-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Phirh9frNe+kVbg5ThVkukECLEowgXaIchrwbA0PRePTg/V0SOTJCrwmoiK6pKOT 2O2kvxO9mxQt16CXX91oig== 0000950149-96-000633.txt : 19960517 0000950149-96-000633.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950149-96-000633 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEVA STEEL CENTRAL INDEX KEY: 0000860192 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 930942346 STATE OF INCORPORATION: UT FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10459 FILM NUMBER: 96566752 BUSINESS ADDRESS: STREET 1: 10 S GENEVA RD CITY: VINEYARD STATE: UT ZIP: 84058 BUSINESS PHONE: 8012279000 MAIL ADDRESS: STREET 1: PO BOX 2500 CITY: PROVO STATE: UT ZIP: 84603 10-Q 1 FORM 10-Q FOR PERIOD ENDING MARCH 31, 1996 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File #1-10459 GENEVA STEEL COMPANY (Exact name of registrant as specified in its charter) UTAH 93-0942346 (State of Incorporation) (I.R.S. Employer Identification No.) 10 South Geneva Road Vineyard, Utah (Address of principal executive offices) 84058 (Zip Code) Registrant's telephone number, including area code: (801) 227-9000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each class of the issuer's common stock, as of the latest practicable date. 13,381,369 and 19,151,348 shares of Class A and Class B common stock, respectively, outstanding as of April 30, 1996. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENEVA STEEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) ASSETS
March 31, September 30, 1996 1995 --------- ------------- Current assets: Cash and cash equivalents $ 5,389 $ 12,808 Accounts receivable, net 28,411 35,178 Inventories 93,421 89,909 Deferred income taxes 6,804 6,885 Prepaid expenses and other 12,584 2,661 -------- -------- Total current assets 146,609 147,441 -------- -------- Property, plant and equipment: Land 1,998 1,941 Buildings 16,092 16,092 Machinery and equipment 588,270 576,066 Mineral property and development costs 8,425 8,425 -------- -------- 614,785 602,524 Less accumulated depreciation (153,261) (132,134) -------- -------- Net property, plant and equipment 461,524 470,390 -------- -------- Other assets 10,621 10,966 -------- -------- $618,754 $628,797 ========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. Page 2 of 17 3 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in thousands) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30, 1996 1995 --------- ------------- Current liabilities: Accounts payable $ 60,053 $ 67,939 Accrued liabilities 16,738 19,045 Accrued payroll and related taxes 10,205 10,667 Production prepayments 15,000 10,000 Accrued interest payable 4,604 4,610 Accrued pension and profit sharing costs 1,956 2,135 -------- -------- Total current liabilities 108,556 114,396 -------- -------- Long-term debt 347,477 342,033 -------- -------- Deferred income tax liabilities 9,585 13,263 -------- -------- Redeemable preferred stock 55,077 51,031 -------- -------- Stockholders' equity: Preferred stock -- -- Common stock: Class A 87,979 87,926 Class B 10,110 10,163 Warrants to purchase Class A common stock 5,360 5,360 Retained earnings 12,004 22,754 Class A common stock held in treasury, at cost (17,394) (18,129) -------- -------- Total stockholders' equity 98,059 108,074 -------- -------- $618,754 $628,797 ======== ========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. Page 3 of 17 4 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In thousands, except per share data) (Unaudited)
1996 1995 -------- -------- Net sales $159,131 $157,213 Cost of sales 151,326 141,401 -------- -------- Gross margin 7,805 15,812 Selling, general and administrative expenses 6,166 6,250 -------- -------- Income from operations 1,639 9,562 -------- -------- Other income (expense): Interest and other income 94 160 Interest expense (8,626) (7,962) Other expense (558) (629) -------- -------- (9,090) (8,431) -------- -------- Income (loss) before benefit for income taxes (7,451) 1,131 Benefit for income taxes (2,766) -- -------- -------- Net income (loss) (4,685) 1,131 Less redeemable preferred stock dividends and accretion for original issue discount 2,235 1,968 -------- -------- Net loss applicable to common shares $ (6,920) $ (837) ======== ======== Net loss per common share $ (.45) $ (.06) ======== ======== Weighted average common shares outstanding 15,281 15,188 ======== ========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 4 of 17 5 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (In thousands, except per share data) (Unaudited)
1996 1995 -------- -------- Net sales $326,220 $321,636 Cost of sales 306,213 289,881 -------- -------- Gross margin 20,007 31,755 Selling, general and administrative expenses 11,899 12,082 -------- -------- Income from operations 8,108 19,673 -------- -------- Other income (expense): Interest and other income 272 189 Interest expense (16,883) (16,716) Other expense (1,111) (1,007) -------- -------- (17,722) (17,534) -------- -------- Income (loss) before benefit for income taxes (9,614) 2,139 Benefit for income taxes (3,597) -- -------- -------- Net income (loss) (6,017) 2,139 Less redeemable preferred stock dividends and accretion for original issue discount 4,399 3,873 -------- -------- Net loss applicable to common shares $(10,416) $ (1,734) ======== ======== Net loss per common share $ (.68) $ (.11) ======== ======== Weighted average common shares outstanding 15,267 15,181 ======== ========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 5 of 17 6 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (Dollars in thousands) (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
1996 1995 -------- -------- Cash flows from operating activities: Net income (loss) $ (6,017) $ 2,139 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation 21,128 17,746 Amortization 843 1,165 Deferred income taxes (3,597) -- Loss on sale of equipment -- 5 (Increase) decrease in current assets-- Accounts receivable, net 6,767 20,565 Inventories (3,512) 3,071 Prepaid expenses and other (9,923) 800 Increase (decrease) in current liabilities-- Accounts payable (7,886) (3,070) Accrued liabilities 2,340 4,329 Accrued payroll and related taxes (62) 1,270 Accrued interest payable (6) (93) Accrued pension and profit sharing costs (179) 908 -------- -------- Net cash provided by (used for) operating activities (104) 48,835 -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (12,261) (30,118) Proceeds from sale of property, plant and equipment -- 14,135 Change in other assets (373) (4,515) -------- -------- Net cash used for investing activities $(12,634) $(20,498) -------- --------
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 6 of 17 7 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (Dollars in thousands) (Unaudited)
1996 1995 -------- -------- Cash flows from financing activities: Proceeds from long-term debt $ 17,296 $ 11,305 Payments on long-term debt (11,852) (32,348) Payments for deferred loan costs and other assets (125) (1,599) Bank overdraft -- (1,341) --------- -------- Net cash provided by (used for) financing activities 5,319 (23,983) --------- -------- Net increase (decrease) in cash and cash equivalents (7,419) 4,354 Cash and cash equivalents at beginning of period 12,808 -- --------- -------- Cash and cash equivalents at end of period $ 5,389 $ 4,354 ========= ========
Supplemental schedule of noncash financing activities: For the six months ended March 31, 1996 and 1995, the Company increased the redeemable preferred stock liquidation preference by $3,690 and $3,523 respectively, in lieu of paying a cash dividend. In addition, for the same periods, redeemable preferred stock was increased by $356 and $350, respectively, for the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. At March 31, 1996, the Company had accrued dividends payable of $353. The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 7 of 17 8 GENEVA STEEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (Unaudited) - -------------------------------------------------------------------------------- (1) INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements of Geneva Steel Company and Geneva Steel Funding Corporation, a wholly-owned subsidiary of Geneva Steel Company (collectively, the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations of the Company. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. (2) INVENTORIES Inventories were comprised of the following components:
March 31, September 30, 1996 1995 --------- ------------- Raw materials $26,349 $27,784 Semi-finished and finished goods 58,756 54,191 Operating materials 8,316 7,934 ------- ------- $93,421 $89,909 ======= =======
(3) NET INCOME (LOSS) PER COMMON SHARE Net income (loss) per common share is calculated based upon the weighted average number of common and common equivalent shares outstanding during the periods. Common equivalent shares consist of warrants and options to purchase Class A common stock which have a dilutive effect when applying the treasury stock method. Class B common stock is included in the weighted average number of common shares outstanding at one share for every ten shares outstanding because the Class B common stock is convertible to Class A common stock at this same rate. The net income (loss) for the three and six-month periods ended March 31, 1996 and 1995 was adjusted for redeemable preferred stock dividends and the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. Page 8 of 17 9 (4) SUBSEQUENT EVENT Amended and Restated Revolving Credit Facility In May 1996, the Company amended and restated its revolving credit facility (the "Revolving Credit Facility") with a syndicate of banks led by Citicorp USA, Inc., as agent, which is used primarily for the working capital and capital expenditure needs of the Company. The Revolving Credit Facility, in the amount of up to $125 million, is secured by the Company's inventories, accounts receivable, general intangibles, and proceeds thereof, and expires on May 14, 2000. Interest is payable monthly at the defined base rate (7.25% at May 14, 1996) plus 1.50% or the defined LIBOR rate (5.50% at May 14, 1996) plus 2.75%. The Company pays a monthly commitment fee based on an annual rate of 5.50% of the average unused portion of the borrowing limit under the Revolving Credit Facility. The amount available to the Company under the Revolving Credit Facility currently ranges between 55 and 60 percent, in the aggregate, of eligible inventories plus 85 percent of eligible accounts receivable. Borrowing availability under the Revolving Credit Facility is also subject to other financial tests and covenants. The Company's receivables securitization facility was terminated in connection with the amendment. Certain deferred fees associated with establishing the Company's previous facilities will be written-off during the third fiscal quarter. (5) CERTAIN RECLASSIFICATIONS Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation. Page 9 of 17 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth the percentage relationship of certain cost and expense items to net sales for the periods indicated:
Three Months Ended Six Months Ended March 31, March 31, ------------------- ---------------- 1996 1995 1996 1995 ----- ----- ----- ----- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 95.1 89.9 93.9 90.1 ----- ----- ----- ----- Gross margin 4.9 10.1 6.1 9.9 Selling, general and admini- strative expenses 3.9 4.0 3.6 3.8 ----- ----- ----- ----- Income from operations 1.0 6.1 2.5 6.1 ----- ----- ----- ----- Other income (expense): Interest and other income 0.1 0.1 0.1 0.1 Interest expense (5.4) (5.1) (5.2) (5.2) Other expense (0.4) (0.4) (0.3) (0.3) ----- ----- ----- ----- (5.7) (5.4) (5.4) (5.4) ----- ----- ----- ----- Income (loss) before benefit for income taxes (4.7) 0.7 (2.9) 0.7 Benefit for income taxes (1.8) -- (1.1) -- ----- ----- ----- ----- Net income (loss) (2.9)% 0.7% (1.8)% 0.7% ===== ===== ===== =====
The following table sets forth the sales product mix as a percentage of net sales for the periods indicated:
Three Months Ended Six Months Ended March 31, March 31, ------------------ ----------------- 1996 1995 1996 1995 ----- ----- ----- ----- Sheet 29.8% 44.0% 32.2% 48.7% Plate 45.2 36.8 39.8 34.2 Pipe 6.2 6.6 5.3 5.5 Slab 16.1 9.6 20.0 8.6 Non-Steel 2.7 3.0 2.7 3.0 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
Page 10 of 17 11 THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1995 Net sales increased 1.2% due to increased shipments of approximately 55,100 tons, offset in large part by decreased overall average selling prices for the three months ended March 31, 1996 as compared to the same period in the previous fiscal year. The weighted average sales price (net of transportation costs) per ton of sheet, plate, pipe and slab products decreased by 11.1%, 2.9%, 0.6% and 22.2%, respectively, in the three months ended March 31, 1996 compared to the same period in the previous fiscal year. The decrease in prices resulted from efforts by service centers to reduce high inventory levels, an increase in domestic hot-rolled capacity, unfairly traded imports and other market factors. The overall average selling price realization per ton also decreased between the periods as a result of a shift in product mix to lower-priced slab products. This decrease was offset, in part, by the Company's increased sales of higher-priced plate products. The Company increased slab shipments to maximize production from the continuous caster while efforts to increase rolling mill throughput continue. Despite weakened slab prices, the Company expects that slab sales will continue. The Company expects, however, that slab shipments will gradually decrease as rolling mill throughput improves. Consistent with the Company's strategic objectives, plate shipments have increased as various upgrades to plate processing and finishing equipment have been completed and are being implemented. The Company intends to continue shifting its product mix toward higher-margin plate. Shipped tonnage of plate and slabs increased approximately 42,400 tons or 28.4% and 62,100 tons or 118.9%, respectively, while shipped tonnage of sheet and pipe decreased approximately 48,300 tons or 22.9% and 1,100 tons or 4.4%, respectively, between the two periods. In response to strengthening orders, the Company announced four price increases during the current calendar year, effective at various dates after March 31, 1996. The Company has phased in price increases as new orders have been accepted. The Company intends, however, to react to price increases or decreases in the market as justified by competitive conditions. The Company sells substantially all of its products in the spot market at prevailing market prices. The Company believes its percentage of such sales is significantly higher than that of most of the other domestic integrated producers. Consequently, the Company may be affected by price increases and decreases more quickly than many of its competitors. Cost of sales includes raw materials, labor costs, energy costs, depreciation and other operating and support costs associated with the production process. The Company's cost of sales, as a percentage of net sales, increased to 95.1% for the three months ended March 31, 1996 from 89.9% for the same period in the previous fiscal year as a result of lower average selling prices. The overall average cost of sales per ton shipped decreased approximately $16 per ton between the two periods. The decreased cost per ton resulted from lower operating costs and increased sales of lower-cost slab products offset, in part, by a shift in product mix to higher-cost plate products. Operating costs decreased as a result of improved production yields and throughput rates, offset in part by higher depreciation expense, the adverse impact of the plant wide-power outage discussed below, increased raw materials costs, higher wages and benefits and other increased costs. The Company expects that production yields and throughput will continue to improve in future periods as the induction furnace and wide coiled plate project continue to be integrated into the production process. The Company continues to evaluate its slab heating requirements and may elect to install additional heating capacity. Page 11 of 17 12 A plant-wide power outage caused by unusual weather conditions in late January had a significant adverse effect on production, resulting in a loss of approximately 40,000 tons, reduced operating efficiencies and damage to certain facilities. The Company maintains insurance for both property damage and business interruption, subject to a deductible of $1 million per occurrence. The Company is continuing to assess the full financial impact of the outage and recorded a portion of the expected loss recovery during the second fiscal quarter. The Company has been testing its new plasma-fired cupola ironmaking facility and expects the facility to be available for operation during the third fiscal quarter. The cupola will be used to replace or supplement blast furnace iron production, particularly when scrap prices are favorable or during relines and other periods requiring additional ironmaking capacity. The Company expects the facility lease cost of the cupola to add approximately $2 per ton to finished product cost. The full impact of the cupola facility on finished product cost will be dependent on raw material costs, particularly scrap and coke, and the level of integration of the cupola. Depreciation costs included in cost of sales increased approximately $1.8 million for the three months ended March 31, 1996 compared with the same period in the previous fiscal year. This increase was due to increases in the asset base resulting from capital expenditures. Depreciation expense will further increase due to implementation of the Company's capital projects. Selling, general and administrative expenses for the three months ended March 31, 1996 decreased approximately $0.1 million as compared to the same period in the previous fiscal year. The lower expenses resulted primarily from reduced outside services. Interest expense increased approximately $0.7 million during the three months ended March 31, 1996 as compared to the same period in the previous fiscal year reflecting higher levels of borrowing. Other expense decreased approximately $0.1 million for the three months ended March 31, 1996, as compared to the same period in the previous fiscal year as a result of decreased fundings under the Company's receivables securitization program. For the three months ended March 31, 1996, the Company recognized a benefit for income taxes by carrying back the loss to the prior year's income. The Company did not recognize a provision for income taxes for the three months ended March 31, 1995 as a result of utilizing net operating loss carryforwards for financial reporting purposes. SIX MONTHS ENDED MARCH 31, 1996 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1995 Net sales increased 1.4% due to increased shipments of approximately 104,800 tons, offset in part by decreased overall average selling prices and a shift in product mix to lower-priced slab products for the six months ended March 31, 1996 as compared to the same period in the previous fiscal year. The weighted average sales price (net of transportation costs) per ton of sheet, plate and slab products decreased by 9.5%, 1.6% and 13.0%, respectively, while the weighted average sales price of pipe products increased by 4.1% in the six months ended March 31, 1996 compared to the same period in the previous fiscal year. The Page 12 of 17 13 overall average selling price realization per ton also decreased between the periods as a result of a shift in product mix to lower-priced slab products. This decrease was offset, in part, by the Company's increased sales of higher-priced plate products. Shipped tonnage of plate and slabs increased approximately 57,700 tons or 20.3% and 174,600 tons or 172.4%, respectively, while shipped tonnage of sheet and pipe decreased approximately 124,600 tons or 25.7% and 2,900 tons or 6.5%, respectively, between the two periods. The Company's cost of sales, as a percentage of net sales, increased to 93.9% for the six months ended March 31, 1996 from 90.1% for the same period in the previous fiscal year as a result of lower average selling prices. The overall average cost of sales per ton shipped decreased approximately $17 per ton between the two periods. The decreased cost per ton resulted from lower operating costs and increased sales of lower-cost slab products offset, in part, by a shift in product mix to higher-cost plate products. Operating costs decreased as a result of improved production yields and throughput offset in part by higher depreciation expense, the adverse impact of the plant-wide power outage, increased raw materials costs, higher wages and benefits and other increased costs. Depreciation costs included in cost of sales increased approximately $3.6 million for the six months ended March 31, 1996 compared with the same period in the previous fiscal year. This increase was due to increases in the asset base resulting from capital expenditures. Selling, general and administrative expenses for the six months ended March 31, 1996 decreased approximately $0.2 million as compared to the same period in the previous fiscal year. The lower expenses resulted primarily from reduced outside services. Interest expense increased approximately $0.2 million for the six months ended March 31, 1996 as compared to the same period in the previous fiscal year reflecting higher levels of borrowing and lower levels of capitalized interest. Other expense increased approximately $0.1 million for the six months ended March 31, 1996, as compared to the same period in the previous fiscal year as a result of increased fundings under the Company's receivables securitization facility. For the six months ended March 31, 1996, the Company recognized a benefit for income taxes by carrying back the loss to the prior year's income. The Company did not recognize a provision for income taxes for the six months ended March 31, 1995 as a result of utilizing net operating loss carryforwards for financial reporting purposes. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise from capital expenditures and working capital requirements, including interest and dividend payments. The Company has met these requirements principally from the incurrence of additional long-term indebtedness, including borrowings under the Company's various credit facilities, the sale of preferred stock, equipment lease financing and cash provided by operations. On May 14, 1996, the Company amended and restated its revolving credit facility (the "Revolving Credit Facility") with a syndicate of banks led by Citicorp USA, Inc., as agent, which is used primarily for the working capital and Page 13 of 17 14 capital expenditure needs of the Company. The Revolving Credit Facility, in the amount of up to $125 million, is secured by the Company's inventories, accounts receivable, general intangibles, and proceeds thereof, and expires on May 14, 2000. Interest is payable monthly at the defined base rate (7.25% at May 14, 1996) plus 1.50% or the defined LIBOR rate (5.50% at May 14, 1996) plus 2.75%. The Company pays a monthly commitment fee based on an annual rate of .50% of the average unused portion of the borrowing limit under the Revolving Credit Facility. The amount available to the Company under the Revolving Credit Facility ranges between 55 to 60 percent, in the aggregate, of eligible inventories plus 85 percent of eligible accounts receivable. Borrowing availability under the Revolving Credit Facility is also subject to other financial tests and covenants. The Company's receivables securitization facility was terminated in connection with the amendment. As of May 14, 1996, the Company's eligible inventories and accounts receivable supported access to $94.9 million under the Revolving Credit Facility. As of May 14, 1996, the Company had $49.5 million in borrowings and $8.4 million in letters of credit outstanding under the Revolving Credit Facility. As a result of the amendment to the Revolving Credit Facility, the Company increased its availability by approximately $18 million as of May 14, 1996. In March 1993, the Company issued 400,000 shares of 14% cumulative redeemable exchangeable preferred stock, no par value, (the "Redeemable Preferred Stock"). Dividends accrue at a rate equal to 14% per annum of the liquidation preference ($151 per share as of March 31, 1996) and are payable quarterly in cash from funds legally available therefor. Prior to April 1996, the Company elected to add the dividends to the liquidation preference. The Redeemable Preferred Stock is exchangeable, at the Company's option, into subordinated debentures of the Company due 2003 (the "Exchange Debentures"). As of May 15, 1996, the Company has not elected to exchange the Redeemable Preferred Stock. The terms of the Revolving Credit Facility and the Company's 11 1/8% Senior Notes issued in March 1993 and 9 1/2% Senior Notes issued in February 1994 (collectively, the "Senior Notes") include cross default and other customary provisions. Financial covenants contained in the Revolving Credit Facility and/or the Senior Notes also include, among others, a limitation on dividends and distributions on capital stock of the Company, a tangible net worth maintenance requirement, a cash interest coverage requirement, a cumulative capital expenditure limitation, a limitation on the incurrence of additional indebtedness unless certain financial tests are satisfied, a limitation on mergers, consolidations and dispositions of assets and limitations on liens. In the event of a change in control, the Company must offer to purchase all Senior Notes then outstanding at a premium. The Company has from time to time entered into various amendments modifying or waiving the financial covenants and tests contained in the Revolving Credit Facility. Besides these and other financing activities, the Company's major source of liquidity has been cash provided by operating activities. Net cash used for operating activities was $0.1 million for the six months ended March 31, 1996 compared with net cash provided by operating activities of $48.8 million for the six months ended March 31, 1995. The uses of cash for operating activities during the six months ended March 31, 1996, resulted primarily from a $3.5 million increase in inventories, a $9.9 million increase in prepaid expenses, a $3.0 million reduction in fundings under the Company's receivables securitization facility, a decrease in accounts payable of $7.9 million and a net loss of $6.0 million. These uses of cash flow were offset by depreciation and amortization of Page 14 of 17 15 $22.0 million and a decrease in accounts receivable of $9.8 million. The Company previously entered into an arrangement with one of its major customers whereby the customer makes a production prepayment of up to $10 million upon entry of new orders. The Company recently completed an amendment increasing the maximum amount of production prepayments to $15 million. Capital expenditures were approximately $12.3 million for the six months ended March 31, 1996. Capital expenditures for fiscal year 1996 are estimated at $38.0 million. Capital projects for fiscal year 1996 consist of a blast furnace reline and various other projects designed to reduce costs and increase product quality and throughput. Substantially all of the equipment for the rolling mill finishing stand improvements will be completed during fiscal year 1996. The Company has, however, elected to defer installation of that equipment until the following fiscal year. The Company anticipates that it may incur significant start-up and transition costs when the equipment is installed and implemented. Depending on market, operational, liquidity and other factors, the Company may elect to adjust the design, timing and budgeted expenditures of its capital plan. The Revolving Credit Facility contains certain limitations on capital expenditures that are dependent, in part, on the Company's future operating results. The Company is required to make substantial interest and dividend payments on the Senior Notes, its Redeemable Preferred Stock or in the alternative exchange debentures, and outstanding balances under the Revolving Credit Facility. Currently, the Company's annual cash interest expense is approximately $37.0 million and its annual preferred stock dividends are approximately $8.4 million. The Company's future operations will be impacted by, among other factors, pricing, product mix, throughput levels and production efficiencies. The Company has efforts underway to increase throughput and production efficiencies and to shift its product mix to higher-margin plate products. Pricing in future periods is a key variable that remains subject to uncertainty. There can be no assurance that the Company's efforts will be successful or that sufficient demand will exist to support the Company's additional throughput capacity. The short-term and long-term liquidity of the Company is also dependent upon several factors, including availability of financing, foreign currency fluctuations, competitive and market forces, capital expenditures and general economic conditions. Moreover, the United States steel market is subject to cyclical fluctuations that may affect the amount of cash internally generated by the Company and the ability of the Company to obtain external financing. Although the Company believes that the anticipated cash from future operations and borrowings under the Revolving Credit Facility will provide sufficient liquidity for the Company to meet its debt service requirements and to fund ongoing operations, including required capital expenditures, there can be no assurance that these or other possible sources will be adequate. Moreover, because of the Company's current leverage situation, its financial flexibility is limited. Inflation can be expected to have an effect on many of the Company's operating costs and expenses. Due to worldwide competition in the steel industry, the Company may not be able to pass through such increased costs to its customers. Page 15 of 17 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The registrant held its Annual Meeting of Shareholders on March 26, 1996. The shareholders elected the following Directors to serve until the next annual meeting of shareholders: Joseph A. Cannon, Robert J. Grow, Richard D. Clayton, R.J. Shopf, Arch L. Madsen and Richard B. Wirthlin. The shareholders also ratified the appointment of Arthur Andersen LLP as independent auditors for the fiscal year 1996 by a vote of 31,474,221 shares for, 116,126 shares against and 89,414 shares abstained and there were no broker-non votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit Filed Number Exhibit Herewith 10.1 Third Amendment to Amended and X Restated Revolving Credit Agreement dated January 31, 1996 10.2 Fourth Amendment to Amended and X Restated Revolving Credit Agreement dated March 31, 1996 10.3 Agreement for the Sale and Purchase of X Coal between the Registrant and Oxbow Carbon & Minerals, Inc. dated February 19, 1996, effective as of April 1, 1994 27 Financial data schedule X (b) Reports on Form 8-K. The Company has not filed any reports on Form 8-K during the three months ended March 31, 1996. Page 16 of 17 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENEVA STEEL COMPANY By: /s/ Dennis L. Wanlass -------------------------------- Vice President, Treasurer and Chief Financial Officer Dated: May 15, 1996 Page 17 of 17 EX-10.1 2 THIRD AMENDMENT DATED JANUARY 31, 1996 1 THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Third Amendment to Amended and Restated Revolving Credit Agreement (this "Amendment"), dated as of January __, 1996, in respect of and to that certain Amended and Restated Revolving Credit Agreement, dated as of November 4, 1994 (as amended by this Amendment and as the same shall have been heretofore or shall be hereafter amended, modified or supplemented, the "Credit Agreement", and the terms defined therein and not otherwise defined herein being used herein as therein defined), among Geneva Steel Company, a Utah corporation (the "Borrower"), the lenders party thereto (the "Lenders"), Citibank, N.A., as Issuer (the "Issuer") and Citicorp USA, Inc., as Agent for the Lenders (the "Agent"). W I T N E S S E T H : WHEREAS, the Borrower has requested that the Credit Agreement be amended in certain respects; and WHEREAS, the Lenders, the Issuer and the Agent are willing to amend the Credit Agreement but only on the terms and subject to the conditions set forth herein; NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: SECTION 1. Amendments to Credit Agreement. Subject to and upon the satisfaction of the conditions set forth in Section 2 hereof, the Credit Agreement is hereby amended as follows: 1.1. The definition of the term "Applicable Base Rate Margin" set forth in Section 1.1 hereby amended by deleting the figure "1.75%" appearing in the first and last lines of the first paragraph thereof and inserting in its place in each such location the figure "2.00%". 1.2 The definition of the term "Applicable Eurodollar Rate Margin" set forth in Section 1.1 is hereby amended by deleting the figure "3.00%" appearing in the first and last lines of the first paragraph thereof and inserting in its place in each such location the figure "3.25%". 1.3 Article V is hereby amended by: (a) deleting Section 5.1 thereof in its entirety; (b) Amending Section 5.2 thereof by deleting the Minimum Tangible Net Worth Amounts set forth therein corresponding to the periods ending January 31, 1996, February 29, 1996, March 31, 1996 and April 30, 1996, and inserting in their place the amounts set forth below: During Each Month Ending on the Date Minimum Set Forth Below Amount ------------------ --------------- January 31, 1996 $90,000,000 February 29, 1996 $90,000,000 March 31, 1996 $90,000,000 April 30, 1996 $91,000,000; (c) amending Section 5.3 thereof by (i) deleting the Maximum Amounts of Cumulative Capital Expenditures set forth therein corresponding to the periods ending January 31, 1996, February 29, 1996, March 31, 1996 and April 30, 1996, and inserting in their place the amounts set forth below: Maximum Amount of During the Cumulative Capital Period Ending Expenditures ------------- ------------------- January 31, 1996 $68,000,000 February 29, 1996 $71,000,000 March 31, 1996 $74,000,000 April 30, 1996 $80,000,000 and (ii) suspending the operation and effectiveness of the proviso appearing at the end of such section for the periods ending January 31, 1996, February 29, 1996, March 31, 1996 and April 30, 1996; (d) deleting Section 5.4 thereof in its entirety for purposes of being a covenant, the breach of which by any Loan Party would constitute a Default or Event of Default, but retaining such section for the sole and exclusive purpose of calculating the Additional Discretionary Amount; and (e) amending Section 5.5 thereof by deleting the Minimum EBITDA to Cash Interest Expense Ratio set forth therein corresponding to the period ending March 31, 1996 and inserting in its place the amount set forth below: For the Fiscal Minimum Quarter Ending Ratio Required -------------- -------------- March 31, 1996 2.00:1.0 SECTION 2. Conditions Precedent. 2.1 This Amendment shall become effective (the "Effective Date") if and when, and only when, the Agent shall have received counterparts of this Amendment executed by the Borrower, the Agent, the Issuer and the Majority Lenders, and the Agent shall have additionally received all of the following documents, each document 2 (unless otherwise indicated) being dated as of the date hereof, in form and substance satisfactory to the Agent and in sufficient original copies for each Lender: (a) Certified copies of the resolutions of the Board of Directors of the Borrower, evidencing authorization of the Borrower to enter into this Amendment and the documents, transactions and matters contemplated hereby; (b) A certificate of the Secretary or an Assistant Secretary of the Borrower, certifying the names and true signatures of the officers of the Borrower authorized to execute and deliver this Amendment on behalf of the Borrower; and (c) A certificate, signed by a Responsible Officer of the Borrower, stating that the conditions specified in Section 2.2 hereof have been satisfied. 2.2. The effectiveness of this Amendment is subject to the further conditions precedent that: (a) The execution and delivery by the Borrower of this Amendment are not enjoined, temporarily, preliminarily or permanently; (b) All costs and accrued and unpaid fees and expenses owing by the Borrower to the Agent or the Lenders, to the extent due and payable on or prior to the Effective Date, shall have been paid; and (c) The following statements shall be true and correct on the Effective Date: (i) The representations and warranties of the Borrower in each Loan Document (after giving effect to this Amendment) and in this Amendment are correct and accurate on and as of the Effective Date, as though made on and as of the Effective Date; and (ii) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. SECTION 3. Representations and Warranties. In order to induce the Lenders, the Issuer and the Agent to enter into this Amendment, the Borrower represents and warrants to the Lenders, the Issuer and the Agent as follows: 2 3 3.1. The execution, delivery and performance by the Borrower of this Amendment and each other document and instrument to be delivered hereunder: (a) are within the Borrower's corporate powers; (b) have been duly authorized by all necessary corporate action, including, without limitation, the consent of shareholders where required; (c) do not and will not (i) contravene its Articles of Incorporation, by-laws or other comparable governing documents, (ii) violate any Requirement of Law (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (iii) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of the Borrower, or (iv) result in the creation or imposition of any Lien upon any of the property of the Borrower; and (d) do not require the consent, authorization by, or approval of, or notice to, or filing or registration with, any Governmental Authority or any other Person, other than those which have been obtained and copies of which have been delivered to the Agent, each of which is in full force and effect. 3.2. This Amendment has been duly executed and delivered by the Borrower. 3.3. This Amendment is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. SECTION 4. Miscellaneous. 4.1. This Amendment and the rights of the parties hereto shall be governed by, and construed in accordance with, the law of the State of New York. Wherever possible, each provision of this Amendment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. 4.2. Any legal action or proceeding with respect to this Amendment or any document related hereto may be brought in the courts of the State of New York or of 3 4 the United States of America for the Southern District of New York, and, by execution and delivery of this Amendment, the Borrower hereby accepts, and submits to, for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 4.3. Nothing contained in this Section 4 shall affect the right of the Agent, the Issuer, any Lender or any holder of a Note to serve process in any manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. 4.4. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Amendment, or any course of conduct, course of dealing, verbal or written statement or action of any party hereto. 4.5. The Section titles contained in this Amendment are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 4.6. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4.7. Except as expressly amended by this Amendment, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. 4 5 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed by an officer thereunto duly authorized, as of the date first above written. GENEVA STEEL COMPANY By: /s/ Dennis L. Wanlass ----------------------- Name: Dennis L. Wanlass Title: Vice President, Treasurer and Chief Financial Officer CITICORP USA, INC., as Agent By: /s/ Keith R. Karako ----------------------- Name: Keith R. Karako Title: Attorney-in-Fact CITICORP USA, INC., as Lender By: /s/ Keith R. Karako ----------------------- Name: Keith R. Karako Title: Attorney-in-Fact CITIBANK, N.A., as Issuer By: /s/ Keith R. Karako ----------------------- Name: Keith R. Karako Title: Attorney-in-Fact 5 6 CORESTATES BANK, N.A., as Lender By: /s/ Michele A. Walcoff ----------------------- Name: Title: Vice President BANK ONE, UTAH, N.A., as Lender By: ----------------------- Name: Title: Vice President FIRST SECURITY BANK OF UTAH, N.A., as Lender By: /s/ David P. Williams ----------------------- Name: Title: Vice President HELLER FINANCIAL, INC., as Lender By: /s/ Tom Bukowski ----------------------- Name: Title: Vice President 6 EX-10.2 3 FOURTH AMENDMENT TO CREDIT AGREEMENT 1 FOURTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Fourth Amendment to Amended and Restated Revolving Credit Agreement (this "Amendment"), dated as of March 29, 1996, in respect of and to that certain Amended and Restated Revolving Credit Agreement, dated as of November 4, 1994 (as amended by this Amendment and as the same shall have been heretofore or shall be hereafter amended, modified or supplemented, the "Credit Agreement", and the terms defined therein and not otherwise defined herein being used herein as therein defined), among Geneva Steel Company, a Utah corporation (the "Borrower"), the lenders party thereto (the "Lenders"), Citibank, N.A., as Issuer (the "Issuer") and Citicorp USA, Inc., as Agent for the Lenders (the "Agent"). W I T N E S S E T H : WHEREAS, the Borrower has requested that the Credit Agreement be amended in certain respects; and WHEREAS, the Lenders, the Issuer and the Agent are willing to amend the Credit Agreement but only on the terms and subject to the conditions set forth herein; NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: SECTION 1. Amendments to Credit Agreement. Subject to and upon the satisfaction of the conditions set forth in Section 2 hereof, the Credit Agreement is hereby amended as follows: 1.1. Section 5.2 is hereby amended by deleting the Minimum Tangible Net Worth Amounts set forth therein corresponding to the periods ending March 31, 1996 and April 30, 1996, and inserting in their place the amounts set forth below: 2
During Each Month Ending on the Date Minimum Set Forth Below Amount --------------- ------ March 31, 1996 $ 82,000,000 April 30, 1996 $ 82,000,000 May 31, 1996 $ 80,000,000;
SECTION 2. Conditions Precedent. 2.1. This Amendment shall become effective (the "Effective Date") if and when, and only when, the Agent shall have received counterparts of this Amendment executed by the Borrower, the Agent, the Issuer and the Majority Lenders, and the Agent shall have additionally received all of the following documents, each document (unless otherwise indicated) being dated as of the date hereof, in form and substance satisfactory to the Agent and in sufficient original copies for each Lender: (a) A certificate of the Secretary or an Assistant Secretary of the Borrower, certifying the names and true signatures of the officers of the Borrower authorized to execute and deliver this Amendment on behalf of the Borrower; and (b) A certificate, signed by a Responsible Officer of the Borrower, stating that the conditions specified in Section 2.2 hereof have been satisfied. 2.2. The effectiveness of this Amendment is subject to the further conditions precedent that: (a) The execution and delivery by the Borrower of this Amendment are not enjoined, temporarily, preliminarily or permanently; (b) All costs and accrued and unpaid fees and expenses owing by the Borrower to the Agent or the Lenders, to the extent due and payable on or prior to the Effective Date, shall have been paid; and 2 3 (c) The following statements shall be true and correct on the Effective Date: (i) The representations and warranties of the Borrower in each Loan Document (after giving effect to this Amendment) and in this Amendment are correct and accurate on and as of the Effective Date, as though made on and as of the Effective Date or, as to those representatives and warranties limited by their terms to a specified date, were correct on and as of such date; and (ii) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. SECTION 3. Representations and Warranties. In order to induce the Lenders, the Issuer and the Agent to enter into this Amendment, the Borrower represents and warrants to the Lenders, the Issuer and the Agent as follows: 3.1. The execution, delivery and performance by the Borrower of this Amendment and each other document and instrument to be delivered hereunder: (a) are within the Borrower's corporate powers; (b) have been duly authorized by all necessary corporate action, including, without limitation, the consent of shareholders where required; (c) do not and will not (i) contravene its Articles of Incorporation, by-laws or other comparable governing documents, (ii) violate any Requirement of Law (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (iii) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of the Borrower, or (iv) result in the creation or imposition of any Lien upon any of the property of the Borrower; and (d) do not require the consent, authorization by, or approval of, or notice to, or filing or registration with, any Governmental Authority or any other Person, other than those which have been obtained and copies of which have been delivered to the Agent, each of which is in full force and effect. 3 4 3.2. This Amendment has been duly executed and delivered by the Borrower. 3.3. This Amendment is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. SECTION 4. Miscellaneous. 4.1. This Amendment and the rights of the parties hereto shall be governed by, and construed in accordance with, the law of the State of New York. Wherever possible, each provision of this Amendment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. 4.2. Any legal action or proceeding with respect to this Amendment or any document related hereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Amendment, the Borrower hereby accepts, and submits to, for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 4.3. Nothing contained in this Section 4 shall affect the right of the Agent, the Issuer, any Lender or any holder of a Note to serve process in any manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. 4.4. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Amendment, or any course of conduct, course of dealing, verbal or written statement or action of any party hereto. 4 5 4.5. The Section titles contained in this Amendment are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 4.6. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 4.7. Except as expressly amended by this Amendment, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. 5 6 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed by an officer thereunto duly authorized, as of the date first above written. GENEVA STEEL COMPANY By: /s/ Dennis L. Wanlass ------------------------------- Name: Dennis L. Wanlass Title: Vice President, Treasurer and Chief Financial Officer CITICORP USA, INC., as Agent By: /s/ Keith R. Karako ------------------------------- Name: Keith R. Karako Title: Attorney-in-Fact CITICORP USA, INC., as Lender By: /s/ Keith R. Karako ------------------------------- Name: Keith R. Karako Title: Attorney-in-Fact CITIBANK, N.A., as Issuer By: /s/ Keith R. Karako ------------------------------- Name: Keith R. Karako Title: Attorney-in-Fact 6 7 CORESTATES BANK, N.A., as Lender By: /s/ Michele A. Walcoff ------------------------------- Name: Michele A. Walcoff Title: Vice President BANK ONE, UTAH, N.A., as Lender By: ------------------------------- Name: Title: Vice President FIRST SECURITY BANK OF UTAH, N.A., as Lender By: /s/ David P. Williams ------------------------------- Name: David P. Williams Title: Vice President HELLER FINANCIAL, INC., as Lender By: /s/ Tom Bukowski ------------------------------- Name: Tom Bukowski Title: Vice President 7 EX-10.3 4 AGREEMENT FOR THE SALE AND PURCHASE OF COAL 1 AGREEMENT FOR THE SALE AND PURCHASE OF COAL This Agreement for the Sale and Purchase of Coal (this "Agreement") is entered into this 19th day of February, 1996 effective as of the 1st day of April, 1994 (the "Effective Date"), between GENEVA STEEL COMPANY, a Utah corporation ("Purchaser") and OXBOW CARBON & MINERALS, INC., a Delaware corporation ("Seller"). RECITALS: A. Purchaser owns and operates the Geneva steel mill at Vineyard, Utah, which has coke batteries (the "Coke Batteries") that require high-volatile, metallurgical grade coking coal. B. Seller is the owner of certain land, mining equipment and mineral interests known as the Sanborn Creek Mine located near Somerset, Colorado (the "Coal Property"). C. Purchaser desires to obtain from the Coal Property high-volatile, metallurgical grade coking coal with the specifications set forth herein (the "Coal"). NOW, THEREFORE, in consideration of the premises and covenants contained herein, the parties hereto agree as follows: 1. Sale and Purchase of Coal. Seller agrees to sell to Purchaser and Purchaser agrees to buy from Seller the quantity of Coal indicated in Section 6 hereof on the terms and conditions set forth herein. 2. Term of Agreement; Contract Year; Contract Quarter. This Agreement shall commence on the Effective Date and expire on March 31, 2004 (the "Term"), unless terminated sooner or extended as herein provided. Notwithstanding the foregoing, upon the expiration of the initial Term, upon the mutual written agreement of Purchaser and Seller, this Agreement shall be extended for successive one (1) year terms on the same terms and conditions as set forth herein for so long as the Coke Batteries are operational. If Purchaser and Seller fail to so agree, no further extensions of the Term shall occur and upon the expiration of the then existing Term, Seller shall have no obligation to continue the supply of Coal to Purchaser hereunder. For purposes of this Agreement, the following terms shall have the indicated meanings: (a) "Contract Year" shall mean each of the twelve (12) month periods beginning on the Effective Date or on an anniversary date thereof during the Term, (b) "Contract Quarter" shall mean each of the three (3)- calendar-month periods during the Term that begin on the Effective Date or on the first day of the calendar month immediately succeeding the completion of the preceding such three (3)-calendar- month period, and (c) "ton" shall mean a ton of two thousand (2,000) pounds avoirdupois weight. 3. Price. The price, f.o.b. railcar at the coal loading facilities operated by Seller and located near Somerset, Colorado (the "Loadout"), for each ton of Coal shipped under the terms of this 2 Agreement (the "Purchase Price") shall be determined in accordance with the following provisions of this Section 3. 3.1 First Contract Year. For the first Contract Year hereunder the Purchase Price shall be: (a) per net ton (the "Base Price") plus per net ton (the "Override") on the first tons of Coal shipped to Purchaser during such Contract Year, and (b) the Base Price per net ton for the balance of the Coal shipped to Purchaser during such Contract Year. 3.2 Second and Subsequent Contract Years. For the second and each subsequent Contract Year, effective as of the first day of such Contract Year (the "Adjustment Date"), the Purchase Price shall be the Base Price multiplied by a fraction, the numerator of which is the Adjustment Index, as hereinafter defined, and the denominator of which is the Beginning Index, as hereinafter defined, adjusted to the nearest one cent per ton. The calculations shall be made within thirty (30) days after the last of the Indices, as hereinafter defined, becomes available and a corrected invoice shall be issued promptly for all shipments made between the Adjustment Date and the date the calculation is made. If the corrected invoice indicates that additional amounts are due Seller from Purchaser, Purchaser shall pay such additional amounts within thirty (30) days after receipt of any such corrected invoice. If the corrected invoices indicate that a credit is due to Purchaser, Seller shall apply such credit against invoices for future shipments until the credit is extinguished. The Purchase Price shall in no event be reduced below the Base Price set forth in this Agreement for the first Contract Year. 3.3 Definitions. a. Adjustment Index; Beginning Index. For the purposes of this Section 3, the term "Adjustment Index" means the average of the Indices, as hereinafter defined, published for each of the twelve (12) months immediately preceding the Adjustment Date; and the term "Beginning Index" means the average of the Indices published for each of the twelve (12) months immediately preceding the Effective Date. b. Indices. For the purposes of this Section 3, the term "Indices" means the published by the United States Department of Labor, Bureau of Labor Statistics, for the applicable months. If the computation of the Indices is changed so that the base year differs from that used at the time the Beginning Index is first published, the Indices shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Indices are discontinued or revised, such government indices or computation with which they are replaced shall be used in order to obtain substantially the same result as would be obtained if the Indices had not been discontinued or revised. 2 3 3.4 Purchase Price All Inclusive. Subject to Section 14 hereof, it is understood that the Purchase Price includes any processing or quality control work necessary to meet the quality specifications hereof, all costs of compliance by Seller with the Federal Surface Mining Control and Reclamation Act of 1977, as amended, and other federal, state and local laws and regulations applicable to the Coal Property and all other items as set forth in this Agreement. 3.5 Purchase Price Adjustment. At the end of each Contract Year hereunder, Seller shall provide Purchaser with evidence satisfactory to Purchaser reflecting the aggregate number of tons of Coal purchased by Purchaser during such Contract Year (the "Purchased Tons") pursuant to this Agreement. For the purpose of calculating the Purchase Price for such Contract Year pursuant to Sections 3.1 and 3.2 hereof the Base Price and the Override shall be adjusted to be (a) , and , respectively, if the Purchased Tons are less than the Maximum Estimated Quantity but greater than the Minimum Estimated Quantity, as such terms are hereinafter defined, for such Contract Year, or (b) , and , respectively, if the Purchased Tons are less than the Minimum Estimated Quantity for such Contract Year. The manner in which such adjustment will be calculated is illustrated on Exhibit A hereto. Notwithstanding anything in this Agreement to the contrary, the Override shall be applicable only during the Term of this Agreement. The difference between the actual payments to Seller for such Contract Year and the amount due to Seller as a result of the adjustment provided for in this Section 3.5 shall be paid to Seller, or refunded to Purchaser, as the case may be, within thirty (30) days after receipt of such evidence by Purchaser. In lieu of receiving the refund provided for in the immediately foregoing sentence, Purchaser may elect to offset and recoup such amounts against the Purchase Price for Coal during subsequent Contract Years. As used in this Agreement, the terms "Minimum Estimated Quantity" and "Maximum Estimated Quantity" shall mean the amount of Coal for the applicable Contract Year identified as such on Exhibit B hereto. The provisions of this Section 3.5 relate to pricing only and shall not modify or affect other provisions of this Agreement relating to the quantity of Coal to be purchased and sold hereunder. 4. Billing and Payment. Seller shall invoice Purchaser for each shipment of Coal sold and shipped at the Loadout at the Purchase Price applicable on the date of shipment. Each such invoice shall specify the date of shipment and the quantity of Coal shipped. Invoices shall be accompanied by supporting documentation including railcar numbers and weights. Purchaser shall pay such invoices to Seller within thirty (30) days from the date of shipment. 3 4 5. Shipment and Freight Charges. 5.1 Shipment. Purchaser and Seller shall cooperate to arrange for and schedule the availability of unit train car sets in order that the Coal to be delivered hereunder may be moved at the scheduled rate of delivery. Railcars to be provided by the railroad under Purchaser's contract therewith shall be open-top bottom dump one hundred (100) ton hopper cars commonly used and in good operating condition whose use will be compatible with the facilities at the Loadout and with Purchaser's unloading facilities. Seller shall, at its own expense, load at the Loadout each railcar to its approximate full visible capacity or stenciled weight, whichever is less, consistent with good operating practice in the industry. At the Loadout, Seller shall be allowed three (3) hours free time for loading each train consisting of 84 or fewer cars. In the event Seller does not complete loading of all cars at the Loadout within three (3) hours after the first empty car is placed into position for loading by the railroad, or Seller fails to satisfy the loading requirements of the applicable tariff or rail contract, Seller will notify Purchaser within twenty-four (24) hours that a delay has occurred and the length of time involved or expected to be involved in such delay, and shall promptly pay Purchaser, with right of set off by Purchaser against payments for Coal in the event of nonpayment, for any resulting car detention penalties, demurrage or other charges (including without limitation, charges for car sets not loaded to a minimum average weight of ninety-five (95) tons per car and for individual cars loaded in excess of marked capacity) assessed against Purchaser by the railroad under Purchaser's applicable tariff or freight contract. Any new loading conditions imposed by Buyer's rail contract beyond those contained in this Section 5.1 must be approved by Seller. 5.2 Freight Charges. Except as otherwise provided in Section 5.1 hereof, Purchaser shall pay all freight and other charges imposed by its freight contract applicable to the destination of the shipment after each shipment has been loaded on railcars. 6. Quantity. 6.1 Quantity of Coal. a. Subject to Section 6.1(b) hereof, the parties intend that this Agreement shall be a contract whereby Seller is obligated to supply and Purchaser is obligated to purchase for use at the Coke Batteries all of Purchaser's requirements for high volatile Coal mined in the western United States. b. Seller acknowledges that , (ii) is currently purchasing, and intends to continue to purchase for use in its blast furnaces, metallurgical coke ("Coke"), and for use in the Coke Batteries coals produced at other locations, (iii) is investigating alternative processes to replace the use of its Coke Batteries, and (iv) has the absolute right to determine at any time, and from time 4 5 to time, the amount and types of purchased Coke to be blended with Coke produced at the Coke Batteries, or whether to operate or suspend, in whole or in part, the operation of the Coke Batteries at the Geneva Works, or the amount and types of Coal for use in its coal blend at the Coke Batteries. Therefore, subject only to Section 6.1(c) hereof, Purchaser shall not be obligated to purchase any Coal from Seller in excess of the amount of Coal that Purchaser requires to be reasonably utilized during any Contract Year in the making, in those Coke Batteries then being operated by Purchaser, of Coke that meets the coking characteristics and blends that Purchaser determines are desirable from time to time in Purchaser's blast furnaces. ---------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- c. Notwithstanding Section 6.1(b), if (and only if) Purchaser (i) purchases less than the Maximum Estimated Quantity of Coal in any Contract Year, and (ii) during the Term hereof, installs and operates an injection system for the use of pulverized coal on its blast furnaces (a "PCI System") during the Term hereof, Purchaser shall be obligated to purchase from Seller, on an as-needed basis, and Seller shall be obligated to sell to Purchaser, the difference in tonnage between such amount and the amount of Coal actually purchased (the "Shortfall") for each such Contract Year, upon the terms and conditions set forth herein (including the then current Purchase Price); provided, however, that in no event shall Purchaser be obligated to purchase more than Three Hundred Thousand (300,000) Tons of such Shortfall. The amount of any Shortfall determined pursuant to the foregoing sentence shall be reduced to the extent Purchaser purchases more than the Maximum Estimated Quantity of Coal during any Contract Year during the Term. Purchaser shall have the absolute right to determine at any time, and from time to time, the amount of purchased Coke and the amount of pulverized coal to be used at the blast furnaces. If the PCI System is not installed on Purchaser's blast furnaces during the Term hereof, Purchaser shall have no obligation to purchase any portion of the Shortfall. The provisions of this Section 6.1(c) shall survive the expiration (but not termination) of the Term hereof. 5 6 6.2 Forecasts and Nomination. a. For Seller's planning purposes and as an expression of Purchaser's then-current best estimate only, Purchaser shall provide Seller with a forecast of its Coal requirements at the Coke Batteries for each Contract Year during the Term hereof. The annual forecast shall be calculated on a Contract Quarter by Contract Quarter basis and submitted to Seller on or before the first day of the third month preceding the beginning of each Contract Year; provided, however, that the annual forecast for the first Contract Year hereunder shall be submitted to Seller within ten (10) days after the execution of this Agreement. b. Purchaser shall nominate the quantity of Coal which Seller shall deliver during each sixty (60) day period during the Term hereof, said nomination to be received by Seller no later than the fifteenth day of the month preceding said sixty (60) day period; provided, however, that the nomination for the sixty (60) day period beginning on the date of this Agreement shall be submitted to Seller within ten (10) days after the execution of this Agreement. Seller shall supply such Coal from only the Coal Property. 7. Weighing. The weight of Coal sold and delivered hereunder shall be determined from Purchaser's weigh-in-motion scales located at its Geneva steel mill in Vineyard, Utah, which shall be maintained and operated so as to satisfy the requirements of the State of Utah and the Western Weighing and Inspection Bureau for certified railroad scale weights. In the event Purchaser's scales fail to meet such requirements, Seller and Purchaser shall mutually agree on the use of substitute weigh scales or methods for determining the weight of any shipment of Coal hereunder. A net weight will be determined and reported to Seller within two (2) business days after delivery for each shipment of Coal hereunder. 8. Loading and Coal Specifications. 8.1 Preparation and Loading of Coal. Purchaser shall make all reasonable efforts to cause the railroad to provide, and Seller shall make all reasonable efforts to load Coal only into, railcars that are reasonably clean and free of debris, Coal remaining from earlier deliveries, ice, snow and/or any other material that might inhibit unloading or cause contamination of the Coal. Seller shall reject any railcars delivered by the railroad that are not in the condition required hereunder and shall promptly advise Purchaser of such rejection. 6 7 9. Coal Specifications. All Coal delivered by Seller pursuant to this Agreement shall have, on a per train average basis, moisture, ash, sulfur and - -100 mesh content less than or equal to, and have a free swelling index, reflectance and oxidation greater than or equal to, and a size distribution standard no greater than, the following (determined, where applicable, on an "as received" basis for moisture content and on a "dry basis" for ash and sulfur content):
Subject Specification ------- ------------- Moisture 9.00% Ash 9.70% Sulfur 0.75% -100 Mesh 5.00% Free Swelling Index 3.00 Size 2" x 0 Reflectance 0.69% Oxidation 90% Minimum Transmittance
9.1 Penalties. Penalties for moisture, ash and sulfur shall be calculated and paid to Purchaser on a train average basis as follows: a. Moisture. If the total moisture content exceeds 9.00%, the weight for settlement purposes in determining the Purchase Price of the Coal shall be reduced by the weight of the excess moisture determined as the percentage of moisture in excess of 9.00%. Seller shall also reimburse Purchaser for all increased freight and transportation costs incurred by Purchaser attributable to the weight of the moisture in excess of 9.00%. b. Ash. If the ash content exceeds 9.7%, a penalty of $ per ton for each one tenth of one percent (0.10%) of ash in excess of 9.7% shall be applied pro rata. c. Sulfur. If the sulfur content exceeds 0.75%, a penalty of $ per ton for each one hundredth of one percent (0.01%) of sulphur in excess of 0.75% shall be applied pro rata. 7 8 9.2 Rejection of Coal. a. Specifications. Purchaser shall have the right to reject any trainload of Coal having on a per train average basis a moisture, ash, sulfur, or -100 mesh content greater than, or having a free swelling index, reflectance or oxidation less than, the following limits (determined, where applicable, on an "as received" basis for moisture content and on a "dry basis" for ash and sulfur content):
Subject Rejection Limit ------- --------------- Moisture 10.00% Ash 10.50% Sulfur 0.80% -100 Mesh 7.00% Free Swelling Index 2.00 Reflectance 0.68% Oxidation 84% Minimum Transmittance
Purchaser shall have the right to reject any Coal that is not shipped within twenty (20) days after it is mined from the Coal Property. b. Exercise of Rejection Right. If Purchaser's rejection is based on Seller's analytical results, exercise of Purchaser's rejection right shall be made by Purchaser's prompt notice to Seller by telecopier or by telephone within three (3) hours after receipt of Seller's analytical results. Where Purchaser's rejection is based on third-party laboratory analyses, or on Purchaser's analyses for reflectance and oxidation only, then Purchaser shall give Seller notice of rejection no later than fifteen (15) days after Purchaser's receipt of Seller's analytical results. Upon rejection, the parties shall negotiate a commercially reasonable price reduction for Purchaser's purchase of the rejected Coal if Purchaser can use such Coal. If the parties fail to agree on a price reduction or if Purchaser cannot use such Coal, Seller shall, at its sole expense, remove the rejected Coal from Purchaser's premises. Seller shall reimburse Purchaser for any freight, handling or other costs Purchaser incurs in dealing with rejected Coal. 8 9 c. Replacement Obligation. Notwithstanding anything to the contrary herein, including, without limitation, Section 6.1 hereof, Seller shall be obligated to supply to Purchaser, if Purchaser so elects, Coal in an amount sufficient to replace any Coal rejected by Purchaser hereunder, but the minimum amounts of Coal that Purchaser shall be obligated to purchase under this Agreement shall be reduced by the amount of any such rejected Coal. 10. Coal Sampling and Analysis. 10.1 Taking of Samples. At Seller's cost, Seller shall sample, at the Loadout, each train shipment of Coal made hereunder. Seller shall use car top sampling (or an equivalent method approved by Purchaser) in accordance with American Society for Testing and Materials ("ASTM") sampling procedures and such other procedures and protocol mutually developed and agreed upon by the parties hereto. 10.2 Preparation of Samples. At the time each such sample is taken, it shall be sealed from atmospheric exposure to prevent change in moisture. The representative composite sample of each unit train shall be split into three (3) subsamples. One laboratory subsample shall be sent to Purchaser, one laboratory subsample retained by Seller for at least sixty (60) days from the date of shipment as a reserve subsample, and one laboratory subsample shall be analyzed by Seller. Each subsample shall be appropriately labeled by Seller so as to identify the loading date, sample preparation date and the sample from which the subsample was prepared. Immediately upon sample preparation, each subsample shall be stored and sealed from atmospheric exposure. The subsamples retained by Seller shall, at Purchaser's request, be delivered to Purchaser's agent or to an independent commercial testing laboratory designated by Purchaser. 10.3 Analysis. Each laboratory subsample taken by Seller under Section 9.1 shall be analyzed for each of the specifications guaranteed pursuant to Section 8.2 to determine the quality of the Coal represented by the train sampled. Analyses shall be performed either in Seller's laboratory or, at Seller's option, a third-party laboratory, pursuant to the applicable ASTM analytical procedures with the exception of reflectance and oxidation which shall be analyzed by Purchaser, or at Purchaser's option a third party laboratory, pursuant to the applicable ASTM standard or the standard U.S. Steel alkali extraction procedure. 10.4 Reporting of Analytical Results. Seller shall report to Purchaser, by telecopy or by telephone, the results of each train analysis within seventy-two (72) hours after such Coal is shipped or as soon as reasonably possible when analysis is done by an independent laboratory. 10.5 Destination Sampling. At Purchaser's expense, destination sampling and analysis may be conducted by Purchaser or a third party. If Purchaser finds that material discrepancies persist between the results of the sampling and analyses performed by Seller and Purchaser, 9 10 the sampling and analytical procedures of Seller and Purchaser shall be reviewed by both parties and necessary steps will be taken to reduce such discrepancies to a reasonable amount. 10.6 Dispute of Analytical Results. Any dispute by Purchaser of Seller's analytical results must be raised within seven (7) days after receipt of Seller's analytical results by Purchaser. After notice from Purchaser of such dispute, the referee subsample shall be analyzed by a third party independent, commercial laboratory mutually agreed upon by Seller and Purchaser. The results of any such analysis shall be binding on both parties. The cost of any such referee analysis shall be shared equally by Purchaser and Seller. 11. Default. In the event of the failure of either Seller or Purchaser to comply in good faith with any material obligation herein set forth, or the insolvency of, the making of an assignment for the benefit of creditors by, the institution of bankruptcy, reorganization, liquidation, or receivership proceedings by, either Seller or Purchaser, (collectively, "Events of Default") then the non-defaulting party shall have the right to terminate this Agreement by giving to the other thirty (30) days notice in writing of its intention so to do, specifying the default complained of. At the expiration of said thirty (30) day period, unless the party in default shall have remedied such default, the party not in default shall have the right at its election to terminate this Agreement forthwith. The right to termination provided for in this Section 10 shall be in addition to the rights provided to either party in other portions of this Agreement, at law or in equity. Notwithstanding the foregoing, for Events of Default involving the failure to pay any amount provided for hereunder, the notice and cure period provided for above shall be ten (10) days after written notice of any such Event of Default. 12. Force Majeure. Performance by either Seller or Purchaser shall be excused to the extent such party's performance is rendered impossible or impracticable by one or more events of Force Majeure, as hereinafter defined. For the purposes hereof, the term "Force Majeure" means any of the following causes to the extent such cause was neither foreseen nor reasonably foreseeable and is beyond the reasonable control of the party affected thereby: acts of government or government authority, acts of God, strikes or other collective action of labor, fires, floods, storms, tornados, earthquakes, explosions, public disturbances, wars (whether declared or not), insurrections or sabotage, or any other cause whether similar or dissimilar to those specifically enumerated herein which was neither foreseen nor reasonably foreseeable and is beyond the reasonable control of the party affected thereby; provided, however, that nothing herein shall require the settlement of any labor dispute against the will of the party affected thereby. Performance by Seller means mining, preparing and delivering Coal to the Loadout and loading of Coal into railcars. Performance by Purchaser means the operation of its Coke Batteries, the transportation and delivery of Coal purchased hereunder from the Loadout to its Coke Batteries, and utilization at its Coke Batteries of Coal to be supplied by Seller hereunder. Any obligation of a party hereto to make payment of money to the other party hereto under the terms of this Agreement shall not be excused by reason of any claim of Force Majeure hereunder. 13. Pro Rata Delivery. In the event of reduced production at the Coal Property as a result of the occurrence of an event of Force Majeure, Seller shall for the period of reduced production (a) 10 11 tender a commercially reasonable substitute coal, if such coal is available at a price (including transportation) comparable to the delivered cost to Purchaser of the Coal hereunder, and (b) allocate to the extent necessary among Purchaser and Seller's other regular contract customers, in a manner which is fair and reasonable, Seller's unaffected production, up to the whole thereof, required to satisfy to the fullest extent commercially practicable Seller's obligations under this Agreement. In making such allocations Seller shall take into account the critical nature of the Coal to Purchaser's manufacturing operations, the potential irreparable damage to Purchaser's Coke Batteries in the event of an inadequate supply of Coal, and other relevant circumstances, all without regard to the price paid by Seller's other customers. 14. No Requirement of Substitute Performance. If Section 11 hereof excuses Purchaser from taking Coal for its Coke Batteries, Purchaser shall not be required to purchase Coal hereunder for use in another plant or any other part of the Geneva steel mill. 15. New or Changed Regulations. The parties hereto are entering into this Agreement in reliance upon the laws, rules, regulations and decrees (the "Regulations") of governments or governmental instrumentalities in effect as of the Effective Date with respect to or directly affecting the Coal to be delivered hereunder (including, without limitation, the mining, taxation, transportation, sale, delivery, storage and use thereof). If at any time during the Term (but not as a result of the fault or participation of the party claiming the benefit of this Section), any Regulations are changed or new Regulations are promulgated, and the effect on a party (the "affected party") of compliance with such changed or new Regulations (a) is not covered by any other provision of this Agreement, and (b) has or will have a materially adverse effect on the affected party in its performance hereunder, then the affected party shall have the option to request renegotiation of the Purchase Price and other pertinent terms set forth in this Agreement to the extent reasonably necessary to mitigate the effect of the new or changed Regulations. Such option may be exercised by the affected party at any time after such new or changed Regulations is promulgated by giving written notice to the other party. Such written notice shall describe with reasonable specificity the new or changed Regulations precipitating the request, the economic effect of the new or changed Regulations, and the revised Purchase Price or other terms proposed by the affected party. If the parties are unable to agree in writing upon a revised Purchase Price or other terms within ______________ after such written notice is given, either party shall have the right to terminate this Agreement at the end of such _____________ period. 16. Independent Contractor. This is an agreement for the purchase and sale of Coal in which the parties recognize and agree that neither Seller nor Purchaser is an agent or employee of the other but each is an independent contractor, independent of any managerial or other control or direction by the other party hereto in the performance of their respective obligations hereunder. Seller and Purchaser are free to perform, by such means and in such manner as Seller or Purchaser, as the case may be, may choose, all work in pursuance of commitments hereunder. 17. Indemnification. 11 12 a. Indemnification by Seller. Seller agrees to indemnify, defend, and hold harmless Purchaser from and against all claims, liabilities, claims of indemnity and/or contribution from Seller's employees or other persons or third parties, damages, losses, expenses, royalties, rents, penalties, fines, and cost of defense (including, without limitation, attorneys' fees), from whatever source, related to or deriving from Seller's mining activities, right to mine and remove Coal, its presumed mining and removal rights, or its sale and delivery of Coal to Purchaser hereunder. b. Indemnification by Purchaser. Purchaser agrees to indemnify, defend, and hold harmless Seller from and against all claims, liabilities, claims of indemnity and/or contribution from Purchaser's employees or other persons or third parties, damages, losses, expenses, royalties, rents, penalties, fines, and cost of defense (including, without limitation, attorneys' fees), from whatever source, related to or deriving from Purchaser's coking activities or its purchase of Coal from Seller hereunder. 18. Warranties; Damages. Seller warrants title to the Coal and quiet possession to Purchaser of Coal delivered to Purchaser pursuant to this Agreement. Subject to Purchaser's right to reject Coal pursuant to Section 8.4 hereof, title to the Coal, as well as the risk of loss, shall transfer from Seller when such Coal is free on board railcars at the Loadout. SELLER WARRANTS THAT ALL COAL SOLD AND DELIVERED HEREUNDER SHALL COMPLY WITH THE QUALITY SPECIFICATIONS SET FORTH HEREIN. NO OTHER WARRANTIES OR REPRESENTATIONS OF ANY KIND ARE MADE BY SELLER, NOR SHALL ANY BE IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. NEITHER SELLER NOR BUYER SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES. 19. Binding Effect and Assignments. 19.1 Binding Effect. This Agreement shall bind and inure to the benefit of the parties and their respective successors and assigns. 19.2 Assignments. Neither party may assign or delegate this Agreement or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, and any assignment without such prior written consent shall be null and void; provided, however, that consent shall not be required for Seller or Purchaser to assign, pledge or hypothecate this Agreement for financing purposes whereby the transferring party retains all performance obligations hereunder. 20. Waiver. The failure of either party to insist in any one or more instances upon strict performance of any provision of this Agreement, or to take advantage of any right hereunder, shall not be construed as a waiver of such provision or relinquishment of such right. To be effective, any 12 13 waiver must be in writing, unambiguously setting forth the right to be waived thereby, and executed by a duly authorized representative of the party to be charged therewith. 21. Remedies Cumulative. Remedies provided under this Agreement shall be cumulative and in addition to other remedies provided by applicable law. 22. Notices. Except as otherwise provided in this Agreement, any notice, request, protest, consent, demand, report, payment or statement given by one party to the other shall be in writing and deemed received forty-eight (48) hours after it is deposited in the United States mail, first-class postage prepaid, and properly addressed as follows: If the notice is to Purchaser, to: Geneva Steel Company 10 South Geneva Road Vineyard, Utah 84058 Attention: Max E. Sorenson Senior Vice President - Engineering & Technology and a required copy to: Kimball, Parr Waddoups, Brown & Gee 185 South State, Suite 1300 Salt Lake City, Utah 84111 Attention: Roger D. Henriksen, Esq. (or to such other person or address as Purchaser shall have designated by due notice to Seller). If the notice is to Seller, to: Oxbow Carbon & Minerals, Inc. 3478 Buskirk Avenue, Suite 346 Pleasant Hill, CA 94523-4342 Attention: Larry Black and a required copy to: Oxbow Carbon & Minerals, Inc. 7901 Southpark Plaza, Suite 202 Littleton, Colorado 80120 Attention: Paul Fritzler 13 14 and Oxbow Corporation 1601 Forum Place West Palm Beach, Florida 33401 Attention: J. Michael Smith, Esq. (or to such other person or address as Seller shall have designated by due notice to Purchaser). 23. Captions. The captions to Sections hereof are for convenience only and shall not be considered a part of or used in construing or interpreting this Agreement. 24. No Third-Party Beneficiaries. The provisions of this Agreement are for the benefit of the parties hereto and not for any other person. 25. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah, including the Uniform Commercial Code as enacted therein, without regard to choice of law rules thereof. 26. Entire Agreement. This instrument contains the entire agreement between the parties as to Coal produced and sold hereunder, and there are no representations, understandings or agreements, oral or written, which are not included herein. This Agreement cannot be changed except by duly authorized representatives of both parties in writing. 27. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. 28. Severability. In the event that any provision or any part of any provision of this Agreement shall be held to be invalid, illegal and/or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision or any part of the same provision which can be given effect without the invalid, illegal or unenforceable provision or part thereof. 14 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their authorized officers, as of the date and year first above written. GENEVA STEEL COMPANY, a Utah corporation By: /s/ Max E. Sorenson -------------------------------------- Max E. Sorenson Senior Vice President - Engineering & Technology Date Executed: February 21, 1996 --------------------------- OXBOW CARBON & MINERALS, INC., a Delaware corporation By: /s/ B. Acton -------------------------------------- Title: President and C.O.O. ----------------------------------- Date Executed: May 4, 1996 --------------------------- 15 16 EXHIBIT A TO AGREEMENT FOR SALE AND PURCHASE OF COAL - -------------------------------------------------------------------------------- For the first Contract Year, the "Base Price" is as follows: Annual Tonnage Base Price/N.T. Case I. Less than the Minimum $ Estimated Quantity -------- Case II. More than the Minimum $ Estimated Quantity but -------- less than Maximum Estimated Quantity Case III. More than Maximum $ Estimated Quantity ======== In Case I above, the "Override" is calculated as follows: 1993-94 Contract Price per net ton New "Base Price" Difference $ X 115,713 N.T. = Then: = In Case II, the "Override" is calculated as follows: 1993-94 Contract Price New "Base Price" Difference $ X 115,713 N.T. = Then: = The "Override" is only applicable to the first Contract Year. Thereafter, the Purchase Price for the second and subsequent Contract Years will be the adjusted "Base Price" for the appropriate annual quantity category as defined in Exhibit B of the Agreement. 17 EXHIBIT B TO AGREEMENT FOR SALE AND PURCHASE OF COAL - -------------------------------------------------------------------------------- The "Minimum Estimated Quantity" and "Maximum Estimated Quantity" of Coal referred to in the foregoing Agreement are set forth below for each Contract Year during the Term of the Agreement: Minimum Maximum Estimated Estimated Contract Quantity Quantity Year (Tons) (Tons) First --------- --------- Second --------- --------- Third --------- --------- Fourth --------- --------- Fifth --------- --------- Sixth --------- --------- Seventh --------- --------- Eighth --------- --------- Ninth --------- --------- Tenth --------- --------- EX-27 5 FINANCIAL DATA SCHEDULE
5 FROM THE REGISTRANTS BALANCE SHEET AND STATEMENT OF INCOME AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. 1,000 U.S. DOLLARS 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 1 5,389 0 28,411 2,171 93,421 146,609 614,785 153,261 618,754 108,556 347,477 80,695 55,077 0 17,364 618,754 326,220 326,220 306,213 306,213 11,899 4,482 16,883 (9,614) (3,597) (6,017) 0 0 0 (6,017) (.68) (.68)
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