EXHIBIT 10.I
LINE ACCESS AGREEMENT
THIS AGREEMENT made as of August 13, 2002, among National Steel
Corporation, a corporation incorporated under the laws of Delaware ("NSC"), NKK
U.S.A. Corporation, a corporation incorporated under the laws of Delaware
("NAC"), Dofasco Inc., a corporation incorporated under the laws of Canada
("Dofasco"), and DNN Galvanizing Corporation, a corporation incorporated under
the laws of Ontario ("Processor"), in its capacity as general partner of DNN
Galvanizing Limited Partnership, a limited partnership established pursuant to
the laws of Ontario ("DNN Partnership").
WHEREAS, Processor operates a hot dip continuous galvanizing line and
related facilities located in Xxxxxxxxxxxx Xxxxxxx, Xxxxxx (the "Facilities");
and
WHEREAS, NSC, NAC and DNN entered into that certain Amended and Restated
Toll Processing Agreement made as of July 26, 1996 (the "Current TPA"),
regarding the use by NSC and NAC of a portion of the line time at the Facilities
and other services offered by Processor; and
WHEREAS, on March 6, 2002, NSC and certain of its affiliates filed under
Chapter 11 for protection under U.S. bankruptcy laws; and
WHEREAS, on April 12, 2002, Dofasco gave notice of the occurrence of a
Financial Default under the Partnership Agreement made as of September 18, 1990,
among Dofasco and certain Affiliates (as defined herein) of NAC and NSC (the
"Partnership Agreement"), which notice resulted in a Matured Default (as such
terms are defined in the Partnership Agreement) on April 18, 2002, and was
subsequently affirmed and adopted by an Affiliate of NAC; and
WHEREAS, on July 9, 2002, an Affiliate of NAC, NSC and Dofasco entered into
a letter agreement which extended the date by which certain Affiliates of NAC
were to acquire the interests of certain Affiliates of NSC in the Facilities,
pursuant to the terms of the Partnership Agreement and the Shareholders'
Agreement made as of September 18, 1990, among Processor and an Affiliate of
each of Dofasco, NAC and NSC (the "Shareholder Agreement"); and
WHEREAS, concurrently with the date hereof, NKK, NSC and Dofasco (and
certain of their Affiliates) have entered into a Forbearance Agreement (the
"Forbearance Agreement") which, inter alia, effects certain amendments to the
Current TPA, the Shareholder Agreement and the Partnership Agreement; and
WHEREAS, concurrently with the date hereof, Affiliates of NAC have acquired
the interests of certain Affiliates of NSC in the Facilities pursuant to the
terms of the Shareholder Agreement and the Partnership Agreement, both as
amended by the Forbearance Agreement, and have entered into the Two Party TPA
(defined herein); and
WHEREAS, after December 31, 2002, the Amended Current TPA will terminate
and NSC will cease to have access to the Facilities thereunder; and
WHEREAS, NSC wishes to use a portion of the available line time at the
Facilities and other services offered by Processor during calendar year 2003 for
the toll processing of steel substrate to produce galvanized steel products; and
WHEREAS, NAC, Dofasco and Processor currently wish to enter into an
agreement with NSC for the use by NSC of a portion of the available line time at
the Facilities allocated to NAC under the Two Party TPA and other services
offered by Processor during calendar year 2003 for the toll processing of steel
substrate to produce galvanized steel products on the terms and conditions set
forth hereinafter.
WITNESSETH, that in consideration of the premises, covenants and agreements
herein contained, the parties hereto hereby agree as follows.
ARTICLE ONE
DEFINITIONS AND INTERPRETATION
1.1 In and for the purposes of this Agreement:
"Additional Line Time Notice" shall have the meaning set forth in Section
3.4 hereof;
"Adjusted Yield Loss" shall have the meaning set forth in Section 10.1
hereof.
"Affiliate" means an entity which is a Subsidiary of NSC, NAC, JFE Holding,
JFE Steel or Dofasco, as the case may be;
"Agreement", "this Agreement" and "herein" and similar expressions mean and
refer to Articles One to Thirteen, Exhibits A and B and Schedule 1.4 hereof
as a whole and not to any particular Article, Section or Subsection;
"Amended Current TPA" means the Current TPA as amended pursuant to the
Forbearance Agreement which shall terminate pursuant to the terms of the
Two Party TPA on December 31, 2002;
"Applicable Policy" shall have the meaning set forth in Section 1.4 hereof;
"Applicable Time Period" means a Month or Quarter, as applicable, during
the Term;
"Article", "Section" or "Subsection" means and refers to the specified
article, section or subsection of this Agreement;
"Available Line Time" means, in respect of each Applicable Time Period, the
total number of Hours during such Applicable Time Period less (1) the
number of scheduled Hours of downtime, (2) an estimate of unplanned
downtime, and (3) an estimate of time to be spent running dummy and
transition coils, as determined by Processor and advised to NSC in
accordance with Section 6.2;
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"Business Day" shall mean a day during which commercial banks are open for
business in New York City and in Xxxxxxx, Xxxxxxx.
"Committed Line Time" means, in respect of each Applicable Time Period, the
amount of Available Line Time set forth in the notification from NSC to
Processor in accordance with Sections 3.4 and 6.2;
"Current TPA" has the meaning set forth in the Recitals;
"Customer Manual" means the document entitled "Partners in Performance"
referred to in Subsection 8.1(b);
"Customer Service Line" means the recoil line included in the Facilities;
"Customer Specifications" means the product specifications supplied by each
Customer to Processor as part of each Work Order or by the Customer Manual;
"Customers" means NSC and its Affiliates, and "Customer" means any one of
the Customers;
"DNN Partnership" has the meaning set forth in the Preamble;
"Dofasco" has the meaning set forth in the Preamble;
"Effective Date" shall mean January 1, 2003;
"Facilities" has the meaning set forth in the Recitals;
"Forbearance Agreement" means the Forbearance Agreement dated concurrently
with the date hereof by and among NKK, NSC and Dofasco (and certain of
their Affiliates);
"Force Majeure Event" shall have the meaning set forth in Section 11.1
hereof;
"Galvanizing Line" means the hot dip continuous galvanizing line included
in the Facilities;
"Hour" means a period of 60 minutes;
"Hourly Rate" means the rate per Hour payable for the use of the
Facilities' galvanizing line which is fixed by Processor on the basis
provided in Exhibit A;
"JFE Holding" means JFE Holding Inc., a corporation incorporated under the
laws of Japan;
"JFE Steel" means JFE Steel Inc., a corporation incorporated under the laws
of Japan;
"Maximum NSC Line Time" means the Available Line Time made available to NSC
and its Affiliates hereunder, which as to each Quarter shall be a
percentage (as set forth
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hereinafter) of Available Line Time for such Quarter: from January 1, 2003,
through March 31, 2003, 43.75% of the Available Line Time for such Quarter;
from April 1, 2003, through June 30, 2003, 31.25% of the Available Line
Time for such Quarter; from July 1, 2003, through September 30, 2003,
18.75% of the Available Line Time for such Quarter; and from October 1,
2003, through December 31, 2003, 6.25% of the Available Line Time for such
Quarter;
"Month" means a calendar month;
"NAC" has the meaning set forth in the Recitals;
"NKK" means NKK Corporation, a corporation incorporated under the laws of
Japan;
"Non-Prime Products" means Products (other than dummy and transition coils
and Scrap) which do not meet the requirements and criteria for Prime
Products;
"NSC Scrap" has the meaning set forth in Subsection 2.4(b) hereof;
"NSC Steel" means NSC's own Steel, as well as the Steel of its Affiliates
which, after being processed at the Facilities, is sold (either directly or
indirectly by or on behalf of NSC or its Affiliates) to a customer of NSC
or of one of its Affiliates other than another steel mill;
"Other Services" means the services to be provided by Processor which are
described in Subsections 2.3(a), (b) and (c);
"Partnership Agreement" means the Partnership Agreement made as of
September 18, 1990, among Dofasco and certain Affiliates of NAC and NSC;
"Prime Products" means those Products which meet all Customer requirements
as specified in the applicable Work Order and Customer Manual which are
established with the objective of ensuring that such Products are capable
of being sold at their full price;
"Processor" has the meaning set forth in the Recitals;
"Products" means exposed and unexposed galvanized steel products to be
produced by processing Steel through the Galvanizing Line;
"Quarter" means any three (3) Month period during the Term ending on the
last day of March, June, September or December;
"Scheduling Notice" has the meaning set forth in Section 6.2 hereof;
"Scrap" means residual product (coated or uncoated) weighing less than one
thousand (1,000) pounds which due to its size, shape or physical properties
is unsuitable for sale as Prime Product or Non-Prime Product;
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"Services" means the Toll Processing Services and the Other Services,
collectively,
"Shareholder Agreement" means the Shareholders' Agreement made as of
September 18, 1990, among Processor and an Affiliate of each of Dofasco,
NAC and NSC;
"Steel" means cold rolled steel substrate suitable for the production of
Products;
"Subsidiary" means a corporation, all of the issued and outstanding voting
shares of which, or a limited liability company, all of the voting
interests of which, are beneficially owned, either directly or indirectly,
by NAC, JFE Holdings, JFE Steel, NSC or Dofasco, as the case may be;
"Take or Pay Obligations" means the obligations of NSC contained in Article
Three of this Agreement;
"Term" means the period specified in Article Twelve hereof;
"Toll Processing Services" means the toll processing services to be
provided and performed by Processor which are described in Section 2.2;
"Two Party TPA" means the Restated Toll Processing Agreement made as of the
date of this Agreement between NAC and Processor and effective January 1,
2003;
"Work Order" means a written work order issued by NSC to Processor setting
forth detailed processing requirements.
"Yield Loss" shall have the meaning set forth in Section 10.1 hereof.
1.2 All references to "money" "dollars" or "$" in this Agreement shall be
deemed to be references to Canadian dollars, unless expressly stated otherwise.
1.3 In case of conflict, the provisions of this Agreement shall prevail
over those contained in the Two Party TPA, any Applicable Policy, the Customer
Manual or any Work Order, provided however that as between NAC and Processor, in
case of any conflict the provisions of the Two Party TPA shall prevail.
1.4 The parties recognize and agree that from time to time, it will be
necessary to interpret and/or clarify the provisions of this Agreement, and the
parties agree to do so by means of issuance of policy documents, each of which
must be approved in writing by each and every party hereto. Each such policy is
hereinafter referred to as an "Applicable Policy." As of the date hereof, the
parties agree that the Applicable Polices set forth on Schedule 1.4 hereto are
in effect.
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ARTICLE TWO
PROCESSOR SERVICES
2.1 During the Term, Processor shall, and NAC shall use commercially
reasonable efforts to cause Processor to:
(a) offer and make available to the Customers the Toll Processing
Services;
(b) offer and make available to the Customers the Other Services;
(c) deal with all Scrap, as described and provided for in Section
2.4; and
(d) perform the other obligations relating to the Services on its
part herein contained;
all in accordance with the terms of this Agreement.
2.2 The Toll Processing Services shall consist of:
(a) receiving and storing all Steel supplied for processing in
accordance with the scheduling requirements set forth in Article Six;
(b) inspecting in accordance with the Customer Manual all Steel
delivered for processing;
(c) processing all Steel so supplied through the Galvanizing Line in
accordance with the requirements specified by the Customer and the
scheduling procedures in effect from time to time;
(d) providing to the Customer, on a timely basis via compatible
electronic or written format, scheduling, product quality, metallurgical,
production and shipping information required by such Customer in accordance
with Work Orders and Customer Manual;
(e) statistical process control testing in accordance, with Customer
Specifications;
(f) labeling, including bar coding, of all processed Steel in
accordance with Customer's instructions;
(g) mechanical property testing and reports with respect to each
Customer's Steel in accordance with the Customer Manual and Work Orders;
(h) inspecting all processed Steel prior to shipping, except Steel
which is inspected at the Facilities in accordance with Subsection 2.3(a)
or which is inspected by Customer's inspector;
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(i) making trucking arrangements for shipping processed Steel to such
location as Customer may designate and loading Products on to trucks for
shipment FOB the Facilities in accordance with Customer's instructions and
procedures; and
(j) services necessarily incidental to the foregoing which are not
Other Services.
2.3 The Other Services to be offered and provided by the Processor to
Customers shall consist of:
(a) rewinding and inspection of processed Steel on the Customer
Service Line in accordance with the instructions and procedures contained
in the Work Orders and Customer Manual;
(b) packaging of all processed Steel for shipping in accordance with
the instructions and procedures contained in the Work Orders and Customer
Manual; and
(c) such other services as Processor may offer to Customers from time
to time.
2.4 In respect of Scrap produced in the course of performing the Services:
(a) Processor shall take all reasonable steps to minimize the amount
of Scrap generated in the course of processing the Products;
(b) Processor shall account to NSC in respect of each coil of Steel
for coated and uncoated Scrap generated in the course of processing the
Products ("NSC Scrap");
(c) if notified by NSC in writing to do so, Processor shall return to
NSC, in accordance with NSC's instructions, any and all NSC Scrap or Scrap
equivalent tonnage generated by the Processor for NSC's account; provided,
however, that NSC shall provide such written notice to Processor at least
thirty (30) days in advance of the date on which Processor is to begin
returning such NSC Scrap or Scrap equivalent tonnage to NSC;
(d) NSC will be entitled to a credit for NSC Scrap which is not
returned to NSC in accordance with Subsection (c) based on the best price
available on the first working day of each month for similar Scrap for the
geographic area closest to the Facilities, less such reasonable allowance
per net ton as may be agreed from time to time; such credit for NSC Scrap
will appear on the face of the applicable invoice issued by Processor and
ownership of NSC Scrap will pass to Processor only after credit therefor is
received by NSC and the credit risk of all sales of NSC Scrap by Processor
shall be Processor's; and
(e) The remedies contained in this Section 2.4 shall constitute
Customer's sole remedies for Scrap produced in the course of provision of
the Services.
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ARTICLE THREE
TAKE OR PAY AND RELATED OBLIGATIONS
3.1 During the Term, NAC shall cause Processor to, and Processor shall,
upon and subject to the terms and conditions of this Agreement, make available
to NSC, for use by NSC and its Affiliates, Available Line Time equal to the
Committed Line Time, provided that, notwithstanding any other provision of this
Agreement, (i) Committed Line Time in any Quarter shall not exceed Maximum NSC
Line Time and (ii) Committed Line Time in any Month shall not exceed 50% of
Available Line Time for such Month. Subject to the foregoing, Committed Line
Time for any Month, expressed as a percentage of Available Line Time for such
Month, may exceed the percentage of Maximum NSC Line Time applicable to the
Quarter during which such Month occurs. Processor shall use make reasonable
commercial efforts to assist NSC in satisfying the Committed Line Time,
including scheduling adjustments, outage relocations, line hour makeup
mechanisms and holiday operations.
3.2 During the Term, NSC shall be obligated, upon and subject to the terms
and conditions of this Agreement, to:
(a) make use (itself and/or with its Affiliates) of the Available
Line Time to process NSC Steel in each Quarter, in accordance with the
terms of this Agreement, not in excess of the Maximum NSC Line Time for
such Quarter;
(b) sixty-seven (67) days prior to the first day of each Quarter,
advise NAC and Processor NSC's non-binding good faith estimate of the
amount of Available Line Time that NSC expects to use during such Quarter,
it being agreed that such estimate shall not be binding on NSC for any
purpose under this Agreement;
(c) sixty-seven (67) days prior to the first day of each Month,
notify NAC and Processor of the Committed Line Time for such Month and the
estimated product mix for such Month, all in accordance with Section 6.2;
and
(d) pay, or cause to be paid, to Processor or NAC (as the case may
be), at the times and in the manner provided in Article Five hereof, the
compensation determined in accordance with Article Four hereof.
3.3 NSC's obligations to make use of a portion of the Available Line Time
to process NSC Steel pursuant to Section 3.2 above will be deemed to have been
satisfied through a combination of:
(a) actual use of and payment for such portion of the Available Line
Time by NSC and its Affiliates; and
(b) to the extent that Committed Line Time is not used by NSC or its
Affiliates and NAC and Dofasco do not use some or all of the Committed Line
Time not used by NSC or its Affiliates, payment by NSC for such portion of
the Committed Line Time. It is agreed by NSC that if, as to any Month, NAC
is offering for sale to third
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parties Hours of Committed Line Time that are not used by NSC or its
Affiliates and also is offering for sale to third parties Hours of
Available Line Time that NAC is obligated to pay for under the Two Party
TPA but which NAC and its Affiliates will not use, NAC may sell the Hours
of Available Line Time that NAC is obligated to pay for under the Two Party
TPA but which NAC and its Affiliates will not use before NAC sells any
Hours of Committed Line Time that are not used by NSC or its Affiliates.
3.4 In the event that NSC and its Affiliates elect to use less than the
Maximum NSC Line Time for any Month, the Hours of Available Line Time
constituting the difference between 50% of Available Line Time and Committed
Line Time for such Month shall be governed by the provisions of Article Ten of
the Two Party TPA relating to Dofasco's right of first refusal. If Dofasco
elects affirmatively not to exercise its right of first refusal under Article
Ten of the Two Party TPA or, by the end of the fifteenth (15th) day after
receipt of the Offer, Dofasco has not exercised such right of first refusal to
use the Hours which constitute such difference, NAC will notify NSC to that
effect (on the next Business Day following such affirmative election by Dofasco
or on the next Business Day after the fifteenth (15th) day after receipt of the
Offer, as the case may be), and NSC shall thereupon have the option to notify
NAC and Processor (the "Additional Line Time Notice") that NSC and/or its
Affiliates will use some or all of such Hours to process NSC Steel. Upon the
delivery to NAC and Processor of an Additional Line Time Notice, and subject to
the next sentence, the amount of additional line time identified by NSC in the
Additional Line Time Notice shall be deemed for all purposes of this Agreement
to be Committed Line Time (in addition to any Hours previously included as
Committed Line Time in the Scheduling Notice for that Month). Notwithstanding
the foregoing, (i) the amount of such additional line time which is the subject
of Additional Line Time Notices during any Quarter, when added to the amount of
Committed Line Time set forth in the Scheduling Notices for the three Months
which constitute that Quarter, cannot exceed the Maximum NSC Line Time
applicable to that Quarter, (ii) no Additional Line Time Notice can be sent in
respect of any line time as to which NAC has entered into an agreement to sell
to a third party which is not an Affiliate of NAC, and (iii) any Additional Line
Time Notice must be delivered by NSC to Processor and NAC no later than thirty
(30) days prior to the Month to which such Additional Line Time Notice applies.
ARTICLE FOUR
COMPENSATION
4.1 NSC shall pay to Processor, at the times and in the manner provided in
Article Five hereof, the aggregate of the amounts set out in this Article Four.
4.2 NSC shall pay to Processor or NAC (as the case may be), as NSC's sole
obligation for the Toll Processing Services performed by Processor for NSC and
its Affiliates and in satisfaction of NSC's Take or Pay Obligations, the amounts
determined in accordance with the provisions set out in Exhibit A.
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4.3 NSC shall pay to Processor, as NSC's sole obligation for the Other
Services performed by Processor for NSC and its Affiliates, the amounts
determined in accordance with the provisions set out in Exhibit B.
ARTICLE FIVE
PAYMENT
5.1 NSC shall be invoiced:
(a) as provided in Exhibit A for Toll Processing Services performed
by Processor for NSC and its Affiliates and for NSC's Take or Pay
Obligations; and
(b) at the times required by the provisions of Exhibit B in respect
of amounts payable, as determined in accordance therewith, for Other
Services performed by Processor for NSC and its Affiliates.
5.2 Each invoice submitted to NSC shall include all applicable taxes and
shall be accompanied by such supporting documentation as NSC shall reasonably
require to satisfy itself that the amounts for which payment is claimed are due
and payable.
5.3 Processor shall provide NSC and NAC with monthly reports specifying
the number of Hours of Available Line Time used by each Customer. In respect of
any Month in which NSC is obligated to make a payment for an unused portion of
the Committed Line Time, such report shall specify the number of Hours of the
shortfall and any cost savings achieved in respect of the Month when the
Galvanizing Line would have been operated but for the shortfall.
ARTICLE SIX
SCHEDULING AND DELIVERY
6.1 It is understood and agreed that it is desirable that maximum use be
made of the Galvanizing Line and the remainder of the Facilities and that the
scheduling of the use of the Galvanizing Line shall be designed to ensure that
NSC shall have proportional access to Available Line Time during each Applicable
Time Period based on the Committed Line Time. The provisions of this Article Six
are intended to achieve this objective.
6.2 Not later than ninety (90) days prior to the beginning of each Month
and each Quarter during the Term, Processor shall notify NSC, NAC and Dofasco as
to the scheduled number of Hours of Available Line Time for such Month and such
Quarter. Subject thereto and in addition to its non-binding good faith estimate
of the amount of the Available Line Time that NSC expects to use during the
relevant Quarter as provided for in Subsection 3.2(b), NSC shall deliver to NAC
and Processor, not later than sixty-seven (67) days prior to the beginning of
each Month, a notice (the "Scheduling Notice") setting forth NSC's Committed
Line Time as well as its estimated product mix and scheduling requirements for
the processing of Steel by the Facilities during such Month.
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6.3 NSC shall, not later than fifteen (15) days prior to the commencement
of each Month, advise Processor of the product mix and current assessment of
actual line time requirements it will require for such Month in order that
Processor can finalize its scheduling for the Galvanizing Line. Unless otherwise
specified by NSC, all Steel supplied hereunder shall be delivered to the
Facilities by NSC and/or its Affiliates, and the scheduling of such deliveries
of Steel shall be coordinated between NSC and Processor as to maximize the use
of Available Line Time.
6.4 NSC shall purchase at its own cost, and deliver to the Processor at
the Facilities, zinc in amounts and quality sufficient to enable Processor to
process Steel for NSC and its Affiliates in accordance with the applicable Work
Orders and Customer Manual. The zinc will at all times be the property of NSC
and any unused zinc will be returned to NSC at the end of the Term of this
Agreement.
ARTICLE SEVEN
TITLE AND RISK
7.1 Title and risk of loss or damage to all Steel delivered by a Customer
for processing shall remain at all times with such Customer subject to
compliance by Processor with the provisions of this Article and to Processor's
liabilities herein.
7.2 Processor shall be obligated to inspect all Steel upon receipt thereof
and to notify Customer and its carrier of any damage or loss which occurred
during transit and shall, if so requested by Customer, co-operate with Customer
in filing and expediting any claims against a carrier for loss or damage.
7.3 Processor shall be liable for any demurrage, detention or other delay
charges incurred in connection with deliveries of Steel to the Facilities for
processing unless such charges arise from deliveries being made in excess of
scheduled deliveries.
7.4 Processor shall promptly and properly unpack and inspect in accordance
with the Customer Manuals all Steel delivered for processing. The commencement
of processing of any Steel shall constitute Processor's representation that such
Steel is not damaged or defective, unless such damage or defect could not have
been discovered in the course of a reasonably diligent inspection by Processor
in accordance with the applicable provisions of the Customer Manual. Damaged or
defective Steel shall be set aside in a safe and suitable location for
examination by Customer. Processor shall follow Customer's instructions with
respect to any Steel which Customer accepts as being damaged, defective or
otherwise unsuitable for processing. Steel rejected by Processor shall be
considered "prime" and will remain "prime" until Customer has notified Processor
of material disposition. Without limitation of the foregoing requirements,
Processor shall comply with the more detailed requirements of the quality and
claims procedures set out in the Customer Manual and any Applicable Policy.
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ARTICLE EIGHT
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PROCESSOR, DOFASCO AND NAC
8.1 Processor, as of the date of this Agreement and as of the Effective
Date, represents and warrants to and covenants with NSC that:
(a) the Facilities at all times during the Term shall be capable of
processing Steel which meets the Customer Specifications for the Products
agreed to by the parties;
(b) Processor is familiar with and acknowledges having received
copies of NSC's "Partners in Performance" including all revisions as of the
date hereof and shall, unless instructed otherwise by NSC in writing,
diligently perform the Services in accordance with the terms of the
Customer Manual and the Work Orders and shall otherwise observe and comply
with the provisions thereof, subject to any revisions agreed upon by NSC
and Processor from time to time that relate to the Services;
(c) the Toll Processing Services and the Other Services will be
performed in a skillful and workmanlike manner, and will conform in all
respects to those requirements set out in the Customer Manual or as
otherwise agreed to from time to time; and
(d) all supplements and revisions to the Customer Manual provided by
a Customer to Processor and not objected to in writing by Processor within
thirty (30) days of receipt shall be deemed to have been accepted and
agreed to by the parties.
8.2 Processor and NAC agree not to amend the Two Party TPA so as to limit,
restrict or otherwise circumvent the rights, or in any manner expand or modify
the obligations, of NSC under this Agreement.
8.3 Subject to Article Eleven, NAC agrees to use reasonable commercial
efforts to maintain NSC's access to the Facilities in accordance with the terms
of this Agreement.
ARTICLE NINE
NSC'S REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 NSC, at the date of this Agreement and as of the Effective Date,
represents and warrants to and covenants with:
(a) NAC and Processor that all Steel delivered by NSC and its
Affiliates for toll coating by the Facilities will be suitable for the
processing of Products by the Facilities;
(b) Dofasco, NAC and Processor that neither the entering into of this
Agreement nor the performance by NSC of its obligations hereunder will
constitute a breach of any agreement or undertaking to which it is a party
or by which any of its properties or assets are bound; and
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(c) Processor that NSC shall supply Processor with copies of all
supplements and revisions to the Customer Manual that may be issued from
time to time.
ARTICLE TEN
LIABILITY
10.1 Processor shall take all reasonable steps to avoid damage or loss to
Steel while in Processor's possession. NSC (which for purposes of this Section
10.1 shall be deemed to include any Affiliate of NSC) and the other parties
hereto acknowledge that the standard yield loss for 2003 shall be determined as
part of the annual budget for 2003 for DNN, as to which budget NSC will consult
(the "Yield Loss"), and further acknowledge that, following the conclusion of
each Month, the Yield Loss will be adjusted for such Month based on the product
mix for such Month (the "Adjusted Yield Loss"). With respect to any damage to or
loss of NSC Steel in any Month in excess of the Adjusted Yield Loss or which is
the subject of a product liability claim by NSC, NSC shall be reimbursed as
follows: (i) if at least a portion of the damage or loss is covered by
Processor's then current insurance coverage, by (a) payment from the relevant
insurer in the ordinary course to the extent of coverage, and (b) payment from
NAC concurrently with the payment referenced in (a) in the amount of any
applicable deductible; and (ii) if at least a portion of the damage or loss is
not covered by Processor's then current insurance coverage, either (a) through
supplemental insurance coverage obtained at NAC's sole cost, in which case
payment shall be made in the same manner as in clause (i) above, and/or (b) by
payment of any uninsured portion of such damage or loss directly by NAC within
thirty (30) days of the notice of claim referenced below. NAC agrees to
reimburse DNN for any additional costs incurred by DNN as a consequence of any
claim for damage to or loss of NSC Steel in accordance herewith, including
increases in the costs incurred by DNN in obtaining insurance. The parties agree
that if NSC Steel is coated by DNN in a manner other than as required in the
applicable Work Order and the resulting Product is rejected by NSC's customer,
the costs incurred by NSC in connection therewith (such as loss in the value of
the damaged or lost NSC Steel (measured as the lesser of net replacement cost or
rework cost or in such other manner as the parties may agree), freight charges
incurred in connection with shipping the Product to and from the customer and/or
to other processors and/or final destination, freight costs incurred in shipping
material to Processor, duties for the originally intended order, and reasonable
fees paid to another party to rework the defective material) shall be included
in NSC's damages and losses for purposes of this Section 10.1. In all cases, any
claim by NSC for damage to or loss of NSC Steel shall be made by notice to NAC
and to Processor and accompanied by appropriate supporting documentation. For
purposes of this Section 10.1, the phrase "damage to or loss of NSC Steel" shall
exclude all indirect, consequential, punitive and special damages and exclude
any damage to or loss of Scrap. NSC shall have no ability to make a claim under
this Section 10.1 as to any of its Steel which has damaged the Facilities. The
procedures to be followed under this Section 10.1 shall be those in the
Applicable Policy; provided that in the case of any conflict between this
Section 10.1 and any Applicable Policy, the provisions of this Section 10.1
shall prevail.
10.2 NSC shall indemnify and hold NAC harmless from any damage to the
Facilities resulting solely from defects in Steel delivered by NSC to Processor
for processing at the
13
Facilities. NSC agrees not to hold NAC liable in the event NSC is unable to
access the Facilities for any reason whatsoever which is reasonably beyond the
control of NAC or its Affiliates.
10.3 The remedies contained in Section 10.1 shall constitute Customer's
sole remedies for damaged or lost Steel and for defective Product. For greater
certainty, it is hereby agreed that no party shall have any liability to another
pursuant to this Agreement for indirect or consequential damages of any nature,
however caused.
ARTICLE ELEVEN
FORCE MAJEURE
11.1 For the purposes of this Agreement, a Force Majeure Event shall mean
Acts of God, wars, riots, fires, explosions, breakdowns or accidents; strikes,
lockouts or other labor difficulties; lack or shortages of labor, materials,
utilities, energy sources or transportation facilities; equipment failures;
delays of carriers; compliance with governmental rules, regulations, priorities,
allocations or other governmental requirements (including, without limitation,
environmental regulations); and any other causes beyond the reasonable control
of Processor or NSC, as the case may be; provided that (1) the occurrence or
cause in question shall have continued for a period of not less than ninety-six
(96) consecutive hours before it constitutes a Force Majeure Event, (2) the
party so prevented (or to be prevented) from performing shall give prompt
written notice to the other party of the nature and probable duration of such
Force Majeure Event, and of the extent of its effects of such party's
performance hereunder, (3) each party shall, in the event it experiences a Force
Majeure Event, make all reasonable efforts to remove such disability as soon as
possible (except for a Force Majeure Event resulting from a labor dispute, the
removal of which shall be solely within the affected party's discretion), and
(4) a Force Majeure Event shall, subject to the foregoing, be deemed for the
purposes of this Agreement to have commenced at the beginning of the period
specified in clause (1).
11.2 In the event of the occurrence of a Force Majeure Event the existence
of which (a) prevents Processor from making available Available Line Time to
NSC, or (b) prevents NSC from making use of all or any part of its Committed
Line Time in respect of any Applicable Time Period, NSC shall be under no
obligation for the duration of such Force Majeure Event to pay Processor or NAC
for any Committed Line Time not in fact made available to NSC and its Affiliates
as a result of such Force Majeure Event.
ARTICLE TWELVE
TERM
12.1 Subject to Sections 12.2 and 12.3, assuming (i) no Matured Default (as
defined in the Amended Current TPA) has occurred prior to the Effective Date and
(ii) the Amended Current TPA has not been terminated pursuant to Section 14.4
thereof, the Term of this Agreement shall commence at the beginning of business
at the Facilities on the Effective Date and expire at the close of business at
the Facilities on December 31, 2003.
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12.2 Notwithstanding the provisions of Section 12.1 and subject to Section
12.3, the term of this Agreement shall expire on the earlier (if prior to
December 31, 2003) of (i) the date on which NSC fails to make any payment
payable to Processor when due under this Agreement, which failure has continued
for a period of five (5) Business Days after notice thereof by NAC, Processor or
Dofasco to NSC (provided that if the payment is disputed by NSC in good faith,
the date shall be extended for an additional five (5) Business Days during which
the parties will endeavor in good faith to resolve such dispute), and (ii) one
hundred eighty (180) days after (A) the entry of an order terminating all
proceedings in connection with Case No. 02-08699 (captioned In re: National
Steel Corporation et al., Debtors) in the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division, (B) the date on which NKK (or
its successor) ceases to have beneficial ownership (within the meaning of
Schedule 13D promulgated under the United States Securities Exchange Act of
1934) of at least a majority of the issued and outstanding voting capital stock
of NSC by reason of an order of the U.S. bankruptcy court having jurisdiction
over NSC confirming a plan of reorganization, or (C) an asset sale of
substantially all of the assets of NSC and its subsidiaries by reason of an
order of the United States Bankruptcy Court having jurisdiction over NSC
confirming a plan of reorganization; provided that NSC may at its election and
in its sole discretion terminate this Agreement during the aforesaid one hundred
eighty (180) days following the occurrence of any of the events described in
(A), (B) and (C) by providing notice of such an election to NAC, Dofasco and DNN
at least sixty-seven (67) days prior to the date such election is to become
effective.
12.3 Notwithstanding Sections 12.1 and 12.2, this Agreement may be
terminated by NSC or NAC at its option in the event of the destruction of the
Facilities, which term shall mean that the Facilities have been destroyed
completely or have suffered damage which is such that the Facilities cannot be
rebuilt or repaired so as to be usable within a period of sixty (60) days (it
being understood and agreed that, in case of damage or partial destruction, the
provisions of Article Eleven shall apply).
ARTICLE THIRTEEN
GENERAL
13.1 Except for the ability of NAC to assign its rights and delegate its
obligations to one of its Affiliates or an Affiliate of JFE Holdings or JFE
Steel to whom the Two Party TPA is assigned in connection with the corporate
restructuring of NKK's business activities in North America following its merger
with Kawasaki Steel Corporation, neither this Agreement nor any of the rights or
obligations hereunder may be assigned, in whole or in part without the prior
written consent of the other parties. Subject thereto and to Section 13.2 below,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns. The assignee of any assignment
permitted hereby shall agree to be bound by the terms hereof as a condition to
the effectiveness of any such assignment.
13.2 Notwithstanding Section 13.1 above, Processor may assign its interest
in this Agreement, either in whole or in part, as required for security for
money borrowed in respect of
15
the Facilities; provided however, that any such lender shall agree to be bound
by the terms hereof.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
13.4 Each of the parties hereto, its successors and permitted assigns,
shall execute such further documents and perform or caused to be done and
performed such further and other acts as may be necessary or desirable from time
to time in order to give full effect to the provision of this Agreement.
13.5 Headings used herein are used for convenience of reference only and
shall not be considered in construing or interpreting this Agreement.
13.6 Words herein shall be construed to be of such gender and number as the
circumstances may require.
13.7 All notices, demands, reports and other communications required or
permitted to be made or given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered personally, couriered by
overnight delivery, prepaid, or sent by electronic telecommunication, to the
address or telecommunication number of the other party specified below or such
other address or telecommunication number as specified by that party by written
notice in accordance with this Section:
(a) If to Dofasco, to: 0000 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Corporate Secretary
Telecopier: (000) 000-0000
(b) If to NAC, to: 25th Floor,
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telecopier: (000) 000-0000
(c) If to NSC, to: 0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000.
Attention: Xxxx Xxxxxxx
Telecopier: (000) 000-0000
With a copy to: Xxxxx Xxxxxxx
000 Xxxxx XxXxxxx Xxxxxx
00
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopier: (000) 000-0000
(d) If to Processor, to: 000 Xxxxxxxxxx Xxxxxx
P.O. Box 7069
Windsor, Ontario
N9G 3Y6
Attention: Vice President, General Manager
Telecopier: (000) 000-0000
All communications shall be conclusively deemed to have been received: if
delivered, when delivered; if sent by electronic telecommunication, when
received; and if couriered, on the fifth day after deposited with the courier.
13.8 This Agreement shall not be modified or amended except by an
instrument in writing signed by the parties hereto.
13.9 No failure by a party to exercise, nor any delay in exercising nor any
partial exercise by such party of, any right, power or privilege available to
such party hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise by such party of any other right, power
or privilege.
13.10 If any provision of this Agreement, or the application thereof to a
party hereto, is held illegal, unenforceable or otherwise invalid by any court
or government authority, such holding shall not affect or invalidate any other
provision of this Agreement and, to this end, the parties agree that the
provisions of this Agreement are and shall be severable; provided that, if such
holding affects or invalidates any provision deemed essential by a party to the
satisfactory performance of this Agreement, then upon written notice being given
by such party to the other party, the parties shall promptly negotiate in good
faith to the end that this Agreement may be amended in such manner as may be
necessary to make it fair and equitable to both parties.
17
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers or signatories to execute this Agreement on the date first mentioned
above.
DOFASCO INC.
By: Xxxx X. Xxxxxxxx
------------------------
Title: Chair and Chief Executive Officer
By: /s/ Xxxx X.X. Xxxxxxx
------------------------
Title: Vice President
Corporate Administration
NKK U.S.A. CORPORATION
By: /s/ Xxxxx Xxxxxxx
------------------------
Title: President
NATIONAL STEEL CORPORATION
By: /s/ Xxxx X. Xxxxxxx
------------------------
Title: Sr. VP & CFO
DNN GALVANIZING CORPORATION
By: /s/ Xxxxxx Xxxxxxx
------------------------
Title: Director
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EXHIBIT A
The payments to be made by NSC for Toll Processing Services performed by
Processor for NSC and its Affiliates and in satisfaction of NSC's Take or Pay
Obligations shall be calculated as follows.
Hourly Rate and Other Charges for Line Time:
a) The rate per Hour for line time (the "Hourly Rate") has been determined
prior to January 1, 2003, based on the budgeted variable cost of running the
Facilities utilizing formulae in use at the time of execution of this Agreement,
and shall be the same rate as is charged to Dofasco and NAC by Processor for use
of Available Line Time. The budget will be reviewed with NSC and comments from
NSC will be included in revising the budget if appropriate.
b) NSC will be invoiced weekly by Processor for Hourly Rate charges for
Available Line Time used by NSC and its Affiliates for processing each coil of
NSC Steel when shipped from Processor.
c) NSC will be invoiced monthly by Processor for Hourly Rate charges for the
number of Hours of Committed Line Time in excess of the number of Hours of
Available Line Time actually used by NSC or its Affiliates during such Month,
provided however that, for these purposes, Committed Line Time shall be reduced
to reflect any Hours of Committed Line Time not used by NSC or its Affiliates
but which are used by NAC or Dofasco (or the Affiliates of either of them) or
which are sold by NAC as contemplated in Subsection 3.3(b). Such adjusted
Committed Line Time is referred to in this Exhibit A as Adjusted Committed Line
Time.
d) NSC will be invoiced weekly by Processor for coating oil charges applicable
to coils of Steel shipped during such week.
Fixed Costs:
a) An administrative fee (the "Administrative Fee") will be determined prior
to January 1, 2003, based on the budgeted cost of running the Facilities, and
shall be determined on the same basis and in the same manner as the
administrative fee charged to Dofasco and NAC by Processor.
b) NSC will be invoiced monthly by Processor for the Administrative Fee for
each Month based on the ratio of Adjusted Committed Line Time for such Month to
the Available Line Time during such Month.
c) NSC will be invoiced by NAC in May 2003 US$1,271,527.93 in respect of Debt
Costs (as defined in the Two Party TPA) and invoiced in November 2003
US$1,239,727.45 in respect of Debt Costs. Such amounts were calculated assuming
NSC would use twenty-five percent (25%) of Available Line Time during each Month
of calendar year 2003, it being understood that such assumption was made solely
for purposes of determining the amount to be set forth in the
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aforesaid invoices, and the amount set forth in such invoices if twenty-five
percent (25%) of all Debt Costs due for the period covered thereby. In the event
the Agreement terminates before an invoice date, NSC shall nevertheless be
obligated to pay a pro rated portion of the invoice amount based on the ratio of
(A) the number of days during 2003 which the Agreement was in effect to (B) 365,
and the obligation of NSC to pay the pro rated portion of the invoice shall
survive the termination of the Agreement. No later than April 30, 2004, NAC and
NSC will recalculate NSC's portion of Debt Costs utilizing the Adjusted
Committed Line Time for the calendar year 2003 (the "Recalculated Debt Cost
Obligation") for purposes of such calculation and NSC shall pay to NAC or NAC
shall pay to NSC (as the case may be) such amounts as are necessary to reconcile
the aggregate amount paid by NSC in respect of Debt Costs (including the amounts
paid in connection with the May invoice and the November invoice and the Rate
Differential calculations set forth in Exhibit B to the Two Party TPA) with the
Recalculated Debt Cost Obligation. The obligation to reconcile the Debt Cost
payments shall survive termination of the Agreement.
d) NSC will be invoiced following the close of calendar year 2003 for its
proportionate share of XXXX Costs and ROFE Costs (each as defined in Exhibit B
to the Two Party TPA) invoiced to NAC under the Two Party TPA. NSC's
proportionate share thereof shall be based on the ratio of Adjusted Committed
Line Time for the calendar year 2003 to 50% of Available Line Time for the
calendar year 2003. In the event that this Agreement terminates before the
invoice date, NSC shall nevertheless be obligated to pay a pro rated portion of
the invoice amount based on the ratio of (A) the number of days during calendar
year 2003 which the Agreement was in effect to (B) 365, and the obligation of
NSC to pay the pro rated portion of the invoice shall survive the termination of
the Agreement.
Adjustments for Variances Between Operating Costs and Total Revenues:
In the event NAC is entitled to a credit or a payment pursuant to Section 5.8 of
the Two Party TPA in respect of a positive variance between Processor's actual
operating costs and Total Revenues (as defined in the Two Party TPA) for 2003 ,
NAC shall pay to NSC a portion of the amount of such credit or payment; and in
the event of a negative variance, NSC shall pay to NAC a portion of the amount
required to be paid by NAC pursuant to Section 5.8 of the Two Party TPA. The
portion to be paid shall be based on the ratio of Adjusted Committed Line Time
for 2003 to the Available Line Time for 2003. Such payment from NAC to NSC or
from NSC to NAC shall be made no later than April 30, 2004 and the obligation to
make such payment shall survive the termination of the Agreement.
Reconciliation:
No later than April 30, 2004, NAC and NSC shall reconcile all outstanding claims
for payment in accordance with the Applicable Policies, including reconciliation
of any adjustments with respect to the Blended Rate (as defined in Exhibit B,
Section 5 of the Two Party TPA).
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Invoices and Payment Terms:
a) Except as set forth in c) below, payments of invoices for Fixed Costs shall
be due ten (10) days after the invoice date.
b) Payments of invoices for Hourly Rate and Other Charges for Line Time shall
be due within thirty (30) days after the invoice date.
c) Payments for invoices for Debt Costs shall be due as to the May 2003
invoice on or before June 30, 2003, and as to the November 2003 invoice on or
before December 31, 2003, and payment for the invoice for XXXX Costs and ROFE
Costs shall be due within ten (10) days after the invoice date.
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EXHIBIT B
The payments to be made by NSC to Processor as full compensation for the Other
Services performed by Processor for NSC or its Affiliates shall be calculated as
follows:
NSC will be invoiced weekly in respect of amounts payable for Other Services
performed by Processor for NSC and its Affiliates. Such invoices shall contain
the same type and detail of information as has been included in such invoices as
delivered by Processor to NSC prior to the date of this Agreement for services
in the nature of Other Services. The rates to be charged for Other Services
shall be designed to recover the cost of providing such Other Services, and
shall not exceed the rates charged by Processor to Dofasco and NAC for such
Other Services. The rates to be charged for the rewinding and inspection
services and for the packaging services of the nature described in Subsections
2.3(a) and (b) shall be determined in the same manner as determined as of the
date of this Agreement for purposes of the Current TPA, it being understood that
the rates determined in such manner for purposes of this Agreement for the
rewinding and inspection services and for the packaging services of the nature
described in Subsections 2.3(a) and (b) may differ from the rates charged
therefor under the Current TPA. The rates to be charged for any other services
as contemplated in Subsection 2.3(c) shall be determined by mutual agreement
from time to time of Processor and Customer.
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SCHEDULE 1.4
Applicable Policies
1. The Claims Policy and Procedure
2. The Cost Savings Policy
3. The Line Time Policy
all as further identified in the Two Party TPA
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