EXHIBIT NO. 10(q) Form of Standstill Agreement dated January 29, 1986, among Material Sciences Corporation, Richard L. Burns and Joyce Burns
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:
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
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
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
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
(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
(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
(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
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
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
(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
(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
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
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
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
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
EXHIBIT 10(r) Form of Indemnification Agreement Between the Company and Each of Its Officers and Directors
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.
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-
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-
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-
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-
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
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
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
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
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
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
. 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
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
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
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 nonautomotive 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
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
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
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
EGL STEEL INC.
BETHLEHEM STEEL CORPORATION By:_/S/___________________________
MSC WALBRIDGE COATINGS INC. By:_/S/___________________________
MSC PRE FINISH METALS INC. By:_/S/___________________________ MATERIAL SCIENCES CORPORATION By:_/S/___________________________
Exhibits Omitted 13
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
TABLE OF CONTENTS
ARTICLE I. ARTICLE II. ARTICLE III. DEFINITIONS APPLICABLE ATTACHMENTS TERM; PURCHASE AND SALE OF COATING SERVICES AND SLITTING SERVICES 3.1 Term.......................................................................... 3.2 Agreement to Perform Coating Services......................................... 3.3 Right of First Offer. ........................................................ 3.4 Agreement to Perform Slitting Services........................................ TOLL FOR COATING SERVICES AND SLITTING SERVICES 4.1 Toll.......................................................................... 4.2 Adjustment to Toll............................................................ 4.3 Toll for Slitting Services.................................................... SUBSTRATE QUANTITY; SUBSTRATE QUALITY 5.1 Substrate Quantity............................................................ 5.2 Substrate Quality............................................................. OPERATIONS 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15
Operation of the Facility..................................................... Communication of ISC Inventory Information.................................... Firm Orders.................................................................. Purchase Orders............................................................... Priority of Firm Orders and Modification of Purchase Orders, etc.............. Shipment and Handling of ISC Substrate........................................ Handling and Shipment of Coated ISC Substrate and Finished Substrate..................................................................... Scrap......................................................................... Claim Policy.................................................................. Insurance..................................................................... ISC Inventory................................................................. Inspection. .................................................................. Customer Service.............................................................. Compliance with Laws.......................................................... Indemnification...............................................................
ARTICLE VII. GENERAL TERMS AND CONDITIONS
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.
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-
"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-
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 Attachment II Attachment III Attachment IV Attachment V Standardized Inspection System Delivered Quality Requirements Outside Processing AISI/Compord Data Requirements Non-EDI Production Reporting Requirements 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-
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-
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-
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-
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-
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-
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-
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 outof-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-
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-
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-
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-
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-
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-
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-
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-
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.
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.
SCHEDULE 4.2 EXAMPLE OF CALCULATION FOR ADJUSTMENT TO TOLL ***
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.
EXHIBIT 21 Subsidiaries of the Registrant
State or Jurisdiction of Incorporation ------------Illinois Delaware Delaware Delaware Delaware California Delaware Delaware U. S. Virgin Islands Florida United Kingdom Canada Australia Singapore Delaware Delaware
Name of Subsidiary -----------------MSC Pre Finish Metals Inc. MSC Pre Finish Metals (EGV) Inc. MSC Pre Finish Metals (MV) Inc. MSC Pre Finish Metals (MT) Inc. MSC Walbridge Coatings Inc. MSC Specialty Films, Inc. MSC Laminates and Composites Inc. MSC Laminates and Composites (EGV) Inc. Material Sciences Foreign Sales Corporation Solar-Gard International, Inc. MSC Specialty Films (UK) Limited Solar-Gard (Canada) Inc. MSC Specialty Films (Australasia) Pty. Limited Solar-Gard (SEA) Pte., Ltd. Innovative Specialty Films, LLC MSC Pinole Point Steel Inc.
MSC Pre Finish Metals (PP) Inc.
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, 33315679, 333-15677, 333-33885 and 333-33897).
/s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP
May 24, 1999
ARTICLE 5 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. MULTIPLIER: 1,000
PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED
12 MOS FEB 28 1999 MAR 01 1998 FEB 28 1999 1,227 0 52,029 5,233 52,166 113,459 360,865 126,384 395,321 72,900 140,000 336 0 0 148,596 395,321 469,136 469,136 384,677 384,677 56,094 0 11,790 16,117 5,963 10,154 0 0 2,207 7,947 0.52 0.52