noteholders, acting for themselves and for
their respective successors and assigns, without regard to domicile,
citizenship or residence, hereby expressly and irrevocably consent to and
subject themselves to the nonexclusive jurisdiction of the courts of the
United States District Court for the Northern District of Illinois, or, if
such District Court shall not have or declines to accept jurisdiction, the
courts
12
<PAGE>
of the State of Illinois located in Cook County, Illinois, in respect of
any matter arising under or in connection with this Agreement; and service
of process, notices and demands of the United States District Court for the
Northern District of Illinois and such courts of the State of Illinois and
any other notices or other communications required or permitted under this
Agreement, may be made upon any of them by personal service at any place
where they may be found or by mailing copies of such process, notices,
demands and communications by registered mail, postage prepaid and return
receipt requested, to their respective addresses set forth in Section 11(g)
-------------
hereof. No change in such addresses shall be effective insofar as service
of process, notices, demands and communications are concerned, unless such
addresses are located in the United States and receipt of notice of such
change shall have been acknowledged in writing by the other party hereto,
which acknowledgment shall not be unreasonably withheld. The foregoing
provisions of this Section 11(b) shall not be construed to limit the right
-------------
of any party to make such service of process, notices, demands and
communications in any manner permitted by applicable law or to obtain
jurisdiction over the other parties hereto in such other jurisdiction, and
in such other manner, as may be permitted by applicable law. Each party
further agrees that a final judgment or order in respect of such matter may
be enforced against such party in any other jurisdiction by suit on such
judgment or order or in such other manner as may be permitted by applicable
law. Each party hereby irrevocably waives, to the extent permitted by
applicable law, any objection which it now has or hereafter may have to the
laying of venue in respect of any such matter brought or maintained in the
United States District Court for the Northern District of Illinois or such
courts of the State of Illinois. Each party further waives, to the extent
permitted by applicable law, any claim which such party otherwise might
have that
13
<PAGE>
any such action, suit or proceeding brought or maintained in the United
States District Court for the Northern District of Illinois or such courts
of the State of Illinois has been brought in an inconvenient forum.
(c) It is the intent and understanding of each party hereto that if
any term or provision of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or
against its regulatory policy, then such term or provision shall be deemed
modified to the extent necessary to make it enforceable by such court or
other authority.
(d) Except as otherwise provided herein, each party hereto pay its own
expenses incurred in connection with this Agreement.
(e) This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Estate Representative or any other
successor or transferee of each Noteholder and by any successor of the
Company.
(f) This Agreement may not be modified, amended, altered or
supplemented except by a written agreement signed by the Company and the
Noteholders.
(g) All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given when delivered
personally or when sent by registered or certified mail (postage prepaid,
return receipt requested) addressed as follows:
If the Company:
Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
14
<PAGE>
If the Noteholders:
Richard L. Burns
Joyce Burns
High Bluff Drive
Suite 375
San Diego, California 92130
or to such other address as any party may have furnished to the other
parties in writing in accordance herewith.
(h) No failure or delay on the part of either party in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
(i) This Agreement relates to the internal affairs and securities of a
Delaware corporation and shall be governed by and construed in accordance
with the laws of the State of Delaware.
(j) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(k) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each
party hereto and delivered to each other party or such party's
representative.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MATERIAL SCIENCES CORPORATION
By:_________________________________
Title:__________________________
_____________________________________
Richard L. Burns
_____________________________________
Joyce Burns
16
<PAGE>
EXHIBIT 10(r)
Form of Indemnification Agreement Between the
Company and Each of Its Officers and Directors
<PAGE>
MATERIAL SCIENCES CORPORATION
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of this ____ day of ______________, 199_,
by and between Material Sciences Corporation, a Delaware corporation (the
"Corporation"), and _______________________ (the "Indemnitee").
WHEREAS, Indemnitee currently serves as a director or an officer of
the Corporation, or both, or as a director of another enterprise at the request
of the Corporation, and, as such, may be subjected to claims, suits or
proceedings arising as a result of such service;
WHEREAS, as an inducement to Indemnitee to continue to serve as such
director or officer, the Corporation has agreed to indemnify Indemnitee against
expenses and costs incurred by Indemnitee in connection with any such claims,
suits or proceedings, in accordance with, and to the fullest extent authorized
by, the General Corporation Law of the State of Delaware as it may be in effect
from time to time (the "Delaware Law");
WHEREAS, the parties desire to set forth the terms and conditions of
such indemnification.
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
Section 1. Agreement to Indemnify. The Corporation hereby agrees to
----------------------
indemnify, keep indemnified and hold harmless, Indemnitee (which shall include
any legal representatives of such person) to the fullest extent authorized by
the Delaware Law, including, without limitation, Section 145(f) thereof, and
other applicable law as in effect from time to time, from and against any
expenses (including expenses of investigation and preparation and reasonable
fees and disbursements of counsel, accountants and other experts), judgments,
fines, liability, losses and amounts paid in settlement, actually and reasonably
incurred by Indemnitee in connection with any threatened, pending or completed
action, suit, claim or proceeding (hereinafter, a "proceeding"), whether civil,
criminal, administrative or investigative, by reason of the fact that Indemnitee
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary or agent
of another corporation, partnership, joint venture, trust or other enterprise,
and whether or not the cause of such proceeding occurred before or after the
date of this Agreement. Notwithstanding the foregoing, but except as provided
in Section 8 hereof, the Corporation shall indemnify the Indemnitee in
connection with a proceeding (or part thereof) initiated by the Indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. For purposes of this Agreement, the terms "corporation,"
"other enterprise," "fines" and "serving at the request of the Corporation"
shall have the meanings provided in Section 145 of the Delaware Law.
<PAGE>
Section 2. Procedure for Indemnification. Any indemnification under
-----------------------------
Section 1 of this Agreement or advance of expenses under Section 5 of this
Agreement shall be made promptly, and in any event within 30 days, upon the
written request of the Indemnitee. If a determination by the Corporation that
the Indemnitee is entitled to indemnification pursuant to this Agreement is
required, and the Corporation fails to respond within 60 days to a written
request for indemnity, the Corporation shall be deemed to have approved the
request. If the Corporation denies a written request for indemnification or
advancement of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days after response (or deemed response) by
the Corporation, the right to indemnification or advances as granted by this
Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. The Indemnitee's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation, in
accordance with Section 8 of this Agreement. It shall be a defense by the
Corporation to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under applicable law for the Corporation to indemnify the
Indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Corporation and the Indemnitee shall be presumed to have acted in
accordance with such standard unless it shall be determined that the Indemnitee
has not met such standard. Neither the failure of the Corporation to have made a
determination prior to the commencement of any such action that indemnification
of the Indemnitee is proper because the applicable standard of conduct has been
met, nor an actual determination by the Corporation, shall be a defense to such
action or create a presumption that the Indemnitee has not met the applicable
standard of conduct. Determinations required to be made pursuant to this
Agreement shall be made by any of the following, the final identification of
which shall be at the sole discretion of Indemnitee, to be made after request by
the Corporation: (i) the Board of Directors of the Corporation, by a majority
vote of a quorum consisting of directors who are not parties to the proceeding,
(ii) independent legal counsel in a written opinion, which counsel shall be
acceptable to the Indemnitee and such quorum of the Board of Directors, or which
at the option, of the Indemnitee shall be selected by the Chief Judge of the
U.S. District Court for the Northern District of Illinois, (iii) the
stockholders of the Corporation, or (iv) a court of competent jurisdiction.
Section 3. Notice to Corporation. Indemnitee shall notify the
---------------------
Corporation in writing of any matter with respect to which Indemnitee intends to
seek indemnification hereunder as soon as reasonably practicable following the
receipt by Indemnitee of written notice thereof, provided that delay in
notifying the Corporation shall not constitute a waiver by Indemnitee of his
rights hereunder.
Section 4. Indemnitee to Control Defense. Indemnitee shall control
-----------------------------
the defense (including the selection of qualified counsel) of any proceeding
against him which may give rise to a right of indemnification hereunder,
provided, however that (a) if the insurance carrier which shall have
- --------
supplied any D&O Coverage (as defined in Section 6 hereof) shall be willing to
conduct such defense without any reservation as to coverage, then unless on
written application by Indemnitee
-2-
<PAGE>
concurred in by the Board of Directors of the Corporation, Indemnitee and the
Board of Directors deem it undesirable, such insurance carrier shall select
counsel to conduct such defense; and (b) in any case involving two or more
defendants who are entitled to indemnification by the Corporation, separate
counsel may be used by Indemnitee only to the extent necessary to avoid
conflicts of interest.
Section 5. Expenses. In the event of any proceeding against
--------
Indemnitee which may give rise to a right of indemnification pursuant to this
Agreement, following written request to the Corporation by Indemnitee, the
Corporation shall advance to Indemnitee amounts equal to reasonable expenses
incurred by Indemnitee in defending such proceeding in advance of the final
disposition thereof upon receipt of (i) a satisfactory undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
by final judgment of a court of competent jurisdiction that he or she is not
entitled to be indemnified by the Corporation hereunder, and (ii) satisfactory
documentation as to the amount of such expenses. Indemnitee's written
certification together with a copy of the statement paid or to be paid by
Indemnitee shall constitute satisfactory documentation for purposes of
subparagraph (ii) hereof absent manifest error.
Section 6. Insurance. The Corporation shall use all reasonable
---------
efforts to provide Indemnitee with Directors and Officers insurance coverage
("D&O Coverage") providing to Indemnitee coverage no less advantageous than that
currently in effect for directors and officers of the Corporation generally. In
the event such coverage is not available to the Corporation at reasonable cost,
the Corporation shall so notify the Board of Directors as promptly as reasonably
practicable and shall obtain the best coverage then available in the insurance
industry for such cost. The Indemnitee shall not settle any matter for which he
has sought or intends to seek indemnification hereunder without first attempting
to obtain any approval required with respect to such settlement by the insurance
carrier of any applicable D&O Coverage. If the Indemnitee seeks such approval
but such approval is not granted by such insurance carrier, the Indemnitee shall
be entitled to indemnification from the Corporation to the fullest extent
provided by such D&O Coverage or to the fullest extent otherwise provided by
this Agreement, whichever shall be greater. The provision of D&O Coverage by an
insurance carrier at the expense of the Corporation or the failure to so provide
D&O Coverage shall in no way limit or diminish the obligation of the Corporation
to indemnify Indemnitee as provided elsewhere in this Agreement, which
obligation shall be absolute, provided that any amounts actually recovered by
Indemnitee from the insurance carrier providing D&O Coverage shall be applied in
reduction of amounts otherwise owing by the Corporation by reason of its
indemnification under this Agreement.
Section 7. Settlement. Neither the Corporation nor Indemnitee shall
----------
settle or compromise any proceeding covered by this Agreement without first
obtaining written consent to such settlement or compromise from the other, which
consent in no event shall be unreasonably withheld.
Section 8. Collection Costs. In the event Indemnitee is required to
----------------
bring any action to enforce rights or to collect amounts due under this
Agreement and is successful in such
-3-
<PAGE>
action, the Corporation shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
Section 9. Nature of Rights. All agreements and obligations of the
----------------
Corporation contained herein shall continue during the period Indemnitee is a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director of another corporation, partnership, joint
venture, trust or other enterprise and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that Indemnitee was a director or officer of the
Corporation or serving in any other capacity referred to herein. The
indemnification rights and the rights to payment of expenses granted to
Indemnitee under this Agreement shall not be deemed exclusive of, or in.
limitation of, any rights to which Indemnitee may be or hereafter become
entitled under any statute or agreement, the Corporation's Certificate of
Incorporation or Bylaws, a vote of stockholders or disinterested directors, or
otherwise. The amounts to which Indemnitee is entitled under this Agreement in
connection with a proceeding shall be reduced by the amount of any other
indemnification or reimbursement of such liability and expense to such person in
connection with the same proceeding.
Section 10. Successors and Assigns. The rights granted to Indemnitee
----------------------
hereunder shall inure to the benefit of Indemnitee, his personal representative,
heirs, executors, administrators and beneficiaries, and this Agreement shall be
binding upon the Corporation, its successors and assigns.
Section 11. Miscellaneous. This Agreement and the rights and
-------------
obligations of the parties hereunder shall be governed by the internal laws, and
not the laws of conflict, of the State of Delaware. To the extent permitted by
applicable law, the parties hereby waive any provision of law which renders any
provision in this Agreement unenforceable in any respect. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision shall be held to
be prohibited by or invalid under applicable law, such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and all other provisions shall remain in
full force and effect. The captions used in this Agreement are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit, characterize or affect in any way any of the provisions of this
Agreement, and all of the provisions of this Agreement shall be enforced and
construed as if no captions had been used in this Agreement. This Agreement may
be executed in two or more counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same
instrument.
* * * * * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
MATERIAL SCIENCES CORPORATION
By:_______________________________
Its:______________________________
__________________________________
Indemnitee
-5-
<PAGE>
EXHIBIT 10(t)
EXHIBIT III
December 7, 1998
Walbridge Coatings, an
Illinois Partnership
c/o MSC Walbridge Coatings, Inc.
30610 East Broadway
Walbridge, OH 43465-0550
Re: Sublease dated as of May 30, 1986 between
MSC Pre Finish Metals Inc., as Sublessor, and
Walbridge Coatings, an Illinois Partnership, as
Sublessee (the "Sublease")
Dear Sir:
This letter shall evidence the agreement of MSC Pre Finish Metals Inc. and
Walbridge Coatings, an Illinois Partnership to extend the expiration of the term
of the Sublease from December 31, 1998 to December 31, 2001.
Very truly yours,
MSC PRE FINISH METALS INC.
By: _____________________________
James J. Waclawik, Sr.
Vice President, Chief Financial Officer
and Secretary
<PAGE>
Walbridge Coatings, an
Illinois Partnership
December 7, 1998
Page Two
Agreed as of the date first written above:
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
BY: MSC WALBRIDGE COATINGS INC.,
A General Partner
By: _________________________________________
James J. Waclawik, Sr.
Vice President, Chief Financial Officer
and Secretary
By: EGL STEEL INC.,
A General Partner
By: _________________________________________
David M. Beckwith
Counsel
<PAGE>
EXHIBIT 10(u)
CONFIDENTIAL TREATMENT REQUESTED
(*** DENOTES REDACTED TEXT)
1998 EXTENSION AGREEMENT
------------------------
THIS AGREEMENT entered into as of the 31/st/ day of December, 1998, by and
among EGL STEEL INC. ("EGL") BETHLEHEM STEEL CORPORATION ("Bethlehem"), MSC
WALBRIDGE COATINGS INC. ("MSCWC"), formerly known as PRE FINISH METALS (EG)
INCORPORATED, and MATERIAL SCIENCES CORPORATION ("MSC");
WITNESSETH:
WHEREAS, EGL, MSCWC and Inland Steel Electrogalvanizing Corporation
("Inland EG") entered into a Partnership Agreement ("Partnership Agreement") in
1984 whereby they created a partnership entitled "WALBRIDGE COATINGS, AN
ILLINOIS PARTNERSHIP" ("Partnership"), the term of which was initially scheduled
to expire on June 30, 1998, but has been extended by separate letter agreements
to December 31, 1998;
WHEREAS, Inland EG has sold its remaining partnership interest to EGL with
the consent of MSCWC, and EGL and MSCWC are in agreement to continue the
Partnership after December 31, 1998 in accordance with the original Partnership
documents and all of the agreements and settlements documented in side letters,
minutes, or other means, agreed to by the parties from 1984 to July 1, 1998
(collectively, the "Definitive Agreements"), with the exceptions set forth
herein.
1
<PAGE>
WHEREAS, Bethlehem is currently negotiating with a domestic integrated mill
("***") to arrange for the processing by the Partnership of a portion of ***'s
pure zinc and zinc-nickel ("ZnNi") electroplating requirements;
NOW, THEREFORE, in consideration of the premises, recitals and mutual
covenants, undertakings and obligations hereinafter set forth or referred to
herein, EGL, Bethlehem, MSCWC and MSC are hereby mutually covenant and agree as
follows:
1. With the purchase of Inland EG's remaining interest by EGL, EGL and
MSCWC each own 50% of the equity, Financial Interests and Voting Interests of
the Partnership.
2. The Term of the Partnership Agreement shall be extended from January
1, 1999 until December 31, 2001, and shall continue from year to year thereafter
unless one party gives the other party written notice by October 1, 2001 (or by
October 1 of any subsequent year) of its intention to terminate as of the end of
that year (the "Term"). Except as otherwise provided in this Agreement, each of
the Definitive Agreements, including the Sublease, shall be deemed to be
extended for so long as the Term of Partnership is extended, with appropriate
deletions to reflect the retirement of financing as of June 30, 1998. In the
event of termination, Article XV of the Partnership Agreement shall apply except
that all rights and options given to Inland EG are nullified and the partners
shall negotiate in good faith appropriate amendments to such Article XV to
ensure that the operations of the Partnership's facilities may continue without
interruption while the procedures provided for in such Article XV are carried
out and that the Partnership's commitments to Inland Steel Company ("Inland")
under the Tolling Agreement dated as of June 30, 1998 (the "Tolling Agreement"),
between the Partnership and Inland, will be performed.
3. The Management Committee discussed in Article VIII of the Partnership
Agreement is reduced from six persons to four persons with two members being
appointed by each of EGL and MSCWC.
2
<PAGE>
4. For purposes of this Agreement, production for Inland up to the
amounts of Production Time specified in Section 3.2 of the Tolling Agreement
(the "Option Tons"), the terms of which are incorporated herein, shall be
considered as production for EGL rather than as production for third parties,
except as otherwise provided herein. The difference between the per ton price
the Partnership is entitled to charge Inland pursuant to the Tolling Agreement
($*** per Standard Ton for the period January 1, 1999 through December 31, 1999
and $*** per Standard Ton for the period January 1, 2000 through December 31,
2001, subject to adjustment pursuant to Section 4.2 of the Tolling Agreement)
and the Operator's Fee payable to MSCWC ($*** per Standard Ton for the period
January 1, 1999 through December 31, 2001, subject to adjustment pursuant to
Paragraph 5) will be credited to EGL. To the extent Inland utilizes the
Partnership pursuant to Section 3.3 of the Tolling Agreement for production in
excess of the Option Tons, such excess will be treated as production for third
parties as outlined in Paragraph 7.
5. Except as expressly provided herein, the provisions in the Definitive
Agreements for setting cost standards and periodic standard cost escalation
(e.g. indexing of S, G & A Expenses, other materials, etc.) are hereby deleted
for the Term. During the Term, the following pricing and escalation provisions
shall apply:
A. Bethlehem's Coating Fee and MSCWC's Operator's Fee per Standard Ton
for pure zinc electroplating are hereby set at $*** for the period January 1,
1999 through December 31, 2000 and $*** for the period January 1, 2001 through
December 31, 2001. Such fees will be adjusted only for changes in the cost of
zinc and electricity since July 1, 1998, under the same procedure provided for
Inland under the Tolling Agreement.
B. Bethlehem's Coating Fee and MSCWC's Operator's Fee per Standard Ton
for ZnNi electroplating are hereby set at $*** for the period January 1, 1999
through December 31, 2000 and $*** for the period January 1, 2001 through
December 31, 2001. Such fees will be adjusted only for changes in the cost of
zinc, nickel and electricity since July 1, 1998, under the same
3
<PAGE>
procedure provided for Inland under the Tolling Agreement. Billing procedures
for transition time and other ZnNi related issues shall be unchanged from the
Definitive Agreements. Other items such as special packaging supplies currently
paid directly by Bethlehem shall continue being paid by Bethlehem.
C. In addition, Bethlehem will pay each month, commencing in February,
1999 and ending in January, 2002, an amount equal to a portion of the
Partnership's estimated fixed costs for real estate taxes, personal property
taxes, insurance, rent and fixed electricity (the "Allocated Fixed Costs"), but
excluding S, G & A Expenses and Fixed Labor Costs (including fringe benefits for
the fixed labor), during the immediately preceding month. Total Allocated Fixed
Costs are currently estimated to be approximately $*** million per year. The
portion of the Allocated Fixed Costs to be paid by Bethlehem each month shall
equal:
One-twelfth (1/12) of the estimated total Allocated Fixed Costs
of the Partnership;
. less an amount equal to the product of $*** times the total
number of Standard Tons of products produced by the Partnership for
Inland and its subsidiaries; provided, however, that the amount
specified shall be limited to the amount which when divided by one-
twelfth (1/12) of the estimated total Allocated Fixed Costs results
in the total percentage of Production Time to which Inland is
entitled under the Tolling Agreement for the immediately preceding
month;
. less only with respect to each month from February, 2000 to
January, 2001, both inclusive, an amount equal to one-twelfth
(1/12) of the estimated total Allocated Fixed Costs times *** (***
/ ***);
4
<PAGE>
. less only with respect to each month from February, 2001 to
January, 2002, both inclusive, an amount equal to the product of
one-twelfth (1/12) of the estimated total Allocated Fixed Costs
times *** (*** / ***);
Any payments with respect to Allocated Fixed Costs by *** will be
negotiated separately by Bethlehem and *** and paid to Bethlehem. MSCWC
will forward to Bethlehem a copy of each invoice or other statement for
Allocated Fixed Costs within 15 days after MSCWC's receipt thereof. Within
90 days after the end of each Fiscal Year, MSCWC shall reconcile the
estimated total annual Allocated Fixed Costs used to calculate Bethlehem's
payments for such Fiscal Year under the third sentence of this paragraph to
the actual Allocated Fixed Costs incurred by the Partnership during such
Fiscal Year and give credit to Bethlehem for any excess of the estimated
total annual amount over the actual amount or charge Bethlehem for any
excess of the actual amount over the estimated total annual amount.
D. Bethlehem's Coating Fee and MSCWC's Operator's Fee during the Term are
hereby set at $*** per ton for base slitting services, $*** per ton for critical
inspection processing, and $*** per ton for VW-type packaging. The current
billing agreement for additional quality inspections (Exhibit I hereto) and the
Barnes Agreement (Exhibit II hereto) will remain in effect during the Term.
E. EGL and MSCWC also agree to pursue (through jointly established teams)
cost reduction in the areas of purchasing and logistics. The benefits of any
cost reductions achieved will be divided on a fifty-fifty basis between EGL and
MSCWC.
F. Any cost reductions realized due to ***'s entry into the Partnership
shall be shared by MSCWC receiving ten percent (10%) of the savings and EGL and
*** dividing the remainder based on their line time ownership.
5
<PAGE>
6. Any slitting revenue received from Inland shall be for MSCWC's
account. Any cancellation charge paid by Inland shall be for EGL's account. The
Partnership shall invoice Inland for the Option Tons and, upon payment of such
invoice, shall credit EGL with the difference described in the second sentence
of Paragraph 4 above. MSCWC shall invoice Inland for slitting charges and
cancellation charges and credit MSCWC's and EGL's account as appropriate. The
credit risk for Inland's Option Tons shall not be borne by the Partnership, but
rather by MSCWC (for slitting revenue owed) or by EGL (for coating revenue on
Option Tons and cancellation charges). With respect to production for Inland in
excess of the Option Tons and production for other third party accounts, the
Partnership shall bear the credit risk.
7. The allocation of the Partnership's profit from sales to third parties
during the Term (including sales to Inland in excess of the Option Tons and
sales to MSC and its subsidiaries pursuant to Paragraph 11) shall be fifty/fifty
sharing (as between MSCWC and EGL); provided, however, that EGL 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 for sales of
electroplating services to third 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 MSCWC on production of MSC
Laminates and Composites products or non-non-automotive products
pursuant to Paragraph 11 during such year; and
(d) the amount of profits retained by MSCWC for applying organic
coatings to pure zinc or ZnNi products for *** during such year,
provided that solely for
6
<PAGE>
purposes of this Paragraph 7(d), the amount of such profit on each ton
of such product shall be deemed to be ***% of the Operators Fees for
organic coatings determined in accordance with Paragraph 11D.
shall exceed $*** per Standard Ton produced for EGL or *** on a cumulative basis
from January 1, 1999 (the "Make Whole Provision"). The purpose of the Make Whole
Provision is to provide MSCWC an opportunity to recover the reductions in its
Operator's Fees provided for in this Agreement in comparison to its Operator's
Fees for the Fiscal Year ended February 28, 1998. The Management Committee shall
prescribe guidelines for the terms, including pricing, under which the
Partnership will conduct coating services for third parties (other than certain
sales to Inland governed by the Tolling Agreement and certain sales to MSC and
its subsidiaries governed by Paragraph 11); provided, however, that MSCWC's
Operator's Fees for (a) electroplating pure zinc for third parties (other than
with respect to such sales to Inland or MSC and its subsidiaries) shall be $***
per Standard Ton, subject to adjustment only for certain changes in the cost of
zinc and electricity since July 1, 1998 under the same procedure provided for
Inland under the Tolling Agreement and (b) electroplating ZnNi for third parties
(other than with respect to such sales to Inland or MSC and its subsidiaries)
shall be $*** per Standard Ton, 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 Inland under the Tolling Agreement. For purposes of
clause (c) of this Paragraph 7, the Partnership's "profits" on sales to MSC and
its subsidiaries during the Term shall refer to the difference between the
coating fee and the Operator's Fee applicable to such sale provided for in
Paragraph 11. The last sentence of Section 10.4 of the Partnership Agreement,
which provides for a ***% commission for procuring sales of coating services for
third parties, shall be deleted for the Term.
8. Article 7.3(g) and Article 12.2 of the Partnership Agreement are
amended to provide that as long as the Partnership's current capital budget has
been approved by the Management
7
<PAGE>
Committee, MSCWC's authority as the Operator for capital projects shall be
increased from $5,000 to $25,000.
9. Except as expressly provided herein, MSCWC shall be responsible for or
keep the benefits from any variations in the Partnership's actual costs from the
Standard Costs for the Term of this Agreement; provided, however; that MSCWC
shall continue to report the Partnership's actual costs for zinc, nickel and
electricity to Bethlehem on a periodic basis. Other cost data will be supplied
to Bethlehem as reasonably requested for the purpose of supporting the parties'
efforts under Paragraph 5E. Any savings from extraordinary capital expenditures
will be negotiated at the time that the capital expenditure is approved.
10. The excess capacity surcharge of $*** per Standard Ton in excess of
the design capacity of *** Standard Tons per year provided for in the 1988
Expansion Proposal is hereby deleted for the Term.
11. Article 3.2 of the Coating Agreement between Bethlehem and the
Partnership is hereby amended to provide that during the Term, Bethlehem will be
entitled to all of the available Production Time, subject to fulfilling the
Partnership's obligations to Inland under the Tolling Agreement and any
obligations entered into with ***; provided, however, that in order to develop
-----------------
new product opportunities, MSC and its subsidiaries shall be entitled priority
to Production Time equal to that of Bethlehem (or ***) for 10,000 Standard Tons
in calendar 2000 and 20,000 Standard Tons in calendar 2001 for the production of
MSC Laminate and Composite products or non-automotive products, with a
preference toward using organic coatings over EG or ZnNi coatings (the "MSC
Priority Tons"). The following provisions shall apply to the Partnership's
production for MSC and its subsidiaries:
A. MSC and its subsidiaries shall have the right to own the substrate
used in the production of these products, provided, however, that Bethlehem, ***
(if *** shall then be admitted as a partner of the Partnership), or both
Bethlehem and *** pro rata in accordance with
8
<PAGE>
their respective rights to Production Time (or as they shall otherwise agree)
shall have the right to quote on selling such substrate to MSC and to match the
last offer received by MSC for such substrate based on total economics, service
and quality.
B. The Partnership shall charge MSC and its subsidiaries a coating fee
for electroplating pure zinc of $*** per Standard Ton in the case of MSC
Laminates and Composites products and $*** per Standard Ton in the case of non-
automotive products, subject in each case to adjustment only for certain changes
in the cost of zinc and electricity since July 1, 1998 under the same procedure
provided for Inland under the Tolling Agreement. Such coating fees for
electroplating ZnNi shall be $*** and $***, respectively, per Standard Ton,
subject in each case to adjustment only for certain changes in the cost of zinc,
nickel and electricity since July 1, 1998 under the same procedure provided for
Inland under the Tolling Agreement. Sales to MSC and its subsidiaries pursuant
to this Paragraph 11 shall be treated as sales to third parties for the purposes
of the Make Whole Provision.
C. The Partnership shall pay MSCWC an Operator's Fee for electroplating
pure zinc of $*** per Standard Ton for both MSC Laminates and Composites
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 Inland under the Tolling Agreement. Such Operator's Fee
for electroplating ZnNi shall be $*** per Standard Ton, 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 Inland under the Tolling
Agreement.
D. The Operator's Fees for organic coatings shall be determined by
negotiations between Bethlehem and MSCWC to yield a ***% profit to the Operator;
the coating fees for such coatings shall be the same as such Operator's Fees
regardless of whether such coatings are for Bethlehem, *** or MSC and its
subsidiaries.
9
<PAGE>
E. On the same terms, MSC and its subsidiaries shall also be entitled to
solicit sales of MSC Laminates and Composites products and non-automotive
products in excess of the MSC 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 ***) (a) to the extent that Bethlehem (or ***) notifies
MSCWC that Production Time will be available for sales to third parties in
accordance with Section 5.1 of the applicable Coating Agreement (as amended
hereby) and (b) in accordance with the last sentence of Paragraph 13.
12. Bethlehem and EGL may negotiate an agreement to sell a portion of the
equity in the Partnership and the rights to Production Time to ***; provided
--------
that the terms of such sale shall be subject to the approval of MSCWC, which
approval shall not be unreasonably withheld, except that any such agreement
shall provide that (a) *** will be entitled to the same prices charged by the
Partnership to Bethlehem for all services and (b) *** shall pay for any and all
information systems modifications and any other extraordinary expenses for
services that it requires. Nothing in this Paragraph 12 shall constitute an
amendment or waiver of MSCWC's rights under Section 13.3 of the Partnership
Agreement.
13. Section 5.1 of the Coating Agreement between the Partnership and
Bethlehem is hereby amended to require (and any Coating Agreement between the
Partnership and *** shall require) Bethlehem (or ***) to give MSCWC a binding
notice on the 15/th/ day of each month of the extent to which Production Time
will be available for sales to third parties during the third succeeding month
in order to give the Partnership a better opportunity to make sales to third
parties. To the extent that Production Time is committed for sales to third
parties on a long-term basis (greater than six months) with the consent of all
Partners, the Production Time required for such sales shall have the same
priority as the rights to Production Time of Bethlehem (or ***).
10
<PAGE>
14. The carestone surcharge ($*** per ton) in Paragraph 1 of the FY 1992
Settlement Agreement is hereby deleted.
15. The paragraph of the 1988 Walbridge Expansion Proposal regarding
extended shutdown is hereby deleted. After June 30, 1998, MSCWC and EGL will
share the actual extended shutdown expense on a fifty/fifty basis. MSCWC will
provide a reasonable estimate of the extended shutdown requirements, time
schedule and costs 30 days in advance of the shutdown for EGL's review and
approval, which approval shall not be unreasonably withheld. EGL 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 with EGL
personnel.
16. The Long-Term Sales Agreement provision in the FY 1992 Settlement is
hereby deleted.
17. The Partnership's obligation to pay rent under the Sublease during the
Term shall continue to be a pass through of the lease cost under the CPA Lease
between MSC Pre Finish Metals Inc. ("MSCPFM") and Corporate Property
Associates/Corporate Property Associates 2 ("CPA/CPA2"). In order to evidence
the extension of the Sublease under Paragraph 2 above for the period from
January 1, 1999 through December 31, 2001, MSCPFM and the Partnership shall
execute a separate letter agreement in the form attached as Exhibit III, a copy
of which shall be delivered to CPA/CPA2.
18. Capitalized terms that are not defined in this Agreement are used
herein as defined in the Definitive Agreements.
11
<PAGE>
EGL STEEL INC.
By:_/S/___________________________
BETHLEHEM STEEL CORPORATION
By:_/S/___________________________
MSC WALBRIDGE COATINGS INC.
By:_/S/___________________________
MSC PRE FINISH METALS INC.
By:_/S/___________________________
MATERIAL SCIENCES CORPORATION
By:_/S/___________________________
12
<PAGE>
Exhibits Omitted
13
<PAGE>
EXHIBIT 10(v)
CONFIDENTIAL TREATMENT REQUESTED
(*** DENOTES REDACTED TEXT)
===============================
TOLLING AGREEMENT
by and between
INLAND STEEL COMPANY
and
WALBRIDGE COATINGS
Dated as of June 30, 1998
===============================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS
ARTICLE II. APPLICABLE ATTACHMENTS
ARTICLE III. TERM; PURCHASE AND SALE OF COATING SERVICES AND SLITTING SERVICES
3.1 Term............................................................................... 4
3.2 Agreement to Perform Coating Services.............................................. 4
3.3 Right of First Offer. ............................................................. 4
3.4 Agreement to Perform Slitting Services............................................. 4
ARTICLE IV. TOLL FOR COATING SERVICES AND SLITTING SERVICES
4.1 Toll............................................................................... 5
4.2 Adjustment to Toll................................................................. 5
4.3 Toll for Slitting Services......................................................... 6
ARTICLE V. SUBSTRATE QUANTITY; SUBSTRATE QUALITY
5.1 Substrate Quantity................................................................. 6
5.2 Substrate Quality.................................................................. 6
ARTICLE VI. OPERATIONS
6.1 Operation of the Facility.......................................................... 6
6.2 Communication of ISC Inventory Information......................................... 6
6.3 Firm Orders....................................................................... 6
6.4 Purchase Orders.................................................................... 6
6.5 Priority of Firm Orders and Modification of Purchase Orders, etc................... 7
6.6 Shipment and Handling of ISC Substrate............................................. 7
6.7 Handling and Shipment of Coated ISC Substrate and Finished
Substrate.......................................................................... 8
6.8 Scrap.............................................................................. 9
6.9 Claim Policy....................................................................... 9
6.10 Insurance.......................................................................... 10
6.11 ISC Inventory...................................................................... 10
6.12 Inspection. ....................................................................... 10
6.13 Customer Service................................................................... 10
6.14 Compliance with Laws............................................................... 11
6.15 Indemnification.................................................................... 11
</TABLE>
ARTICLE VII. GENERAL TERMS AND CONDITIONS
<PAGE>
TOLLING AGREEMENT
-----------------
THIS TOLLING AGREEMENT (the "Agreement") is made as of this 30th day of
June, 1998 by and between INLAND STEEL COMPANY, a Delaware corporation ("ISC"),
and WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP (the "Partnership").
WITNESSETH:
----------
WHEREAS, the Partnership was organized by Inland Steel Electrogalvanizing
Corporation, a Delaware corporation ("Inland EG"), EGL Steel Inc., a Delaware
corporation ("EGL Steel") and MSC WALBRIDGE Coatings, Inc. ("MSCWC"), formerly
known as Pre Finish Metals (EG) Incorporated, a Delaware corporation ("PFM EG"),
for the purpose of owning and operating a coating facility for cold rolled steel
("Substrate");
WHEREAS, the Partnership owns and operates a coating facility for Substrate
located at 30610 East Broadway, Walbridge, Ohio 43465 (the "Facility");
WHEREAS, the Partnership utilizes an electrogalvanization process to place
a free zinc coating on Substrate ("Zinc Process") or a roll application process
to place other substances on Substrate ("Roll Process," the Zinc Process and the
Roll Process are collectively referred to herein as the "Processes") at the
Facility;
WHEREAS, pursuant to the Transfer Agreement dated as of June 30, 1998 among
ISC, Bethlehem Steel Corporation, Inland Steel Industries, Inc., Inland EG and
EGL Steel (the "Transfer Agreement"), all of the interests of Inland EG, ISC and
Inland Steel Industries, Inc. in the Partnership are being transferred to EGL
Steel and Bethlehem Steel Corporation as of the date of this Agreement;
WHEREAS, MSCWC consents to the execution by the aforementioned parties of
the Transfer Agreement and the performance of the obligations set forth
thereunder;
WHEREAS, ISC and the Partnership desire that upon request by ISC, the
Partnership will, at the Facility, coat ISC Substrate (as hereinafter defined)
utilizing one of the Processes in the same manner as conducted prior to the date
hereof ("Coating Services") and perform slitting and other inspection services
("Slitting Services") on such coated Substrate in exchange for the payment of
tolls, all on the terms and conditions as set forth herein; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
obligations of the parties to the Transfer Agreement to complete the "Purchase
Closing," as defined therein.
<PAGE>
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein set forth and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I. DEFINITIONS
"Affiliate" means, with respect to any Person at any time, any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such specified Person.
"AISI" means American Iron and Steel Institute.
"Bankruptcy" means, as to any Person, the Person's taking or acquiescing to
the taking of any action seeking relief under, or advantage of, any applicable
debtor relief, liquidation, receivership, conservatorship, bankruptcy,
moratorium, rearrangement, insolvency, reorganization or similar law affecting
the rights or remedies of creditors generally, as in effect from time to time.
For purposes of this definition, the term "acquiescing" shall include, without
limitation, the failure to file, within thirty (30) days after its entry, a
petition, answer or motion to vacate or to discharge any order, judgment or
decree providing for any relief under such law.
"Business Day" shall mean any day that the Facility is open for business.
"Coated ISC Substrate" means ISC Substrate that has been coated pursuant to
one of the Processes at the Facility, or has been coated with free zinc or other
substance at the I/N Kote Facility or any other facility.
"Coating Weight" means the amount of free zinc required to be applied by the
Zinc Process to ISC Substrate, expressed in grams per square meter of coated
substrate surface area.
"Compord" means computer order data formats which facilitate the transfer of
information.
"Control" means, with respect to any Person, the power to, directly or
indirectly, direct the management and policies of such Person, whether through
ownership of voting securities (or pledge of voting securities if the pledgee
thereof may on the date of determination exercise or control the exercise of the
voting rights of the owner of such voting securities), by contract or otherwise;
and the terms "Control" (when used as a verb), "Controlling" and "Controlled"
have meanings correlating to the foregoing.
"EDI" means electronic data interchange.
-2-
<PAGE>
"Electricity Costs" has the meaning set forth in Section 4.2.
------------
"Finished Substrate" means ISC Substrate or Coated ISC Substrate on which
Slitting Services have been performed.
"Firm Order" has the meaning set forth in Section 6.3.
------------
"Floor Space" means the square footage of the Facility as of June 30, 1998.
"I/N Kote Facility" means the coating facility owned by I/N Kote, a
partnership composed of subsidiaries of ISC and Nippon Steel Corporation,
located at New Carlisle, Indiana.
"ISC Inventory" means ISC Substrate, Coated ISC Substrate and Finished
Substrate.
"ISC Line Time" means production time on the Line necessary to fulfill the
current Firm Order.
"ISC Substrate" means Substrate owned by ISC.
"Line" means the production line of the Facility commonly referred to as
Line 6.
"LME" means London Metal Exchange.
"Person" means any individual, partnership, corporation, trust, limited
liability company or other entity.
"Prime Rate" means the rate of interest published in The Wall Street Journal
as the "prime rate" on the most recent Business Day.
"Reference Strip" means a 60-inch wide, 0.030-inch minimum thickness steel
coil to which a minimum Coating Weight of 100 grams of free zinc per square
meter has been applied on one side only by the Zinc Process.
"Reference Strip Ton Rate" has the meaning set forth in Section 4.2.
------------
"Scheduled Line Time" means all time on the Line available to perform
Coating Services.
"Trip Title" means title passes to the customer at the Facility prior to
shipment from the Facility. The process is described in Attachment VI.
-------------
"Zinc Costs" has the meaning set forth in Section 4.2.
------------
-3-
<PAGE>
ARTICLE II. APPLICABLE ATTACHMENTS
In addition to the other schedules attached hereto, the following attachments
(the "Attachments") are made a part of this Agreement and the parties shall
comply with the requirements of such documents in carrying out their obligations
hereunder:
Attachment I Standardized Inspection System
Attachment II Delivered Quality Requirements
Attachment III Outside Processing AISI/Compord Data Requirements
Attachment IV Non-EDI Production Reporting Requirements
Attachment V Scrap Policy and Production Reporting Requirements (provided
that the standard scrap allowance shall be ***% rather than as stated in
Attachment V)
Attachment VI Billing Requirements
Attachment VIII Claim Policy
Attachment IX Invoicing Requirements
Attachment X Removal Policy
In the event of any conflict between the terms of the Attachments and this
Agreement, this Agreement shall govern.
ARTICLE III. TERM; PURCHASE AND SALE OF COATING SERVICES AND SLITTING SERVICES
3.1 Term. Subject to Section 9.1, the term of this Agreement shall be
---- -----------
from July 1, 1998 through December 31, 2001 (the "Term").
3.2 Agreement to Perform Coating Services. Subject to the terms and
-------------------------------------
conditions of this Agreement, during the Term the Partnership shall provide ISC,
as requested by ISC in accordance with this Agreement, with time on the Line as
set forth on Schedule 3.2 for the Partnership's performance of Coating Services
------------
on ISC Substrate. The Partnership acknowledges that ISC may request the
Partnership to perform Coating Services only to the extent that the I/N Kote
Facility is unable to provide ISC with sufficient coating services.
-4-
<PAGE>
3.3 Right of First Offer. If ISC requires time on the Line for the
--------------------
Partnership to provide Coating Services on ISC Substrate in addition to that set
forth on Schedule 3.2, ISC shall request, in writing, that the Partnership
------------
provide ISC with an offer for such additional time on the Line. The Partnership
may provide ISC with such an offer, in writing, within three days of receiving
ISC's request. ISC shall, in good faith, consider the Partnership's offer,
including price, freight, yield and other economic factors, and accept it unless
ISC determines, in its sole and exclusive judgment, that an offer from a third
party to provide such services is a better offer, in which case it may accept
the offer from such third party. Upon the Partnership's request, ISC shall
provide the Partnership with such information, including, without limitation,
price, freight, yield and other relevant economic factors as the Partnership
reasonably requests to evidence an offer from a third party. Any additional
time on the Line offered to and accepted by ISC under this Section 3.3 shall be
-----------
in addition to the time on the Line reflected on Schedule 3.2.
-------------
3.4 Agreement to Perform Slitting Services. During the Term, ISC may
--------------------------------------
request and the Partnership shall provide Slitting Services on ISC Substrate or
Coated ISC Substrate. The Partnership shall perform Slitting Services in
accordance with Schedule 4.3 and the requirements and procedures set forth in
------------
Attachment I.
- ------------
ARTICLE IV. TOLL FOR COATING SERVICES AND SLITTING SERVICES
4.1 Toll. ISC agrees to pay the Partnership a toll for requested Coating
----
Services performed during the periods set forth on Schedule 4.1 in the amounts
------------
corresponding to such periods set forth on Schedule 4.1, subject to adjustment
------------
pursuant to Section 4.2. Invoicing will be rendered on 'coated' weight and
------------
shall include the weight of coatings applied on each individual coil but not the
weights of protective wrappings and shipping materials. Tolls for Coating
Services other than Reference Strip shall be proportionately adjusted in
accordance with the parties' past practices.
4.2 Adjustment to Toll. (a) Beginning on June 30, 1998 and on each
------------------
anniversary thereof during the Term, the Partnership shall calculate the
"Reference Strip Ton Rate," which calculation shall be the sum of (u) the
Partnership's then current kilowatt hour price for electricity to generate a
Reference Strip ton at the Facility multiplied by the kilowatt hours per
Reference Strip ton ("Electricity Costs") and (v) the forward price, as of such
June 30 or the most recent Business Day thereto, for a period of three months,
of the price of special hygrade zinc, as determined by the LME and published in
The Wall Street Journal, for free zinc used in the Zinc Process multiplied by
the units of free zinc per Reference Strip ton ("Zinc Costs"). Beginning on
June 30, 1999 and continuing through June 30, 2001, the Partnership will
determine the percentage increase or decrease of the Reference Strip Ton Rate by
calculating (i) the difference between the Reference Strip Ton Rate for the
current June 30 and the Reference Strip Ton Rate for the prior June 30 divided
by (ii) the Reference Strip Ton Rate for the prior June 30. If such percentage
change is positive and greater than 5%, the Partnership shall increase the toll
for Coating Services for a Reference Strip ton for the next 12 month period,
effective as of the July 1 of such 12 month period, by an amount equal to the
difference between (w) the Reference Strip Ton Rate for the current June 30 and
(x) 1.05 times
-5-
<PAGE>
the Reference Strip Ton Rate for the prior June 30. If such percentage change is
negative and greater than 5%, the Partnership shall decrease the toll for
Coating Services for a Reference Strip ton for the next 12 month period,
effective as of the July 1 of such 12 month period, by an amount equal to the
difference between (y) .95 times the Reference Strip Ton Rate for the prior June
30 and (z) the Reference Strip Ton Rate for the current June 30. An example of
such calculation is set forth on Schedule 4.2. The Partnership will provide ISC
-------------
evidence of such calculations as ISC shall reasonably request. In the event that
the Partnership and ISC disagree as to one or more of the calculations, then the
General Manager of Purchasing of ISC and the Chief Operating Officer of MSCWC
shall meet and in good faith attempt to equitably determine such calculations;
provided that until such agreement is reached there shall be no adjustment to
the toll for Coating Services; provided further that when such agreement is
reached, there shall be a retroactive adjustment from the period beginning the
current July 1, of the toll for Coating Services.
(b) Notwithstanding Section 4.2(a), electricity costs shall be subject to
--------------
the Billing Policy for Electric Buy-Through Rates dated as of March 18, 1996 by
and among, Bethlehem Steel Corporation, ISC and MSCWC.
4.3 Toll for Slitting Services. ISC shall pay the Partnership for
--------------------------
Slitting Services in the amount set forth on Schedule 4.3.
-------------
ARTICLE V. SUBSTRATE QUANTITY; SUBSTRATE QUALITY
5.1 Substrate Quantity. ISC shall provide the Partnership with an amount
------------------
of ISC Substrate necessary to utilize ISC Line Time. Subject to Section 7.1, if
-----------
the Line becomes idle as a direct result of ISC's failure to provide the
Partnership with ISC Substrate sufficient to utilize ISC Line Time, and the
Partnership, after using its reasonable commercial efforts, is unable to utilize
any remaining ISC Line Time for the benefit of the Partnership or other parties,
at the end of the nearest fiscal quarter ISC shall pay the Partnership $*** per
Reference Strip ton equal to the difference between (i) the Reference Strip tons
that would have been produced during that quarter if ISC had utilized all of the
ISC Line Time and (ii) the Reference Strip tons actually produced for ISC, the
Partnership or any other party during such quarter allocable to the ISC Line
Time.
5.2 Substrate Quality. The Partnership shall promptly advise ISC if all
-----------------
or part of any shipment of ISC Substrate is obviously damaged or defective. The
Partnership shall have no obligation to perform Coating Services or Slitting
Services on any damaged or defective ISC Substrate.
ARTICLE VI. OPERATIONS
6.1 Operation of the Facility. The Partnership currently maintains and
-------------------------
shall maintain the capability of the Facility to receive ISC Substrate and to
ship Coated ISC Substrate and Finished Substrate via rail and/or truck as
requested by ISC.
-6-
<PAGE>
6.2 Communication of ISC Inventory Information. The Partnership shall
------------------------------------------
operate an AISI Compord computerized system (the "System") to electronically
communicate inventory information regarding ISC Inventory and provide ISC such
information in accordance with the requirements of Attachment III. At any time
--------------
and from time to time as the System is off-line for in excess of twelve hours,
the Partnership shall instead provide ISC information regarding the ISC
Inventory pursuant to Attachment IV.
-------------
6.3 Firm Orders. Thirty days prior to the beginning of each calendar
-----------
quarter during the Term, ISC shall deliver a firm order for the amount of time
on the Line to be used during such quarter to provide Coating Services for ISC
("Firm Order"); provided that such Firm Order shall not exceed the amount of
time on the Line set forth on Schedule 3.2 for that quarter, and provided
------------
further that for the quarter commencing July 1, 1998, ISC shall deliver such
Firm Order by June 1, 1998.
6.4 Purchase Orders. ISC shall deliver purchase orders ("Purchase Order")
---------------
to the Partnership, which Purchase Orders shall set forth the specifications for
Coating Services (which specifications shall be within the reasonable
capabilities of the Line), and the delivery points and scheduled delivery dates
for Coated ISC Substrate. In the event that ISC requests the Partnership to
perform Slitting Services on all or part of such Coated ISC Substrate, the
delivery points and dates set forth in the Purchase Order shall, absent written
notification by ISC to the Partnership, also apply to the delivery of Finished
Substrate. In the event of any inconsistency between the terms of a Purchase
Order and this Agreement, this Agreement shall govern. ISC shall order Coating
Services and Slitting Services in a reasonably level manner so that excessive
productivity demands will not be placed on the Partnership's operation of the
Facility during any unit of time. ISC acknowledges that such scheduled delivery
dates will necessarily be approximate, and 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
Substrate and raw materials and otherwise to maximize efficiency and levels of
production.
6.5 Priority of Firm Orders and Modification of Purchase Orders, etc.
----------------------------------------------------------------
(a) ISC may at any time notify the Partnership of any priority within any
Firm Order or Purchase Order and the Partnership shall, to the extent
reasonably practicable, utilize the Processes requested by ISC to coat
ISC Substrate in accordance with the priority set forth in any such
notification and shall allocate production time on the Line in an
equitable manner between Coating Services and the coating of other
Substrate.
(b) ISC may, at any time prior to the commencement of coating ISC
Substrate, notify the Partnership of changes in the specifications for
all or part of a Purchase Order, which specifications shall be within
the reasonable capabilities of the Line, and the
-7-
<PAGE>
Partnership shall, to the extent reasonably possible, utilize the
Processes requested by ISC to coat such ISC Substrate in accordance
with such changed specifications.
(c) In utilizing the Processes requested by ISC to coat ISC Substrate, the
Partnership will comply, to the extent reasonably possible, with any
reasonable request (including, without limitation, changes to delivery
points and scheduled delivery dates) made by ISC, provided that the
Partnership shall not be required: (i) to comply with any request that
would result in unfair or inequitable treatment of others who have
ordered time on the Line or (ii) to follow any practices which are not
commercially reasonable or consistent with the effective utilization
of the Line.
6.6 Shipment and Handling of ISC Substrate.
--------------------------------------
(a) ISC shall be responsible for arranging and paying for the shipment of
ISC Substrate to the Facility.
(b) Shipments of ISC Substrate to the Facility shall be at the expense and
risk of ISC, and the Partnership shall have no responsibility for any
ISC Substrate until delivered to the Facility; provided that the
Partnership shall, pursuant to the requirements of Attachment V
------------
(subject to the adjustment to scrap allowance set forth in Article
-------
II), account for 100% of all ISC Substrate received at the Facility.
--
(c) The Partnership shall be responsible for unloading (after removal of
bracing materials and covers, if any) all ISC Substrate delivered by
or on behalf of ISC to the Facility and so shall unload ISC Substrate
in accordance with the requirements of Attachment II and customary
----------
industry practices. The Partnership shall load and unload carriers
expeditiously to avoid delays and shall be liable for the detention of
trucks caused by the Partnership; provided that carriers comply with
their scheduled appointment times. The Partnership shall be liable for
all rail demurrage charges which result from delays caused by the
Partnership that extend beyond its free time. The parties shall work
together to avoid delivery or shipping schedules that will over-tax
the normal capacity and operation of the Facility.
6.7 Handling and Shipment of Coated ISC Substrate and Finished Substrate.
--------------------------------------------------------------------
(a) The Partnership shall be responsible for arranging, and ISC shall be
responsible for paying for, all shipments of Coated ISC Substrate
and/or Finished Substrate from the Facility pursuant to the following
procedures:
(i) ISC shall furnish the Partnership with written carrier routing
instructions for delivery of Coated ISC Substrate and Finished
Substrate, which instructions shall list the routings numerically in
order of dispatch priority along with the carrier's
-8-
<PAGE>
phone number. Unless modified by such instructions, the Partnership
shall ship Coated ISC Substrate and/or Finished Substrate to the
address stated on the relevant Purchase Order.
(ii) Unless ISC instructs the Partnership otherwise, all Coated ISC
Substrate and Finished Substrate shall be shipped on a per coil
basis, oldest coils first. In the event that the Partnership does
not so ship Coated ISC Substrate or Finished Substrate, the
Partnership shall be liable to ISC for losses caused by
deterioration of aged Coated ISC Substrate and/or Finished
Substrate.
(iii) If the Partnership fails to comply with routing instructions or uses
an unauthorized carrier without the prior approval of ISC's External
Transportation Department, then the Partnership shall be held liable
for any increase in freight rate due to such failure to comply or
use of such unauthorized carrier.
(iv) In the event that all approved carriers refuse ISC's freight of
Coated ISC Substrate and/or Finished Substrate, the Partnership
shall contact ISC's External Transportation Department and such
department shall give the Partnership alternative carriers to call.
If the Partnership is unable to reach such department to obtain
alternative carriers, then the Partnership may use such other
carriers as necessary to meet ISC's delivery requirements.
(v) The Partnership shall provide ISC billing information pursuant to
the requirements of Attachment VI and shall invoice ISC pursuant to
-------------
the requirements of Attachment VI, both on a timely basis.
-------------
(vi) The Partnership shall allocate sufficient storage space at the
Facility to accommodate ISC Inventory, which storage space shall be
approximately equal to the product of (i) the percentage of all
Scheduled Line Time subject to Firm Orders from ISC for the
following quarter and (ii) the Floor Space available for the storage
of Substrate. The Partnership shall store such inventory in
accordance with Attachment II and shall provide such additional
-------------
protection for any ISC Inventory stored at the Facility in
accordance with customary industry practice; provided, however, that
when the ISC Inventory stored at the Facility equals the storage
space allocated to ISC Inventory pursuant to the immediately
preceding sentence, the Partnership shall immediately provide
written notice to ISC and the Partnership, forty-eight hours after
delivery of such notice, shall have the right to refuse delivery of
additional Substrate for so long as the ISC Inventory stored at the
Facility equals the storage space allocated to ISC Inventory.
(b) The Partnership shall execute Trip Title of Coated ISC Substrate
and/or Finished Substrate, subject to any mechanic's, serviceman's,
bailee's or similar liens to which the
-9-
<PAGE>
Partnership is entitled, within twenty-four hours of the date such
information is provided by ISC to the Partnership.
6.8 Scrap. Scrap allowance will be credited at the beginning of each month
-----
for line scrap generated the previous month using the price for #1 dealer
bundles as quoted in Iron Age's "New Steel" magazine for the month the scrap was
generated as quoted for Detroit, less $*** per ton handling fee. In the event
"New Steel" no longer publishes the scrap price for #1 dealer bundles; Detroit,
the parties shall mutually agree on an appropriate source for such scrap price.
The Partnership shall maintain records of scrap sales and shall, upon ISC's
reasonable request, grant ISC access to all such records.
6.9 Claim Policy. In the event that (a) due to a breach by the Partnership
------------
of the warranty set forth in Section 7.2, ISC or a customer of ISC rejects, in
-----------
whole or in part, any Coated ISC Substrate or Finished Substrate, or the
Partnership (b) damages, destroys or loses ISC Inventory (other than normal
scrap), (c) through improper processing, storage, clerical or other error causes
ISC Inventory (other than normal scrap) to lose value, (d) fails to correct or
report to ISC any defects in or affecting ISC Inventory that are reasonably
discoverable by the Partnership in the course of its operations, whether such
defects are caused by ISC, the Partnership or another party, then the
Partnership shall reimburse ISC for the value lost to such Coated ISC Substrate,
Finished Substrate or ISC Inventory ("Claim Product") in accordance with the
requirements of Attachment VIII and shall remove such rejected Coated ISC
---------------
Substrate and/or Finished Substrate in accordance with the requirements of
Attachment X. "Value lost" shall be determined by taking the difference between
- ------------
the value of the uncoated substrate, processing fees, and freight less the
subsequent sales price of the Claim Product. The parties will, with due
diligence, work amicably together to resolve disputes over the underlying cause
of such Claim Product defects. The Partnership's obligation as set forth herein
shall not terminate until the buyer has accepted such Claim Product or has
waived such acceptance. The Partnership shall be similarly liable for "value
lost" on ISC Substrate obviously damaged during transit to the Facility only if
the Partnership fails to comply with the inbound inspection requirements
pursuant to Attachment II and ISC is unable to recover the "value lost" from the
--------------
carrier due to a lack of proper inbound inspection documentation by the
Partnership.
6.10 Insurance. The Partnership shall maintain in force at its sole cost and
---------
expense general comprehensive liability insurance in an amount not less than
$*** in the aggregate, $*** per occurrence and excess liability coverage in the
form of a $*** umbrella policy (per occurrence and in the aggregate). The
Partnership shall provide ISC with a certificate of insurance covering the
Partnership's insurance obligations. Such certificate shall name ISC as an
additional insured and shall contain a statement that ISC will be notified by
the insurer in writing at least thirty (30) days before any material policy
change or cancellation or non-renewal is effected.
6.11 ISC Inventory. For the Term and for a period of six months thereafter,
-------------
the Partnership shall provide ISC reasonable access to its records regarding all
ISC Inventory except Claim Product records. ISC will have reasonable access to
Claim Product records for the Term and a period of eighteen months thereafter.
The Partnership shall perform a physical inventory of ISC Inventory at
-10-
<PAGE>
least once every calendar year. In addition, the Partnership shall, upon request
of ISC during the Term (made not more than once in any calendar year), permit
ISC (or its designees) to conduct a physical inventory of all ISC Inventory then
held by the Partnership. In the event that ISC and the Partnership disagree as
to the amount of ISC Inventory, then the General Manager of Purchasing of ISC
and the Chief Operating Officer of MSCWC shall meet and in good faith attempt to
equitably determine the amount of ISC Inventory.
6.12 Inspection. The Partnership shall employ customary inspection techniques
----------
on ISC Substrate, Coated ISC Substrate and Finished Substrate during the coating
process, unless directed by ISC in a Purchase Order or other written
instruction, to employ the techniques as set forth in Attachment I; provided
------------
that in any event, the Partnership shall not be responsible for failure to
detect any defect in any Coated ISC Substrate or Finished Substrate which could
not have been reasonably discovered during inspection of such Substrate.
6.13 Customer Service. ISC shall be responsible for rendering advice and
----------------
providing other assistance to ISC customers relating to Coated ISC Substrate
and/or Finished Substrate. At the reasonable request of ISC, the Partnership
shall make qualified personnel available at any location reasonably specified by
ISC or any ISC customer to assist ISC or such customer with respect to the
provision of advice and assistance relating to Coated ISC Substrate or Finished
Substrate. To the extent that ISC or an ISC customer reasonably specifies the
number and/or qualifications of such personnel, the Partnership shall use its
reasonable efforts to provide such personnel to ISC or such ISC customer.
Services to be provided by such personnel may include the investigation of
claims or complaints relating to the coating and/or the slitting of Finished
Substrate.
6.14 Compliance with Laws. The Partnership warrants that (i) no infringement
--------------------
of any patents shall arise from the Partnership's use of the Processes and the
performance of Coating or Slitting Services and (ii) subject to Section 7.3, as
-----------
of the date of shipment all Coated ISC Substrate or Finished Substrate supplied
to ISC or to an ISC customer will have been processed and loaded for shipment in
accordance with all applicable laws, ordinances, rules and regulations relating
thereto. Without limiting the generality of the foregoing, the Partnership
warrants that any Coated ISC Substrate and Finished Substrate processed and
loaded for shipment by it will be processed and loaded for shipment in
accordance with the Fair Labor Standards Act of 1938, as amended.
6.15 Indemnification. (a) The Partnership shall indemnify ISC and its
---------------
Affiliates against, and hold them harmless from, any losses, damages,
liabilities, costs or expenses, including, without limitation, the reasonable
fees and out-of-pocket expenses of attorneys retained by ISC, arising out of or
relating to (i) a breach by the Partnership of any of its representations or
warranties in this Agreement or (ii) any breach by the Partnership; provided
that ISC may be represented in any action, at its own expense, by attorneys of
its own choice.
(b) ISC shall indemnify the Partnership and its Affiliates against, and hold
them harmless from, any losses, damages, liabilities, costs or expenses,
including, without limitation, the reasonable
-11-
<PAGE>
fees and out-of-pocket expenses of attorneys retained by the Partnership,
arising out of or relating to (i) any breach by ISC of any of its
representations and warranties in this Agreement or (ii) any breach by ISC of
this Agreement; provided that the Partnership may be represented in any action,
at its own expense, by attorneys of its own choice.
ARTICLE VII. GENERAL TERMS AND CONDITIONS
7.1 Force Majeure. Neither party shall be liable or responsible to the other
-------------
party for any delay in or failure of performance of its obligations under this
Agreement to the extent such delay or failure is attributable to any cause
beyond its control, including, without limitation, any act of God, fire,
accident, strike, or other labor difficulties, war, embargo or other
governmental act, or riot; provided, however, that the party affected thereby
gives the other party prompt written notice of the occurrence of any event which
is likely to cause any delay or failure and sets forth its best estimate of the
length of any delay and any possibility that it shall be unable to resume
performance; provided, further, that said affected party shall use its best
efforts to expeditiously overcome the effects of that event and resume
performance.
7.2 Warranty. The Partnership warrants to ISC that all Coated ISC Substrate
--------
and Finished Substrate shipped by the Partnership pursuant to this Agreement
shall be in conformity with the specifications set forth by ISC in the related
Purchase Order (as such Purchase Order may be modified from time to time
pursuant to Section 6.5) which specifications shall be within the reasonable
-----------
capabilities of the Line; provided, however, that ISC's payment for services
provided hereunder shall not be deemed to waive any such warranty. The
Partnership further warrants that, subject to Section 7.5, all Coated ISC
-----------
Substrate and Finished Substrate shipped by the Partnership pursuant to this
Agreement shall be delivered free from any security interest, lien or other
encumbrance created by the Partnership, other than any liens of the carrier to
whom the Partnership delivers such ISC Substrate for shipment. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 7.2, THE PARTNERSHIP MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY ARISING FROM USAGE OF TRADE.
7.3 Trademarks, etc. All ISC Substrate coated by the Partnership pursuant to
---------------
this Agreement shall bear the trademark or brand name requested by ISC. ISC
represents and warrants to the Partnership that the application of each such
trademark or brand name by the Partnership has been duly authorized and will not
violate the trademark or other rights of any other Person.
7.4 Title to Substrate and Products. Subject to Sections 6.7(b), 6.8 and
------------------------------- --------------------
6.9, ISC shall at all times retain title to all ISC Inventory (other than normal
- ---
line scrap). The Partnership agrees that under no circumstances shall it hold
itself out as being the owner of any ISC Inventory on its premises, including,
without limitation, on the Partnership's books and records. Risk of loss shall
pass to ISC upon delivery of the Coated or Finished Substrate to the carrier.
-12-
<PAGE>
7.5 UCC Filings. Notwithstanding Section 7.4, the parties hereto intend to
----------- -----------
create the relationship of bailee-bailor with respect to any such Inventory in
the possession of the Partnership, and agree that an informational or
precautionary filing shall be made pursuant to the Uniform Commercial Code in
effect in each jurisdiction where any such Inventory is being held by the
Partnership. ISC and the Partnership each agree to execute and file such
instruments, including financing statements and related amendments or
continuation statements, and take such other actions as may be deemed by either
of them to be necessary or desirable in order to fully protect the rights of ISC
in and to the ISC Inventory. Nothing in this Section 7.5 or in any instrument
-----------
executed, delivered or filed pursuant hereto, and no action or omission on the
part of any party hereto, shall change the fact that the ISC Inventory is
legally and equitably owned by ISC and is held by the Partnership as a bailee
only. The Partnership shall inform ISC, in writing and within 30 days of
becoming so aware, of any financing statement filed against the ISC Inventory.
ARTICLE VIII. PROCEDURES FOR PAYMENT
8.1 Method of Payment. All amounts payable hereunder shall be paid at such
-----------------
place or account as the party shall reasonably specify in writing. Each payment
shall be made in immediately available funds prior to 12:00 noon local time at
the place of payment, on the scheduled date when such payment shall be due,
unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day.
8.2 Late Payment. If any amount payable hereunder is not paid when due, the
------------
paying party shall pay interest (to the extent permitted by law) on such overdue
amount from and including the due date thereof to but excluding the date of
payment thereof (unless such payment shall be made after 12:00 noon local time
at the place of payment, on such date of payment, in which case such date shall
be included) at a rate per annum equal to the Prime Rate. If any amount payable
hereunder is paid on the date when due, but after 12:00 noon local time at the
place of payment, interest shall be payable as aforesaid for one day. The
Partnership reserves the right to refuse providing services if ISC has invoices
in excess of ninety (90) days past due; provided that any such invoices do not
involve Claim Product under contention.
8.3 Payment Terms. ISC shall pay the Partnership for Coating Services and
-------------
Slitting Services properly invoiced in accordance with the requirements of
Attachment IX net 30 days from the date the Coated ISC Substrate and/or Finished
- -------------
Substrate has been produced.
ARTICLE IX. TERMINATION
9.1 Termination due to Bankruptcy or Material Breach. (a) Notwithstanding
------------------------------------------------
Section 7.1, either party may immediately terminate this Agreement upon the
- -----------
Bankruptcy of the other party by written notice to the other party; provided
that in the event of the Bankruptcy of the Partnership, ISC may enter the
Facility and take possession of all ISC Inventory, and, without limiting any
rights granted hereunder, take such actions as are permitted by law to protect
ISC's interest and enforce
-13-
<PAGE>
the Partnership's obligations hereunder.
(b) If either party materially defaults in the performance of any of its
obligations under this Agreement, which default is not substantially cured
within fifteen (15) days after notice is given to the defaulting party
specifying the default and referencing this Section 9.1, then the party not in
-----------
default may, by giving notice to the defaulting party, terminate this Agreement
as of a date specified in such notice of termination. Notwithstanding the
foregoing, with respect to material defaults that cannot reasonably be cured
within 15 days, it will not be a default under this Section 9.1 if the
-----------
defaulting party in good faith submits a corrective action plan to cure such
default, reasonably acceptable to the other party, within fifteen (15) days of
receipt of the notice of default, and thereafter proceeds with due diligence to
carry out such plan to conclusion; provided that the Term shall not be suspended
or extended by any such cure period.
ARTICLE X. AUDITS
10.1 Audits. ISC has the right to hire a firm of independent certified
------
accountants of recognized standing to monitor, investigate and verify the proper
performance of the Partnership's obligations hereunder. The Partnership shall
permit such accountants to inspect records relating to such obligations during
normal business hours and shall make available in a reasonably timely manner all
current data reasonably deemed necessary by the auditors to perform their task.
ARTICLE XI. MISCELLANEOUS
11.1 Independent Contractor. The Partnership is an independent contractor and
----------------------
this Agreement will not create a principal-agent, employer-employee, partnership
or joint venture relationship between the Partnership and ISC. Each party shall
be solely responsible for all of its acts and the acts of their respective
agents, employees and subcontractors.
11.2 Confidentiality. Each party and its Affiliates shall treat the existence
---------------
of this Agreement, the schedules and attachments hereto and all data and
information furnished by a party or an Affiliate to the other party hereto or
its Affiliates which is marked "Confidential," or contains a similar proprietary
notice clause, as confidential and shall take or cause to be taken such
reasonable precautions as such party takes to safeguard its own confidential
information to prevent disclosure of the existence of this Agreement and all
such data and information to others for a period of three years from the
termination of this Agreement; provided, however, that this obligation shall not
be applicable:
(a) to disclosure to public authorities to the extent required by applicable
law, including, without limitation, any securities laws or stock
exchange rules applicable to either partners of the Partnership;
provided, however, that the party required to disclose the existence of
this Agreement or any confidential data or information shall have given
the other party prompt written notice thereof so that the other party
may seek a protective
-14-
<PAGE>
order or other appropriate remedy;
(b) to the extent the existence of this Agreement or such data or
information was part of the public domain at the time of its disclosure
to such party;
(c) to the extent the existence of this Agreement or such data or
information became generally available to the public or otherwise part
of the public domain after its disclosure other than through any act or
omission of a party or its Affiliate in breach of this Agreement;
(d) to the extent the existence of this Agreement or such data or
information was subsequently disclosed to such party by a third party on
a non-confidential basis who had no obligation to either party (whether
directly or indirectly) not to disclose the existence of this Agreement
or such data or information; or
(e) to the extent that a party can demonstrate that such data or information
was in such party's possession at the time of disclosure and was not
acquired, directly or indirectly, from the other party or an Affiliate
on a confidential basis.
Each party may disclose the existence of this Agreement and such data and
information to its respective Affiliates, provided that each party shall take
all reasonable measures to impose upon such Affiliates an obligation to respect
the confidentiality of the existence of this Agreement, the schedules and
attachments hereto and all other data and information disclosed, and no
marketing or commercial use shall be made by either party or its Affiliates
based on such information without the prior written consent of the other party.
In addition, ISC may disclose the existence of this Agreement to its customers.
11.3 Notices. All communications, notices and consents provided for herein
-------
shall be in writing and be given in person (or by air freight delivery) or by
means of telex, telecopy or other wire transmission (with request for assurance
of receipt in a manner typical with respect to communications of that type) or
by mail, and shall become effective (x) on delivery if given in person or by air
freight delivery, (y) on the date of transmission if sent by telex, telecopy or
other wire transmission, or (z) three Business Days after being deposited in the
mail, with proper postage for first-class registered or certified mail, prepaid.
Notices shall be addressed to each party as follows:
If to ISC:
Inland Steel Company
3210 Watling Street
East Chicago, Indiana 46312
Attn: General Manager, Purchasing
-15-
<PAGE>
Fax Number: (219) 399-4448
If to the Partnership:
Walbridge Coatings, An Illinois Partnership
c/o MSC Walbridge Coatings, Inc.
2200 Pratt Boulevard
Elk Grove Village, IL 60007
Attn: C.F.O.
Fax Number: (847) 439-0737
with a copy to:
Bethlehem Steel Corporation
1170 8th Avenue
Bethlehem, Pennsylvania 18016
Attn: David M. Beckwith
Fax Number: (610) 694-1447
and a copy to:
MSC WALBRIDGE Coatings, Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attn: Vice President and General Manager
Fax Number: (419) 661-5802
or at such other address as either party hereto may from time to time designate
by notice duly given in accordance with the provisions of this Section 11.3 to
------------
the other party hereto.
11.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Fully executed sets
of counterparts shall be delivered to and retained by each of ISC and the
Partnership.
11.5 Waiver, Remedies. No failure or delay in exercising any right hereunder
----------------
shall operate as a waiver of or impair any such right or any other right. No
single or partial exercise of any such right shall preclude any other or further
exercise thereof or the exercise of any other right. The remedies afforded to
each party hereunder shall be in addition to any other remedies to which such
party is entitled, whether at law or in equity.
-16-
<PAGE>
11.6 Amendment. This Agreement may be amended, modified or supplemented only
---------
by an instrument in writing signed by the parties hereto.
11.7 Entire Agreement. This Agreement expresses the entire understanding
----------------
between the parties with respect to the subject matter herein and any prior or
contemporaneous oral or written negotiations, discussions or agreements are
hereby superseded.
11.8 Headings. The headings of the articles, sections, schedules, attachments
--------
and paragraphs of this Agreement have been inserted for convenience of reference
only and shall in no way restrict or otherwise modify any of the terms or
provisions hereof.
11.9 Survival. Articles 1 and 2 and Sections 6.9, 7.2, 8.1, 8.2, 8.3, 11.2,
-------- --------- - -------- --- --- --- --- --- ----
11.5, 11.9 and 11.12 shall survive the termination of this Agreement.
- ---- ---- -----
11.10 Extension of Time for Performance. If this Agreement calls for any
---------------------------------
action to be taken on or by a date which is not a Business Day, such action
shall be deemed to be required to be taken on or by the next succeeding Business
Day.
11.11 Assignment. The Partnership shall not assign this Agreement or
----------
subcontract any part of its obligations to be performed hereunder without the
prior written consent of ISC. In the event consent for such subcontract is
given, the Partnership shall be and remain liable as if no such subcontract had
been made. ISC shall not assign this Agreement without the prior written consent
of the Partnership; provided that the foregoing notwithstanding, no such consent
of the Partnership shall be required for an assignment by ISC of its rights and
obligations hereunder to an Affiliate. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.12 Governing Law. This Agreement shall be construed under and governed by
-------------
the internal laws of the State of Illinois, without regard to its conflicts of
law provisions.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the date first above given.
INLAND STEEL COMPANY
By:______________________
Its:_____________________
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: EGL Steel Inc., a General Partner
By:________________________
Its:_______________________
By: MSC Walbridge Coatings, Inc., a General
Partner
By:________________________
Its:________________________
-18-
<PAGE>
SCHEDULE 3.2
LINE TIME AVAILABLE TO ISC FOR COATING SERVICES
July 1, 1998 to December 31, 1998 - ***% of Scheduled Line Time.
January 1, 1999 to December 31, 1999 - ***% of Scheduled Line Time.
January 1, 2000 to December 31, 2000 - ***% of Scheduled Line Time.
January 1, 2001 to December 31, 2001 - ***% of Scheduled Line Time.
<PAGE>
SCHEDULE 4.1
TOLLING FOR COATING SERVICES
July 1, 1998 to December 31, 1998 -$*** per Reference Strip ton.
January 1, 1999 to December 31, 1999 -$*** per Reference Strip ton.
January 1, 2000 to December 31, 2000 -$*** per Reference Strip ton.
January 1, 2001 to December 31, 2001 -$*** per Reference Strip ton.
<PAGE>
SCHEDULE 4.2
EXAMPLE OF CALCULATION FOR ADJUSTMENT TO TOLL
***
<PAGE>
SCHEDULE 4.3
TOLLING FOR SLITTING SERVICES
Standardized Inspection System Edge Trim and Inspection: $*** per charged ton
No Inspection -- Edge Trim Only: $*** per charged ton
The Barnes Agreement shall apply to future slitting operations at $*** per ton
surcharge.
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
State or
Jurisdiction of
Name of Subsidiary Incorporation
------------------ -------------
MSC Pre Finish Metals Inc. Illinois
MSC Pre Finish Metals (EGV) Inc. Delaware
MSC Pre Finish Metals (MV) Inc. Delaware
MSC Pre Finish Metals (MT) Inc. Delaware
MSC Walbridge Coatings Inc. Delaware
MSC Specialty Films, Inc. California
MSC Laminates and Composites Inc. Delaware
MSC Laminates and Composites (EGV) Inc. Delaware
Material Sciences Foreign Sales Corporation U. S. Virgin Islands
Solar-Gard International, Inc. Florida
MSC Specialty Films (UK) Limited United Kingdom
Solar-Gard (Canada) Inc. Canada
MSC Specialty Films (Australasia) Pty. Limited Australia
Solar-Gard (SEA) Pte., Ltd. Singapore
Innovative Specialty Films, LLC Delaware
MSC Pinole Point Steel Inc. Delaware
MSC Pre Finish Metals (PP) Inc. Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated April 22, 1999, included in or incorporated by
reference in this Form 10-K, into the Company's previously filed Registration
Statements on Form S-8 (No. 33-00067, 33-40610, 33-41310, 33-57648, 33-81064,
333-15679, 333-15677, 333-33885 and 333-33897).
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 24, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 1,227
<SECURITIES> 0
<RECEIVABLES> 52,029
<ALLOWANCES> 5,233
<INVENTORY> 52,166
<CURRENT-ASSETS> 113,459
<PP&E> 360,865
<DEPRECIATION> 126,384
<TOTAL-ASSETS> 395,321
<CURRENT-LIABILITIES> 72,900
<BONDS> 140,000
336
0
<COMMON> 0
<OTHER-SE> 148,596
<TOTAL-LIABILITY-AND-EQUITY> 395,321
<SALES> 469,136
<TOTAL-REVENUES> 469,136
<CGS> 384,677
<TOTAL-COSTS> 384,677
<OTHER-EXPENSES> 56,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,790
<INCOME-PRETAX> 16,117
<INCOME-TAX> 5,963
<INCOME-CONTINUING> 10,154
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<CHANGES> 2,207
<NET-INCOME> 7,947
<EPS-BASIC> 0.52
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