Exhibit 10.3
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COATING AGREEMENT
Dated as of July 23, 1999
By and Between
LTV STEEL COMPANY, INC.
and
WALBRIDGE COATINGS,
AN ILLINOIS PARTNERSHIP
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions.............................. 2
ARTICLE II
General Terms of Purchase and Sale................... 2
ARTICLE III
Other Terms and Conditions
3.01. Title to Steel; Liability for Defective Steel....................... 2
3.02. Reserved Production Time............................................ 3
3.03. Injuries to Persons................................................. 3
3.04. Major Loss.......................................................... 3
3.05. Shipping............................................................ 3
3.06. Warehousing......................................................... 3
3.07. Invoices and Payment................................................ 4
ARTICLE IV
Operations
4.01. Scheduling of Production Time....................................... 4
4.02. Production Priorities............................................... 5
ARTICLE V
Coating Fees
5.01. Coating Fees........................................................ 6
5.02. Fixed Fee........................................................... 8
5.03. Scrap Credit........................................................ 9
5.04. Proportionate Adjustment............................................ 9
5.05. Cost Disclosure..................................................... 9
5.06. No Minimums......................................................... 10
5.07. Costs in Connection with Modifications.............................. 10
ARTICLE VI
Miscellany
6.01. Entire Agreement.................................................... 10
6.02. Limitations on Liabilities.......................................... 11
6.03. Amendments.......................................................... 11
6.04. Notices............................................................. 11
6.05. Headings............................................................ 13
6.06. Waiver of Default................................................... 13
6.07. Severability........................................................ 13
6.08. Assignment.......................................................... 13
6.09. Governing Law....................................................... 13
6.10. Execution in Counterparts........................................... 13
6.11. Confidentiality..................................................... 14
6.12. Third Party Beneficiaries........................................... 14
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EXHIBIT 1: Standard Terms and Conditions for Sales of EG Services by the
Partnership (the "Seller") to the Purchaser (the "Buyer")
EXHIBIT 2: Standard Terms and Conditions for Sales of Organic Coating Services
by the Partnership (the "Seller") to the Purchaser (the "Buyer")
ANNEX I: Barnes Edge Conditioning Equipment Capital Recovery and Surcharge
Agreement
ANNEX II: Billing Policy for Electric Buy-Through Rates
APPENDIX A: Definitions of Terms and Phrases
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COATING AGREEMENT
THIS COATING AGREEMENT (this "Agreement"), dated as of this 23rd day
of July, 1999, by and between LTV STEEL COMPANY, INC., a New Jersey corporation,
having a place of business at 200 Public Square, Cleveland, Ohio 44114 ("LTV
Steel" or the "Purchaser") and WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP,
having a place of business at 30610 East Broadway, Walbridge, Ohio 43465 (the
"Partnership"),
W I T N E S S E T H :
WHEREAS the Partnership was formed under the laws of Illinois for the
purpose, among others, of owning (or leasing) and operating a facility designed
to coat sheet metal with electrogalvanized zinc, zinc alloy or other coatings;
and
WHEREAS, pursuant to the Initial Transfer Agreement and the 1998
Transfer Agreement, EGL Steel purchased Inland EG's entire Partner's Interest in
the Partnership so that, after giving effect to such purchase, EGL Steel had a
50% Financial Interest and a 50% Voting Interest in the Partnership; and
WHEREAS, pursuant to the Purchase Agreement, LTV-W is purchasing a
portion of EGL Steel's Partner's Interest so that, after giving effect to such
purchase, LTV-W shall have a 16.5% Financial Interest and a 16.5% Voting
Interest in the Partnership and EGL Steel shall have a 33.5% Financial Interest
and a 33.5% Voting Interest in the Partnership; and
WHEREAS, on the date hereof, EGL Steel, LTV-W and MSCWC are entering
into the Partnership Agreement; and
WHEREAS the Partnership Agreement provides, in part, that: (a) the EG
Facility will be primarily dedicated to the electrogalvanizing of coiled sheet
steel for the Primary Purchasers, including Purchaser, while developing new
products and markets using Organic Coatings in conjunction with EG Services, and
(b) the Partnership will provide the highest quality coating service primarily
for sale to Primary Purchasers; and
WHEREAS Purchaser and the Partnership desire to enter into this
Agreement to provide for the purchase by Purchaser of various coating services
from the Partnership on the terms and conditions set forth herein; and
WHEREAS the Partnership and Bethlehem, as the other Primary Purchaser,
are entering into the Bethlehem Coating Agreement as of the date hereof with
respect to 67% of the
available Production Time, subject to certain exceptions as set forth therein,;
and
WHEREAS, the Partnership and MSCWC are concurrently entering into the
MSCWC Coating Agreement as of the date hereof relating to certain coating
services for MSCWC at the EG Facility and the Partnership and Ispat Inland have
previously entered into the Inland Tolling Agreement providing for certain pure
zinc EG Services for Ispat Inland at the EG Facility;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Purchaser and the Partnership do
hereby agree as follows:
ARTICLE I
Definitions
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Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Appendix A (which is attached hereto and
incorporated herein by reference), such definitions to be equally applicable to
both the singular and the plural forms of the terms defined.
ARTICLE II
General Terms of Purchase and Sale
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Except as otherwise expressly provided in this Agreement, Purchaser
will purchase from the Partnership, and the Partnership will sell to Purchaser,
coating services in accordance with the terms and conditions set forth in
Exhibits 1 or 2 hereto, whichever is applicable, as amended from time to time by
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agreement between the Partnership and Purchaser. The term of this Agreement
shall be for a period commencing on the date hereof and ending at the end of the
Term (including renewals), unless this Agreement is earlier terminated or is
extended to a later date by mutual agreement of the parties hereto.
ARTICLE III
Other Terms and Conditions
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SECTION 3.01. Title to Steel; Liability for Defective Steel.
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Purchaser or an Affiliate thereof shall, at all times, retain title to all sheet
metal being processed for it at the EG Facility. Purchaser shall indemnify and
hold harmless the Partnership, the Operator and its Affiliates from and against
any and all customer claims (net of insurance and other recoveries) to the
extent resulting from Purchaser supplying defective or faulty metal substrate
for coating at the EG Facility, and
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Purchaser shall not assert any such claim against the Partnership, the Operator
or its Affiliates.
SECTION 3.02. Reserved Production Time. Purchaser shall be entitled
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to certain priority rights during each month to available Production Time for EG
Services and Other Services at the EG Facility, all in accordance with the terms
and conditions set forth in Article IV of this Agreement.
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SECTION 3.03. Injuries to Persons. Purchaser shall be responsible
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for and shall indemnify and hold harmless the Partnership, all Partners and
their respective Affiliates from and against any and all damages, liabilities,
losses, expenses and costs, including reasonable attorneys' fees, incurred by
any of them as a result of injuries to persons at the EG Facility caused by the
gross negligence or willful misconduct of Purchaser or its Affiliates; provided
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that if at any time the Partnership determines not to obtain the insurance
specified in Section 3.08(a)(iii) of the Operating Agreement with respect to
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injuries caused by the negligence of Purchaser and its Affiliates then the
indemnification set forth in this Section 3.03 shall be deemed to apply to
injuries caused by such negligence during any period when such insurance is not
in force.
SECTION 3.04. Major Loss. If, after the occurrence of a Major Loss,
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Section 3.10(c) of the Operating Agreement is applicable, Purchaser and the
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Partnership shall amend this Agreement to take into account the repairs made
pursuant to such Section 3.10(c) and their effects on the provisions of this
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Agreement. Such amendments shall be commercially reasonable as between the
Partnership and Purchaser.
SECTION 3.05. Shipping. (a) Purchaser shall be responsible for
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arranging all of its shipments of sheet metal to the EG Facility and all such
shipments shall be at the risk and expense of Purchaser.
(b) The Partnership shall arrange shipments of Purchaser's finished
product from the EG Facility from shipping alternatives provided by Purchaser;
provided that all of such shipments shall be made at the risk and at the expense
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of Purchaser.
(c) The Partnership shall provide cooperation and assistance in
scheduling shipments of metal substrate from the EG Facility and shall provide
dockside assistance in receiving, handling and shipping materials at the EG
Facility.
SECTION 3.06. Warehousing. Purchaser shall ship to the EG Facility
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sheet metal as it reasonably anticipates
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purchasing coating services. The Partnership shall warehouse and provide
customary protection at the EG Facility for metal substrate and finished product
of Purchaser stored at the EG Facility, subject to the terms and conditions set
forth in Exhibits 1 or 2, whichever is applicable, in accordance with the
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standards of MSCWC at the EG Facility on the date hereof.
SECTION 3.07. Invoices and Payment. Except in cases in which payment
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is otherwise expressly provided herein, the Partnership shall issue invoices for
the Coating Fees payable pursuant to Article V from time to time on the date
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that the relevant coating service is rendered and Purchaser shall pay the total
amount of each such invoice to the Partnership within thirty days after the date
of such invoice; provided, however, that effective upon the completion of
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installation of electronic data interchange (EDI) capability at the EG Facility
(at the expense of LTV Steel) and the successful electronic transmission, as
determined by Operator's Information Systems Manager, of invoices to Purchaser
utilizing a X.12 data format, Purchaser may elect by notice to the Operator to
be invoiced with respect to each coating service rendered thereafter on the date
of shipment from the EG Facility of the products to which such coating service
is applied; provided, however, that each such invoice shall provide for payment
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(and Purchaser shall pay such invoice) within fifteen (15) days after the date
of such invoice in the total amount stated therein plus, if applicable, one and
one-half percent (1.5%) of such total amount per each month (or fraction
thereof) from the fifteenth (15th) day after the date such coating service is
rendered to the date as of which Operator is instructed by Purchaser to ship
such products from the EG Facility. Except as provided in this Agreement,
including Section 3.01, and Exhibits 1 or 2 hereto, whichever is applicable,
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Purchaser shall not, at any time, be obligated to pay the Partnership any
Coating Fee under Section 5.01 hereof with respect to EG Services or Other
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Services rendered by the Partnership which result in a product that is not
Commercially Saleable.
ARTICLE IV
Operations
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SECTION 4.01. Scheduling of Production Time. (a) On or before the
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15th day of each calendar month, Purchaser shall deliver to the Partnership and
to the other Primary Purchaser a binding notice ("Production Forecast") of the
number of hours of Production Time which at the then current rates of production
of the EG Facility will be required for the Partnership to perform the EG
Services and Other Services (stated separately) for Purchaser during the third
succeeding calendar month (the "Forecast Period"). Subject to the availability
of Production
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Time, each such Production Forecast shall constitute a "Firm Order" under this
Article IV with respect to the numbers of hours of Production Time stated in the
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Production Forecast for the Forecast Period.
(b) Purchaser shall order EG Services and Other Services in a
reasonably level manner so that excessive productivity demands will not be
placed on Operator's operation of the EG Facility during any unit of time.
SECTION 4.02. Production Priorities. (a) In scheduling available
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Production Time for EG Services during each month, the Partnership shall give
priority to purchase orders of Purchaser for EG Services and Other Services up
to the amount of Production Time for EG Services and Other Services set forth in
the timely Firm Order of Purchaser for such month; provided that (i) Purchaser's
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right of priority for EG Services and Other Services shall be limited to
thirty-three percent (33%) of all available Production Time during such month
and (ii) Purchaser shall have a right of first refusal for additional EG
Services and Other Services for any available Production Time which the other
Primary Purchaser, MSCWC or Ispat Inland has the right to reserve under their
respective Coating Agreements or the Inland Tolling Agreement, as the case may
be, but which the Partnership notifies Purchaser has not been so reserved;
provided, however, that if the other Primary Purchaser or MSCWC desires to
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exercise a similar right of first refusal with respect to such available
Production Time under its Coating Agreement, such available Production Time
shall be shared as Purchaser and Primary Purchaser or MSCWC, as the case may be,
shall agree or, in the absence of such agreement, (A) Purchaser and MSCWC shall
share any such available Production Time of the other Primary Purchaser in
accordance with the relative rights to Production Time of Purchaser and MSCWC at
the time and (B) the other Primary Purchaser shall have priority to any such
available Production Time of MSCWC or Ispat Inland. The foregoing rights of
first refusal shall be exercisable by Purchaser by giving notice to the
Partnership not more than five days after receipt of such notice from the
Partnership. Each such right of first refusal shall expire upon the expiration
of such five-day period. Purchaser acknowledges that the Bethlehem Coating
Agreement contains a priority right for the benefit of the other Primary
Purchaser with respect to sixty-seven percent (67%) of all available Production
Time, subject to certain deductions as set forth therein, and the Bethlehem
Coating Agreement and the MSCWC Coating Agreement contain rights of first
refusal with respect to Production Time that Purchaser has the right to reserve
under this Coating Agreement if Purchaser should fail to reserve it.
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(b) In giving effect to the above priorities, however, the
Partnership may make such adjustments from time to time as are reasonably
necessary or advisable to achieve economic and efficient order sizes, to make
efficient use of available metal substrate and raw materials needed for such
production and otherwise to maximize efficiency and levels of production.
(c) If Purchaser shall fail to deliver its Production Forecast by the
date specified in Section 4.01(a) of this Coating Agreement, the Partnership
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shall attempt to contact the appropriate personnel at Purchaser to obtain such
Production Forecast, but if in the Partnership's judgment such Production
Forecast is not received within a reasonable time thereafter, (i) the priority
set forth in Section 4.02(a) for Purchaser shall not be in effect for the
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Forecast Period involved and (ii) the rights of first refusal of Bethlehem and
MSCWC provided in Section 4.02(a) of their respective Coating Agreements shall
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be in effect for such Forecast Period.
(d) Notwithstanding the foregoing, if the General Manager of the
Operating Partner causes the Partnership to sell electrogalvanizing, coating and
associated services to parties other than the Primary Purchasers, Ispat Inland
or MSCWC, during any Forecast Period in accordance with guidelines established
from time to time by the Management Committee and Section 10.04 of the
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Partnership Agreement, the Partnership shall give priority to orders for such
sales equal to Purchaser's rights to priority under this Section 4.02 and the
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rights to priority of the other Primary Purchaser and MSCWC under Section 4.02
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of the other Coating Agreements, but only to the extent necessary to permit the
filling of such orders; provided, however, that to the extent that Production
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Time is committed by the Partnership for sales to outside parties for a period
of time greater than six months, which shall require the consent of all
Partners, the Production Time required for such sales shall have the same
priority as the rights to production time of Purchaser, the other Primary
Purchaser and MSCWC during the term of such commitment.
(e) The Partnership shall cause Operator to furnish to Purchaser a
copy of each Production Schedule established by Operator in accordance with
Section 4.01 of the Operating Agreement not less than the fifth day before the
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beginning of each Forecast Period.
ARTICLE V
Coating Fees
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SECTION 5.01. Coating Fees. In consideration of the services to be
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rendered to Purchaser and its other benefits under this Agreement, and subject
to Section 7.07 of the Partnership
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Agreement, Purchaser agrees to pay the following fees to the Partnership:
(a) For each Standard Ton of pure zinc electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the same
procedure as is provided for Ispat Inland in Section 4.2 of the Inland Tolling
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Agreement.
(b) For each Standard Ton of ZnNi electroplating produced, the
Purchaser shall pay a Coating Fee equal to (i) for the period beginning and
including January 1, 1999 and concluding and including December 31, 2000, ***
and (ii) for the period beginning and including January 1, 2001 and concluding
and including December 31, 2001, ***. Such fees may be adjusted for changes in
the cost of zinc, nickel or electricity (i.e., the twelve month average variable
kilowatt hour cost per Standard Ton) since July 1, 1998, pursuant to the
procedure provided in Section 4.2 of the Inland Tolling Agreement (using a price
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for nickel equal to the 3-month forward quotation for nickel determined by the
London Metal Exchange and published in The Wall Street Journal).
(c) For each transition from pure zinc production to ZnNi production
and back to pure zinc production, the Partnership shall charge Purchaser an
additional Coating Fee (subject to the last sentence of this paragraph) equal to
the product of (a) *** (the agreed number of Tons of Reference Strip that could
have been produced at standard utilization rates and at Design Capacity during
the transition time) times (b) *** (equal to the transition fee per Ton of
Reference Strip in effect immediately prior to July 1, 1998, which shall be
applicable during the entire term of this Agreement, subject to adjustment only
for certain changes in the cost of electricity since July 1, 1998 under the same
procedure provided for Ispat Inland under Section 4.2 of the Inland Tolling
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Agreement). Such additional Coating Fee shall be prorated among the Primary
Purchasers and MSCWC in accordance with the number of Tons of Reference Strip
produced for each of them during the particular ZnNi production run.
(d) The Coating Fee for any other items (such as special packaging
supplies) furnished by the Partnership shall be the same as the Partnership's
cost for such items.
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(e) The Coating Fee for any Organic Coating shall be the same as the
Operator's Fees for such services and shall be determined by negotiations
between the Primary Purchasers and the Operator to yield a *** profit to the
Operator (i.e., Coating Fees = Operator's total costs ***). Any such negotiated
Coating Fees shall be subject to review from time to time to reflect increases
or decreases in costs.
(f) The Purchaser's Coating Fee for base slitting services shall be
*** per Ton processed, for critical inspection processing shall be *** per Ton
inspected and for VW-type packaging shall be *** per Ton packaged. The
provisions of the agreements for the Barnes edge conditioning equipment (as set
forth in Annex I hereto) and electric buy-through rates (as set forth in Annex
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II hereto) will continue in effect during the term of this Agreement; provided,
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however, that each reference in such agreements to Inland shall be deemed to be
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a reference to LTV Steel. The Purchaser's Coating Fee for mode changes shall be
*** per hour of downtime, plus the cost of any lead strip furnished by the
Partnership, subject to a minimum charge for each mode change of *** (for 15
minutes).
(g) For warehousing finished steel coils more than 90 days after
completion of coating services, the Purchaser shall pay a Coating Fee equal to
*** per Ton stored per calendar month or fraction of a calendar month after such
90-day period.
SECTION 5.02. Fixed Fee. (a) The Purchaser shall pay to the
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Partnership each month, commencing in August, 1999 and ending in January, 2005,
in each case for the immediately preceding month, an additional Coating Fee
equal to a portion of the Partnership's estimated fixed costs for real estate
taxes, personal property taxes, Insurance Costs, rent and fixed electricity (the
"Allocated Fixed Costs"), during the immediately preceding month. The portion
of the Allocated Fixed Costs to be paid by Purchaser each month shall equal the
product of one-twelfth of the estimated total Allocated Fixed Costs of the
Partnership for the then current Fiscal Year times thirty-three percent (0.33).
(b) The Partnership shall forward to Purchaser a copy of each invoice
or other statement for Allocated Fixed Costs within 15 days after the
Partnership's receipt thereof. Within 90 days after the end of each Fiscal Year,
the Partnership shall reconcile the estimated total annual Allocated Fixed Costs
used to calculate Purchaser's payments for such Fiscal Year pursuant to Section
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5.02(a) hereof to the actual Allocated Fixed Costs incurred by the Partnership
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during such Fiscal Year and give credit to Purchaser for any excess of
Purchaser's total amount paid under this Section 5.02 for such Fiscal Year over
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the total
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reconciled amount receivable from Purchaser under this Section 5.02 for such
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Fiscal Year or charge Purchaser for any excess of such total reconciled amount
receivable for such Fiscal Year over such total amount paid for such Fiscal
Year.
SECTION 5.03. Scrap Credit. The Partnership is hereby authorized to
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sell all scrap metal generated by the Partnership's performance of EG Services
or Other Services for Purchaser under this Agreement and to retain all proceeds
of such sales; provided, however, that the Partnership shall issue monthly scrap
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credits equal to (a) the product of (i) the actual weight of scrap generated by
such performance during the particular month times (ii) the price for #1 dealer
bundles (low side) as quoted in Iron Age's "New Steel" magazine for such month
for Detroit, less (b) a *** per Ton handling fee, plus (c) *** of any excess of
the proceeds of the sale of such scrap over the product of (i) the actual weight
of scrap generated by such performance during the particular month times (ii)
the price for #1 dealer bundles (low side) as quoted in Iron Age's "New Steel"
magazine for such month for Detroit.
SECTION 5.04. Proportionate Adjustment. In each case under this
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Article V in which a Coating Fee is specified per "Standard Ton," (a) the
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Coating Fees for services to produce Reference Strip shall be calculated by
multiplying the specified amount of Coating Fees times the actual number of Tons
of product produced, and (b) the Coating Fees for services to produce any EG
Product other than Reference Strip shall be calculated by multiplying the
specified amount of Coating Fees times the product of the actual number of Tons
of product produced times the Standard Ton Factor for such EG Product.
SECTION 5.05. Cost Disclosure. (a) Purchaser represents and
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warrants that as of the date hereof, neither Purchaser nor any of its Affiliates
is entitled to receive any discount, rebate, refund or other similar payment or
credit from the Partnership or the Operator or any of Operator's Affiliates
other than as provided in this Coating Agreement or in the Operating Agreement.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates shall accept any
discount, rebate, refund or other similar payment or credit from the Partnership
or the Operator or any of Operator's Affiliates with respect to services
rendered to such Purchaser by the Partnership, other than as provided for
herein, unless Purchaser shall promptly disclose such discount, rebate, refund
or other similar payment or credit to the other Primary Purchaser.
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SECTION 5.06. No Minimums. The Partnership acknowledges that
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Purchaser assumes no obligation to order any minimum amounts of EG Services or
Other Services.
SECTION 5.07. Costs in Connection with Modifications. The Purchaser
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shall be solely responsible for all costs, expenses or obligations incurred by
the Partnership in connection with any extraordinary modification of the
Partnership's information systems or any other extraordinary expenses for
services that it requires, including modifications of the Partnership's
information systems required to ensure compatibility of the Partnership's
information systems with the information systems of the Purchaser, LTV-W or
their customers.
ARTICLE VI
Miscellany
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SECTION 6.01. Entire Agreement. (a) This Agreement, the other
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Definitive Agreements referred to herein or executed contemporaneously herewith
and the Purchase Agreement supersede all prior oral and written agreements and
understandings of the parties hereto with respect to the transactions
contemplated hereby, including but not limited to the Original Coating Agreement
and the 1998 Extension Agreement, and the parties shall look only to this
Agreement, such other Definitive Agreements and the Purchase Agreement for the
rights and obligations of the parties with respect to each other in relation to
the subject matter hereof; provided, however, that nothing herein shall
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supersede any agreements or understandings heretofore set forth in the minutes
of proceedings of the Management Committee that are not superseded in effect by
this Agreement, such other Definitive Agreements or the Purchase Agreement; and
provided, further, that no such agreements or understandings heretofore set
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forth in the minutes of proceedings of the Management Committee shall be
applicable to or binding on LTV-W or its Affiliates.
(b) Purchaser covenants that during the term of this Coating
Agreement, neither Purchaser nor any of its Affiliates will enter into or become
a party to any agreement with any Partner or any Affiliate thereof relating to
the use of the EG Facility that does not include both Bethlehem and MSCWC (or
their respective Affiliates) as parties, unless such agreement shall be fully
disclosed to whichever of them is not also to become a party thereto (for
purposes of this Section 6.01(b),the "Excluded Party"), and the Excluded Party
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shall have a reasonable amount of time to review such agreement before it
becomes effective. If such agreement could reasonably be expected to have an
adverse impact on the Excluded Party (or any of its Affiliates), the Excluded
Party shall have the right to seek relief with respect
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thereto pursuant to Article XIV of the Partnership Agreement; provided, however,
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that this Section 6.01(b) shall not apply to any agreement for the sale of sheet
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metal pursuant to the proviso in Section 3.01 of the MSCWC Coating Agreement.
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SECTION 6.02. Limitations on Liabilities. The liability of the
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Partnership, Operator, the other Partners and their respective successors and
assigns to Purchaser for any loss, damage or injury of any nature or kind
resulting from the breach of the Partnership's covenants herein shall not,
except as expressly provided herein, include any amounts in respect of indirect
or consequential damages or commercial loss, damage or injury, such as loss of
profits or production. The liability of Purchaser to the Partnership, Operator,
the other Partners and their respective successors and assigns for any loss,
damage or injury of any nature or kind resulting from the breach of Purchaser's
covenants herein shall not, except as expressly provided herein, include any
amounts in respect of indirect or consequential damages or commercial loss,
damage or injury, such as loss of profits or production.
SECTION 6.03. Amendments. This Agreement may not be modified or
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amended except by written agreement of the parties hereto.
SECTION 6.04. Notices. Any notice, consent, request, report or other
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document required or permitted under the terms of this Agreement shall be in
writing and shall be effective (a) when personally delivered on a business day
during normal business hours to the party to be given such notice at the address
designated by it for such delivery below or (b) on the business day following
the day such notice shall have been sent by telecopier or similar electronic
device (providing confirmation of transmission) or by reputable overnight
courier (providing proof of delivery) sent to such address, whichever shall
first occur. Until otherwise specified by notice, the addresses for such notice
shall be:
(i) if to Purchaser:
LTV Steel Company, Inc.
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
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(ii) if to the Partnership:
Walbridge Coatings, an Illinois Partnership
30610 East Broadway
Walbridge, Ohio 43465
Attention: Management Committee
Telecopier Number: (419) 661-5951
(Together with copies to the Partners)
(iii) if to the Partners:
(A) EGL Steel Inc.
In care of Bethlehem Steel Corporation
Room 2036, Martin Tower
1170 Eighth Avenue
Bethlehem, Pennsylvania 18016
Attention: Mr. David M. Beckwith
Vice President
Telecopier Number: (215) 694-7086
(B) LTV-Walbridge, Inc.
In care of The LTV Corporation
200 Public Square
Cleveland, Ohio 44114
Attention: General Counsel
Telecopier Number: (216) 622-5688
(C) MSC Walbridge Coatings Inc.
30610 East Broadway
Walbridge, Ohio 43465
Attention: Group Vice President and General Manager
Telecopier Number: (419) 661-5951
with a copy to:
Material Sciences Corporation
2200 Pratt Boulevard
Elk Grove Village, Illinois 60007
Attention: Chief Financial Officer
Telecopier Number: (847) 718-8643
provided, however, that any entity listed above may change the address to which
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notices and other communications to it shall be sent by giving to the other
entities listed above written notice of such change, in which case notices and
other communications to the entity giving the notice of the change of address
shall not be deemed to have been sufficiently given or delivered unless
addressed to it at the new address as stated in said notice;
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provided further, that notices and other communications to the Partnership shall
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not be deemed to have been sufficiently given or delivered unless and until a
copy thereof shall be given or delivered as above provided to each of the
Partners.
SECTION 6.05. Headings. The headings of the Articles, Sections and
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Exhibits of this Agreement are for the convenience of reference only and shall
not be construed to be part of this Agreement.
SECTION 6.06. Waiver of Default. Any waiver at any time by any
-----------------
party hereto of its rights under this Agreement shall not constitute a waiver of
any other default hereunder. No delay or omission by any party to exercise any
right or power accruing upon a default hereunder shall impair any such right or
power or shall be construed to be a waiver of any such default or acquiescence
therein.
SECTION 6.07. Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
performance of the remaining obligations to be unreasonable, in which case the
parties hereto shall negotiate in good faith to amend this Agreement and the
other Definitive Agreements to take into account such material change in a
manner that is fair and equitable to all parties hereto and to achieve the
purposes of Section 2.1 of the Operating Agreement.
-----------
SECTION 6.08. Assignment. Except as otherwise provided in the
----------
Partnership Agreement, no party hereto shall assign this Agreement or any of its
rights or obligations hereunder except with the consent of the other party and
upon the express assumption by the assignee of the obligations of such party
hereunder.
SECTION 6.09. Governing Law. This Agreement shall be governed by
-------------
the laws of the State of Illinois.
SECTION 6.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be deemed an original,
and shall become a binding agreement when each of the parties hereto shall have
executed and delivered a counterpart of this Agreement to the other party.
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SECTION 6.11. Confidentiality. The parties acknowledge that this
---------------
Agreement contains confidential information regarding the operation of the
Partnership. Except as required by law, including applicable securities laws, or
otherwise agreed to by the parties hereto, the parties agree to maintain the
contents of this Agreement confidential in accordance with Article XVI of the
-----------
Partnership Agreement.
SECTION 6.12. Third Party Beneficiaries. Each of the Partners of
-------------------------
the Partnership, including the Operator, shall be an express third party
beneficiary of this Agreement and entitled to enforce the rights of the
Partnership hereunder.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed and delivered as of the date first above written.
LTV STEEL COMPANY, INC.
By:_____________________________________
Name:
Title:
WALBRIDGE COATINGS, AN ILLINOIS PARTNERSHIP
By: MSC WALBRIDGE COATINGS
INC., General Partner
By:________________________________
Name: James J. Waclawik, Sr.
Title: Vice President, Chief
Financial Officer
and Secretary
By: EGL STEEL INC., General Partner
By:________________________________
Name:
Title:
By: LTV-WALBRIDGE, INC.,
General Partner
By:________________________________
Name:
Title:
ANNEX I
Barnes Edge Conditioning Equipment Capital
Recovery and Surcharge Agreement
-16-
ANNEX II
Billing Policy for Electric Buy-Through Rates
-17-
APPENDIX A
TO THE
PARENT AGREEMENT,
PARTNERSHIP AGREEMENT,
OPERATING AGREEMENT and
COATING AGREEMENTS
Definitions of Terms and Phrases
--------------------------------
The following terms and phrases shall have the following definitions when
capitalized in each of the Parent Agreement, the Partnership Agreement, the
Operating Agreement, and the Coating Agreements unless the context shall
otherwise require:
"Affiliate" shall mean, with respect to any specified person, a person
(as defined in Section 2(2) of the Securities Act of 1933, as amended) that
directly, or indirectly through one or more intermediaries, Controls or in
Controlled By, or is Under Common Control With, the person specified.
"Allocated Fixed Costs" shall have the meaning set forth in Section
-------
5.02 of the Coating Agreements.
- ----
"Appraised Partnership Interest Dissolution Value" shall have the
meaning set forth in Section 15.06 of the Partnership Agreement.
-------------
"Bethlehem" shall mean Bethlehem Steel Corporation, a Delaware
corporation.
"Bethlehem Coating Agreement" shall mean that certain Amended and
Restated Coating Agreement dated as of July 23, 1999 by and between the
Partnership and Bethlehem as amended from time to time in accordance with its
terms.
"Coating Agreement" shall mean: (a) individually, the Bethlehem
Coating Agreement, the LTV Steel Coating Agreement or the MSCWC Coating
Agreement, as amended from
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time to time in accordance with the terms thereof, and (b) collectively, all of
such agreements.
"Coating Fee" shall mean the various fees charged by the Partnership
for performing coating services pursuant to the Coating Agreements.
"Coating Weight" shall mean the amount of zinc ordered to be applied
by the EG process to the steel substrate, expressed in grams per square meter of
coated substrate surface area.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Saleable" shall mean with respect to coating services
such coated sheet metal as is capable of being marketed and sold as a prime
product (satisfying the Coating Weight and other specifications ordered) at the
then current market price for such prime product.
"Control" (including the terms "Controlling," "Controlled By" and
"Under Common Control With") shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person (as defined in Section 2(2) of the Securities Act of 1933, as amended),
------------
whether through the ownership of voting securities, by contract, or otherwise.
"Definitive Agreements" shall mean the Parent Agreement, the
Partnership Agreement, the Operating Agreement and the Coating Agreements.
"Design Capacity" shall mean the capacity of the EG Facility to
produce *** Tons, net of all Yield Loss, of Reference Strip annually, subject to
adjustment pursuant to Section 5.03 of the Operating Agreement, and with respect
------------
to any other unit of time shall mean the pro rata amount based on such annual
rate.
"EG" shall mean electroplating, which is the process of applying zinc
or alloy coatings to sheet steel by an electrolytic plating process.
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"EG Facility" shall mean the entire coil coating facility located at
30610 East Broadway, Walbridge, Ohio 43465, together with all fixtures,
furnishings, machinery, equipment and improvements located at such facility.
"EGL Steel" shall mean EGL Steel, Inc., a Delaware corporation.
"EG Product" shall mean electroplated steel coils produced at the EG
Facility.
"EG Services" shall mean all services rendered in connection with the
production of EG Product.
"Financial Interest" shall mean, with respect to any Partner, such
Partner's percentage financial interest in the Partnership as set forth opposite
the Partner's name indicated below:
Partner Financial Interest
- ------- ------------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
"Firm Order" shall mean an order placed by a Primary Purchaser or by
MSCWC for coating services pursuant to Section 4.01(a) of the relevant Coating
---------------
Agreement.
"Fiscal Quarter" shall mean each of the periods of three calendar
months ended on the last day of May, August, November and February of each
Fiscal Year.
"Fiscal Year" shall mean the period commencing on the first day of
March of each calendar year and ending on the last day of February of the next
successive calendar year.
"Force Majeure" shall mean any cause or causes beyond the control of,
and without fault or negligence of, the entity asserting a claim of Force
Majeure, including but not limited to any acts of God, strikes, lockouts or
other labor disputes or industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, other storms, floods, washouts or other acts of
nature, civil disturbances, explosions, temporary or permanent failure of
electrical supply, acts, directives or binding orders of any court or
governmental authority or persons purporting to act therefor and such
-20-
orders or regulations of governmental bodies or agencies asserting jurisdiction
as would materially inhibit or prohibit the entity from performing under the
Definitive Agreements or would require such entity to accept a condition
reasonably unacceptable to it, so long as such occurred without the fault or
negligence of such entity.
"Forecast Period" shall have the meaning set forth in Section 4.01 of
------------
the Coating Agreements.
"Guarantor" shall mean: (a) with respect to EGL Steel, Bethlehem; (b)
with respect to LTV-W and LTV Steel, LTV; (c) with respect to MSCWC, MSCPFM and
MSC; and (d) with respect to MSCPFM, MSC.
"Initial Transfer Agreement" shall mean the Transfer Agreement dated
as of May 29, 1991, among Ispat Inland, Inland, Inland EG, Bethlehem and EGL
Steel, as amended April 23, 1992 and June 5, 1992.
"Inland" shall mean Inland Steel Company, a Delaware corporation
(which has been merged into Ispat Inland).
"Inland EG" shall mean Inland Steel Electrogalvanizing Corporation, a
Delaware corporation.
"Inland Option Tons" shall mean the coating services which Ispat
Inland may require the Partnership to perform pursuant to Section 3.2 of the
-----------
Inland Tolling Agreement.
"Inland Tolling Agreement" shall mean that certain Tolling Agreement
dated as of June 30, 1998 entered into by and between Ispat Inland (as successor
to Inland) and the Partnership.
"Insurance Costs" shall mean all costs of the insurance coverages
required to be maintained pursuant to Section 3.08 of the Operating Agreement or
------------
otherwise maintained with the approval of the Partnership, including premiums,
the cost of maintaining any records required by such insurance coverages, and
the amount of any casualty losses incurred which are not reimbursed under such
insurance coverages due to deductible or co-insurance requirements. Insurance
Costs shall also include the costs of any self-insurance program approved by the
Partnership for the EG Facility or its operations, including all costs
associated with administering such program as well as all losses incurred
thereunder.
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"Intellectual Property" shall have the meaning given to such term in
Section 3.01(g) of the Parent Agreement.
- ---------------
"Ispat Inland" shall mean Ispat Inland Inc., a Delaware corporation
(formerly known as Inland Steel Industries, Inc.).
"LTV" shall mean The LTV Corporation, a Delaware corporation.
"LTV Steel" shall mean LTV Steel Company, Inc., a New Jersey
corporation and a wholly-owned subsidiary of LTV.
"LTV Steel Coating Agreement" shall mean that certain Coating
Agreement dated as of July 23, 1999 by and between the Partnership and LTV
Steel, as amended from time to time in accordance with its terms.
"LTV-W" shall mean LTV-Walbridge, Inc., a Delaware corporation and a
wholly-owned subsidiary of LTV Steel.
"Major Loss" shall mean substantial damage or destruction by fire or
other casualty of the EG Facility or any portion thereof, or the taking,
requisitioning or sale of the use, occupancy or title to the EG Facility or any
substantial portion thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person or entity having the
power of eminent domain.
"Management Committee" shall mean the management committee of the
Partnership established by Article VIII of the Partnership Agreement.
------------
"MSC" shall mean Material Sciences Corporation, a Delaware
corporation.
"MSCPFM" shall mean MSC Pre Finish Metals Inc., an Illinois
corporation (formerly known as Pre Finish Metals Incorporated) and a wholly-
owned subsidiary of MSC.
"MSCPFM Lease" shall mean that certain lease dated as of December 1,
1980 by and between MSCPFM and Corporate Property Associates/Corporate Property
Associates 2, as amended.
"MSCWC" shall mean MSC Walbridge Coatings Inc., a Delaware corporation
(formerly known as Pre Finish Metals (EG) Incorporated) and a wholly-owned
subsidiary of MSCPFM.
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"MSCWC Coating Agreement" shall mean that certain Coating Agreement
dated as of July 23, 1999 by and between the Partnership and MSCWC, as amended
from time to time in accordance with its terms.
"Net Fair Market Value" shall mean the following:
(a) In the case of a Partner's Interest, the fair market value of the
assets and interests being valued, less any liabilities associated
therewith (determined in accordance with generally accepted accounting
principles), on a going concern basis and assuming a willing buyer and a
willing seller, neither of whom is under any compulsion to buy or sell and
each of whom has equal access to all pertinent facts, all as determined by
appraisal under Section 13.05 of the Partnership Agreement, or
-------------
(b) In the case of the EG Facility, the fair market value of the
assets thereof, less any liabilities associated therewith (determined in
accordance with generally accepted accounting principles) which are assumed
by the purchaser in accordance with the governing instruments thereof or
with the consent of the persons or entities to whom the obligation is owed,
on a going concern basis and assuming a willing buyer and a willing seller,
neither of whom is under any compulsion to buy or sell and each of whom has
equal access to all pertinent facts, all as determined by appraisal under
Section 15.04 of the Partnership Agreement.
-------------
"1998 Extension Agreement" shall mean that certain 1998 Extension
Agreement dated as of December 31, 1998 entered into by and among EGL Steel,
Bethlehem, MSCWC, MSCPFM and MSC.
"1998 Transfer Agreement" shall mean the Transfer Agreement dated as
of June 30, 1998 among Ispat Inland, Inland, Inland EG, Bethlehem and EGL Steel.
"Operating Agreement" shall mean that certain Amended and Restated
Operating Agreement dated as of July 23, 1999 by and between the Partnership and
MSCWC, as amended from time to time in accordance with its terms.
"Operating Partner" shall mean MSCWC, its successor or assign.
-23-
"Operator" shall mean MSCWC, its successor or assign, as Operating
Partner under the Operating Agreement.
"Operator's Fee" shall mean the various fees charged by Operator for
rendering services to the Partnership pursuant to the Operating Agreement.
"Organic Coating" shall mean any organic (non-metal) coating on sheet
metal, including Zincrometal(R).
"Original Coating Agreement" shall mean that certain Coating Agreement
dated as of October 15, 1984 by and between the Partnership and Bethlehem, as
amended up to the date immediately prior to the execution and delivery of the
Bethlehem Coating Agreement.
"Original Operating Agreement" shall mean that certain Operating
Agreement dated as of October 15, 1984 by and between the Partnership and MSCWC,
as amended up to the date immediately prior to the execution and delivery of the
Operating Agreement.
"Original Parent Agreement" shall mean that certain Parent Agreement
dated as of October 15, 1984 by and among Bethlehem, Inland, Ispat Inland,
MSCPFM and MSC, as amended up to the date immediately prior to the execution and
delivery of the Parent Agreement.
"Original Partnership Agreement" shall mean that certain Partnership
Agreement dated as of August 30, 1984 by and among EGL Steel, Inland EG and
MSCWC, as amended up to the date immediately prior to the execution and delivery
of the Partnership Agreement.
"Other Services" shall mean all services (including any Organic
Coating services) rendered by the Partnership, but excluding EG Services.
"Parent Agreement" shall mean the Amended and Restated Parent
Agreement dated as of July 23, 1999 by and among each of Bethlehem, LTV, MSCPFM
and MSC, as amended from time to time in accordance with its terms.
"Partner" or "Partners" shall mean a general partner or partners of
the Partnership and shall include each of EGL Steel, LTV-W and MSCWC and their
respective successors and assigns as Partners who become such in a manner
consistent with Article XIII of the Partnership Agreement.
------------
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"Partner's Account" shall mean, in respect of any Partner, the account
maintained for such Partner in accordance with Section 9.03 of the Partnership
------------
Agreement.
"Partner's Interest" shall mean, with respect to each Partner, (i)
such Partner's general partner interest in the Partnership (including all its
advances to, and any other claims against, the Partnership) and (ii) the
interest, if any, of such Partner or any Affiliate of such Partner in the Parent
Agreement, the Partnership Agreement, the Operating Agreement and the Coating
Agreements.
"Partnership" shall mean Walbridge Coatings, An Illinois Partnership,
continued and governed by the Partnership Agreement.
"Partnership Agreement" shall mean that certain Amended and Restated
Partnership Agreement dated as of July 23, 1999 by and among EGL Steel, LTV-W
and MSCWC, as amended from time to time in accordance with its terms.
"Primary Purchaser" shall mean: (a) individually, either of Bethlehem
or LTV Steel and (b) collectively, both of them.
"Prime Commercial Paper" shall mean commercial paper which is rated P-
1 by Moody's Investors Services, Inc., or A-1 by Standard and Poor's
Corporation, having a remaining term until maturity of not more than one year.
"Production Forecast" shall mean the forecast described in Section
-------
4.01 of each Coating Agreement.
- ----
"Production Schedule" shall mean the schedule described in Section
-------
4.01(b) of the Operating Agreement.
- -------
"Production Time" shall mean the time, as determined by Operator,
available for the production of EG Product or the rendering of Other Services in
accordance with the Operating Agreement and the Inland Tolling Agreement during
which the EG Facility is not shut down for testing, for transition to ZnNi
production or back to pure zinc production, for other scheduled or estimated
unscheduled downtime, for maintenance or repairs, for the making of capital
improvements, for national holidays, or due to Force Majeure.
"Purchase Agreement" shall mean the Purchase Agreement dated as of
July 23, 1999 among LTV-W, LTV, EGL Steel, Bethlehem, MSCWC and MSC.
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"Purchaser" shall mean (a) with respect to the LTV Steel Coating
Agreement, LTV Steel, (b) with respect to the Bethlehem Coating Agreement,
Bethlehem and (c) with respect to the MSCWC Coating Agreement, MSCWC.
"Reference Strip" shall mean a *** wide,***-inch minimum thickness
steel coil to which a minimum Coating Weight of *** grams of zinc per square
meter has been applied on one side only by the EG process.
"Reporting Period" shall mean a calendar month.
"S, G & A Expenses" shall mean all expenses of Operator or its
Affiliates for administrative support of the EG Facility and its operations.
"Standard Capacity" shall mean for any EG Product the product of (a)
the Width Capacity for such EG Product times (b) the quotient of the specified
thickness of the processed steel substrate divided by *** times (c) the quotient
of *** divided by the Coating Weight applied to the processed steel substrate.
"Standard Costs" shall mean the standard costs developed by the
Partnership and the Operating Partner as specified in Section 6.4 of the
-----------
Original Operating Agreement.
"Standard Ton Factor" shall mean for any EG Product the quotient of
***, divided by the Standard Capacity for such EG Product. Accordingly, the
Standard Ton Factor for Reference Strip shall be one (1).
"Standard Tons" shall mean a Ton of Reference Strip, subject to
Section 5.05 of the Operating Agreement and Section 5.04 of the Coating
- ------------ ------------
Agreements.
"Sublease" shall mean the Sublease dated as of May 30, 1986, as
amended, between MSCPFM and the Partnership.
"Subsidiary" shall mean (i) with respect to Bethlehem, EGL Steel; (ii)
with respect to LTV, LTV-W or LTV Steel; (iii) with respect to LTV Steel, LTV-W;
(iv) with respect to MSC, MSCPFM or MSCWC; and (iv) with respect to MSCPFM,
MSCWC.
"Taxes" shall mean all taxes (except income taxes) paid or incurred by
Operator in the operation of the EG Facility and of a type in existence as of
this date hereof,
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such taxes to include, but not be limited to, all real estate and personal
property taxes and assessments on the EG Facility or the equipment, supplies or
inventories contained therein, all sales and use taxes, and all governmental
franchises, licenses and permits; provided, however, that if any other taxes are
-------- -------
enacted after the date hereof, such taxes shall also be included in the terms
"Taxes" to the extent appropriate to do so in accordance with the provisions of
Article II of the Partnership Agreement.
- ----------
"Technical Representative" shall mean the person designated by
Operator and each Partner (other than the Operating Partner) from time to time
to represent such party in connection with any of the matters specified as being
the responsibility of the Technical Representatives.
"Term" shall have the meaning set forth in Section 5.01 of the
------------
Partnership Agreement.
"Termination Notice" shall have the meaning set forth in Section 5.01
------------
of the Partnership Agreement.
"Ton" shall mean an avoirdupois unit of two thousand pounds.
"Voting Interest" shall mean, with respect to any Partner, such
Partner's percentage voting interest in the Partnership as set forth opposite
the Partner's name below:
Partner Voting Interest
- ----------- ----------------
EGL Steel 33.5%
LTV-W 16.5%
MSCWC 50.0%
The Voting Interest of any Partner shall be adjusted only to reflect a transfer
of its Partner's Interest under the Partnership Agreement in accordance with the
provisions of Article XIII thereof.
------------
"Width Capacity" shall mean the theoretical annual capacity in Tons of
the EG Facility to produce EG Product having a given width, assuming (1) ***
inch specified thickness steel substrate, (2) a Coating Weight of *** grams of
pure zinc per square meter of coated substrate surface area (on one side), (3)
*** hours per year of Production Time and (4) *** Yield Loss and no defective
steel substrate, all as determined in the reasonable judgment of the Technical
Representatives.
-27-
"Yield Loss" shall mean steel substrate scrap losses and rejections of
EG Product caused by quality failures in the operation of the EG Facility and
shall be calculated based on the difference between the weight of the substrate
delivered to the EG Facility and the weight of the EG Product shipped from the
EG Facility. Such term shall not include losses or rejections caused by any
defective steel substrate which (a) is rejected by Operator prior to being
processed as being unfit or unsuitable for coating or processing (other than due
to improper handling by Operator) or (b) was included in EG Product but was the
primary cause for rejection of the EG Product. Responsibility for rejected EG
Product shall be determined by agreement of the Technical Representatives of
Operator and the Partner whose Affiliate supplied the steel substrate.
"Zincrometal(R)" is a registered trademark (United States Registration
Number 839,031) for a coated steel previously used extensively for the
manufacture of automobiles because of its corrosion resistance properties.
"ZnNi" shall mean zinc-nickel alloy coatings.
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